200,000 Borrowers Await Ninth Circuit Ruling on $12 Billion Student Loan Settlement

A federal appeals court heard arguments on Friday over whether the Education Department can further delay a court-approved settlement that promises loan discharges, payment refunds, and credit report corrections to more than 200,000 student loan borrowers who say they were defrauded by their colleges.

The case, Sweet v. McMahon, has been working through the courts since 2019 (as a result, the case has changed names a few times: Sweet v. DeVos and Sweet v. Cardona). The settlement, valued at up to $12 billion, set firm deadlines for the Department to process borrower defense to repayment applications. The Department has missed those deadlines and asked for extensions multiple times. So far, those requests have been denied.

During Friday’s hearing before the Ninth Circuit Court of Appeals, Judge Kim McLane Wardlaw offered a blunt assessment: “The time for negotiating is over. You missed your deadline.”

The court is now considering the Department’s motion to stay the settlement while it appeals.

What Is Sweet v. McMahon?

Sweet v. McMahon (many times still referred to as Sweet v. Cardona) is a class-action lawsuit filed during the first Trump administration. It accused the Education Department of delaying decisions on borrower defense to repayment applications — a federal program designed to provide debt relief to students defrauded by their schools.

The College Investor team filed a FOIA Request in 2023, and at that time, 59% of all borrower defense claims were still pending.

Under the Biden administration, the Department struck a settlement that established deadlines for processing applications and promised either timely decisions or automatic relief to three groups of borrowers. A central piece of the settlement is Exhibit C, a list of 151 schools that the Department identified as having strong indicators of substantial misconduct. Borrowers who attended those schools and filed applications during the class period were promised expedited treatment.

Full settlement relief includes forgiveness of the borrower’s federal student loan balance, refunds of past payments, and correction or removal of adverse credit reporting.

This relief is a contractual obligation under the court-approved settlement.

Loan Forgiveness Claims Delayed 

The current appeal is the latest in a series of efforts by the Education Department to avoid meeting its settlement obligations. Here is how the timeline has unfolded:

Late 2025: The Department asked U.S. District Judge William Alsup for an 18-month extension to process borrower defense claims. Under Secretary of Education Nicholas Kent argued the settlement “imposes a timeline that would require the Department to automatically cancel up to $12 billion in student loans by January 2026 without proper vetting.” At the time, the Department reported it was adjudicating about 1,500 applications per month, with roughly 193,000 applications still lacking decisions.

December 11, 2025: Judge Alsup ruled that applications involving Exhibit C schools must be adjudicated by the original deadline of January 28, 2026, or be automatically approved. He called the 18-month request “unacceptable.”

January 28, 2026: The Department missed the court-ordered deadline, triggering the settlement’s automatic relief provision for Exhibit C post-class borrowers who did not receive decisions.

February 24, 2026: The Department filed a notice of appeal (PDF File) and on February 27, filed a motion to stay in the Ninth Circuit.

March 20, 2026: The Ninth Circuit heard oral arguments on the Department’s motion. The court’s decision is pending.

What This Hearing Signals For Borrowers

Judge Wardlaw’s statement that “the time for negotiating is over” is a strong signal from the appellate bench. While the Ninth Circuit has not yet issued a ruling, the remark suggests limited patience for the Department’s ongoing attempts to delay.

It's important to remember that filing an appeal does not automatically pause the lower court’s orders. Unless the Ninth Circuit separately issues a stay, automatic discharges must proceed under the settlement terms.

You can watch the hearing here:

What This Means For Student Loan Borrowers Awaiting Loan Forgiveness

If you filed a borrower defense application and attended a school on the Exhibit C list, your situation depends on whether you received a decision by January 28, 2026.

Exhibit C post-class applicants who did not receive a decision by January 28, 2026 are entitled to full settlement relief. The Education Department must send you a notice of eligibility by March 30, 2026. Your loan forgiveness and other eligible relief should be delivered within one year of receiving that notice.

Post-class applicants who did not attend an Exhibit C school are owed a decision from the Department by April 15, 2026.

Meanwhile, borrowers need to continue to watch the outcome of this case and see how the court will rule.

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