A nonprofit borrower advocacy group sued the U.S. Department of Education on Wednesday, Oct. 28, alleging that the agency is not fully following federal rules requiring the cancellation of certain student loans when a college closes suddenly.
Student Defense filed the case in federal court on behalf of a Connecticut borrower who attended Brooks Institute, a private, for-profit photography college that closed about a decade ago. The lawsuit also could cover potentially thousands of other borrowers, according to the group.
The federal program is known as closed-school discharge. For more than three decades, federal law has required the secretary of education to cancel the federal student-loan debt of eligible borrowers whose schools shut down. The lawsuit claims the administration of President Donald Trump is unlawfully refusing to apply the program in full.
“It was very eerie.”
The borrower recalled arriving at Brooks Institute’s Ventura, California, campus and finding the school’s doors chained while classmates gathered outside. He had been working toward a bachelor’s degree in photography. The closure left him with student-loan debt and no clear path to completing his degree, according to the account presented in the lawsuit and by NPR.
Who may qualify
Traditional closed-school discharge rules cover borrowers who were enrolled when their college closed or who left the school within a specified period before the closure. The program is separate from other federal debt-relief programs and is tied to the loss of the educational program because the institution shut down.
A review by the nonpartisan U.S. Government Accountability Office found that more than 1,100 colleges closed between 2010 and 2020. Those closures left about 246,000 borrowers eligible for a closed-school discharge, the review found.
- The program applies to eligible federal student loans connected to a college that closed.
- Eligibility can depend on whether the borrower was enrolled when the school shut down or left within the applicable period before the closure.
- The lawsuit was filed by Student Defense on behalf of one borrower and potentially thousands of others.
The Connecticut borrower’s loans should have been erased under a change made during the Biden administration, according to NPR’s account. Instead, he has continued trying to obtain relief after spending years managing the debt left by the school’s closure.
The Education Department told NPR that it stands by its implementation of the closed-school discharge program. The lawsuit now places the agency’s interpretation and administration of the rules before a federal court.
