The U.S. Supreme Court dealt a significant setback to the Biden administration’s efforts to provide student debt relief, declining on Wednesday, Aug. 28, to reinstate the SAVE Plan, a key part of the administration’s broader strategy to ease the financial burden on millions of Americans. This decision leaves borrowers in limbo as legal challenges from GOP-led states continue to play out in the courts.
The SAVE Plan, rolled out in July 2023, is an income-driven repayment program that lowers monthly payments and offers earlier loan forgiveness for borrowers with smaller balances. Under the plan, borrowers with loans of $12,000 or less could see their debt wiped away after 10 years of payments, a reduction from the previous 20 to 25 years.
The plan also adjusts the percentage of discretionary income that borrowers must pay from 10% to 5%, with discretionary income redefined to exclude those earning less than 225% of the federal poverty line.
The Supreme Court’s decision to leave an injunction from the U.S. Court of Appeals for the 8th Circuit in place means that the program remains blocked for now. The Education Department had already paused loan payments for those enrolled in the SAVE Plan due to the ongoing legal battles.
This legal struggle follows the Supreme Court’s rejection last year of a more ambitious plan by the Biden administration that aimed to cancel over $400 billion in student loans, affecting more than 40 million Americans. The new SAVE Plan, though less sweeping, still faces fierce opposition, with critics arguing that it effectively forgives loans without proper congressional authorization.
The estimated cost of the SAVE Plan has been a major point of contention. While the Biden administration estimates the plan will cost nearly $156 billion over a decade, critics argue that the true cost could be as high as $475 billion.
