Tens of thousands of borrowers may be about to receive automatic student loan forgiveness after the U.S. Department of Education missed a key processing deadline under a settlement agreement. But with a pending challenge to that agreement still undecided by a court, much uncertainty remains, and it is unclear if any of the covered student loans have been discharged yet.
The uncertainty stems from a 2022 settlement agreement to resolve Sweet v. Cardona, a class action lawsuit brought by borrowers during the first Trump administration over allegations that the Education Department had unlawfully stalled or improperly denied applications for Borrower Defense to Repayment. Borrower Defense is a discharge program for federal student loans that allows borrowers to request cancellation on the basis of certain forms of school misconduct, such as misrepresenting admissions selectivity or program costs, or lying about graduate earnings and career prospects.
Many borrowers already have received student loan forgiveness under the Sweet v. Cardona (now Sweet v. McMahon, renamed after the current Secretary of Education, Linda McMahon) settlement agreement. But a separate group of borrowers was supposed to have their Borrower Defense applications decided earlier this week. If that didn’t happen, under the terms of the settlement agreement, these borrowers would be entitled to full relief including automatic discharges and refunds of past payments they made on the covered student loans. But the Education Department is trying to delay relief and legal wrangling is ongoing, casting doubt on whether any of the settlement benefits for this final group of borrowers is happening. Here’s the latest.
Student Loans Should Be Discharged For Certain Post-Class Members of Sweet v. Cardona
The Sweet v. Cardona settlement essentially put student loan borrowers into two broad classes.
First, borrowers who submitted a Borrower Defense to Repayment application on or before June 22, 2022, and who attended one of dozens of schools outlined on an exhibit appended to the settlement agreement, are considered “class members.” These borrowers would be entitled to “full settlement relief” which includes a discharge, a refund of past payments made on the covered student loans, and a correction of any associated negative credit reporting.
A second group of borrowers is known as “post-class applicants.” These are borrowers who submitted their Borrower Defense to Repayment applications between June 22, 2022 (which is when the settlement agreement was first entered) and November 16, 2022 (which is when the court overseeing the Sweet v. Cardona legal challenge approved the settlement). Post-class applicants are treated differently from class members, but could still potentially receive full settlement relief, including student loan forgiveness and a refund of any past payments.
“All Post-Class Applicants should receive a decision on their application by January 28, 2026,” says the Project On Predatory Student Lending, the legal group representing student loan borrowers in the Sweet case, on a FAQ page on its website. “If your application is approved, you should receive your settlement relief within one year of the date when you receive your approval notice. If you do not receive a decision by January 28, 2026, you are entitled to Full Settlement Relief.”
Education Department Had Sought Extension To Decide Whether To Discharge Student Loans For Post-Class Members
Despite having three years to process the batch of Borrower Defense applications for post-class applicants, the Education Department indicated in a court filing last November that it would not be able to meet the January 28, 2026 deadline, and asked for an extension of 18 months. At the time, the department suggested the post-class applicant pool was around 207,000. The department indicated that the post-class pool was larger than anticipated, and it did not have the resources to evaluate so many applications by the deadline.
“Due to a variety of circumstances—including most notably the unanticipated size of the post-class pool, the Department’s reasonable but unexpected resource constraints, and the new requirement in certain circumstances that the Department now discharge ineligible loan debt unrelated to a post-class applicant’s borrower defense application—the Court should provide the Department relief from this one aspect of the parties’ comprehensive and otherwise nearly concluded settlement agreement,” said the department in a legal brief filed with the court overseeing the Sweet v. Cardona settlement in November.
The class of student loan borrowers strongly opposed the department’s request.
“Post-Class Applicants have now relied on the Settlement Agreement for over three years,” said PPSL in its opposition. “They have planned their lives around the expectation that they will get at least finality, and perhaps a grant of relief, by January 28, 2026. They have tuned in to the regular status conferences in this case over Zoom, listening as the Department repeatedly stated that it was on track and committed to meeting the Post-Class decision deadline. Now, less than 12 weeks before the deadline, the Department reveals that not only is it behind schedule to meet that deadline, it never had a prayer of meeting the deadline: out of more than 251,000 Post-Class applications, it has adjudicated fewer than 54,000—barely one-fifth.”
PPSL continued, “The relevant loans have already wreaked havoc on Post-Class Applicants’ lives, and further delay will, for many, be the literal difference between housing and homelessness, between health and illness, between being able to provide for their families and falling into desperation. In these circumstances, the Department’s assertion that the equities favor further delay are positively Orwellian.”
The judge overseeing the Sweet settlement agreement ultimately sided with the class of student loan borrowers, ordering the Education Department to process most of the post-class Borrower Defense to Repayment applications (totalling at least 170,000) by the original January 28, 2026 deadline.
Education Department Tries Again To Blow Past Deadline For Discharging Student Loans Under Sweet Settlement
Despite the court’s ruling, last week the Education Department again tried to persuade the court to extend the deadline for post-class applicants by a year and a half. The department filed what it characterized as an “administrative” motion for reconsideration, asking to extend the time to review relevant post-class Borrower Defense applications to July 2027. The implication is that would also push out the date for automatic discharges of applicable student loans to be after July 2027, as well.
“Defendants are currently required to provide full settlement relief to certain non-class members if Defendants fail to issue timely final decisions on such non-class members’ borrower defense applications by January 28, 2026,” conceded the department in its new filing. “Despite the Department’s good-faith efforts, actual progress was nowhere close to what the Court projected.” The department blamed lack of funding for insufficient staff to review the large volume of student loan discharge requests, although it didn’t mention the mass layoffs and buyouts the department had implemented under Education Secretary McMahon last year that dramatically reduced the department’s staff.
The attorneys representing the Sweet post-class student loan borrowers responded by arguing that the Education Department’s filing was procedurally deficient and should be rejected on that basis alone, although indicated that they would submit additional substantive arguments if necessary.
Where Things Stand For Discharges of Student Loans For Post-Class Applicants Under Sweet Settlement
As of right now, the January 28, 2026 deadline has passed. And according to the court docket, the court has not issued an official response or ruling on the Education Department’s second request to extend the deadline for reviewing student loan forgiveness requests for post-class members under the Sweet v. Cardona settlement (although the department did make some additional filings on Thursday, seemingly in an attempt to address the procedural deficiencies identified in PPSL’s initial opposition). The situation remains in flux. But for now, barring any further orders from the court, the department has a legal and contractual obligation to comply with the settlement agreement, which means discharging the student loans for any post-class applicants where no Borrower Defense decision has been issued, refunding any past payments made on those loans, and updating any relevant adverse credit reporting.
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