By Reuters Nate Raymond
June 24, 2024
Two federal judges in Kansas and Missouri on Monday sided with several Republican-led states and partially blocked Democratic President Joe Biden's administration from moving forward with a key student debt relief initiative that would cost billions of dollars.
FILE PHOTO: A sign calling for student loan debt relief is seen in front of the Supreme Court as the justices are scheduled to hear oral arguments in two cases involving President Joe Biden's bid to reinstate his plan to cancel billions of dollars in student debt in Washington, U.S., February 28, 2023. REUTERS/Nathan Howard/File Photo
U.S. District Judge Daniel Crabtree in Wichita, Kansas, blocked the U.S. Department of Education from proceeding with parts of a plan set to take effect July 1 designed to lower monthly payments and speed up loan forgiveness for millions of Americans.
He ruled shortly before U.S. District Judge John Ross in St. Louis, Missouri, issued a preliminary injunction barring the department from granting further loan forgiveness under the administration's Saving on a Valuable Education (SAVE) Plan.
The SAVE Plan provides more generous terms than past income-based repayment plans, lowering monthly payments for eligible borrowers and allowing those whose original principal balances were $12,000 or less to have their debt forgiven after 10 years.
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Biden announced the SAVE Plan in 2022, alongside a separate, broader plan that would have fulfilled a campaign promise by cancelling up to $20,000 in debt for up to 43 million Americans.
That plan would have canceled about $430 billion in debt but was blocked by the conservative-majority U.S. Supreme Court in June 2023 after several Republican-led states challenged it. But the Supreme Court's ruling did not address the SAVE Plan.
The White House has said that over 20 million borrowers could benefit from the SAVE plan. The administration in May said that 8 million are already enrolled, including 4.6 million whose monthly payments have been reduced to $0.
But Republican state attorneys general in a pair of lawsuits filed beginning in March argued the rule that created the SAVE Plan was unlawful and the Education Department lacked authority to create
Impact on people of color
Several racial advocacy groups have cheered Biden's decision as a "step in the right direction."
"Approximately one in four Black Americans have negative net worth — meaning their total debt exceeds their total assets," said the civil rights group National Action Network in a statement. "The administration expects the first $10,000 of debt relief will move over half a million Black Americans from a negative to a positive net worth."
More Black students take out loans than white students: 71% compared to 56%, according to the research organization Education Data Initiative.
Black college graduates owe $25,000 more in student debt on average than white graduates, the Department of Education found. And four years after graduation, 48% of Black students owe an average of 12.5% more than they borrowed, according to the Education Data Initiative.
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Black students make up 72% of Pell grant recipients, according to the DOE.
A typical Black borrower will see his or her loan balance cut nearly in half and more than one in four Black borrowers will have their balance forgiven, according to the White House.
Black women, in particular, carry a disproportionate burden of student debt. They hold nearly two-thirds of the nearly $2 trillion outstanding student debt in the U.S., according to data from the Census Bureau.
About half of Latino borrowers will have their entire federal loan debt forgiven thanks to the $10,000 loan cancellation plan, according to higher education research and advocacy group Excelencia in Education.
"Because of racial disparities in intergenerational wealth, Black and Latino students aren't just more likely to need to borrow student loans to go and get an education, but we also know that predatory for-profit colleges that cost more to attend also target Black and Latino populations around the country, which results in many Black and brown borrowers having larger balances," Taylor of National Consumer Law Center said.
The administration had estimated the SAVE Plan would cost $156 billion over 10 years. But the states said that estimate assumed the Supreme Court would uphold the broader student debt plan and as a result will now cost $475 billion over a decade.
Eleven states sued in Kansas, though Crabtree earlier this month dismissed eight of their claims while finding that South Carolina, Texas and Alaska "just barely" had legal standing to pursue their case. Six other states had sued in Missouri.
(Reporting by Nate Raymond in Boston; Editing by Leslie Adler and David Gregorio)
Copyright 2024 Thomson Reuters.
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