Thousands expecting federal student loan forgiveness within a few weeks could face delays or lose relief altogether as the Education Department (ED) moves to stall a court‑mandated discharge process.
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Newsweek reached out to the ED for comment via email.
Why Forgiveness Is at Risk
The dispute is based on a nearly decade‑long lawsuit over the Borrower Defense to Repayment program.
While borrowers argued the government wrongfully delayed or denied relief claims, the program is supposed to allow loan cancellation if a school misled or defrauded students by making promises they would be able to secure a lucrative job or transfer credits to another educational institution.
In 2022, a settlement agreement required the government to process claims and grant relief in certain cases. That settlement has already resulted in hundreds of thousands of loan discharges, but one final group of borrowers remains unresolved.
What to Know
Borrowers tied to the long‑running legal battle over loan forgiveness were anticipating decisions as soon as June 15. However, the ED is still pressing for its appeal after filing an emergency request for a stay of a district court’s decision within the Ninth Circuit Court of Appeals that was denied. The ED is citing that lower court judges abused their discretion by not allowing the department to extend the relief deadlines.
While many borrowers have already received relief, the outcome for this final Sweet v. McMahon post-class group could determine how aggressively the government enforces or resists court‑mandated forgiveness going forward.
“The [ED] contends it has not had enough time to determine whether borrowers seeking loan forgiveness are actually eligible under the Sweet v. McMahon decision,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.
“Their argument is that not every applicant qualifies for forgiveness, and allowing broad relief to move forward as the courts have suggested could create a massive and, in their view, undeserved windfall for some borrowers. As a result, borrowers, whether deserving or not, remain stuck in legal limbo while the [ED] continues to delay the process.”
In a worst‑case scenario, some borrowers could see their forgiveness canceled altogether, depending on how courts ultimately rule.
“These borrowers are in a frustrating position because they were supposed to be moving toward discharge under a 2022 settlement, but legal disputes continue to delay any relief they are hoping to see,” Alex Beene, a financial literacy instructor for the University of Tennessee, told Newsweek. “Unfortunately, affected borrowers should expect more legal and administrative back-and-forth, but the hope is even if the June 15th date passes, they should still see a qualifying discharge in the next year.”
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Who Is Affected
The borrowers most at risk are known as “post-class applicants.”
These individuals were those who:
- Applied for Borrower Defense relief during a limited window in 2022
- Were not part of the original automatic relief group
- Are entitled to decisions by June 15 if their applications were not processed on time
For many, that deadline is the trigger for automatic loan discharge.
“These are typically for-profit organizations that grossly misrepresent their offerings, placement rates, and accreditations, but somehow still pass vetting by the accrediting body, the State, and the Department of Education,” Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek.
“In essence, the [ED] is saying, ‘You felt comfortable attending classes here because the institution passed three levels of vetting, including our own, but we were wrong, you got ripped off, and 100 percent of the responsibility is on you and zero on us.’”
What the Education Department Is Doing
The ED has made multiple attempts to delay the process.
Officials have sought to extend deadlines tied to the settlement. While those efforts were rejected by federal district court judges, the administration has now appealed to the Ninth Circuit Court of Appeals.
The appeal introduces new uncertainty just weeks before borrowers expected relief.
“Missed payments and defaults can severely limit access to future credit, damaging younger borrowers’ financial lives for years,” Thompson said. “More importantly, it creates a growing distrust in the federal government among an entire generation. If the government can reinterpret or shift legal language to fit a changing narrative, many borrowers will naturally begin to question whether the system itself can truly be trusted.”
What Borrowers Could See Next
Depending on how the courts rule, several outcomes are possible.
Relief could proceed on schedule, with borrowers receiving discharge notices around mid‑June
However, if relief is delayed, court action could pause or extend the timeline.
And it’s also possible some borrowers may not receive discharge at all based on the pending legal decisions.
“I would expect borrowers from clearly defunct or predatory institutions to ultimately receive relief, but those tied to schools not explicitly named in the suit may face a much tougher path forward, even if those institutions have since gone bankrupt,” Thompson said.
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What Happens Next
- A key deadline for borrower notifications is set for June 15
- The Ninth Circuit appeal could determine whether that deadline holds
- Courts may issue rulings in the coming weeks that clarify whether discharges proceed or are delayed
Until then, borrowers remain in limbo as the legal fight continues.
