Quick Answer: The Department of Education is attempting to back out of the Sweet v. McMahon settlement they agreed to in 2022, which promised loan forgiveness to over 200,000 defrauded student loan borrowers. Despite a court-approved settlement and binding deadlines, ED has filed motion after motion seeking delays – and just missed the January 28, 2026 deadline entirely. The borrowers who attended predatory schools and were promised relief are being betrayed by the very agency meant to protect them.
I’ve seen some shameless behavior from government agencies in my 30+ years working with people in debt, but this takes the cake.
The Department of Education agreed to a settlement. The court approved it. The deadlines were clear. And now ED is doing everything in its power to weasel out of providing the relief they promised to students who were defrauded by predatory schools.
This isn’t a case of budget constraints or administrative challenges. This is a systematic effort to deny relief to people who were already victimized once by their schools – and are now being victimized again by their own government.
What the Sweet v. McMahon Settlement Actually Promised
Let’s be clear about what we’re talking about here. The Sweet v. McMahon settlement (originally Sweet v. Cardona, before that Sweet v. DeVos) was supposed to provide over $6 billion in relief to borrowers who were defrauded by their colleges.
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The settlement covers federal student loan borrowers who filed borrower defense applications that were delayed or mishandled by ED. Under the agreement, approved in November 2022, qualifying borrowers were promised:
- Elimination of their federal student loan balance
- Refunds of past payments made on those loans
- Correction or removal of adverse credit reporting
The settlement included specific deadlines. If ED failed to act on applications by certain dates, borrowers would automatically receive full relief.
Simple enough, right? Make a decision by the deadline, or the borrower gets what they’re owed.
ED agreed to this. The court approved it. Done deal.
Or so everyone thought.
The Parade of Delay Tactics
Since agreeing to the settlement, the Department of Education has engaged in what I can only describe as a masterclass in bad faith:
The Pattern of Obstruction:
- January 2024: ED failed to provide relief to the “Automatic Relief Group” by the original deadline, forcing borrowers to file an enforcement motion
- November 2025: With less than seven weeks until the January 28, 2026 deadline, ED requested an 18-month extension – pushing relief to July 2027
- December 2025: Judge William Alsup denied the request, calling it “unacceptable”
- January 22, 2026: ED filed another motion asking for more time
- January 28, 2026: The deadline passed. ED missed it.
- February 2026: ED continues filing motions seeking relief from their obligations
According to the Project on Predatory Student Lending, the Department’s January motion is “directly contrary to the language of the Settlement Agreement and the binding court order approving the Settlement.”
In other words: they’re trying to use legal technicalities to avoid honoring their word.
What Judge Alsup Said About This
Judge William Alsup, who presided over this case before his recent retirement, didn’t mince words about ED’s behavior.
“They have great interest in this because the student loan has been hanging over their head for how many years, how many decades, wrecking their credit. It’s just not right.”
– Judge William Alsup
The judge characterized ED’s requested 18-month delay as “totally unacceptable.”
And he’s right. These aren’t just numbers on a spreadsheet. These are real people who:
- Were deceived by predatory schools about job placement rates, accreditation, and career prospects
- Took on massive debt for worthless degrees
- Had their credit destroyed while waiting years for decisions
- Were promised relief through a court-approved settlement
- Are now watching the government try to renege on that promise
The Numbers: 200,000+ Borrowers Left Hanging
Borrowers Awaiting Relief
Settlement Value
Already Received Relief
The settlement has already provided relief to over 271,000 borrowers. But approximately 200,000 “post-class applicants” – those who filed borrower defense applications between June 22 and November 16, 2022 – are still waiting.
Under the settlement terms, if ED didn’t issue decisions by January 28, 2026, these borrowers should automatically receive full relief: loan discharge, refunds, and credit repair.
ED missed that deadline. The relief should be automatic.
Instead, ED is in court trying to get out of it.
Why This Matters Beyond This Case
Here’s what really bothers me about this situation: if the government won’t honor a court-approved settlement, what’s the point of settlements at all?
These borrowers didn’t ask for a handout. They were defrauded. They jumped through every hoop – filed applications, provided documentation, waited years. The government acknowledged the fraud and agreed to provide relief.
Now they’re being told to wait longer. And longer. And maybe forever.
The Excuse: ED claims “resource constraints” and “declining staffing at Federal Student Aid” prevent them from processing applications.
The Reality: ED had years to prepare for these deadlines. They agreed to the timeline. Resource constraints don’t excuse breaking a legal agreement – they just expose poor planning and misplaced priorities.
What Happens Next
Judge Alsup has retired, and the case is now before Judge Gilliam. A case management conference is scheduled for February 10, 2026.
The legal situation remains uncertain because ED keeps filing motions. But under the plain language of the settlement:
- Borrowers from Exhibit C schools who didn’t receive decisions by January 28, 2026 are entitled to full relief
- All other post-class applicants must receive decisions by April 15, 2026, or receive automatic relief
- ED’s attempts to modify these terms are “directly contrary” to the binding settlement agreement
What Affected Borrowers Should Do
If you’re one of the 200,000+ borrowers affected by this, here’s my advice:
- Don’t assume anything is automatic. Despite what the settlement says, ED is fighting to avoid providing relief. Stay vigilant.
- Document everything. Keep records of when you applied, what communications you’ve received, and when deadlines passed.
- Follow the case closely. The Project on Predatory Student Lending has a FAQ page for class members and is hosting a webinar on February 26, 2026 at 7 PM ET.
- Don’t give up. The law is on your side. The settlement is on your side. Don’t let bureaucratic obstruction make you walk away from relief you’re owed.
The Bottom Line
The Department of Education agreed to provide relief to students defrauded by predatory schools. They had years to prepare. They missed their deadlines. And now they’re trying to use every legal maneuver available to avoid honoring their commitment.
This isn’t about budget constraints. It’s about priorities. And right now, the priority seems to be protecting the government from its own promises rather than protecting the students who were already victimized once.
If you were defrauded by your school, you deserve the relief you were promised. Don’t let anyone tell you otherwise.
… (Source: Court Filing, Sweet v. McMahon)
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