Republican States File Emergency Supreme Court Appeal to Halt Biden’s SAVE Plan

This week, Republican-led states escalated their efforts to block one of President Biden’s key student loan relief programs by filing an emergency appeal with the Supreme Court. In this article, we will explore the ongoing legal battles, their implications for borrowers, and the potential final say of the Supreme Court.

Legal challenges to the SAVE plan

In the spring, a coalition of more than a dozen states filed two separate legal challenges in two different courts — Kansas and Missouri — to block Biden’s new Saving on a Valuable Education (SAVE) plan. This income-driven repayment (IDR) program reduces monthly payments and can accelerate student loan forgiveness for certain groups of borrowers. A flurry of court rulings resulted in certain elements of SAVE getting temporarily blocked, while other aspects of the program were allowed to continue — at least for now. 

But several states have now asked the U.S. Supreme Court to intervene.

Lower student loan payments under SAVE were initially blocked, but appeals court stepped in

In June, a federal district court judge in Kansas blocked features of the SAVE plan that were scheduled to go into effect this July. 

More than eight million borrowers have already signed up for SAVE or switched from other IDR plans, lowering their payments in the process. At least 400,000 borrowers have received student loan forgiveness under the program, which can shorten their repayment term to as little as 10 years if they took out small initial federal student loan balances.

But some elements of SAVE were not set to go into effect until July 1, 2024. These include a modified repayment formula that would slash payments in half for undergraduate borrowers and administrative improvements designed to streamline IDR overall, including the ability for borrowers to opt into automatic annual income recertification by allowing the Education Department and IRS to share information.

Preliminary injunction issued

In response to one of the two legal challenges, the federal judge in Kansas issued a preliminary injunction — a temporary order blocking implementation SAVE while the legal process continues. But because the judge found that the states had waited too long to bring their challenge, he only blocked the SAVE features scheduled to go into effect on July 1. Critically, this included the reduction in payments, which the Education Department and its contracted loan servicers were already in the process of implementing.

Small win for borrowers from the 10th Circuit Court of Appeals

The Biden administration quickly appealed the Kansas ruling to the 10th Circuit Court of Appeals, arguing that implementing the injunction just days before lower payments were set to go into effect would be logistically challenging and could throw the entire student loan system into disarray. 

The 10th Circuit agreed and stayed (or blocked) the Kansas injunction. This allowed the Biden administration to continue implementing the lower payments under SAVE that had mostly already been calculated for borrowers. Those payments have now already started to go into effect.

States ask U.S. Supreme Court to stop Biden’s student loan relief

This week, three states — South Carolina, Texas and Alaska — filed an emergency petition with the United States Supreme Court, asking the court to block the 10th Circuit’s order. 

Last year, the Supreme Court struck down President Biden’s sweeping student loan forgiveness plan, which would have eliminated $10,000 or up to $20,000 in federal student debt for qualifying borrowers. In a 6-3 ruling, the Court’s conservative majority ruled that the Biden administration had exceeded its authority when it relied on the HEROES Act. This 2003 statute grants the Education Department wide latitude to modify or waive nearly any provision governing federal student aid in response to a national emergency.

“The Court must unfortunately step in again,” wrote the states in its latest petition to the Supreme Court, arguing that the 10th Circuit’s ruling should be reversed, allowing the earlier injunction to go back into effect. 

Importantly, the Biden administration established the SAVE plan under an entirely distinct authority through the Higher Education Act. So legally, the current challenge is distinguishable from the lawsuit over Biden’s earlier student loan forgiveness plan.

Separate injunction blocking student loan forgiveness under SAVE remains in effect (for now)

In a separate ruling last month, a federal district court judge in Missouri — also considering a legal challenge to SAVE — issued a different injunction. The Missouri judge allowed the July 1 changes to go into effect, including lower payments for undergraduate borrowers. But the judge blocked student loan forgiveness, questioning whether loan forgiveness had been authorized by Congress under the Higher Education Act.

The Biden administration indicated that it will appeal this ruling, as well. Such an appeal would go to the 8th Circuit Court of Appeals. 

But first, attorneys for the administration have asked the Missouri court for clarification on the scope of its ruling. Borrower advocates argue that the court merely blocked fast-tracked student loan forgiveness (i.e., 10 years), a unique feature of the SAVE plan designed to benefit borrowers who attended trade schools or community colleges and who took out small amounts of debt. Most borrowers would be eligible for student loan forgiveness in 20 or 25 years, just like other IDR plans. But the language in the court’s ruling could be read to cover any student loan forgiveness under the SAVE program.

Supreme Court may have final say

The Supreme Court only accepts a small number of cases relative to the appeals it receives. So just because an appeal is filed does not mean the Supreme Court will act. Emergency appeals from the 10th Circuit first go to Justice Neil Gorsuch for review, although he can refer the matter to the full court if he chooses.

Even if the Supreme Court punts for now, the reprieve may only be temporary. With two separate legal challenges against the SAVE plan pending in two separate courts and two different orders already having been issued, it may be inevitable that the Supreme Court gets involved. 

The nation’s highest court is more likely to accept an appeal when the subject matter is a significantly important national issue and when there are different rulings from different circuit courts on the same matter.