Attorney General Ellison wins expansion of federal-loan discharge for MSB/Globe University students
Following advocacy by AG Ellison’s office, the US Dept. of Education will now allow students who withdrew any time after court found schools had engaged in fraud to apply to discharge their federal loans
August 8, 2019 (SAINT PAUL) — Minnesota Attorney General Keith Ellison announced today that based on recent action by the U.S. Department of Education that he advocated for, students who withdrew from the Minnesota School of Business (MSB) and Globe University (Globe) at any time after September 8, 2016 may now be eligible for relief from federal student loans they used to attend the closed for-profit schools.
“Students from MSB and Globe were just trying to afford their lives and get ahead — but because these schools engaged in fraud and closed their doors, many of them ended up saddled with debt and with little or nothing to show for it. Today, they have more help in getting back on track,” Attorney General Ellison said. “I’m glad that the Secretary of Education has acted on my office’s request to make student-loan discharge available to many more MSB and Globe students. No one who had to withdraw from a school because of the school’s wrongdoing should be saddled with federal-loan debt that keeps them from affording their lives.
“I thank the Secretary for recognizing the harsh and unfair circumstances facing MSB and Globe students who weren’t able to complete their degree through no fault of their own,” Attorney General Ellison added. “I also thank Rep. Scott and Rep. Omar for their help in securing this much-needed relief for Minnesota students.”
In January 2019, the Minnesota Attorney General’s Office sent a letter to the Secretary requesting expansion of the loan-discharge period. Since then, Attorney General Ellison has coordinated with members of the U.S. House Committee on Education and Labor, including Chairman Bobby Scott and Rep. Ilhan Omar, to urge action by the Department. The Attorney General’s Office specifically asked the Department to allow for discharge of federal loans for students who withdrew any time after September 8, 2016. That date was when a Hennepin County Court found that MSB and Globe engaged in consumer fraud and deceptive trade practices in the marketing, advertising, and recruitment of students into their criminal-justice program.
Following the Court’s findings, the Minnesota Office of Higher Education (“OHE”) revoked MSB and Globe’s registration to operate and the U.S. Department of Education did not renew the schools’ eligibility to participate in federal financial-aid programs.
This change will likely allow hundreds of former students of MSB and Globe to apply for discharge of the loans they took out to attend the schools.
Normally, students of closed schools are able to discharge federal loans they used to attend those schools if they withdrew no more than 120 days before those schools closed. Many former students of MSB and Globe, however, were until now unable to discharge their loans. Because they could not afford to attend MSB and Globe without federal financial aid, they withdrew shortly after the U.S. Department of Education revoked the schools’ eligibility to participate in federal financial-aid programs — yet MSB and Globe continued to operate for nearly a year after the court found they had engaged in fraud. Thus because these students withdrew from MSB and Globe more than 120 days before the schools closed — even though they had no other financial option but to withdraw — they have until now been ineligible to discharge the federal student loans they took out to attend those now-closed schools.
The federal student-loan debt that remained for these students prohibited them from taking out new student loans to re-start their education and subjected them to onerous payment obligations and collection costs. Also, because MSB and Globe’s credits were generally not transferrable, many of these students were left with nothing to show for the debt they took out to attend MSB and Globe, let alone the time and effort they expended to attend school. With the recently expanded closed-school-discharge period, however, many of these students who were not able to complete their education elsewhere will at least be able to remove the significant debt burden they face and restart their lives. The Department may also recoup the cost of discharging such loans from the closed schools.
Eligible students must submit an application to the Department of Education in order to receive the closed-school discharge of their federal loans. However, if eligible MSB and Globe students do not apply for closed-school discharge and do not enroll at another school that participated in federal student-aid programs within three years of the schools’ closure date, their loans will be automatically discharged.
Students are generally not eligible for discharge if they completed their program through a “teach out” agreement or were able to transfer the credits they earned at MSB and Globe to a comparable program at another institution. Students are also ineligible if they completed all of their coursework for their program.
Closed-school discharge provided by federal law is also limited to federal loans. If students seek relief from private student loans, they should consult a student-loan advisor, financial consultant, or attorney to discuss their options.
Affected students interested in determining if they are eligible for a closed-school discharge should visit the U.S. Department of Education’s website for more information. Students should contact their loan servicer to receive information on how to apply for closed-school discharge.