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, 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.
“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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WASHINGTON — A federal appeals court has granted permission to the U.S. Education Department to proceed with its plan to reduce monthly payments for numerous student loan borrowers, temporarily overturning a recent decision by a lower court. This decision from the 10th U.S. Circuit Court of Appeals reinstates a key aspect of President Joe Biden’s strategy to tackle student debt – a measure that decreases the percentage of discretionary income that certain qualifying borrowers must pay from 10% to 5% under a repayment plan.
The adjusted payment terms were scheduled to come into effect on July 1, but federal judges in Kansas and Missouri had previously blocked a significant portion of the administration’s repayment plan through separate rulings. With the latest ruling on a Sunday, the Education Department is now able to implement the reduced payments already calculated while proceeding with an appeal.
Persis Yu, the deputy executive director of the Student Borrower Protection Center, expressed that the recent rulings have created confusion for borrowers. While the stay granted by the 10th Circuit is temporary, Yu noted that many borrowers are uncertain about their future financial obligations, making it challenging for them to make sound decisions about their finances.
Last year, the Biden administration introduced the SAVE plan as a replacement for other existing income-based repayment programs provided by the federal government. This initiative made it possible for many individuals to qualify for lower payments, with the potential for loan forgiveness for those who had made payments for at least a decade and initially borrowed $12,000 or less.
U.S. Education Secretary Miguel Cardona affirmed the Biden administration’s dedication to rectifying issues within the student loan system and improving college affordability for more Americans. Despite the appeals court ruling, an injunction issued by a federal judge in Missouri remains in place, preventing the Education Department from canceling loan balances moving forward.
The injunctions stem from legal challenges brought by Republican-led states aiming to invalidate the Biden administration’s complete loan forgiveness program. This program first became available to borrowers in the summer of 2023, resulting in at least 150,000 individuals having their loans forgiven. The suing states contended that the administration’s plan was an attempt to circumvent a previous Supreme Court ruling that nullified the original student loan forgiveness plan earlier in the same year.
