Federal Appeals Court Halts Biden's New Student Debt Relief Plan

A federal appeals court has blocked the Biden administration from implementing a new student debt relief plan that would lower monthly payments for millions of Americans. This ruling follows a request by seven Republican-led states and further complicates efforts to offer debt relief to eligible borrowers.

A federal appeals court on Thursday blocked President Joe Biden's administration from continuing to implement a new student debt relief plan designed to lower monthly payments for millions of Americans. The St. Louis-based 8th U.S. Circuit Court of Appeals granted a request by seven Republican-led states to put on hold parts of the U.S. Department of Education's debt relief plan that had not already been blocked by a lower-court judge.

The previous ruling by U.S. District Judge John Ross in St. Louis had temporarily stopped the department from granting further loan forgiveness under the administration's Saving on a Valuable Education (SAVE) Plan. This plan offers more generous terms than past income-based repayment plans, lowering monthly payments for eligible borrowers and allowing those with principal balances of $12,000 or less to have their debt forgiven after 10 years.

Missouri Attorney General Andrew Bailey led state attorneys general in asking the 8th Circuit to block the rest of the SAVE Plan. Bailey praised the one-page court order as a 'huge win for every American who still believes in paying their own way,' arguing the plan would burden working Americans with Ivy League debt.

An Education Department spokesperson indicated the ruling's impact is under review. Meanwhile, Biden, a Democrat, continues to defend the SAVE Plan announced in 2022 as part of a broader effort to cancel up to $20,000 in debt for up to 43 million Americans—a wider initiative blocked by the U.S. Supreme Court in June 2023.

The SAVE Plan, scheduled to take full effect on July 1, has already benefited more than 20 million borrowers. According to the Education Department, 8 million borrowers are already enrolled, with 4.5 million seeing monthly payments reduced to $0. So far, $5.5 billion has been granted to 414,000 borrowers under the plan.

Separate challenges to the SAVE Plan continue. Another federal judge in Kansas blocked parts of the plan last month, although that decision was partially stayed by the Denver-based 10th U.S. Circuit Court of Appeals. A group of Republican-led states has urged the U.S. Supreme Court to reinstate the Kansas judge's injunction.

(With inputs from agencies.)