Approximately 450,000 student loan borrowers are receiving debt forgiveness as part of a $23 billion class-action settlement with the U.S. Department of Education. The settlement stems from a legal challenge in which borrowers claimed their schools misled them significantly and that the Trump administration delayed providing relief to which they were entitled under the Borrower Defense program, which allows defrauded federal student borrowers to have their debts excused.
A federal appeals court decision in late July cleared the way for nearly 200,000 additional borrowers to have their loans forgiven. The legal case has spanned three presidential administrations, evolving from Sweet v. DeVos to Sweet v. Cardona to Sweet v. McMahon. According to advocates, some borrowers experienced substantial financial hardship during the lengthy process; in one documented case, a borrower’s debt grew from $250,000 to approximately $400,000 while awaiting an Education Department decision.
The settlement involves dozens of schools, many of which were for-profit institutions now closed, that allegedly made false promises to students regarding career outcomes, earning potential, and credit transferability. Borrowers reported facing serious consequences including denied mortgage and auto financing applications, delayed family planning, postponed medical care, and mental health challenges including panic attacks and anxiety.
Eligibility for the settlement depends on which school a borrower attended and when they submitted their Borrower Defense application. Those with claims pending in November 2022, as well as certain borrowers whose applications were denied between December 2019 and October 2020, may qualify. Borrowers can verify their application submission date through Studentaid.gov. The settlement applies only to federal student loans; private loans do not qualify, though some states offer tuition recovery programs for those who attended for-profit schools that closed.
The average federal student loan balance forgiven under the settlement exceeds $48,000, with individual amounts varying significantly. Eligible borrowers may also receive refunds for previous payments, with typical refunds exceeding $15,000. The Education Department must clear eligible borrowers’ debts by June 15, 2027, and borrowers are not required to make payments while awaiting forgiveness.
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