Closed school: who may qualify for student loan discharge

If your institution closed before you completed your program, the new lawsuit does not automatically cancel your loan. You may, however, already qualify for a closed school discharge under the ordinary rules for U.S. federal student loans. The key questions are when you attended, whether you completed a comparable program, and whether you used a teach-out or transferred credits.

The lawsuit filed on October 28, 2026 concerns a narrower group: borrowers who rely on eligibility windows that the Department of Education expanded for specific institutions. Its claims have not been adjudicated. A denial should therefore be checked against its stated reason, but filing the case is not the same as receiving relief.

Who fits the ordinary rule

The federal closed school discharge regulation provides for discharge of a Direct Loan when a student did not complete the program because the school closed while the student was enrolled or within 180 days after withdrawal. The education secretary may extend that period for exceptional circumstances.

The protection also covers a loan taken out by a parent on the student’s behalf, making it relevant to Parent PLUS borrowers. Generally, the applicant must state that the loan proceeds financed attendance at that school and that the program was not completed because of its closure. Statements are made under penalty of perjury, and additional records may be requested.

A granted discharge removes the repayment obligation and related accrued charges or collection costs. The regulation also provides for reimbursement of amounts paid, removal of the discharged loan’s default status, and deletion of adverse credit history associated with it.

Teach-outs and transfers can change the answer

A teach-out offers a route to finish a program at the same institution or another school. According to CFPB guidance, a borrower who accepts that route and completes the program remains responsible for the loans. Declining it does not guarantee discharge, but may preserve the possibility when the remaining requirements are met.

Completing the program at another location of the school or through an approved teach-out also affects eligibility under the regulation. If a borrower accepts a continuation but does not complete it, a separate rule provides for discharge one year after the borrower’s last attendance in the alternative program.

Transferred credits require careful review. Federal Student Aid guidance says no single factor determines whether programs are comparable. Their academic or professional nature, course requirements, treatment of credits, and views of state or accrediting bodies may matter. Before transferring, obtain a written explanation of how many credits will count and where they apply in the new curriculum.

What Gaussoin challenges

The case reported by South Carolina Public Radio/NPR involves former Brooks Institute student Kendrick Gaussoin and his mother, Christine, a Parent PLUS borrower. Brooks closed in August 2016. Kendrick had taken leave in December 2015 and fell outside the ordinary window. In January 2025, however, the Department expanded the period for certain schools, including Brooks, to cover borrowers enrolled as of May 6, 2015.

Kendrick applied in August 2026 and was denied under the traditional criteria. Christine’s application was also denied. Student Defense’s lawsuit alleges that the government cannot disregard the earlier expansion. The Department told NPR that it stands by its implementation of the program and disputed the legality of that expansion.

That defines the case’s limits: it does not immediately rewrite the rule for every closed school, guarantee that the plaintiffs will prevail, or establish that every former student qualifies. The dispute concerns the treatment of exceptional windows previously established for specified institutions.

Steps after a closure or denial

First, confirm the official closure date and compare it with your last date of attendance. Gather transcripts, enrollment and withdrawal records, loan documents, and messages about the closure, teach-out, or transfer. Keep the written decision too: the regulation requires a denial to state its reasons.

Next, determine whether the decision used the ordinary 180-day period or an institution-specific extension. Compare the explanation with your records and check current Department of Education information before acting because procedures can change. Do not assume private loans receive the same protection: CFPB says they generally remain payable, although state programs or lender options may exist.

CFPB accepts complaints about servicer problems online or at (855) 411-CFPB (2372). A complaint does not replace a discharge application or individual legal advice.

Closed school discharge is not borrower defense

A closed school discharge focuses on a closure that prevented program completion. Claims about deception or school misconduct involve a different analysis, often associated with borrower defense. A closure alone does not prove fraud, and a borrower does not need to turn a closure application into a fraud allegation.

The practical decision is to separate three groups: borrowers within the ordinary window; those relying on an exceptional extension such as the one disputed in Gaussoin; and those who completed a comparable program through a teach-out, transfer, or another route. That distinction makes a denial easier to assess without mistaking pending litigation for relief already awarded.