WASHINGTON–More than 170,000 federal student loan borrowers who said they were defrauded by their schools will have approximately $11 billion in debt canceled after a federal appeals court rejected the U.S. Department of Education’s request for additional time to review their claims.
The ruling expands a landmark class-action settlement involving borrowers who attended dozens of for-profit schools accused of misleading students with false promises about earnings potential and other deceptive recruiting practices.
A unanimous three-judge panel of the U.S. Court of Appeals for the Ninth Circuit upheld a lower court’s decision denying the Education Department’s request for an additional 18 months to process borrower claims. The department had sought the extension after missing deadlines established under a 2022 settlement reached during the Biden administration, noted the New York Times.
Nearly $23 Billion Slated for Cancellation
The latest ruling brings the total number of borrowers receiving relief under the lawsuit to nearly 500,000, with approximately $23 billion in federal student loan debt slated for cancellation. The Project on Predatory Student Lending, which represented the borrowers, said it believes the agreement is the largest class-action settlement in U.S. history and the largest financial settlement ever reached against the federal government.
The lawsuit, originally filed in 2019 during President Donald Trump’s first administration and known as Sweet v. Cardona, centered on the federal “borrower defense” program, which allows student loan borrowers to seek debt cancellation if their schools engaged in fraud or other misconduct.
Collapse of Several Schools
The case followed the collapse of several major for-profit education companies after hundreds of thousands of borrowers alleged they had been misled about graduation outcomes, employment prospects and earning potential. Many claims remained unresolved for years.
Under the 2022 settlement, nearly 300,000 original class members automatically received loan forgiveness. The agreement also opened a five-month period for additional borrowers to file claims and required the Education Department to rule on those applications by early 2026.
The department missed deadlines of Jan. 28, 2026, for borrowers who attended more than 150 specifically identified schools and April 15, 2026, for other applicants. Under the settlement terms, any unresolved claims are automatically approved, and the department has one year to discharge those loans.
Court Overrules Trump Administration Request
The Trump administration sought to delay those deadlines in late 2025, arguing more time was needed to review the applications. Both the district court and the Ninth Circuit rejected that request.
Education Department spokesperson Ellen Keast told The New York Times the original settlement imposed “an unrealistic deadline” on the department. She said the agency had complied with court orders in good faith and believes the appeals court erred by denying what it considered a reasonable extension.
Despite the latest round of relief, a substantial backlog remains. According to Education Department data cited by The New York Times, more than 463,000 borrower defense claims were still awaiting decisions as of March 2026. While borrowers may continue filing new claims, rule changes adopted during the first Trump administration limited the amount of relief available for many borrowers who took out or consolidated federal student loans beginning in 2019.
