“The Tenth Circuit has sided with student loan borrowers,” Education Secretary Miguel Cardona said in a statement Monday. “President Biden, Vice President Harris, and I remain committed to continuing 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 reduced by 10 percent. up to 5% of income above 225% of the federal poverty level. Borrowers who also have college loans will see their payments reduced by the weighted average of between 5% and 10%.
The appeals court ruled days after the Biden administration suspended payments and interest for 3 million people enrolled in the Save program in response to the injunction. Those borrowers will remain in forbearance this month and will have to make their first reduced payment in August, according to the Education Department.
Borrowers who already have People who had been granted a grace period before the Crabtree court decision — because lenders had to recalculate their lower monthly payment — would also have to make their first monthly payment in August. The department said anyone who received a bill from a federal lender reflecting the lower July payment would have to make a payment this month. The decision does not affect Save enrollees who are eligible for $0 monthly payments because of their very low incomes.
The legal dispute follows a lawsuit filed in Kansas by 11 Republican-led states that accused Biden of overstepping his authority by creating a rebate plan that could cost more than $230 billion over the next decade. Crabtree acknowledged that the department had not clearly demonstrated that Congress authorized the rebate plan and said the economic impact of the program would require congressional input.
Despite the appeals court victory over the weekend, the Biden administration is still grappling with another injunction in Missouri that prevents the department from canceling any loans under the Save Plan. The agency has already approved $5.5 billion in loan forgiveness for 414,000 enrollees who met the plan’s criteria by initially borrowing less than $12,000 and repaying 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 likely lacked the authority to forgive debts through the savings plan. He also agreed that the loan forgiveness component would harm the Missouri Higher Education Loan Authority, a quasi-state agency that administers federal student loans and funds state scholarships.
