Starting today, former MSB/Globe students to finally receive nearly $24M in debt forgiveness, $16M in restitution for fraud, illegal lending
Restitution checks to be issued starting today; now-final deal brings relief to 920 students hurt by fraud and more than 3,000 harmed by illegal lending at now-shuttered schools
October 4, 2021
Hotly contested case ends with final approval of bankruptcy court; resolves lawsuit AG’s office first brought in 2014
September 30, 2021 (SAINT PAUL) — Minnesota Attorney General Keith Ellison announced today that $23.6 million in debt relief has now finally been approved for former students of Minnesota School of Business (MSB) and Globe University (Globe) and that $15.6 million in additional cash restitution will begin to be distributed, as early as today. This relief is the result of an agreement that fully resolves the State’s lawsuit against MSB and Globe and proceedings in federal bankruptcy court. The agreement, first reached in March, has now been approved by a bankruptcy court and confirmed by all parties, finally resolving the hotly contested case. The Attorney General’s office first sued MSB and Globe, alleging consumer fraud and illegal lending practices, in 2014.
“Starting today, money will finally get back in the pockets of students who were defrauded by MSB’s and Globe’s false claims and charged illegal rates of interest,” Attorney General Ellison said. “I am glad everyone affected will finally get some closure and a measure of justice. I’m very proud of the Attorney General’s Office for fighting and winning one of the biggest consumer-fraud cases we ever filed and one of the only cases against a for-profit college ever brought to trial.
“I remain heartbroken, however, by what students who attended MSB and Globe’s fraudulently marketed ‘criminal-justice’ program went through. These students — many of whom were low-income, people of color, veterans, and supporting families while working — wanted nothing more than to get a degree that would allow them to pursue a career in public service and help them afford their lives. What they got instead was a waste of time and money and seemingly inescapable debt. Students were also signed up for loans at illegally high interest rates, which further buried them in debt and poverty. I hope that the debt relief and payments beginning today will help them finally put this behind them and get them on track to affording their lives and living with the dignity and respect that we all deserve.”
Restitution for MSB/Globe students
Under the now-approved agreement, students who enrolled in the schools’ fraudulently marketed “criminal-justice” program between 2009 and 2016 and submitted certified claims for relief will receive forgiveness of the federal student loans they took out to attend the program. Eligible students will also begin receiving cash payments to refund them at near 100% of what they paid to attend the criminal-justice program, along with compensation for payments made on their federal student loans. Additional restitution will also fully refund students who were signed up for illegal loans the schools themselves offered students at interest rates as high as 18 percent.
Claimants who attended the “criminal-justice” program can expect to receive notice from the U.S. Department of Education regarding their student loans in the near future. Restitution payments will be distributed by the former trustee appointed to manage the schools’ assets during the bankruptcy proceedings, who was designated as “Disbursing Agent” under the court-approved bankruptcy plan.
Checks are expected to start going out to claimants of the former “criminal-justice” program on Thursday, September 30. Restitution for borrowers of illegal loans will soon follow.
Additional information about the case and resources for students who enrolled at MSB and Globe can be found at this page on Attorney General Ellison’s website. Consumers with questions can contact the Office by calling (651) 296-3353 (Metro area) or (800) 657-3787 (Greater Minnesota).
Background to AGO’s litigation against MSB/Globe
The case began as part of an effort by state attorneys general across the United States to address fraud and abuse uncovered in the for-profit-college industry by a 2012 report by a U.S. Senate committee. The total amount of financial relief secured for former students from the Attorney General’s litigation against MSB and Globe, including debt forgiveness and restitution, exceeds $46.3 million.
Since the Attorney General’s Office first sued MSB and Globe in 2014, the case has seen two trials, several appeals, and a bankruptcy filing by the schools. In 2016, the Hennepin County District Court found MSB and Globe engaged in consumer fraud by misleading students to believe they could pursue careers as Minnesota police or probation officers. In truth, the schools’ “criminal-justice” degree — which cost between $40,000 and $80,000 — provided no value towards pursuing those careers. The court’s findings detailed how the fraud was pervasive and harmed students who wasted time and took out crushing debt as a result of their enrollment. The court ordered a process whereby eligible students who attended the program could claim restitution.
Despite the court’s order, the restitution claims process was delayed by appeals and a bankruptcy filing, but the Attorney General’s Office continued the fight and was able to secure the financial relief announced today.
In addition to fraud and deception that the Attorney General’s Office alleged MSB and Globe had engaged in when it came to marketing their “criminal-justice” degree, the Attorney General’s Office also alleged that loans that MSB and Globe issued to its own students at predatory 18 percent interest rates violated Minnesota’s “usury” law. The courts ultimately agreed and ordered the loans void and subject to full refunds. Partial refunds of $3.7 million were made by the schools in 2018, though additional refunds were delayed when the schools filed for bankruptcy.
The agreement to bring final resolution to the case in bankruptcy court was originally reached and announced in March 2021: it was subsequently approved by the U.S. Department of Education and now by the bankruptcy court. The agreement to resolve the case was joined by a former MSB/Globe criminal-justice student, Tamara Blanchette, who brought a class action against the U.S. Department of Education and alleged the Department improperly engaged in collection actions on her federal loans. Blanchette is represented by the National Student Legal Defense Network, a Washington D.C.-based nonprofit.
Other Attorney General enforcement actions against misconduct by for-profit schools
The Minnesota Attorney General’s Office has taken numerous enforcement actions against for-profit schools and related companies that engaged in misconduct.
• In April 2021, Attorney General Ellison formally sought federal loan forgiveness on behalf of students that attended and were defrauded by now-defunct ITT Technical Institute.
• He also obtained $2.6 million in private debt relief for ITT students harmed by illegal lending practices in settlements obtained in 2019 and 2021.
• Attorney General Ellison has led the fight for expanded debt relief for students who took out worthless loans to attend failed for-profit school Argosy University.
• He has also filed lawsuits and obtained several settlements against companies that have harmed Minnesota borrowers with false promises of loan forgiveness.
The Attorney General has also advocated for broad-based debt relief and stronger protections for borrowers and taxpayers before the U.S. Department of Education.
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