300,000 student-loan borrowers got their debt wiped out — but their credit is still taking a hit, a new lawsuit says

A lawsuit filed by the Project on Predatory Student Lending alleges that the Department of Education is still reporting the forgiven balances of student-loan borrowers to credit bureaus. The lawsuit estimates that around 300,000 borrowers who were victims of predatory for-profit schools are affected. These borrowers, who received debt relief through the borrower defense to repayment program between April 2022 and January 2025, have seen their credit scores impacted due to inaccurate reporting.

The lawsuit claims that the Department of Education is violating the Fair Credit Reporting Act by reporting these outstanding balances as unpaid debt. Mandy Woods, one of the plaintiffs, borrowed $65,000 to attend Ashford University, which was later found to have defrauded its students. Despite qualifying for relief, her credit report still shows a balance over $71,000.

The plaintiffs are concerned that the government's continued reporting could lead to further financial harm, such as wage garnishment or tax refund offset.