Nelnet Class Action Lawsuit Update Court Blocks DOE Delay in Sweet v. McMahon (Dec 2025)
Multiple class action lawsuits target Nelnet for miscalculating income-driven repayment payments, delaying loan forgiveness applications, and exposing 2.5 million borrowers’ data in a 2022 breach. December 2025 update: Judge Alsup denied the Department of Education’s request to delay borrower defense decisions by 18 months in Sweet v. McMahon, ordering all decisions by April 15, 2026. This impacts Nelnet borrowers awaiting loan discharge. If you had Nelnet-serviced loans with IDR miscalculations, processing delays, or were affected by the data breach, document everything now—class certification is pending and you may qualify for compensation.
What’s Actually Happening With Nelnet Lawsuits
Nelnet faces three major legal battles as of December 2025.
The IDR miscalculation lawsuit (Stevens v. Nelnet, June 2024) alleges Nelnet calculated wildly inflated monthly payments for borrowers on SAVE and PAYE plans. One West Virginia borrower was told she owed $1,969/month when the correct amount was $583. This error caused her mortgage denial.
The processing delay lawsuit (Johansson v. Nelnet, filed 2020, refiled with new plaintiffs) claims Nelnet systematically delayed processing income-driven repayment applications and loan forgiveness paperwork. Five plaintiffs submitted required documents multiple times but faced excuses and delays. Two qualified for forgiveness programs but must now work months or years longer because of Nelnet’s delays.
The data breach lawsuit (Varlotta v. Nelnet, August 2022) involves a 2022 security breach that exposed unencrypted personal information—names, Social Security numbers, addresses, phone numbers—of over 2.5 million borrowers with OSLA or EdFinancial loans serviced by Nelnet.
All three cases remain in active litigation. No settlements have been finalized. Classes have not been certified yet, meaning there’s nothing to “join” right now.
December 2025 Sweet v. McMahon Development
On December 11, 2025, Judge Alsup ruled in Sweet v. McMahon—a separate case involving the Department of Education’s borrower defense processing. This ruling directly affects Nelnet borrowers waiting for loan discharge decisions.
What the court ordered:
The Department of Education cannot delay borrower defense decisions by 18 months as requested. All post-class applications for schools on Exhibit C must be decided by January 28, 2026. All other post-class applications must be decided by April 15, 2026.
Why this matters for Nelnet borrowers:
Nelnet is one of four major servicers (along with MOHELA, EdFinancial, and Aidvantage) ordered by the court in April 2025 to improve how they handle class member complaints and questions. The December ruling prevents the DOE from further delaying relief that borrowers have been waiting years to receive. If your loans are serviced by Nelnet and you filed a borrower defense claim, the December ruling accelerates your timeline for receiving a decision.
As of May 2025, the Sweet settlement has delivered relief to over 271,000 borrowers.
What Nelnet Actually Did Wrong
Miscalculated monthly payments on income-driven plans.
Nelnet allegedly calculated payments using incorrect formulas. For SAVE plan borrowers, Nelnet charged amounts far exceeding 10% of discretionary income as required. These inflated amounts were then reported to credit bureaus, damaging borrowers’ credit scores and causing mortgage and loan denials.
Delayed and mishandled IDR applications.
Borrowers submitted income-driven repayment applications and annual recertifications with all required documentation. Nelnet allegedly failed to process them properly, causing borrowers to: lose income-based payment plans and get switched to standard repayment, have unpaid interest capitalized onto principal balances, miss out on forgiveness progress, and work additional years to meet Public Service Loan Forgiveness requirements.
Sent defective notices about IDR recertification.
Between 2013-2017, Nelnet sent notices that violated federal regulations. The notices failed to provide 60 days advance warning before recertification deadlines, didn’t explain consequences of missing deadlines, and omitted estimated payment increases if borrowers failed to recertify. Some borrowers received no notices at all.
In January 2024, Nelnet paid Massachusetts $1.8 million to settle allegations about these defective notices—but that money went to the state, not affected borrowers.
Failed to protect borrower data.
The 2022 breach exposed personally identifiable information without encryption or proper security measures. Over 2.5 million borrowers’ data was compromised.
Who Qualifies for These Lawsuits
Each lawsuit has different class definitions that haven’t been finalized yet since class certification is pending.
For the IDR miscalculation case (Stevens): Likely covers borrowers with West Virginia addresses whose loans were serviced by Nelnet and who had monthly payments calculated for income-driven repayment plans during the applicable statute of limitations period.
For the processing delay case (Johansson): Expected to include potentially hundreds of thousands of borrowers nationwide who submitted IDR applications or loan forgiveness applications that Nelnet failed to process properly. Separate classes exist for breach of contract, negligent misrepresentation, and individual states where plaintiffs live.
For the data breach case (Varlotta): Covers the 2.5+ million borrowers whose personal information was exposed in the 2022 Nelnet security breach, particularly those with OSLA or EdFinancial loans.
How class actions work: You don’t need to “join” when a lawsuit is filed. If courts certify the classes and you meet the definition, you’ll automatically receive notice by mail or email. You’re then included unless you opt out.
What You Should Do Right Now
If you think you’re affected:
Check if you had loans serviced by Nelnet between 2013-2025. Review your payment history for unexplained increases or miscalculated amounts. Use the Federal Student Aid IDR calculator at studentaid.gov to verify your correct payment amount. Document every interaction with Nelnet—save emails, letters, account screenshots, and payment records. If your payments were miscalculated, file a complaint with the Consumer Financial Protection Bureau at consumerfinance.gov/complaint.
If you submitted IDR or forgiveness applications:
Verify submission dates and keep confirmation emails. Document how many times you submitted required paperwork. Note any delays or excuses Nelnet provided. Track how these delays affected your forgiveness timeline.
If you were affected by the data breach:
Monitor your credit reports for suspicious activity at annualcreditreport.com. Consider placing fraud alerts or credit freezes. Save any identity theft protection offers Nelnet sent you.
For Sweet v. McMahon borrower defense applicants:
If you filed a borrower defense claim and haven’t received a decision, the December 2025 ruling means you should receive a decision by January 28, 2026 (Exhibit C schools) or April 15, 2026 (all others). If no decision comes by those dates, your loans should be automatically discharged.
What Legal Claims Are Being Made
Breach of contract: Nelnet violated agreements to properly service loans according to federal requirements and borrower contracts.
Negligent misrepresentation: Nelnet provided false information about payment amounts, repayment options, and forgiveness eligibility that borrowers relied on to their detriment.
Violation of consumer protection laws: State-specific claims for deceptive practices and unfair business practices.
Negligence: Nelnet failed to exercise reasonable care in data security and loan servicing practices.
Credit reporting violations: Falsely reporting inflated payment amounts to credit bureaus under the Fair Credit Reporting Act.
What Compensation Might Be Available
No settlement amounts exist yet since the cases haven’t been resolved. Looking at similar student loan servicer settlements provides context:
Navient paid $1.85 billion in 2022 to settle claims with 39 state attorneys general over steering borrowers into costly forbearances instead of income-driven plans.
Massachusetts received $1.8 million from Nelnet in January 2024 for defective IDR notices, but individual borrowers received nothing—the money went to state funds.
Past Nelnet call recording settlement paid approximately $422 per claimant in December 2014 from a $1.2 million settlement fund.
If the current cases settle or reach verdict, compensation could include: corrected payment calculations and refunds for overpayments, credit report corrections and damages for wrongful mortgage denials, restored forgiveness progress and timeline, compensation for data breach harm and identity theft protection, and attorney’s fees and costs.
What Nelnet Says in Defense
Nelnet denies wrongdoing but hasn’t filed detailed public defenses yet since cases are early in litigation.
Expected defenses include: borrowers received accurate information based on data provided, any errors were isolated incidents not systematic failures, systems and processes comply with Department of Education requirements, data security met industry standards at the time, and borrowers can’t prove damages directly caused by alleged misconduct.
In the Massachusetts settlement, Nelnet didn’t admit liability but agreed to pay $1.8 million and improve business practices.
Similar Servicer Cases That Set Precedents
FedLoan Servicing faced multiple PSLF tracking error lawsuits before transferring all loans to MOHELA in 2021. Many borrowers lost years of qualifying payments due to servicer errors.
Great Lakes settled payment processing error claims though settlement terms weren’t widely publicized.
MOHELA continues facing litigation over PSLF processing failures and payment application errors.
These cases establish patterns: servicers systematically mishandle income-driven repayment plans, processing delays cause real financial harm to borrowers, regulatory oversight hasn’t prevented widespread violations, and class actions provide the main accountability mechanism.
What Federal Law Actually Requires
Higher Education Act requirements:
Servicers must properly apply payments to principal and interest. Borrowers must receive accurate information about repayment options. Annual recertifications for IDR plans must be processed timely. Loan forgiveness applications require prompt review.
Fair Credit Reporting Act protections:
Information reported to credit bureaus must be accurate. Borrowers can dispute inaccurate information. Servicers must investigate disputes within 30 days and correct verified errors.
Federal regulations on IDR notices:
Servicers must provide at least 60 days notice before recertification deadlines. Notices must explain consequences of missing deadlines. Borrowers must receive estimated payment increases if they fail to recertify.
Consumer Financial Protection Bureau authority:
The CFPB supervises large student loan servicers and can take enforcement action for violations of federal consumer financial laws.
Current Case Status and Next Steps
As of December 2025:
The Stevens IDR miscalculation case (filed June 2024) is in discovery. The Johansson processing delay case is awaiting class certification decisions. The court permitted claims for breach of contract, breach of promissory notes, negligent misrepresentation, and accounting rights to proceed. The Varlotta data breach case (filed August 2022) remains pending in Nebraska federal court.
What happens next:
Plaintiffs will continue fighting for class certification. Discovery will reveal internal Nelnet documents and policies. Motion practice will narrow legal claims. Settlement negotiations may occur as cases progress. If classes are certified, eligible borrowers will receive official notice with opt-out instructions.
This process typically takes 2-4 years from filing to resolution.
When You Need an Attorney
Individual claims may be worth pursuing if:
Your damages exceed $10,000 due to mortgage denial or other financial harm. You can document specific losses directly caused by Nelnet’s errors. The statute of limitations hasn’t expired in your state. You want to opt out of the class action to pursue individual litigation.
Most borrowers should:
Wait for class certification and settlement rather than filing individual lawsuits. Continue documenting all Nelnet interactions and financial impacts. File CFPB complaints to create regulatory records. Monitor case updates through plaintiff attorneys’ websites like dominalaw.com.
Attorney consultation makes sense for:
Complex situations involving multiple servicer errors. Questions about whether to opt out of a certified class. Individual claims with substantial provable damages. Understanding your specific rights and options.
How to Protect Yourself Now
Monitor your account religiously:
Log into your Nelnet account monthly and download statements. Compare payment amounts to what IDR calculators show you should owe. Immediately dispute any incorrect information with Nelnet in writing. Keep copies of everything you send and receive.
Verify your forgiveness progress:
Check your qualifying payment count for PSLF or IDR forgiveness. Request payment count reviews if numbers seem wrong. Document employment and certify it annually if pursuing PSLF. Don’t assume Nelnet is tracking correctly—verify yourself.
Know your rights:
You can request detailed payment histories. You can dispute credit report errors directly with bureaus. You can file complaints with CFPB and your state attorney general. You can switch servicers if your loan type permits.
Stay informed:
Check the Domina Law Group website for Johansson case updates. Monitor ClassAction.org for Nelnet lawsuit news. Review the Federal Student Aid website for borrower defense updates. Sign up for case notification emails if class certification occurs.
FAQ: Nelnet Class Action Lawsuits
Can I join the Nelnet class action lawsuits right now?
No. Classes haven’t been certified yet. If certification is granted and you meet the class definition, you’ll automatically receive notice by mail or email. You don’t need to “join” anything at this stage.
Will I get money from these lawsuits?
Maybe, but nothing is certain yet. No settlements have been reached. If the cases settle or plaintiffs win at trial, compensation depends on settlement terms or jury verdicts. The earlier Massachusetts settlement paid the state, not individual borrowers.
How do I know if my payments were miscalculated?
Use the Federal Student Aid IDR calculator at studentaid.gov to calculate your correct payment based on your income and family size. Compare it to what Nelnet charged you. Differences of hundreds or thousands of dollars indicate potential miscalculation.
What if I already paid off my Nelnet loans?
You may still qualify if you had loans serviced by Nelnet during the relevant time periods and suffered damages. Statute of limitations varies by state, typically 2-6 years for different claim types.
Does this affect my current Nelnet loans?
The lawsuits don’t directly change your current servicing, but they may pressure Nelnet to improve practices. Continue making required payments to avoid delinquency while cases proceed.
I was affected by the data breach—what should I do? Monitor your credit reports, consider credit monitoring services, watch for signs of identity theft, and save any Nelnet communications about the breach. You’re likely part of the Varlotta class automatically if your data was exposed.
What about the December 2025 Sweet v. McMahon ruling?
That case is separate from the Nelnet class actions but affects Nelnet borrowers who filed borrower defense claims. The ruling prevents the DOE from delaying decisions and sets firm deadlines of January 28 or April 15, 2026 depending on your school.
Can I sue Nelnet individually?
Yes, but you’d need to opt out of any certified class. Individual litigation is expensive and risky. Most borrowers benefit more from class action participation unless they have unusually large individual damages.
How long will these cases take?
Class actions typically take 2-4 years from filing to resolution. The Johansson case was originally filed in 2019, dismissed, refiled in 2020, and is still pending in 2025.
What if Nelnet contacts me about the lawsuit?
Nelnet can’t retaliate against you for being part of a class action. Continue servicing your loan normally. Don’t let lawsuit status affect your payment obligations—delinquency harms you, not Nelnet.
Should I hire my own attorney?
Not unless you have individual damages exceeding $10,000 or complex circumstances. Class action attorneys represent all class members. You only need individual counsel if considering opting out or have unique claims.
What happens if I do nothing?
If classes are certified and you qualify, you’re automatically included unless you opt out. You’ll receive notice explaining your options. Doing nothing means accepting the class outcome and forfeiting individual lawsuit rights.
Bottom line: Nelnet faces serious allegations about miscalculated payments, processing delays, and data security failures affecting hundreds of thousands of borrowers. December 2025’s Sweet v. McMahon ruling accelerates borrower defense decisions, helping some Nelnet borrowers. While no settlements exist yet, document everything now—your records become critical evidence if you’re part of a certified class. Check your payment calculations, save all communications, and file CFPB complaints to create official records of problems.
About the Author
Sarah Klein, JD, is a licensed attorney and legal content strategist with over 12 years of experience across civil, criminal, family, and regulatory law. At All About Lawyer, she covers a wide range of legal topics — from high-profile lawsuits and courtroom stories to state traffic laws and everyday legal questions — all with a focus on accuracy, clarity, and public understanding.
Her writing blends real legal insight with plain-English explanations, helping readers stay informed and legally aware.
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