Risks for student loan borrowers

The Biden administration rolled out its new repayment plan, known as SAVE, or the Saving on a Valuable Education plan, in the summer of 2023, describing it as “the most affordable student loan plan ever.” Under the program, many borrowers expected to see their bills reduced by half or more.

However, Republican-backed states, including Arkansas, Florida and Missouri, filed lawsuits against the SAVE plan earlier this year, putting that relief in jeopardy.

The states argued that the Biden administration was overstepping its authority with SAVE, and essentially trying to find a roundabout way to forgive student debt after the Supreme Court blocked its sweeping plan last year.

In response, two federal judges in Kansas and Missouri temporarily halted significant parts of the SAVE plan on June 24. Days later, the Biden administration successfully appealed part of the injunction against its plan. Yet the fate of SAVE remains in limbo until the judges decide the cases.

Borrowers likely won’t learn more until after the presidential election in November, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

Buchanan assumes the cases will eventually reach the Supreme Court.

“Then they themselves wouldn’t even take it up until the October term, for a ruling much later,” he said.

For now, SAVE enrollees can learn more about what the recent legal developments mean for them in a CNBC story from last week.

Meanwhile, a recent Supreme Court ruling is expected to make it harder for the Education Department to deliver relief to student loan borrowers.

The high court in late June overruled the so-called Chevron doctrine, a 40-year-old precedent that required judges to defer to a federal agency’s interpretation of disputed laws. The 6-3 ruling, which split the conservative-majority court along ideological lines, is expected to undermine the federal government’s regulatory power.

“Federal agencies will have less flexibility in developing, implementing and enforcing regulations,” said higher education expert Mark Kantrowitz.

That could make Biden’s do-over effort at sweeping student loan forgiveness more difficult, Kantrowitz explained. The president had hoped to start canceling borrowers’ debt under a so-called Plan B before the election.

“President Biden’s proposal for student loan forgiveness involves significant interpretation of the statute,” Kantrowitz said. “This makes it more vulnerable to legal challenge.”

So what would a Harris presidency mean for those with student debt?

Harris has helped promote Biden’s policies to alleviate the burden of borrowers, and would likely continue his efforts, experts say. However, as a presidential candidate in the 2020 race, Harris put forward a debt relief program that was criticized as being overly complicated and narrow. (To be eligible, borrowers needed to receive a Pell Grant and open a business in a disadvantaged community, among other requirements.)

Ernesto Apreza, press secretary for Harris, did not immediately respond to a request for comment.

For now, the fact that Trump is leading in the polls is a concern for consumer advocates.

As president, Trump called for the elimination of the U.S. Department of Education’s existing loan relief programs, including the popular Public Service Loan Forgiveness initiative. He also wanted to slash the department’s budget, and his administration halted a regulation aimed at providing loan forgiveness to those defrauded by their schools.

“When Donald Trump was president, prior to the pandemic, a new student loan borrower fell into default every 26 seconds and more than 99% of educators, first responders and nurses were denied relief they were entitled to under PSLF,” said Aissa Canchola-Banez, political director at Protect Borrowers Action.

“The stakes for Americans with student debt have never been higher,” Canchola-Banez said.