Two student loan borrowers have sued the U.S. Department of Education over federal loans they say were canceled but continue to appear as outstanding debt on their credit reports.
The proposed class-action lawsuit was filed Thursday in the U.S. District Court for the District of Columbia and seeks damages under the Fair Credit Reporting Act (FCRA). The borrowers allege that the department continues to report canceled loans to Equifax, Experian, and TransUnion, as reported in the case materials from the Project on Predatory Student Lending (PPSL).
Canceled Loans
PPSL noted that from April 2022 through January 2025, the Department of Education announced final group discharges covering more than 1.5 million borrowers and $23.4 billion in federal student loans tied to schools where the department found widespread fraud and misconduct. Eligible borrowers were told the relief would be automatic and that they would not need to make further payments or take additional action.
PPSL estimates that $4.6 billion in canceled debt is still being reported to credit bureaus, affecting more than 300,000 people. The organization says the reported debt can affect borrowers seeking mortgages, rental housing, auto loans, credit cards, and employment.
The lawsuit also says the FCRA requires companies that provide information to credit bureaus to investigate disputed information and correct or delete information that is inaccurate, incomplete, or cannot be verified.
The Department of Education did not immediately respond to Benzinga’s request for comment.
What Are the Borrowers Saying?
Mandy Woods borrowed about $65,000 to attend Ashford University. After the department announced the automatic discharge of qualifying Ashford loans, Woods contacted her loan servicer and Federal Student Aid and disputed the credit reporting with all three major credit bureaus. As of August 2026, her credit reports showed a $71,901 balance.
Jorge Cortes, a Marine Corps veteran, borrowed federal student loans to attend ITT Technical Institute. His loans were included in the department’s August 2022 group discharge, but his credit reports still showed a $21,586 balance in August 2026.
The department has recently corrected other student-loan records. In one case, it said technical problems with its National Student Loan Data System led to incorrect borrower income information in a court filing. In another, the department corrected coding errors that affected some Public Service Loan Forgiveness payment counts.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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