With federal judges having halted key parts of the Biden administration’s new student loan repayment plan, the Education Department said Friday that it will suspend payments and interest charges for about 3 million borrowers.


President Biden speaks at the grand opening ceremony for the Stonewall National Monument Visitor Center on Friday in New York. With federal judges having halted key parts of the Biden administration’s new student loan repayment plan, the Education Department said Friday that it will suspend payments and interest charges for about 3 million borrowers. Evan Vucci/Associated Press

The decision affects enrollees in the Saving on a Valuable Education plan, commonly known as Save, which ties monthly payments to earnings and family size. More than 8 million people are signed up for the plan, with 4.5 million of them qualifying for monthly payments of $0 because of their low earnings. Those borrowers will continue to receive that benefit while others with higher earnings will now have their payments and interest accrual postponed. Education officials have not said how long this forbearance will last or when exactly it will take effect, but borrowers will be notified in the coming days.

Postponing payments for Save enrollees is a direct response to an injunction imposed on the plan this week. In Kansas, U.S. District Judge Daniel D. Crabtree blocked the administration from launching the final component of the Save plan, which would have cut most enrollees’ monthly payments in half starting in July. His ruling stems from a lawsuit originally brought by 11 Republican-led states that allege President Biden exceeded his authority by creating a repayment plan that could cost more than $230 billion over the next decade.

Crabtree agreed the department failed to clearly show that Congress authorized the repayment plan and said the economic impact of the program would require congressional input. On Thursday, Justice Department attorneys filed a motion to set aside the injunction.

A spokesperson for the Education Department said the agency is taking action to support borrowers while meeting the terms of the injunction. The department plans to pull down the online application for all income-driven repayment programs and loan consolidation while updating its system to ensure borrowers have accurate information about their loans. The department said the changes will take approximately four to six weeks.

Student advocacy groups praised the department’s move but questioned whether it is enough to ensure other borrowers are not harmed amid the ongoing lawsuit.

“We are pleased to see the Department of Education take quick and decisive action,” said Natalia Abrams, executive director of the nonprofit advocacy group Student Debt Crisis Center. But many borrowers still face “uncertainty and financial instability,” she added. “Given the lack of clarity, swirling questions, and legal uncertainty of the Save plan, [we’re] calling for a widespread payment pause on all federal student loans.”

It is unclear what legal authority the Education Department is using to postpone payments, and officials did not immediately respond to that question. The move will probably incense conservative lawmakers who say Biden plays fast and loose with the law to the detriment of taxpayers. It could also place the department at odds with the courts.

“The definition of Biden insanity is trying the same unlawful debt schemes over and over again and expecting a different result,” Rep. Virginia Foxx, R-N.C., chairwoman of the House Education Committee, said late Friday. “President Biden’s false promises have left borrowers and loan servicers in limbo, and now taxpayers are being forced to foot the entire loan bill for nearly 8 million individuals each month.”

The Biden administration is also facing an injunction in Missouri that has stopped the department from forgiving any loans under the Save plan. The agency has already approved $5.5 billion in loan cancellation for 414,000 enrollees who met the plan criteria by originally borrowing less than $12,000 and paying down their debt for at least 10 years.

In that case, U.S. District Judge John A. Ross agreed with Missouri Attorney General Andrew Bailey and five other Republican-led states that Biden probably lacks the authority to erase debts through the Save plan. He also agreed that the loan-forgiveness component would harm the Missouri Higher Education Loan Authority, a quasi-state agency that services federal student loans and funds state scholarships.

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