A class-action lawsuit filed Wednesday alleges the U.S. Department of Education has illegally denied debt relief to thousands of student-loan borrowers whose schools shut down, despite a 2025 policy expansion intended to broaden eligibility.
The lawsuit, brought by advocacy group Student Defense on behalf of borrower Kendrick Gaussoin, claims the department has failed to implement a closed school discharge program as required under federal law. Gaussoin, who attended the Brooks Institute—a for-profit visual arts college that closed in 2016—says he has been forced to continue repaying loans totaling tens of thousands of dollars despite qualifying for relief under the expanded rules.
Closed school discharge allows borrowers whose institutions close suddenly to have their federal student loans canceled. A January 2025 decision under the Biden administration extended the eligibility window, enabling more borrowers to qualify. The lawsuit argues the department has not applied this extension retroactively, leaving affected borrowers in limbo.
Gaussoin, who has spent nine years attempting to move forward after the school’s closure, described the situation as discouraging. “I was completely discouraged,” he said. “I basically gave up, and I’ve spent the past nine years really just trying my best to move forward.” His legal complaint states that borrowers who do not repay face consequences including wage garnishment and seizure of federal benefits such as Social Security.
The Education Department has not publicly addressed the lawsuit’s allegations but previously stated it stands by its implementation of the closed school discharge program.
How the program works
Federal law has required the Education Department to cancel the debts of eligible borrowers whose schools close since the 1990s. According to a 2020 report by the nonpartisan U.S. Government Accountability Office, more than 1,100 colleges closed between 2010 and 2020, leaving 246,000 borrowers potentially eligible for discharge.
To qualify, borrowers must have been enrolled when the school closed or withdrawn within 180 days prior. The 2025 policy change extended the eligibility period, allowing borrowers who withdrew up to 365 days before closure to apply. The lawsuit contends the department has not processed applications under this expanded timeframe.
Broader context and related disputes
The lawsuit is the latest in a series of legal challenges over student debt relief. Advocacy groups have also pushed for the department to process relief for borrowers defrauded by their schools, as well as those who received lower payments under a Biden-era repayment plan. The Trump administration has faced criticism for delays in implementing relief programs, with multiple lawsuits alleging noncompliance with federal requirements.
The Education Department has previously denied wrongdoing in similar cases, maintaining that its policies comply with existing law. The outcome of the lawsuit could determine whether affected borrowers receive retroactive relief or remain responsible for debts tied to schools that no longer exist.