A group of defrauded students says the Education Department continued to report their student loans as active to credit bureaus, years after canceling the debt.
The lawsuit, filed in the U.S. District Court for the District of Columbia Thursday, estimates that more than 300,000 people with a total of $4.6 billion in forgiven student loans have been affected.
Between April 2022 and January 2025, the Education Department canceled $23.4 billion in outstanding debt for 1.5 million borrowers defrauded by their for-profit colleges. The accounts were supposed to appear as closed on their credit reports, but some borrowers noticed the balance never went away, and in some cases grew as interest continued to accrue, according to the complaint.
Mandy Woods, one of two plaintiffs in the lawsuit, said her credit report showed that she owes $71,901 in student loans in August, despite the Education Department discharging the $65,000 she borrowed to attend Ashford University. Woods said she contacted the department, her loan servicer, and submitted detailed disputes to all three credit bureaus to no avail.
“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. “The department said these loans would be cancelled. It needs to follow through and make that real.”
The Education Department did not respond to requests for comment.
Attorneys for the borrowers say the inaccurate credit reports have affected their clients’ ability to qualify for mortgages, rent homes, obtain auto loans and credit cards, secure employment and build financial stability. They are seeking damages under the Fair Credit Reporting Act.
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