Federal Appeals Court Stymies Latest Version of Federal Student Loan Forgiveness, Putting Nearly Eight Million Borrowers in Financial Purgatory
7.30.2024
Earlier this month, the U.S. Department of Education put all borrowers, including law students, law graduates, and working lawyers here in New York, who enrolled in the Saving on a Valuable Education repayment and loan forgiveness plan, into temporary forbearance. This paused payments and interest immediately following a federal appeals court decision halting a signature program of the Biden administration.
The forbearance gives a tad bit of relief to borrowers while the courts decide the fate of the plan, the latest version of the White House’s proposed student debt forgiveness program.
The feds created the plan last year, enabling borrowers to repay their student loans while making lower payments than older federal loan repayment and forgiveness plans.
The case, brought by the state attorney general of Missouri against the federal Department of Education, is one of several legal challenges against the plan that are making their way to the U.S. Supreme Court. The cases have been instigated by Republican state attorneys general, who argue the administration lacked the constitutional authority when it offered borrowers generous repayment terms, and forgiveness of a portion of their loans after 20 years.
The department created the program, known as SAVE, last year after the Supreme Court halted President Biden’s populist proposal to offer up to $20,000 of forgiveness to each federal student loan borrower, giving borrowers lower payments while working toward forgiveness of their remaining balance after two decades of timely repayment of their debt.
This “ruling from the 8th Circuit blocking President Biden’s SAVE plan could have devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect,” U.S. Secretary of Education Miguel Cardona told the media.
More than 40 million Americans, mostly people under 35 years of age, have student loan debt. While Congress did provide relief during the pandemic, more needs to be done including extending the moratorium on payments, expanding the program to private loans, and providing targeted monetary relief in cases of economic hardship. Providing some form of student loan relief for Americans saddled with this debt has been a legislative priority of the New York State Bar Association.
