Court Ruling Sparks Concerns for Student Loan Forgiveness

The 8th Circuit Court of Appeals recently declined to provide clarification on a ruling that blocked President Joe Biden’s SAVE student loan plan. This plan, which is a newly introduced income-driven repayment program, reduces the percentage of monthly income that borrowers are required to pay. The court’s decision has raised concerns that this ambiguous ruling might also impede other forms of student loan forgiveness.

On Monday, the court rejected a request from the Department of Education to clarify its August 9 ruling. This ruling, which halted the implementation of the SAVE Plan, came in response to a lawsuit filed by Republican-led states seeking to block the entire plan. The court’s August 9 decision was sweeping in scope, prohibiting the government from offering “any further forgiveness of principal or interest” for loans governed by income-driven repayment rules or the Federal Family Education Loan (FFEL) program. This broad ruling has prompted questions about its potential impact on other loan forgiveness programs.

Unlike previous injunctions that had only blocked specific aspects of the plan, this ruling represented a more extreme measure. In response, Biden and the Department of Education requested that the 8th Circuit Court clarify the extent of its ruling “to prevent further disruption to student loan programs unrelated to this litigation.” The Department of Education’s request highlighted concerns that the injunction might be interpreted as banning other forms of loan forgiveness. This includes forgiveness offered through income-based repayment plans, public service loan forgiveness, or existing income-contingent repayment plans that are not being challenged. The department sought clarification on whether these programs were still protected under the ruling.

In response to this request, the court issued a brief one-sentence reply: “The motion to clarify is denied.” This terse response has intensified concerns regarding the status of non-SAVE repayment plans.

The primary focus now is how President Biden and the Department of Education will respond to the court’s refusal to clarify its ruling. The injunction in question will remain in effect until the 8th Circuit Court revisits it or until the Supreme Court issues a ruling. Prior to the court’s refusal to clarify, the Department of Education had already filed an emergency request with the Supreme Court to overturn the 8th Circuit’s decision. The department argued that if the ruling is allowed to stand, it could “harm borrowers who have diligently repaid their loans for up to 25 years by denying forgiveness that has been available under the law for three decades.”

President Biden’s Saving on a Valuable Education (SAVE) Plan has faced significant opposition since its announcement last year. This opposition followed the Supreme Court’s decision to block Biden’s earlier attempt to cancel a large portion of student loan debt. Critics, including Republicans, argue that the SAVE Plan exceeds the authority of the president and imposes an unlawful financial burden on the states. Lawsuits filed in Kansas and Missouri claim that the comprehensive relief proposed by the plan is “unlawful” and that it creates financial strain for the states.

Thirty million is the number of borrowers that President Biden estimated the SAVE Plan could assist when he announced it last August. As of July, more than 8 million borrowers had enrolled in the program.

Following the August 9 ruling, the Department of Education announced that borrowers enrolled in the SAVE Plan would be in forbearance while the lawsuits against the plan are ongoing. During this period, borrowers’ payments can be paused, and they will not accrue interest. Additionally, time spent in forbearance will not count toward loan forgiveness.