A federal appeals court has rejected the Education Department’s attempt to delay student loan relief required under the Sweet v. McMahon settlement. The decision keeps the department on the hook to provide discharges and related relief for more than 500,000 borrowers covered by the case.
The settlement is valued at roughly $23 billion and includes federal student loan discharges, refunds of certain past payments, and credit-reporting adjustments. The latest ruling is another setback for the department after earlier efforts to postpone relief were also rejected.
Ninth Circuit Says the Settlement Must Stand
A three-judge panel of the Ninth Circuit Court of Appeals unanimously denied the department’s request to modify the settlement. The court had previously declined to grant the department an emergency stay.
The Education Department argued that the volume of post-class Borrower Defense applications created changed circumstances that justified a delay. But the court said the agency knew about the scale of those applications when the settlement received final approval.
“The DOE failed to show ‘a significant change either in factual conditions or in law’ that would warrant modification of the Settlement,” the court wrote. It noted that the department had known by February 2023 that the number of post-class applicants had exceeded 205,000, yet waited about three years before seeking relief from its obligations.
According to www.forbes.com, the court did not need to decide whether post-class applicants were technically class members. The panel said the Education Department had voluntarily accepted obligations in a settlement that expressly covered those borrowers.
Who Is Covered by the Sweet v. McMahon Settlement
The case began with a class-action lawsuit filed in 2017 by federal student loan borrowers who said their Borrower Defense to Repayment applications were wrongly denied or left unresolved for too long. Borrower Defense can allow borrowers to seek debt cancellation when a school used fraud or other misconduct to induce enrollment.
Examples of alleged misconduct can include misleading students about career outcomes, admissions selectivity, accreditation, or program costs. The parties reached a settlement in 2022, when the case was known as Sweet v. Cardona.
Many original class members attended institutions listed in the settlement’s Exhibit C, which primarily included for-profit schools. These borrowers were generally eligible for automatic relief if they had submitted qualifying applications before the settlement was finalized.
| Borrower Group | Application Timing | Settlement Treatment |
|---|---|---|
| Class members | Before the settlement’s finalization | Automatic relief for qualifying borrowers, including those tied to Exhibit C schools |
| Post-class applicants | After June 2022 settlement execution and before November 2022 final approval | Applications had to be decided within three years or borrowers could receive full settlement relief |
Why Post-Class Applicants Became the Focus
Post-class applicants did not initially qualify for automatic discharges in the same way as earlier class members. Instead, the settlement required the department to review their Borrower Defense to Repayment claims on the merits within a three-year deadline.
If the department missed that deadline, eligible post-class applicants could receive full settlement relief. That relief can include student loan forgiveness, refunds of covered payments, and corrected credit reporting.
The department argued that granting widespread relief to post-class applicants would create a windfall and harm taxpayers. Multiple federal courts rejected that position before the Ninth Circuit issued its latest ruling.
Eileen Connor, president and executive director of the Project on Predatory Student Lending, said the decision moves borrowers closer to receiving what they were promised. “Once again, the courts have rejected the Department’s attempts to evade its obligations to borrowers who have waited far too long for the relief they are owed,” Connor said.
Deadlines for Remaining Discharge Notices
The Project on Predatory Student Lending said post-class applicants from Exhibit C schools who did not receive a decision by January 28, 2026, are entitled to full settlement relief. The organization said those borrowers should have received eligibility notices on or around March 30, 2026.
Post-class applicants from non-Exhibit C schools who did not receive a decision by April 15, 2026, are also entitled to full settlement relief. Their eligibility notices were expected by June 15, 2026.
| School Category | Missed Decision Deadline | Expected Notice Timing |
|---|---|---|
| Exhibit C school | January 28, 2026 | On or around March 30, 2026 |
| Non-Exhibit C school | April 15, 2026 | By June 15, 2026 |
The final batch of discharge notices for post-class applicants was sent in June, according to the Project on Predatory Student Lending. Borrowers who believe they should have received a notice are encouraged to check their email carefully and contact the organization if no notice is found.
Borrowers who receive a discharge notice should have their covered federal student loans discharged within one year of that notice. The Education Department could seek further review, but the next potential step would be an appeal to the U.S. Supreme Court.