Feds tell pair of MN colleges: 'No student loans for you'

Globe University, Minnesota School of Business can't accept federal student loan money in 2017

The financial walls are closing in on a pair of Minnesota-based for-profit colleges.

Globe University and Minnesota School of Business (MSB), which have the same owners, learned Tuesday they won't be allowed to accept federal student loan money starting on New Year's Day.

That means anyone who uses a federal loan to help pay tuition won't be able to spend it at those schools, which have seven Minnesota locations (and others in Wisconsin and South Dakota).

The U.S. Department of Education made the announcement and sent letters to Globe and to MSB telling them they can't take part in the loan programs because a Minnesota court found they had defrauded students.

Here's why the loans got yanked

In September a court agreed with Minnesota's attorney general that recruiters for Globe and MSB had purposely misled students about their criminal justice programs. They said the schools made it sound like when they finished at Globe or MSB students would be able to get jobs or transfer to other colleges.

But in reality, the Education Department said Tuesday, lots of them were left thousands of dollars in debt with no job prospects or transferable credits.

So because the court found they had defrauded students, Globe and MSB are not eligible to take part in the student loan programs.

What happens now?

Minnesota had already told the schools they couldn't enroll any new students in the state. But more than 1,000 are already enrolled and probably want to finish their programs.

Those students are getting ready for finals now. If they rely on student loans from the government, they won't be able to go back to Globe or MSB after New Year's.

In a Facebook message to students, the schools say they're working on arranging transfers.

The president of Globe and MSB, says things that happened only in the criminal justice program are causing the state and federal governments to punish the entire schools and all their students.

Jeff Myhre tells MPR News: "Instead of helping students in one program, their actions will eliminate options and tarnish the degrees of thousands of graduates."

Will the schools stay in business?

There's no straight answer for that yet, but they're trying to navigate a whole minefield of issues.

As their website notes, Globe and MSB were already trying to get a renewal from the group that accredits them (it's called ACICS). The lawsuit filed by Minnesota's attorney general is still tied up in court. The Office of Higher Education revoked their registration with the state, which is why there's that freeze on enrolling new students.

And now they're losing their student loans.

The Education Department says in the 2014-15 school year Globe and MSB together got nearly $54 million through the federal loan programs.

Minnesota's Commissioner of Higher Education, Larry Pogemiller, told MPR Tuesday's decision by the feds "strikes at the financial viability of the organization."

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