A federal appeals court has allowed the U.S. Education Department to proceed with a plan to reduce monthly payments for millions of student loan borrowers, overturning a lower court ruling that had blocked the initiative. The rule, part of President Joe Biden’s efforts to address student debt, lowers the payment threshold from 10% to 5% of discretionary income for some qualifying borrowers. The reduced payments were set to begin on July 1, but were temporarily halted by federal judges in Kansas and Missouri.
The ruling from the 10th U.S. Circuit Court of Appeals puts the department back on track to implement the reduced payments while it pursues an appeal. However, the uncertainty created by the legal battles has made it difficult for borrowers to plan their finances. The Student Borrower Protection Center has expressed concern that borrowers lack crucial information to make informed decisions about their financial obligations.
The Biden administration introduced the SAVE plan last year to replace existing income-based repayment plans, allowing many borrowers to qualify for lower payments and forgiveness after 10 years of payments. Education Secretary Miguel Cardona reaffirmed the administration’s commitment to fixing the student loan system and making college more affordable.
Meanwhile, a federal judge in Missouri issued an injunction preventing the Education Department from forgiving loan balances moving forward. This injunction is part of lawsuits filed by Republican-led states challenging the administration’s loan forgiveness program. These legal battles stem from a Supreme Court decision earlier in the year that struck down the original plan for student loan forgiveness.
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