Court Forces $23 Billion in Student Loan Forgiveness for 450,000 Defrauded Borrowers
A July 17, 2026, ruling by the Ninth Circuit Court of Appeals requires the Department of Education to discharge $23 billion in federal student loans for 450,000 borrowers who were defrauded by their schools. The department must complete all discharges by June 15, 2027.
A federal appeals court has ordered the Department of Education to forgive $23 billion in student loans for 450,000 borrowers who were defrauded by their schools.
The July 17, 2026, ruling by the U.S. Court of Appeals for the Ninth Circuit denied the government's request for more time to process claims under the Sweet v. McMahon class-action settlement. The court set a deadline of June 15, 2027, for the department to complete all discharges.
The case, originally filed in 2019 as Sweet v. DeVos, challenged the government's failure to process borrower defense applications. Borrower defense is a federal regulation that allows students to seek loan discharge if their school misrepresented job prospects, credit transferability, or salary expectations.
By April 2026, the department had processed only about 60,000 of the roughly 200,000 pending post-settlement applications. The court rejected the government's argument that the volume of claims was unexpectedly high and ordered the department to move forward.
Eligible borrowers will receive a full discharge of their federal student loan balances, a refund of payments made after the settlement, and removal of negative credit reporting tied to the debt. The discharges are federally tax-free under existing IRS rules, though borrowers should check their state's tax treatment.
The application window for the settlement closed on November 15, 2022. Borrowers who were part of the original class or who applied during the 2022 window and attended one of the schools listed in the settlement do not need to take any action while awaiting their discharge.
