Altering the Deal

In usury-related news sure to thrill worshipers of Mammon, a federal court upended government student loan repayment plans, the terms of which had stood for decades.

There is no other way to describe this ruling than moon-barking greedhead insanity. Federal judges had already granted the Mammon Mob's petition to rug pull usury victims by outlawing Biden's rather mild SAVE plan. Now, another coven of black-robed wizards have altered the deal further, retroactively divining that when Congress passed student debt forgiveness in 1993, they actually meant to outlaw debt forgiveness. And now no one can apply for any debt relief or renew longstanding lower payment agreements.

Former President Joe Biden's key student-loan repayment plan is blocked without an end in sight, preventing millions of borrowers from accessing cheaper payments and a shorter timeline for loan forgiveness.

On Tuesday, the 8th Circuit Court of Appeals ruled that Biden's SAVE income-driven repayment plan was an overreach of authority and upheld a preliminary injunction on the plan. SAVE is set to remain blocked as a district court continues to work on the case.

The SAVE plan, first introduced in the summer of 2023, has been on pause since a group of GOP-led states filed lawsuits to block it in July 2024, leaving 8 million enrolled borrowers in limbo.

Striking down SAVE was just for openers, though. Because millions of usury victims on existing icome-driven repayment plans attempted their annual mandatory renewal, only to find the application process blocked.

All federal IDR plans require borrowers to recertify their income each year by completing a new application through the Department of Educataion web site. But since the ruling, the links used to do so are dead. If the state’s debtors remain unable to renew their IDR plans on time, their monthly payments will automatically skyrocket.

But why did striking down SAVE affect borrowers enrolled in other income-driven plans—some who’ve been paying on time for decades?

The ruling also suggested that other student-loan repayment plans, including income-contingent repayment, weren't permissible under the Higher Education Act.

The law, passed in 1993, had provisions that established plans whereby borrowers could cap their monthly student loan payments according to their income. Schools, banks, and the Department of Education have advertised these plans for over thirty years, only for the court to find fault with them now.

ICR, PAYE, and the SAVE plan (as well as SAVE’s predecessor plan, REPAYE) were all created under the same statutory authority, a provision of the Higher Education Act that Congress passed in 1993. The court reasoned that while Congress clearly stated that these types of income-driven plans should have payments tied to income with a maximum repayment term of 25 years, that doesn’t mean Congress actually intended for there to be student loan forgiveness at the end, because the statute does not expressly call for a discharge at the end of the repayment term. The Biden administration and student loan borrower advocacy groups had argued that there was no other rational way to interpret Congress’s intent — and that forcing borrowers to pay off their loans in full would be impossible for many people using the repayment formula that Congress authorized. And forcing these borrowers who cannot pay off their loans based on their income-driven payments into a different, more expensive plan, or forcing them to make a balloon payment at the end of the 25-year term, would defeat the purpose of creating these plans in the first place.

Cutting through the legalese, what the court has done is retroactively decide that instead of offering students who face potentially crippling debt burdens some modicum of relief, Congress’ real purpose in drafting Higher Education Act was to create a new kind of debt combining the worst aspects of usurious student loans and adjustable rate mortgages. Because were the court’s interpretation correct, borrowers enrolled in ICR or PAYE would get 20-25 years of reduced monthly bills, followed by a massive balloon payment at the end. And unlike an ARM, failure to pay wouldn’t simply result in foreclosure because student debt attaches to the borrower bodily instead of just his alienable property.

Tl; dr: the 8th Circuit Court just re-legalized indentured servitude withtout due process.

However, it’s possible that Congress could act first, before there’s a final ruling in the litigation. Congress is reportedly considering repealing all existing IDR plans, including IBR, and replacing them with a single new IDR plan that would use a similar repayment formula, but would eliminate student loan forgiveness after 20 or 25 years. According to the most recent proposal, current borrowers would be grandfathered into existing repayment plan options. Meanwhile, Republican lawmakers are also exploring potential changes to eligibility for the PSLF program. Nothing has been finalized yet, however, and the situation remains very fluid.

No matter your feelings on student debt relief, this ruling and the follow up bill are just stupid. Millions of borrowers signed on with the understanding they'd be forgiven if they missed zero payments for 25 years. Going full Vader and altering the deal is plain evil.

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