The Supreme Court has put a hold on the Biden administration's latest multibillion-dollar plan aimed at reducing payments for millions of student loan borrowers. The plan, known as the SAVE plan, seeks to streamline loan cancellation processes and lower monthly income-based repayments from 10% to 5% of a borrower's discretionary income.
The plan also includes a provision that would exempt borrowers from making payments if their income falls below 225% of the federal poverty line, which is currently set at $32,800 per year for a single person.
However, the plan faced legal challenges from Republican-led states, with cost estimates varying between $276 billion, as cited by the administration, and $475 billion over 10 years, as claimed by the challenging states.
Two separate legal challenges to the SAVE plan have been progressing through federal courts, with rulings from Kansas and Missouri blocking significant portions of the plan. The 10th U.S. Circuit Court of Appeals allowed the Education Department to proceed with lower monthly payments, while the 8th U.S. Circuit Court of Appeals blocked most of the plan.
The Supreme Court declined to intervene at this stage, expecting the lower courts to issue further decisions promptly. Last year, the Court's conservative majority rejected a previous plan that aimed to forgive over $400 billion in student loan debt.
The Justice Department had suggested the Supreme Court could take up the legal battle over the SAVE plan immediately, but the justices chose not to do so. The administration is awaiting a more comprehensive ruling from the appeals court on the fate of the plan.
Debt forgiveness under the plan that had already been granted remains unaffected by the legal challenges. The Education Department continues to seek ways to alleviate the burden of student loan debt for borrowers, while navigating the legal hurdles posed by the ongoing litigation.
