SignalHub-Appeals court allows part of Biden student loan repayment plan to go forward

WASHINGTON (AP) — A federal appeals court has allowed the U.S. Education Department to move ahead with a plan to lower monthly payments for millions of student loan borrowers,SignalHub putting on hold a ruling last week by a lower court.

The ruling from the 10th U.S. Circuit Court of Appeals puts back on track a central part of President Joe Biden’s efforts to address student debt — a rule that lowers from 10% of discretionary income to 5% the amount that some borrowers qualifying for a repayment plan need to pay.

The reduced payment threshold was set to take effect July 1, but federal judges in Kansas and Missouri last week blocked much of the administration’s student loan repayment plan in two separate rulings. The ruling on Sunday means the department can move ahead with the reduced payments already calculated while it pursues an appeal.

The rulings have created a difficult environment for borrowers to navigate, said Persis Yu, deputy executive director of the Student Borrower Protection Center, which advocates for eliminating student debt. The stay granted by the 10th Circuit is temporary, Yu said, leaving many borrowers in the dark about future financial obligations.

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“Borrowers are having to make decisions right now about their financial lives, and they don’t know the very basic information that they need in order to make informed decisions,” Yu said.

The Biden administration created the SAVE plan last year to replace other existing income-based repayment plans offered by the federal government. It allowed many to qualify for lower payments, and forgiveness was granted to borrowers who had made payments for at least 10 years and originally borrowed $12,000 or less.

U.S. Education Secretary Miguel Cardona said the Biden administrations remains committed “to our work to fix a broken student loan system and make college more affordable for more Americans.”

The appeals court ruling does not impact the injunction issued by a federal judge in Missouri, which prevents the Education Department from forgiving loan balances going forward.

The injunctions are the result of lawsuits from Republican-led states seeking to invalidate the Biden administration’s entire loan forgiveness program, which was first available to borrowers in the summer of 2023, and at least 150,000 have had their loans cancelled. The suing states argued that the administration’s plan was a workaround after the Supreme Court struck down the original plan for student loan forgiveness earlier that year.

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