Closed School Discharge Lawsuit 2026: What It Means for Your Federal Loans

Short answer: On October 28, 2026, the nonprofit Student Defense filed a class action asking a federal court to make the Education Department carry out its January 2025 decision, which extended closed school discharge eligibility for students of Le Cordon Bleu, the Art Institutes, Argosy, Virginia College, Brightwood, Bay State College and other closed schools. If you attended one of those schools and left without finishing on or after the dates below, your federal loans are worth a close look now, without waiting for the case to end.

Last updated: October 30, 2026. Checked against the complaint in Gaussoin v. McMahon, the Education Department's January 16, 2025 announcement, StudentAid.gov's closed school discharge page, and reporting by NPR and Inside Higher Ed.

Key dates at a glance:

• May 6, 2015: extended look-back start for closed Career Education Corporation (CEC) campuses, including Le Cordon Bleu and Brooks Institute.
• December 16, 2016: start date for closed Education Corporation of America (ECA) campuses, including Virginia College and Brightwood College.
• October 17, 2017: start date for closed Education Management Corporation (EDMC) campuses, including the Art Institutes and Argosy University.
• April 23, 2021: start date for Bay State College, which closed in August 2023.
• January 16, 2025: the Education Department announced the extended windows.
• October 28, 2026: the class action was filed in the U.S. District Court for the District of Columbia.
• October 30, 2026: no court ruling had been reported.

What the lawsuit says

The case is Gaussoin v. McMahon, No. 1:26-cv-03784, in the U.S. District Court for the District of Columbia. The defendants are the U.S. Department of Education and Education Secretary Linda McMahon. Student Defense (the National Student Legal Defense Network) filed it on October 28, 2026.

The lead plaintiff, Kendrick Gaussoin, attended Brooks Institute, a CEC-owned school. According to the complaint, he enrolled in September 2014, last attended on December 17, 2015, and never finished his program. Brooks closed on August 19, 2016. That puts his last day of attendance well inside the extended window that starts May 6, 2015.

He applied for a closed school discharge on August 23, 2026. The complaint says that on August 31, 2026, the Department, acting through its servicer MOHELA, denied the application because he "withdrew more than 180 days before the school closed." The denial letter didn't mention the January 2025 decision.

At its core, the lawsuit asks the court to have the Department carry out its January 2025 decision for borrowers in the covered windows. The court hasn't ruled on the claims yet.

What the suit asks the court to do:

• Certify a class of borrowers who attended a covered school, or borrowed for a student who did, left without finishing on or after the extended start date, and haven't received a discharge.
• Order the Department to carry out the 2025 decision and tell eligible borrowers about it.
• Have the Department instruct servicers to carry out the decision and to stop collection on class members' loans until the discharges are processed.
• Set aside Mr. Gaussoin's denial and send his application back for approval.

The Department's side. An Education Department spokesperson told NPR the agency stands by its implementation of the program. Inside Higher Ed also reported on the case.

Which schools and dates the January 2025 decision covers

Normally, a closed school discharge covers students who were enrolled when the school closed or who left shortly before it closed. On January 16, 2025, the Education Department said several schools had closed under "exceptional circumstances" and pushed their look-back dates much further back. NPR reports the underlying order was signed January 6, 2025 by then-Under Secretary James Kvaal.

Why those dates? According to the Department's announcement:

• May 6, 2015 is the day CEC announced it would close or sell all of its campuses except two brands.
• December 16, 2016 ties to ECA's path to closure after its accrediting agency lost federal recognition and ECA couldn't get accreditation elsewhere.
• October 17, 2017 is the day EDMC sold substantially all of its assets to Dream Center Educational Holdings.
• April 23, 2021 is the day Bay State College began facing serious accreditation problems. The school lost accreditation and closed in August 2023.

The decision applies to campuses that were owned by those companies on those dates and later closed. In the announcement, the Department said eligible borrowers would generally need to apply. It also said the Secretary had directed Federal Student Aid to tell borrowers they were eligible and to pursue automatic discharges for people affected by closures between 2013 and 2020 who didn't enroll elsewhere within three years. The lawsuit asks the court to have the Department carry out those steps.

How closed school discharge works in general

The 2025 decision changed the dates for specific schools. The basic rules come from the Higher Education Act and the regulation at 34 CFR 685.214, and StudentAid.gov summarizes them.

Loans that can be discharged. Direct Loans, Federal Family Education Loan (FFEL) Program loans and Perkins Loans you received to attend the school that closed. That includes Parent PLUS loans, when the student meets the rules.

The standard look-back. You can be eligible if you were enrolled when the school closed, were on an approved leave of absence, or left within the look-back period. That period is 120 days for loans first disbursed before July 1, 2020, and 180 days for loans first disbursed on or after that date. The Secretary can extend it when a school closed under "exceptional circumstances," which is what the 2025 decision did.

When it doesn't apply. StudentAid.gov lists these situations:

• You graduated or finished your program at the closed school.
• You finished, or are finishing, through a teach-out agreement at another school.
• You finished, or are finishing, the program at another branch or location of the same school.

StudentAid.gov also lists two situations that do not rule you out:

• Getting a lesser diploma or certificate before the school closed, if you didn't finish the program you enrolled in.
• Transferring credits to a completely different school.

How applications are handled. The application goes to your loan servicer, such as Aidvantage, CRI (Central Research Inc.), Edfinancial, MOHELA or Nelnet. StudentAid.gov says to keep making payments while the application is reviewed. It also says borrowers previously denied under the older 120-day rule can submit a new application for review under the current rules.

What a discharge does, with a hypothetical example

Under 34 CFR 685.214(b) and StudentAid.gov, an approved closed school discharge means:

• No further obligation to repay the discharged loan.
• Reimbursement of payments you made on it, whether you paid voluntarily or the money was taken through collection, like a tax refund offset or wage garnishment.
• Credit reporting fixed. The loan's record and repayment history, including any negative history, is deleted from your credit report.
• Out of default. A defaulted loan is no longer in default, and your eligibility for federal student aid is restored.

Hypothetical example (for illustration only): Maria enrolled in a Le Cordon Bleu culinary program in 2014 and stopped attending in February 2016, before finishing. Her campus later closed. She left far more than 180 days before the closure, so she wouldn't have met the standard rule. February 2016 is after May 6, 2015, though, so her attendance falls inside the extended CEC window. Say she still owes $14,200 in Direct Loans for that program and has paid $3,600 over the years, part of it through a seized tax refund. If a discharge on those loans were approved, the regulation provides that the remaining $14,200 would no longer be owed and the $3,600 she paid would be reimbursed. Maria is not a real borrower, and any actual result depends on the Department's review of the specific loans and dates.

That's why the lawsuit matters to so many people. For borrowers inside these windows, the stakes include both the balance still owed and the money already paid.

Smart next steps while the case moves forward

• Pin down your dates. Write down when you started, your last day of attendance and the campus you attended. Your enrollment dates are what place you inside or outside a window.
• Gather your records. Transcripts, enrollment agreements, emails from the school and financial aid letters all help. If your school is gone, the state licensing agency where it was located may hold its records.
• Find out which loans you have. Make a list of each federal loan tied to the closed school, along with its servicer and status. Note whether any loan is in default or has been consolidated.
• Talk it through on a free review call. A friendly specialist can go over your school, campus and attendance dates with you and check whether they might fit one of the closed school discharge windows, including if you were turned down before.
• Keep your other loans on track. Loans from other schools aren't part of a closed school discharge. Matching them to a plan that fits your budget keeps the rest of your picture steady while this one is resolved.
• Follow the case. The court's decisions on class certification and on the claims will shape what happens next. This page is updated as the case develops.

What to have ready before you call

• The name and campus of the school, and the dates you attended
• Your last day of attendance, and whether you finished, transferred or joined a teach-out
• A list of your federal loans and the servicer for each (Aidvantage, CRI, Edfinancial, MOHELA, Nelnet or the Default Resolution Group)
• Any letters about a past closed school discharge application, including a denial
• Recent statements, plus any notices about a tax refund offset or wage garnishment
• If you're a parent, the Parent PLUS loan details and the student's school and dates

Related: the student loan default hub, the student loan collections pause, how to get student loans out of default, student loan forgiveness programs and total and permanent disability discharge.

Frequently asked questions