A fresh class action lawsuit has been filed against the Education Department this week by a coalition of student loan borrowers, who claim that the agency and Secretary of Education Linda McMahon are unlawfully blocking individuals from discharging their educational debt following institutional closures. According to the legal filing, the department is actively breaching federal statutes.

At the heart of the litigation is the Closed School Discharge initiative, a provision that enables borrowers to wipe away their federal student loans if their institution shut down—or threatened to shutter—while they were actively enrolled, effectively halting their ability to finish their degree or certificate programs. Although the Education Department broadened eligibility thresholds for specific campuses under this framework in early 2025, the complaint asserts that eligible applicants seeking relief under those revised standards are being wrongfully rejected.

“The Department cannot make promises to students and then pretend that those promises do not exist. Thousands of borrowers are entitled to discharges under the Department’s 2025 Decision, and we are going to court to make sure they receive them.” — Alexander Elson, Co-founder and Vice President of Student Defense

This newly launched legal challenge emerges as the Education Department grapples with separate legal battles regarding perceived efforts to curtail student debt forgiveness across different government programs. Here is what borrowers need to understand about the ongoing dispute.

Closed School Discharge Program Authorizes Student Loan Discharges

Functioning for over thirty years, the Closed School Discharge program gives eligible participants the right to apply for the cancellation of their federal student loans if their school went out of business during their enrollment cycle.

The Education Department outlines the criteria on its official platform, noting that students may qualify for a complete cancellation of their William D. Ford Federal Direct Loan (Direct Loan) Program loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans if they could not finish their curriculum due to a closure. Eligibility applies if the student was enrolled when the school shut its doors, was on an authorized leave of absence, or if the institution closed within 180 days following their official withdrawal.

Conversely, borrowers forfeit their eligibility for cancellation under this scheme if they ultimately secured their degree or certificate elsewhere—such as by transferring credits to an alternate institution—or if they dropped out more than 180 days prior to the closure, unless exceptional circumstances can be proven, like the school signaling its impending demise well beyond the standard 180-day window.

Extended Look-Back Period Is Point Of Dispute In New Student Loan Lawsuit

The core grievance in the fresh lawsuit targeting the Education Department and Secretary McMahon involves the expanded look-back window for closed-school cancellations tied to exceptional circumstances.

During the early months of 2025, federal education officials concluded that four distinct entities—Career Education Corporation (CEC), Education Management Corporation (EDMC), Education Corporation of America (ECA), and Bay State College—shut down under extraordinary conditions. Consequently, the agency lengthened the look-back timeframes past the standard 180-day period, which itself had been an upgrade from an earlier 120-day limit under legacy regulations.

In its January 2025 bulletin, the department emphasized that these extraordinary closures justified opening relief to students who left the institutions prior to the typical cutoff window. Yet, the current litigation argues that the administration has failed to honor this policy, rejecting cancellation requests from borrowers who withdrew within these explicitly widened timeframes.

Education Department Is Unlawfully Denying Student Loan Discharges, Says Lawsuit

Filed in the U.S. District Court for the District of Columbia, the complaint asserts that defendants have quietly rescinded, abandoned, or neglected to enforce the expanded look-back guidelines without public warning or formal justification, thereby denying valid claims.

The lawsuit warns that affected class members remain tethered to debt obligations that the Secretary previously acknowledged as qualifying for cancellation. Consequently, these loans continue accumulating interest, while vulnerable borrowers face aggressive collection tactics, including administrative wage garnishments and Treasury offsets for those in default.

Kendrick Gaussoin, the primary plaintiff, enrolled at the CEC-operated Brooks Institute, which folded mid-program. Despite qualifying under the expanded 2025 rules, Gaussoin's relief application was rejected.

“I enrolled at the Brooks Institute to chase my dream of being a snowboard photographer. Instead, the school fell apart, leaving me with tens of thousands of dollars of debt and no degree. When the Department expanded relief for Brooks students, I was overjoyed. I qualify, but my application was denied anyway. Now I am a father of two, struggling to get by and still carrying debt for a school that failed me. The Department must honor its decision and give students like me the relief we were promised.” — Kendrick Gaussoin

The class action aims to force the implementation of the January 2025 directive and compel debt relief for qualified applicants. The Education Department has yet to file a formal legal response.

Education Department Faces Other Allegations Of Denying Student Loan Relief

This closed-school dispute represents only the latest hurdle for an agency facing mounting accusations of obstructing debt relief initiatives.

Recent setbacks include legal defeats over efforts to stall remedies connected to the Sweet v. McMahon settlement under the Borrower Defense to Repayment framework, with plaintiffs now pushing for court-ordered sanctions and enforcement. Additionally, the department recently abandoned appeals defending proposed regulatory changes to Public Service Loan Forgiveness (PSLF), effectively killing rules critics argued would grant undue authority to disqualify public service and nonprofit employers from the popular forgiveness program.