Your Fraud-School Loans Were Canceled Years Ago. Your Credit Report May Still Say You Owe Them, Plus Interest.

If you went to Corinthian, ITT Tech, the Art Institutes, Westwood, Ashford, or another for-profit chain whose federal loans the Education Department canceled in a group discharge, pull your credit reports this week.

A lawsuit filed September 24 says the department is still telling the credit bureaus you owe that money. And that the balance is growing.

”No additional action on their part”

Between April 2022 and January 2025, the department wiped out loans for more than 1.5 million borrowers at schools it found had committed widespread fraud. Relief was supposed to be automatic. In January 2025 it sent borrowers a notice saying “any future attempts to collect on or enforce your repayment obligations are without legal basis.”

Your credit report didn’t get the memo, according to the complaint. It says the department keeps furnishing these loans as “Deferred,” with a live balance, a future payment date, and interest piling on monthly. The department’s own servicing rules, as quoted in the complaint, tell servicers to report a borrower defense discharge as “DA,” which stands for “delete account.” The catch: that happens after the discharge is processed, and for a lot of people it never was. The department told one court it still hadn’t finished for about 13,500 Westwood borrowers and “will not have meaningful additional availability during 2026” to do it.

The Project on Predatory Student Lending, which filed the case, estimates $4.6 billion of canceled debt is still being reported for more than 300,000 people.

Take plaintiff Mandy Woods. She borrowed about $65,000 for Ashford, which got a group discharge in January 2025. Her August 2026 reports showed $71,901 owed, about $2,000 more than when she disputed it in February. Her servicer called the dispute “frivolous.” Then on September 10, Federal Student Aid emailed her: “As of the date of this letter, FSA has not directed MOHELA to process your loan discharge.”

Twenty months after the announcement. These are allegations, and the department hasn’t answered in court yet. That email is its own words.

Why a dead loan still costs you

Fannie Mae lets a mortgage lender count 1% of a deferred student loan balance as your monthly payment. On Woods’s reported balance, that’s a $719 phantom bill on your application. On $25,000, it’s $250 a month you don’t owe, and it can be the gap between approved and denied. The same balance drags on any credit score built from your report.

Verdict: this is dumb. The department already has the list of every borrower it canceled.

Do this now

Pull all three reports free at AnnualCreditReport.com. The FTC says you can check each bureau once a week. Look for a federal student loan tradeline still carrying a balance from that school.

Dispute it with Equifax, Experian and TransUnion. Attach the discharge notice or announcement plus proof of your enrollment dates, and ask for a zero balance. Expect a brush-off. File anyway: the dispute is your paper trail, and it’s exactly what this lawsuit is built on. Our read on why disputes stall explains what to expect.

Then file a CFPB complaint under credit reports. Companies generally respond within 15 days.

Applying for a mortgage or car loan soon? Hand the lender your discharge notice up front, before underwriting finds the balance.

Don’t pay it. The department’s own notice says you don’t owe it. More on your options at the education hub.

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