Supreme Court keeps Biden’s SAVE plan blocked for now

The Biden administration’s new loan repayment plan remains on hold this week after the U.S. Supreme Court refused to lift an injunction blocking the plan.

On Wednesday, Justice Brett Kavanaugh also declined to take up a lawsuit filed by seven Republican-led states challenging the Saving on a Valuable Education plan. The order from the U.S. Court of Appeals for the Eighth Circuit, issued last week, overturned a separate appeals court decision that had allowed SAVE to move forward. All of this has left borrowers reeling.

The decision means payments will remain suspended for more than eight million borrowers while the legal battle over the SAVE plan continues. The plan, launched last year, offers borrowers lower payments and a faster path to loan forgiveness, among other benefits. Before the federal judges intervened, the Education Department had canceled more than $5 billion in loans for 414,000 borrowers under the SAVE plan.

Borrowers who want to apply for the SAVE program can fill out a PDF application, but the department has disabled the online form. Lending companies have temporarily suspended processing SAVE applications, the department said.

Missouri and six other Republican-led states filed a lawsuit in the spring against the Biden administration, which objected to the cost of the program and its loan forgiveness provisions. They argued, among other things, that the plan exceeded the department’s authority and was another version of the one the Supreme Court struck down last summer in Biden v. Nebraska. In addition, the plan would hurt states’ bottom lines, they argued, and result in lost revenue for the Higher Education Loan Authority of the State of Missouri (MOHELA), a state-created entity that services federal loans.

The Eighth Circuit ruled earlier this month that the states had a good chance of succeeding in their lawsuit and granted their request for a nationwide injunction. “The new SAVE plan, by contrast, is an order of magnitude broader than anything that has come before,” the judges wrote, noting that previous versions of income-based repayment plans “were relatively uncontroversial.”

The Biden administration appealed that decision to the Supreme Court, arguing that the appeals court “fundamentally erred” in issuing a nationwide injunction that caused “significant and irreparable harm to borrowers.”

Temporary injunctions are meant to preserve the status quo while courts consider the merits of a case. Eighth Circuit judges said the injunction would not disrupt the status quo for borrowers despite the fact that many of SAVE’s provisions have been in place since last fall. (Payments for affected borrowers had already been suspended under an earlier court order.)

If the justices were unwilling to vacate the order, Solicitor General Elizabeth Prelogar asked that they resume the case and hear oral arguments in November, a request the court also denied.

Opponents of debt relief welcomed the decision.

“We are pleased to see the Supreme Court allow the Eighth Circuit’s injunction against the illegal SAVE loan forgiveness plan to continue,” said Sheng Li, a trial attorney for the New Civil Liberties Alliance, a conservative nonprofit that urged the Supreme Court to reject the administration’s request. “There was no reason to lift the injunction because the Department of Education’s new loan forgiveness program is just as illegal as the one the Court struck down a year ago in Biden v. Nebraska.”

Rep. Virginia Foxx, a North Carolina Republican who chairs the House Education Committee, said in a statement that the Biden administration should “stop trying to force the passage of the SAVE program.”

“I don’t know how many times the Biden-Harris administration has to hear this before the message sinks in: Their student loan programs are illegal,” Foxx said.

Kavanaugh did not explain his decision but wrote that he expected the Eighth Circuit Court of Appeals to issue its decision on the lawsuit “as soon as possible.” At that point, the Biden administration could appeal again to the Supreme Court.

Consumer protection and debt relief advocates have sharply criticized the injunction in recent weeks.

“Borrowers have relied for decades on the stability and security of income-driven repayment plans like SAVE to help them repay their loans at affordable and predictable rates,” the Student Borrower Protection Center wrote in an amicus brief filed this week with the Eighth Circuit. “That was the status quo before the states brought this action. The injunctions in this case have needlessly wreaked havoc on the system, threatening the financial well-being of millions of borrowers.”

Kristin McGuire, executive director of Young Invincibles, an advocacy group focused on issues affecting young adults in higher education and other policy areas, said in a statement that the Supreme Court made “a serious and unfair error” on Wednesday.

“It is outrageous that politics continues to trump borrowers’ well-being and financial livelihood,” McGuire said. “The SAVE plan is a legal and fair form of student debt cancellation, and these political battles should not prevent borrowers from getting the relief they so desperately need.”

The Eighth Circuit lawsuit is one of two filed by Republican-led states challenging the plan. In the other, led by Alaska, the U.S. Court of Appeals for the 10th Circuit ruled differently, saying the Biden administration could move forward with implementing the SAVE plan. Last week, in light of the Eighth Circuit’s decision, the 10th Circuit halted its review of the lawsuit because the decision was national.

“This is not how the judicial process is supposed to work,” Prelogar wrote in a brief filed with the Supreme Court. “A circuit should not be able to prevent the development of ‘considered circuit precedent’ by issuing a universal injunction in circumstances where a more tailored remedy would fully redress the harm the plaintiffs claim.”