MINNEAPOLIS (WCCO) — The state’s highest court ruled Wednesday that two private, for-profit schools based in Minnesota issued thousands of illegal loans to students – which will be voided.
The Minnesota Attorney General’s office says officials at Globe University and Minnesota School of Business, which are owned by a Minnesota family, never obtained a state license to offer loans.
About 6,000 students took out financial products called “loans” from the schools at interest rates of up to 18 percent.
But despite referring to the products as “loans” dozens of times in their contract, the attorney general’s office says the schools insisted in court that they were actually “open-end consumer credit plans.”
Minnesota law requires student loan interest rates to be capped at 8 percent.
The Minnesota Supreme Court ruled that since the schools set interest rates above 8 percent, they were breaking the law.
“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,” said Minnesota Attorney General Lori Swanson.
Loans made without a license in Minnesota are considered null and void, and the debtor is not required to pay them back.
Swanson says she is asking a county judge to order the cancellation of loans issued by the schools on or after Jan. 1, 2009.
The schools will also be ordered to refund student borrowers all principal, interest and any others fees they have paid.