In Kansas, US District Judge Daniel D. Crabtree blocked the Biden administration from launching the final component of the Saving on a Valuable Education program, commonly known as Save.
Borrowers with undergraduate debt were set to see their payments cut in half in July -- from 10 percent to 5 percent of income above 225 percent of the federal poverty line. Borrowers who also have graduate loans would have had their payments lowered by the weighted average between 5 percent and 10 percent.
That feature of the plan, which launched in October, will be shelved while a lawsuit is litigated.
Crabtree, who was appointed by President Barack Obama, wrote that the Education Department failed to clearly show that Congress authorized the repayment plan created by the Biden administration in 2023. He said the economic impact of the program, which the Congressional Budget Office estimates will cost some $230 billion over the next decade, would require congressional input.
The ruling arrives weeks after Crabtree said eight of the 11 states challenging the repayment plan failed to adequately show how they would be harmed by the policy. He concluded that only Alaska, Texas, and South Carolina made a strong enough case that the plan's debt-relief component could harm their tax revenue and dismissed the arguments made by Kansas, Idaho, Alabama, Louisiana, Montana, Utah, Nebraska, and Idaho.
The coalition of 11 Republican-led states, headed by Kansas Attorney General Kris Kobach, alleged in their lawsuit that the president overstepped his authority in creating the repayment program -- claims that mirror the case that last year toppled Biden's initial effort to forgive up to $20,000 in federal student loans. The states say Biden's new repayment plan is an attempt to sidestep a Supreme Court ruling that struck down his debt forgiveness program.
In the separate ruling in Missouri, US District Judge John A. Ross enjoined the Education Department from forgiving any more loans through the Save plan. The decision is a win for Missouri Attorney General Andrew Bailey, who led a group of six states in filing a lawsuit in April seeking to overturn the program.
Bailey argued that the Missouri Higher Education Loan Authority, a quasi-state agency that services federal student loans and funds state scholarships, loses revenue from servicing direct loans -- those made and owned by the federal government -- when the loans are wiped away. The argument mirrors the claims in the lawsuit that brought down Biden's debt relief plan and proved strong enough to advance this lawsuit and bolster the case for halting further debt relief under the program.
Ross, another Obama appointee, also questioned whether Congress envisioned a loan repayment plan as far-reaching as what the Biden administration created in 2023, signaling that the Save plan could be in jeopardy of being overturned.
On the social media platform X, Bailey called Ross's ruling "a huge win for the constitution."
"Congress never gave Biden the authority to saddle working Americans with half-a-trillion dollars in other people's debt," Bailey wrote.
White House press secretary Karine Jean-Pierre said late Monday that the administration strongly disagrees with the rulings and that the Justice Department will continue to defend the Save plan in court.
"It's unfortunate that Republican elected officials and their allies have fought tooth and nail to prevent their constituents from accessing lower payments and a faster path to debt forgiveness -- and that courts are now rejecting authority that the Department has applied repeatedly for decades to improve income-driven repayment plans," Jean-Pierre said in a statement Monday.
The Save plan provides lower monthly payments for millions of borrowers and a faster path to cancellation. It has already wiped clear the balances of 414,000 enrollees, who originally borrowed less than $12,000 and had been paying for at least 10 years. More than 8 million people are enrolled in the repayment plan, which ties monthly payments to earnings and family size.
The program is an amended version of an existing repayment plan known as Revised Pay as You Earn, or Repaye. All income-driven plans promise to forgive a borrower's balance after 20 or 25 years of payments, but the Save plan shortens the timeline for people who took out small loans.