Former students of Le Cordon Bleu, the Art Institutes, Virginia College, Brooks Institute and other closed for-profit schools were told in January 2025 that they could have their federal student loans erased. A class action filed Wednesday, October 28, says the Education Department has not granted a single one of those discharges since.
The nonprofit Student Defense filed the suit in federal court in Washington and wants a judge to force the department to carry out the 2025 decision.
Who the 2025 decision covers
Normally, a borrower can get a closed school discharge only if they were still enrolled when the school shut down or left within a set window before it closed: 120 days for older loans and 180 days for loans first disbursed on or after July 1, 2020. On January 16, 2025, the department said four groups of schools had closed under "exceptional circumstances" and stretched that window back to a specific date for each:
| Schools | Eligible if enrolled on or after |
|---|---|
| Career Education Corporation campuses that later closed, including Le Cordon Bleu, Brooks Institute, Missouri College, Briarcliffe College and Sanford-Brown | May 6, 2015 |
| Education Corporation of America campuses, including Virginia College, Brightwood College, EcoTech and the Golf Academies | December 16, 2016 |
| Education Management Corporation campuses that later closed, including the Art Institutes, Miami International University of Art & Design and Argosy University | October 17, 2017 |
| Bay State College in Massachusetts | April 23, 2021 |
The extension helps only borrowers who did not finish the program at another campus or through a teach-out. The announcement said most people would have to apply, but it also told Federal Student Aid to alert eligible borrowers and to discharge loans automatically for people whose schools shut down from 2013 through 2020 if they never re-enrolled at another school within three years of the closure.
What the lawsuit says happened
The lead plaintiff, Kendrick Gaussoin of Winsted, Connecticut, enrolled at Brooks Institute in Ventura, California, in 2014 and was still a student on May 6, 2015. He applied for a discharge on August 23, 2026, and wrote on the form that the window had been extended. According to the complaint, his servicer, MOHELA, denied it eight days later because he "withdrew more than 180 days before the school closed," without mentioning the 2025 decision. The suit says the department never publicly withdrew the decision and has neither instructed servicers to apply it nor notified borrowers.
The department said it stands by how it runs the program. A spokesperson told NPR the previous administration had used "the stroke of a (digital) pen to inappropriately expand the closed-school discharge period."
What a discharge would mean
Under the department's rules, as the complaint describes them, a closed school discharge cancels the federal loans taken out to attend the school and refunds payments already made, including money collected involuntarily. It also ends any default, restores eligibility for federal aid and removes the negative credit history tied to those loans. Parent PLUS borrowers qualify when the student would.
Borrowers who think they fit one of the windows can still apply through their servicer and keep a copy of the application and any denial letter. The lawsuit is at its first stage, and a judge has not yet ruled on whether it can proceed as a class action.
