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Kiersten Essenpreis for Money

Millions of student loan borrowers have been left worrying about the state of their credit reports after a company that manages repayment botched a program to help borrowers during the pandemic, according to a class-action lawsuit filed on Wednesday.

In the lawsuit, plaintiffs said that student loan servicing company Nelnet Corporation and its subsidiary Great Lakes Education Loan Services Inc. illegally damaged borrowers’ credit files that were supposed to be protected under coronavirus relief legislation. Other defendants included credit reporting agencies Equifax, TransUnion and Experian, as well as their subsidiary VantageScore Solutions, LLC.

The CARES Act stipulated most federal student loan borrowers would be eligible to have their monthly payments and interest charges temporarily waived. Great Lakes, which services the student loans of roughly 8 million borrowers, was supposed to count borrowers’ payments as up-to-date and on-time during this time period. Instead, the suit alleges that the servicer “mishandled the implementation of this relief” by classifying these borrowers’ accounts as “deferred,” a status with negative credit implications. Some people reported seeing their scores drop by 50 points or more — a significant amount.