Parts of student debt forgiveness plan halted: What you need to know

(NEXSTAR) — In yet another blow to the Biden administration’s attempts to provide student debt relief to Americans, two federal judges have halted parts of an income-driven repayment plan set to take effect next week.

Various benefits related to the SAVE Plan were set to take effect on Monday, July 1. That included cutting payments on some loans in half and granting borrowers credit toward forgiveness for certain bouts of deferment and forbearance. Many borrowers on the SAVE Plan were also scheduled to skip a payment in July thanks to a “brief processing forbearance.”

Two injunctions handed down by federal judges on Monday appear to be putting those plans in jeopardy.

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Here’s what we know.

What are the injunctions?

In one ruling, a Kansas judge determined the Education Department cannot enact the full scope of the SAVE Plan because it did not receive authority from Congress to do so, The Hill previously reported.

In the other, a Missouri judge ruled the department can’t forgive any loans under the SAVE Plan because it illegally deprives state loan operators of revenue.

These orders, each by a judge appointed by former President Barack Obama, stem from two lawsuits in which the suing states sought to invalidate the entire SAVE program.

How will the injunctions impact borrowers on the SAVE program?

The determinations do not impact the roughly 400,000 borrowers who have seen over $5.5 billion in debt forgiveness under the plan already.

Other borrowers on the SAVE Plan may not be as lucky. The assistance they are already receiving through the program is unaffected while other benefits seemingly are.

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As part of the Kansas ruling, the Education Department won’t be allowed to implement parts of the SAVE program meant to help students who had larger loans and could have their monthly payments lowered and their required payment period reduced from 25 years to 20 years. The order from the Missouri judge says the Education Department can’t forgive loan balances going forward but could still lower monthly payments.

For now, the Biden administration cannot forgive any more debt for borrowers on the SAVE Plan, and cannot cut payments for borrowers as planned in July. It’s also currently unclear whether the “brief processing forbearance” many borrowers were told they would be placed into for July will still happen.

What comes next for the SAVE program?

The orders are preliminary, meaning the injunctions imposed by the judges would remain in effect through a trial of the separate lawsuits. However, to issue a temporary order each judge had to conclude that the states were likely to prevail in a trial.

That also means it’s too soon to say what longer-term impact the injunctions will have on the SAVE Plan.

The White House said it strongly disagrees with the judges’ rulings and would continue to defend the program, and use every available tool to give relief to students and borrowers.

In a statement, White House press secretary Karine Jean-Pierre said the Biden administration “will never stop fighting for students and borrowers — no matter how many roadblocks Republican elected officials and special interests put in our way.” On Tuesday, she said the Department of Justice will appeal both decisions.

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The Federal Student Aid office of the Department of Education notes that it is “assessing the rulings.” Officials also explain that these injunctions do not prohibit borrowers from enrolling in the SAVE Plan.

“The Biden-Harris Administration’s SAVE Plan is the most affordable repayment plan in history,” Education Secretary Miguel Cardona said in a statement Tuesday. “But Republican elected officials and special interests sued to block their own constituents from being able to benefit from this plan – even though the Department has relied on the authority under the Higher Education Act three times over the last 30 years to implement income-driven repayment plans.”

More than 8 million borrowers have enrolled in the SAVE Plan since it launched last summer.

The Associated Press contributed to this report.

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