A group of student loan borrowers filed a proposed class-action lawsuit against the U.S. Department of Education on Thursday, claiming they sustained financial harm despite having their federal student loan debts canceled. The case, Woods v. U.S. Department of Education, was filed in the U.S. District Court for the District of Columbia.
According to the plaintiffs, the Education Department continues to report their canceled loans to major credit reporting agencies—including Equifax, Experian, and TransUnion—as active debts. This inaccurate reporting has real consequences for borrowers’ creditworthiness and ability to access new credit or housing, according to The Project on Predatory Student Lending, which is representing the plaintiffs. Eileen Connor, the organization’s president and executive director, stated that borrowers who have fulfilled their obligations remain constrained by false debt records affecting their housing options, borrowing capacity, and future prospects.
The lawsuit encompasses borrowers whose federal student loan debts were discharged during the Biden administration between April 2022 and January 2025 due to attendance at fraudulent or misleading colleges. One named plaintiff, Jorge Cortes, a Marine veteran, had his ITT Technical Institute loans forgiven in August 2022, yet a balance of $21,586 remained on his credit report as of this summer. Cortes stated that despite being told his loans were discharged, his credit report told a different story, preventing him from moving forward with rebuilding his financial life.
The Project on Predatory Student Lending estimates that the Education Department is still reporting debts for more than 300,000 student loan borrowers. The Education Department did not provide an immediate response to requests for comment on the lawsuit.
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