Students, parents, and all-around consumers and taxpayers are growing increasingly skeptical of the dubious for-profit college model that promises valuable degrees (and ultimately, jobs) but instead leave students with crippling debt and few career options upon graduation. Rising public scrutiny in the wake of lawsuits concerning predatory loans, lack of job placement assistance, misleading recruitment claims, and deceptive financial aid activities have begun to have an effect on this industry’s worst offenders. EDMC (parent company of the Art Institutes) was sued until their stock dropped so far they eventually delisted from the NASDAQ last November, while Corinthian Colleges is selling off or shutting down campuses as it faces lawsuits and investigations from multiple state and federal agencies.
At the Huffington Post, Kyle McCarthy writes about another culprit: Globe University and the Minnesota School of Business (MSB), part of the Globe Education Network responsible for more than 30 for-profit colleges with sky-high tuition, outrageous debt, low graduation rates, high default rates, and more than their share of dirty laundry.
The tuition is so high, in fact, that often students are forced to search for alternative funds above and beyond their financial aid; and this is where the trap is sprung.
from Huffington Post (emphasis added):
Globe University and Minnesota School of Business were ripping off students with their predatory, “Educational Opportunities” (EdOp) loan at a usurious 18% interest rate. The schools also directed students to sign up for the loan through EdOpLoan.com, a website which was actually being serviced by a debt collection agency.
Unlike with federal student loans, lenders are not required to provide borrowers with benefits such as Income Based Repayment (IBR), Pay as You Earn (PAYE), public service loan forgiveness options, unemployment deferment, forbearance without fees, nor the ability for loans to be discharged in cases of fraud, school closure, or a borrower’s death or permanent disability.
A quick look at the EdOp loan promissory note shows that borrowers were also subjected to late charges, collection costs, capitalized interest, and numerous things that could trigger a default. For instance, upon graduating or withdrawing from school, borrowers immediately go into default after 30 days without payment. Other reasons for default include: failing to notify the lender of a name change within 10 days, or upon death of the borrower or co-signer…
Globe Education Network CEO Jeff Myhre has refuted the 18 percent figure, and instead cited a loan starting at 12 percent interest for students without a co-signer, 8 percent interest for students with a co-signer“. Either way, anything over 8% is considered usury in the state of Minnesota, which may have been what led Myhre (and/or Globe Education Network) to delete the article and replace it with a revised version that makes no mention of those rates.
This is also one of the reasons why Minnesota Attorney General Lori Swanson is suing Globe University and Minnesota School of Business for misleading students over their deceptive ads amounting to consumer fraud, and unlicensed lending and usury (specifically involving EdOp and StA loans). The company may have also provided “misleading and incomplete information” to students concerning those loans.
Swanson asserts that the loans may be “void” with “no obligation to pay any amount owing and are entitled to recover all amounts paid.”
This would come as vindication for students who have been taken advantage of, as well as the two former deans of the schools who blew the whistle on falsification of job placement numbers, inflation of graduation rates and defying accreditation standards.
For more details in the ongoing case, read McCarthy’s full article at the Huffington Post.
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