Well, the main key is that Manchester United must fire Erik Ten Hag first if they want Sancho to return, but if they can't do that then it's better for Sancho's future to stay at Dortmund. Moreover, he felt much happier at Dortmund and his performances improved impressively.
Maybe Dortmund knows that Sancho's potential is still not exhausted and the proof is that even though he hasn't played for Dortmund for quite a long time, he still made a comprehensive contribution throughout the season. Because of this, Dortmund is also trying to persuade Manchester United to take another season on loan and this step is very appropriate if you look at Dortmund's actions in the world of football business and player transfers.
At the beginning of Sancho move to Manchester United, Sancho was able to show a pretty good and impressive performance, but his dispute with ten hag actually made him removed from the main squad, ten hag big ego made him not care to back Sancho even though Sancho at that time performed quite well, Ten Hag ego made the dispute even bigger and made Sancho want to leave Old Trafford at that time, Dortmund managed to get Sancho as a loan player without waiting long Sancho was able to show his great form this season again and help Dortmund reach the Champions League final.
Sancho still has a contract with Manchester United and reportedly Manchester United will not release Sancho at a cheap price to Dortmund, besides that Sancho reportedly wants to return to the Premier League and play for Manchester United on the condition that Manchester United must fire Ten Hag from the coach, if not, otherwise Sancho prefers to be sold or loaned to another club, Sancho and Ten Hag do not seem to want to give in to their dispute so indeed Manchester United is currently in a considerable dilemma between choosing Ten Hag or Sancho.