US judges block parts of key Biden student debt plan

By Nate Raymond

(Reuters) -Two federal judges in Kansas and Missouri on Monday sided with several Republican-led states and partially blocked Democratic President Joe Biden’s administration from moving forward with a key student debt relief initiative that would cost billions of dollars.

U.S. District Judge Daniel Crabtree in Wichita, Kansas, blocked the U.S. Department of Education from proceeding with parts of a plan set to take effect July 1 designed to lower monthly payments and speed up loan forgiveness for millions of Americans.

He ruled shortly before U.S. District Judge John Ross in St. Louis, Missouri, issued a preliminary injunction barring the department from granting further loan forgiveness under the administration’s Saving on a Valuable Education (SAVE) Plan.

The SAVE Plan provides more generous terms than past income-based repayment plans, lowering monthly payments for eligible borrowers and allowing those whose original principal balances were $12,000 or less to have their debt forgiven after 10 years.

Biden announced the SAVE Plan in 2022, alongside a separate, broader plan that would have fulfilled a campaign promise by cancelling up to $20,000 in debt for up to 43 million Americans.

That plan would have canceled about $430 billion in debt but was blocked by the conservative-majority U.S. Supreme Court in June 2023 after several Republican-led states challenged it. But the Supreme Court’s ruling did not address the SAVE Plan.

The White House has said that over 20 million borrowers could benefit from the SAVE plan. The administration in May said that 8 million are already enrolled, including 4.6 million whose monthly payments have been reduced to $0.

But Republican state attorneys general in a pair of lawsuits filed beginning in March argued the rule that created the SAVE Plan was unlawful and the Education Department lacked authority to create it.

The administration had estimated the SAVE Plan would cost $156 billion over 10 years. But the states said that estimate assumed the Supreme Court would uphold the broader student debt plan and as a result will now cost $475 billion over a decade.

Eleven states sued in Kansas, though Crabtree earlier this month dismissed eight of their claims while finding that South Carolina, Texas and Alaska “just barely” had legal standing to pursue their case. Six other states had sued in Missouri.

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