Minnesota Attorney General Lori Swanson, left, led the case against Globe University and the Minnesota School of Business.
On Wednesday, July 26, the Minnesota State Supreme Court ruled that Globe University and the Minnesota School of Business were issuing thousands of illegal student loans. Additionally, the schools were accused of lacking a proper license to issue financial aid as well as issuing these loans at unlawful interest rates.
According to the Minnesota Supreme Court’s ruling, both colleges offered student loans from $3,000 to $7,500 at interest rates ranging between 12 and 18 percent. Minnesota Attorney General Lori Swanson estimated that roughly 6,000 students were issued these educational loans since 2009.
Swanson also stated that the for-profit school dubbed the product they were offering to student borrowers as a “loan” no less than 45 times in various contracts with the students. However, Globe University and the Minnesota School of Business argued in court that they were not loans, but consumer-credit plans. The Minnesota Supreme Court defined the transactions as closed-end loans; under Minnesota state law, closed-end loans must have interest rates that are no higher than 8 percent.
On the same day as the Supreme Court’s decision, Swanson also announced that she would be seeking a court order to have all of the illegal loans declared null and void while also requiring the for-profit education company to issue refunds to the impacted students.
The issue arose in 2015 when Attorney General Swanson filed a lawsuit against Globe University and the Minnesota School of Business. A lower court in Minnesota dismissed Swanson’s claims about the illegal loans. The Minnesota Supreme Court’s Wednesday decision reversed the ruling of that lower court.
The for-profit education company has had a rough couple of years to say the least. Recently, the schools lost a civil case in a local county court after it was discovered that they misled students’ ability to transfer credits and the law enforcement program at the school.
In December of 2016, Globe University and the Minnesota School of Business announced that they were shutting down after the U.S. Department of Education ended their access to federal financial aid. The Department of Education came to their decision because of the aforementioned issues that the schools ran into with the local county court in Minnesota.
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