Court Ruling Forces $11 Billion In Student Loan Cancellations

A federal court ruling has forced the Department of Education to cancel roughly $11 billion in student loan debt for more than 170,000 borrowers, in a case that has been working through the courts since 2019.

The case, Sweet v. McMahon, was originally filed as Sweet v. Cardona. Borrowers accused dozens of mostly for-profit schools of institutional misconduct, saying the schools misled them with inflated job placement numbers, credits that would not transfer to other institutions, and promises of stable careers that never materialized.

The ruling relies on the borrower defense rule, which lets federal student loan borrowers seek forgiveness if they can show they were defrauded or misled about their education. The court denied the Department of Education’s request to push back the deadline for processing that relief.

Relief under this ruling covers borrowers who applied for borrower defense forgiveness between June 23, 2022, and November 15, 2022. Combined with earlier rounds of forgiveness in the same case, the total relief now reaches roughly $23 billion for close to 500,000 borrowers, making it one of the largest settlements against the federal government on record.

For affected borrowers, the cancellation applies automatically once processed, without a separate application. Loan servicers are expected to update account balances in the coming weeks, though the exact timeline has not been made public.

The ruling adds to a string of legal fights over student debt relief that have played out since the pandemic-era pause on federal loan payments ended, with courts increasingly asked to referee disputes between borrowers, for-profit schools, and the Department of Education over who bears responsibility when a school’s claims turn out to be false.

Borrowers do not need to file a new claim to benefit from this round of relief. The Department of Education is expected to identify eligible accounts from the pool of borrower defense applications already on file and process the cancellations directly, according to reporting on the ruling, though affected borrowers may still want to confirm their loan status once servicers update their records.