A new proposed class-action lawsuit has been filed against the U.S. Department of Education, alleging that the agency continues to report previously forgiven student loan debts to major credit reporting companies, including Equifax, Experian, and TransUnion. The plaintiffs contend that these inaccurate reports are causing significant financial harm to borrowers who believed their debts had been cleared, impacting their ability to secure housing, auto loans, and employment.

The lawsuit, titled *Woods v. U.S. Department of Education* and filed in the U.S. District Court for the District of Columbia, represents borrowers whose federal student loans were discharged between April 2022 and January 2025. These discharges were primarily granted to individuals who attended fraudulent or misleading educational institutions. Despite the official forgiveness, the Department of Education is accused of maintaining these debts as active on credit reports. Eileen Connor, president and executive director of The Project on Predatory Student Lending, which is representing the plaintiffs, emphasized the profound impact: “These borrowers have done everything asked of them, but this false debt is still shaping where they can live, what they can borrow, and what their futures look like.”

One plaintiff, Marine veteran Jorge Cortes, shared his experience. His student loans from ITT Technical Institute were forgiven in August 2022, yet a balance of $21,586 remained on his credit report as recently as this summer. Cortes stated, “When the Department of Education told me these loans were discharged, I thought I could finally put them behind me and start rebuilding my life, but my credit report tells a different story.” The Project on Predatory Student Lending estimates that over 300,000 student loan borrowers are currently affected by similar reporting discrepancies. The Department of Education has not yet issued a public response to the allegations.

Key Takeaways

• A class-action lawsuit alleges the U.S. Department of Education is still reporting forgiven student loan debts to credit bureaus (Equifax, Experian, TransUnion) as active.
• These inaccuracies are negatively impacting borrowers' ability to obtain credit, housing, and employment, despite their debts being officially discharged due to fraudulent colleges.
• The lawsuit, *Woods v. U.S. Department of Education*, highlights the plight of over 300,000 estimated borrowers, with one veteran plaintiff still seeing a significant balance on his credit report years after forgiveness.

Editor’s Analysis & Impact

This lawsuit could have significant implications for both the student loan industry and credit reporting practices. If the allegations are proven true, it exposes a critical systemic failure within the U.S. Department of Education to accurately update borrower records, potentially undermining public trust in debt forgiveness programs. For the credit reporting agencies, it underscores the need for robust verification processes to ensure data accuracy, especially concerning government-issued debt relief. The broader impact could lead to increased scrutiny of how federal agencies communicate with credit bureaus and may prompt legislative action to prevent similar discrepancies. Furthermore, it highlights the ongoing challenges faced by individuals attempting to rebuild their financial lives after being impacted by predatory educational institutions, even after receiving official relief.

Frequently Asked Questions

Q: Who are the plaintiffs in this class-action lawsuit?
A: The lawsuit involves student loan borrowers whose federal debts were cleared between April 2022 and January 2025, primarily due to their attendance at fraudulent or misleading colleges.

Q: What are the potential consequences for borrowers if these debts remain on their credit reports?
A: Inaccurate reporting of active debt can severely impact borrowers' credit scores, making it difficult for them to obtain mortgages, rental housing, auto loans, and even employment, despite their debts being legally discharged.