A group of student loan borrowers filed a proposed class-action lawsuit against the U.S. Department of Education on Thursday in federal court for the District of Columbia. The plaintiffs allege that despite having their federal student loan debts canceled during the previous administration due to attendance at fraudulent or misleading institutions, the Education Department continues to report these discharged loans to major credit reporting agencies as active debts.
According to the lawsuit, Woods v. U.S. Department of Education, the inaccurate credit reporting has caused borrowers financial harm by affecting their ability to secure mortgages, obtain rental housing, qualify for auto loans, and pursue employment opportunities. The Project on Predatory Student Lending is representing the plaintiffs in the case. Leadership from the organization stated that borrowers who successfully obtained forgiveness are experiencing ongoing consequences from false debt reports that impact major life decisions.
The lawsuit encompasses borrowers whose federal student loan debts were cleared between April 2022 and January 2025 because they attended institutions determined to be fraudulent or misleading. One named plaintiff, Jorge Cortes, a Marine veteran, had his student loans from ITT Technical Institute forgiven in August 2022. However, as of this summer, a balance of $21,586 remained listed on his credit report, despite the official discharge.
According to estimates from the advocacy organization, more than 300,000 borrowers remain affected by continued reporting of their discharged debts on credit files. The Education Department has not yet issued a response to inquiries regarding the lawsuit or the reported discrepancies in credit reporting practices.
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