The Education Department has approved $613 million in student loan forgiveness under President Joe Biden’s new SAVE plan in recent weeks, totaling $5.5 billion for 414,000 borrowers since the beginning of the year. The program is receiving scrutiny from detractors, including 18 Republican-led states, who are attempting to block it. The SAVE plan, which stands for the Saving on a Valuable Education Plan, offers benefits such as lower monthly payments and unique fast-tracked student loan forgiveness for borrowers who took out smaller amounts initially.
In one legal challenge to the SAVE plan, a federal court in Kansas partially granted the Biden administration’s request to dismiss the lawsuit filed by eight states. The judge found that these states could not demonstrate harm from the student loan forgiveness benefits of the program. However, three states were allowed to proceed with the lawsuit due to potential impacts on their state revenues. The next likely step in this challenge is for the remaining states to seek a preliminary injunction to freeze the program during the litigation process.
Another legal challenge to the SAVE plan is being considered in a federal court in Missouri where a coalition of states led by Missouri is seeking to block the program. The judge in this case held a hearing last week to hear arguments for an injunction, with a ruling expected soon. The challengers argue that borrowers already enrolled in the program would not be impacted by the potential injunction, but the judge will ultimately decide the parameters of any ruling. This challenge is just the first step in a potential lengthy legal process.
Separately, the Biden administration prevailed in a legal challenge to another student loan forgiveness initiative called the IDR Account Adjustment, which credits borrowers towards their repayment term for past periods that previously wouldn’t have counted. A federal appeals court upheld the dismissal of this challenge, rejecting arguments that the program would harm Public Service Loan Forgiveness benefits and recruitment efforts. Borrowers have until June 30 to consolidate their loans to receive benefits from the IDR Account Adjustment, with one less legal challenge to be concerned about.
Overall, the Biden administration’s efforts to provide student loan forgiveness through programs like SAVE and the IDR Account Adjustment are facing legal challenges from Republican-led states and conservative-leaning groups. While the administration has scored some victories in the courts, challenges still remain, and the fate of these programs is uncertain. Borrowers who have received or are seeking loan forgiveness under these programs may be at risk depending on the outcome of ongoing legal battles. The rulings and decisions expected in the coming days and weeks will be crucial in determining the future of student loan forgiveness under these initiatives.
