Student Loan Update: Federal Judge Hands Joe Biden’s Plan a Legal Win

A Kansas federal judge ruled on Friday that only three of the 11 states that filed a lawsuit against President Joe Biden’s recent $156 billion student loan debt forgiveness plan could proceed with their case.

In late March, 11 Republican-led states filed a lawsuit against the Biden administration’s student loan debt forgiveness plan, stemming from last year’s rejection of the president’s $430 billion student debt erasure initiative by the U.S. Supreme Court.

Alabama, Alaska, Idaho, Iowa, Kansas, Louisiana, Montana, Nebraska, South Carolina, Texas and Utah asked to be repaid for Biden’s Saving on a Valuable Education Plan (SAVE) loan forgiveness. In the lawsuit, the 11 states asked the U.S. District Court for the District of Kansas to officially declare the SAVE plan illegal and block it from moving forward.

All 11 states either fully or partially backed former Republican President Donald Trump in the 2020 presidential election—one of Nebraska’s three congressional districts supported Biden, a Democrat.

On Friday, U.S. District Judge Daniel Crabtree, an appointee of former President Barack Obama in Wichita, ruled that South Carolina, Texas and Alaska “just barely” alleged enough facts to have a legal standing to proceed with their case in challenging the Biden administration’s plan in court.

According to the court documents, Crabtree said the three states had established a legal standing based on how the plan would likely reduce their revenue for public instrumentalities that assist with education funding and student loans.

However, Crabtree rejected the eight other states led by Kansas Attorney General Kris Kobach due to a lack of direct harm as the states argued the plan would reduce their income tax revenues or harm their ability to recruit state employees.

“No court has ever bought into this theory, and this court declines to become the first,” Crabtree wrote. “These plaintiffs simply have no skin in the game.”

According to Reuters, a spokesperson for Kobach, whose office was leading Friday’s case, said his office was “reviewing the judge’s decision and consulting with the other states in our coalition.”

Newsweek has reached out to Kobach’s office and the White House via email for comment.

The ruling comes after experts previously told Newsweek that it would be difficult for each state to have legal standing to proceed with their case.

“The odds of success for the states in this lawsuit are much lower than the one-time forgiveness case,” attorney and Student Loan Sherpa founder Michael Lux previously told Newsweek.

Lux said states will likely struggle to establish legal standing, especially as it concerns Biden’s new SAVE repayment plan.

“The legal authority for the Department of Education to create the SAVE plan is much stronger than the argument for one-time forgiveness,” Lux said. “In the one-time forgiveness case, the government argued they were authorized to do so though disaster legislation passed in the wake of 9/11. In this case, the government can argue that Congress explicitly authorized creation of income-driven repayment plans and left it up to the Department of Education to determine exactly how the program worked.”

Under the SAVE plan, 8 million people are eligible for lower payments or potentially full debt forgiveness. The repayment plan calculates monthly loan payments based on income and family size as well as discretionary income, lowering the amount owed for millions.

Around half of the eligible borrowers saw their monthly payments drop to zero if they make under $16 an hour.

Biden announced the SAVE Plan in 2022, along with a broader plan, which initially would have canceled about $430 billion in debt as he was seeking $10,000 in federal student loan debt forgiveness for the majority of borrowers and $20,000 for Pell Grant recipients.

However, it was blocked by the U.S. Supreme Court in June 2023 after several Republican-led states challenged it. However, it did not address the SAVE Plan, which had yet to be finalized at the time. Despite the pushback, the president has not backed down on his promises to forgive student debt, which nationally sits at more than $1.7 trillion.

“From day one, I promised to fix broken student loan programs and make sure higher education is a ticket to the middle class, not a barrier to opportunity,” Biden wrote on X, formerly Twitter, in March.