A federal appeals court has ruled in favor of more than 170,000 borrowers who claimed they were defrauded by for-profit colleges, resulting in the cancellation of approximately $11 billion in federal student loan debt. The decision follows a long-running class-action lawsuit addressing loans taken out by attendees of dozens of predatory for-profit institutions.
The ruling came from a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit, which unanimously rejected a request from the U.S. Department of Education for additional time to review outstanding borrower defense claims. The department had sought an 18-month extension to process the cases but was denied, upholding a prior decision from a federal district court judge.
This latest development expands the scope of the class-action settlement, initially filed in 2019 under the Trump administration and known as Sweet v. Department of Education. The lawsuit alleges that certain for-profit colleges misled students with false promises about graduate earnings and job prospects while encouraging them to take out federal loans. Under federal borrower defense rules, students who were defrauded can apply to have their loans discharged.
In 2022, during President Joseph R. Biden Jr.’s administration, the government settled the suit by forgiving the debts of nearly 300,000 borrowers categorized as class members. The settlement also established deadlines for adjudicating additional claims from borrowers who submitted applications after the settlement announcement. Specifically, the Education Department was required to determine claims for borrowers from more than 150 identified schools by January 28, 2026, and to make decisions on claims involving other schools by April 15, 2026.
The government failed to meet both deadlines, triggering an automatic approval provision that mandates loan cancellation for those unresolved claims within one year. As a result, the size of the settlement now encompasses close to 500,000 borrowers with debts totaling an estimated $23 billion. According to the Project on Predatory Student Lending, a nonprofit representing the borrowers, this is the largest class-action financial settlement against the federal government in U.S. history.
Eileen Connor, executive director of the nonprofit, compared the settlement’s significance to the 1998 tobacco industry agreement, which required companies to pay more than $200 billion over smoking-related health costs. She described the loans from these institutions as “toxic products,” drawing a parallel between misrepresented tobacco products and predatory loan practices.
The Education Department expressed disagreement with the ruling. Spokeswoman Ellen Keast called the original timelines “unrealistic” and argued that the department had acted in compliance with court orders. She said the government believes the court erred in denying the extension request.
Despite the settlement, a significant backlog remains. As of March 2026, the Education Department had more than 460,000 borrower defense claims pending, with about one-third subject to automatic discharge under the current settlement. The remainder of the claims, along with those submitted after 2019, face ongoing delays exacerbated by regulatory changes implemented during the Trump administration that narrowed relief eligibility.
Borrowers who believe they have been defrauded can continue to submit claims, but the pace of adjudication remains slow, leaving many applicants waiting years for resolution. The ruling ensures loan forgiveness for a substantial group amid efforts to address longstanding concerns over predatory practices in the for-profit college sector.