Two shuttered for-profÂit uniÂverÂsiÂties must reÂpay stuÂdents both the prinÂciÂpal and inÂterÂest on milÂlions of dolÂlars in ilÂlegal loans they isÂsued, the MinÂneÂsoÂta Court of Appeals ruled MonÂday.
Globe University and MinÂnesota School of Business, which closed in 2016 amid a legal batÂtle with the state, isÂsued unÂliÂcensed loans to thousands of stuÂdents, with inÂterÂest rates of up to 18%. MinÂneÂsoÂta deems rates of more than 8% on such loans "usuÂriÂous," and the state SuÂpreme Court deÂclared the Globe loans unÂlawÂful. A disÂtrict court then ordered the schools to reÂpay inÂterÂest stuÂdents had paid only on loans with rates that exÂceedÂed 8%. But the ApÂpeals Court found the schools have to covÂer the prinÂciÂpal and inÂterÂest of those loans, which the state esÂtiÂmatÂes totals $7.2 milÂlion and went to as many as 6,000 stuÂdents.
The rulÂing is the latÂest in a five-year legal saga, which startÂed when then-Attorney General Lori SwanÂson sued the schools, alÂlegÂing Globe's crimÂiÂnal jusÂtice proÂgram deÂfraudÂed stuÂdents who beÂlieved they would be able to work as poÂlice and proÂbaÂtion ofÂficÂers in MinÂneÂsoÂta. The courts agreed, but later this year the state SuÂpreme Court will weigh a lower-court ruling that the schools only need to comÂpenÂsate stuÂdents who tesÂtiÂfied in the case.
"I feel bad the stuÂdents have had to wait such a long time to get their day of jusÂtice," said SwanÂson, who is now in priÂvate pracÂtice. "This is aÂmong the most egreÂgious cases I was inÂvolved in as atÂtorÂney genÂerÂal."
Defense attorneys issued this statement Monday on behalf of the closed Woodbury-based schools: "For more than a century, Globe University and Minnesota School of Business provided a valuable education to its students. The district court agreed and issued its order taking into account that value. The Court of Appeals ignored the district court's determinations and in doing so, effectively stripped the district court of its power to apply Minnesota law to the circumstances before it. The Schools are disappointed with the decision and are considering their options for review."
The court case has stretched on three years afÂter Globe and the MinÂneÂsoÂta School of Business shut down folÂlowÂing the U.S. Department of Education endÂing their acÂcess to fedÂerÂal fiÂnanÂcial aid proÂgrams.
The schools claimed that the loans weren't techÂniÂcalÂly stuÂdent loans but rathÂer "open-end credÂit plans" that should have been exÂempt from those rules.
AcÂcordÂing to court docuÂments, the two schools ofÂfered stuÂdents loans of up to $7,500 with inÂterÂest rates beÂtween 12 and 18%, though they lowÂered their rates in 2013. The high court found that the two schools failed to obÂtain a reÂquired state liÂcense to isÂsue stuÂdent loans, and that they were charÂging usuÂriÂous inÂterÂest rates.
The schools paid about half the $7.2 million to the state under a previous lower court ruling that said they were only responsible for interest beyond the 8% allowed. The latÂest rulÂing calls on the company to cover the remainder and also reÂquires the schools to pay legal fees and costs.
SwanÂson filed suit against the schools in 2014 claimÂing that many stuÂdents, inÂcludÂing vetÂerÂans using GI Bill beneÂfits, enÂrolled in the schools' crimÂiÂnal jusÂtice proÂgram only to later disÂcover that their deÂgree didn't meet reÂquireÂments for beÂcomÂing poÂlice and proÂbaÂtion ofÂficÂers in MinÂneÂsoÂta. The state amendÂed that suit the folÂlowÂing year to add claims for lendÂing withÂout a liÂcense and charÂging unÂlawÂfulÂly high inÂterÂest rates.
Swanson said Monday that the Appeals Court ruling will serve as an important deterrent to lenders who won't be able to get away with only forfeiting the illegal portion of loans with unlawfully high interest rates.
Mila Koumpilova • 612-673-4781