A Federal Court Ordered $11 Billion In Student Loan Forgiveness
A unanimous three-judge panel of the United States Court of Appeals for the Ninth Circuit ruled in July 2026 that more than 170,000 student loan borrowers who were defrauded by for-profit colleges will have their loans automatically cancelled, clearing the way for $11 billion in relief without any action required from borrowers themselves. The ruling is the latest development in a class-action lawsuit now known as Sweet v. McMahon, originally filed in 2019 on behalf of students who claimed the Education Department had illegally stalled or rejected their applications under the Borrower Defense program, a federal regulation that allows students to seek loan cancellation if their school defrauded them. Under a 2022 settlement, the government agreed to process the remaining claims by specific deadlines. It missed both. The settlement terms were clear: if the department failed to act by the deadline, the loans were to be automatically approved. The Trump administration asked for an additional 18 months to review the cases. A district judge denied the request. The Ninth Circuit affirmed that denial. The loans are discharged.
The ruling brings the total size of the Sweet settlement to approximately $23 billion in cancelled debt for nearly 500,000 borrowers, making it by a substantial margin the largest class-action settlement in American history according to the Project on Predatory Student Lending, the nonprofit that represented the borrowers throughout the case. The schools whose students are covered include dozens of mostly for-profit institutions that have since closed, including locations of the Art Institutes, Argosy University, and many others whose recruiters made misleading claims about job placement rates, accreditation, and program quality to enroll students who then took on federal loans for degrees that were worth far less than advertised. Eileen Connor, the president and director of the Project on Predatory Student Lending, said the ruling makes clear that the federal government cannot simply disregard borrowers' rights and its own legal obligations without consequence. Borrowers who are covered under the settlement do not need to apply or take any action: the discharge is automatic, and the government has one year to complete it. Those whose loans were already cancelled will receive documentation confirming the discharge.
