A coalition of states with Republican leadership has initiated legal action against the Biden administration, aiming to dismantle a recently introduced student loan repayment scheme. This program, known as the SAVE Plan, is designed to offer millions of borrowers a quicker route to debt forgiveness along with reduced monthly payments.
The legal challenge was launched on Thursday by 11 states spearheaded by Kansas, asserting that the President exceeded his jurisdiction with the creation of the SAVE Plan, which has been operational since last year and has already led to the cancellation of loans for over 150,000 borrowers.
The contention revolves around the assertion that the SAVE Plan mirrors President Biden’s earlier student loan forgiveness attempt, which was invalidated by the Supreme Court the previous year. The lawsuit states, “Last time Defendants tried this the Supreme Court said that this action was illegal. Nothing since then has changed.”
Despite not commenting directly on the lawsuit, the Education Department highlighted that in 1993, Congress granted it the authority to establish the terms for income-driven repayment plans. The department remains committed to providing support and relief to borrowers, despite opposition from Republican officials.
The SAVE repayment plan, unveiled by Biden in 2022, was announced in conjunction with another initiative aimed at canceling up to $20,000 in debt for more than 40 million Americans. While the Supreme Court halted the debt cancellation plan following a lawsuit by Republican states, it did not review the SAVE Plan, which was still in development at the time.
This lawsuit against the SAVE Plan was filed as the White House was actively promoting the initiative. The administration reports that over 7.7 million borrowers have joined the plan, with more than 5 million benefiting from reduced monthly payments due to lower annual incomes.
Led by Kansas Attorney General Kris Kobach, the lawsuit seeks an immediate injunction to stop the plan and is supported by a consortium of states. Kobach criticized the president’s actions as blatantly defiant, asserting that Biden’s wishes do not align with legal permissions.
The SAVE Plan, though a modification of existing income-based repayment schemes from the 1990s, introduces more lenient conditions, including the potential for loan cancellation within a decade and measures to prevent interest accumulation for compliant borrowers.
Despite the anticipation of Republican challenges, the administration moved forward with the plan, adjusting existing schemes through federal regulation. However, the lawsuit argues that such significant amendments required Congressional approval.
The states involved in the lawsuit claim that the SAVE Plan could lead to various adverse effects, including diminishing incentives for public service careers and exacerbating recruitment and retention challenges in public schools. Furthermore, they fear the plan could unleash economic repercussions and increase susceptibility to fraud, necessitating enhanced protective measures by states.
If the legal challenge proves successful, it could mark the end of Biden’s efforts to provide widespread student loan relief, following the Supreme Court’s rejection of his broader cancellation strategy last year. The administration is now exploring a more constrained approach to mass loan cancellation through a different legal rationale.
