Imagine being told your student loan was cancelled, and then watching your credit report keep counting it against you for years anyway. That’s the allegation at the center of a new lawsuit against the U.S. Department of Education, filed by the Project on Predatory Student Lending on behalf of two former students, according to reporting on the filing by The College Investor.
What the lawsuit alleges
The complaint, known as Woods v. U.S. Department of Education, claims the department has continued reporting roughly $4.6 billion in cancelled student loans to credit bureaus as though the debt were still owed, per the reporting on the filing. Reporting only, not a verdict: this is what the lawsuit alleges, not a finding a court has made.
The plaintiffs say the department had its own directive requiring these discharged loans to be deleted from credit reports within 15 to 45 days of the discharge being completed — and that in these cases, it wasn’t done.
The two named plaintiffs
Mandy Woods, who attended Ashford University, says her reported loan balance actually grew after her debt was supposed to be cancelled — from roughly $65,000 to $71,901, according to the same reporting.
Jorge Cortes, a former ITT Technical Institute student, says his credit report still shows a balance of $21,586, down from an original principal of about $54,000 but still listed as owed despite the discharge.
Both are real, named plaintiffs in a filed federal case, not composites — the details above come from the lawsuit itself as reported, and neither figure is estimated or rounded for effect.
Who else the lawsuit says is affected
The complaint describes a proposed class of more than 300,000 borrowers whose loans were discharged through group programs tied to schools including Corinthian Colleges, ITT Technical Institute, the Art Institutes, and Ashford University, per the coverage of the filing. These are borrowers whose schools were found to have defrauded them — the kind of discharge meant to close the book on a debt entirely, not just reduce it.
If your own loans were tied to one of those schools and forgiven through a group discharge, this is the exact mechanism the lawsuit says failed — not a processing delay measured in weeks, but a persistent reporting error measured in years.
What the lawsuit is asking for
The complaint seeks statutory damages under the Fair Credit Reporting Act, ranging from $100 to $1,000 per violation, along with actual and punitive damages, according to the same reporting. That framework — a fixed per-violation penalty on top of provable harm — is standard in credit-reporting cases, and it’s why a case involving 300,000 potential class members carries real financial exposure even before any individual damages are calculated.
As of this reporting, the Department of Education had not yet filed a public response, and federal agencies typically have 60 days to respond once a complaint like this is formally served.
Why a cancelled loan can still hurt your credit
You’d reasonably assume “discharged” means the debt simply disappears from your record. It doesn’t work that way. Discharge and credit reporting are two separate systems, and they don’t always update in sync.
Here’s the mechanism: your loan servicer or the agency has to actively notify the credit bureaus that the tradeline should be removed or marked as satisfied. If that notification doesn’t happen, the old balance can sit on your report indefinitely — dragging down your score for a debt that no longer legally exists. That gap is exactly what this lawsuit says happened here, at a scale that turns an individual clerical failure into a systemic one: billions of dollars, hundreds of thousands of borrowers.
The bottom line
This is reporting on allegations in a filed lawsuit, not financial advice and not a confirmed finding against the department. If your loans were discharged through a group program and you’re not sure your credit report reflects that, checking your own report against your discharge paperwork is a reasonable step regardless of how this particular case resolves.
This article was produced with the assistance of AI and reviewed by Womens Overview editors prior to publication.