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Former Globe University/MN School of Business students win loan forgiveness, compensation

The schools closed in 2016, and filed for bankruptcy in 2019.

Hundreds of former students of Woodbury's Minnesota School of Business (MSB) and Globe University will have their unlawful loans forgiven and will receive compensation for being fraudulently enrolled in a criminal justice program.

The Minnesota Attorney General's office announced Tuesday that 920 former criminal justice students will have $23.1 million in federal student loan debt forgiven, while $15.6 million in additional compensation will be paid out as part of a settlement reached with the owner of the for-profit colleges and the Department of Education.

It stems from a lawsuit first filed by then Attorney General Lori Swanson back in 2014 after the colleges misled students about the jobs they could get with their criminal justice degree, wrongly suggesting it would qualify them for a career in the police or as a probation officer.

A Supreme Court ruling in July 2017 also found that the colleges were unlawfully offering student loans without a license, and were gouging students by charging interest rates of up to 18 percent.

The schools had argued they weren't making loans, but instead were extending credit to students, which at the time they argued was an important distinction because Minnesota law capped interest on loans at 8 percent, but allowed up to 18 percent on a credit line.

Both schools closed their campuses in December 2016, and filed for bankruptcy in November 2019.  The agreement with the Minnesota AG's Office filed on Monday evening in bankruptcy court by a trustee acting on the owner's behalf to pay the schools' debts.

The settlement will also see the schools' owner pay out $3.4 million in refunds to thousands of other students who signed up for student loans through the schools, and an additional $7 million paid to the Department of Education.

The schools had previously paid out $3.7 million in partial refunds in 2018.

 “People take out student debt because they trust it will help them better afford their lives in the future. For students in the so-called “criminal justice” program, MSB and Globe University abused their trust,” Attorney General Keith Ellison said.

"These students were often low-income, often veterans, often people of color, often supporting families while working full-time. They wanted nothing more than to get a degree that would allow them to pursue a career in public service. What they got instead was a waste of their efforts and inescapable debt. What they went through is heartbreaking.

“This agreement should finally resolve one of the biggest consumer-fraud cases ever brought by the Attorney General’s Office, and one of the only cases against a for-profit college ever brought to trial in America."

The settlement must be approved by the U.S. Department of Education before payments can be issued and loan debts forgiven.

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