Legal challenges over key components of the Biden administration’s student loan forgiveness initiatives are continuing. And key new rulings from two separate courts are expected in just a matter of weeks.
The Biden administration has had some success in enacting student debt relief, approving close to $170 billion in debt cancellation for nearly five million borrowers during the last several years. These efforts have largely succeeded by tweaking or easing access to existing programs, and updating federal regulations to make these plans more accessible.
But President Biden’s efforts to expand student debt relief more dramatically have faced serious challenges. A coalition of states led by Republicans successfully convinced the U.S. Supreme Court to overturn Biden’s first mass student loan forgiveness plan last summer. The administration’s latest attempts to provide broad relief through the SAVE plan and mass debt cancellation are now tied up in litigation, which is causing chaos throughout the federal student loan system.
Two major court rulings on these new loan forgiveness efforts are expected within just a few weeks. Here’s what borrowers should know.
Biden’s Newest Student Loan Forgiveness Plan Blocked For Another Two Weeks
Earlier this month, a federal judge in Georgia issued a temporary order blocking the Biden administration from implementing a new mass student loan forgiveness initiative.
This new program, billed as a second attempt at broad debt relief following last summer’s Supreme Court decision, could benefit up to 30 million borrowers in four primary categories — those who attended low-value schools that failed to meet federal standards, borrowers whose balances have ballooned due to interest, people who qualify for existing loan forgiveness programs but never enrolled, and borrowers who first entered repayment at least 20 years ago. The Education Department has been developing new regulations for the program under the Higher Education Act, a different legal authority than the one used for Biden’s initial plan released earlier in his term.
Administration officials indicated that the Education Department would finalize the rules in October, with relief to follow automatically sometime thereafter. But a group of GOP-led states filed a lawsuit in Georgia seeking to halt the program before it could be launched. The states argued that the department was intending on launching relief imminently, before publishing the final regulations, in violation of federal law. The Biden administration disputed this.
In response to the lawsuit, the Georgia judge blocked the new program temporarily. On Thursday, the judge extended the order for another two weeks while he considers two competing requests: a motion from the Republican states to extended the block further through a preliminary injunction, and a motion from the Biden administration to dismiss the lawsuit entirely. A ruling is expected before that two-week period ends.
Upcoming Ruling On Student Loan Forgiveness Under SAVE Plan And Other IDR Plans
Meanwhile, litigation over the SAVE plan is ongoing. SAVE, a new income-driven repayment program launched by the Biden administration last fall, reduces payments, curtails runaway interest, and fast-tracks student loan forgiveness. More than eight million borrowers enrolled or were converted to SAVE from other IDR plans.
But a belated lawsuit by many of the same Republican-led states who have challenged other Biden debt relief initiatives culminated in August with an order by the 8th Circuit Court of Appeals granting an injunction. The injunction halted all elements of the SAVE plan and forced millions of borrowers into a forbearance.
The legal battle over SAVE is now impacting other IDR plans, however. In its August order, the 8th Circuit appeared poised to adopt an argument by the Republican-led states that, despite 30 years of regulations and bipartisan guidance, the Higher Education Act does not authorize student loan forgiveness after 20 or 25 years under several IDR plans. This would not just be limited to SAVE — it would include Income-Contingent Repayment, Pay As You Earn, and Revised Pay As You Earn, as well.
Briefing on the issue is ongoing. The Biden administration and borrower advocates argue that Congress clearly intended for borrowers to receive student loan forgiveness under IDR plans at the end of a 25-year term, pointing to regulations, legislative history, federal student loan promissory notes that include assurances of loan forgiveness, and the interplay between ICR-derived plans and the Income-Based Repayment program which specifically authorizes debt cancellation. But because the 1993 statute authorizing IDR plans (which was called Income-Contingent Repayment at the time) does not specifically use words like “cancel,” “discharge,” or “forgive,” the challengers argue that the issue is ambiguous, leaving room for judges to step in with their own interpretation.
A key court hearing is set for October 24, with a ruling expected shortly thereafter.
What’s Next For Student Loan Forgiveness
These upcoming court decisions in the next several weeks could be critical to borrowers. They may determine whether millions of borrowers can receive student loan forgiveness, or will continue to be stuck in limbo in an increasingly failing federal student loan system.
But whatever the rulings are, they are almost certainly going to be appealed to the Supreme Court. Given that the nation’s highest court may not issue any final decisions until next summer, this means that borrowers may be looking at closer to another year of uncertainty.
Of course, there is one potential wildcard — the national elections in November. Control of the White House and Congress could prove to be decisive in determining the fate of student loan forgiveness.