Nearly 450,000 federal student loan borrowers will have their debts cleared under a $23 billion class-action settlement with the U.S. Department of Education.
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450,000 defrauded student borrowers get debt wiped in $23B settlement
Nearly 450,000 federal student loan borrowers will have their debts cleared under a $23 billion class-action settlement with the U.S. Department of Education.
A federal appeals court's late-July ruling cleared the way for nearly 200,000 more borrowers to have student loans wiped, bringing total relief under the $23 billion Sweet settlement to about 450,000.
"It makes clear that the federal government cannot simply disregard borrowers' rights and its own legal obligations without consequence," Eileen Connor, president and director of The Project on Predatory Student Lending, said.
The average federal student loan balance cleared under the settlement exceeded $48,000, Connor said. Eligible borrowers may also receive refunds for prior payments, with the typical refund exceeding $15,000. The Education Department must clear eligible debt by June 15, 2027, and borrowers are not required to make payments while waiting.
The settlement stems from Borrower Defense, a federal protection that allows defrauded student borrowers to have their debt excused. The legal challenge, which began as Sweet v. DeVos in 2019 and became Sweet v. McMahon, implicated dozens of schools — many of them shuttered for-profit institutions — that made false promises about career outcomes, earnings and transferable credits.
Who qualifies for relief
Eligibility hinges on what school a borrower attended and when they submitted their Borrower Defense application, Connor said. Borrowers with a claim pending with the Education Department as of November 2022 may be included in the settlement class, as may certain borrowers whose applications were denied between December 2019 and October 2020. It is not something one can newly qualify for today.
Borrowers can check when their application was submitted at Studentaid.gov, and the Education Department also notifies eligible borrowers directly.
The settlement only impacts federal student loans. "Private student loans do not qualify for Borrower Defense," said Mark Kantrowitz, a higher education expert. However, nearly two dozen states maintain tuition recovery funds programs for borrowers who attended for-profit schools that closed.
The human cost of delayed relief
The consequences for borrowers caught in the legal limbo were severe. One borrower's debt swelled to roughly $400,000 from $250,000 while waiting for the Education Department to decide on her claim, Connor said. People were denied mortgages and car financing because of their federal debts, while others delayed starting a family or postponed medical care. "Borrowers also described panic attacks, anxiety, depression and years of being unable to plan for the future," she added.
The Trump administration had argued in April court documents that it needed time to determine eligibility among an "unexpectedly large" number of applicants that could lead to a "substantial windfall at taxpayer expense." The Education Department did not respond to a request for comment.
The settlement's timeline means the Education Department has until June 15, 2027, to clear eligible borrowers' debts. Borrowers awaiting forgiveness are not required to make payments during the interim period. For those who believe they may qualify, checking application status at Studentaid.gov and monitoring Education Department notifications is the first step. Figures cited here reflect the settlement terms as of July 2026; borrowers should verify against the latest official announcements.
This article is for informational reference only and does not constitute professional advice.
