Student Loans: Court Challenge Over Denied Discharges
A lawsuit alleges the Education Department is ignoring rules that expanded eligibility for borrowers whose schools closed suddenly.
By Hugo Khalil ·
Kendrick Gaussoin and his mother, Christine, currently carry a combined debt of roughly $50,000 from a photography school that closed a decade ago. Gaussoin holds about $22,000 in student loans, while his mother owes approximately $28,000 on Parent PLUS loans. Neither holds a degree from Brooks Institute in Ventura, California. The Gaussoins argue they are entitled to have those debts erased under federal law, but the Department of Education has denied their requests.
The dispute stems from a sudden closure of Brooks Institute in August 2016. The school was shut down by its parent company, leaving students with chained doors and no clear path to graduation. Gaussoin was returning from an eight-month leave of absence when the school closed. Under standard federal rules, borrowers must have been enrolled or left school within six months of the closure to qualify for discharge. Because Gaussoin had been away for eight months, he fell outside that traditional window.
In January 2025, the Education Department changed the rules for borrowers at several closed schools, including Brooks. Then-Undersecretary James Kvaal issued an order expanding the eligibility window. The new rule allowed any borrower enrolled as of May 6, 2015, to apply for loan cancellation and a refund of past payments. This change made Gaussoin and his mother eligible for discharge. Kvaal cited exceptional circumstances to justify the expanded timeframe.
Gaussoin learned about this change in the summer of 2026. He submitted his application for closed school discharge on August 23, 2026, citing the expanded eligibility. A week later, on August 31, the department denied his request. The denial letter stated that he did not meet the pre-2025 requirements. Christine Gaussoin’s application was also denied this month, despite her technical eligibility under the same rule.
Student Defense, a nonprofit advocacy group, filed a lawsuit in federal court on Wednesday. The suit challenges the Trump administration’s refusal to process discharges under the expanded window. Attorneys for the group argue that the department cannot ignore rules made within its legal authority. They claim the administration must provide a reasoned legal explanation and public notice if it intends to reverse the changes.
Bonnie Latreille, a former senior official in the Office of Federal Student Aid, noted that the secretary has the authority to expand eligibility windows. She said that quietly ignoring the 2025 rule raises legal questions. Latreille stated that during the transition between administrations, a top department official instructed her not to process discharges using the expanded window without approval from the incoming team. Two other former officials confirmed this instruction but requested anonymity due to professional concerns.
The department defended its actions through a statement from spokesperson Ellen Keast. Keast described the 2025 expansion as an unlawful policy shift implemented days before the change in administration. She argued that the move inappropriately shifted debt onto taxpayers. This stance contrasts with a 2019 decision by Education Secretary Betsy DeVos, who used the same authority to expand eligibility for borrowers at other closed schools. DeVos described that move as a way to make students whole.
The Gaussoins have felt the impact of the debt for ten years. Gaussoin works for an online retailer and supports a wife and two young children. His mother works in retail and lives on disability while recovering from a knee replacement. Both say the unpaid loans prevent them from moving forward. The lawsuit seeks to force the department to process their applications and those of other qualified borrowers under the 2025 rules.
The case is now in federal court. The department has not yet responded to requests for its specific legal justification for ignoring the expanded eligibility window. The court will determine whether the administration can retroactively apply the older, stricter rules to borrowers who applied under the newer, broader criteria.
Source: WYPR
