Education Department freezes student loan payments for 8M borrowers

The Education Department will suspend student loan payments and interest for around 8 million borrowers after a Thursday court order blocked the Biden administration's latest repayment program.

Agency officials said they would freeze the loans of borrowers enrolled in the program, known as SAVE, until appeals finish winding through the courts. The plan lowers monthly payments for almost all enrolled and offers loan forgiveness for certain long-time borrowers. The order further upends President Joe Biden's promise to tackle high loan payments for students weighed down by debt.

"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," U.S. Secretary of Education Miguel Cardona said in a statement. He warned the order would have “devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect."

Federal district judges in Kansas and Missouri blocked key provisions of the plan in June. But a federal appeals court put that decision on hold in July and allowed the Biden administration to move ahead with its lower monthly payments. Thursday’s unsigned order, from the 8th Circuit Court of Appeals, completely blocks the program for an unclear length of time.

Critics argue the plan amounts to government overreach and unfairly burdens taxpayers.

"The chaos and destruction this administration is inflicting on the nation’s student loan system is unprecedented," House Education and Workforce Committee Chair Virginia Foxx (R-N.C.) said. "Is it hubris, ignorance, or indifference that encourages the Biden administration to move forward with an illegal agenda that has dangerous repercussions?"

This isn't the first time the Education Department froze payments because of lawsuits. Officials paused about 3 million borrower payments in June after a federal judge in Kansas blocked the administration from reducing them, a part of the plan set to take effect in July. An appeals court later reversed the decision. But the department has paused those borrowers' payments again, along with others in the program. Officials have not yet said when the freeze will take effect.

Mike Pierce, the executive director and co-founder of the Student Borrower Protection Center said the department had few other options. “It’s the only way you can be sure you’re not violating this court order,” he said.