Student loan borrowers celebrated a historic milestone in July 2026 after a federal appeals court rejected the Education Department’s latest efforts to delay settlement relief under the Sweet v. McMahon case. Following the court’s ruling, more than 170,000 additional borrowers are expected to get their student loans discharged, bringing the total relief under the settlement to $23 billion. That makes it a settlement of historic proportions.
“The landmark borrower defense case Sweet v. McMahon is now the largest-ever settlement against the U.S. federal government, and the largest class-action settlement in American history, after a federal appeals court rejected the Department of Education’s attempt to delay a decision deadline that has triggered automatic relief for more than 170,000 additional borrowers targeted by predatory schools,” said the Project on Predatory Student Lending (PPSL), the legal group representing borrowers in the case, in a statement last week.
“Now totaling at least $23 billion in settlement relief, Sweet joins the combined tobacco settlements of 1998 ($246 billion), the combined opioid settlements of 2021 (about $58 billion), and the National Mortgage Settlement of 2012 ($25 billion) as one of the largest consumer settlements in U.S. history overall.”
Here’s what the latest legal development means for student loan discharges under the Sweet v. McMahon case and the Borrower Defense to Repayment program more broadly.
What the Sweet v. McMahon settlement resolved
The Sweet v. McMahon case is a long-running class-action lawsuit brought by borrowers who alleged that the Department of Education (DOE) had unlawfully stalled or denied applications for student loan relief under the Borrower Defense to Repayment program. Borrower Defense allows borrowers to apply for a discharge of their federal student loans if their school lied or made misrepresentations to convince prospective students to enroll in the program (such as by inflating post-graduation earnings projections, lying about career prospects or providing misleading information about the transferability of credits).
“Between 2015 and today, over 750,000 borrowers have asserted their right under federal law to discharge their federal student loans due to their schools’ misconduct (“borrower defense”),” summarized PPSL on its website. “As it was legally obligated to do, the Department of Education started to adjudicate these claims in 2016, approving nearly 28,000 borrower defenses in the six-month period before January 20, 2017. Then, under Secretary Betsy DeVos, the Department of Education halted all processing of borrower defense claims. As of June 2019, more than 200,000 students had a borrower defense application pending. Many had been unresolved for nearly four years. The plaintiffs filed this lawsuit to demand that the Department do its job and start adjudicating their borrower defenses immediately. Over the course of three years of litigation, the borrower defense backlog only grew, while the plaintiffs uncovered evidence that Department’s policies had stacked the deck against borrowers.”
In 2022, under the Biden administration, the Education Department and the class of student loan borrowers under Sweet reached a settlement agreement. Under that agreement, borrowers who had already applied for Borrower Defense and had attended schools on an approved list (called “Exhibit C”) would be entitled to an automatic discharge of their federal student loans, along with other relief (such as refunds of past payments). A second group of borrowers, called “post-class applicants” who had submitted their Borrower Defense applications during a five-month period prior to the settlement’s entry in court, would be entitled to a full review of their Borrower Defense application on the merits within three years, or they, too, would be entitled to full settlement relief.
Appeals court rejects latest bid to delay discharges under Sweet v. McMahon
It’s that second group of borrowers, the post-class applicants, that has been the subject of the latest legal battle over student loan discharges under Sweet v. McMahon. The Education Department, citing resource constraints, argued for a delay in providing these borrowers with relief. The department contended that if these borrowers, totaling more than 170,000 individuals, were to receive automatic discharges of their federal student loans, it would amount to a windfall for borrowers and harm American taxpayers in the process.
But in July 2026, the Ninth Circuit Court of Appeals, in a unanimous decision, rejected these arguments.
“The DOE voluntarily undertook the obligations set forth in the Settlement, which expressly covered Post-Class Applicants,” wrote the court in its ruling. “The DOE knew that there were approximately 179,000 Post-Class Applicants when it jointly moved with Plaintiffs for final approval of the Settlement in September 2022, and it knew the total number of Post-Class Applicants at the time the district court entered final judgment in November 2022… The DOE failed to show ‘a significant change either in factual conditions or in law’ that would warrant modification of the Settlement.”
The Ninth Circuit’s ruling paves the way for the remaining post-class applicants to get their federal student loans discharged.
Discharges should reach borrowers within a year
Student loan borrower advocates praised the Ninth Circuit’s ruling and underscored the historic scope of the Sweet v. McMahon settlement.
“This is a huge accomplishment and one that would not have been possible without the tireless efforts of our plaintiffs, the borrower community, and, of course, the small but fierce team at PPSL,” said Eileen Connor, president and executive director of the Project on Predatory Student Lending, in a statement last week. “But the work isn’t over: to anyone out there struggling with predatory student debt, we see you. And to anyone out there looking to exploit students, we see you too.”
Under the terms of the Sweet v. McMahon settlement, the remaining post-class applicants who did not receive a decision on their Borrower Defense to Repayment applications should have already received a letter confirming their discharge eligibility. They should then get their federal student loans discharged within a year.
“You should have received a notice from the Department confirming your eligibility for Full Settlement Relief” between March 30, 2026, and June 15, 2026, said PPSL on its website. “Your relief should be delivered within one year of receiving that notice.”
But new problems may be brewing on the horizon for the Borrower Defense program.
“More than 1,000 members of the Sweet class are still waiting for loan discharges, refunds, or other relief that the Department of Education was legally required to provide by deadlines that passed between nearly six months and two years ago,” said PPSL in its statement. “And as the Department has spent recent years fighting the Sweet settlement implementation and gutting its own resources, another backlog of borrower defense applicants has grown to more than 210,000.”