The Supreme Court on Wednesday rejected a Biden administration request to reverse lower-court decisions blocking President Joe Biden’s student-loan plan that would lower payment rates before eventually forgiving borrowers’ outstanding debt.
The Saving on a Valuable Education (SAVE) plan, introduced in August 2023, is the White House’s most recent attempt at debt forgiveness after the Court rejected a move to cancel over $400 billion in outstanding loans in June 2023.
Under the newer model, required payments would be reduced from 10 percent of a borrower’s discretionary income — redefined to mean income above 225 percent of the poverty line — to five percent. Those making less than 225 percent of the poverty line would not be required to pay anything, and outstanding loans totaling $12,000 or less would be forgiven after ten years provided the borrower completed any necessary payments.
While the Biden administration initially claimed the SAVE plan would cost $156 billion over the next decade, the eleven states challenging the program in court contended that the actual cost would be $475 billion over the same period of time. The Congressional Budget Office estimated a $276 billion price tag.
Of the approximately $1.6 trillion in student-loan debt at the outset of the Biden administration, the president and his team have used executive action to cancel about $144 billion to this point, a total comprising the debt of almost 4 million borrowers. $62.5 billion of the $144 billion total came from the Public Service Loan Forgiveness program, which eliminates student-loan debt for public-sector employees.
The Court unanimously denied the administration’s motion to void a lower-court injunction, writing that it “expects that the Court of Appeals will render its decision with appropriate dispatch.” The Wednesday order does not directly impact the 8 million Americans with student-loan debt currently enrolled in the SAVE plan; the Department of Education in July placed those borrowers in an interest-free forbearance pending the resolution of those lower-court cases.
While the Court has for the time being declined to hear the SAVE plan case in its upcoming term, it is likely that it may find its way to a Supreme Court hearing after the lower-court processes play out. Such a case would decide whether the Department of Education has the authority under a 1993 “income contingent repayment” law to pave the way for eventual loan forgiveness, rather than the previous case dealing with unilateral debt cancellation.