Automatic Discharges Of Student Loans To Proceed After Dual Court Wins

Student loan borrowers notched two major court victories this week. The wins should pave the way for tens of thousands of borrowers to receive automatic discharges of their federal student loans in the coming months, along with payment refunds and fixes to credit reporting.
Both legal wins involve the Sweet v. McMahon case (formerly named Sweet v. Cardona, but renamed after Linda McMahon took over as U.S. Secretary of Education), a long-running class action lawsuit over stalled or rejected student loan forgiveness requests under the Borrower Defense to Repayment program. Borrower Defense offers a path to discharging federal student loans on the basis of certain forms of school misconduct, particularly misrepresenting or lying about key aspects of an educational program or future career or earnings prospects.
A 2022 settlement agreement between the Education Department and the class of student loan borrowers provided automatic student loan forgiveness and other relief to hundreds of thousands of borrowers who had attended certain schools. For those who had submitted Borrower Defense applications after the settlement’s approval, but before it was formally entered into court, the settlement agreement mandated that the department must process these applications by the end of January 2026. If that didn’t happen, these borrowers (referred to as “post-class applicants”) would be entitled to an automatic discharge of their federal student loans, along with other settlement relief. But the Education Department sought to delay this relief just weeks before the deadline, repeatedly asking the court overseeing the Sweet v. McMahon settlement to extend the deadline for post-class applicants by a year and a half.
On Tuesday, the court resoundingly rejected the Education Department’s second request to delay student loan forgiveness processing for post-class applicants under Sweet v. McMahon. And that ruling came just one day after the U.S. Supreme Court put an end to a separate appeal brought by a coalition of schools seeking to block settlement relief under the same case. Here’s what student loan borrowers should know about the dual legal victories.
Court Rejects Second Request To Delay Discharges Of Student Loans Under Sweet v. McMahon
On Tuesday, the court overseeing the Sweet v. McMahon settlement issued a long-awaited ruling rejecting the Education Department’s second attempt to delay providing settlement relief to post-class applicants. The department missed the January 28, 2026 deadline for reviewing nearly 170,000 Borrower Defense applications submitted by post-class applicants, and under the terms of the settlement agreement, these borrowers would be entitled to complete relief. This includes student loan forgiveness, a refund of past payments made on the applicable student loans, and corrections to any associated credit damage.
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The court had already rejected the department’s request for a delay in December. But the department then filed a second motion asking the court to reconsider its ruling. The court considered the department’s arguments that the prior judge had erred and that it was logistically impossible for the department to comply with the January deadline. But the new judge overseeing the case ultimately agreed with the previous judge, and rejected the department’s request.
“At no point before November 2025 did the Department signal that it would have any trouble meeting its deadline to adjudicate all post-class applications,” reads the ruling issued on Tuesday. “Rather, the Department waited until the eleventh hour, not even three months before the January 28, 2026 deadline to to seek the relief now requested. The Court agrees with Plaintiffs that to justify such relief, ‘a party must show ‘extraordinary circumstances’ suggesting that the party is faultless in the delay.’ Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 393 (1993). Defendants have shown no such circumstances.”
“The Court denies Defendants’ motion for the simple reason that the record amply reflects that Defendants have not shown (and indeed, cannot show) that any extraordinary circumstances beyond their control prevented timely action to protect their interests,” concluded the court.
“Today’s decision sends an unmistakable message: court orders are not optional,