Cases & Developments

The U.S. Department of Education’s Office of Federal Student Aid reopened the online income-driven repayment (IDR) plan and loan consolidation applications for borrowers. The Department reported that the application was temporarily paused to comply with the Eighth Circuit Court of Appeals injunction, which directed the Department to cease implementation of the Saving on a Valuable Education (SAVE) Plan and parts of other IDR plans. 

Executive Order: “Restoring Public Service Loan Forgiveness.” This Executive Order directs the Secretary of Education to coordinate with the Secretary of the Treasury to propose revisions to 34 C.F.R. 685.219, Public Service Loan Forgiveness Program. It specifically directs that “public service” be defined to exclude employment with organizations that participate in “activities that have a substantial illegal purpose” including (1) “aiding or abetting violations of 8 U.S.C. 1325 or other Federal immigration laws,” (2) “supporting terrorism … or engaging in violence for the purpose of obstructive or influencing Federal Government policy,” (3) “child abuse, including the chemical and surgical castration or mutilation of children or the trafficking of children to so-called transgender sanctuary States,” (4) “engaging in a pattern of aiding and abetting illegal discrimination,” or (5) “violating State tort laws, including laws against trespassing, disorderly conduct, public nuisance, vandalism, and obstruction of highways.” 

Opinion affirming the district court’s entry of a preliminary injunction and remanding for further proceedings. Plaintiffs are seven states challenging a rule by the U.S. Department of Education under the Biden administration that modified an existing income contingent repayment (“ICR”) plan for federal student loans, known as the Saving on a Valuable Education (“SAVE”) plan. Plaintiffs challenged the SAVE Rule as exceeding statutory authority given to the Secretary of Education because they claim the Secretary cannot forgive loans through an ICR plan, among other things. The district court concluded that plaintiffs were likely to succeed on this claim and preliminarily enjoined the early loan forgiveness provisions. On cross-appeals to the Eighth Circuit, plaintiffs requested a broadening of the injunction and federal officials sought vacatur of the preliminary injunction. The Circuit agreed with the district court that the states are likely to succeed in their claim that the Secretary’s authority to promulgate ICR plans does not authorize loan forgiveness at the end of the payment period. The court analyzed statutory history, including that Congress expanded repayment options for low-income borrowers by creating an income-based repayment (“IBR”) plan, which provided caps on payments and provided for loan forgiveness for borrowers using IBR once they made enough loan payments. Unlike IBR, the ICR statutory text does not provide a specific formula for calculating loan payments and does not explicitly state the Secretary can forgive loans. The court reasoned that “[t]he power Congress gave the Secretary in 20 U.S.C. § 1087e(d)(1) to create repayment plans means the Secretary must design ICR plans leading to actual repayment of the loans. The Secretary has gone well beyond this authority by designing a plan where loans are largely forgiven rather than repaid.” The Eighth Circuit affirmed the entry of the preliminary injunction but concluded that the district court erred by not enjoining the entire rule. The Circuit remanded the case with instructions to modify the injunction to cover the entire SAVE Rule and the revived forgiveness provisions under the 2015 REPAYE plan, which federal officials resuscitated to fill in the gap created after the SAVE Rule was enjoined by the district court.