Joe Biden’s student debt relief plan suffered a major blow Monday when two federal judges partially blocked a measure of a plan that will cost the nation $160 billion.
Two federal judges in Kansas and Missouri sided with several Republican-led states on Monday, blocking Democrats from moving forward with a major student debt relief initiative.
In total, the government has already approved nearly $160 billion in emergency aid for nearly 4.6 million borrowers.
U.S. District Judge Daniel Crabtree in Wichita, Kansas, has blocked the U.S. Department of Education from moving forward with parts of a plan that was set to take effect July 1 and aimed at lowering monthly payments and forgiving loans for millions of Americans to speed up.
He ruled shortly before U.S. District Judge John Ross in St. Louis, Missouri, issued a preliminary injunction barring the department from granting further loan forgiveness under the government’s Saving on a Valuable Education (SAVE) Plan.
Joe Biden’s student debt relief plan suffered a major blow Monday when two federal judges partially blocked a measure of a plan that will cost the nation $160 billion.
The SAVE plan is designed to tie monthly payments to a borrower’s income and family size.
According to CNN, this measure has already been used by eight million people, more than half of whom have received payments of up to zero dollars.
The plan was hatched by the Biden administration after their initial loan forgiveness program was halted by the Supreme Court.
As part of the rulings, the White House must stop forgiving federal student debt for those enrolled.
Biden and the Department of Education have yet to comment on the statements.
The lawsuit is the repeat of a courtroom confrontation between the Biden administration and Missouri, a central figure in the Supreme Court case that overturned the Democratic president’s first attempt to cancel loans last year.
Biden has provided $160 billion in student loan forgiveness to 4.6 million borrowers so far
In that case, the Supreme Court ruled that loan forgiveness would be harmful to Missouri because of its ties to a quasi-government loan company, MOHELA, that would lose federal student loan revenue.
The new lawsuit makes a similar argument. Biden’s new SAVE plan accelerates an existing path to loan cancellations, which the lawsuit says would deprive MOHELA — the Missouri Higher Education Loan Authority — of “up to 15 years of servicing fees.”
Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma also joined the lawsuit.
Congress created income-driven repayment plans in the 1990s to help borrowers who were struggling to pay off their student loans.
These plans capped payments based on the borrower’s income and promised to forgive remaining debt after 20 or 25 years.
In addition to the harm to MOHELA, the lawsuit alleges that Biden’s plan makes it more difficult for states to hire and retain workers.
The repayment plan, according to the lawsuit, is so generous that it undermines the Public Service Loan Forgiveness program, which allows borrowers to have student loans forgiven after ten years of working in public service jobs.
According to the lawsuit, it’s an important recruiting tool for states — of 13 graduates hired by the Missouri attorney general’s office last year, nearly all said Public Service Loan Forgiveness influenced their decision to enter the public sector influenced work.
“Once the Final Rule takes effect, however, PSLF will not be nearly as attractive compared to other income-driven repayment programs,” the lawsuit said. ‘The comparative advantage will shrink or disappear altogether.’
The states note that more than half of borrowers in the plan pay nothing. “This is not a student loan program. It is a subsidy program that has never been authorized by Congress,” the lawsuit states.
Combining student loans into one large federal debt consolidation loan is a necessary step for graduates with private loans to qualify for forgiveness programs.
Additionally, a key factor in determining forgiveness is the number of years Americans have been actively paying off their loans.
Depending on the program, this could be ten or 25 years – so having a full history can also bring them closer to the threshold for forgiveness.
“The Department is working quickly to ensure that borrowers receive credit for every month they have rightfully earned in the form of forgiveness,” said U.S. Secretary of Education James Kvaal.
As college costs rise, more and more students are turning to loans to finance their degrees. But millions are struggling to pay them back, with interest rates keeping the total high even as payments are made.
This is a development story.