Emergency order lifts block on parts of student debt relief plan
An appellate court issued an emergency motion lifting the block on part of the Education Department's student debt relief plan, a victory for the Biden administration in the ongoing legal battle.
In a 2-1 ruling issued on Sunday, Judge David Ebel, a Reagan appointee, and Carolyn McHugh, an Obama appointee, ruled in favor of the emergency order allowing a provision lowering payments to be implemented. Judge Timothy Tymkovich, appointed by George W. Bush, voted against the emergency order in the 10th Circuit U.S. Court of Appeals.
Background: Last week, two Obama-appointed federal judges in Missouri and Kansas issued separate preliminary injunctions against different parts of the SAVE Plan. In the Kansas case, a provision of the program was blocked that would allow lower payments starting July 1. Under the SAVE Plan, the cap on payments for undergraduate borrowers was supposed to decrease to 5 percent of their discretionary income, down from 10 percent starting.
That provision will now go forward under the emergency order.
“Yesterday, the U.S. Court of Appeals for the Tenth Circuit sided with student loan borrowers across the country who stand to benefit from the SAVE Plan — the most affordable repayment plan in history," Education Secretary Miguel Cardona said in a statement. "Borrowers enrolled in the SAVE Plan can still access its considerable benefits, including undergraduate loan payments cut in half, as well as protection against interest accruing if borrowers are making their monthly payments.
Education Department officials said the agency had been preparing stopgap measures to comply with the injunction, but has directed student loan servicers not to take those steps because they are no longer necessary. The Department said last week that it planned to take down the online SAVE application and loan consolidation form, but both of those will now remain online.
Separately, Judge John A. Ross of the Eastern District of Missouri blocked the Education Department from carrying out “any further loan forgiveness for borrowers” under the SAVE program until he decides the full case. The Education Department filed an appeal in that case, but it was denied. The agency has not asked the appeals court for a stay, and no action has been taken blocking Ross' ruling from taking effect.
The lawsuits challenging the SAVE Plan were filed by Republican-led states.
What's next: The Education Department announced last week before the emergency order that it would suspend monthly student loan payments and interest for some 3 million borrowers. These borrowers will remain in forbearance for July but will be expected to make their first lower payments in August.
If a borrower's payments had been put on hold before these court rulings because what they owe was being recalculated, their first monthly payment will be due in August and will reflect the new, lower amount of 5 percent of their income on undergraduate loans.
