Student loan borrowers back in tumultuous spot amid latest legal challenges

Student loan borrowers are in a state of confusion — again.  

President Biden’s term has been marked by bold action on student loans followed by numerous legal challenges that are difficult for borrowers to keep track of, with the latest coming against his income-driven repayment plan called Saving on Valuable Education (SAVE).

“I think there’s a lot of moving pieces for borrowers … the chaos in the legal system is going to translate to chaos for borrowers and the [legal] system is not one that maneuvers quickly. I have a lot of concerns about what borrowers fall through the cracks, through all of this turmoil,” said Persis Yu, deputy executive director Student Borrower Protection Center.  

The SAVE plan began in October, when the Biden administration raised the income protected from payments from 150 percent above the federal poverty guidelines to 225 percent, while accrued unpaid interest outside of the calculated payments gets waived.  

Its second half was set to be implemented this July, changing monthly payments from 10 percent of discretionary income to 5 percent and issuing more loan forgiveness for certain borrowers who have been making payments on their debt over a certain period of time. 

Two cases hit the courts against the SAVE plan earlier this year, arguing it would hurt state revenues.  

“Yet again, the President is unilaterally trying to impose an extraordinarily expensive and controversial policy that he could not get through Congress,” a lawsuit led by Missouri said.  

The whole plan was initially halted temporarily before the judges in both cases ruled the administration could go forward with lowering monthly payments. The Education Department is still blocked from giving any more student loan forgiveness from the plan.  

While the rulings were developing, the department temporarily took down the applications for SAVE and put millions of borrowers in forbearance so they would not have to pay on their debt until a final ruling was made. 

“I know these rulings can be confusing for borrowers, and it remains our top priority to provide clarity to you and continue our work to make higher education more affordable and accessible for more students from all walks of life,” the Department of Education said in a letter to borrowers. 

Currently, some borrowers are still in forbearance until the end of the month but will be expected to start paying on their debt again in August. Applications for the SAVE plan are open, and borrowers are seeing their monthly payments decrease.

Republicans aren’t giving up, though, filing an emergency motion to the Supreme Court on Monday to stop the lowering of monthly payments, a move that concerns advocates because of the court’s conservative bent.

“Often, the Supreme Court will take up those cases to harmonize the case and bring them into one case. So, we were already hearing prior to Alaska and all these other states doing the emergency [motion] this was probably, or potentially going to end up at the Supreme Court,” said Natalia Abrams, president at the Student Debt Crisis Center. 

“It’s hard to have any hope with this current Supreme Court, even though we firmly believe the law is on our side, and these were completely legal decisions and plans that just seems like when we look at the [presidential] immunity case, the Chevron case or the environmental cases that the Supreme Court does not rule with on the side of people,” she added. 

The Biden administration has tried and failed to go up against the Supreme Court before, with the president’s plan for universal debt relief struck down by the high court in the summer of 2023.

Despite the failure of universal forgiveness, Biden has forgiven more student loans than any previous presidency, totaling more than $150 billion.

While student loan advocates appreciate Biden’s efforts with the SAVE plan, some argue it does not do much for voters who feel let down by the lack of blanket relief.

“As a borrower myself and someone who represents and talks to young adults about this issue, I think it’s just confusing. You’re trying to figure out, well, where’s the relief we were promised from the campaign,” said Van Freeman, senior director of policy and public affairs at Young Invincibles.  

“Why don’t they continue to work with us to forgive this debt, to live with the promise that they gave us about forgiving student loan debt?” Freeman added.  

And the legal battles over student loans won’t end with the SAVE plan, as Biden’s administration is finishing its rulemaking process to forgive more student loans, which will almost certainly face Republican lawsuits when the details are finalized.