Woods v. U.S. Department of Education
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On September 24, 2026, borrowers filed a proposed class action lawsuit against the U.S. Department of Education for continuing to report federal student loans as active, years after the Department cancelled the loans. The lawsuit, filed in the U.S. District Court for the District of Columbia, seeks damages under the Fair Credit Reporting Act.
The Department’s inaccurate reporting can raise borrowers’ cost of borrowing, limit access to credit and housing, and otherwise hold them back financially.
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Between April 2022 and January 2025, the Department announced final group discharges covering more than 1.5 million borrowers and $23.4 billion in loans associated with schools where it found widespread fraud and misconduct. The Department told eligible borrowers that the relief was automatic, that they had no obligation to make additional payments, and that they did not need to take further action.
Despite those final decisions, the Department continues to furnish information to Equifax, Experian, and TransUnion showing cancelled loans as outstanding debt, often with balances that continue to grow as interest accrues. PPSL estimates, based on publicly available data, that the Department is falsely reporting $4.6 billion of cancelled debt, impacting more than 300,000 people.
Those inaccurate credit reports affect borrowers’ ability to qualify for mortgages, rent homes, obtain auto loans and credit cards, secure employment, and build financial stability. For example, lenders offering federally insured home loans are required to count deferred student loan debt when deciding whether a prospective homeowner qualifies for a mortgage, which can add hundreds of dollars to a borrower’s monthly payments.
The Fair Credit Reporting Act requires entities that supply information to credit bureaus to investigate disputes reasonably and correct or delete information that is inaccurate, incomplete, or unverifiable. In 2024, the U.S. Supreme Court unanimously held that federal agencies are subject to the law’s damages provisions just like private creditors.
Plaintiff Mandy Woods borrowed approximately $65,000 to attend Ashford University. In January 2025, the Department announced that qualifying Ashford loans would be discharged automatically. Woods contacted her servicer and Federal Student Aid repeatedly, sought help from the FSA ombudsman and her member of Congress, and submitted detailed disputes to all three major credit bureaus. Her servicer deemed correspondence about the dispute “frivolous” or “irrelevant.” As of August 2026, her credit reports showed that she owed $71,901 —approximately $2,000 more than when she filed the disputes.
Plaintiff Jorge Cortes, a Marine Corps veteran, borrowed federal student loans to attend ITT Technical Institute. The Department’s August 2022 group discharge covered his loans, but his August 2026 credit reports still showed a balance of $21,586. After Cortes disputed the reporting with all three major credit bureaus, his servicer said it had investigated and concluded the information was accurate. -
The lawsuit marks a new phase of PPSL’s work to hold the federal government accountable to student borrowers. After securing the historic $23 billion Sweet settlement — the largest class action settlement in U.S. history and the largest financial settlement ever against the federal government — PPSL is now seeking damages for borrowers whose financial lives continue to be harmed by debts the Department has already cancelled.
PPSL previously filed a lawsuit against the U.S. Department of Education after the agency failed to respond to fifteen Freedom of Information Act (FOIA) requests seeking records about its implementation of these group discharges.
For more information on schools and timelines connected to these federal loan cancellations, please see our Group Discharges page. -
September 24, 2026: Complaint
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