WASHINGTON (AP) — A federal appeals court has allowed the U.S. Department of Education to move forward with a plan to lower monthly payments for millions of students with student loans, putting on hold a lower court ruling last week.
The ruling by the 10th U.S. Court of Appeals puts a key part of President Joe Biden’s efforts to tackle student debt back on track: a rule that lowers the amount some borrowers eligible for a repayment plan must pay from 10% of disposable income to 5%.
The lowered payment threshold was set to take effect July 1, but federal judges in Kansas and Missouri blocked much of the government’s student loan repayment plan in two separate rulings last week. The appeals court’s ruling Sunday means the department can move forward with the lower payments that have already been calculated.
The rulings have created a difficult environment for borrowers to navigate, said Persis Yu, deputy director of the Student Borrower Protection Center, which advocates for eliminating student debt. The reprieves granted by the 10th Circuit are temporary and subject to appeal, Yu said, leaving many borrowers in limbo about future financial obligations.
“Borrowers right now have to make decisions about their financial lives, and they don’t have the most basic information they need to make informed decisions,” Yu said.
The Biden administration created the SAVE plan last year to replace the federal government’s other existing income-based repayment plans. It allowed many to qualify for lower payments and provided forgiveness to borrowers who had made payments for at least 10 years and originally borrowed $12,000 or less.
The appeals court’s ruling does not affect a federal judge in Missouri’s order barring the Department of Education from forgiving loans in the future.
The orders come amid lawsuits from Republican-led states seeking to invalidate the Biden administration’s entire student loan forgiveness program, which first became available to borrowers in the summer of 2023, and at least 150,000 have seen their loans forgiven. The states suing argued that the administration’s plan was a temporary fix after the Supreme Court struck down the original student loan forgiveness plan earlier that year.
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