Former Students Sue Trump Administration Over Lingering Credit Damage from Forgiven Loans

U.S. Secretary of Education Linda McMahon testifies before a Senate Appropriations hearing on U.S. President Donald Trump’s budget request for the Department of Education, on Capitol Hill in Washington, D.C., U.S., June 3, 2025. REUTERS/Annabelle Gordon

Annabelle Gordon | Reuters

Former students have filed a lawsuit against the Trump administration, alleging they suffered unforeseen financial harm despite having their student loan debts forgiven years ago.

The plaintiffs, represented by The Project on Predatory Student Lending, filed the class-action lawsuit, Woods v. U.S. Department of Education, in the U.S. District Court for the District of Columbia. They allege that the Education Department continues to report their canceled federal student loans as active to credit reporting agencies. This inaccurate reporting severely hinders their ability to secure mortgages, rental housing, auto loans, and employment.

“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 and executive director of The Project on Predatory Student Lending.

The lawsuit involves borrowers whose federal student loan debts were discharged between April 2022 and January 2025 under the Biden administration because they attended fraudulent or misleading colleges. The borrowers allege that despite this relief, the Education Department continues to report their debts to major credit reporting agencies, including Equifax, Experian, and TransUnion.

One of the plaintiffs, Marine veteran Jorge Cortes, had his student loans from the ITT Technical Institute forgiven in August 2022, according to the court filing. Nevertheless, a $21,586 balance remained on his credit report as of this past summer.

“When the Department of Education told me these loans were discharged, I thought I could finally put them behind me and start rebuilding my life, but my credit report tells a different story,” Cortes said in a statement.

The Education Department is still reporting the debts of more than 300,000 student loan borrowers, according to an estimate by The Project on Predatory Student Lending.

The Education Department did not immediately respond to a request for comment.

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