US appeals court blocks Biden-era student debt relief plan

By Nate Raymond

(Reuters) - A U.S. appeals court ruled on Tuesday that Democratic former President Joe Biden's administration lacked authority to pursue a student debt relief program designed to lower monthly payments for millions of borrowers and speed up loan forgiveness for some.

The St. Louis-based 8th U.S. Circuit Court of Appeals sided with seven Republican-led states that sued to block the U.S. Education Department's program, whose future was already in doubt with President Donald Trump back in the White House.

The three-judge panel held that the Education Department exceeded its authority by trying to use a Higher Education Act provision that allows for income-based loan repayment plans to adopt debt forgiveness on the scale provided by Biden's Saving on a Valuable Education (SAVE) Plan.

That program was designed to provide more generous terms than past income-based repayment plans, with monthly payments dropping for some borrowers to as low as $0.

It also provided debt forgiveness for some smaller loans in as few as 10 years, compared to the 20- or 25-year timeline under earlier rules.

U.S. Circuit Judge L. Steven Grasz, appointed by Trump during his first term in office, said the Higher Education Act's text made clear that Congress only authorized repayment plans that lead to actual repayment of student loans.

Grasz, whose opinion was joined by two fellow Republican-appointed judges, said the Biden administration had "gone well beyond this authority by designing a plan where loans are largely forgiven rather than repaid."

Missouri Attorney General Andrew Bailey, a Republican who led the litigation, said on X that while Biden is out of office, "this precedent is imperative to ensuring a president cannot force working Americans to foot the bill for someone else's Ivy League debt."

James Bergeron, who was recently named acting under secretary at the Education Department under Trump, in a statement said the department is working to ensure borrowers understand existing repayment alternatives.

He said the ruling "affirmed what we've known all along: the Biden administration misled students into believing their debt would simply disappear, despite the law being clear that a taxpayer-funded bailout is blatant executive overreach."

The ruling marked another legal setback to Biden's efforts to address what his White House described as a broken student debt system that can financially burden Americans seeking higher education.

The 6-3 conservative majority U.S. Supreme Court in 2023 blocked Biden's earlier plan to cancel $430 billion in student loan debt - a move that had been intended to benefit up to 43 million Americans and fulfill a campaign promise.

Following that ruling, Biden's administration sought to continue providing student debt relief through other means, announcing by the time he left office $183.6 billion in student loan forgiveness for more than 5 million borrowers.

(Reporting by Nate Raymond in Boston; Editing by Richard Chang and Christopher Cushing)