Joe Biden's Student Loan Reform Has Cut Payments, In Many Cases To Zero. Two Judges Just Stopped It.

The 'major questions' doctrine is unbelievable bullshit.

Federal judges in Kansas and Missouri, ruling in two different lawsuits, blocked parts of Joe Biden’s signature student loan reform yesterday, so thanks a lot red-state attorneys general: You just created a lot of chaos and made life measurably more uncertain for millions of borrowers who anticipated lower payments and eventual loan forgiveness.

The good news, as we’ll get to, is that the challenges look like bullshit because the repayment program is solidly based in existing federal law. The bad news, of course, is that federal law and legal precedent stopped meaning anything under the present US Supreme Court years ago.

The rulings both go after Biden’s “Saving on a Valuable Education” (SAVE) loan repayment plan, which was first proposed in January 2023 as an improvement of already-existing Income-Driven Repayment (IDR) plans. The basic idea of all such plans is that once a borrower makes a certain number of payments — usually 20 to 25 years, or 10 years for public servants like teachers and others — the remaining balance on their debt is forgiven.

SAVE improved on that basic formula in important ways aimed at reducing monthly payments, preventing loan interest from piling up forever, and allowing borrowers with small loan balances to reach the forgiveness threshold much more quickly. The two rulings yesterday put the kibosh on a couple of key features, at least until the Biden administration appeals; the entire SAVE program now seems eventually headed for the Supreme Court.

So far, the Biden administration has wiped out student loan debt from almost five million borrowers, saving regular people $167 billion as of May.

The SAVE program specifically has already deleted the student debts of 414,000 Americans who had loan balances under $12,000 and had made 10 years’ worth of payments. It has also meant lower monthly loan payments for nearly eight million borrowers, with low-income borrowers — those making roughly $16 an hour or less — seeing their payments going down to zero dollars a month. And — another important improvement! — those “zero dollar a month” payments counted for the first time toward the 20 years of payments after which the outstanding debt is forgiven. (A lot of 50- and 60-year-olds all got their loans forgiven at once last August, when months spent “in forbearance” counted for the first time. I was one of them. And like many others I know, I wept.)

Let’s dig in and unscramble this fuckery.

As the Washington Post explains (gift link), the Kansas case, originally brought by a coalition of 11 red state AGs fronted by Kansas’s Kris Kobach (Hmmm), challenged a part of the SAVE plan that was supposed to go into effect in July. Up to now, most income-driven plans have set a borrower’s monthly payments at 10 percent of the borrower’s “discretionary income,” which under SAVE was increased to 225 percent of the federal poverty rate. In July, that formula was set to go to just five percent, cutting most SAVE payments in half. (Borrowers with grad-school debt would pay a portion between five and 10 percent, based on how much of their debt was for undergrad or graduate studies.)

US District Judge Daniel D. Crabtree, an Obama appointee, put the reduced payments on hold because, he said, the Education Department hadn’t adequately demonstrated that such low payments had been intended by Congress when it established income-driven repayment in the 1993 Higher Education Act.

He said the economic impact of the program, which the Congressional Budget Office estimates will cost some $230 billion over the next decade, would require congressional input.

Oh get out of here and stop drinking the “major questions doctrine” Flavor-Aid, Judge Crabtree. On the upside, the Post notes that Crabtree had already disqualified the claims made by eight of the 11 states in the case, leaving only Alaska, Texas, and South Carolina as plaintiffs, so that may help, at least.

Crabtree also rejected, kind of, the Republican AGs’ claim that SAVE was just a sneaky Biden administration end run around the Supreme Court’s June 2023 decision tossing out Biden’s proposal to forgive up to $10,000 in student debt for most borrowers. That would be weird, seeing as how SAVE was proposed six months before the decision, and under a different federal law, at that. But as we say, that’s sort of moot since Crabtree considered the cost of the lower payments enough to make that part of SAVE a “major question” that only Congress can decide. We say “major questions” is broccoli and we say the hell with it.

We’ll add that Politico points out the new lower payments were the only part of SAVE that Crabtree blocked in his order,

citing concerns about the feasibility of unwinding the parts of the program that had already been implemented. He also wrote that the Republican states’ delay in filing the lawsuit months after the plan was announced undercut their arguments that there was an immediate need to block the entire program.

Thank the lord for small mercies.

However the other ruling, by Eastern District of Missouri District Judge John A. Ross, also an Obama appointee, is a much broader decision that stays the Education Department from enacting any further loan forgiveness for SAVE borrowers while the case moves forward. (Yes, borrowers must of course still keep making payments. No stay there.)

That case was brought by Missouri Attorney General Andrew Bailey and joined by five other states; it argued, like the 2023 loan forgiveness case, that the Missouri Higher Education Loan Authority (MOHELA), a state agency that’s kinda also an independent student loan servicer, loses revenue when loan balances are forgiven, especially on the shorter timeline for smaller loans in SAVE.

As WaPo explains, Ross

also questioned whether Congress envisioned a loan repayment plan as far-reaching as what the Biden administration created in 2023, signaling that the Save plan could be in jeopardy of being overturned.

The Biden administration has made clear it intends to fight back against both rulings, arguing that hell yes Congress gave the Education Department the ability to forgive student debt, which it has been doing with income-driven repayment plans for decades (you dipshits).

In a statement Monday, White House Press Secretary Karine Jean-Pierre said the administration will continue “using every tool available to give students and borrowers the relief they need,” and will continue enrolling borrowers in the SAVE plan while the court cases play out. She also read the Republican AGs for filth:

“It’s unfortunate that Republican elected officials and their allies have fought tooth and nail to prevent their constituents from accessing lower payments and a faster path to debt forgiveness — and that courts are now rejecting authority that the Department has applied repeatedly for decades to improve income-driven repayment plans.” 

These lawsuits really do represent some unprecedented fuckery, because the Higher Education Act gives the Secretary of Education the authority to set the terms of income-driven repayment plans, full stop. SAVE is the fourth type of IDR plan the Department has rolled out since 1993, but then, maybe congressional authorization doesn’t mean congressional authorization anymore.

In the meantime, the Federal Student Aid site is still taking applications for SAVE repayment plans, because nothing in either order blocks that. This is very far from over.

---

Joe Biden's New Income-Based Student Loan Forgiveness Plan Wipes Out $1.2 Billion In Debt In First Go

Supreme Court: You Owe Your Soul To The Student Debt Store

---

[WaPo / Alaska v. Department Of Education order / Missouri v. Biden order / White House / Politico]

Yr Wonkette is funded entirely by reader donations. If you can, please become a paid subscriber. Or if a one-time donation works better for you, that too would be awesomesauce. And unlike a student debt servicer, we won’t track you down and extract the donation through your windpipe — we do PayPal instead!