A Federal Appeals Court Rejected Another Delay, Allowing More Borrowers to Receive Loan Discharges, Refunds and Credit Repairs
After seven years, three presidential administrations and repeated government delays, hundreds of thousands of federal student loan borrowers who say their colleges deceived them are finally seeing their debts disappear.
The relief stems from Sweet v. McMahon, a landmark class-action lawsuit involving the federal borrower-defense program. Previously called Sweet v. DeVos and Sweet v. Cardona, the case has lasted long enough to carry the names of three education secretaries: Betsy DeVos, Miguel Cardona and current Secretary Linda McMahon.
The settlement has affected more than 450,000 people and improved borrowers’ personal balance sheets by more than $23 billion, according to Eileen Connor, president and executive director of the Project on Predatory Student Lending, the organization representing borrowers in the case.
“At the end of the day, this settlement has impacted over 450,000 people, and it’s improved their personal balance sheets by over $23 billion,” Connor said.
The organization says the settlement has now secured relief for more than 500,000 borrowers when all covered groups are counted. It describes the agreement as the largest class-action settlement in U.S. history and the largest settlement reached against the federal government.
Borrowers Accused Colleges of Selling False Promises
Borrower defense to repayment is a federal protection that allows people to seek cancellation of federal student loans when a college commits certain forms of misconduct.
Claims can involve schools misrepresenting their accreditation, tuition costs, graduation rates, job-placement results, expected salaries or whether credits will transfer to another institution.
The lawsuit was filed in 2019 after borrowers accused the Education Department under DeVos of effectively halting the borrower-defense process. Some applications remained unresolved for years, while advocates said others were denied without a meaningful review of the facts.
A settlement approved in November 2022 required the department to address the backlog under court-ordered deadlines.
Borrowers who attended more than 150 schools identified in the settlement were promised full and automatic relief. The list included several institutions that have faced allegations of deceptive recruiting or other misconduct, including ITT Technical Institute, Corinthian Colleges, the Art Institutes and the University of Phoenix.
Depending on a borrower’s status under the settlement, full relief may include:
- Cancellation of federal loans connected to the school
- Refunds of certain payments already made
- Removal of the covered loans from credit reports
- Restoration of federal student-aid eligibility
The settlement does not represent broad student loan forgiveness. It applies to defined groups of borrowers who submitted borrower-defense applications within the periods covered by the litigation.
Education Department Missed Court-Ordered Deadlines
The agreement also created protections for more than 200,000 “post-class” applicants who filed borrower-defense claims after the settlement was reached on June 22, 2022, but before it received final approval on Nov. 16, 2022.
The Education Department was required to decide those applications by specified deadlines. Claims that were not resolved on time would automatically qualify for full settlement relief.
Court records show the department knew the size of the post-class group before the settlement received final approval. By February 2023, officials knew the group included more than 205,000 people, according to the U.S. Court of Appeals for the Ninth Circuit.
Still, the department later said it needed an additional 18 months to complete its reviews. Officials argued the existing timetable was unrealistic and that more time was necessary to ensure federal money went only to borrowers who qualified based on the merits of their claims.
Education Department spokesperson Ellen Keast said the department had complied with the court’s orders in good faith but believed the court should have granted the extension.
A three-judge Ninth Circuit panel unanimously rejected that argument on July 17. The court found that the department had known about the number of applications for years and had repeatedly assured the lower court that it understood the settlement deadlines.
The judges also noted that the department waited nearly three years before arguing that the number of post-class claims amounted to a significant change in circumstances.
The ruling left previous court orders intact and triggered full relief for more than 170,000 additional borrowers whose claims were not decided by the applicable deadlines.
One Borrower’s Debt Is Gone, but the Anger Remains
For borrowers such as Jessica Feindt, the court victory arrived after years of financial and emotional strain.
Feindt, who lives near Flint, Michigan, was among the first people in her family to attend college. She enrolled at the University of Phoenix to pursue an undergraduate psychology degree after seeing the school advertised throughout her community.
“They really marketed heavily in the area,” Feindt said. “It was on every radio station, every newspaper. It was everywhere.”
Feindt completed her degree in less than four years but accumulated substantial federal student loan debt. She said a recruitment counselor repeatedly assured her that the degree would be accepted by graduate programs in Michigan that she hoped to attend.
It was not.
“I paid a lot out of pocket. I paid through student loans,” Feindt said. “I had all federal loans because poor people cannot get [private] loans.”
She submitted a borrower-defense application in 2022 and became part of the post-class group. In late July, she logged into her federal student loan account and discovered that the debt connected to her college had been erased.
“I feel like I should be happy,” Feindt said, “but I’m really angry about all the years that my family suffered under these loans.”
Connor compared loans issued for attendance at predatory schools to other harmful consumer products that generated historic litigation.
Like cigarettes, she said, the debts can operate as “toxic products,” leaving borrowers responsible for years of payments tied to an education that did not deliver what the institution promised.
Why the Settlement Matters for Black Borrowers
The outcome carries added significance for Black borrowers, who frequently rely more heavily on student loans to finance higher education and are more likely to continue carrying debt long after leaving school.
Those disparities can make deceptive college recruiting particularly damaging. Students may enroll believing a degree will provide a path to higher earnings and economic stability, only to learn that credits will not transfer, employers do not recognize the credential or further education requires starting over.
In those situations, borrowers can be left with the debt of a legitimate education without receiving its promised economic value.
The Sweet settlement establishes that borrowers should not remain financially responsible for federal debt created through a school’s deception—especially when the government agency responsible for evaluating their claims fails to act by its own legally binding deadlines.
Borrowers Should Watch for Relief Scams
Borrowers covered by the settlement do not need to pay a company, debt-relief service or private consultant to receive court-ordered relief.
Anyone promising to accelerate a discharge, guarantee approval or secure special access in exchange for money may be attempting a scam.
Covered borrowers should monitor their official Federal Student Aid accounts and correspondence from the Education Department. Those who believe they qualify but have not received relief can also review updates from the Project on Predatory Student Lending.
After years of litigation, the outcome delivers more than a corrected account balance. It recognizes that students should not be forced to spend decades repaying the cost of promises their schools never kept.
