WASHINGTON – An advocacy group for students with education debt problems has sued the U.S. Department of Education for trying to collect delinquent payments from students who were defrauded by the Minnesota School of Business and Globe University.
The National Student Legal Defense Network said the education department and Secretary of Education Betsy DeVos are improperly seeking federal loan repayment from students who the department and the Minnesota courts agree were illegally misled by the for-profit school, which closed in 2016.
The federal case filed in Washington by the legal defense network covers roughly 200 Minnesota School of Business and Globe University (MSB-Globe) students who testified or filed written affidavits in a Minnesota state court fraud case against the school.
“We have a very strong case that [the education department] shouldn’t be trying to collect on these loans,” said Robyn Bitner, an attorney with the legal defense network.
An education department spokesperson said “the department does not comment on pending litigation.” The spokesman referred a request for documents describing the department’s handling of MSB-Globe to the department’s freedom of information section for a formal filing.
Tax refund seized
The lead plaintiff in the lawsuit, Tamara Blanchette of Minneapolis, was among hundreds of students seeking criminal justice degrees from MSB-Globe that turned out to be worthless in securing jobs as probation and police officers, despite the school’s promises. Blanchette was also among students told her credits from the for-profit school would transfer to other institutions. That, too, was untrue, the education department found.
Blanchette stopped paying her federal loan. Then, the education department stepped in and seized her tax refund, legal defense network lawyer Alex Elson said.
When the education department told Blanchette it was taking her tax refund, Elson said, it did not tell her that she had the right to challenge the seizure under a federal “borrower defense program.”
Other students who testified in the MSB-Globe fraud case suffered similar seizures, including threats of wage garnishment, Elson and Bitner said. The suit argues that promissory notes associated with the student loans void repayments if schools involved violate the law or federal rules.
The education department is only allowed to collect on loans that are legally repayable, the suit claims, so the education department should stop trying to collect and refund all of the money seized so far.
Jim Spencer • 202-662-7432