Nearly 6,000 students in Minnesota are paying student loans at a rate that's illegal, according to the Minnesota Attorney General.
An active lawsuit argues Globe University is pressuring students into loans without being clear about what they're signing up for. The maximum interest rate a school can charge in Minnesota is 8%.
Globe University is charging more than double that rate, according to Minnesota's Attorney General, Lori Swanson. She says the university is charging 18%. On top of that, the lawsuit says the university isn't a licensed lender.
Promising to pay thousands of dollars back is a commitment Carolyn Zehren says many students take too lightly, "We hear so many times from students, well I am not going to worry about that now, I'll get a great job, I'll get a great salary, and I'll be able to pay it.” Zehren is the Financial Aid Director at Minnesota State University Moorhead.
Students are a group that some feel can be easily taken advantage of, "For a student, any of these off the wall, or non-recognized loan programs are really scary. It's like going to a money lender, because you are desperate for money."
That's why the Minnesota Attorney General's Office is suing Globe University. "The school is taking advantage of their dreams," says Attorney General Lori Swanson says, it's not just Globe University, and it's not just Minnesota. She claims there are plenty of loan companies trying to rip you off.
"When they are starting out, they are coming out of high school, they haven't incurred financial loans before. These loans can be pretty complicated." Her advice is to take advantage of federal loans, and read the fine print if you must take out a private loan.
"I heard is what we hear periodically, someone told me, or I thought, or I guess, no get the facts,” says Zehren. She’s explaining if it's overwhelming students should seek expert help, and be careful who you trust.
In the case of Globe University, the Attorney General advises students for now to keep paying their loans, "I don't know if the school would sue them, or if the school would try to file a report with the credit bureau to hamper or harm their credit. I just don't know what the school would do."
If the state finds Globe University is in the wrong, students could get some money back. The case against Globe University is set to go to trial in November.
On top of getting students' money back, the lawsuit is asking for a change in practices, a fine. We reached out to the university, but haven't heard back yet.
Globe University has been accused of fraud in the past, but has an A+ rating with the Better Business Bureau.
Minnesota Attorney General, Lori Swanson is speaking out about Globe University’s student loans, saying the university is charging illegal interest rates.
By law, Minnesota sets a cap on student loan rates at 8%, but AG Swanson says Globe University is charging 18%. AG Swanson says the university is pitching loans to students in a way that confuses students, and often times the student is unclear about what they are signing up for.
“Defendants train their admissions representatives to “master the art of selling” and tell them that “selling education is different from any other type of selling.” Defendants use what they call “qualitative selling” or “the reverse approach,” which they define to mean presenting “challenges to the potential students and an attitude that they must prove their worthiness of being accepted.” Defendants tell recruiters: “During your questioning you will allow your potential student to start selling you on the reasons he should be considered for acceptance,” says AG Swanson.
The average student takes out $28,400 in loans. With the maximum loan rate of 8% a student would pay around $30,672. With a Globe University loan at 18% a student would pay around 33,512. That’s at a simple rate, rates can change depending on circumstances.
AG Swanson also says Globe University is not a licensed lender, and in the state of MN that’s illegal.
The full report is attached to this article.
Coming up on Valley News Live at 6, Crime and Safety Reporter Nicole Johnson tells us what happens if you get an illegal loan, and how to spot them.