More than 170,000 borrowers will see $11 billion in student loan balances disappear after a key federal court ruling in what has become the largest settlement against the U.S. government in the nation’s history.
The ruling stems from the 2019 Sweet vs. McMahon settlement against the government based on the borrower defense rule, a federal regulation that allows student loan borrowers to apply for loan forgiveness if they believe they were defrauded or misled about the education they paid for.
Eileen Connor, president of Project on Predatory Student Lending (PPSL), the legal group that represented the plaintiff in Sweet vs. McMahon, hailed the court victory as a team effort.
“This is a huge accomplishment and one that would not have been possible without the tireless efforts of our plaintiffs, the borrower community, and, of course, the small but fierce team at PPSL,” Connor said in a statement.
The recent court ruling denied the Department of Education’s request to have the settlement’s loan relief deadline for a group of more than 170,000 students extended by 18 months, according to the PPSL.
In doing so, the court triggered loan relief for students who applied for borrower defense forgiveness from June 23, 2022, to November 15, 2022, according to the Department of Education.
The lawsuit is a win for student loan borrowers, many of whom have endured an ever-changing landscape of federal student loan rules and availability over the past two years.
The Trump administrated eliminated SAVE – a Biden-era repayment plan that featured low monthly payments compared to other repayment options – after a federal court ruled in 2023 that the plan was illegal.
The administration then rolled out a new lineup of repayment plans with overhauled available income-driven repayment plans, which based monthly payments on a percentage of a borrower’s income.
Beyond repayment plans, the federal loan program has become a flashpoint for the country as borrowers cope with a collective $1.66 trillion in student loans – second only to auto loans in non-housing debt, according to federal data.
Calls for student loan forgiveness have mounted for years. In 2024, President Joe Biden announced a plan for a one-time loan forgiveness of up to $20,000 per borrower.
The forgiveness plan was later struck down in the court ruling against Biden’s SAVE plan.
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