Defrauded Students Sue Education Department Over Credit Reporting Errors
More than 300,000 student loan borrowers whose debts were officially canceled by the federal government are still seeing those balances on their credit reports, triggering a federal lawsuit filed Thursday in the U.S. District Court for the District of Columbia. Education Department continued reporting $4.6 billion in forgiven loans as active debt to major credit bureaus, damaging plaintiffs’ credit scores, employment prospects, and access to housing.
Between April 2022 and January 2025, the Education Department canceled $23.4 billion in outstanding debt for 1.5 million borrowers who were defrauded by their for-profit colleges. While these accounts were legally required to display as closed, hundreds of thousands of borrowers found their balances intact or expanding as interest continued to accrue.
The Scope of the Financial Fallout and Credit Damage
Plaintiff Mandy Woods discovered that her credit report listed an outstanding student loan balance of $71,901 in August, despite the Education Department discharging the $65,000 she originally borrowed to attend Ashford University. Woods attempted to resolve the discrepancy by contacting the department, her loan servicer, and submitting formal disputes to all three major credit bureaus.
“I’ve been jumping through hoops, getting different answers depending on who I talk to, and watching a debt I was told I no longer owe keep growing on my credit report,” Woods said regarding the ongoing errors.
Attorneys representing the borrowers state that these inaccurate credit profiles have blocked clients from qualifying for mortgages, renting homes, obtaining auto loans, securing credit cards, and passing employment background checks. The lawsuit seeks financial damages under the Fair Credit Reporting Act.
Regulatory Compliance and Institutional Accountability
The Education Department did not respond to requests for comment regarding the ongoing discrepancies in credit bureau reporting.