The legal battle has prompted the Education Department to pause loan payments for 3 million borrowers.
Three states are asking the U.S. Supreme Court to step in to stop the Biden administration from implementing the final pieces of its federal student loan repayment program.
In an emergency application filed on July 5, South Carolina, Texas, and Alaska petitioned the high court to halt the Saving on a Valuable Education (SAVE) plan after a key part of it was allowed to resume.
The program is designed to make student loan payments more affordable and help low-income borrowers pay their loans off more quickly by, in part, using a new repayment formula that was originally scheduled to take effect on July 1. The formula would cut monthly payments on undergraduate loans from 10 percent of the borrower’s discretionary income to 5 percent.
In the latest development in the legal back-and-forth over SAVE, the U.S. Court of Appeals for the 10th Circuit sided with the Department of Education (DOE) to lift a lower court’s injunction, allowing the lower monthly payments and a few other segments of the plan to proceed.
As a result of the 10th Circuit’s decision, undergraduate borrowers enrolled in SAVE could see their monthly bills halved. It also means that the DOE could automatically enroll borrowers by default into the program.
“The Supreme Court already ruled in another case that the Biden administration doesn’t have the authority to waive hundreds of billions of student loan repayments,” South Carolina Attorney General Alan Wilson said in a July 5 statement, referring to the high court’s June 2023 decision striking down President Joe Biden’s initial plan to wipe away at least $20,000 worth of debt for each borrower in the country.
Mr. Wilson said the current provisions would be a way to get around the 2023 decision.
“It would mean all taxpayers will be saddled with paying off billions of dollars of these students’ debts,” he said.
Joining Mr. Wilson are Attorneys General Ken Paxton of Texas and Treg Taylor of Alaska. By default, their motion went to Justice Neil Gorsuch, who is assigned to handle emergency appeals from the 10th Circuit.
Justice Gorsuch may grant or deny the application on his own. He may also refer the matter to his colleagues for a vote. Although the Supreme Court is on summer break, the justices can still act on emergency applications.
About 8 million Americans have enrolled in the SAVE plan since last fall. The DOE has already implemented some of the offers ahead of schedule, including debt cancellation for borrowers who originally took out $12,000 or less in loans and have made at least 10 years of monthly payments.
Some 414,000 borrowers have had their federal student loan debts erased under SAVE, according to the department. It also brought more than 4 million borrowers’ monthly payments down to as low as $0.
In response to the uncertainty arising from the legal battle, the DOE has put 3 million enrollees on forbearance—during which payments are suspended and interest does not accrue.
As the challenges play out in courts, the Biden administration has promised a continued push for student loan forgiveness.
“President Biden, Vice President [Kamala] Harris, and [Education] Secretary [Miguel] Cardona remain committed to fixing a broken student loan system and making college more affordable for more Americans,” a spokesperson for the DOE said in a statement to The Epoch Times.
“They will not stop vigorously defending the SAVE Plan, the most affordable repayment plan in history, and will continue to fight for this long-overdue relief.”