A federal appeals court cleared the way for $11 billion in student debt forgiveness for 170,000 borrowers after rejecting the Trump administration’s attempt to delay relief for those who claimed they were defrauded by their schools. The 9th U.S. Circuit Court of Appeals affirmed the decision on July 17, 2026, ruling that the Education Department must proceed with loan discharges under the Sweet v. McMahon settlement.
The borrowers at the center of the case attended schools that allegedly misled them about job prospects, earnings potential, credit transferability, and other educational outcomes. Many attended for-profit colleges, some of which have since closed.
The ruling stems from a years-long class-action lawsuit filed in 2019 by the Project on Predatory Student Lending against the Education Department. The case has spanned three presidential administrations, changing names from Sweet v. DeVos to Sweet v. Cardona during the Biden years, and finally to Sweet v. McMahon under the current Trump education secretary, Linda McMahon.
Under the borrower defense program, a federal rule established to protect students from institutional fraud, the Education Department is supposed to erase debts if schools have lied to borrowers. In 2022, the Biden administration agreed to a landmark settlement pledging that borrowers who attended a predetermined list of more than 150 mostly for-profit colleges would receive full and automatic relief.
The settlement also allowed more than 250,000 additional borrowers—known as “post-class applicants”—to file claims during a brief period in 2022. The Education Department was required to review those new applications within a set timeframe or automatically discharge the loans. However, according to court documents, the Trump administration processed only 60,000 of those applications by the court-appointed deadline in early 2026.
The Education Department subsequently asked the courts for an additional 18 months to review the remaining claims, arguing it needed more time to ensure “taxpayer funds are only disbursed to those borrowers who are entitled to relief on the merits.” The court rejected this request, finding that the settlement’s obligations were clear from the start and that the department had waited three years to raise an objection.
Eileen Connor, executive director of the Project on Predatory Student Lending, stated that “this settlement has impacted over 450,000 people, and it’s improved their personal balance sheets by over $23 billion.” The latest ruling brings the total borrowers receiving relief under the settlement to approximately 450,000, making it the largest settlement ever against the U.S. government once all loan discharges and refunds are completed.
The average federal student loan balance cleared under the settlement exceeds $48,000, according to Connor. Borrowers may also qualify for refunds of previous payments made on their debt, with typical refunds exceeding $15,000.
One borrower, Jessica Feindt, attended the University of Phoenix hoping to earn an undergraduate degree in psychology. She said the school’s recruitment counselor repeatedly misled her, including about whether her degree would be accepted by Michigan graduate programs. She filed a borrower defense claim in 2022 as a post-class applicant and saw her federal student loans erased following the July court ruling. “I feel like I should be happy,” Feindt told NPR, “but I’m really angry about all the years that my family suffered under these loans.”
The Education Department has until June 15, 2027, to clear all eligible borrowers’ debts. Borrowers are not required to make payments while waiting for loan forgiveness. The department did not respond to requests for comment but previously stated through a spokesperson that the settlement “imposed an unrealistic deadline” on the agency.
Sources
- The Hill — reported the appeals court ruling, the $11 billion figure, and the 170,000 borrowers eligible for relief
- NPR — provided background on the borrower defense program, the three presidential administrations involved in the lawsuit, the Education Department’s processing failures, and a borrower’s personal account
- CNBC — detailed the $23 billion total settlement value, the 450,000 borrowers affected, average loan balances, refund amounts, and the department’s arguments for delay
