8 million student-loan borrowers on Biden's new repayment plan don't have to make payments after a federal court blocked the program in full

Ayelet Sheffey
·3 min read
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  • The 8th Circuit blocked the SAVE student-loan repayment plan in full.

  • Student-loan borrowers on SAVE won't have to make payments as the legal process continues.

  • This will likely spark confusion for borrowers who already received bills with lower payments.

Another student-loan payment pause is here for millions of borrowers.

On Thursday, the 8th Circuit Court of Appeals blocked the SAVE student-loan repayment plan in full, meaning that key provisions of the plan, like lower monthly payments and a shorter timeline to debt cancellation, cannot be implemented.

It's the latest in the legal rollercoaster for borrowers — earlier this year, two separate groups of GOP state attorneys general filed lawsuits to block SAVE, and at the end of June, two federal courts blocked parts of the plan. The 10th Circuit allowed parts of the plan to move forward just days later, but the 8th Circuit's ruling once again halted the plan in its entirety.

Education Secretary Miguel Cardona said in a statement Thursday night that all borrowers enrolled in SAVE "will be placed in an interest-free forbearance while our Administration continues to vigorously defend the SAVE Plan in court."

"The Department will be providing regular updates to borrowers affected by these rulings in the coming days," Cardona said.

The 8th Circuit's ruling responded to a lawsuit led by Missouri's attorney general. The other lawsuit to block SAVE, led by Kansas, now sits with the Supreme Court, and Solicitor General Elizabeth Prelogar wrote in a briefing to SCOTUS that blocking the plan would lead to "intense confusion" for borrowers. The Education Department said 8 million borrowers are enrolled in the SAVE plan, including 4.5 million whose incomes qualify them for zero-dollar monthly payments.

The Education Department already directed servicers to proceed with processing borrowers' lower payments. Should the court issue a final ruling that SAVE cannot be implemented, the department will once again have to recalculate borrowers' payments, likely leading some of them to reconfigure their budgets.

Some Republican lawmakers lauded the ruling. Sen. Bill Cassidy, the top Republican on the Senate education committee, said in a statement that the ruling "is another rebuke to President Biden's illegal student loan schemes."

"This is an abuse of power before an election in an attempt to buy votes at the expense of American taxpayers," Cassidy said.

Still, Biden's administration has vowed to continue working to provide relief to borrowers. Along with SAVE, the Education Department plans to finalize its broader student-loan forgiveness plan in October, which is expected to benefit over 30 million borrowers.

"Today's ruling from the 8th Circuit blocking President Biden's SAVE plan could have devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect," Cardona said. "It's shameful that politically motivated lawsuits waged by Republican elected officials are once again standing in the way of lower payments for millions of borrowers."

Read the original article on Business Insider