The U.S. Court of Appeals for the Ninth Circuit has issued a ruling that is expected to finalize the discharge of federal student loans for approximately 450,000 borrowers. The decision concludes a class-action lawsuit filed against the U.S. Department of Education involving claims of institutional fraud. The litigation, known as *Sweet v. McMahon*, has spanned three presidential administrations and centers on the "borrower defense" rule, which allows for debt relief if a school misled students about job placement rates or credit transferability.
The lawsuit began in 2019 during the first Trump administration as *Sweet v. DeVos*. Borrowers alleged that the Education Department had illegally halted the processing of claims and issued mass denials without reviewing the merits of individual cases. In 2022, under the Biden administration, the department reached a settlement agreeing to automatic relief for those who attended a list of over 150 schools, mostly for-profit institutions, and established a deadline for reviewing additional "post-class" applications.
The current Education Department requested an 18-month extension to review the remaining 250,000 post-class applications, stating it needed time to ensure taxpayer funds were only used for valid claims. Department spokesperson Ellen Keast called the original settlement deadline "unrealistic" and stated the department had acted in good faith. However, the Ninth Circuit court rejected the request on July 17, stating the department had sufficient time to raise objections previously and must adhere to the settlement terms.
The scale of the discharge makes this the largest settlement of its kind against the U.S. government. Borrowers who attended the specified schools will notice the removal of these debts from their credit reports, which can impact their ability to secure mortgages, auto loans, or other forms of credit. The decision sets a significant legal precedent for how the Department of Education must handle backlogs of administrative claims and reinforces the binding nature of settlements reached under previous administrations.
For the Department of Education, the ruling creates an immediate administrative requirement to process the remaining discharges without the requested 18-month delay. The department must now move forward with the systematic erasure of these debts and the issuance of refunds. While the court has ruled, the mechanical process of updating individual loan accounts and notifying borrowers is managed by federal loan servicers, and the specific dates for each borrower's completion may vary based on their servicer’s processing speed. Currently, no further appeals have been announced.