Final Sweet v. McMahon Deadline Passes as Student Loan Relief Enters Enforcement Phase

Case Snapshot

• Court: U.S. District Court for the Northern District of California; U.S. Court of Appeals for the 9th Circuit
• Case: Sweet v. McMahon (formerly Sweet v. Cardona)
• Decision Date: Settlement implementation ongoing; latest appellate decision issued July 17, 2026
• Core Issue: Processing of borrower defense to repayment applications and enforcement of court-approved settlement deadlines
• Key Allegation: Borrowers alleged the Department of Education unlawfully delayed borrower defense decisions and failed to provide required settlement relief.
• Court Holding: The 9th Circuit declined to modify the settlement deadlines for post-class applicants.
• Outcome: Court-ordered deadlines remain in effect, with implementation now entering an enforcement phase following the final July 28 settlement deadline.
• Notable Detail: PPSL estimates the settlement now provides at least $23 billion in student loan relief, making it one of the largest settlements involving the federal government.

The final court-ordered deadline under the landmark Sweet v. McMahon borrower defense settlement has passed, shifting attention from determining eligibility for student loan relief to ensuring the U.S. Department of Education delivers the billions of dollars in relief required under the agreement.

July 28 marked the deadline for borrowers in Decision Group 5, the final decision group established under the settlement. With that date now passed, the Project on Predatory Student Lending (PPSL), which represents the borrower class, says it will begin reviewing whether affected borrowers have actually received the loan discharges, refunds and other relief required under the settlement.

The milestone comes as thousands of borrowers continue receiving debt cancellation under what PPSL estimates is now a $23 billion settlement covering more than 500,000 borrowers. At the same time, advocates argue that more than 1,000 class members are still waiting for relief that should have been completed months ago, setting the stage for additional litigation over the Department’s compliance.

Settlement Moves From Deadlines to Enforcement

The Sweet litigation began in 2019, when borrowers accused the Department of Education of unlawfully delaying decisions on borrower defense to repayment applications submitted by students who alleged they had been misled or defrauded by their schools.

The case resulted in a landmark settlement approved in 2022 that established strict timelines for processing borrower defense claims and created automatic consequences if the Department failed to meet those deadlines.

Borrowers whose applications were not decided within the required timeframes became entitled to Full Settlement Relief, which may include:

• Discharge of eligible federal student loans
• Refunds of qualifying payments
• Removal of negative credit reporting related to discharged loans
• Restoration of federal student aid eligibility

The July 28 deadline represented the final scheduled relief milestone for the original decision groups established under the settlement.

Ninth Circuit Reinforced Deadline Requirements

The settlement’s final implementation phase follows a significant appellate decision earlier this summer.

On July 17, a unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals rejected the Department of Education’s attempt to extend deadlines for post-class borrower defense applicants.

The Department had argued that the volume of applications submitted after the settlement was negotiated created unforeseen administrative burdens warranting additional time. The court disagreed, concluding the Department had not demonstrated the type of changed circumstances necessary to modify a court-approved settlement.

The ruling preserved automatic relief for post-class borrowers whose applications were not decided by the settlement’s deadlines, including applicants from Exhibit C schools whose claims remained undecided after Jan. 28 and applicants from non-Exhibit C schools whose claims remained undecided after April 15.

The appeals court also noted that the Department was aware of the substantial number of post-class applications before final approval of the settlement, weakening its argument that the workload was unforeseen.

Implementation Remains Incomplete

Despite the expiration of nearly every settlement deadline, implementation remains ongoing.

According to PPSL, more than 1,000 borrowers covered by the settlement are still waiting for some combination of loan discharges, refunds or other required relief after their applicable deadlines have passed.

Those borrowers include members of the settlement’s Automatic Relief Group as well as borrowers assigned to Decision Groups 1 through 4.

In June, PPSL served the Department of Education and the Department of Justice with a formal Notice of Material Breach, alleging the Department had failed to provide the Full Settlement Relief required under the agreement. The notice is a prerequisite to asking the federal court to take additional enforcement action but does not itself establish that the Department breached the settlement.

Following the July 28 deadline, PPSL said it plans to contact Decision Group 5 borrowers to determine whether their required relief has been delivered before deciding whether additional court intervention is necessary.

Borrowers Continue Seeing Account Changes

As implementation accelerates, many borrowers have reported unexpected changes to their loan balances.

PPSL says fluctuating balances are generally a normal part of the discharge process as the Department and federal loan servicers unwind consolidated loans, apply discharges and process refunds. Temporary increases or decreases in balances do not necessarily indicate an error and often signal that servicing adjustments are underway.

The organization has advised borrowers to continue monitoring their Federal Student Aid accounts and communications from loan servicers while relief is processed.

Operational Implications for Student Loan Servicers

The settlement continues to present significant operational challenges for federal student loan servicers and other organizations involved in borrower account administration.

Delivering Full Settlement Relief can require:

• Reconstructing historical account activity.
• Separating eligible debt from consolidated loans.
• Issuing refunds for qualifying payments.
• Updating consumer reporting agencies.
• Coordinating account corrections across multiple servicing platforms.

The case also highlights the importance of maintaining accurate servicing records and timely implementation of court-ordered account adjustments. Delays or reporting errors could expose the Department to additional compliance challenges as the settlement enters its enforcement phase.

While the major eligibility deadlines established by the settlement have now passed, the focus is increasingly shifting toward whether every borrower entitled to relief actually receives it.