A federal appeals court has cleared the way for 450,000 student loan borrowers to have $23 billion in debt forgiven under a landmark settlement after the Education Department failed to meet its legal obligations to process their claims.
The Ninth Circuit Court of Appeals ruled in mid-July 2026 that the Department of Education must continue discharging loans for borrowers who claim they were defrauded by their colleges. The decision ended the Trump administration’s latest bid to delay relief, according to NPR and CNBC reporting on the July 17 ruling.
The settlement, formally known as Sweet v. McMahon (named after the current Education Secretary Linda McMahon), originated from a class-action lawsuit filed in 2019 by the Project on Predatory Student Lending against the Trump administration. The suit centered on the federal “borrower defense” rule, which allows borrowers to petition for loan forgiveness if a school has misled them about job prospects, credit transferability, or likely earnings after graduation.
The Biden administration reached a landmark settlement in November 2022, pledging that borrowers who attended a predetermined list of more than 150 mostly for-profit colleges would receive full automatic relief. The settlement also allowed more than 250,000 additional borrowers to apply for relief during a post-settlement period in 2022, requiring the Department to review those claims within a set timeframe or automatically discharge the loans.
However, the Trump administration revealed in court documents that it had processed only 60,000 of those post-settlement applications by the court-appointed deadline, leaving approximately 190,000 borrowers waiting. The Department argued it needed 18 months to properly review the applications, but the Ninth Circuit rejected that request, noting the settlement obligations were clear from the outset and the Department had waited three years to raise an objection.
Once all required discharges and refunds are completed, the Sweet settlement will become the largest ever against the U.S. government, according to Eileen Connor, executive director of the Project on Predatory Student Lending. She stated that “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,” as reported by NPR.
Borrowers eligible for relief attended schools that made false promises, including claims about stable career paths, higher earnings, and transferable credits. Many of the implicated schools were for-profit institutions, many now shuttered. According to CNBC, the average federal student loan balance cleared under the settlement exceeded $48,000, and borrowers eligible for refunds typically received over $15,000 for previous payments made on their debt.
The case has spanned three presidential administrations, with its name changing from Sweet v. DeVos in 2019 to Sweet v. Cardona during the Biden years, and finally to Sweet v. McMahon under Trump’s second term. Under the settlement terms, the Education Department must clear all eligible borrower debt by June 15, 2027, and borrowers are not required to make payments while awaiting forgiveness.
For individual borrowers like Jessica Feindt, who attended University of Phoenix and waited years for relief after being misled about degree acceptance by Michigan graduate programs, the ruling offered both relief and frustration. According to NPR, Feindt stated: “I feel like I should be happy, but I’m really angry about all the years that my family suffered under these loans.”
Sources
- NPR — details on the Sweet v. McMahon settlement, the Ninth Circuit ruling, the Education Department’s application backlog, and borrower impact; reporting by Cory Turner, July 31, 2026
- CNBC — overview of the settlement, eligible borrowers, average loan balances, refund amounts, and legal timeline; July 31, 2026
- Project on Predatory Student Lending (PPSL) — settlement impact statement and total dollar amount; Eileen Connor quote and historical context
