On Wednesday, the Supreme Court ruled to keep an injunction halting one of the key provisions of President Joe Biden's changes to the federal student loan program. The court upheld a lower court's block on the Saving on a Valuable Education (SAVE) plan—an income-driven repayment plan that would have drastically reduced the amount many borrowers would have to pay on their loans before receiving forgiveness.
In 2022, Biden announced plans to enact widespread, one-time student loan forgiveness. While that plan was halted by the Supreme Court last year, several other elements of Biden's policy changes—including the SAVE plan—went untouched. However, several Republican states launched lawsuits against the program, arguing that the plan's incredibly generous terms amounted to an illegal overuse of executive spending power.
Just how generous are these terms? Under SAVE's predecessor, borrowers were required to pay 10 percent of their discretionary earnings (calculated as income above 150 percent of the federal poverty line) for 20 years in order to receive forgiveness. Under SAVE, borrowers only have to pay 5 percent of their discretionary income, now calculated as income above 225 percent of the federal poverty level. Borrowers can also obtain forgiveness after just 10 years if their balance is less than $12,000.
If allowed to continue, the fiscal impact of the SAVE program will be staggering. The program is estimated to cost as much as $536 billion over the next decade—about as much as one-time debt cancelation alone.
In June, two federal judges blocked parts of the program. The following month, a judge from the U.S. Court of Appeals for the 8th Circuit placed an injunction completely blocking the program. The legal battle over SAVE reached the Supreme Court earlier this month, and the Court is expected to eventually issue a formal ruling on the program. However, the Court's ruling today means SAVE will remain blocked for the foreseeable future.
The Supreme Court's decision is hardly surprising. Despite making student debt cancellation a core priority of his administration, Biden simply doesn't have the power to introduce sweeping plans that cost taxpayers hundreds of billions of dollars without first getting Congressional approval. Yet, this hasn't kept Biden from trying increasingly unconventional attempts to enact widespread loan forgiveness—or from facing legal defeats.
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