On July 17, 2026, a federal appeals court refused to let the U.S. Department of Education back out of the Sweet v. McMahon borrower defense settlement. Here's what happened, what it means for students, and exactly what to do next — whether you've already applied or still need to.
The Ninth Circuit Court of Appeals upheld a lower court's refusal to modify the Sweet settlement. The Department had argued that "changed circumstances" — a larger-than-expected number of applications and a court order to fully discharge consolidated loans — justified reopening the deal. The court disagreed on every point, finding the Department knew exactly what it was agreeing to back in 2022.
The bottom line: the loan cancellation promised in the settlement stands, and the Department must carry it out.
In plain terms, the Department of Education tried to get out of a legally binding settlement that cancels federal student loans for people whose schools misled or defrauded them. The court said no. That means:
Read the primary source records for yourself. These are the actual filings in the case.
It's a nationwide class-action lawsuit brought by student borrowers against the U.S. Department of Education. The borrowers said the Department left their "borrower defense to repayment" applications — claims that their schools defrauded or misled them — undecided for years. The 2022 settlement created a system to cancel loans and refund payments for hundreds of thousands of borrowers.
The case name changes with whoever leads the Department: it has been Sweet v. DeVos, Sweet v. Cardona, and is now Sweet v. McMahon — but it is the same case.
The Department asked the courts (under Rule 60(b)) to modify the settlement it had already agreed to, claiming "changed circumstances." Its two main arguments were (1) that there were more "post-class" applications than expected, and (2) that a court order requiring full discharge of consolidated loans was a new burden.
The Ninth Circuit rejected both. It found the Department knew the number of post-class applicants (about 179,000 at final approval, over 205,000 by early 2023) when it signed the deal, and that the consolidated-loan issue was foreseeable too. Because the Department "understood the implications of agreeing to the Settlement," there was no genuine changed circumstance — so the settlement stands. The decision was unanimous.
Class members generally had a borrower defense application on file with the Department on or before June 22, 2022, that had not yet been granted or denied on the merits. Post-class applicants submitted their application after that date but before final approval on November 16, 2022.
Both groups are protected by the settlement. The court in this ruling confirmed that post-class applicants keep their protections — including full discharges when the Department misses its deadlines to decide their claims. If you applied after November 16, 2022, you are outside the settlement class but can still pursue borrower defense through the standard process.
The settlement includes a list of schools (Exhibit C) whose former students receive automatic, presumptive relief — meaning the Department treats attendance there as strong evidence of misconduct. The list covers well-known for-profit chains and their many brand names, including the Art Institutes, DeVry, ITT Technical Institute, Le Cordon Bleu, Westwood College, Kaplan, Walden University, University of Phoenix, and dozens more.
Download the full list from the Court Documents above (Exhibit C). If your school isn't on the list, you may still qualify for borrower defense — the list is not the only path to relief.
In theory a party can ask the Supreme Court to review a Ninth Circuit decision, but the Court accepts only a tiny fraction of such requests, and earlier attempts to stop this settlement were already turned away. Importantly, the appeals court did not pause the Department's obligations — relief continues while any further steps play out. Do not wait on the sidelines: keep your application moving and your records current.
Under current federal law, student loan amounts discharged through 2025 were excluded from federal taxable income, and borrower defense discharges are generally treated as non-taxable federally because they cancel a debt tied to school misconduct. State tax treatment can differ. This site is not tax advice — confirm your specific situation with a tax professional and with official guidance at studentaid.gov.
ED Watch is an unofficial, public-interest resource and is not affiliated with the U.S. Department of Education, the courts, or the plaintiffs' counsel. This summary is for general information only and is not legal or financial advice. Court documents shown here are copies of public filings. For official information and to apply, visit studentaid.gov/borrower-defense. For legal help with the settlement, the borrowers are represented by the Project on Predatory Student Lending.
The form is open. Separate this year’s formula updates from borrowing and asset rules that began in 2026–27.
Federal Student Aid announced public availability on September 23, 2026. This application covers attendance from July 1, 2027, through June 30, 2028. If you successfully submitted during early testing, you do not need to submit again.
Federal Student Aid source ↗The 2027–28 dependent-student income protection allowance is $12,220. For independent students without dependents other than a spouse, it is $19,000 if unmarried or $30,470 if married. Other independent students use family-size tables. The 50% assessment applies to available income after applicable allowances and offsets; it is not a tax on gross wages above $12,220. Asset protection allowance tables remain $0.
Federal Student Aid source ↗Beginning in 2026–27 and continuing into this cycle, exclude the net worth of qualifying family-owned businesses with 100 or fewer full-time or full-time-equivalent employees, farms where the family resides, and family-owned and controlled commercial fishing businesses and related expenses. These are continuing rules, not new 2027–28 changes.
Federal Student Aid source ↗Beginning in 2026–27, an SAI equal to or greater than twice that award year’s maximum Pell Grant generally makes a student ineligible. A special rule applies to qualifying dependents of certain deceased servicemembers and public safety officers. Do not reuse a prior year’s dollar threshold without checking the award year’s maximum. An SAI below the cutoff does not by itself guarantee a Pell Grant.
Federal Student Aid source ↗For borrowers subject to the new limits: graduate borrowing is capped at $20,500 annually and $100,000 aggregate; qualifying professional programs have $50,000 annual and $200,000 aggregate limits. Grad PLUS is unavailable outside the interim exception. A separate $257,500 student lifetime maximum includes undergraduate borrowing; Parent PLUS borrowed as a parent is excluded from that student maximum.
Federal Student Aid source ↗Parent PLUS is capped at $20,000 annually and $65,000 aggregate per dependent student, combined across parents, subject to remaining cost of attendance after other aid. Eligible students enrolled by June 30, 2026 with a qualifying prior Direct Loan for that program may have an interim exception, generally for the shorter of three academic years or remaining program length. Ask the school to confirm eligibility and continued enrollment requirements before assuming the new limits apply.
Federal Student Aid source ↗Real policy shifts — not proposals. Know what's in effect, what's coming, and what requires your immediate attention.
Congress controls education funding, loan programs, and the Department of Education's existence. The 2026 midterms are the most direct lever available to change or accelerate current policy.
Primary dates vary by state. General Election: November 3, 2026. Check your state's voter registration deadline now.
Pell is not the only path. Search federal and state programs below — many are significantly underused.
Federally funded, state-administered job training. Covers tuition, supplies, and sometimes transportation. No prior education level required. Access through your local American Job Center — available in every state. Individual Training Accounts (ITAs) let you pick an approved program and use funds like a voucher.
For anyone with a physical, mental, or learning disability — including ADHD, anxiety disorders, and chronic conditions. Can cover full tuition, books, assistive technology, job coaching, and transportation. Each state runs its own VR agency. Income limits are more generous than most people expect and many students qualify without realizing it.
If you receive SNAP benefits, you may qualify for education and job training funding through your state's E&T program. Covers vocational programs, GED, and some college courses. Contact your local SNAP or social services office — availability and scope vary significantly by state. Some states have robust college funding through this channel.
Post-9/11 GI Bill covers tuition, housing allowance, and a book stipend for eligible veterans and some dependents. Also check VR&E (Vocational Rehabilitation & Employment, Chapter 31) separately if you have a service-connected disability — it can be more comprehensive than the GI Bill for education funding and doesn't count against your GI Bill entitlement.
Nearly every state has its own grant program independent of federal Pell. California's Cal Grant, Texas's TEXAS Grant, New York's TAP, Washington's State Need Grant, and others can substitute for or stack with federal aid within the new grant stacking limits. These are frequently underused because students don't apply separately.
Many major employers pay tuition directly — no repayment required. Amazon Career Choice, Walmart Live Better U, Starbucks-ASU, Chipotle, Home Depot, and others have active programs. These don't affect your Pell eligibility unless they cover your entire cost of attendance (tuition + living costs). Ask HR before assuming you're not eligible.
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