A new class action lawsuit filed in the U.S. District Court for the District of Columbia targets the Trump administration’s Department of Education, alleging officials improperly denied federal student loan relief to people whose schools closed before they could finish their programs.
The federal Closed School Discharge program sits at the center of the dispute. Plaintiffs argue that the Department of Education under Education Secretary Linda McMahon has failed to enforce a January 2025 determination made in the final days of the Biden administration, which expanded debt cancellation eligibility for specific school groups.
The Bottom Line
- The Core Dispute: Borrowers who attended closed institutions like the Career Education Corporation, Education Management Corporation, Education Corporation of America, and Bay State College allege they are being responsible for debts that they argue should be discharged.
- Financial Exposure: Affected borrowers may be facing unjustified interest accrual and even involuntary collections and wage garnishment.
- Legal Demands: Seeking judicial intervention, the complaint requests that the court compel the Department of Education to uphold its January 2025 decision and grant closed-school discharges to all eligible borrowers.
Litigation Centers on January 2025 Discharge Expansion
The complaint was filed Wednesday by Student Defense on behalf of borrowers. Alexander Elson, the co-founder and vice President of Student Defense, stated, “The Department cannot make promises to students and then pretend that those promises do not exist.” He added that thousands of borrowers are entitled to discharges under the Department’s 2025 Decision.
According to standard guidelines set by the Department of Education, an individual can be eligible if their institution shut its doors while they were actively attending classes, on an authorized leave, or within a 180-day window following their withdrawal. Certain “exceptional circumstances” can result in a longer look-back period. 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.
| School Network Group | Discharge Program Status |
|---|---|
| Career Education Corporation (CEC) | Expanded look-back window granted Jan 2025 |
| Education Management Corporation (EDMC) | Expanded look-back window granted Jan 2025 |
| Education Corporation of America (ECA) | Expanded look-back window granted Jan 2025 |
| Bay State College | Expanded look-back window granted Jan 2025 |
Borrowers Face Continuing Debt and Interest Accrual
The lead plaintiff is Kendrick Gaussoin, who attended the Brooks Institute, a school owned by Career Education Corporation. Pointing to the Education Department’s extended look-back timeframe, Gaussoin noted that he meets those criteria despite his application for a discharge being rejected.
Ryan noted the ongoing financial toll on participants. “Families are trying to move forward financially while carrying debt for an education they never finished,” Ryan said.
The lawsuit asserts that failing to honor the previously determined discharges exposes borrowers to unjustified interest accrual and even involuntary collections and wage garnishment.
Broader Legal Challenges Face the Department of Education
Additionally, a separate proposed class action brought forward in September claimed the agency kept listing loans as active debt even after they had already been forgiven. This litigation affects upwards of 300,000 individuals and encompasses $4.6 billion in balances that plaintiffs argue should no longer be treated as liabilities. The department has also faced litigation concerning proposed changes to Public Service Loan Forgiveness. Yet, the administration recently opted not to pursue challenges against judicial decisions that invalidated its intended rules for the initiative, which offers debt relief to eligible nonprofit and government personnel.
The legal question before the U.S. District Court for the District of Columbia is whether the agency lawfully changed course. “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.
Worth a look
