Lawsuit Alleges Department of Education Illegally Denies Student Debt Relief

A new federal class-action lawsuit filed on Wednesday accuses the U.S. Department of Education of illegally withholding student debt relief from thousands of borrowers whose schools shut down. The complaint, brought forward by the nonprofit borrower advocacy group Student Defense, targets the administration's failure to properly execute closed school discharge rules established during the final days of the Biden administration.

Federal law has mandated for over three decades that the secretary of education must cancel the debts of qualified borrowers when their educational institutions close suddenly. Traditionally, applicants must have been enrolled at the time of closure or have left no more than six months prior. However, in January 2025, the outgoing administration broadened this look-back window for specific institutions under exceptional circumstances, making individuals who attended schools like the shuttered Brooks Institute newly eligible for loan cancellation and refunds.

Kendrick Gaussoin, a plaintiff in the lawsuit, took out student loans to pursue a bachelor's degree in photography at the Ventura, California, campus of Brooks Institute. The for-profit college abruptly chained its doors and shut down in August 2016, leaving Gaussoin and his peers with substantial debt and no degrees. Because Gaussoin had taken a leave of absence shortly before the closure, he initially fell outside the standard look-back window, but qualified under the subsequent January 2025 expansion.

After applying for his closed school discharge in August 2026 based on the updated guidelines, Gaussoin received a denial letter from the current Department of Education stating he failed to meet traditional pre-Biden eligibility requirements. His mother, Christine Gaussoin, who took out Parent PLUS loans that also technically qualified under the Biden-era update, had her application denied as well. Gaussoin currently carries nearly $22,000 in student loan debt, while his mother owes approximately $28,000.

The lawsuit asserts that the department cannot simply ignore or abandon the previous administration's rule changes, which attorneys argue were enacted well within legal authority. Higher education attorneys note that reversing such regulations typically requires building a reasoned legal explanation and making it public, a justification the department has not provided to the public.

An Education Department spokesperson defended the current implementation, stating that the previous administration focused on shifting student loan debt onto taxpayers and inappropriately expanded the closed-school discharge period right before leaving office. Conversely, legal experts point out that the Department of Education previously utilized the exact same authority under Secretary Betsy DeVos in November 2019 to widen the look-back window for troubled art institutes.

The legal challenge highlights that affected borrowers are currently stuck paying down their balances while facing the severe consequences of default, including wage garnishment and the seizure of federal benefits like Social Security. Student Defense representatives emphasized that the department must honor its commitments to students rather than leaving vulnerable borrowers burdened with debt from failed educational institutions.