Minnesota attorney general strikes $39M deal to forgive loans, compensate students defrauded by for-profit colleges

Former students who were defrauded by the Minnesota School of Business and Globe University would receive loan debt forgiveness and cash compensation under a tentative agreement Attorney General Keith Ellison has struck with the for-profit colleges, their owners and the U.S. Department of Education.

Ellison announced Tuesday the tentative deal that would provide $23 million in federal student loan debt forgiveness and nearly $16 million in cash compensation to 920 former students who were fraudulently enrolled into the colleges' criminal justice program and issued "unlawful loans."

"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," Ellison said in a statement.

The agreement comes after a court battle involving two trials, several appeals and bankruptcy filings by the schools.

Hennepin County District Court concluded in 2016 that the schools committed consumer fraud in telling students they could pursue careers as police or probation officers by enrolling in a criminal justice degree program that cost $40,000-$80,000. The program did not actually provide the education needed to pursue those careers.

Ellison's office also accused the two schools of violating Minnesota laws by issuing loans to students at "predatory" 18% interest rates. The courts agreed, ordering the loans void and subject to full refunds.

The schools issued partial refunds totaling $3.7 million in 2018 before delaying further repayments when they filed for bankruptcy.

The new agreement must be confirmed by the federal government.

Ryan Faircloth • 612-673-4234