SF Judge Rejects Government Bid to Delay Processing Student Debt Claims

Tens of thousands of student loan borrowers who say their schools misled them may soon find out whether that debt will be cleared after a Thursday ruling from a federal judge in San Francisco.

U.S. District Judge William Alsup denied the Department of Education’s request for an 18-month deadline extension, as the agency grapples with roughly 250,000 applications for student loan relief, originally filed in the latter half of 2022.

“I think [Alsup]’s really come to see the way that the system has failed and that there are obligations in the law that are put on the people with power and authority, and they can ignore them and just leave students and individuals holding the bag,” said Eileen Connor, executive director for the Project on Predatory Student Lending and co-counsel for borrowers.

The ruling stems from a class-action lawsuit by plaintiffs who claimed the Department of Education illegally delayed processing or improperly denied hundreds of thousands of borrower defense claims, a process that allows federal loans to be wiped out if a school engaged in misconduct or the student was misled when applying.

As part of a settlement reached in June 2022, the Department of Education was expected to meet a Jan. 28, 2026, deadline to decide on applications filed between late June and mid-November of 2022.

Alsup ruled that the government must abide by that looming deadline for applicants who attended schools with previous evidence of misconduct, or clear the debt entirely.

For applicants from any other schools, Alsup granted the government an extension to April 15, 2026.

In a statement, the Department of Education said it is still evaluating the impact of Alsup’s order.

“We remain committed to doing the right thing for students, families, and taxpayers,” Press Secretary Ellen Keast said.

Alice Panzo is a clinical psychologist who racked up roughly $250,000 in loans attending the for-profit, and now-defunct, Argosy University for her graduate degree between 2009 and 2014.

“What I was sold on when I accepted and started attending was not at all what the program was,” Panzo said. “It was promises about an [American Psychological Association] accredited internship is guaranteed coming out of our program. That was a lie.”

In the years since graduating, Panzo said compounding interest ballooned her debt to roughly $400,000, despite making consistent payments. She applied for borrower defense in 2022 and has been waiting for a decision ever since.

“It has been literally waiting in limbo,” Panzo said. “My husband and I have put off pursuing IVF until we know … it seems irresponsible to start doing that if we are going to have to pay all of these loans back.”

In the meantime, Panzo said the debt has ruined her credit score.

When her father died last month, Panzo said she didn’t qualify for a low-interest loan to cover the funeral expenses.

“Obviously, I was going to find whatever way I could, whether this is wise or not, to have a funeral for my father. So, I ended up having to take out an embarrassingly high-interest rate loan just to cover those expenses,” Panzo said.

Argosy was among the list of roughly 150 schools with known misconduct allegations, so Panzo said she expects to learn the fate of her debt in just a few weeks.

“It’s incredibly comforting,” Panzo said.

Panzo acknowledged that the government could choose to deny her application, meaning she will have to pay down that roughly $400,000, but she said it’s better than having to live with the uncertainty.

Though the government is now working to review the applications in this group by the established deadlines, new applications continue to pour in from other students claiming to have been defrauded.

According to court documents, 250,000 applications for borrower defense were filed between late 2022, after the group covered by the ruling, and May 2025.

Connor, the co-counsel for borrowers, expressed concern that, without significant change, the department will fall behind again, leaving new claimants in limbo for years.

“This settlement was meant to put leverage and pressure onto the department to stand up a system that would be able to handle the volume of borrower defense applications and force other reforms,” Connor said. “I don’t have confidence that that message has quite gotten through yet or that those reforms have happened.”

On the contrary, Connor said the problem might be worsened by cuts and massive layoffs as part of the Trump administration’s “efficiency” initiative this year.

“The problem of fraud is only going to grow, because there’s no enforcement happening at the Department of Education right now,” Connor said. “It’s a failure on a very large scale, and it’s going to hurt a lot of people. And some people will make money off of it.”