New lawsuit claims thousands of borrowers from closed schools were wrongly denied student-debt relief

• The Education Department is facing another legal challenge over unpaid student-debt relief.

• The lawsuit alleges the department is refusing to process relief for borrowers whose schools closed.

• According to the complaint, that leaves eligible borrowers stuck with balances and at risk of default.

A new lawsuit says student-loan borrowers whose schools shut down are not receiving the debt relief they are entitled to.

Advocacy group Student Defense filed a class-action complaint on behalf of Kendrick Gaussoin, who borrowed money to attend Brooks Institute. The visual arts school closed in 2016 amid financial troubles and new regulation affecting for-profit colleges, leaving Gaussoin with debt but no degree.

Borrowers whose schools close can seek relief through a process known as a closed school discharge. A decision issued under the Biden administration expanded the window for that relief, opening the door for more borrowers to qualify.

The lawsuit says the department has not been following that expanded timeline.

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

Even though he and other borrowers allegedly qualify for relief, the lawsuit says they have still been told to keep paying their loans. Those who do not or cannot pay may face default-related consequences, including wage garnishment and the seizure of federal benefits such as Social Security.

The Trump administration has also faced a series of lawsuits over delayed debt relief in other student-loan cases. Advocacy groups have been pushing the department to process relief for borrowers who were defrauded, as well as for those who received lower payments under a Biden-era repayment plan.

The department has previously denied wrongdoing in those cases. Gaussoin, the plaintiff in the new closed-school case, said he is dealing 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."