Thousands of student-loan borrowers whose schools shut down have been illegally denied debt relief, a new lawsuit says

• The Education Department is facing another lawsuit over withholding student-debt relief for borrowers.
• The lawsuit said the department is not processing relief for borrowers whose schools shut down.
• It leaves borrowers who qualify stuck paying their balances and facing default, the lawsuit said.

Student-loan borrowers whose schools shut down are not getting the debt relief they're owed, a new lawsuit said.

On Wednesday, advocacy group Student Defense filed a class-action lawsuit on behalf of Kendrick Gaussoin, a borrower who took out student loans to attend the Brooks Institute. The visual arts college shut down in 2016 due to financial distress and new regulation on for-profit colleges; Gaussoin was left with student debt but no degree.

A mechanism called a "closed school discharge" allows borrowers whose schools shut down to receive debt relief. A January 2025 decision under the Biden administration expanded the timeframe for relief, allowing more borrowers to qualify.

The lawsuit said the department has not been adhering to the timeframe extension.

"The Department cannot make promises to students and then pretend that those promises do not exist," said Alexander Elson, vice president of Student Defense, in a statement. "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."

The Education Department did not immediately respond to a request for comment from Business Insider.

The lawsuit said that despite qualifying for relief, Gaussoin and other affected borrowers have been required to keep paying down their balances. Those who do not or cannot repay face the consequences of default, including wage garnishment and the seizure of federal benefits, such as Social Security.

Beyond closed school discharges, the Trump administration has faced a range of lawsuits over stalled debt relief. For example, advocacy groups have been pushing for the department to process relief for defrauded borrowers, in addition to those who received lower payments under a Biden-era repayment plan.

The department has previously denied wrongdoing in the cases. Gaussoin, the plaintiff in the recent closed-school lawsuit, said he's struggling 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," Gaussoin said in the press release. "Now I am a father of two, struggling to get by and still carrying debt for a school that failed me."

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