A federal appeals court on Thursday issued an order temporarily halting the Biden administration from implementing its new student loan repayment plan, known as SAVE.
“We are assessing the impacts of this ruling and will be in touch directly with borrowers with any impacts that affect them,” an Education Department spokesperson said.
The St. Louis-based 8th U.S. Circuit Court of Appeals seems to have blocked the entire Saving on a Valuable Education plan, said higher education expert Mark Kantrowitz.
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Previously, only parts of the plan were on hold amid a flurry of legal challenges to the relief program.
SAVE plan mired in legal troubles
The Biden administration rolled out the SAVE plan in the summer of 2023, describing it as “the most affordable student loan plan ever.” Indeed, the terms of the new income-driven repayment plan are the most generous to date, making it controversial among critics of debt forgiveness.
So far, around 8 million borrowers have signed up for SAVE, according to the White House.
SAVE comes with two key provisions that legal challenges have targeted: It has lower monthly payments than any other IDR plan, and it leads to quicker debt erasure for those with small balances.
In late June, two federal judges in Kansas and Missouri temporarily halted those parts of SAVE, after a number of red states argued that the Education Department overstepped its authority and essentially was trying to find a roundabout way to forgive student debt after the Supreme Court blocked its sweeping plan in June 2023.
The Biden administration successfully appealed the injunction against SAVE that stopped it from lowering borrowers’ payments, but it now may be blocked from doing so again. Prior to Thursday’s ruling, the expedited forgiveness provision was still on hold.
Before the legal challenges, the Education Department had already forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE Plan.