A federal appeals court has struck down President Biden’s income-based student loan forgiveness plan, saying that his Education Department went beyond its authority in creating a plan that would cost nearly half a trillion dollars over the next ten years. The program was aimed at eliminating debt for those who took out smaller loans. 

The Eighth Circuit Court of Appeals sided with a number of Republican attorneys general who sued to stop the Education Department program, known as Saving on a Valuable Education, or SAVE, last year.

The loan forgiveness plan was aimed at reducing monthly payments for borrowers who had been making their payments for at least a decade. The income-driven forgiveness plan eliminated monthly payments for those who make less than 225 percent of the federal poverty guideline, or $32,800. 

“The Secretary has gone well beyond this authority by designing a plan where loans are largely forgiven rather than repaid,” Judge Steven Grasz wrote for the unanimous three-jurist panel, ordering a district court to modify its original, narrower injunction. “We thus affirm the entry of the preliminary injunction, though we conclude the district court erred by not enjoining the entire rule and we remand with instructions to modify the injunction accordingly.”

The attorneys general argued that Mr. Biden’s income-based approach to reducing payments and forgiving loans was an attempt to violate the Supreme Court ruling that struck down the former president’s first forgiveness plan in 2023. By the time he had left office, Mr. Biden was still able to cancel upwards of $180 billion worth of student loans for more than five million Americans. 

The attorney general of Missouri, Andrew Bailey, who led his fellow Republicans in suing the Biden administration, said in an X post on Tuesday that their victory at the Eighth Circuit represented a precedent-setting moment for those who wanted to stop taxpayers from bailing out those with college degrees. 

“Though Joe Biden is out of office, this precedent is imperative to ensuring a President cannot force working Americans to foot the bill for someone else’s Ivy League debt,” Mr. Bailey wrote. “HUGE win.”

The court said that despite the former president’s insistence that the SAVE rule was not an all-out forgiveness program like his original plan, borrowers were still being let off the hook for the money they owed. “Of the 7.5 million borrowers enrolled in SAVE as of February 2024, 4.3 million pay $0 monthly towards their loans under SAVE,” Judge Grasz said. 

According to an analysis from the Penn Wharton Budget Model in 2023, the SAVE plan would have likely cost the federal government $475 billion over the course of a decade, though they said that the cost could balloon to as high as $558 billion.