A class action lawsuit was filed against the Department of Education challenging its refusal to implement loan discharge eligibility determinations made during the previous administration. The plaintiffs, represented by the nonprofit Student Defense organization, attended for-profit institutions owned by Career Education Corporation, Education Management Corporation, Education Corporation of America, and Bay State College. In January 2025, the outgoing Biden administration’s Education Department classified these colleges as having closed under exceptional circumstances, which expanded the pool of borrowers eligible for student loan forgiveness beyond the standard regulatory framework.
Under regulations that have been in place for more than 30 years, the Education Department has authority to discharge student loans for borrowers enrolled at the time of a college closure or those who withdrew within a specified look-back period. The department’s leadership also possesses discretion to extend this look-back period when determining that a school closed under exceptional circumstances. According to the lawsuit filed in federal district court this week, the Trump administration has declined to honor the Biden-era determination, instead rescinding or failing to implement the expanded eligibility criteria.
The plaintiffs contend they remain legally obligated to repay loans already deemed eligible for discharge under the prior determination. The borrowers continue to accrue interest on these debts and face potential collection actions, including wage garnishment and Treasury offset for those in default status. Named plaintiff Kendrick Gaussoin, who attended Brooks Institute before its closure in 2016, stated he was denied loan discharge despite qualifying under the expanded criteria announced days before the Biden administration departed.
A department spokesperson characterized the Biden-era expansion as an unlawful policy implemented through executive action and stated the current administration views the action as an inappropriate targeting of specific institutions. However, the first Trump administration similarly invoked exceptional circumstances reasoning in 2019 when Education Secretary Betsy DeVos expanded the look-back period for borrowers who had attended the now-closed Art Institute of Colorado and Illinois Institute of Art.
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