Court Orders $23B in Student Loan Relief to Borrowers
More than 400,000 federal student loan borrowers are one step closer to having their debt erased after a federal appeals court ordered the U.S. Department of Education to move forward with billions of dollars of loan forgiveness.
The ruling stems from the landmark Sweet v. McMahon class-action settlement, which requires the Department of Education to cancel loans for borrowers whose schools were found to have engaged in widespread misconduct. The settlement is expected to provide approximately $23 billion in debt relief, making it one of the largest class-action settlements in U.S. history.
The lawsuit was originally filed in 2019 after thousands of borrowers accused the Department of Education of unlawfully delaying or ignoring Borrower Defense to Repayment applications. The federal program allows students to seek loan forgiveness if they can prove their college misled them through false advertising, inflated job placement rates, deceptive recruiting, or other fraudulent practices.
Many of the affected borrowers attended for-profit colleges such as the University of Phoenix, DeVry University, ITT Technical Institute, and Corinthian Colleges. Earlier rounds of the agreement have already erased debt for hundreds of thousands of borrowers, while the latest court order covers an additional group whose claims remained unresolved after government deadlines expired.
The Department of Education had asked the Ninth Circuit Court of Appeals for more time to process the remaining claims, but the court denied that request, triggering automatic relief for eligible borrowers under the terms of the settlement. Those borrowers do not need to take additional action and are expected to receive loan discharges, refunds of qualifying payments, and updates to their credit reports as the Department implements the ruling.
This article was produced with the assistance of AI.
