A lawsuit filed this week by advocacy group Student Defense alleges the Department of Education has illegally denied debt relief to thousands of student-loan borrowers whose schools shut down. The class-action complaint, brought on behalf of borrower Kendrick Gaussoin, says the department has failed to process closed school discharges despite expanding eligibility under a January 2025 decision.
The closed school discharge mechanism allows borrowers whose schools shut down to receive debt relief. A Biden administration decision in January 2025 expanded the timeframe for relief, allowing more borrowers to qualify. The lawsuit says the department has not adhered to that timeframe extension, leaving qualified borrowers required to keep paying their balances.
"The Department cannot make promises to students and then pretend that those promises do not exist," said Alexander Elson, vice president of Student Defense, in a statement. "Thousands of borrowers are entitled to discharges under the Department's 2025 Decision, and we are going to court to make sure they receive them."
Gaussoin attended the Brooks Institute, a visual arts college that closed in 2016. He said he was left with tens of thousands of dollars in debt and no degree. "When the Department expanded relief for Brooks students, I was overjoyed. I qualify, but my application was denied anyway," he said in a press release. "Now I am a father of two, struggling to get by and still carrying debt for a school that failed me."
The lawsuit warns that borrowers who cannot repay face consequences including wage garnishment and seizure of federal benefits such as Social Security. The Education Department did not immediately respond to a request for comment. The department has previously denied wrongdoing in similar cases involving stalled debt relief, which advocacy groups have also challenged in court.
Analysis
Why This Matters
- Borrowers who qualify for closed school discharges remain trapped in debt, facing default and severe financial penalties such as wage garnishment.
- The lawsuit tests whether the Department of Education can be compelled to follow its own policy expansions.
- The case adds to a growing list of legal challenges over the department's handling of student-debt relief, potentially shaping how future administrations administer forgiveness programs.
Background
Closed school discharge is a federal program that cancels student loans for borrowers whose schools close before they can finish their degree. In January 2025, the Biden administration expanded the qualifying window, allowing more former students to apply. The current lawsuit argues the department has failed to process those applications, leaving borrowers like Gaussoin in limbo. The department has faced similar litigation over defrauded-borrower relief and a Biden-era repayment plan, and has consistently denied wrongdoing.
Key Perspectives
Student Defense: The Department of Education made a promise to expand relief and is now ignoring it; the lawsuit aims to enforce that commitment.
Kendrick Gaussoin: He qualified under the expanded rules but was denied anyway and is now struggling to support his family while carrying debt for a school that failed him.
Department of Education: Has previously denied wrongdoing in cases over stalled debt relief and has not yet responded to this specific lawsuit.
What to Watch
- The court's decision on class certification, which would determine whether thousands of borrowers can seek relief together.
- Whether the Education Department moves to process the backlog before a ruling, potentially undermining the lawsuit.
- Broader legal fallout: if the lawsuit succeeds, it could pressure the department to overhaul how it handles all borrower-defense claims.
Checked
12 claims in this story checked against 1 source: 9 supported.
Show each claim
- SupportedThe lawsuit alleges that thousands of student-loan borrowers whose schools shut down were illegally denied debt relief.All Content from Business Insider: “Thousands of student-loan borrowers whose schools shut down have been illegally denied debt relief, a new lawsuit says.”
- SupportedStudent Defense filed a class-action lawsuit on behalf of borrower Kendrick Gaussoin.All Content from Business Insider: “On Wednesday, advocacy group Student Defense filed a class-action lawsuit on behalf of Kendrick Gaussoin, a borrower who took out student loans to attend the Brooks Institute.”
- Partly supportedStudent Defense filed the lawsuit this week.All Content from Business Insider: “On Wednesday, advocacy group Student Defense filed a class-action lawsuit”
- SupportedA January 2025 decision under the Biden administration expanded the timeframe for closed-school relief, allowing more borrowers to qualify.All Content from Business Insider: “A January 2025 decision under the Biden administration expanded the timeframe for relief, allowing more borrowers to qualify.”
- SupportedThe lawsuit says the department has not followed the expanded timeframe, leaving affected borrowers required to keep paying their balances.All Content from Business Insider: “The lawsuit said the department has not been adhering to the timeframe extension. The lawsuit said that despite qualifying for relief, Gaussoin and other affected borrowers have been required to keep paying down their balances.”
- SupportedAlexander Elson said: “The Department cannot make promises to students and then pretend that those promises do not exist,” and “Thousands of borrowers are entitled to discharges under the Department's 2025 Decision, and we are going to court to make sure they receive them.”All Content from Business Insider: “"The Department cannot make promises to students and then pretend that those promises do not exist," said Alexander Elson, vice president of Student Defense, in a statement. "Thousands of borrowers are entitled to discharges under the Department's 2025 Decision, and we are going to court to make sure they receive them."”
- SupportedGaussoin said: “When the Department expanded relief for Brooks students, I was overjoyed. I qualify, but my application was denied anyway,” and “Now I am a father of two, struggling to get by and still carrying debt for a school that failed me.”All Content from Business Insider: “"When the Department expanded relief for Brooks students, I was overjoyed. I qualify, but my application was denied anyway," Gaussoin said in the press release. "Now I am a father of two, struggling to get by and still carrying debt for a school that failed me."”
- SupportedGaussoin attended the Brooks Institute, a visual arts college that closed in 2016.All Content from Business Insider: “a borrower who took out student loans to attend the Brooks Institute. The visual arts college shut down in 2016”
- SupportedGaussoin was left with tens of thousands of dollars in debt and no degree.All Content from Business Insider: “Gaussoin, the plaintiff in the recent closed-school lawsuit, said he's struggling with "tens of thousands of dollars of debt and no degree."”
- Partly supportedThe lawsuit warns that borrowers unable to repay face wage garnishment and seizure of federal benefits such as Social Security.All Content from Business Insider: “Those who do not or cannot repay face the consequences of default , including wage garnishment and the seizure of federal benefits, such as Social Security.”
- Partly supportedThe Education Department did not immediately respond to a request for comment.All Content from Business Insider: “The Education Department did not immediately respond to a request for comment from Business Insider.”
- SupportedThe department has previously denied wrongdoing in similar stalled debt-relief cases that advocacy groups have also challenged in court.All Content from Business Insider: “Beyond closed school discharges, the Trump administration has faced a range of lawsuits over stalled debt relief. For example, advocacy groups have been pushing for the department to process relief for defrauded borrowers, in addition to those who received lower payments under a Biden-era repayment plan. The department has previously denied wrongdoing in the cases.”