Minnesota Supreme Court says Globe, School of Business issued illegal student loans

A decision by the Minnesota Supreme Court could wipe out some $20 million in college loans for as many as 6,000 former students of the now-shuttered Globe University and the Minnesota School of Business.

The court ruled Wednesday that the two for-profit schools violated state law by issuing thousands of student loans since 2009 without a license, and by charging unlawfully high interest rates.

Minnesota Attorney General Lori Swanson promptly announced that she would seek a court order to have all those loans declared null and void, and to require the schools to pay refunds to students.

On Wednesday, the Supreme Court reversed a lower court's ruling dismissing the claims about the loans, which Swanson had raised in a 2015 lawsuit.

The high court found that the two schools failed to obtain a required state license to issue student loans, and that they were charging "usurious" interest rates — up to 18 percent, when state law caps such loans at 8 percent.

The schools claimed that the loans weren't technically "student loans" and should be exempt from those rules. Their attorney did not respond to requests for comment Wednesday.

Both schools closed earlier this year after a Hennepin County court found that they had defrauded students in a criminal justice program.

On Wednesday, Swanson said she plans to seek immediate relief for all students who have been repaying the colleges' private loans, sometimes for years. In a statement released Wednesday, she said she would ask a Hennepin County district court to declare that all "loans issued by the school on or after January 1, 2009 are void and canceled," and to force the schools to refund borrowers all the payments they've made.

Sheena Janusch, a former Globe University student from Cambridge, Minn., said the ruling was just more confirmation that she had been "suckered in" by the school.

"I keep finding out more and more and more about the dirty things they did, not only to me but to a bunch of people," she said.

Janusch said she borrowed at least $15,000 in high-interest loans from Globe to help pay for her education, only to find out that none of her credits would transfer. She ultimately dropped out without a degree, and is struggling to pay back her loans. "I feel completely taken advantage of," she said.

Janusch was one of the students who testified in a lawsuit brought by Swanson over the recruiting practices at Globe and the Minnesota School of Business. Last September, a Hennepin County court ruled that the schools violated consumer fraud laws by misrepresenting their criminal justice program as a pathway to careers in police work. The ruling, by Judge James Moore, found that recruiters used "false and misleading" claims to lure students into the program, which was not accepted by Minnesota law enforcement. That same day, the Minnesota Office of Higher Education announced it was revoking the schools' authorization to operate.

In December, both Globe and the Minnesota School of Business announced they were shutting down after the U.S. Department of Education cut off their access to federal financial aid.

The schools, jointly owned by Terry and Kaye Myhre, charged up to $42,000 for a two-year degree, and $89,000 for a four-year degree, according to Swanson's office.

Swanson said that many of the borrowers "have not been able to find gainful employment with their degrees and are swimming in student debt." The schools made an estimated $20 million in illegal loans, according to her office.

A spokesman said the attorney general plans to file a motion to require the schools to notify students who are owed a refund. In the meantime, Swanson's office plans to post updates on the case on its website, ag.state.mn.us.

Maura Lerner • 612-673-7384