Borrowers Sue Education Department for Reporting $4.6 Billion in Canceled Student Loans

Berger Montague, a leading national plaintiff law firm, and the Project on Predatory Student Lending (PPSL) have filed a class action lawsuit against the U.S. Department of Education for reporting canceled student loans as unpaid debts on borrowers’ credit reports. The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the Department violated the Fair Credit Reporting Act (FCRA) by continuing to report loans it canceled for former students of ten for-profit schools found to have engaged in fraud and misconduct. An estimated $4.6 billion in canceled debt is still being reported for more than 300,000 borrowers.

“The Department told these borrowers their debts were gone, but their credit reports say otherwise,” said Shareholder John Albanese. “These are people who were defrauded by their schools, and now they are paying the price a second time—through higher borrowing costs and lost opportunities—because the Department will not correct its own records.”

Between April 2022 and January 2025, the Department canceled all federal student loans tied to schools including Corinthian Colleges, ITT Technical Institute, the Art Institutes, and Ashford University, and told borrowers they owed nothing and did not need to take any action. According to the complaint, the Department has not finished processing many of these discharges and continues to report the canceled loans to Equifax, Experian, and TransUnion as “Deferred” debts with growing balances. When borrowers formally disputed the errors, the Department failed to correct them.

Plaintiff Mandy Woods, who attended Ashford University, had her loans canceled in January 2025, yet her credit reports showed a balance of $71,901 as of August 2026. Plaintiff Jorge Cortes, a U.S. Marine Corps veteran who attended ITT Technical Institute, still had $21,586 in canceled debt on his credit reports four years after the Department canceled his loans. In 2024, the U.S. Supreme Court unanimously held that federal agencies can be held liable for damages under the FCRA, just like private creditors.

“These borrowers have done everything asked of them, but this false debt is still shaping where they can live, what they can borrow, and what their futures look like,” said Eileen Connor, President of PPSL.

Additional Information

• Case page: Woods v. U.S. Department of Education. Read more here.
• Complaint: Woods v. U.S. Department of Education, No. 1:26-cv-03335 (D.D.C. filed September 24, 2026). Read more here.
• Co-counsel: Project on Predatory Student Lending
• Student loan borrowers sue Trump administration over forgiven debts on credit reports, CNBC (September 24, 2026). Read more here.
• Student Loan Borrowers Allege Canceled Debt Is Still Trailing Them, The Wall Street Journal (September 24, 2026). Read more here.
• The government canceled her student loans due to a scam — but $72,000 is still on her credit report, MarketWatch (September 24, 2026). Read more here.

Berger Montague is one of the nation’s preeminent law firms focusing on complex civil litigation, class actions, and mass torts in federal and state courts throughout the United States. With more than $2.4 billion in 2025 post-trial judgments alone, the Firm is a leader in the fields of complex litigation, antitrust, consumer protection, defective products, environmental law, employment law, securities, and whistleblower cases, among many other practice areas. For over 55 years, Berger Montague has played leading roles in precedent-setting cases and has recovered over $50 billion for its clients and the classes they have represented. Berger Montague is headquartered in Philadelphia and has offices in Chicago; Malvern, PA; Minneapolis; San Diego; San Francisco; Toronto, Canada; Washington, DC, and Wilmington, DE.

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John Albanese

Shareholder

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Joe Hashmall

Senior Counsel

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