Two federal judges issued rulings minutes apart on Monday, temporarily blocking key elements of the Biden administration’s income-driven repayment (IDR) program. Versions of this program have been in place without legal issues since 1994. The rulings create uncertainty for millions of student loan borrowers.
Judge Daniel Crabtree in Kansas ruled against a new feature of the Saving on a Valuable Education (SAVE) program, which aimed to reduce payments from 10% to 5% of discretionary income. Crabtree argued this change could harm three states with holdings in student loans.
Across the state line in Missouri, Judge John Ross challenged another feature of SAVE, questioning the legality of full debt forgiveness after the payment period. Despite the government forgiving loans through this program since its inception, Ross expressed doubts about its statutory support.
What stands out is the contradictory nature of these rulings. It showcases the inconsistencies in judicial policymaking. While judges see themselves as impartial examiners of evidence, the fact that no two judges interpret the law the same way reveals flaws in this approach. This inconsistency leaves millions of borrowers in limbo and complicates the implementation of the student loan system. Basic questions about loan repayment, such as how much borrowers owe and for how long, remain unanswered.
Mike Pierce, executive director of the Student Borrower Protection Center, warned that these rulings could make the largest portfolio of consumer credit in the world uncollectible.
Both judges were appointed by President Obama, which typically counters concerns about bias against a Democratic administration. However, the judicial confirmation process, particularly in Kansas and Missouri, involves significant input from home-state senators. At the time of these judges’ confirmations, only one of the four relevant senators was a Democrat. This explains how an “Obama judge” in Missouri could have previously worked for a Republican like John Ashcroft.
The Supreme Court’s “major questions” doctrine further complicates executive actions, allowing courts to scrutinize significant economic or political decisions. This doctrine, utilized by 18 red-state attorneys general, challenges the authority of executive actions like SAVE.
The SAVE Program
Originally established by President George H.W. Bush, the IDR program links monthly loan repayments to a borrower’s income. The Biden administration’s updated version, SAVE, is notably generous. It raises the threshold of exempted income to 225% of the poverty line, sets payments for individuals earning around $30,000 a year at $0, and forgives small loans after ten years. Larger loans see forgiveness after 20 years, and the percentage of income allocated to monthly payments drops to 5%.
The Higher Education Act of 1965 (HEA) clearly states that the executive branch can manage student loans, including creating income-driven repayment plans. This authority has been reaffirmed and revised over the years. Biden’s education secretary, Miguel Cardona, followed his predecessors in updating the program.
Legal Interpretations
Both judges acknowledge the HEA’s authorization of the SAVE plan. Judge Crabtree notes the significant authority granted to the Secretary of Education, while Judge Ross highlights the limitation that repayment cannot exceed 25 years.
However, Ross argues that the statute does not explicitly mention loan forgiveness after the payment period. Crabtree, using basic logic, counters that if repayment is capped at 25 years, any remaining balance must be forgiven, a practice followed by every Secretary of Education since the HEA’s enactment.
Implications
Judge Crabtree invalidated part of SAVE due to a cost calculation error and the unprecedented nature of certain features. He allowed existing parts of SAVE to continue, questioning why plaintiffs waited to sue. Meanwhile, Judge Ross focused on the legality of loan forgiveness, severing it from the final SAVE rule but allowing other benefits to remain.
These preliminary injunctions create confusion for borrowers and loan servicers. Advocates call for Biden to place all borrowers on SAVE in administrative forbearance until the cases are resolved. The current patchwork of rules and injunctions makes it impossible for borrowers to understand their obligations.
Ultimately, these rulings underscore the need to end conservative legal doctrines that allow judges to arbitrarily interpret statutes. This hampers government functionality and places undue power in the hands of judges.
The judicial system’s influence over policy implementation is concerning. Judges act like policymakers, making decisions that impact millions, yet often ignore the broader implications. This situation highlights the need for a more coherent and consistent approach to judicial decision-making.
FAQs
What is the SAVE program?
The SAVE program is an updated version of income-driven repayment, reducing payments to 5% of discretionary income.
Why did the judges block parts of the SAVE program?
They questioned the legality and potential harm to states with student loan holdings.
What does this mean for borrowers?
Borrowers face uncertainty about repayment terms and obligations.
Who called for administrative forbearance?
Advocates urged Biden to place all borrowers on SAVE in administrative forbearance.
What is the major questions doctrine?
A legal principle allowing courts to scrutinize significant executive actions.
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