A federal court has now blocked Biden's new student-loan repayment plan in full, prohibiting borrowers from getting cheaper payments and debt cancellation
The 8th Circuit on Thursday blocked the SAVE student-loan repayment plan in full.
This means that debt cancellation and cheaper payments through the plan cannot be implemented.
This also reverses the 10th Circuit's decision that allowed some of SAVE's provisions to continue.
A major repayment plan for millions of student-loan borrowers is once again blocked.
On Thursday, the 8th Circuit Court of Appeals ruled that the SAVE plan, intended to lower borrowers' monthly payments and give many of them a shorter timeline for loan forgiveness, cannot be implemented as the legal process continues.
It follows a series of legal challenges to the plan. Earlier this year, two separate groups of GOP state attorneys general filed lawsuits to block the SAVE plan, and at the end of June, two federal courts placed preliminary injunctions on the plan.
However, just days later, the 10th Circuit appeals court granted the Biden administration's request to stay one of the rulings, allowing provisions that were set to go into effect in July — including cheaper payments — to move forward.
Thursday's ruling from the 8th Circuit blocked all provisions of SAVE in a one-sentence ruling: "Appellants' emergency motion for an administrative stay prohibiting the appellees from implementing or acting pursuant to the Final Rule until this Court rules on the appellants' motion for an injunction pending appeal is granted."
An Education Department spokesperson told Business Insider that "we are assessing the impacts of this ruling and will be in touch directly with borrowers with any impacts that affect them."
"Our Administration will continue to aggressively defend the SAVE Plan – which has been helping over 8 million borrowers access lower monthly payments, including 4.5 million borrowers who have had a zero dollar payment each month," the spokesperson said. "And, we won't stop fighting against Republican elected officials' efforts to raise costs on millions of their own constituents' student loan payments."
Thursday's ruling was in response to the lawsuit led by Missouri's attorney general. Kansas is leading the other lawsuit to block SAVE, which it has requested the Supreme Court take on. SCOTUS has not yet said if it will.
However, the Education Department recently filed a response to the Supreme Court detailing the steps the department and borrowers would be forced to take should the SAVE plan be blocked. Solicitor General Elizabeth Prelogar wrote that if the plan cannot be carried out, the department must put borrowers on forbearance as they recalculate new payments.
"Many have already received bills that reflect the decrease in monthly payments to 5% of their discretionary income," she wrote. "Many would experience intense confusion when they are told that their payments must be recalculated and that they must be placed in forbearance -- which would delay any eventual loan forgiveness."
The back-and-forth rulings have already prompted payment delays and confusion among borrowers. After the 10th circuit allowed SAVE's June provisions to move forward, the Education Department moved to direct servicers to begin processing the new, lower payments for borrowers. The department also clarified at the time that due to the lawsuits, payments will not become due until July or August.
That timeline is now in flux, and borrowers will once again be waiting for clarity on the status of their payments and what will happen to their SAVE benefits now that the plan is blocked.
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