A federal appeals court has cleared the way for 450,000 borrowers to receive debt relief after rejecting the Trump administration’s bid to delay discharges under a landmark settlement for students defrauded by for-profit colleges.
On July 17, the U.S. Court of Appeals for the Ninth Circuit unanimously rejected the Education Department’s request to postpone relief for borrowers covered by the Sweet v. McMahon settlement, a $23 billion class-action agreement that represents the largest settlement against the U.S. government in history.
The case has spanned three presidential administrations since it was filed in 2019, when borrowers sued claiming the Education Department had illegally stopped processing Borrower Defense claims—a federal program that allows students to seek loan forgiveness if their school misled them about job prospects, credit transferability, or other key facts.
The Department of Education reached a settlement in 2022 that required it to process applications within set deadlines or automatically discharge loans for borrowers who attended over 150 for-profit schools found to have engaged in substantial misconduct. However, the Department later argued it needed more time, claiming it had encountered an “unexpectedly large” number of applications.
The Ninth Circuit rejected that argument, noting the Department knew the scale of applications when it agreed to the settlement in 2022 but waited nearly three years to raise objections. “The DOE knew that there were approximately 179,000 Post-Class Applicants when it jointly moved with Plaintiffs for final approval of the Settlement in September 2022,” the court wrote.
According to court documents, the Education Department had processed only 60,000 of more than 250,000 post-settlement applications by its court-ordered deadline. The ruling means borrowers who did not receive a decision by applicable deadlines are entitled to full settlement relief, including loan discharges, refunds of past payments, and amended credit reporting.
The average federal student loan balance cleared under the settlement exceeded $48,000, according to Eileen Connor, president and executive director of the Project on Predatory Student Lending, the advocacy group that filed the original lawsuit. Typical refunds for eligible borrowers exceeded $15,000.
One borrower whose case exemplifies the long wait is Jessica Feindt, who attended the University of Phoenix and later filed a Borrower Defense claim in 2022 after discovering the school had misled her about whether her degree would be accepted by Michigan graduate programs. “I feel like I should be happy,” she told NPR, “but I’m really angry about all the years that my family suffered under these loans.”
Connor emphasized the broader impact: “At the end of the day, this settlement has impacted over 450,000 people, and it’s improved their personal balance sheets by over $23 billion.” She noted that the Education Department must now discharge loans for 500,000 borrowers under the court order, and that over the last decade, PPSL has secured $50 billion in total fraudulent student debt cancellation.
The Department of Education stated it had “complied in good faith with court orders” and believed the settlement “imposed an unrealistic deadline.” However, courts at every level, including the Supreme Court, have rejected the Department’s attempts to delay relief. The ruling marks the latest in a series of legal defeats for the Trump administration over the settlement’s implementation.
Sources
- CNBC — Details on the Sweet v. McMahon settlement, the $23 billion relief total, average loan balances cleared ($48,000+), and typical refunds ($15,000+)
- NPR — The seven-year legal history spanning three administrations, the Borrower Defense program mechanics, the 60,000 processed applications figure, and borrower Jessica Feindt’s account
- Project on Predatory Student Lending — The July 17, 2026 Ninth Circuit ruling details, the Department’s knowledge of 179,000 post-class applicants in September 2022, and the $50 billion total fraudulent debt cancellation secured by PPSL
- Forbes — The Ninth Circuit’s unanimous rejection of the Department’s delay request, the three-year gap between settlement approval and the Department’s first objection, and the court’s reasoning on changed circumstances
