The U.S. Department of Education began sending mass student loan discharge notices this week to approximately 170,000 borrowers following a recent court defeat.

The notices stem from the Sweet v. McMahon settlement, a 2022 class-action agreement that resolved claims of delays and improper denials in the Borrower Defense to Repayment program. This program allows federal student loan forgiveness for borrowers defrauded by their schools. The settlement covers hundreds of thousands of applications tied to institutions on a court-approved "Exhibit C" list of schools accused of misconduct.

Specifically, the notices went to "post-class applicants" borrowers who filed claims between June 23 and November 15, 2022, after the class period ended. These individuals were entitled to a decision on their applications by January 28, 2026. The department missed that deadline and sought an 18-month extension, citing resource constraints and the unexpectedly large pool of over 205,000 post-class applicants.

Two district court judges rejected the extension requests. The department then appealed to the Ninth Circuit Court of Appeals and filed for an emergency stay, which a unanimous panel denied last week. The court noted that the department had known about the post-class applicant numbers since February 2023 and found no changed circumstances warranting delay.

Eligible borrowers who receive notices will have their relevant federal student loans discharged, receive refunds for any payments made, including on previously paid-off debt, and see related credit report entries deleted, all within one year. Loans remain in forbearance during processing, with collections halted. No further action is required from borrowers beyond updating contact information.

The Project on Predatory Student Lending, which represented borrowers, celebrated the development. "Every court decision has been clear, the settlement remains in effect—and it requires full relief for Exhibit C Post-Class applicants by March 30, 2027," the group posted on X.

A second group of post-class applicants from non-Exhibit C schools awaits decisions by April 15, 2026, or similar notices if delayed. The full settlement requires relief for all Exhibit C post-class applicants by March 30, 2027. However, the department's broader appeal of its obligations under the settlement remains pending before the Ninth Circuit.

The Trump administration, facing these obligations from a prior settlement, argued in court filings that unanticipated factors like staffing shortages justified more time. District courts criticized the late requests, filed only months before the deadline. Discharges for three specific schools, Lincoln Technical Institute, American National University, and Everglades College, remain temporarily stayed pending separate appeals.

Borrowers can check their status via servicers or the Federal Student Aid website. The settlement has already processed hundreds of thousands of claims since 2022, providing relief to those alleging school fraud.