“The Tenth Circuit Court of Appeals sided with student loan borrowers,” Education Secretary Miguel Cardona said in a statement Monday. “President Biden, Vice President Harris and I remain committed to fixing our broken student loan system and making college affordable for more Americans.”
With the ban temporarily lifted, the department announced Monday that undergraduate borrowers with debt will see their payments reduced from 10%. Up to 5 percent of income above 225 percent of the federal poverty line. Borrowers who also have graduate student loans will have their payments reduced by a weighted average of 5 percent to 10 percent.
The appeals court’s ruling came days after the Biden administration responded to the injunction by halting payments and interest charges to 3 million people enrolled in SAVE. Those borrowers will continue their grace period this month and are due to make their first reduced payments in August, according to the Education Department.
already Loan borrowers who were in payment deferral before Judge Crabtree’s ruling — because their loan servicers had to recalculate their lower monthly payments — are also due to make their first monthly payment in August. The department said people who received bills from federal loan servicers reflecting the July payment reductions are due to make their payments this month. The ruling does not affect Save subscribers who qualify for $0 monthly payments because their incomes are so low.
The legal battle originally stemmed from a lawsuit filed in Kansas by 11 Republican-led states alleging that President Biden exceeded his authority by creating a repayment plan that could cost more than $230 billion over the next decade.Crabtree agreed that the Department failed to clearly show that Congress had approved the repayment plan, and said the economic impact of the program requires congressional input.
Despite the weekend appeals court victory, the Biden administration is still fighting a separate Missouri injunction blocking forgiveness of loans under the Save plan. The department has already approved $5.5 billion in loan forgiveness for 414,000 enrollees who met the plan’s criteria of initially borrowing less than $12,000 and repaying their debts for at least 10 years.
In the case, U.S. District Judge John A. Ross agreed with Missouri Attorney General Andrew Bailey and five other Republican-led states that Biden likely lacks the authority to cancel debt through the Save Plan. He also agreed that elements of loan forgiveness would adversely affect the Missouri Higher Education Loan Authority, a quasi-state agency that services federal student loans and funds state scholarships.
