Student Loan Discharges For 170,000 Borrowers May Hinge on Court Hearing

Tens of thousands of borrowers are waiting on student loan forgiveness. And whether their student loans actually get discharged may depend on the outcome of an upcoming court hearing scheduled for next week.

Last week, a key deadline in the Sweet v. Cardona case (now known as Sweet v. McMahon after Linda McMahon took over as Secretary of Education under the Trump administration) passed. Under a 2022 settlement agreement intended to resolve allegations of improper or unlawful delays and denials for Borrower Defense to Repayment applications, the Education Department was required to complete a review of the final group of “post-class” applicants by January 28, 2026. If the department didn’t do that, those borrowers — numbering 170,000 or more — would be entitled to complete settlement relief, including student loan forgiveness and refunds of prior payments made. 

But the Education Department is fighting to delay this relief. And the federal court overseeing the Sweet settlement has scheduled a hearing for next week. Here’s what borrowers should know.

Sweet settlement allows for automatic student loan discharges if deadline is missed

Thousands of student loan borrowers filed a class action lawsuit during the first Trump administration, originally captioned as Sweet v. DeVos, arguing that the Education Department had unlawfully deprived borrowers of their legal rights by stalling or arbitrarily denying their applications for Borrower Defense to Repayment, a federal student loan discharge program for borrowers who have been defrauded or misled by their school. In 2022, during the Biden administration, the Education Department entered into a settlement agreement to resolve these allegations and to provide relief to hundreds of thousands of borrowers.

Under the terms of that settlement agreement, relief was divided into two distinct groups.

“Borrowers who submitted a borrower defense application on or before June 22, 2022 (the day the settlement agreement was signed) AND whose borrower defense application relates to a school on [an approved] list are part of the automatic relief group,” says the Project on Predatory Student Lending, the legal organization representing the class of student loan borrowers, on its website. “Full Settlement Relief consists of (i) discharge of the outstanding loans that were the subject of your borrower defense application, (ii) refunds of any amounts you paid to the federal government toward those loans, and (iii) deletion of the credit tradeline associated with those loans from your credit report.”

Then, there are “post-class applicants.”

“If you applied for borrower defense after June 22, 2022, but before November 16, 2022 (the date of final approval of the settlement), then you are a ‘Post-Class Applicant,’” says PPSL. 

Post-class applicants would be entitled to a decision on their Borrower Defense application by January 28, 2026. Under the terms of the settlement agreement, if they don’t receive a decision by that date, they would be automatically entitled to full settlement relief, just like a “regular” Sweet class member. That includes a full discharge of their federal student loans.

Education Department seeks delay of automatic student loan discharges for post-class applicants

Last fall, the Education Department sought to extend the post-class applicant review deadline by 18 months, arguing that it wouldn’t be possible to meet the January 28, 2026, deadline.

“The Department has not received the resources that are needed to adjudicate post-class applications—Congress repeatedly ignored requests for funding to increase staffing to the levels the Department deemed necessary to fully implement the settlement, and the Department’s Federal Student Aid office (‘FSA’) has instead seen staffing dwindle at the time when resources for postclass adjudication are most needed,” said the department in a legal brief last November, asking the court overseeing the Sweet settlement to delay the January 2026 deadline. “As a result, the Department currently projects that it will come well short of adjudicating all post-class claims by the deadline.”

PPSL opposed the department’s request, arguing that any further extension would be unjust. 

“Post-Class Applicants have now relied on the Settlement Agreement for over three years,” said PPSL in its opposition brief. “They have planned their lives around the expectation that they will get at least finality, and perhaps a grant of relief, by January 28, 2026. They have tuned in to the regular status conferences in this case over Zoom, listening as the Department repeatedly stated that it was on track and committed to meeting the Post-Class decision deadline. Now, less than 12 weeks before the deadline, the Department reveals that not only is it behind schedule to meet that deadline, it never had a prayer of meeting the deadline: out of more than 251,000 Post-Class applications, it has adjudicated fewer than 54,000—barely one-fifth.”

In December, the court overseeing the Sweet settlement ultimately sided with student loan borrowers and ordered the department to stick with the January 28, 2026, deadline for reviewing post-class applicants’ Borrower Defense requests.

Education Department seeks reconsideration of request to delay student loan discharges

Last month, the department tried again, asking the court to reconsider its December ruling.

“The Court’s decision is… premised on manifest errors of fact,” said the department in its new filing in January. “The Court concluded that the thirty-seven attorneys in the Department’s Borrower Defense Branch could adjudicate the 170,000 postclass applications related to Exhibit C schools by January 28, 2026 (the “January Tranche”), by working overtime during the holiday season, including on Christmas Day and New Year’s Day. That finding is irreconcilable with the evidence in the record regarding the Department’s capacity to adjudicate claims, as the Department has on average completed about 1,500 adjudications per month.”

PPSL responded by noting numerous procedural deficiencies in the department’s request.

“Plaintiffs do not dispute that the Court has the authority to grant the requested administrative relief,” said PPSL. “However, the Department has no justification for requesting it.”

PPSL has repeatedly argued that the Education Department entered into a binding settlement agreement to resolve allegations of widespread delays in providing borrowers with student loan relief that they would be legally entitled to receive, and that further delays would be unjust.

“Borrowers deserve fair, timely decisions, not years of uncertainty,” said the organization in an earlier statement in December. 

Court may decide fate of automatic student loan discharges

The court has scheduled a case management conference for February 10, and a new judge overseeing the Sweet settlement will preside over that hearing. The Education Department’s request to delay automatic student loan forgiveness will almost certainly play a major part of that hearing.

“If you attended [a covered] school and did NOT receive a decision on or before January 28, 2026, then you are entitled to Full Settlement Relief,” says PPSL on its website. “We are fighting in court to make sure Post-Class Applicants receive the Full Settlement Relief they are entitled to.”

PPSL encourages student loan borrowers, and post-class applicants in particular, to attend the February 10 hearing via Zoom. Ultimately, the fate of Sweet settlement relief, including the discharge of student loans and refunds of past payments, may be decided at that hearing.