Biden’s student loan forgiveness plan hits a massive roadblock as the U.S. 8th Circuit Court of Appeals strikes it down.
At a Glance
- 8th Circuit Court of Appeals ruled against Biden’s $500 million SAVE plan.
- Missouri AG Andrew Bailey led the legal challenge citing executive overreach.
- The ruling echoes a Supreme Court decision maintaining an enforcement block.
- The White House remains committed to defending the plan for borrowers’ benefit.
The Legal Battle Against Executive Overreach
The 8th Circuit Court of Appeals has ruled that the Secretary of Education overstepped legal boundaries by designing the SAVE plan, intended to cancel $500 million in student loans. Missouri Attorney General Andrew Bailey spearheaded a lawsuit against the Biden administration, arguing that the plan represented a dangerous overreach of presidential power. According to Bailey, such measures could unjustly compel working Americans to shoulder the financial burden of others. This decision underscores the court’s focus on delineating the limits of executive authority.
This court ruling extends beyond the current plan. The decision halts any similar executive actions aimed at student loan forgiveness by establishing a binding legal precedent. The White House maintains that the SAVE plan has already lowered costs for over 8 million borrowers, and it pledges to persist in its defense. The administration asserts that reducing financial burdens is vital, despite Republican-led legal challenges fighting to raise costs on constituents.
Implications for Student Loan Forgiveness
The court’s decision highlights a growing tension over the breadth of executive powers in enacting financial relief policies. Judge L. Steven Grasz, involved in the ruling, stated that the Education Secretary had “gone well beyond” his constitutional authority by attempting to implement the SAVE plan. Legal scrutiny is necessary due to sizeable financial implications, with estimates suggesting the program might have cost taxpayers $475 billion over a decade. This ruling challenges the administration’s interpretation of its authority in broad loan forgiveness.
“We are hard-pressed to conclude that Congress, by directing the Secretary to enact a repayment plan with varying payments based on income over a period not exceeding twenty-five years, believed it authorized the Secretary to wipe out any remaining principal or interest of any borrower in as few as ten years of low or no payments.” – Judge L. Steven Grasz
Under the SAVE plan, certain borrowers could have benefitted from reduced monthly payments, including zero-dollar payments for some. The proposal envisioned loan forgiveness after ten years for specific borrowers. Congressional Republicans have criticized the plan, suggesting it was an election tactic, aiming to secure votes. With the latest setback, borrowers under the plan are left in forbearance, facing uncertainty over their future payments.
The Future of the SAVE Plan
The legal injunction by the 8th Circuit substantially affects Biden’s broader strategy for offering loan forgiveness through SAVE and related income-driven repayment (IDR) programs. The injunction results from litigation driven by seven Republican-led states, underpinned by arguments that SAVE was an unauthorized move akin to backdoor cancellation. The ruling actions directly challenge the administration’s strategy, positing the SET as unconstitutional.
“Rather than implying by omission or other ambiguities, Congress has spoken clearly when creating a repayment plan with loan forgiveness or otherwise authorizing it — explicitly stating the Secretary should cancel, discharge, repay, or assume the remaining unpaid balance” – Judge L. Steven Grasz
Congress is now contemplating proposals to repeal SAVE alongside other IDR plans, replacing them with alternatives that question the statutory validity of large-scale loan forgiveness. Future borrowers might experience increased monthly payments by roughly $200 if existing repayment structures are reversed. This ruling significantly impacts debates over legislative actions concerning student debt relief, hinting at potential sweeping reforms ahead.
