Canceled Student Debt Still on Credit Reports

On paper, Mandy Woods' student loans were cancelled in January 2025. On paper, she did everything right: she contacted her loan servicer, reached Federal Student Aid, went to the FSA ombudsman, got her member of Congress involved, and filed formal disputes with all three major credit bureaus.

By August 2026, her credit reports showed she owed $71,901 — roughly $2,000 more than when she started fighting it.¹

That's the situation at the center of a new federal lawsuit against the U.S. Department of Education.

What the Lawsuit Says

Two former for-profit college students filed Woods v. U.S. Department of Education (No. 1:26-cv-3335) on September 24, 2026, in the U.S. District Court for the District of Columbia. The case was brought by the Project on Predatory Student Lending (PPSL), a legal advocacy group at Harvard Law School.¹

The lawsuit claims the Department of Education has been continuing to tell the three major credit bureaus that former students owe federal student loans the agency itself cancelled years ago.

The discharges at the center of the case came from group relief programs the prior administration announced between April 2022 and January 2025. Those programs covered more than 1.5 million borrowers and $23.4 billion in loans tied to schools where the agency found widespread fraud and misconduct.¹

Borrowers who attended for-profit schools — Ashford University, ITT Technical Institute, Corinthian Colleges, and others — were in many cases discharged automatically, meaning they never submitted an individual application. Many assumed the credit bureau update would happen the same way.

It didn't.

Why Filing a Dispute With the Bureaus Doesn't Solve It

This is the part most borrowers don't know. When you dispute an error with Equifax, Experian, or TransUnion, the bureau contacts the company that originally reported the data — in these cases, the Department of Education or its servicers.

If the Department keeps telling the bureau the debt is valid — which the lawsuit alleges is happening — the bureau closes the dispute and the entry stays. You can dispute correctly and the error persists, because the problem is at the source, not at the bureau.

The PPSL lawsuit argues this violates the Fair Credit Reporting Act. Borrowers can seek up to $1,000 per violation under that statute.²

The real-world consequences are significant. Inaccurate credit reports can affect applications for mortgages, rental housing, auto loans, credit cards, and employment background checks.

If you attended a for-profit school that closed or was found to have committed fraud, check your credit report at AnnualCreditReport.com now. Look for any student loan tradelines still marked "open" or carrying a balance. Compare what you see to any discharge confirmation you received.

Who Should Check Their Reports

The lawsuit focuses on borrowers whose loans were discharged through group discharge programs — where the agency identified a category of borrowers and cancelled their loans en masse, without requiring individual applications.

Schools whose borrowers received automatic group discharges include Ashford University, DeVry University, Everest/Corinthian Colleges, ITT Technical Institute, and others. If you attended a for-profit college and received any notice about an automatic discharge, your situation falls within what the lawsuit covers.

If you submitted an individual borrower defense to repayment application that was approved, your situation is different — but it's still worth checking your credit reports. A June 2026 Senate report on student loan credit report errors found that servicer-level mistakes are widespread across all loan types, not only discharge cases.

What to Do Right Now

1. Pull your credit reports. Go to AnnualCreditReport.com — this is the federally authorized free source, not a subscription service. Pull reports from all three bureaus.

2. Look for your discharged loan. You're looking for a tradeline with a balance or delinquency when your loan was supposed to be cancelled. The account name will typically be the servicer, not the Department of Education.

3. Dispute with the furnisher directly. File a dispute with Federal Student Aid at studentaid.gov before or alongside any bureau dispute. If the bureau dispute gets "verified" back using the same inaccurate data, you need a paper trail showing you alerted the source first.

4. File a CFPB complaint. A complaint at consumerfinance.gov/complaint creates a formal record and requires a written response from the servicer. This matters if you later pursue legal options under the Fair Credit Reporting Act.

Check all three bureaus separately. Servicers don't always report to every bureau, and errors don't always appear the same way across all three. A loan that looks fine on one report may show as delinquent on another.

The average student loan debt for for-profit school borrowers runs nearly twice the national average. When that debt was already cancelled — and is still showing on your credit report — the financial harm is real and documentable. The first step is to know what your reports say.

For borrowers still figuring out their repayment options on loans that weren't cancelled, the student loan forgiveness programs still available in 2026 have changed significantly since the SAVE plan's end. It's worth reviewing what applies to your situation before the end of the year.

Footnotes

1. Washington Post. (2026, September 24). Students sue Education Department, claiming it reported $4.6B in canceled loans as debt. The Washington Post. https://www.washingtonpost.com/education/2026/09/24/students-sue-education-department-claiming-it-reported-46b-canceled-loans-debt/ ↩ ↩² ↩³

2. Forbes. (2026, September 26). Student Loan Borrowers Sue Education Department For Botching Loan Discharges. Forbes. https://www.forbes.com/sites/adamminsky/2026/09/26/student-loan-borrowers-sue-education-department-for-botching-loan-discharges/ ↩