A Biden Administration Student Debt Program is Challenged Once Again

Written By: Madison Stonemetz

On March 28, 2024, eleven Republican-led States challenged the legality of a student loan repayment plan created by the Biden Administration. This comes less than one year after the Supreme Court invalidated Biden’s sweeping one-time loan forgiveness program in Biden v. Nebraska. The current complaint, Kansas v. Biden, filed in the United States District Court for the District of Kansas, challenges the validity of the Saving on a Valuable Education (SAVE) Plan and relies on the holding in Biden v. Nebraska to argue that the Plan should also be considered unlawful.

What is the SAVE Plan?

The SAVE Plan is an income-driven repayment plan that will calculate one’s monthly student loan payment with consideration given to their income and number of family members. According to the Federal Student Aid informational website, the Plan can decrease loan payments by basing them on a borrower’s discretionary income which is calculated by assessing the difference between one’s adjusted gross income and 225% of the poverty line based on their family size; this is an increase from the previous income exemption threshold of 150% above the relevant poverty guideline. The Plan also aims to limit the burdens of interest by absolving the remaining monthly interest payment for both subsidized and unsubsidized loans once the borrower pays the scheduled payment in full. The Plan aims to reduce the amount required for each monthly payment, limit the accrual of an owed balance, and encourage on-time payments for borrowers enrolled.

What the States Are Arguing

The States’ complaint often references Biden v. Nebraska, where the Supreme Court found that President Biden’s proposed widespread student loan forgiveness plan was an act that the Secretary of Education was not authorized to take under the Higher Education Relief Opportunities for Student Act of 2003 (HEREOS Act). The plan challenged in Biden v. Nebraska was set to forgive nearly $430 billion in student loan debt. Although the Secretary had authority to waive or modify financial assistance programs in certain circumstances, they may not “transform them.” Rather than making minor or modest changes to the regulations governing student debt repayment, the Court determined that the forgiveness plan created was “fundamentally different,” and constituted “exhaustive rewriting,” of the governing statutes. Ultimately, the proposed plan was held invalid.

Stemming from this decision, the complaint–written by Kansas Attorney General, Kris W. Kobach on behalf of the eleven State plaintiffs–says that the last time the Biden administration tried to implement student debt forgiveness, the Supreme Court determined “that action was illegal,” and that “nothing has since then changed.” They argue that – despite being an income driven repayment plan – the SAVE Plan effectively forgives thousands of dollars in student debt, thereby transforming those loans into government grants. The lawsuit challenges the fact that the Secretary establishes their authority from the Higher Education Act (HEA) to implement the Plan and asserts that they do not have the sole authority to create these changes. However, the reliance on the HEA comes after Biden’s former plan was invalidated due to lack authority under the HEREOS Act. The complaint also notes that the SAVE Plan was estimated to cost the government $156 billion; but these numbers were calculated before the Supreme Court struck down the previously proposed $430 billion in debt relief in Biden v. Nebraska. Thus, the true costs of this program are allegedly unknown.

The Plaintiffs request that the SAVE Plan should be invalidated because it violates separation of powers and implicates the major questions doctrine. The complaint further asserts that the Plan extends further than the Secretary’s authority created by Congress in the Higher Education Act. The lawsuit finally alleges that the SAVE Plan is arbitrary and capricious, and in violation of Administrative Procedures Act procedures. They ask the Court to deem the rule unlawful and hold the Defendants had no authority to implement it. The also request a judgment to set the Plan aside, a permanent injunction preventing enforcement, monetary relief for the Plaintiffs, and any other award the Court deems just and proper.

Potential Implications

With the upcoming 2024 presidential election, this challenge may impact partisan positions. When looking at voter opinions, nearly forty-eight percent of voters consider canceling student debt to be an important issue. Debt forgiveness has continuously been a divisive topic between Democrat and Republican Parties. It is likely that incumbent and Democratic candidate, Joe Biden, will continue to run his campaign with this issue at the forefront; while the likely Republican candidate, Donald Trump will echo much of the party’s opposition to these loan forgiveness and payment plans.

Another potential result of this pending lawsuit is the furtherance of uncertainty regarding student loan forgiveness and repayment plans. For example, Biden’s previously proposed widespread student loan forgiveness plan, after being announced in August 2022, was put on pause during litigation, and was ultimately cast aside nearly a year later when the Supreme Court found the plan unconstitutional. While the SAVE Plan has been in place since the summer of 2023, with additional benefits scheduled to be enacted in February 2024 and the upcoming 2024 summer, the current challenges could lead to confusion among student borrowers and those repaying their loans under the current Plan while the litigation proceeds.