Biden could move forward with plan to reduce monthly payments for millions of student loan borrowers
A federal appeals court has allowed the U.S. Department of Education to proceed with a plan to reduce monthly payments for millions of student loan borrowers, halting a lower court ruling last week.
The ruling by the 10th U.S. Circuit Court of Appeals puts a central part of President Joe Biden’s effort to tackle student debt — a rule that reduces the 10% of discretionary income to 5% of the amount some borrowers who qualify for repayment programs must repay.
The reduced payment threshold was set to take effect July 1, but federal judges in Kansas and Missouri last week blocked The administration has largely scrapped its student loan repayment plan in two separate rulings. Sunday’s ruling means the department can proceed with the reduced payments that have been calculated while it pursues an appeal.
Persis Yu, deputy executive director of the Student Debtor Protection Center, which advocates for student debt relief, said the rulings have created a difficult environment for borrowers to navigate. Yu said the stay issued by the 10th Circuit Court of Appeals is only temporary, leaving many borrowers in the dark about their future financial obligations.
“Borrowers are now having to make decisions about their financial lives and they don’t have the most basic information they need to make informed decisions,” Yu said.
The Biden administration has created SAVE plan last year to replace other existing income-driven repayment plans offered by the federal government. It allows more people to qualify for lower payments and debt forgiveness for borrowers who have made payments for at least 10 years and originally borrowed $12,000 or less.
US Education Secretary Miguel Cardona said the Biden administration remains committed to “working to fix our troubled student loan system and make higher education accessible to more Americans.”
The appeals court’s ruling does not affect an order by a federal judge in Missouri that prevents the Department of Education from forgiving the debt in the future.
The orders are the result of lawsuits filed by Republican-led states seeking to completely invalidate the Biden administration’s debt-forgiveness program, which was first offered to borrowers in the summer of 2023 and has already had at least 150,000 people’s loans canceled. The states that sued argued that the administration’s plan was a temporary fix after the Supreme Court rejected the original plan to forgive student debt at the beginning of that year.
