An appeals court blocked a Biden student loan plan — after another one had let it go forward

The Eighth Circuit issued an unsigned order Friday blocking the Saving on a Valuable Education, or SAVE, student loan program — and other related relief.

[Update, 5:00 p.m. August 13: The Justice Department went to the U.S. Supreme Court on Tuesday, asking the high court to allow the Biden administration to implement the Saving on a Valuable Education, or SAVE, student loan program. Specifically, DOJ is asking the Supreme Court to vacate the injunction pending appeal that the U.S. Court of Appeals for the Eighth Circuit issued on Friday, August 9.

A response was requested and is due by 4 p.m. Monday, August 19.

Read on for more on the Eighth Circuit’s ruling and more.]

On Friday afternoon, a federal appeals court blocked the Biden administration from doing almost anything to provide student loan relief to those people nationwide whose loans are currently in income-contingent repayment plans.

It was the third appeals court ruling relating to the Saving on a Valuable Education, or SAVE, program — and followed a June 30 order from a different appeals court that would have allowed the program to go into effect.

Friday’s order from the U.S. Court of Appeals for the Eighth Circuit is the first of those appellate orders addressing the SAVE program that contained any substantive discussion of the effort.

With the ruling, seven Republican-led states succeeded in getting a three-judge panel of all Republican appointees on a federal appeals court that only has one Democratic appointee to issue a nationwide injunction blocking the SAVE program. More than that, the injunction goes even further — blocking any similar relief, regardless of whether it is issued under the rule creating the SAVE program or otherwise.

The per curiam order issuing an injunction pending appeal, unsigned and with its grand total of eight pages of substance, was issued for Judge Raymond Gruender, a George W. Bush appointee, and Judges Ralph Erickson and Steven Grasz, Trump appointees.

The ruling caused significant confusion coming a day or two after many borrowers across the country received word that their loans had been placed into forbearance following an earlier order from the same court in mid-July. Although the covered loans are not accruing interest during this time, according to the Education Department, the months the loans are in forbearance will not court toward borrowers’ Public Service Loan Forgiveness or income-driven repayment loan forgiveness time.

Neither the Justice Department nor Education Department provided comment on Friday’s ruling or next steps in its immediate aftermath.

The bottom line, though, is that the SAVE plan is blocked currently — and that this is not the final word.

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What’s going on?

The SAVE program was finalized by the Education Department shortly after the U.S. Supreme Court’s June 2023 decision rejecting the Biden administration’s loan forgiveness program issued under the authority of the HEROES Act.

The SAVE program, set out in a rule that was issued on July 10, 2023, addresses loans subject to income-contingent repayment plans, which are allowed under a 1993 law. The program alters previously existing income-contingent programs to reduce the percentage of a person’s discretionary income used to calculate payments, creates rules for addressing and forgiving interest accrual, and sets forth time limits after which point some loans are forgiven.

To be clear about what I just laid out there: This is a different program, taking different actions, and using a different law than the program blocked by the Supreme Court in 2023.

In Friday’s order, however, the appeals court blocked virtually all of it:

The appeals court previously had issued a one-sentence administrative stay on July 18 blocking the administration from implementing any of the SAVE program while the court decided how to handle the states’ request for an injunction pending appeal.

Friday’s order, as noted, superseded that.

“We agree with the district court that the Government’s ‘interpretation’ of this provision to authorize loan forgiveness of this magnitude ‘is questionable,’” the order stated, noting that “The SAVE plan is even larger in scope than the loan-cancellation program at issue in [the HEROES Act case].” As with most of its substantive discussion, the unsigned order focused almost exclusively on the loan forgiveness aspects of the SAVE plan — despite the injunction it ultimately issued being substantially more broad.

Notably, because Friday’s order blocks the government from taking “any” of the actions detailed “for any borrowers whose loans” are covered by the new rule — and not just blocking enforcement of the rule itself — this order also appears to block the government from implementing loan forgiveness under any other rule, under past plans, or for any other reason for those covered by the SAVE plan.

In other words, if you are a borrower in an income-contingent repayment plan, Friday’s order appears to block the government from doing virtually anything to forgive your loan while the injunction remains in place.

The Eighth Circuit’s ruling was an expansion of a lower court’s preliminary injunction, which blocked the Education Department for forgiving loans under the SAVE program during litigation but denied other relief. After U.S. District Judge John Ross, an Obama appointee in Missouri, issued that ruling, the Republican-led states suing the Biden administration asked Ross for two more things — a stay of the entire rule during their appeal, which he denied, and a “clarification” of his injunction to block other loan forgiveness based on earlier income-related plans, which he also denied as outside the scope of relief requested.

On Friday, in short, the Eighth Circuit kept the prior injunction and gave the states both of those other asks as well.

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An earlier ruling

The Eighth Circuit’s ruling is in contrast to an earlier ruling from the U.S. Court of Appeals for the Tenth Circuit, which, on a 2-1 vote, stayed a lower court’s preliminary injunction out of Kansas that had blocked part of the rule in a lawsuit brought by a different set of Republican-led states.

In other words, an appeals court blocked the SAVE plan (and maybe other relief) nationwide in one lawsuit brought by seven Republican-led states during litigation after another appeals court in another lawsuit initially brought by 11 other Republican-led states had already ruled that the plan should be able to go into effect during litigation.

If that sounds confusing or unfair, you’re not wrong. Essentially, the Republican-led states just had to win once — but the Biden administration had to win both times. This about sums up the concerns with “nationwide injunctions.”

As with Ross’s injunction, moreover, the district court’s injunction in the Kansas case did not block the entire SAVE program. Instead, U.S. District Judge Daniel Crabtree, an Obama appointee in Kansas, issued an ruling and injunction that blocked the department “from implementing or acting pursuant to the parts of Final Rule … set to become effective on July 1, 2024” while litigation continued. Crabtree found that the plaintiffs had not moved quickly enough to stop all of the program, and some aspects had already gone into effect. That is far more broad than Ross’s injunction — and would have blocked the part reducing the percentage of discretionary income to be used in setting payments — but it did have limits.

Regardless, on June 30, the Tenth Circuit stayed that injunction during the appeal. Judge Carolyn McHugh, an Obama appointee, and Judge David Ebel, a Reagan appointee, stayed the injunction — letting the plan go fully into effect — while Judge Timothy Tymkovich, a George W. Bush appointee, would have denied the stay and let the district court’s injunction remain in place during the appeal. (While the Justice Department appealed the injunction, the three states that Crabtree found had standing — Alaska, South Carolina, and Texas — cross-appealed, seeking to get the appeals court to expand the injunction.)

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Then, there’s SCOTUS

That wasn’t the end of that. After the Tenth Circuit’s stay order, the three states then went to the U.S. Supreme Court, asking the justices to vacate the stay — which would put the injunction by Crabtree back into effect. Although that request has been fully briefed on the shadow docket since July 19, the Supreme Court is yet to rule. (That was likely so because a Supreme Court ruling was unnecessary to block the rule while the Eighth Circuit’s July 18th administrative stay was in effect.)

Now, however, Friday’s order from the Eighth Circuit likely will set things in motion back at the Supreme Court — but on a different footing. Now, it puts the question to the Education Department and Justice Department as to to whether they will ask the Supreme Court to vacate the Eighth Circuit’s injunction pending appeal — and also rule on the Justice Department’s opposition to the states’ request out of the Tenth Circuit to vacate that court’s stay order.

Only then would the SAVE program — or, potentially, any related relief — be able to go into effect.

In addition to all of that, and on the other side, both groups of states have already asked the Supreme Court to treat the application as a petition for certiorari if necessary and take up the matter now on the merits as well.

[Update, 8:20 p.m.: Texas Solicitor General Aaron Nielson filed a letter with the U.S. Supreme Court on Saturday, noting that the Eighth Circuit’s injunction “negate[s] the need for emergency relief from this Court so long as that injunction remains in effect,” but still seeking Supreme Court review — either by having the court “summarily order the district court to vacate the SAVE Plan“ or setting the case for argument — based on the application already filed.

When Nielson asks for the Supreme Court to “summarily order the district court to vacate the SAVE Plan,” it’s important to understand what that means. Neither the district court did nor the Tenth Circuit vacated the SAVE Plan. No court has done so.

So, what Texas is asking the court to do (starting with this case) is to stop considering cases at all on the merits docket, get rid of all pretense, and actually resolve a merits case — involving a different program based on application of a different law — because Nielson thinks Texas should obviously win based on the HEROES Act case.]

This report was updated after initial publication to provide additional information — including adding the word “court” into the headline — with the final update made at 5:45 p.m.