Appeals Court Blocks Biden-Era Student Loan Forgiveness Plan

President Joe Biden gestures after speaking at Madison Area Technical College in Madison, Wis., on April 8, 2024. Andrew Caballero-Reynolds/AFP/Getty Images

A federal appellate court has blocked key provisions of former President Joe Biden’s student debt relief initiative, ruling that the Department of Education overstepped its legal authority in implementing broad loan forgiveness through its income-contingent repayment (ICR) plan.

The U.S. Court of Appeals for the Eighth Circuit issued the decision on Feb. 18, affirming a lower court’s preliminary injunction against the Saving on a Valuable Education (SAVE) Plan. The program is designed to lower monthly payments and accelerate forgiveness for some borrowers.

The ruling is in response to a lawsuit filed by seven states—Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio, and Oklahoma—challenging the legality of the Biden administration’s student loan forgiveness program.

The court found that the secretary of education lacked the statutory authority to implement loan forgiveness under an ICR plan.

“The statute’s text and structure require ICR plans to be designed for a borrower to pay his or her loan balance in full through payments that can fluctuate based on income during the payment term,” the ruling states.

The judges determined that the SAVE Plan went beyond this framework by forgiving loans rather than ensuring repayment, making the policy inconsistent with congressional intent.

The lawsuit argues that altering payment thresholds, stopping interest accrual, and providing early loan forgiveness exceeded the Department of Education’s authority.

The appellate panel agreed, ruling that while the department has the power to create repayment plans, it must do so within existing law.

The decision also expanded the district court’s injunction, blocking the entire SAVE Rule. The judges determined that the rule’s loan forgiveness provisions were central to its structure and could not be separated from the rest of the plan.

Because the forgiveness provisions were deemed unlawful and inseparable from the rule, other aspects of the SAVE Plan—such as new payment thresholds and interest accrual policies—are also now blocked.

The ruling also addressed the issue of legal standing, affirming that at least one state, Missouri, demonstrated financial harm through its student loan servicer, the Higher Education Loan Authority of the State of Missouri.

Critics of the plan viewed SAVE as a way to achieve broad debt cancellation after the Supreme Court struck down Biden’s previous relief order in 2023.

Missouri Attorney General Andrew Bailey celebrated the court’s decision.

“Though Joe Biden is out of office, this precedent is imperative to ensuring a President cannot force working Americans to foot the bill for someone else’s Ivy League debt,” Bailey wrote in a post on X. “HUGE win.”

With this latest ruling, millions of borrowers enrolled in the SAVE Plan could see changes to their repayment terms, particularly those who anticipated early loan forgiveness.

The U.S. Department of Education did not respond by publication time to a request for comment on what the court ruling could mean for borrowers enrolled in the SAVE Plan.