NCLA Challenges Education Department's SAVE Plan in Eighth Circuit

The NCLA argues that the SAVE plan exceeds the Secretary of Education’s authority and violates constitutional provisions by attempting to enact loan cancellation without explicit congressional authorization. The brief points to the Supreme Court’s prior ruling in Biden v. Nebraska, which struck down an earlier student debt cancellation initiative, as a precedent for rejecting the SAVE plan. NCLA contends that the 1993 law does not provide the Department of Education with the discretion to create plans that effectively cancel loans rather than requiring their repayment, and that such actions could lead to significant competitive disadvantages for states that rely on the Public Service Loan Forgiveness program.

Legal Basis for Challenge

The challenge hinges on the interpretation of the 1993 amendments to the Higher Education Act, which stipulate that income-contingent repayment plans should be based on borrowers’ adjusted gross income and should not exceed a repayment term of 25 years. NCLA asserts that the Department’s current interpretation allows for monthly payments so low that borrowers would end up with substantial unpaid balances at the end of their repayment periods, which would then be canceled. This, they argue, is not in line with the original intent of the law.

Implications for States

NCLA emphasizes that states like Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio, and Nebraska have standing in this case due to the potential harm the SAVE plan could inflict on their public service sectors. The plan is seen as undermining the benefits provided by the Public Service Loan Forgiveness program, which is designed to help state employers recruit and retain employees by offering loan forgiveness after ten years of service in qualifying roles. The loss of this competitive edge could lead to immediate adverse effects on state employment and public service delivery.

NCLA’s Position

In statements released by NCLA, officials expressed concern over the Department of Education’s attempts to bypass congressional authority. They argue that the ongoing efforts to modify student loan repayment terms without legislative backing are unlawful and call for the Eighth Circuit to intervene to protect taxpayer interests and uphold the rule of law.