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Globe University, Minnesota School of Business students should get loan refunds, appeals court rules

Lori Swanson (courtesy photo)

ST. PAUL -- Former students who borrowed money from a now-defunct for-profit college chain could get refunds thanks to a Minnesota Appeals Court ruling.

An appeals court panel ruled on Monday, June 3, that Globe University and the Minnesota School of Business made illegal loans that had interest rates significantly higher than the maximum of 8 percent allowed by law for unlicensed lenders.

The ruling is connected to a 2014 case brought against the schools by former Attorney General Lori Swanson. In 2016, a Hennepin County District Court judge found the schools had deceived students to convince them to enroll in a criminal justice program.

“I am very proud of this result and the staff who brought this matter to justice,” Swanson, who is now leading a private law firm, wrote in an email. “After five years of litigation, it is good that these students will hopefully finally get their money paid under today’s court ruling.”

Attorneys for the schools did not respond to a request for comment. A call to the schools’ parent organization was not returned.

As many as 6,000 students took out loans worth a total of $7 million directly from the schools beginning in 2009. Individual loan amounts were between $3,000 and $7,500 with interest rates often between 12 and 18 percent.

The appeals court ruling noted the schools eventually reduced the interest rates in 2014 to the state maximum of 8 percent.

In court documents, the schools described the borrowing as “open-ended credit,” like a credit card or home equity loan, rather than a traditional loan. Lending in that manner made the loans legal, the schools argued, despite the fact they were not a licensed lender.

However, the court found any loans made to students with interest rates above 8 percent were “usurious,” or unlawful lending, and borrowers should be repaid all principal and interest. The appeals court sent the case back to the district court to determine the amounts to be repaid as well as attorneys’ fees.