In an unsigned order dated August 9, 2024, the U.S. Court of Appeals for the Eighth Circuit signaled its frustration with the U.S. Department’s ongoing efforts to proceed with implementation of its much-debated SAVE repayment plan notwithstanding an earlier partial injunction entered by a federal district court.
In a case filed by Republican state officials (the “States”), a federal judge in Missouri had previously concluded that the States were likely to prevail on their claim that the Department of Education exceeded its authority in creating the SAVE plan, and that the prospect of irreparable harm warranted an injunction prohibiting the Department from forgiving loans under the SAVE plan while the case was litigated. In the course of considering cross-appeals from that injunction, the Eighth Circuit observed that the Department had responded to it by creating a so-called “hybrid rule” that combined the portions of the SAVE plan that were not enjoined with the forgiveness rules of a predecessor repayment plan—a combination that “effectively rendered that injunction a nullity.” The court ordered an administrative stay of the hybrid rule on July 18 pending further briefing
In addressing the States’ request for a more expansive injunction, the Eighth Circuit concluded that for the reasons set forth by the Supreme Court last year in Biden v. Nebraska, 600 U.S. —-, 143 S. Ct. 2355 (2023), at least the State of Missouri was likely to have standing to sue.
On the merits, the panel then concluded that the States had shown a likelihood of success on the merits: although the SAVE plan was projected to forgive over $475 billion in federal student loans, the Department’s statutory authority to conduct forgiveness on that scale is “questionable,” particularly given that Congress had expressly authorized loan forgiveness under several specific circumstances, but not in connection with income-driven repayment. Further, under the major-questions doctrine, the panel found it unlikely that the Department could identify the requisite level of congressional clarity “to forgive hundreds of [billions] of dollars’ worth of student loans, 3,000 percent more than has ever been forgiven” under income-driven repayment plans.
Last, the panel held that the States had demonstrated irreparable harm insofar as the hybrid rule had “render[ed] the [district court] injunction largely a nullity,” and that the balance of the equities favored the States given that “all borrowers currently impacted by [the] administrative stay are in administrative forbearance and thus not required to pay principal or interest on their loans, borrowers who have remained in PAYE and REPAYE plans are not impacted, and the States cannot turn back the clock on any loans that have already been forgiven.”
The ruling all but ensures that the SAVE plan will not be further implemented before the November 2024 presidential election, and in all likelihood such implementation will remain stayed unless and until the case is taken up by the Supreme Court in its 2024–25 term—a scenario that, given the parallels to Nebraska v. Biden and identical court composition, could result in the SAVE plan being invalidated in its entirety.
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