The decision increases the total relief provided under the Sweet v. McMahon settlement to at least $23 billion. It applies to borrowers whose borrower-defense applications were not decided by court-ordered deadlines, allowing them to receive full settlement relief, including federal loan discharge and, in some cases, refunds of payments made to the Department of Education.
The ruling marks another chapter in a yearslong legal battle over how the federal government handled borrower-defense claims submitted by students who alleged misconduct by their colleges. According to The New York Times, the case has now grown into the largest class-action settlement in American history.
Appeals Court Upholds Settlement after Education Department Misses Deadline
The case began in 2019, when borrowers sued the Department of Education over delays and denials involving borrower-defense applications. Those claims came from students who alleged their schools had misrepresented job placement rates, expected earnings, accreditation status, or the cost of educational programs.
The parties reached a settlement in June 2022, which received final court approval later that year. Under its terms, borrowers whose applications remained pending as of June 22, 2022, became class members, while those who filed between June 23 and November 15, 2022, were designated as post-class applicants.
According to Newsweek, the Department of Education was required to decide post-class applications by January 28, 2026. Borrowers whose claims remained unresolved after that deadline became eligible for what the settlement defines as Full Settlement Relief, including discharge of the relevant federal student loans.
The Trump administration sought an additional 18 months to complete its reviews, arguing that the original timetable was unrealistic. A federal district court denied that request, and the U.S. Court of Appeals for the Ninth Circuit later upheld that decision. An Education Department spokesperson told The New York Times that the department had complied with court orders in good faith but believed the appeals court had erred in rejecting its request for more time.
Relief Targets Borrowers Who Alleged School Misconduct
The settlement applies to borrowers connected to 151 schools identified in the agreement, including institutions such as ITT Technical Institute, Corinthian Colleges, University of Phoenix, and the Art Institutes. Several schools challenged their inclusion in the settlement, arguing that it unfairly suggested wrongdoing, though those appeals were unsuccessful, according to Newsweek.
Borrower defense allows federal student loan borrowers to seek debt cancellation when misconduct by their schools caused financial harm. According to the Government Accountability Office, the most common allegations involved false claims about graduates’ employment prospects, including job placement rates and expected salaries. The agency also found that many schools engaged in multiple forms of misrepresentation.
Newsweek reported that more than 170,000 additional borrowers are expected to receive approximately $11 billion in debt relief under the latest ruling. The broader Sweet v. McMahon settlement now covers nearly 500,000 borrowers and totals at least $23 billion in canceled federal student loan debt.
Borrowers covered by the settlement are encouraged to review their StudentAid.gov accounts and monitor communications from Federal Student Aid. The automatic relief applies only to eligible applications filed on or before November 15, 2022, while borrowers outside the settlement may still pursue borrower-defense claims through the standard federal process.
