Cashing a settlement check normally costs you something. In most consumer cases the money arrives attached to a release, and taking it closes the file for good. The University of Phoenix payments do not work that way, and the Federal Trade Commission now says so twice on the same page: once for people whose loan-forgiveness application is already pending, and once for people who have never filed one.
A record 2019 case, more than $49 million refunded, and now Zelle payments
The refund money traces back to an enforcement action against the school and its parent company, and it has gone out in waves. The FTC first sent payments in March 2021, then additional payments in July 2023 and September 2025, which resulted in more than $49 million in refunds. The round running now is a cleanup pass over the people the earlier waves missed: the FTC is sending Zelle payments to people who didn’t cash their check or accept their PayPal payment. No per-person figure has been published for this round, so any specific dollar amount you hear quoted for it is somebody’s guess rather than an agency number.
The case underneath the payments is old. In December 2019 the FTC announced a record $191 million settlement with the University of Phoenix to resolve charges that it used deceptive advertising to attract prospective students. That history matters for a practical reason: someone who moved house, changed banks, or simply never opened the envelope in 2021 or 2023 can still be sitting inside a case first settled in 2019 and still distributing money in 2026.
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One remedy sends cash, the other erases the loan
The confusion here is worth naming precisely, because two agencies are running two unrelated processes. The settlement fund is Federal Trade Commission money. It arrives as a payment, it goes to eligible people who paid the school, and nobody has to apply for it. Borrower defense is a Department of Education program. It does not send you a payment at all; it cancels federal student loan debt, and you have to submit an application for it.
Because the two run on separate tracks, they also arrive on separate timetables. The settlement payment shows up when the FTC’s administrator sends it, whether or not you have ever heard of borrower defense. A discharge, if it comes, comes when the Education Department finishes reviewing the application you filed. Neither one is waiting on the other.
The Department of Education recently announced that it will approve federal student loan forgiveness for people who attended the University of Phoenix, were deceived by the school’s job placement claims, and submitted a valid application for borrower defense. The Department is continuing to process new and existing applications and expects to approve additional claims. All borrowers with approved claims will receive full loan forgiveness.
Read that last sentence with the qualifier attached. Full forgiveness attaches to approved claims, and approval is a finding the Department makes case by case. Somebody who attended the school and applies is asking for full cancellation; they are not guaranteed to receive it.
The FTC’s two sentences about already having taken the money
For a borrower whose application is already in the queue, the agency’s language is direct: “Even if you already received a payment from the University of Phoenix settlement fund, it should not affect your pending application for loan forgiveness.”
For a borrower who has never filed, the same page says the same thing from the other direction: “Even if you already received a payment from the University of Phoenix settlement fund, you can still apply for loan forgiveness through the borrower defense program.” Both statements sit on the FTC’s refunds page for this case, which was last modified on July 21, 2026.
The reason is structural rather than generous. A settlement fund administered by the Commission and a discharge granted by the Education Department under its own regulations are not the same pot of money, are not decided by the same officials, and are not traded against each other. Taking the first does not spend the second.
What the Education Department has to find before it approves
Approval is not a formality, and understanding the standard is the difference between filing something useful and filing something that gets denied. To approve a claim, the Department has to find that the borrower was deceived and that the borrower reasonably relied on the misrepresentation. Reliance is a real element, not a technicality. The question is whether the school’s claims about job placement actually figured into the decision to enroll and to borrow.
Practically, that means the application is where the case is won or lost. What the advertising said, when it was seen, and how it shaped the enrollment decision are the details that carry weight. A one-line assertion that the school lied is asking an adjudicator to fill in the parts of the story only the borrower knows.
No time bar, as long as the federal loans are still active
Two procedural facts govern whether it is too late. The first is that the queue is moving again: the U.S. Department of Education “has resumed adjudicating borrower defense to repayment applications that are not impacted by the Sweet v. McMahon settlement.” The second is the one people get wrong most often.
Federal Student Aid stated it plainly in an electronic announcement, GENERAL-26-22, posted March 30, 2026: “there is no time bar on a borrower’s ability to apply for borrower defense. As long as the borrower still has active federal student loans, the borrower may submit a borrower defense application.” Applications are filed through the borrower defense pages at studentaid.gov, which is also where the Department directs borrowers to check on one already submitted. Attendance twelve or fifteen years ago does not close the door; an outstanding federal loan balance is what keeps it open.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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