Thousands of borrowers are receiving emails from the Education Department this week, notifying them that their student loans will be discharged. The relief is for the final group of federal student loan borrowers under the Sweet v. McMahon settlement agreement, which was finalized in 2022 to resolve claims of stalled or rejected Borrower Defense to Repayment applications.
“We’re hearing that some Post-Class Applicants who attended a non-Exhibit C school and are entitled to full settlement relief have started receiving notices from @usedgov,” said the Project on Predatory Student Lending, the legal organization that has been representing federal student loan borrowers in the Sweet v. McMahon litigation for nearly a decade, said in a statement on X on Friday. “The Department has until June 15 to send these notices. In the meantime, be sure to check all inboxes and spam/junk folders for messages from noreply@studentaid.gov, and make sure your contact information is up to date in your Federal Student Aid account.”
But even as borrowers receive the student loan discharge notices, the Education Department continues its push to try to stall or delay providing relief. Here’s the latest.
Final Group Eligible For Student Loan Discharges Under Sweet v. McMahon
The latest batch of student loan discharge emails is being sent to the final group of borrowers eligible for relief under the Sweet v. McMahon settlement. That 2022 agreement was intended to resolve a class action lawsuit initiated by borrowers in 2017 over claims of unlawfully delayed or denied applications for Borrower Defense to Repayment, a federal student loan discharge program that can wipe out the federal student debt for borrowers whose school misled or defrauded them through lies or misrepresentations about program costs, admissions selectivity, career prospects, or other key aspects of the applicable educational program.
The Sweet v. McMahon settlement (originally called Sweet v. DeVos when the suit was filed in 2017, and then Sweet v. Cardona during the Biden administration) granted automatic relief to more than 500,000 borrowers with federal student loans who had submitted Borrower Defense applications prior to the finalization of the agreement and had attended certain court-approved schools (called “Exhibit C schools”), which were predominantly for-profit institutions. In addition to student loan forgiveness, the settlement agreement provided for refunds of prior payments made, as well as a deletion of any associated negative credit reporting.
A second group of federal student loan borrowers, called post-class applicants, were also entitled to relief under the Sweet v. McMahon settlement, although relief wasn’t necessarily guaranteed. Post-class applicants were borrowers who applied for Borrower Defense to Repayment during a five-month window between the settlement agreement’s finalization in June 2022 and its ultimate approval by the court overseeing the litigation in November 2022. Post-class applicants wouldn’t receive automatic relief like regular class members, but would be entitled to a final decision on their Borrower Defense applications within three years. If the Education Department failed to make a determination of student loan discharge eligibility within that timeframe, they would receive full settlement relief just like regular class members, including a full discharge of their student loans, refunds of past payments, and credit reporting adjustments.
This week’s student loan discharge notices are for the second group of post-class applicants, which are those who submitted Borrower Defense to Repayment applications between June and November 2022, and did not attend an Exhibit C institution. This group, estimated to include around 30,000 federal student loan borrowers, is the final cohort entitled to relief under the Sweet v. McMahon settlement. A larger group of post-class applicants (around 170,000 borrowers) who had attended Exhibit C schools received student loan discharge notices earlier this year.
Student Loan Discharges Expected Within One Year Of Notice Date
Post-class applicants reported receiving the latest student loan discharge emails within the last few days on public forums.
“I just wanted to share that I received the email from Department of Education on Thursday!” said a user on a Borrower Defense forum on Reddit on Saturday. “School: Mountain State University. Servicer: Nelnet. Application date: 06/26/22.”
“Me too!” said another user in response. “Woot woot!”
“Congrats just received mines,” said a third.
The latest batch of student loan discharge emails sent by the Education Department explains the basis for the relief.
“You are receiving this letter pursuant to Paragraph IV.D.2. of the Settlement Agreement reached in the civil action: Sweet v. McMahon, No. 3:19-CV-03674-WHA (N.D. Cal.) (“Agreement”),” reads the email. “You submitted a borrower defense to repayment discharge application after June 22, 2022, and on or before Nov. 15, 2022.” The letter then verifies the school that the borrower attended that was the basis of their Borrower Defense application.
“The U.S. Department of Education (ED) is providing you with this notice because, despite its best efforts, ED could not respond to your application on or before Apr. 15, 2026,” which was the deadline for the department to render a decision.
“Your relief should be delivered within one year of receiving that notice,” said the Project on Predatory Student Lending on its website for the Sweet v. McMahon settlement. “In the meantime, all you need to do is make sure that your contact information is up to date on your FSA profile.”
Education Department’s Efforts To Delay Student Loan Discharges Under Sweet v. McMahon Continue
But even as the Education Department sends out student loan discharge notices to thousands of borrowers, it continues to press an appeal before the Ninth Circuit Court of Appeals to try to delay providing settlement relief under Sweet v. McMahon. The court rejected an emergency request for a stay earlier this year, which followed two similar denials at the district court level.
“The stakes of this appeal are stark: absent modification of the post-class adjudication deadline, the Department of Education must provide $11 billion in refunds and discharges to hundreds of thousands of non-parties whose claims for relief have not been adjudicated on the merits,” said the Education Department in its latest court filing last month. “It must do so even though materially changed circumstances since the agreement have dramatically increased the burden of implementing the settlement and the cost of missing the deadline. It must do so even though it has been diligently implementing the settlement with limited resources for years. It must do so even though it has almost completely finished implementing the settlement with respect to the parties to the litigation, including by providing $12 billion in relief to nearly 300,000 borrowers. It must do so even though the settlement provides relief that goes well beyond any relief that the post-class applicants could have received on the merits of any underlying claims.”
But the Project on Predatory Student Lending maintains that the Education Department entered into a binding settlement agreement, and that thousands of federal student loan borrowers have waited too long for relief already.
“Although the decision deadlines for the Post-Class have now passed, the Department is still trying to evade those deadlines, and it has appealed to the Ninth Circuit Court of Appeals,” explained the Project on Predatory Student Lending on its website. “The Ninth Circuit has not yet scheduled oral argument on the appeal. The existing deadlines and your rights to relief remain in effect. PPSL remains committed to ensuring every class member receives the relief they are entitled to under the settlement.”
“The specific timeframe within which ED must process your application is the subject of ongoing litigation before the United States Court of Appeals for the Ninth Circuit,” said the Education Department in its discharge emails to borrowers this week, suggesting that the outcome of the litigation could determine whether borrowers actually get their student loans discharged.
For now, federal student loan borrowers who are entitled to relief under the Sweet v. McMahon settlement should make sure their contact information (including their email address) is up to date with the Education Department, and watch for notices from the department explaining that their federal student loans will be discharged.
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