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By Suzanne Blake
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The Trump administration is facing a new class action lawsuit from student loan borrowers who allege the Department of Education improperly denied debt relief to people whose schools closed before they could finish their programs.
The lawsuit was filed Wednesday in the U.S. District Court for the District of Columbia and centers on the federal Closed School Discharge program and a 2025 decision that expanded eligibility for borrowers who attended certain institutions.
The plaintiffs allege the department has failed to carry out that decision, leaving borrowers responsible for debts that they argue should be discharged.
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“The Department cannot make promises to students and then pretend that those promises do not exist,” said Alexander Elson, the co-founder and vice President of Student Defense, which is representing the borrowers, 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.”
The complaint specifically names Education Secretary Linda McMahon and the Department of Education as defendants.
Newsweek reached out to the Department of Education for comment via email.
Why It Matters
The legal dispute could have consequences for thousands of federal student loan borrowers who attended schools that closed and who may qualify for debt cancellation under the department's previous determination.
The lawsuit alleges that affected borrowers remain responsible for loans that the department had already determined could qualify for discharge. That means many may be facing unjustified interest accrual and even involuntary collections and wage garnishment, according to the complaint.
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What To Know
Closed School Discharge allows qualifying federal student loan borrowers to have loans canceled when their school closes, and they are unable to finish their program.
Under the general eligibility standard by the Department of Education, a borrower may qualify if the school closed while the borrower was enrolled, while the borrower was on an approved leave of absence, or within 180 days after the borrower withdrew. Certain "exceptional circumstances" can result in a longer look-back period.
The latest lawsuit is concerning one of those exceptions.
In January 2025, during the Biden administration, the department determined that closures involving four groups or schools qualified as exceptional circumstances: Career Education Corporation (CEC), Education Management Corporation (EDMC), Education Corporation of America (ECA) and Bay State College.
The determination also expanded the look-back periods for some former students beyond the ordinary eligibility window.
The lawsuit now alleges that the department under the Trump administration has not implemented those longer periods as required.
"This lawsuit comes down to whether the Education Department can simply stop honoring student loan relief that was already approved under a previous admin," Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.
"Borrowers say they qualify for debt cancellation after their schools closed, yet they're still being billed. The Department argues the earlier expansion was improper. The court will have to sort out whether the agency lawfully changed course."
Borrowers Say They Are Being Denied Student Loan Relief
The lead plaintiff is Kendrick Gaussoin, who attended the Brooks Institute, a school owned by Career Education Corporation.
Gaussoin said that he qualifies under the Education Department's expanded look-back period but that his discharge application was nevertheless denied.
When the department expanded relief for Brooks students, Gaussoin believed he qualified, but his application was denied. Gaussoin said he is now a father of two who is still carrying the debt.
"A school can close in a day. Apparently, the financial consequences can follow students for a decade," Ryan said.
Trump Administration Faces Other Student Loan Lawsuits
The latest challenge comes amid several other court battles involving the administration's handling of student loan relief.
One involves the Sweet v. McMahon settlement and Borrower Defense to Repayment, which allows borrowers to seek loan cancellation based on misconduct by their schools. Borrower representatives have sought sanctions against the Education Department over alleged delays in providing required relief.
"What bothers me is, what happens while everyone argues? Interest keeps adding up. Credit and borrowing decisions get harder. Families are trying to move forward financially while carrying debt for an education they never finished," Ryan said.
And a separate proposed class action filed in September accused the department of continuing to report previously discharged loans as outstanding debt. That case involves more than 300,000 borrowers and $4.6 billion in debt that plaintiffs say should no longer be reported as owed.
The department has also faced litigation concerning proposed changes to Public Service Loan Forgiveness. However, the administration recently dropped appeals of court rulings that struck down proposed regulations governing the program, which provides forgiveness to qualifying government and nonprofit workers.
What Happens Next
The new lawsuit is asking the court to enforce the Department of Education's January 2025 determination and require the department to provide closed-school discharges to borrowers covered by it.
"I wouldn't predict a court ruling this early. But if the Department loses, it could be forced to honor those expanded discharge rules," Ryan said.
Newsweek’s reporters and editors used Martyn, our AI assistant, to produce this story. Learn more about Martyn here.
Contact Newsweek editors on this story: Jason Lemon and Gray R. Thomas
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