ST. PAUL, Minn. - Minnesota School of Business (MSOB) and Globe University issued illegal loans to thousands of students at unlawful interest rates. That's the finding of the Minnesota Supreme Court, which issued the ruling Wednesday.
The Court found that the schools should have obtained a state license to issue the loans and that the companies charged unlawful rates of interest. Justices ruled that Minnesota School of Business and Globe University issued the loans to up to 6,000 students, many of whom took out multiple loans.
MSOB and Globe University called this product a “loan” at least 45 times in a loan contract with students, but claimed in court the product was not a loan but an “open-end consumer credit plan.” This is significant, because the interest rate on a “loan” of this type in Minnesota would be capped at 8 percent, whereas “open-end consumer credit plans” can charge interest of 18 percent under Minnesota law. The Minnesota Supreme Court found that the products were loans and that the companies unlawfully charged rates of interest that exceeded the allowable 8 percent interest rate.
“We felt it was important for the Minnesota Supreme Court to give direction on the matter," said Minnesota Atttorney General Lori Swanson in a released statement. "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. We plan to immediately ask the district court to declare the loans void and cancelled and to require the schools to refund borrowers for payments they have already made.”
This is the second major decision against SOB and Globe University. In 2016 Minnesota Attorney General Swanson sued the schools, alleging the schools violated state consumer fraud laws by enrolling students in a costly criminal justice program that did not prepare them to become police officers or probation officers. After the Hennepin County Court ruled in Swanson's favor, the Office of Higher Education revoked the companies’ authorizations to operate because the court found they engaged in fraud.
Swanson's office maintained the schools charged students up to $42,000 for a two-year degree and $89,000 for a four-year degree. That is almost four times more than a Minnesota community college and two-and-a-half times more than a public university in Minnesota. In fact, the companies’ tuition was so high that federal loans were not enough to pay for tuition for many students. The companies issued their own private loans to about 6,000 of their students (many of whom took out two or more loans) at interest rates of up to 18 percent.