Class Action Targets Trump-Era Rollback of Closed-School Loan Discharges

A class-action suit was filed in the U.S. District Court for the District of Columbia alleging that the Department of Education, under Education Secretary Linda McMahon, has not implemented a January 2025 determination that expanded eligibility for the federal Closed-School Discharge program. The plaintiffs—borrowers whose schools closed before they could finish their programs—assert that the department continues to hold them liable for loans the agency previously said could be discharged.

Newsweek

In January 2025, the Biden administration issued a decision identifying four groups of institutions—Career Education Corporation (CEC), Education Management Corporation (EDMC), Education Corporation of America (ECA) and Bay State College—as “exceptional circumstances” and extending the look-back period for former students beyond the standard 180-day window. The current lawsuit claims the Trump administration has ignored those extended periods, leaving borrowers subject to interest accrual, collections and wage garnishment.

Newsweek

• Alexander Elson – Co-founder and vice president of Student Defense, representing the borrowers.

Newsweek

• Kendrick Gaussoin – Lead plaintiff, former student at the Brooks Institute (owned by CEC).

Newsweek

• Michael Ryan – Finance expert and founder of MichaelRyanMoney.com, commenting on the dispute.

Newsweek

• Linda McMahon – Education Secretary, named as a defendant.

Newsweek

The complaint alleges that the department’s failure to honor the 2025 determination violates promises made to students and creates “unjustified interest accrual” and potential wage garnishment. If the court enforces the earlier expansion, thousands of borrowers could receive loan cancellations, altering their credit profiles and borrowing capacity.

Newsweek

Separately, a September-filed class action involving more than 300,000 borrowers and $4.6 billion of debt claims the department continues to report previously discharged loans as outstanding. The new suit joins other challenges to the administration’s handling of borrower-defense claims and Public Service Loan Forgiveness regulations. The Department of Education has not responded to requests for comment.

Newsweek

• “The Department cannot make promises to students and then pretend that those promises do not exist,” — Alexander Elson, the co-founder and vice President of Student Defense

Newsweek

• “A school can close in a day. Apparently, the financial consequences can follow students for a decade,” — Michael Ryan, a finance expert and the founder of MichaelRyanMoney

Newsweek

• “What bothers me is, what happens while everyone argues? Interest keeps adding up. Credit and borrowing decisions get harder. Families are trying to move forward financially while carrying debt for an education they never finished,” — Michael Ryan, a finance expert and the founder of MichaelRyanMoney

Newsweek