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The closed school discharge program lawsuit filed against the U.S. Department of Education could affect thousands of borrowers whose colleges closed before they completed their degrees. Student Defense, a nonprofit borrower advocacy group, filed the federal case on behalf of Kendrick Gaussoin and potentially other former students.
The lawsuit claims the Trump administration is refusing to fully apply rules that expand eligibility for federal student loan cancellation after certain schools shut down. The Education Department told NPR that it stands by its implementation of the program.
Closed School Discharge Program Lawsuit Challenges Loan Rules
Federal law has required the Education Department for more than three decades to cancel the federal loans of qualifying borrowers whose schools close suddenly. The process is known as a closed school discharge.
Under traditional rules, borrowers generally qualify if they were enrolled when their school closed or if they left no more than six months before the closure. A 2025 policy change, however, expanded that look-back period for students who attended several institutions, including Brooks Institute.
According to the Government Accountability Office, more than 1,100 colleges closed between 2010 and 2020. Those closures left approximately 246,000 borrowers potentially eligible for a closed school discharge.
How the Student Loan Discharge Program Works
- Borrowers may qualify if they were enrolled when their school closed.
- Some former students qualify if they left within six months of the closure.
- Special exceptions can expand eligibility when a school closes under exceptional circumstances.
- Approved borrowers may receive cancellation of eligible federal loans and refunds for certain past payments.
In January 2025, then-Education Department Undersecretary James Kvaal approved an expanded eligibility window for students at several institutions. Under that change, borrowers who were enrolled at Brooks Institute as of May 6, 2015, could qualify for loan relief.
Borrower Says Policy Change Was Ignored
Gaussoin attended Brooks Institute, a private, for-profit photography school in Ventura, California. The college abruptly closed in August 2016 while he was attempting to return from an eight-month leave of absence.
Because his leave lasted longer than the standard look-back period, Gaussoin initially did not qualify for a discharge. He later learned about the 2025 expansion and applied on Aug. 23, 2026.
His application was denied in a letter dated Aug. 31. The decision said he did not meet the traditional eligibility requirements, without applying the expanded window approved during the Biden administration.
“Everyone was crying. Everyone felt like they’d lost everything,” Gaussoin recalled of the day Brooks Institute’s doors were chained shut.
Gaussoin now owes nearly $22,000 in student loans, including interest, despite never receiving his degree. He is married, has two young children and works for an online retailer.
Trump Administration Calls Expansion Unlawful
Education Department spokesperson Ellen Keast said the Biden-era policy improperly expanded the program and shifted additional debt onto taxpayers. The department described the change as an unlawful action taken shortly before the previous administration left office.
That position has drawn criticism because a previous Trump administration used similar authority in 2019. Then-Education Secretary Betsy DeVos expanded relief for borrowers connected to the Art Institute of Colorado and the Illinois Institute of Art, saying students who had been failed deserved to be made whole.
Bonnie Latreille, a former senior Federal Student Aid official, said the secretary has legal authority to expand the eligibility window. She told NPR that reversing or quietly ignoring the 2025 rule could raise significant legal questions.
Former Education Department officials also said staff members were instructed not to process applications under the expanded window without approval from the incoming Trump administration.
Why the Case Matters for Former College Students
The lawsuit argues that the Education Department cannot simply abandon a policy created within its legal authority. Higher education attorneys not involved in the case told NPR that any reversal would require a reasoned legal explanation and public notice.
The dispute is especially important for families who borrowed money based on promises about degrees, employment and earning potential. Gaussoin’s mother, Christine, took out Parent PLUS loans and owes about $28,000. She says Brooks Institute led the family to believe the loans would cover the cost of her son’s education.
Both mother and son applied for relief under the expanded rules. Both were denied.
The case could determine whether thousands of borrowers receive loan forgiveness, refunds and a fresh opportunity to complete their education—or remain responsible for debts tied to colleges that no longer exist.
Frequently Asked Questions
What is a closed school discharge?
A closed school discharge is a federal student loan cancellation program for eligible borrowers whose colleges close suddenly before they can complete their programs.
Who may qualify for a closed school discharge?
Borrowers who were enrolled when their school closed, or who left within the required period before closure, may qualify. Special eligibility expansions can apply in exceptional circumstances.
What is the closed school discharge program lawsuit about?
The lawsuit alleges that the Education Department is refusing to apply a 2025 eligibility expansion covering certain former students, including some Brooks Institute borrowers.
How much debt does Kendrick Gaussoin have?
Gaussoin owes nearly $22,000 in student loan debt and has no degree from Brooks Institute. His mother owes approximately $28,000 in Parent PLUS loans.
