Two federal judges recently said that the Education Department lacked the power to reduce or cancel federal student loans under the SAVE program; an appeals court subsequently lifted the injunction in one case.

In cases filed by Republican state officials, federal judges in Kansas and Missouri, both Democratic appointees, issued injunctions, saying that Congress had not given the Department of Education the power to reduce and cancel those loans as it had planned to do under the SAVE program.

The SAVE program, which was developed after the U.S. Supreme Court blocked the Administration’s large-scale student debt relief program last year, is a new income-driven repayment program created by regulations promulgated by the Department of Education.  It caps monthly loan repayment at 5% of a borrower’s earnings over 225% of the poverty line instead of 10%.  It also reduces the repayment term on loans of $12,000 or less to as low as 10 years, with a maximum repayment period of 20 years for those with only undergraduate loans and 25 years for those with any graduate loans, at which point the balance is forgiven. More than eight million student loan borrowers are currently enrolled in the program and the Administration already has canceled $5.5 billion under the program.

In his opinion, Judge John A. Ross of the Eastern District of Missouri said that the Biden Administration has “failed to point to a clear congressional authorization for the loan forgiveness provisions of the Final Rule, and the Court has found none.” Following the decision of the Supreme Court in last term’s loan forgiveness opinion, he found that the State of Missouri had standing to sue, since its student loan authority would not be able to collect servicing fees for loans that have been forgiven.  He issued an injunction prohibiting any further relief under the program.

In Kansas, Judge Daniel D. Crabtree ruled in favor of the states of Alaska, Texas and South Carolina—the remaining plaintiffs in a case filed by 11 states—that he had previously found had standing due to the likely loss of income by their respective public instrumentalities servicing federal student loans. Judge Crabtree further concluded that no “clear congressional authorization for the SAVE Plan” existed. He added that the monthly payment cap and the payment period limitation “overreach any generosity Congress has authorized before.”  He issued an injunction prohibiting the Department of Education from implementing the changes in the payment cap and repayment periods.

The Biden Administration vowed to appeal the decisions. “We will never stop fighting to lower monthly payments and help borrowers get out from under the burden of student debt – no matter how many times Republican elected officials try to stop us,” White House Press Secretary Karine Jean-Pierre said.

Education Secretary Miguel Cardona sharply criticized the Republican attorneys general for suing to block the program. “Republican elected officials and special interests sued to block their own constituents from being able to benefit from this plan – even though the Department has relied on the authority under the Higher Education Act three times over the last 30 years to implement income-driven repayment plans,” Cardona said.

The Administration’s appeal from the Kansas decision has met with preliminary success. In a 2-1 order issued on June 30, a panel of the Tenth Circuit Court of Appeals granted a stay pending appeal of the injunction issued by the U.S. District Court for the District of Kansas. The Tenth Circuit will consider the merits of the Administration’s appeal at a later time.

The Administration has also filed an appeal from the injunction issued by the U.S. District Court for the Eastern District of Missouri, which blocks any further forgiveness under the program, and the Eighth Circuit has set a briefing schedule.