Supreme Court Keeps Biden Student-Loan Relief Plan on Hold (2)

The US Supreme Court refused for now to reinstate President Joe Biden’s latest push to reduce student-loan bills for millions of people, keeping the multibillion-dollar plan on hold while a fresh legal fight over educational debt plays out.

The court turned away an administration request to lift a pause a federal appeals court imposed on the program in a lawsuit by Missouri and other Republican-led states. The order didn’t indicate that any justices dissented.

The court gave no explanation, saying only that it expected the 8th US Circuit Court of Appeals to issue a definitive ruling in the case “with appropriate dispatch.”

The high court order is likely to mean months of additional uncertainty for eight million borrowers who were already enrolled in the so-called SAVE plan. The Department of Education placed those debtors, who collectively owe more than $400 billion, in temporary forbearance after the appeals court intervened. Other borrowers are currently not allowed to sign up for the program.

“We are disappointed in this decision, particularly because lifting the injunction would have allowed for lower payments and other benefits for borrowers across the country,” the Education Department said in an emailed statement. “The department will work to minimize further harm and disruption to borrowers as we await a final decision from the 8th Circuit.”

The Supreme Court last year threw out an earlier Biden plan to make a one-time cut to the debt of more than 40 million people, saying Congress hadn’t authorized such a far-reaching step.

“This is the second time the Supreme Court has sided with my office against one of Joe Biden and Kamala Harris’ unlawful student loan cancellation schemes,” Missouri Attorney General Andrew Bailey said in an online statement. “This court order is a stark reminder to the Biden-Harris Administration that Congress did not grant them the authority to saddle working Americans with $500 billion in someone else’s Ivy League debt.”

In blocking the SAVE plan, the 8th Circuit said it was “even larger in scope” than the earlier approach. The appeals court pointed to a private estimate that SAVE would eventually eliminate $475 billion in debt.

The SAVE plan would augment some of the broad metrics by which repayment amounts and timelines are tabulated. SAVE initially capped a borrower’s monthly payments at 10% of income over a certain threshold, later bringing that rate down to 5%.

Borrowers would also also be able to bank on reaching forgiveness sooner than the typical 20 or 25 years, depending on how much they initially borrowed for school. Other provisions would prevent ballooning interest, on the condition that borrowers made their monthly payments on time.

Parts of the SAVE plan had been in effect, reducing millions of monthly bills, before the 8th Circuit intervened.

The Supreme Court action comes as borrowers face the renewed prospect of penalties if they don’t make payments. When payments on federal loans resumed last September after the pandemic freeze, the Biden administration instituted a 12-month “on-ramp” period, during which borrowers would not be reported to credit bureaus or collections for missing a payment. That grace period ends next month.

As of July, the Biden administration has forgiven some $168.5 billion in student loan debt, primarily through a program for borrowers working in qualifying public service jobs. That’s less than half of the $400 billion price tag placed on the one-time debt forgiveness program, which promised at least partial relief to a broader swath of borrowers.

The Biden administration is battling two sets of states that say the SAVE plan is as legally flawed as the one the Supreme Court rejected last year. In the case before the 8th Circuit, states led by Missouri said the plan constituted a “major question,” meaning under Supreme Court precedent that clear congressional authorization was required.

The administration contends that the states lack legal standing to challenge the program and that Congress gave the Education Department explicit authority to set repayment schedules and use income to determine payment levels. The administration says the Education Department and its loan servicers have spent months updating their computer systems and notifying borrowers of their new payment amounts.

The case is Biden v. Missouri, 24A173.

(Updates with Education Department, Missouri statements starting in fifth paragraph.)

To contact the reporters on this story:
Greg Stohr in Washington at gstohr@bloomberg.net;
Ella Ceron in New York at eceron1@bloomberg.net

To contact the editors responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

Peter Blumberg

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