8 million student-loan borrowers who remain blocked from cheaper payments and debt cancellation are getting a step closer to a final decision on Biden's new repayment plan

• A Missouri court will hear oral arguments for Biden's SAVE student-loan repayment plan on October 24.
• The SAVE plan has been blocked for months following challenges from GOP state attorneys general.
• The case now sits with the 8th Circuit, and the Supreme Court urged for a quick decision.

Millions of student-loan borrowers are getting a step closer to a court ruling on cheaper payments and debt relief.

Last summer, Biden and his Education Department introduced the SAVE income-driven repayment plan, intended to make repayment cheaper for borrowers and bring them a shorter timeline for student-loan forgiveness.

Shortly after the Education Department began implementing key parts of the plan — like loan forgiveness for borrowers who had original balances of $12,000 or less and made as few as 10 years of qualifying payments — it ran into legal threats from groups of GOP state attorneys general and culminated in two separate lawsuits, one of which blocked any future loan forgiveness through the plan in June.

Since then, the plan in its entirety has remained blocked — the 8th Circuit Court of Appeals prohibited the Education Department from implementing any provisions of the SAVE plan until the court issues a final decision on the legality of the plan, leaving 8 million enrolled borrowers in limbo.

But some movement could soon be made; on October 24, a Missouri court will hear oral arguments on the SAVE plan, after which the 8th Circuit will issue its final decision. It will consider the key arguments the GOP states have made on why SAVE should be blocked, including the plans' harm to student-loan company Mohela and the states' tax revenues.

"MOHELA faces the imminent loss of revenue in its role as a servicer of loans owned by the Federal Government," the lawsuit the attorneys general filed said.

It's the same argument GOP attorneys general used to block Biden's first attempt at broad student-loan forgiveness last summer, which the Supreme Court ultimately struck down. They had argued that Mohela, which is an instrumentality of Missouri, would lose revenue on forgiven loans despite the servicer having previously denied involvement in the legal process.

David Nahmias, the legal director of the UC Berkeley Center for Consumer Law and Economic Justice, told Business Insider that given the Supreme Court's prior ruling, the arguments the states are making this time around could prevail with the Missouri judges during oral arguments.

"An appellate court has to apply the law from the US Supreme Court," Nahmias said. "So I think that this particular argument that Missouri and the states are making, even if I believe that it's not substantial, I think that it might hold some water with this panel."

Where borrowers stand under the SAVE block

It's not surprising that there's confusion surrounding the SAVE litigation — there have been a number of different court rulings over the past few months that impacted different parts of the SAVE plan. For now, borrowers can focus on the 8th Circuit, which placed a preliminary injunction on the plan in its entirety and will determine whether the plan will ultimately be implemented or blocked.

At the end of August, the Supreme Court declined to allow the Education Department to move forward with implementing the SAVE plan while the legal process continued, instead referring the task back to the 8th Circuit. In its one-paragraph ruling, the nation's highest court said that it expects the 8th Circuit "will render its decision with appropriate dispatch," encouraging the court to move quickly with its final decision.

It's unclear when exactly a final decision on the SAVE plan will be made, and the 8th Circuit might look at the broader relief the Supreme Court struck down as context to make its decision. However, Nahmias said that the arguments the GOP attorneys general are making — particularly when it comes to Mohela — are highly speculative.

For example, Federal Student Aid announced in April that over 1 million student-loan borrowers were being transferred from Mohela to new servicers upon Mohela request to allow borrowers to receive "the best service and support," and Nahmias said there has not been any evidence of financial harm to the servicer despite it managing fewer accounts.

"Mohela has been offloading borrowers' accounts, there were accounts of folks who were already having their loans being discharged, and there is no sign of any financial harm to Mohela," Nahmias said.

Mohela did not immediately respond to a request for comment from BI on the lawsuit.

While the SAVE plan has been blocked, the Education Department has kept enrolled borrowers on interest-free forbearance and said it will continue to fight for the plan in court. Even so, Nahmias said the legal whiplash borrowers are experiencing is prompting chaos and confusion.

"People just can't make any independent decisions about how much they're going to pay every month to their student loans," Nahmias said. "This is something that affects millions of people, and they just can't."