A group of student loan borrowers has filed a class action lawsuit against the U.S. Department of Education and Education Secretary Linda McMahon, accusing the agency of illegally denying student loan discharges to people whose colleges closed before they could complete their degrees.
Battle Over Student Loans
Americans owe a total of $1.86 trillion in student loan debt across federal and private loans.
The lawsuit centers on the federal Closed School Discharge program, which allows eligible borrowers to have their federal student loans canceled when their school closes while they are enrolled or shortly afterward, leaving them unable to finish their academic programs.
The Education Department expanded certain eligibility criteria in 2025, extending the look-back periods for borrowers at specific schools. However, the lawsuit alleges that the agency is rejecting applications from people who qualify under those updated rules.
According to Alexander Elson, co-founder and vice president of Student Defense, the organization representing the borrowers, the department must honor its previous commitments.
“The Department cannot make promises to students and then pretend that those promises do not exist,” Elson said in a press 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 lawsuit seeks to force the department to provide loan discharges to borrowers covered by the expanded eligibility criteria.
The legal challenge comes as the Education Department is involved in another lawsuit over student loan forgiveness.
The American Federation of Teachers recently sued the Trump administration over alleged failures to properly administer the Public Service Loan Forgiveness program. The program, which was established in 2007, allows eligible government and nonprofit employees to have their federal student loans forgiven after making 120 qualifying monthly payments, generally over 10 years.
The union alleges that the department incorrectly reduced borrowers’ qualifying payment counts and delayed decisions on applications.