NEED TO KNOW

• The Supreme Court denied review of the $6 billion Sweet settlement on Feb. 23, and a federal judge rejected the Education Department’s request for more time on Feb. 24 — clearing the way for automatic discharges
• More than 170,000 borrowers who attended predatory for-profit colleges are now legally entitled to full loan forgiveness, refunds of prior payments and credit report corrections
• The Education Department filed an appeal within hours of the ruling but has not received a stay — meaning discharges are proceeding under court order

WASHINGTON, DC (TDR) — Two federal courts delivered back-to-back victories for student loan borrowers this week, ordering the Department of Education to proceed with automatic discharges for an estimated 170,000 or more federal student loan borrowers who attended schools found to have engaged in fraud and misconduct.

The rulings involve two separate cases that together represent the largest wave of court-ordered student loan relief since the Biden administration’s broad forgiveness plan was struck down by the Supreme Court in 2023. They also expose an institutional pattern that has spanned three administrations: the government promising borrowers relief, missing its own deadlines, then asking courts for more time.

“For nearly a decade, the AFT has fought for the rights of student loan borrowers to be freed from the shackles of unjust debt — and today, a huge part of that affordability fight was vindicated.” — Randi Weingarten, AFT President

What The Courts Decided

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Case 1: Sweet v. McMahon (Supreme Court, Feb. 23)

The U.S. Supreme Court denied certiorari on a petition filed by Everglades College, Inc. — a private institution that had intervened to challenge the entire $6 billion Sweet settlement. The denial means the 2022 settlement, which covers borrowers who attended 151 schools on an “Exhibit C” list of institutions found to have engaged in substantial misconduct, is now legally final and beyond challenge.

Case 2: Sweet v. McMahon (Federal District Court, Feb. 24)

CLICK HERE TO READ MORE FROM THE THE DUPREE REPORT

One day later, Judge Haywood Gilliam of the Northern District of California denied the Education Department’s second motion to delay loan discharges for post-class applicants. The department had asked for an extension through July 2027 — an 18-month delay — arguing that limited staff (37 attorneys processing approximately 1,500 applications per month) made the January 28, 2026 deadline impossible to meet.

Judge Gilliam rejected that argument, noting the department had known since September 2022 that approximately 179,000 borrowers were in the post-class applicant group and “waited until the eleventh hour” to seek relief. His order ended with language rarely seen from a federal bench: “No further Rule 60(b) motions will be entertained.”

Three Promises, Three Broken Deadlines

The court’s frustration reflected a documented pattern. According to Judge Gilliam’s Feb. 24 order, the Education Department’s attorneys made specific, on-the-record commitments at three separate hearings in 2025:

March 13, 2025: The department told the court it was “committed to providing full settlement relief” and “committed to honoring the settlement agreement.”

Subsequent hearings: The department repeatedly assured the court that borrowers would receive timely decisions on their applications.

Reality: In the five weeks between Judge William Alsup‘s December 11 denial of the first extension request and the department’s second delay motion on January 22, fewer than 1% of the 169,900 pending applications were adjudicated.

The Project on Predatory Student Lending, which litigated the case on behalf of borrowers, called the department’s request for more time a claim with “no justification.”

What Borrowers Get — And The Tax Trap Nobody’s Talking About

For qualifying borrowers, “full settlement relief” means three things: automatic discharge of federal student loans, refunds of all payments made, and correction of credit reports to remove the discharged debt. The Education Department must notify eligible Exhibit C post-class applicants by March 29, 2026, with relief delivered within one year of that notification.

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