Education Dept. Erases $11 Billion for 170,000 Defrauded Borrowers After Appeals Court Loss
Updated
Updated · The New York Times · Aug 3
Education Dept. Erases $11 Billion for 170,000 Defrauded Borrowers After Appeals Court Loss
3 articles · Updated · The New York Times · Aug 3
Summary
$11 billion in federal student debt will be canceled for more than 170,000 borrowers whose fraud claims were automatically approved after the Education Department missed a settlement deadline.
A Ninth Circuit panel unanimously refused the department more time to review those claims, upholding a district judge after the Trump administration had sought an extra 18 months in late 2025.
The borrowers were part of a class action over loans tied to dozens of predatory for-profit schools; a 2022 settlement had already forgiven debt for nearly 300,000 plaintiffs.
That settlement now covers nearly 500,000 borrowers and about $23 billion in canceled debt, which borrower advocates say is the largest class-action settlement in U.S. history.
$23 Billion in Student Loans Wiped Out: Inside the Sweet v. McMahon Class-Action Settlement and Its Impact on Borrowers, Taxpayers, and For-Profit Colleges
Overview
The 2026 Ninth Circuit ruling in Sweet v. McMahon marked a turning point in student loan relief, unlocking $11 billion in debt cancellation for over 170,000 borrowers after the Department of Education failed to process their claims on time. This outcome stemmed from years of legal battles that began with the collapse of Corinthian Colleges, a surge in borrower defense claims, and a landmark 2022 settlement. Despite attempts by both the Department and several schools to delay or block relief, the court enforced automatic discharges, setting a precedent for holding federal agencies accountable and highlighting ongoing challenges in student loan administration and oversight.