Education Dept. freezes loan payments for 3M student borrowers after court rulings


The Education Department will suspend monthly student loan payments and interest for some 3 million borrowers in response to court rulings blocking parts of President Joe Biden’s new loan-repayment program.

Department officials said Friday they would freeze the student loans of borrowers who are enrolled in the program — known as the SAVE plan — and required to make payments in July.

Many of those borrowers were set to enjoy lower monthly payments under the SAVE plan. But a federal judge in Kansas, siding with Republican attorneys general, earlier this week prohibited the Education Department from implementing the payment reductions, which were set to take effect July 1.

A separate federal judge in Missouri halted other provisions of the program that allow borrowers to more easily obtain loan forgiveness.

The rulings, both from Obama-appointed judges, have caused an election-year headache for the White House. The administration had been relying on the SAVE plan as a centerpiece of its efforts to create a safety net for Americans resuming their student loan payments after a 3½-year Covid-related pause.

The new, narrower payment pause comes after progressive groups pressed the Biden administration to take action to soften the blow of the court rulings for millions of borrowers.

“Republican elected officials continue to fight to block their own constituents from saving money, having their monthly payments cut in half, and receiving relief,” an Education Department spokesperson said in a statement Friday. The spokesperson vowed that the administration would “continue to fight for this long-overdue relief” for borrowers.

Sen. Bill Cassidy of Louisiana, the top Republican on the Senate education committee, blasted the administration’s latest move as “irresponsible and desperate.”

“President Biden had a horrendous debate performance and is down in the polls, so now he is attempting to use tax dollars to buy votes,” Cassidy said in a statement.

The Education Department also said it would have to take down its online application form for new borrowers who want to enroll in the SAVE program or other repayment programs. It said it needed four to six weeks to update its systems to comply with the court orders.

In the meantime, the department said it would continue to accept paper applications for the SAVE program. Borrowers who enroll in the plan will immediately have their monthly payments and interest suspended, it said.

The Biden administration has asked the federal judge in Kansas to issue an emergency stay of the decision. Department officials said in court filings that the agency was unable to recalculate the payments for millions of borrowers in a matter of days and warned of major operational disruption to the student loan system.

The Consumer Financial Protection Bureau, which regulates student loan servicers, echoed those concerns, saying in a filing that the sudden changes could unleash major servicing breakdowns.

The injunction, the CFPB said, “significantly raises the risk that monthly payments are not accurately calculated, payment systems are not operated in compliance with federal consumer financial law, and that servicers might fail to provide accurate and actionable information to consumers about the status of their loans and their other payment options.”

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