Court Ruling Mandates Automatic Loan Discharge for 205,000 Defrauded Borrowers

Roughly 205,000 borrowers will have their student loans automatically discharged following a federal appeals court ruling in the Sweet v. McMahon case. The ruling follows a March 2026 decision by the court to reject a U.S. Department of Education appeal to delay relief for those who claim they were defrauded by their schools. Relief is provided to class members who submitted Borrower Defense applications requesting loan forgiveness. The Department of Education is currently weighing rules to protect federal aid from predatory for-profit schools. Argosy University, a now defunct for-profit institution, is among the schools cited in fraud claims. Argosy used $13 million in federal student loan money to cover payroll and other expenses before the Department of Education cut off its funding and the school ceased operations in 2019.