Eighth Circuit Applies Loper Bright in Biden Student Loan Case

As we’ve discussed, Loper Bright has been changing the legal landscape as courts revisit and revise or uphold standards of review. Recently, the Eighth Circuit reviewed “the authority of the President and Secretary of Education, under existing law, to forgive hundreds of millions of dollars of loans made to borrowers to finance the cost of obtaining their post-secondary education.” Missouri v. Trump, No. 24-2332, 2025 WL 518130, at *1 (8th Cir. Feb. 18, 2025). At issue was a Biden-era rule (“SAVE Rule”) promulgated by the Department of Education to modify a pre-existing income contingent repayment (ICR) plan for federal student loans that would alter payment thresholds, stop interest accrual, and forgive loan balances after as little as ten years of repayment. Seven states challenged the rule as exceeding the Secretary of Education’s authority.

Congress Creates Loan Program

In 1993, Congress authorized the federal government to directly issue loans to college students, which allowed borrowers to repay their loans through four generally applicable options: (1) a standard repayment plan with fixed payments over a period not exceeding ten years; (2) a graduated repayment plan with increasing payments over a period not exceeding ten years; (3) an extended repayment plan with fixed or graduated payments over a period not exceeding twenty-five years; or (4) an income contingent repayment plan with varying payments based on income over a period not exceeding twenty-five years. 20 U.S.C. §§ 1078(b)(9)(A), 1087e(d)(1)(A)–(D).

Congress later enacted the College Cost Reduction & Access Act to expand repayment options for low-income borrowers by creating an income-based repayment (IBR) plan to limit monthly payments for borrowers experiencing a “partial financial hardship.” See, Pub. L. No. 110-84, § 203, 121 Stat. 784, 792–95 (2007) (codified as amended at 20 U.S.C. § 1098e). The plans have two central features: a ceiling on loan payments and loan forgiveness after twenty or twenty-five years of payments. These features are expressly set forth in the statute. 20 U.S.C. § 1098e.

There were thus two potential programs applicable to repayment based on income: the ICR and the IBR. The ICR statutory text does not provide a specific formula for calculating loan payments and does not explicitly state the Secretary can forgive loans. Instead, the balance owed “equal[s] the unpaid principal amount of the loan, any accrued interest, and any fees, such as late charges, assessed on such loan.” Congress empowered the Secretary to “establish procedures for determining the borrower’s repayment obligation on that loan for such year, and such other procedures as are necessary” to implement the ICR.

Accordingly, since 1994, the Department of Education has established various ICR plans that provided for loan forgiveness of any remaining debt at the end of the established payment period of twenty or twenty-five years, depending on the plan and the borrower’s loans.

The Biden Administration SAVE Rule

The SAVE Rule, by contrast, starts cancelling outstanding balances after 120 months of payments for certain borrowers and forgives remaining balances after twenty years of payments for borrowers with only undergraduate loans or twenty-five years of payments for those with graduate loans. The difference between the SAVE Rule and previous approaches is that under SAVE some borrowers would repay less than the original amount borrowed and only “borrowers in the top two quintiles of lifetime income could expect to pay more than they initially borrowed.”

In evaluating whether the SAVE Rule was authorized by the statute the court relied on Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024) for the scope of its task, “determine[ing] the statute’s ‘best meaning’ by “deploying its full interpretative toolkit.” The court thus starts with “the statute’s plain language,” looking to “the meaning that proper grammar and usage would assign” the text, giving “effect, if possible, to every clause and word of a statute” and “look[ing] to the structure of the statute and the language surrounding the term to ascertain its meaning.” If the text is clear, “the judicial inquiry must end.”

Accordingly, the court determined that at “the time ICR was first codified, the statute had four generally applicable options for borrowers to repay ‘principal and interest’ on their loans:

• a standard repayment plan with a fixed payment made over a set number of years, not to exceed ten years;
• an extended repayment plan with a fixed annual repayment amount paid over an extended period of time;
• a graduated repayment plan, “with annual repayment amounts established at 2 or more graduated levels and paid over a fixed or extended period of time, except that the borrower’s scheduled payments shall not be less than 50 percent, nor more than 150 percent, of what the amortized payment on the amount owed would be if the loan were repaid under the standard repayment plan”; and
• an income contingent repayment plan, with varying payments based on income paid over an extended time period, not to exceed twenty-five years.”

Court Distinguishes SAVE Plan from IBR

Unlike the IBR, Congress did not empower the Secretary to cancel outstanding balances after a certain number of payments. Nevertheless, the federal officials claimed the absence of the phrase “full repayment” and the presence of the words “income contingent” signify Congress expected loan repayment to be fully contingent on whether a borrower earned enough income and borrowed a small enough amount of money. But silence does not equal authority. And, although “courts give ‘respect’ to ‘an Executive Branch interpretation [that] was issued roughly contemporaneously with enactment of the statute and remained consistent over time.’” . . . “’respect’” simply means ‘[t]he views of the Executive Branch could inform the judgment of the Judiciary, but d[o] not supersede it.’” . . . and “[T]he basic nature and meaning of a statute does not change when an agency happens to be involved” or “has happened to offer its interpretation.” Citing Loper Bright, 144 S. Ct. at 2258, 2271.

The court thus concluded that “As with the previous attempt at loan forgiveness, the major questions doctrine informs our analysis. We assume Congress would have provided clear signs if it authorized such significant power to the Secretary. . . . It did not. By creating the ICR plan, Congress simply created a different method to calculate payments to repay student loans.”

Accordingly, the court held that the states were likely to succeed in their challenge to the SAVE Rule’s forgiveness provision, affirmed the district court’s entry of a preliminary injunction, and remanded with instructions to modify the preliminary injunction to enjoin the entire SAVE Rule.