Borrowers Sue Education Department Over Reversal of Closed School Loan Discharges

Student Defense filed a federal lawsuit on Wednesday against the U.S. Department of Education, alleging the Trump administration is illegally ignoring a 2025 rule change. The suit seeks to restore closed school discharge eligibility for borrowers who attended institutions that shut down under exceptional circumstances.

The case centers on Kendrick Gaussoin, a former student at Brooks Institute in Ventura, California. Brooks, a for-profit photography school, closed its doors in August 2016. Gaussoin took an eight-month leave of absence in December 2015 to work as a photographer. Under standard rules, borrowers must have been enrolled or left within six months of closure. Gaussoin’s absence placed him outside that window, blocking his initial claim for debt relief.

In January 2025, the Education Department expanded the look-back period for borrowers at closed schools. Then-Undersecretary James Kvaal issued an order dated Jan. 6, 2025, stating that schools closed under exceptional circumstances warranted greater leniency. This change made borrowers enrolled as of May 6, 2015, eligible for discharge. Gaussoin applied for relief on Aug. 23, 2026, citing this new eligibility. The department denied his request on Aug. 31, stating he did not meet pre-2025 requirements.

The current administration argues that the previous government acted unlawfully to shift debt to taxpayers. Spokesperson Ellen Keast stated that the former Under Secretary inappropriately expanded the discharge period in the final days of the Biden administration. However, the department has not provided a public legal justification for reversing the policy. Two former officials told NPR that the department instructed staff not to process discharges under the expanded window without specific approval from the incoming team.

The dispute highlights a shift from the first Trump administration. In 2019, then-Secretary Betsy DeVos used the same authority to expand eligibility for students at the Art Institute of Colorado and the Illinois Institute of Art. She cited exceptional circumstances and stated that students deserved to be made whole. Bonnie Latreille, a former top official in the Office of Federal Student Aid, noted that the secretary has the legal authority to expand these windows. She argued that quietly ignoring the 2025 change raises legal concerns.

The Gaussoin family has carried the debt for a decade. Kendrick, now married with two children, owes nearly $22,000. His mother, Christine Gaussoin, who took out Parent PLUS loans while living on disability, owes about $28,000. Her own application for discharge was denied this month. A GAO review found that more than 1,100 colleges closed between 2010 and 2020, leaving 246,000 borrowers potentially eligible for discharge.

Attorneys for Student Defense argue the department cannot abandon the 2025 changes without a reasoned legal explanation shared with the public. Multiple higher education attorneys outside the case agreed that any reversal requires a formal process similar to the one used during the Biden administration. The department declined to comment further on its legal rationale for the denials.