Risks for students with a student loan

Students study in the Perry-Castaneda Library at the University of Texas at Austin on February 22, 2024 in Austin, Texas.

Brandon Bell | Getty Images

New affordable repayment plan faces legal criticism

The Biden administration rolled out its new repayment plan, known as SAVE, or the Savings on a Valuable Education plan, in the summer of 2023, billing it as “the most affordable student loan plan ever.” Under the program, many borrowers expected to their bills were reduced by half or more.

However, Republican-backed states including Arkansas, Florida and Missouri filed lawsuits earlier this year challenging the SAVE plan, putting that aid in jeopardy.

The States argued that the Biden administration overstepped its authority with SAVE and essentially tried to find a roundabout way to cancel student debt after the Supreme Court blocked its sweeping plan last year.

In response, two federal judges in Kansas and Missouri temporarily halted key parts of the SAVE plan on June 24. Days later, the Biden administration successfully appealed part of the injunction against its plan. Still, the fate of SAVE remains in limbo until the judges rule on the cases.

President Biden's ambitious new plan to help students with student loans, explained

Borrowers likely won't find out more until after the presidential election in November, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade association for federal student loan providers.

Buchanan expects the cases will ultimately end up before the Supreme Court.

“Then they would only bring it up themselves in the October session and make a ruling much later,” he said.

SAVE participants can learn more about what the recent legal developments mean for them in a CNBC story from last week.

Chevron ruling could limit Department of Education

Meanwhile, a recent Supreme Court ruling is expected to make it harder for the Department of Education to provide relief to student borrowers with student debt.

The Supreme Court in late June rejected the so-called Chevron doctrine, a 40-year-old precedent that required judges to defer to a federal agency's interpretation of challenged laws. The 6-3 ruling created an ideological divide within the conservative-majority court that is expected to undermine the federal government's regulatory power.

“Federal agencies will have less flexibility in developing, implementing and enforcing regulations,” said higher education expert Mark Kantrowitz.

Rep. Pramila Jayapal, a Democrat from Washington, speaks outside the U.S. Supreme Court in Washington, DC, U.S., Friday, June 28, 2024.

Valerie Plesch | Bloomberg | Getty Images

That could complicate Biden’s push to cancel student loans en masse, Kantrowitz explained. The president had hoped to forgive borrowers’ debt under a so-called Plan B before the election.

“President Biden’s student loan forgiveness proposal requires significant interpretation of the law,” Kantrowitz said. “This makes it more vulnerable to legal challenges.”

Now that Biden's future is in jeopardy, so is student loan assistance

What would a Harris presidency mean for people with student debt?

Harris has helped promote Biden's policies to ease the burden on borrowersand would likely continue his efforts, experts say. As a presidential candidate in the 2020 race, however, Harris proposed a debt relief program that was criticized as overly complicated and limited. (To qualify, borrowers had to be recipients of a Pell Grant and open a business in a disadvantaged community, among other requirements.)

A White House spokesperson said Harris is proud of her and Biden's work to cancel $167 billion in student debt for nearly 5 million Americans so far, and that they plan to provide more relief to borrowers in the future.

For now the fact is that Trump is ahead in the polls is a concern for consumer organizations.

As president, Trump called for the elimination of the U.S. Department of Education’s existing loan relief programs, including the popular Public Service Loan Forgiveness initiative. He also wanted to slash the department’s budget, and his administration ended a program aimed at providing loan forgiveness to those defrauded by their schools.

“When Donald Trump was president, before the pandemic, every 26 seconds a new student paying off a student loan went bankrupt and over 99% of teachers, first responders and nurses were denied the assistance they were entitled to under PSLF,” said Aissa Canchola-Banez, political director at Protect Borrowers Action.

“The stakes for Americans with student debt have never been higher,” Canchola-Banez said.

Don't miss these insights from CNBC PRO

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