Hundreds of thousands of federal student loan borrowers are one step closer to having their debt canceled after a federal appeals court allowed a $23 billion settlement with the U.S. Department of Education to move forward, potentially expanding relief for borrowers who say their schools misled them, WEAU reports.
The Sweet v. McMahon Settlement resolves a years-long legal battle brought by borrowers who filed claims under the federal borrower defense program, which allows student loan forgiveness for students whose colleges engaged in deceptive or unlawful conduct. Plaintiffs alleged their schools falsely promised higher earning potential, transferable academic credits, and stronger career prospects to encourage enrollment.
The lawsuit also accused the federal government of failing to process borrower defense claims in a timely manner, leaving many applications unresolved for years despite borrowers meeting the program’s eligibility requirements.
A federal appeals court recently denied the Trump administration’s request to pause the processing of borrower defense applications, allowing the Education Department to continue reviewing claims covered by the settlement. The decision
could ultimately make an additional 200,000 borrowers eligible for federal student loan cancellation if their applications are approved, adding to the roughly 450,000 borrowers already expected to receive relief under the agreement.The class-action lawsuit was filed in 2019 by an advocacy organization representing borrowers who argued the Education Department unlawfully delayed decisions on their claims. The case became one of the largest borrower defense disputes in the federal student loan system and spanned multiple presidential administrations before reaching the settlement.
According to the advocacy group behind the lawsuit, dozens of colleges accused of misleading students were named in the litigation. The allegations included false representations about job placement rates, credit transferability, and the value of academic programs. Many of the institutions cited in the case have since closed.
For eligible borrowers, the settlement could eliminate remaining federal student loan balances and resolve long-pending borrower defense claims. The latest court ruling also clears the way for the Education Department to continue reviewing outstanding applications, extending the possibility of debt relief to thousands more borrowers awaiting a final decision.
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