Republican states file lawsuit challenging Biden's student loan repayment plan

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Republican states file lawsuit challenging Biden's student loan repayment plan​

Story by COLLIN BINKLEY and JOHN HANNA, Associated Press

• 1d • 4 min read

Kansas Attorney General Kris Kobach announces during a news conference that he and the attorneys general of 10 other states are suing the Biden administration over its new student loan repayment plan, Thursday, March 28, 2024, at the Statehouse in Topeka, Kan. The lawsuit to block a new student loan repayment plan that provides a faster path to cancellation and lower monthly payments for millions of borrowers. (AP Photo/John Hanna)© Provided by The Associated Press

TOPEKA, Kan. (AP) — A group of Republican-led states is suing the Biden administration to block a new student loan repayment plan that provides a faster path to cancellation and lower monthly payments for millions of borrowers.

In a federal lawsuit filed Thursday, 11 states led by Kansas argue that Biden overstepped his authority in creating the SAVE Plan, which was made available to borrowers last year and has already canceled loans for more than 150,000.

It argues that the new plan is no different from Biden's first attempt at student loan cancellation, which the Supreme Court rejected last year. “Last time Defendants tried this the Supreme Court said that this action was illegal. Nothing since then has changed,” according to the lawsuit.

FILE - People demonstrate outside the Supreme Court, June 30, 2023, in Washington. A group of Republican-led states filed a federal lawsuit Thursday, March 28, 2024, suing the Biden administration to block a new student loan repayment plan that provides a faster path to cancellation and lower monthly payments for millions of borrowers. (AP Photo/Jacquelyn Martin)© Provided by The Associated Press

The Education Department declined to comment on the lawsuit but noted that Congress in 1993 gave the department the authority to define the terms of income-driven repayment plans.

“The Biden-Harris Administration won’t stop fighting to provide support and relief to borrowers across the country — no matter how many times Republican elected officials try to stop us,” the department said in a statement.

Biden announced the SAVE repayment plan in 2022, alongside a separate plan to cancel up to $20,000 in debt for more than 40 million Americans. The Supreme Court blocked the cancellation plan after Republican states sued, but the court didn’t examine SAVE, which was still being hashed out.

FILE - President Joe Biden speaks on student loan debt forgiveness at the White House, Oct. 4, 2023, in Washington. A group of Republican-led states filed a federal lawsuit Thursday, March 28, 2024, suing the Biden administration to block a new student loan repayment plan that provides a faster path to cancellation and lower monthly payments for millions of borrowers. (AP Photo/Evan Vucci, File)© Provided by The Associated Press

The new lawsuit was filed this same week the White House hosted a “day of action” to promote the SAVE Plan. The Biden administration says more than 7.7 million borrowers have enrolled in the plan, including more than 5 million who have had their monthly payments reduced to $100 or less because they have lower yearly incomes.

The challenge was filed electronically in federal court in Kansas by Kansas Attorney General Kris Kobach, who requested that any trial be in Wichita, the state's largest city. The lawsuit asks a judge to halt the plan immediately. Along with Kansas, the suit is backed by Alabama, Alaska, Idaho, Iowa, Louisiana, Montana, Nebraska, South Carolina, Texas and Utah.

“In a completely brazen fashion, the president pressed ahead anyway,” Kobach said during a news conference at the Kansas Statehouse. “The law simply does not allow President Biden to do what he wants to do.”

Biden’s new repayment plan is a modified version of other income-based repayment plans that the Education Department has offered since the ’90s. The earliest versions were created by Congress to help struggling borrowers, capping payments at a portion of their income and canceling any remaining debt after 20 or 25 years.

FILE - Kansas Attorney General Kris Kobach speaks to the media, March 26, 2024, in Washington. A group of Republican-led states filed a federal lawsuit Thursday, March 28, suing the Biden administration to block a new student loan repayment plan that provides a faster path to cancellation and lower monthly payments for millions of borrowers. Kobach argues that Biden overstepped his authority in creating the SAVE Plan, which was made available to borrowers last year and has already canceled loans for 150,000. (AP Photo/Amanda Andrade-Rhoades, File)© Provided by The Associated Press

The new plan offers more generous terms than ever, offering to reduce monthly payments for more borrowers and canceling loans in as little as 10 years. Unlike other plans, it prevents interest from snowballing as long as borrowers make their monthly payments.

The plan’s provisions are being phased in this year, and the quicker path to cancellation was originally scheduled to take effect later this summer. But the Biden administration accelerated that benefit and started canceling loans for some borrowers in February.

Biden said it was meant “to give more borrowers breathing room so they can get out from under the burden of student loan debt.”

Instead of creating a new plan from scratch, the Education Department amended existing plans through federal regulation. Supporters saw it as a legal maneuver that put the plan on firmer grounding, anticipating a challenge from Republicans.

But in the new lawsuit, Kobach argues that Biden needed to go through Congress to make such significant changes.

The states argue that Biden's plan will harm them in many ways.

With such a generous repayment plan, fewer borrowers will have an incentive to go into public service and pursue the Public Service Loan Forgiveness program, the states argue. They predict more state employees will leave their jobs, and it will worsen public schools' struggles to recruit and retain teachers.

They argue the plan will inject hundreds of billions of dollars in loan relief into the U.S. economy, which would require states to increase fraud protection efforts. The plan “will create enormous opportunities for fraudsters to exploit student debt borrowers that would not otherwise exist,” according to the suit.

If successful, it would effectively kill the last remnant of Biden’s first attempt at widespread student loan relief. After the Supreme Court blocked his wider plan last year, Biden ordered the Education Department to craft a new plan using a different legal justification. The agency is now pursuing a more limited plan for mass cancellation.

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Binkley reported from Washington

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The Associated Press’ education coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org.

 

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Republicans Will Cut Off Student Loan Forgiveness For Medical Residents Under New Plan

Buried deep in a new bill is a major change that would cut off a popular federal student loan forgiveness program for medical and dental residents.

www.forbes.com

Republicans Will Cut Off Student Loan Forgiveness For Medical Residents Under New Plan​

ByAdam S. Minsky,

Senior Contributor.

Adam Minsky is an attorney and writer focusing on student loans.

May 01, 2025, 08:31am EDT

UNITED STATES - FEBRUARY 5: Chairman Tim Walberg, R-Mich., attends the House Education and Workforce ... More

CQ-Roll Call, Inc via Getty Images

House Republicans this week unveiled sweeping legislation to remake the federal student loan system. Nearly every element of the federal student aid system, from grants to aid disbursement to repayment plans and loan forgiveness programs, would be impacted if the plan is enacted. And buried deep in the bill is a major change that would cut off a popular federal student loan forgiveness program for medical residents and interns.

“This bill set forth by Committee Republicans not only would save taxpayers over $330 billion but also bring much-needed reform in three key areas: simplified loan repayment, streamlined student loan options, and accountability for students and taxpayers,” said Education and Workforce Committee Chair Tim Walberg (R-Mich.) in a speech on the House floor on Tuesday. “Moreover, it simplifies and improves the system going forward by streamlining repayment options and providing targeted assistance to struggling borrowers who need it rather than blanket bailouts for those who don’t."

While not expressly called out in Walberg’s speeceh, the bill explicitly cuts off medical and dental residents from key student loan forgiveness benefits, suggesting that the legislation’s authors believe these individuals don’t need the relief. The proposal is intended to become part of a massive reconciliation “mega-bill” that Republican lawmakers hope to enact this summer. The reconciliation process, which allows legislation to pass with simple, party-line majorities in Congress without crashing into a Senate filibuster, would facilitate the GOP’s expansion of expiring tax cuts and slash government spending to cover the associated costs.

PSLF Historically Has Provided Broad Student Loan Forgiveness Benefits​

Public Service Loan Forgiveness allows borrowers to qualify for a discharge of their federal student loans after making 10 years of qualifying payments. Under current law, a qualifying payment is one made on a Direct federal student loan under either a 10-year Standard plan or one of several income-driven repayment options, while the borrower is employed full-time by an eligible public service employer. This includes 501(c)(3) nonprofit organizations and government or public entities. Many nonprofit and public hospitals and community health centers are PSLF-eligible employers.

The statute governing PSLF, which was passed by Congress and signed into law by President George W. Bush in 2007, does not distinguish between different types of public service work, as long as the entity is a 501(c)(3) nonprofit or public organization and the borrower is meeting all of the program’s eligibility criteria. That means someone who is employed at, for instance, a nonprofit hospital, could qualify for PSLF regardless of whether they are a medical technician, a nurse, a doctor, or an administrative support staff member. While doctors and nurses may earn significantly more income than other employees at the same organization, they likely would be earning comparatively much less than they would in a private practice setting. These borrowers also likely carry significantly higher student loan balances due to their education, and would have much higher monthly payments under income-driven repayment plans as a result.

GOP Bill Eliminates Student Loan Forgiveness Eligibility For Medical And Dental Residents​

But for the first time in the PSLF program’s history, the House Republican bill – if enacted – would target a specific group of public service employees and cut them off from student loan forgiveness under the program.

“The term ‘public service job’ does not include time served in a medical or dental internship or residency program (as such program is described in section 428(c)(3)(A)(i)(I)) by an individual who, as of June 30, 2025, has not borrowed a Federal Direct PLUS Loan or a Federal Direct Unsubsidized Stafford Loan for a program of study that awards a graduate credential upon completion of such program," reads the legislative text under the heading, “Exclusion.”

This essentially would mean that if the bill becomes law, doctors and dentists would receive no PSLF credit during their residencies and internships. Typically, medical and dental residents work long hours (often at nonprofit or public hospitals) for very low pay for several years at the beginning of their careers, before moving into more permanent roles. Many medical residents repay their student loans under income-driven repayment plans during that time, given their low income, and interest accrual often means significant balance increases by the time the borrower completes their residency. Residency periods historically have counted toward student loan forgiveness under PSLF, as long as the borrower is meeting all of the program’s eligibility rules.

Department Of Education May Further Limit Student Loan Forgiveness Under PSLF​

The good news for PSLF borrowers is that the House Republican draft reconciliation bill would not make other significant changes to the program, such as by capping loan forgiveness or cutting off borrowers at certain income levels. Some advocates had been concerned that additional restrictions on student loan forgiveness under the program would be included in the GOP bill. But that’s not the end of the story.

This week, the Department of Education held its first public hearing as part of negotiated rulemaking, a lengthy process that allows the department to update, change, or repeal regulations governing federal student loan programs. And PSLF is explicitly a topic for negotiated rulemaking this year. The department is considering enacting new rules to implement President Donald Trump’s executive order in March that would cut off student loan forgiveness eligibility under PSLF for organizations that engage in certain “illegal” activities. Advocacy groups have warned this is not allowable under the PSLF statute passed by Congress, and that the definition of “illegal” in the president’s order is so vague and broad that it could wind up sweeping up untold numbers of nonprofit organizations and government entities whose mission or actions the Trump administration simply disagrees with.

“This month, the Department of Education began a process called negotiated rulemaking or ‘neg reg’ that will decide the future of student loan programs including Public Service Loan Forgiveness (PSLF),” said the Student Debt Crisis Center in an email this week. “The current Trump Administration is seeking to end PSLF eligibility for public service workers working at certain non-profits or serving certain communities.”

Meanwhile, the Trump administration is taking additional steps that could jeopardize student loan forgiveness under PSLF. Earlier this month, the administration began targeting the nonprofit status of Harvard University, which could be a prelude to a broader effort to eliminate the tax-exempt status for other nonprofit organizations that the administration has clashed with. So far, that has not yet happened, but advocates remain concerned. In the meantime, Republican lawmakers are considering a separate proposal that would remove the tax-exempt status from nonprofit hospitals, which could make additional healthcare workers ineligible for PSLF.