By Nate Raymond
(Reuters) – A U.S. appeals court has allowed President Joe Biden’s administration to move forward with implementing a key part of a new student debt relief plan. The plan is intended to lower monthly payments for millions of Americans.
The 10th U.S. Court of Appeals in Denver on Sunday stayed an injunction issued last week by a Kansas judge at the behest of Republican states that argued the U.S. Department of Education’s debt restructuring plan was illegal.
The three-judge panel of the 10th Circuit did not provide a reason for granting the stay sought by the Democratic president’s administration. The Department of Education did not respond to a request for comment.
The Saving on a Valuable Education (SAVE) Plan offers more generous terms than previous income-based repayment plans, lowering monthly payments for eligible borrowers and allowing those whose original principal balance was $12,000 or less to have their debt forgiven after ten years become.
U.S. District Judge Daniel Crabtree in Wichita, Kansas, had concluded June 24 that the Higher Education Act of 1965 did not clearly authorize the kind of “unprecedented and dramatic expansion” of income-based repayment plans.
In his ruling in favor of the attorneys general from South Carolina, Texas and Alaska, Crabtree had challenged the plan and limited the scope of his decision by imposing only aspects of the SAVE plan that were not yet in effect.
But in short order, the government told the 10th Circuit that Crabtree’s ruling was only “technically prospective” and that the Department of Education and loan servicers would essentially have to reprogram complex software to calculate borrowers’ new monthly payments, prepare bill notices and process payments.
That work would take months and in the meantime, many borrowers who participated in the SAVE Plan would have to be placed in forbearance until their loans could be repaid with proper calculation of payments due, the U.S. Department of Justice argued on behalf of the government.
The Department of Education said last week that about 3 million borrowers who would have had lower monthly payments under SAVE would be put on hold. These borrowers would not accrue interest during that time.
The White House has said more than 20 million borrowers could benefit from the SAVE Plan. The government said in May that 8 million people have already been enrolled, including 4.6 million whose monthly payments have been reduced to $0.
Although the government filed a stay of Crabtree’s ruling following its request, it did not seek a similar stay of a separate order from a federal judge in Missouri that prohibited it from granting further loan forgiveness to borrowers under the SAVE Plan.
(Reporting by Nate Raymond in Boston; Editing by Alexia Garamfalvi and Jonathan Oatis)
