A federal appeals court has cleared the way for 450,000 student loan borrowers to receive $23 billion in debt cancellation under a landmark class-action settlement against the U.S. Department of Education. On July 17, 2026, the Ninth Circuit Court of Appeals unanimously rejected the Trump administration’s latest request to delay implementing the Sweet v. McMahon settlement, paving the way for nearly 200,000 borrowers to have their loans automatically discharged.
The ruling marks the culmination of a seven-year legal battle that began in 2019 when the Project on Predatory Student Lending sued the Trump administration over delays in processing borrower defense claims—applications from students who say they were defrauded by their colleges. The case has since spanned three presidential administrations and carried the names of three different education secretaries: Betsy DeVos, Miguel Cardona, and Linda McMahon.
According to court documents, the Trump administration had processed only 60,000 of approximately 200,000 applications that were submitted after the original 2022 settlement by the court-appointed deadline. The Education Department argued it needed 18 months to properly review the remaining applications, but the appeals court found that the settlement’s obligations were clear from the start and the department had waited three years to raise objections.
The settlement, originally reached on June 22, 2022, requires the Education Department to either approve borrower defense claims or automatically discharge loans by a series of court-ordered deadlines. Once all discharges are complete, the settlement will become the largest ever against the U.S. government, according to Eileen Connor, executive director of the Project on Predatory Student Lending. “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,” Connor said.
Borrower defense is a federal rule that allows students to petition for loan forgiveness if their school misled them about job prospects, credit transferability, or likely earnings after graduation. The rule has been particularly relevant for students who attended for-profit colleges, many of which have since closed. The settlement covers borrowers who attended dozens of schools for which the Education Department found significant evidence of institutional misconduct.
The consequences of the multi-year delay have been substantial for borrowers. The average federal student loan balance cleared under the settlement exceeds $48,000, with individual amounts varying significantly. Eligible borrowers may also receive refunds for previous payments, with the typical refund exceeding $15,000. During the years of waiting, borrowers reported being denied mortgages and car financing, delaying family plans, and experiencing anxiety, depression, and panic attacks.
This settlement adds to a broader history of for-profit college accountability. When Corinthian Colleges collapsed in 2015, the Education Department ultimately discharged $5.8 billion in federal student loans for approximately 560,000 former students. The Sweet v. McMahon settlement, however, is substantially larger and represents a more comprehensive resolution of borrower defense claims across multiple institutions.
Under the settlement terms, the latest deadline for the Education Department to clear an eligible borrower’s debt is June 15, 2027. Borrowers are not required to make payments while awaiting forgiveness. Eligibility is based on which school a borrower attended and when they submitted their borrower defense application—it is not something one can newly qualify for today. If you had a claim pending with the Education Department in November 2022, you may be included in the settlement class, and you can check your application status at Studentaid.gov.
Sources
- NPR — reported on the appeals court ruling, the settlement’s history spanning three administrations, and borrower impact, including details from Eileen Connor and a borrower’s personal account
- CNBC — provided details on the July appeals court decision, settlement terms, eligibility criteria, average loan balances ($48,000+), typical refund amounts ($15,000+), and expert commentary from Connor and Mark Kantrowitz
- Project on Predatory Student Lending (PPSL) — confirmed the settlement as the largest against the U.S. government and noted PPSL’s cumulative $50 billion in federal student loan discharges for defrauded borrowers
- U.S. Department of Education — official settlement page confirming the June 22, 2022 settlement date, court approval on November 16, 2022, and settlement structure
