Education Department sued over canceled student loans still appearing on credit reports |
Two student-loan borrowers have sued the U.S. Department of Education, alleging that loans canceled years ago remain listed as active on their credit reports, damaging their credit scores and limiting their ability to borrow. The Project on Predatory Student Lending, which represents plaintiffs Mandy Woods and Jorge Cortes and is seeking class-action status, says more than 300,000 borrowers still have $4.6bn in canceled debt reported as outstanding. Woods borrowed about $65,000 to attend Ashford University, while Cortes borrowed about $54,000 for ITT Technical Institute, with the Education Department later canceling loans for eligible former students after taking action against both institutions. Woods said her credit report continues to show nearly $72,000 in federal student-loan debt because of accrued interest, despite the discharge, and that she was recently denied three credit cards. The lawsuit alleges that the department is violating the Fair Credit Reporting Act by continuing to report canceled balances, amid broader disruption in the federal student-loan system and a default population that has reached more than 9.3m borrowers.