A federal appeals court is allowing the U.S. Department of Education to move forward with a plan to lower monthly payments for millions of student loan borrowers, setting aside a lower court ruling last week.
The 10th U.S. Circuit Court of Appeals’ ruling puts back on track a central part of President Joe Biden’s plan to address student debt, a rule that would reduce the 10% of discretionary income to the 5% required for some borrowers who qualify for repayment plans. Pay.
The lowered payment threshold was set to take effect on July 1, but federal judges in Saskatchewan and Missouri last week blocked much of the government’s student loan repayment plan in two separate rulings. Sunday’s ruling means the department can continue to enforce the reduced payments that have been calculated while it appeals.
Persis Yu, deputy executive director of the Student Borrower Defense Center, which advocates for the elimination of student debt, said the rulings create a difficult environment for borrowers. The moratorium granted by the 10th Circuit is temporary, it said, leaving many borrowers in the dark about future financial obligations.
“Borrowers now have to make decisions about their financial lives, but they don’t know the very basic information they need to make informed decisions,” Yu said.
The Biden administration created the SAVE program last year to replace other existing income-based repayment plans offered by the federal government. It allows many people to qualify for lower payments and provides forgiveness to borrowers who have been repaying for at least 10 years and who originally borrowed $12,000 or less.
U.S. Education Secretary Miguel Cardona said the Biden administration remains committed to “fixing the broken student loan system and making college affordable for more Americans.”
The appeals court ruling does not affect an injunction issued by a federal judge in Missouri that prevents the Department of Education from forgiving future loan balances.
The bans are the result of lawsuits filed by Republican-led states seeking to invalidate the Biden administration’s entire loan forgiveness program, which was first made available to borrowers in the summer of 2023 and has now seen at least 150,000 people have their loans canceled. The suing states argued that the administration’s plan was a workaround after the Supreme Court struck down the original student loan forgiveness plan earlier that year.
