Borrowers sue over denied discharge after school closure

A federal lawsuit filed Wednesday challenges the Trump administration's refusal to cancel student loans for borrowers affected by recent college closures. The suit argues that the Department of Education is violating federal law by ignoring an eligibility expansion put in place by the previous administration. The case was brought by Student Defense, a nonprofit borrower advocacy group, in federal court.

The lawsuit centers on the closed school discharge program, which has required the U.S. secretary of education to cancel debts for qualified borrowers since the 1990s. For decades, borrowers generally qualified if they were enrolled at the time of closure or had left school within six months prior. The administration currently denies most requests that fall outside this traditional window.

In January 2025, then Under Secretary James Kvaal issued an order expanding the look-back window for borrowers from specific closed institutions, including Brooks Institute. The order stated that the schools closed under exceptional circumstances, justifying leniency for those who left as early as May 6, 2015. This change made many previously ineligible borrowers, including Kendrick Gaussoin, qualified for discharge and refunds.

Gaussoin attended Brooks Institute in Ventura, California, before it shut down in August 2016. He took an eight-month leave of absence in December 2015, which placed him outside the standard six-month eligibility period. Under the new 2025 rule, he became eligible for forgiveness. On August 23, 2026, he applied for the discharge. One week later, the department denied his request, citing the pre-2025 requirements.

The Department of Education told NPR it stands by its implementation of the program. Spokesperson Ellen Keast described the Biden-era expansion as an unlawful policy shift. She stated that the former under secretary inappropriately expanded the discharge period for targeted institutions just days before leaving office. The department did not provide a separate legal justification for ignoring the 2025 order.

Bonnie Latreille, a former top official in the Office of Federal Student Aid, said the secretary has the legal authority to expand the window. She noted that the current administration must provide a reasoned, public explanation to reverse the change. Latreille stated that a top department official instructed her not to process discharges under the expanded window without approval from the incoming Trump team. Two other former officials corroborated this account.

The lawsuit claims the administration cannot simply abandon the 2025 changes without following proper legal procedures. Gaussoin now carries nearly $22,000 in student loan debt, including interest, without a degree. His mother, Christine Gaussoin, also owes about $28,000 from Parent PLUS loans. Her application for a closed school discharge was also denied this month.

Between 2010 and 2020, more than 1,100 colleges closed, leaving 246,000 borrowers eligible for discharge according to the U.S. Government Accountability Office. The Gaussoins argue they are among the thousands of borrowers caught in the administrative gap between the rule change and its current denial.