Biden’s SAVE student loan repayment plan faces fresh legal challenges from Republican-led states

Two groups of Republican-led states have sued President Joe Biden over the student loan repayment plan he launched last year, arguing he’s once again overstepping his authority to cancel student debt.

Some of the states, including Missouri, are among the same plaintiffs that sued the Biden administration over its sweeping student loan forgiveness program, which was struck down by the Supreme Court last year.

Eighteen Republican-led states have joined one of two lawsuits challenging the repayment plan known as SAVE (Saving on a Valuable Education). The plan lowers monthly payments and offers a shorter pathway to loan forgiveness for many low-income borrowers.

SAVE is separate from Biden’s latest student loan forgiveness proposals, unveiled Monday, which would automatically cancel student debt for millions of borrowers if enacted. But the new legal challenges suggest it’s likely some of these same states will challenge the new rules, which the Biden administration is attempting to implement ahead of the November election.

“Yet again, the President is unilaterally trying to impose an extraordinarily expensive and controversial policy that he could not get through Congress,” reads the lawsuit filed Tuesday by attorneys general in Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma.

“This latest attempt to sidestep the Constitution is only the most recent instance in a long but troubling pattern of the President relying on innocuous language from decades-old statutes to impose drastic, costly policy changes on the American people without their consent,” the lawsuit says.

Eleven other states, led by Kansas, filed an initial lawsuit over SAVE in late March.

Many Republicans have criticized Biden’s student loan policies as giveaways for college graduates, transferring the cost of their degrees to taxpayers who chose not to go to college or who already paid for it themselves, and argue that he’s circumventing the Supreme Court’s earlier ruling. The Biden administration argues it is fixing a broken system and providing student debt relief to targeted groups of borrowers, including teachers, that already qualify for debt cancellation from existing programs.

The Department of Education said in a statement that it doesn’t comment on pending legislation.

“However, Congress gave the U.S. Department of Education the authority to define the terms of income-driven repayment plans in 1993, and the SAVE plan is the fourth time the Department has used that authority,” it said.

How SAVE works

Since SAVE launched last year, nearly 8 million borrowers have enrolled and nearly 153,000 people had seen their remaining debt canceled due to the terms of the new plan, totaling $1.2 billion in debt relief.

Before SAVE, the federal government already offered several income-driven repayment plans, which tie monthly payments to a borrower’s income and family size. But Biden’s new version offers the most generous terms, especially for low-income borrowers – some of whom will see their monthly payments cut in half when the plan is fully phased in this July.

There’s a forgiveness component for borrowers once they’ve made monthly payments for a certain number of years under SAVE. That’s true under other income-driven repayment plans, too, but the time to debt relief is shorter under SAVE and based on how much the borrower initially took out. For example, those who borrowed $12,000 or less will see their debt forgiven after paying for 10 years, compared with the 20-plus years it may take if enrolled in another plan.

Another benefit to borrowers enrolled in SAVE: Unpaid interest will not accrue as long as full monthly payments are made. That means a borrower’s balance won’t increase even if the monthly payment doesn’t cover the interest accumulated that month.

What’s next for borrowers

It’s unclear what the lawsuits could mean for borrowers already enrolled in the SAVE plan, but for now there’s no change. The plan remains open to borrowers.

Abby Shafroth, co-director of advocacy at the National Consumer Law Center, said she doesn’t see “any real risk” to enrolling in SAVE now if it’s the best payment plan available to the borrower.

“I also think it is highly unlikely that borrowers whose debt is canceled under SAVE would have their debt reinstated, though that doesn’t mean Kansas and Missouri and other states won’t ask for it,” Shafroth said.

Biden’s latest student loan forgiveness proposals, which could take effect starting in the fall, call for canceling accumulated interest for those enrolled in SAVE who have balances bigger than what they initially borrowed.

What the lawsuits say

In 1993, Congress gave the Department of Education the power to create different repayment plans for borrowers with federal student loans. But the lawsuits say the Biden administration’s SAVE plan goes too far.

In the legal challenges led by Kansas Attorney General Kris Kobach, the complaint argues that the SAVE plan “transforms many or most loans into outright grants from the federal government — without any appropriation from Congress.”

The estimated cost of the SAVE plan varies, depending on how many borrowers end up enrolling, ranging from $138 billion to $475 billion over 10 years, according to different studies. In comparison, Biden’s student loan forgiveness program was expected to cost about $400 billion.

Before a court can rule on the merits of the cases, the judge must consider whether the suing parties have standing to bring the legal challenges. The states must show they have the legal injury required to bring the lawsuits.

In 2022, a district court found the states suing over Biden’s sweeping student loan forgiveness program did not have standing to sue. But an appeals court reversed and blocked the program.

Ultimately, the Supreme Court said Missouri had standing because the loan forgiveness program would harm a nonprofit created by the state to administer student loans. Since the high court found Missouri had standing, it did not need to consider whether the other states also had standing to sue, according to the opinion written by Chief Justice John Roberts.

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