What’s Next in Court Battle Over SAVE Student Loan Repayment Plan?

The latest legal back-and-forth over student loan debt relief could once again end up in the Supreme Court, whose conservative majority blocked President Joe Biden’s previous efforts.

For the past several months, the Saving for a Valuable Education (SAVE) repayment plan has been in limbo as two cases—initially led by the attorneys general of Missouri and Kansas, respectively—work their way through federal courts. These cases have resulted in a back-and-forth for borrowers that ultimately resulted in forbearance for all those enrolled in the income-driven plan until the legal issues can be resolved.

This has left borrowers with an unclear path ahead as the complicated court proceedings leave the Department of Education and the states that are suing to block the repayment plan to interpret rulings and file a web of legal actions.

Last week, the Biden administration asked the Supreme Court to lift a lower court’s ruling that had blocked the SAVE plan until the Missouri case is resolved. The filing from the Department of Justice also asked the high court to deny an appeal filed in the Kansas case.

Here’s what you need to know about the legal battle surrounding the SAVE plan.

Who Are the Players?

Two parallel and similar court cases were filed by a contingency of Republican-led states in the spring. These cases seek to block the SAVE plan, arguing that the eventual cost is so high that only Congress—not the White House on its own—should be allowed to authorize the expenditure.

The plan is more generous to borrowers, who would only be required to pay 5% of their discretionary income and have the remaining balance forgiven after 20 or 25 years. Implementing the plan would cause a $475 billion hit to the federal budget over 10 years because of lower student loan payments and more debt forgiveness, researchers at the University of Pennsylvania estimated last year.

“The President is unilaterally trying to impose an extraordinarily expensive and controversial policy that he could not get through Congress,” Missouri Attorney General Andrew Bailey said in a statement earlier this year when he launched one of the lawsuits against the plan.

However, according to Department of Education Secretary Miguel Cardona, student loan debt is a crisis the administration is committed to mitigating.

“It wasn’t so long ago that a million borrowers defaulted on their student loans every single year, mainly because they couldn’t afford the payments,” Cardona said in a statement. “The SAVE plan is a bold and urgently needed effort to fix what’s broken in our student loan system and make financing a higher education more affordable in this country.”

How Did We Get Here?

The states and the Federal government haven’t even made arguments about the actual merits of the case yet—many of the squabbles thus far have been about what to do with the program until the court case is resolved. That hasn’t kept it from being complicated.

“We’re at the string board point of the litigation,” said Persis Yu, deputy executive director and managing counsel of the Student Borrower Protection Center.

The first order of business for judges has been a legal concept called Standing, which has been important in many student loan-related cases. For judges to rule on the merits of a case, a plaintiff must prove they have been harmed by the defendant’s law-breaking and the court can fix it. In the Kansas case, the judge ruled that a majority of the states in the coalition (including Kansas) did not have reason enough to bring a case against the SAVE Act.

The next was whether the program would be able to move forward while the cases were being litigated. Judges had different thoughts on how the implementation of the plan could proceed, causing headaches for borrowers trying to keep up.

In the Missouri case, an appeals court has blocked the implementation of the SAVE plan until the case can be resolved. In the Kansas case, lawyers are awaiting for the appeals to be settled by the Supreme Court.

Although it is a moot point because of the block in the Missouri Case, Alaska appealed the court ruling that allowed changes to move forward on July 1 in the case originally brought by Kansas. That case has been appealed all the way up to the Supreme Court.

What’s Ahead in the Cases?

While the appeals only pertain to what happens to the plan while the case is disputed, the Supreme Court could choose to take on the case in its entirety. In fact, the Texas Solicitor General as a part of Kansas’ original case has asked that the highest court do just that—and to go even further and not hear oral arguments.

The highest court in the nation stuck down a broad student loan forgiveness plan last summer in a case that echoes some of the beats in the cases around the SAVE plan.

If the Supreme Court does not take up the case, both cases will continue to play out in federal courts and will move on to making arguments about whether the Biden administration has the authority to implement the SAVE Act.

No matter how the case plays out, borrowers are caught in the middle of a legal drama that may drag on for an extended amount of time, experts said.

“The best advice I can give borrowers right now is to not make any drastic decisions,” said Betsy Mayotte, President of The Institute of Student Loan Advisors. “This situation is truly uncharted territory and it’s going to take the Department of Education and the courts some time to work this through.”