“The Tenth Circuit sided with student loan borrowers,” Education Secretary Miguel Cardona said in a statement Monday. “President Biden, Vice President Harris and I remain committed to our work to fix a broken student loan system and make college more affordable for more Americans.”
With the ban temporarily lifted, the department said Monday that borrowers with undergraduate debt will see their payments cut from 10 percent to 5 percent of income above 225 percent of the federal poverty line. Borrowers who also have graduate loans will have their payments lowered by the weighted average between 5 percent and 10 percent.
The appeals court ruled days after the Biden administration suspended payments and interest charges for 3 million people enrolled in Save in response to the injunction. Those borrowers will remain in forbearance this month and will be expected to pay their first lowered payment in August, according to the Education Department.
Borrowers who already had been in forbearance before Crabtree’s court ruling — because servicers needed to recalculate their lower monthly payment — are also expected to make their first monthly payment in August. The department said anyone who received a bill from a federal loan servicer reflecting July’s lower payment is expected to make a payment this month. The ruling has no bearing on Save enrollees who qualify for $0 monthly payments because their earnings are so low.
The legal wrangling stems from a lawsuit originally brought in Kansas by 11 Republican-led states, which alleged that Biden exceeded his authority by creating a repayment plan that could cost more than $230 billion over the next decade. Crabtree agreed the department failed to clearly show that Congress authorized the repayment plan and said the program’s economic impact would require congressional input.
Despite the weekend win with the appeals court, the Biden administration is still contending with another injunction in Missouri that has stopped the department from forgiving any loans under the Save plan. The agency has already approved $5.5 billion in loan cancellation for 414,000 enrollees who met the plan criteria by originally borrowing less than $12,000 and paying down their debt for at least 10 years.
In that case, U.S. District Judge John A. Ross agreed with Missouri Attorney General Andrew Bailey and five other Republican-led states that Biden probably lacks the authority to erase debts through the Save plan. He also agreed that the loan-forgiveness component would harm the Missouri Higher Education Loan Authority, a quasi-state agency that services federal student loans and funds state scholarships.