Students who borrowed money from Globe University and the Minnesota School of Business to cover tuition might be in for a refund thanks to a ruling Wednesday by the Minnesota Supreme Court.
The court found student loans offered by the two for-profit schools, which carried interest rates as high as 18 percent, were illegal and that the schools issued the loans without the proper license.
Under Minnesota law, loans made without a license are void and the borrower does not have to repay them. Minnesota Attorney General Lori Swanson said she would seek loans issued to up to 6,000 students be canceled and also try to get refunds on money already repaid.
“Many of the students who were enrolled in loans of up to 18 percent interest have not been able to find gainful employment with their degrees and are swimming in student loan debt,” Swanson said.
The Supreme Court ruling reverses a lower-court decision that initially threw out allegations the loans were illegal and improperly made. That claim was part of a 2014 lawsuit brought by Swanson that ended in September 2016 with a Hennepin County District Court judge ruling the schools committed fraud.
The lawsuit was centered around criminal justice programs at Globe and the Minnesota School of Business that charged students as much as $89,000 for degrees that got them no closer to their dreams of becoming police and probation officers.
The fraud ruling led to the state Office of Higher Education pulling the schools’ operating authority and the U.S. Department of Education shutting the schools out of the federal student loan program.
Those decisions led most of Globe and the Minnesota School of Business campuses to close, but some were taken over by other institutions. Some current Globe students were able to transfer to other schools to complete their degrees.
School leaders have denied a widespread effort to mislead students, noting that the criminal justice program was closed years ago and said the decisions by state and federal regulators damaged the schools’ students and graduates. School officials did not return a message Wednesday seeking comment about the Supreme Court ruling.
As the state’s lawsuit against the schools made its way through the courts, attorneys for the schools argued the loans were actually lines of credit. Lower courts initially agreed with that argument and the state’s allegation of illegal loans was thrown out of the lawsuit.
However, the state Supreme Court rejected that claim. Minnesota law caps loan interest at 8 percent and interest on consumer lines of credit at 18 percent.
Swanson noted that the contract students signed to borrow money from the schools described it as a loan in 45 different instances. She plans to ask the Hennepin County court to order the schools return principal, interest and other payments made to the school.
The court has already ordered the schools refund tuition and other expenses to the roughly 1,200 students who attended the criminal justice program.
