A federal appeals court decision has cleared the way for the automatic discharge of billions of dollars in federal student loan debt, expanding what plaintiffs’ attorneys call the largest class-action settlement in American history.
A three-judge panel of the Court of Appeals for the Ninth Circuit unanimously upheld a district court ruling rejecting the Education Department’s request for an additional 18 months to review pending borrower defense claims under the Sweet v. McMahon settlement, formerly known as Sweet v. Cardona. The ruling means roughly 170,000 to 200,000 additional borrowers will have approximately $11 billion in debt erased because the department missed adjudication deadlines built into the 2022 agreement.
The settlement now covers close to 500,000 borrowers and roughly $23 billion in total discharges, according to the Project on Predatory Student Lending, the nonprofit that represented the class.
The case, filed in 2019, centered on claims that dozens of mostly for-profit schools defrauded students with false promises about earnings, career outcomes and transferable credits. The 2022 settlement forgave loans for nearly 300,000 original class members and required the department to decide claims filed after the deal was announced by two deadlines: January 28, 2026, for borrowers who attended more than 150 schools named in the agreement, and April 15, 2026, for claims against other institutions. The department missed both. Under the settlement’s terms, unresolved claims are automatically approved, and the government has one year to effectuate the discharges.
The relief carries direct implications for the receivables and credit reporting ecosystem. Full settlement relief includes discharge of the loans, refunds of amounts previously paid to the department, and deletion of the associated credit tradelines. Average balances cleared exceed $48,000, and typical refunds for eligible borrowers top $15,000, according to plaintiffs’ counsel. The settlement also bars involuntary collection activity, including wage garnishment and Treasury offset, on covered loans while claims are pending.
An Education Department spokesperson said the original settlement imposed an unrealistic deadline and that the department complied in good faith with court orders. In earlier filings, the administration argued the volume of applicants could produce a substantial windfall at taxpayer expense.
The backlog remains significant. More than 463,000 borrower defense claims were pending as of March 2026, and only about a third will be resolved through this settlement. The latest date for the department to clear an eligible borrower’s debt is June 15, 2027.
