Borrowers scored a major victory on Friday after a federal appeals court rejected a challenge to a landmark settlement agreement, and required the Education Department and Secretary of Education Linda McMahon to continue discharging the federal student loans for more than 500,000 Americans. The ruling represents the department’s latest loss in the long running saga over the Sweet v. McMahon settlement.

"Once again, the courts have rejected the Department’s attempts to evade its obligations to borrowers who have waited far too long for the relief they are owed," said Eileen Connor, President and Executive Director of the Project on Predatory Student Lending, the legal organization representing student loan borrowers in the Sweet v. McMahon case, on Friday. "Today's decision brings us another step closer to fulfilling the settlement's promise to every borrower, and we won’t stop fighting until that promise is realized."

The ruling by the Ninth Circuit Court of Appeals is the culmination of months of failed efforts by the Trump administration to delay relief for student loan borrowers under the landmark 2022 settlement agreement, which provides $23 billion in discharges of federal student loans, refunds of past payments, and other relief. Here’s what the latest development in the Sweet v. McMahon case means for borrowers.

Education Department Sought To Delay Discharging Student Loans Under Sweet v. McMahon Settlement

The landmark Sweet v. McMahon settlement agreement (at the time, the case was called Sweet v. Cardona ) was designed to end a long-running class action lawsuit brought by thousands of federal student loan borrowers in 2017 who claimed that their Borrower Defense to Repayment applications had been wrongfully rejected or delayed by the U.S. Department of Education. The Borrower Defense program offers borrowers with federal student loans a pathway to discharging their debt if they can demonstrate that their school engaged in certain kinds of fraud or other misconduct to convince them to enroll, such as lying or misleading prospective students about career prospects, admissions selectivity, program accreditation, or financial costs.

After years of litigation, the parties reached an agreement in 2022 to settle the case. Under the terms of that agreement, the Education Department agreed to automatically discharge the federal student loans for hundreds of thousands of borrowers who had submitted their Borrower Defense to Repayment application prior to the agreement’s finalization, and had attended one of several dozen institutions (mostly for-profit schools) on an approved list, referred to as “Exhibit C.” Class members would also receive other meaningful relief including a refund of past payments made on the covered student loans and adjusted credit reporting. Many of these borrowers have now already gotten their federal student loans discharged under the settlement agreement, although some class members are still waiting for relief.

The current dispute centers on a subsequent cohort of borrowers covered by the Sweet v. McMahon settlement, called post-class applicants. These are individuals who had submitted their Borrower Defense to Repayment applications after the settlement agreement was finalized in June 2022, but before it was approved by the court five months later. Unlike class members, these post-class members would not be entitled to an automatic discharge of their federal student loans. Instead, they would be entitled to have the Education Department adjudicate their applications on the merits within a three-year time period. Only if the department failed to meet this review deadline would they be entitled to complete settlement relief including student loan forgiveness, payment refunds, and amended credit reporting.

As the Education Department approached, and then blew past, the Sweet v. McMahon adjudication deadlines for post-class applicants, officials repeatedly sought to delay relief for these borrowers, arguing that the department had resource constraints and that these federal student loan borrowers were not actually class members and, therefore, should not be entitled to the same relief as other borrowers covered by the settlement. The department argued that if it was compelled to discharge the federal student loans of so many post-class applicants, it would be a windfall for them and would, in turn, harm American taxpayers. Multiple federal courts rejected these arguments, and the administration ultimately appealed to the Ninth Circuit Court of Appeals.

Appeals Court Rejects Request To Delay Discharging Student Loans Under Sweet v. McMahon Settlement

On Friday, the Ninth Circuit unanimously rejected the Education Department’s latest request to delay discharging student loans for post-class applicants under the Sweet v. McMahon settlement. The ruling by a three-judge panel followed the court’s earlier rejection of the department’s request for an emergency stay this spring.

“The DOE failed to show ‘a significant change either in factual conditions or in law’ that would warrant modification of the Settlement,” said the court in its ruling . “The DOE argues that ‘the unexpectedly large number of [P]ost-[C]lass [A]pplications’— applications received after the execution of the Settlement (June 23, 2022), but before the date of the Settlement’s final approval (November 16, 2022)— constituted a ‘changed circumstance.’ However, the DOE knew that there were approximately 179,000 Post-Class Applicants when it jointly moved with Plaintiffs for final approval of the Settlement in September 2022, and it knew the total number of Post-Class Applicants at the time the district court entered final judgment in November 2022. At minimum, as we observed in our order denying the DOE’s stay motion, the DOE knew by February 2023 that the Post-Class Applicants totaled over 205,000 people. Yet the agency did not object to any aspect of this order until its first Rule 60(b) motion approximately three years later.”

The court side-stepped the department’s arguments that post-class applicants are not actually class members and that, as a result, they should not be entitled to the same settlement relief (including student loan discharges) as class members. The court noted that the Sweet v. McMahon settlement agreement clearly encompasses relief for this group of borrowers.

“We need not resolve the question of whether the Post-Class Applicants are members of the class because it does not change the outcome of our review,” explained the court. “The DOE voluntarily undertook the obligations set forth in the Settlement, which expressly covered Post-Class Applicants.”

It is unclear if the Education Department intends on appealing the Ninth Circuit’s ruling. If it does, the next and final stop would be at the United States Supreme Court. Notably, the Supreme Court declined to halt the Sweet v. McMahon settlement relief in response to a separate appeal in 2023 .

Where Things Stand With Discharges Of Student Loans Under The Settlement

At this point, the Education Department should have notified all class members and post-class applicants under the Sweet v. McMahon settlement who did not receive a decision on their Borrower Defense to Repayment application that they are entitled to have their federal student loans discharged.

“If you are a post-class applicant from an Exhibit C School who did not receive a decision by January 28, 2026, you are entitled to full settlement relief,” says the Project on Predatory Student Lending on its website . “You should have received a notice from the Department confirming your eligibility for Full Settlement Relief on or around March 30, 2026."

“If you are a post-class applicant from a non-Exhibit C school who did not receive a decision by April 15, 2026, you are entitled to full settlement relief,” continued PPSL. “You should have received a notice from the Department confirming your eligibility for Full Settlement Relief by June 15, 2026."

The final batch of student loan discharge notices was sent to the last group of post-class applicants in June . PPSL encourages borrowers who believe they should have received a discharge notice to carefully check their email inboxes, and contact the organization if they do not see it. Sweet v. McMahon class members and post-class applicants should have their federal student loans discharged within one year of receiving the discharge notice.