A federal appeals court decision in late July has cleared the way for approximately 450,000 student loan borrowers to receive debt forgiveness through a $23 billion class-action settlement with the U.S. Department of Education. The action stems from a lawsuit brought by borrowers who alleged their schools made misleading claims about educational outcomes and career prospects. The case, originally filed in 2019 and known as Sweet v. DeVos, has evolved through multiple administrations, most recently becoming Sweet v. McMahon.
The court’s recent decision denied the Trump administration’s request to delay processing a large group of applications, allowing nearly 200,000 additional borrowers to move forward with debt relief. According to Eileen Connor, president of The Project on Predatory Student Lending which initiated the lawsuit, the settlement addresses misconduct at dozens of institutions, many of them now-defunct for-profit colleges. These schools allegedly made false promises regarding employment prospects, earnings potential, and credit transferability.
The borrowers affected reported significant hardship while awaiting relief determinations. Many faced obstacles including mortgage and car loan denials due to outstanding federal debt, while others experienced mental health challenges and delayed major life decisions. In some cases, borrower debt balances increased substantially during the waiting period, with one borrower’s obligation growing from $250,000 to approximately $400,000.
Eligibility for the settlement is determined by the school attended and the timing of the Borrower Defense application submission. Individuals with pending claims as of November 2022 may qualify, as may certain borrowers whose applications were denied between December 2019 and October 2020. The average federal student loan balance forgiven under the settlement exceeded $48,000, though individual amounts vary. Eligible borrowers may also receive refunds averaging over $15,000 for previous payments made on their debt. The Education Department must complete all debt relief by June 15, 2027.
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