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A Major Part of Biden's Student Loan Repayment Plan Is Restored

·2 mins

Major components of President Biden’s student loan repayment plan can continue to operate as lawsuits challenging it wind through the legal system, a federal appellate court ruled. That frees the administration to cut certain borrowers’ payments by as much as half, a benefit that had been previously scheduled but blocked.

The order, from the U.S. Court of Appeals for the 10th Circuit, is the latest twist in a saga that began to unfold last week after two federal judges temporarily suspended parts of the plan known as SAVE. That program, which has about eight million enrollees, ties borrowers’ monthly payment amounts to their income and household size.

Two judges, one in Kansas and another in Missouri, last Monday issued separate preliminary injunctions, which are tied to lawsuits that were filed by two groups of Republican-led states that seek to upend the SAVE program.

The Kansas order suspended parts of the program that were not yet in place, including a big decrease in monthly payments for people with undergraduate debt — to 5 percent of their discretionary income from 10 percent — which was to take effect on July 1. The judge in Missouri blocked new debt cancellation through the SAVE program, though legal experts initially said it wasn’t clear how widely that ruling should be interpreted.

To comply with the Kansas district court’s injunction, the Education Department said it would pause monthly bills for borrowers in the SAVE program who are required to make payments as it reconfigured those amounts once again. More than four million low-income borrowers qualify for $0 monthly payments. More than 124,000 borrowers had already received billing notices calculated with their new lower payments, the Education department said in a court filing.

But now that an appeals court has temporarily lifted the Kansas injunction, the Biden administration can move forward and roll out the rest of the SAVE program, including the reduction in payments for undergraduate borrowers, while it appeals the preliminary injunction.