Student Loan Update: Supreme Court Could Raise Payments for 3 Million

The Supreme Court could undermine President Joe Biden after three states called on the highest court to block his student debt relief plan.

Alaska, South Carolina and Texas filed a lawsuit on Tuesday asking the Supreme Court to reverse a ruling by the 10th U.S. Circuit Court of Appeals that permitted much of Biden’s student debt plan to continue.

If the states get their way, roughly 3 million Americans could see their monthly payments increase under the Saving on a Valuable Education program.

More From Newsweek Vault: Student Loan Forgiveness Updates and FAQs

Today, 8 million Americans are enrolled in SAVE, with 3 million who were expecting to see lower payments this month as the program is fully implemented.

In the filing, the states claim the new plan is “every bit as unlawful” as the president’s first large-scale student loan forgiveness program. That one intended to clear debt for millions of Americans but was ultimately struck down by the Supreme Court.

“Due to the Administration’s intransigence, the Court must unfortunately step in again,” the states wrote in their filing.

More From Newsweek Vault: How to Consolidate Student Loans

In June, different federal judges ruled against Biden’s income-driven repayment program Saving on a Valuable Education (SAVE).

Under SAVE, millions of federal borrowers saw their monthly payments lowered or even come down to $0.

The Education Department said SAVE has canceled $5.5 billion in federal student debt for more than 400,000 borrowers. While this won’t be impacted by the judges’ decisions, the rulings did stop the Education Department from moving the SAVE program forward.

After these rulings, however, the 10th U.S. Circuit Court of Appeals put one of the rulings on hold, making it unclear how SAVE will fare in the coming months.

“I think there is a realistic possibility that both provisions are ultimately struck down,” Michael Lux, an attorney and the founder of the Student Loan Sherpa, told Newsweek.

“Both district court judges were Obama era appointees, so these are experienced judges and the injunctions don’t look like politically motivated decisions. It is also worth noting that judges don’t usually grant an injunction unless the plaintiff is likely to succeed on the merits.”

If SAVE continues, Biden’s administration says more than 20 million borrowers will be helped, while the three states express concerns over the hundreds of billions of dollars it will cost the public.

“These three states are making the argument, which is a financially fair one, that this type of loan forgiveness does have some legal hurdles that are difficult to overcome and long term will cost taxpayers, including those who didn’t take out student loans, millions of dollars,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.

“The Biden Administration’s plan to lower monthly student loan payments seemed like a popular and sustainable one for borrowers in the short term, yet the long-term promises of potentially forgiving those loans entirely at a future date are where many take caution.”

If the plans do end up being overturned, Beene said there needs to be national consistency on what the federal government can and cannot do when it comes to student debt.

“The on-again-off-again policy occurring now causes more confusion and inability to plan for other financial plans borrowers may have,” Beene said.

Lux said for borrowers, the entire legal process has been “terribly frustrating.” But for now, he says borrowers need to hope all provisions of SAVE pass the judicial review. If they do not, any further loan relief is unlikely.

“We’ve dealt with weeks of abrupt changes, gotten little clarity, and more changes are likely ahead,” Lux said. “The judicial whiplash makes it really hard to plan a repayment strategy and puts responsible borrowers in a bind.”