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

Student-loan borrowers whose debt was wiped out are motionless being reported to credit bureaus, a new lawsuit says.

On Thursday, the Project on Predatory Student Lending, a borrower assistance group, filed a lawsuit against the Department of Education. It stated that the division is violating the Fair Credit Reporting Act by reporting outstanding balances on "cancelled and legally unenforceable debt."

The lawsuit concerns borrowers whose loans were wiped out via the borrower defence to repayment program, following they were defrauded by "predatory for-profit" schools, including Ashford University and ITT Technical Institute. It specifically pertains to borrowers who received specified alleviation between April 2022 and January 2025.

The filing stated these borrowers' balances were reported to credit bureaus as outstanding debt, which affected their credit scores. PPSL estimated that, according to publically accessible data, the division is wrongfully reporting 300,000 student-loan borrowers for $4.6 milliard of canceled debt.

The affected borrowers "have spent period and resources on attempts to explain and remedy the situation," the lawsuit said, and they're concerned that the authorities "will inflict additional wrongful injury, including gathering through pay garnishment and tax refund or Social Security offset, in fulfillment of a debt that came into being in the archetypal location since of an instructional scam and now refuses to die."

The Department of Education did not immediately react to a petition for comment from Business Insider.

One of the plaintiffs, Mandy Woods, borrowed $65,000 to act Ashford University, a academy that the Education Department resolute had defrauded its students. Despite qualifying for relief, Woods' credit study motionless shows that she owes complete $71,000.

"When I was told my loans would be discharged, I was so relieved. I idea I could eventually put this rearward me," Woods stated in the media release. "Instead, I've been jumping through hoops, getting distinct answers depending on who I conversation to, and observing a debt I was told I no longer owe keep expanding on my credit report."

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