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In response to court rulings earlier this week that blocked key components of a student loan policy, the Biden administration is planning to place about 3 million student loan borrowers into a monthslong payment pause.
The pause would be very similar to the pandemic-era student loan moratorium — borrowers would not need to make payments and interest would not accrue.
The SAVE Plan, dubbed the most affordable plan for borrowers and President Joe Biden’s hallmark surviving student debt reform effort, has been the target of two Republican-led lawsuits that argue the Biden administration has gone beyond its authority in aspects of the plan. The move to pause millions of borrowers’ bills comes after courts in Kansas and Missouri ruled in the GOP states’ favor on Monday night, deciding the Biden administration could not go forward with further implementation of the SAVE Plan, which was rolled out last August and is used by 8 million people.
In particular, the rulings halted the Department of Education from cutting borrowers’ payments beginning July 1, when they were set to decrease from 10% of a borrowers’ discretionary income down to 5% for those with undergraduate loans, and from canceling any more loans for people who’d taken out small initial loan balances but had been paying them down for over a decade. So far, 414,000 people have qualifed for such debt relief.
« If the injunction takes effect, it will inflict irreparable harm on the federal government in the form of unrecoverable disruption costs and create extraordinary confusion and chaos for borrowers », wrote Brian Boynton, the Department of Justice’s principal deputy assistant attorney general.
The process of reverting back to charging borrowers 10% of their income will take « at least several months », Boynton argued, because it took months of preparation to get ready for the new payment calculation. During that time, « the Department will have no choice but to place a large number of SAVE borrowers into forbearance, until its servicers’ systems can service loans with a correct calculation of payments due.
