More than 170,000 federal student loan borrowers who claim they were defrauded by their colleges will have $11 billion in debt erased, according to a ruling that triggered automatic relief after the Education Department missed court-ordered deadlines to process their claims.
The borrowers are part of the Sweet v. McMahon settlement, a landmark class-action case that has spanned three presidential administrations since 2019. These 170,000 borrowers, known as “post-class” applicants, submitted their borrower defense claims between June and November 2022 but waited years for the Education Department to review their cases and make final decisions.
The Borrower Defense to Repayment program allows students to petition for federal loan cancellation if their school engaged in deception or misconduct—such as misrepresenting job placement rates, claiming credits would transfer when they would not, or overstating likely salaries after graduation. Borrowers at schools including University of Phoenix, ITT Technical Institute, Corinthian Colleges, and the Art Institutes have filed claims under the program.
On July 17, 2026, the U.S. Court of Appeals for the Ninth Circuit unanimously rejected the Education Department’s latest attempt to delay the decision deadline. According to the court, the department had clear obligations under the 2022 settlement agreement but waited three years before raising objections to the timeline, making its request unreasonable.
The 170,000 borrowers are part of a much larger relief effort. The complete Sweet settlement, which affects over 450,000 borrowers overall, totals at least $23 billion in debt cancellation, making it the largest-ever settlement against the U.S. federal government. According to the Project on Predatory Student Lending, which brought the lawsuit, PPSL has now secured $50 billion in fraudulent student debt cancellation over the past decade.
The settlement originated from a lawsuit filed against the first Trump administration in 2019, when borrowers argued that Education Secretary Betsy DeVos had deliberately stopped processing borrower defense claims and wrongfully denied others without considering their merits. The case evolved through subsequent administrations—becoming Sweet v. Cardona under President Biden and now Sweet v. McMahon under Education Secretary Linda McMahon in Trump’s second term.
The Education Department said in a statement that it “has complied in good faith with court orders” and believed the court erred in not granting its request for more time. The department had argued it needed 18 months to properly review the applications and ensure “taxpayer funds are only disbursed to those borrowers who are entitled to relief on the merits.” However, the court found this argument unconvincing given the department’s delay in raising the concern.
Beyond the 170,000 borrowers receiving automatic relief, more than 1,000 additional class members remain waiting for loan discharges, refunds, or other relief that the department was legally required to provide by deadlines that have already passed. Additionally, another backlog of over 210,000 borrower defense applicants has accumulated as the department has redirected resources away from processing claims in recent years.
Sources
- New York Times — confirmed 170,000 borrowers and $11 billion in debt erasure
- NPR — detailed the Sweet settlement history, the Ninth Circuit ruling, and borrower testimonies
- Project on Predatory Student Lending (PPSL) — announced the settlement as the largest against the U.S. government and provided details on schools involved and total relief amounts
