Court Ruling Ends Long Legal Battle for Student Loan Forgiveness

The long legal battle to erase the debts of nearly half a million federal student loan borrowers who say they were defrauded by their colleges is finally coming to an end, after a recent court ruling in a lawsuit that has spanned three presidential administrations.

The class-action suit, originally filed against the first Trump administration seven years ago, centered on a federal rule known as borrower defense. The rule is supposed to allow borrowers to petition the U.S. Education Department to erase their debts if a school has lied to them — about things like their job prospects, their credits' transferability or their likely salary after graduation.

During Trump's first term, thousands of borrowers who claimed they had been ripped off by predatory schools waited years to have their borrower defense claims reviewed. Finally, advocates sued, arguing that, under then-Education Secretary Betsy DeVos, the department had deliberately and illegally stopped processing claims and wrongfully denied others without considering the merits of their cases.

The suit has endured long enough to bear the names of three different education secretaries: from Sweet v. DeVos in 2019 to Sweet v. Cardona during the Biden administration, and now Sweet v. McMahon for Trump's second term.

"At the end of the day, this settlement has impacted over 450,000 people, and it's improved their personal balance sheets by over $23 billion," said Eileen Connor, executive director of the Project on Predatory Student Lending (PPSL), the advocacy group that filed the suit against the department in 2019.

Once all of the required loan discharges and refunds are completed, Connor says the Sweet settlement will be the largest ever against the U.S. government.

Why it has taken so long

In 2022, the Biden administration agreed to a landmark settlement in the class-action suit, pledging that borrowers who had attended a predetermined list of more than 150 mostly for-profit colleges would receive full and automatic relief from their loans.

Not only that, but the settlement also allowed more than 250,000 additional borrowers to apply for relief during a brief, post-settlement period in 2022. It required the department to review those new claims within a set period of time or the loans in question would have to be discharged.

The second Trump administration revealed in court documents that it had processed only 60,000 of those post-class applications by the court-appointed deadline.

The current Education Department has argued in court that it needs more time — 18 months — to properly review so many applications, "ensuring that taxpayer funds are only disbursed to those borrowers who are entitled to relief on the merits."

But, in a July 17 ruling that likely means the end of this legal fight, the U.S. Court of Appeals for the 9th Circuit told the department that the obligations of the settlement were clear early on — and yet the department waited three years to raise an objection.

Ellen Keast, an Education Department spokesperson, told NPR in a statement that the Sweet settlement "imposed an unrealistic deadline."

She said, "The Department has complied in good faith with court orders, and we believe the court erred in not granting our reasonable request."

"I'm really angry about all the years that my family suffered under these loans"

Jessica Feindt is one of the post-class borrowers who's been waiting years for relief. She lives near Flint, Mich., and was one of the first in her family to go to college. She enrolled at University of Phoenix, hoping to earn an undergraduate degree in psychology.

"They really marketed heavily in the area. It was on every radio station, every newspaper. It was everywhere," Feindt says.

Feindt did earn her degree — and in less than four years. But she took out a lot of debt to do so. "I paid a lot out of pocket. I paid through student loans. I had all federal loans because poor people cannot get [private] loans."

But, she says, she realized later that the school's recruitment counselor had repeatedly misled her, including telling her that her degree would be accepted by the Michigan graduate programs she was interested in applying to next. It wasn't. In 2022, she filed a borrower defense claim, joining that post-settlement group.

In court documents filed in April as part of its appeal, the Education Department revealed that, after the Sweet settlement of 2022, it had provided some $12 billion in loan discharges and/or refunds to nearly 300,000 federal student loan borrowers who claimed to have been defrauded. After the July ruling, that dollar amount will continue to grow considerably.

Connor likens this case, about schools defrauding borrowers, to the historic settlement against Big Tobacco. Like cigarettes, she says, these student loans to predatory schools are "toxic products."

Less than a week ago, Feindt logged in to her federal student loan account, and her college debts were gone — erased soon after the latest developments in the Sweet case.

"I feel like I should be happy," Feindt says, "but I'm really angry about all the years that my family suffered under these loans."