Like many significant legal disputes, it began with individuals who believed they had nowhere else to go. Former for-profit college students who had done everything correctly—enrolled, borrowed money, and attempted to build a future—discovered that the institutions had misled them about earning potential, graduation rates, and job placement rates. They submitted applications to the Department of Education thru the Borrower Defense program, which is designed specifically for circumstances such as these. They then bided their time. Months turned into years. There were no decisions made.
Eventually, that annoyance turned into a federal lawsuit. Seven plaintiffs filed a complaint in the U.S. District Court for the Northern District of California in June 2019, claiming that more than 160,000 pending applications had not been processed since the middle of 2018 and that no timeline was in sight. One of the lesser-known but no less important court cases in recent American history was Sweet v. McMahon, which was named after the initial defendant and later revised when department leadership changed.
The settlement that resulted from that case in 2022 seemed like a sea change. About 200,000 borrowers who attended institutions with records of fraud and misconduct had their loans discharged by the Biden administration. Most of the more than 150 institutions listed were for-profit universities. Checks arrived and balances fell to zero for many borrowers. In the strictest sense of the word, there was true relief.
However, the case didn’t stop there. The Education Department was mandated by the settlement to continue handling claims from borrowers who applied after the 2022 agreement was finalized. There was a strict deadline in place: those claims had to be decided by early 2026, or they would be granted automatically. It appeared to be a sensible precaution, a means of keeping the government from taking too long.
After taking office in January 2025, the Trump administration requested an additional eighteen months from the court. The deadline was deemed unrealistic. A district judge didn’t agree. Last month, a three-judge panel of the Ninth Circuit unanimously upheld that decision. As a result, an estimated $11 billion in federal student loan debt will be forgiven for over 170,000 additional borrowers. This brings the total settlement to almost 500,000 individuals and $23 billion, making it the biggest class-action settlement in American history and, according to some estimates, the biggest financial settlement ever made against the federal government.
The 1998 tobacco settlement, in which corporations were forced to pay states more than $200 billion for decades of health harm, was compared by Eileen Connor, executive director of the Project on Predatory Student Lending, the nonprofit that first filed the 2019 lawsuit. It’s a powerful analogy. It’s difficult to ignore the notion that some universities were effectively marketing a product—degrees funded by federal loans—that left students in worse financial situations than when they enrolled. Naturally, not all for-profit universities fall into that category. However, enough came to land here.
Ellen Keast, a spokesman for the Education Department, insisted that the department had acted in good faith and that the initial deadline was unrealistic. In a technical sense, that might be true. Nevertheless, the courts had two different perspectives on it. Watching this unfold gives the impression that the legal system worked as it should have—slowly, imperfectly, but ultimately in favor of those with little institutional power.
Borrowers can check their status at studentaid.gov if they think they qualify. The settlement stipulates that debt discharge must be finished by June 15, 2027, at the latest. It’s unclear if that deadline will be met. However, the answer came at last for hundreds of thousands of people who had been wondering for years if anyone was paying attention.
