On September 24, 2026, a group of U.S. student loan borrowers filed a proposed class-action lawsuit, Woods v. U.S. Department of Education, claiming the Education Department continues to report certain federal student loans as active even after formal forgiveness. The canceled loans, discharged between April 2022 and January 2025, followed attendance at colleges accused of fraudulent or misleading practices, but their debt remains on credit reports.
The lawsuit states that the ongoing reporting of these canceled debts has caused financial difficulties. Incorrect credit report information can impact access to mortgages, rental housing, auto loans, and may influence employment decisions. Borrowers argue they fulfilled debt relief requirements but are still viewed as owing money in credit systems.
The case alleges the Education Department continues submitting information about these discharged loans to the three major credit bureaus — Equifax, Experian, and TransUnion. The Project on Predatory Student Lending, representing the plaintiffs, estimates over 300,000 borrowers could be affected by this issue. One plaintiff, Jorge Cortes, a Marine veteran, exemplifies the problem.
His loans from ITT Technical Institute were forgiven in August 2022, yet a $21,586 balance appeared on his credit report as of summer 2026. Cortes believed the loans were resolved but the lingering debt altered his financial record. The lawsuit centers on the disconnect between loan forgiveness and accurate credit reporting.
Plaintiffs seek corrections so discharged debts are no longer marked as outstanding.
The case raises broader concerns about federal student-loan forgiveness administration and the accuracy of government-supplied data used by credit agencies. The Education Department had not immediately responded to CNBC’s request for comment at the time of this report.
