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Student Loan Borrowers Sue Over Credit Reporting of Forgiven Debt
By Drooid · · How we work
Lawsuit Over Credit Reporting of Forgiven Student Loans
A group of borrowers filed Woods v. U.S. Department of Education in the U.S. District Court for the District of Columbia, alleging that the Department of Education continues to report their federally-forgiven student loans to credit reporting agencies as active obligations. The plaintiffs contend that the erroneous listings damage their creditworthiness and limit access to mortgages, rental housing, auto loans, and employment opportunities.
Background and Context
The lawsuit follows a broader wave of student-loan forgiveness actions taken during the Trump administration. Although the debts were officially cancelled, the borrowers assert that the Department’s reporting practices have not been updated to reflect the forgiveness. The Project on Predatory Student Lending (PPSL) is representing the plaintiffs and has highlighted the potential financial harms caused by the inaccurate credit data.
Official Statements & Responses
U.S. Secretary of Education Linda McMahon testified before a Senate Appropriations hearing on June 3 2025 regarding President Donald Trump’s budget request for the Department of Education. During the hearing, McMahon addressed the Department’s data-reporting procedures, affirming that the agency follows existing federal guidelines for credit reporting but offering no specific comment on the plaintiffs’ allegations.
Verbatim Quotes
- “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,” — Eileen Connor, the president and executive director of PPSL
Potential Impact
If the court finds that the Department’s reporting practices violate borrowers’ rights, it could compel the agency to correct credit records nationwide, thereby restoring affected individuals’ ability to secure housing, loans, and employment. The case also raises questions about the administrative processes governing the removal of forgiven debt from credit histories, a matter that may prompt further regulatory review.
