Key facts
- Over 170,000 borrowers will have their student loans canceled due to fraud by for-profit schools.
- Two court victories in February 2026 mandated the Department of Education to proceed with automatic loan discharges.
- The rulings stem from the Sweet v. McMahon borrower defense settlement and the AFT v. Department of Education case concerning IDR/PSLF.
- Eligible borrowers will receive full loan cancellation, refunds of payments made, and credit report removals.
- The Department of Education is required to notify affected borrowers by March 29, 2026.
The U.S. Department of Education is set to discharge student loans for over 170,000 borrowers who were victims of fraud by for-profit institutions. This action follows two significant court victories in February 2026 that compelled the department to move forward with automatic discharges, ending prolonged delays.
The rulings, one at the Supreme Court level and another in federal district court, resolved legal challenges that had obstructed the process. The cases, Sweet v. McMahon and AFT v. Department of Education, address different aspects of student loan relief, including borrower defense claims and income-driven repayment (IDR) and public service loan forgiveness (PSLF) programs.
Borrowers who applied for borrower defense between June 23 and November 15, 2022, and whose applications were not decided by the settlement deadlines, are now entitled to full relief. This includes the cancellation of their federal loan balances, refunds for payments already made, and the removal of these loans from their credit reports. The department had previously missed court-ordered deadlines and sought extensions, but courts found these justifications insufficient, noting the known size of the affected borrower group.
The Project on Predatory Student Lending, representing the borrowers, highlighted that these court wins represent the most substantial progress for affected individuals in months. The Department of Education is required to notify all eligible borrowers by March 29, 2026.