Ninth Circuit Rejects Education Department’s Bid To Delay Loan Forgiveness

The U.S. Court of Appeals for the Ninth Circuit unanimously rejected (PDF File) the Department of Education’s appeal to delay student loan relief for more than 170,000 borrowers under the Sweet v. McMahon borrower defense settlement, affirming the district court’s ruling on July 17, 2026.

The judges found the Department failed to show the “changed circumstances” legally required to modify a settlement it agreed to in 2022 and said the agency knew exactly what it was signing up for.

Why It Matters

The Sweet settlement is one of the largest government settlements in U.S. history, securing at least $23 billion in federal student loan relief for more than 500,000 borrowers who said their schools (mostly for-profit colleges) misled or defrauded them.

This ruling covers the group of “post-class applicants” who filed borrower defense claims between the settlement’s execution in June 2022 and its final approval in November 2022. The Department missed the deadlines to decide those applications, and under the settlement’s terms, it now owes relief to more than 170,000 of them.

What The Court Said

The Department of Education argued the “unexpectedly large number” of post-class applications counted as a changed circumstance justifying more time to process the loan forgiveness. The panel didn’t buy it, pointing to the record:

• The Department knew there were roughly 179,000 post-class applicants when it jointly asked the court to approve the settlement in September 2022.
• By February 2023, it knew the group totaled more than 205,000 people.
• It raised no objection until its motion to modify the settlement roughly three years later.

The panel quoted the Supreme Court’s standard for modifying settlements: “Ordinarily… modification should not be granted where a party relies upon events that actually were anticipated at the time it entered into a decree.”

The court also rejected the Department’s argument based on Trump v. CASA, the 2025 Supreme Court decision limiting universal injunctions, noting the Department “voluntarily undertook” settlement obligations that expressly covered post-class applicants.

How We Got Here

Earlier this year, the district court refused to extend the deadline for deciding post-class applications involving schools on the settlement’s Exhibit C list, and allowed only a limited extension (to April 15, 2026) for applications involving other schools. The Ninth Circuit denied the Department’s request for a stay in March 2026. And now, both deadlines have now passed.

In a statement,  Eileen Connor, president and executive director of the Project on Predatory Student Lending, said, “Once again, the courts have rejected the Department’s attempts to evade its obligations to borrowers who have waited far too long for the relief they are owed.”

What Happens Next

The Department must now deliver relief (including full loan discharges) to post-class borrowers whose applications weren’t decided on time. It could still seek review by the full Ninth Circuit or the Supreme Court, but it has lost at every stage of this dispute so far.

Borrowers who aren’t covered by the Sweet settlement may still qualify for other student loan forgiveness programs, including Borrower Defense, Public Service Loan Forgiveness, and income-driven repayment forgiveness.

How This Connects

We previously covered the 200,000 borrowers awaiting this ruling, with an estimated $12 billion in relief at stake for the post-class group. The decision is the latest in a string of accountability wins for borrowers harmed by their schools, with similar relief such as the Navient settlement checks that arrived earlier this year for a separate group of misled borrowers.

Borrowers who believe their school defrauded them can learn how the borrower defense process works, and leverage our student loan debt resources cover repayment and relief options while applications are pending.

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