The suit, brought by former Trump administration official A. Wayne Johnson and four named borrowers, accuses the U.S. Department of Education and the three major credit reporting agencies—Equifax, Experian, and TransUnion—of “willful violations” of the Fair Credit Reporting Act (FCRA) through widespread misreporting of student-loan delinquencies and defaults.
Newsweek contacted the Department of Education for comment via email outside of normal office hours on Wednesday.
Equifax said it does not comment on pending litigation, and Experian and TransUnion did not respond to requests for comment.
Why It Matters
The lawsuit is important because it strikes at the heart of the federal government’s role in the $1.6 trillion student-loan system.
It challenges whether the U.S. Department of Education—both the nation’s largest lender and a credit reporter—can be held legally accountable for allegedly mislabeling student-loan holders as delinquent or in default.
Beyond the courtroom, the case exposes the government’s servicing failures following the end of the pandemic loan pause, raising broader questions about fairness, transparency, and the federal duty to protect borrowers from the very systems meant to help them pay for college.
What To Know
A Class Action Over Student Loan Defaults
Johnson, who oversaw the federal student-loan program during Donald Trump’s first term, filed the action in the U.S. District Court for the Northern District of Georgia with the Atlanta law firm Cooper, Barton & Cooper.
It seeks class certification on behalf of millions of federal borrowers who, according to the complaint, were wrongly recorded as seriously delinquent or in default after loan-repayment obligations resumed in 2025.
The 59-page filing alleges that “since January 1, 2025, over five million individuals have been improperly declared to be in serious delinquency and many also declared to be in legal default” due to the Education Department’s “failure in its basic duty to competently service its borrowers.”
The complaint projects that figure could double to ten million by the end of 2025 and reach twenty million by April 2026.
Servicing Failures And Alleged Credit Reporting Abuse
At the center of the case is the department’s status as a “furnisher” of credit information under the FCRA, which requires accurate and fair reporting to credit bureaus.
The plaintiffs argue that the department’s automated servicing systems advanced accounts through 30-, 60-, 90-, 120-, and 270-day delinquency stages even when borrowers had attempted to re-establish payment.
According to the filing, call wait times for federal servicers exceeded ten hours and abandonment rates surpassed 95 percent, leaving borrowers “unable to pay or even contact someone about restarting payment.”
Business Insider, which first reported on the case, quoted Johnson as saying that the relief sought includes “$100,000 returned to each member and the removal of all negative credit reporting from borrowers’ credit reports.”
The suit estimates that the collective financial damage from wrongful defaults could exceed $500 billion.
The Education Department has rejected the claims.
A department spokesperson said that the filing represents “an embittered attempt by ideologues to change the way the administration collects student loans.”
As previously stated, Equifax said it does not comment on pending litigation, while Experian and TransUnion did not respond to requests for comment.
A Turbulent Year For Student-Loan Servicing
The dispute follows a turbulent year for federal student-loan operations. The Trump administration ended the pandemic-era pause on collections in May 2025, resuming enforcement after five years.
Education Secretary Linda McMahon defended the move, writing in an April opinion piece that the restart was not meant “to be unkind to student borrowers.”
“Borrowing money and failing to pay it back isn’t a victimless offense,” she said. “Debt doesn’t go away; it gets transferred to others.”
In the months before collections resumed, the department implemented large staffing reductions—cutting more than 1,300 employees, roughly half its workforce.
Johnson’s complaint links those layoffs, along with contracting failures and outdated systems, to what it calls a “collapse in servicing capacity.”
The lawsuit contends that the department used negative credit reporting “to weaponize the credit system as a back-end collection tool,” coercing borrowers into contact by damaging their credit scores.
Under federal law, default on student loans generally occurs after 270 days of missed payments, triggering wage garnishment, tax-refund seizures, or Social Security offsets.
The New York Federal Reserve reported that 10.2 percent of student borrowing was in serious delinquency as of mid-2025, or roughly five million borrowers nationwide.
If certified, the Johnson case could establish a significant precedent in defining the Education Department’s obligations under the FCRA.
For now, it underscores a deep operational rift between a federal lender managing trillions in consumer credit and the millions of Americans still struggling to navigate repayment.
Whether the courts view that rift as administrative failure or unlawful negligence may determine the financial futures of a generation of borrowers—and the credibility of the agency that lent to them.
What People Are Saying
From the class-action complaint filed October 28, 2025: “It is one thing for the Department to be inept in its servicing and default resolution practices; it is unconscionable for the Department to use unfair credit reporting practices as a way to mitigate the Department’s ineptitude.”
What Happens Next
The case will move through preliminary motions in federal court, where the Education Department is expected to seek dismissal on grounds of sovereign immunity.
If it survives, the plaintiffs will pursue class certification on behalf of millions of borrowers, followed by discovery that could expose internal loan-servicing records and credit-reporting practices.
Possible outcomes include dismissal, settlement, or a court-ordered overhaul of how the department reports student-loan data.
Even before any ruling, the lawsuit is likely to intensify political scrutiny of the government’s handling of student debt and pressure officials to address servicing and reporting failures.
Senior Crime & Court Reporter