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Educational Opportunity? Globe University's Murky Student Loan Partnership With Debt Collection Agency

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Recently, Jeff Myhre, CEO of the Globe Education Network, issued a statement in response to my article, Globe University: Profiteering off the Backs of Students and Taxpayers. In Jeff Myhre's response, he specifically takes issue with my pointing out that Globe Education Network schools and the Myhre family have profited off lending money to students at 18% interest, loans which they must use to pay for the schools' extremely high tuition. Myhre attempts to deflect attention away from this predatory lending and instead, deceptively sell Globe University as an opportunity for those less fortunate. His response is factually deficient in many areas and fails to address perhaps the biggest question of all: why does the Educational Opportunities Loan website have the same mailing address as a debt collection agency? At best, it is a public display of a CEO out of touch with the services his company provides. At worst, an executive blatantly misleading students and the public about services his institutions offer.

The Globe Education Network makes up more than 20 for-profit colleges owned by Jeff Myhre's father, Terry Myhre, operating under the names Globe University, Minnesota School of Business, and Broadview University, among others. In Myhre's recent response, he mentions that the Educational Opportunities (EdOp) Loan Program was discontinued this past March and is no longer offered at Globe Education Network schools. However, this loan is still marketed on the Globe University website under the loans and grants page, and students can still fill out an application on the EdOp Loan website. Regardless of whether or not this specific loan is still being offered, the fact still remains that a loan with predatory terms was issued to students, and the Myhre family profited from it.

For years, the EdOp Loan has been marketed as one of the "primary sources of financial aid" (at Globe?) and carried an 18% interest rate. As I mentioned in my previous article, the mailing address listed on EdOpLoan.com happens to be the same mailing address for American Accounts and Advisers, a debt collection agency. As of March 31 of this year, Terry Myhre had more than $1.2 million in loans outstanding to Broadview University students. Terry Myhre owns 87% of the share of Broadview University and because it is a publicly traded company, we are able to see this information. Each of the 20+ other Globe Education Network schools is privately owned by Myhre, so this information is not publicly available. However, there certainly is reason to believe that Terry Myhre has been profiting off students with these loans at his other schools as well.

Myhre lists a series of bullet points which he claims are the terms of the EdOp Loan. Let's take a look at one:

  • The interest on the loan varies, but is reduced with consecutive on-time payments and at program completion. Students have the opportunity to reduce interest to zero percent.

Myhre indicates that the interest on the EdOp loan is variable but is reduced with consecutive payments and upon graduation. This is comical. He is the CEO of colleges with horrendous graduation rates and many with very high student loan default rates. According to the school's own website, Globe University's flagship location in Woodburry, Minnesota, for instance, has a graduation rate of 30%, and in 2011 Broadview University had a graduation rate of only 19%.

Students at Globe also graduate with far more debt than average. A report available at PellInstitute.org, which lists the cumulative student debt in Minnesota in 2009-2010, is quite telling. According to the report, students graduating from Minnesota State universities in 2010 finished with an average of $23,879 in student loan debt. Students graduating from one of the University of Minnesota campuses finished with an average of $26,727 in federal student loan debt. However, the 45 students that graduated from Globe University finished with an astonishing average of $44,824 in student loan debt. The 312 graduates of Minnesota School of business finished with an average of more than $45,244 in student debt.

With average student debt so much higher than the state and national averages, how could he (better to say, anyone, or, Myhre) possibly expect students who borrow at a high interest rate offered through the the EdOp Loan to continuously make payments? The most recent data shows that the three year cohort default rate at Globe University for federal student loans is 17.5%. It would be interesting to see what the default rate is for the EdOp Loan since it is not factored into this number and has an interest rate multiple times higher.

Another point Myhre lists is certainly puzzling:

  • No late fees

Yet, the EdOp Loan promissory note, as seen below, certainly lists a variety of late fees.
2013-11-19-latecharges.jpg

Is Myhre looking at a different loan than the rest of us? Because once again, Myhre lists another term of the loan which contradicts the promissory note on the EdOp Loan website.

  • The loan goes into default after 6 months of nonpayment

According to Myhre, the EdOp Loan goes into default after six months of nonpayment. At no point does it say this in the promissory note (or anything even close).

2013-11-19-wholeloanduedefault.jpg

Myhre goes on to say that the EdOp Loan has been replaced with the Student Access (StA) Loan program. According to Myhre, with this new loan, the interest rate is lowered to between 8% and 12% and the interest is eliminated upon graduation. The only problem is, as I mentioned earlier, there is low graduation rate at Globe Education Network schools, so presumably, most students would not see zero percent interest.

I asked Joshua Cohen, an attorney specializing in student loan law, to take a look at the terms of the Educational Opportunities Loan and here is what he had to say:

First, if a student can't afford a school with federal aid alone, the school is overpriced. Period! Secondly, this is one of the worst private student loan programs I've seen. Where do I even start with this? An 18% interest rate? And there is an interest rate reduction for completing a grade? That is very telling - these people don't expect their students to get very far if they consider that an incentive. What student goes to a school without the expectation of graduating? The incentive to graduate IS graduating, not a reduction in their student loan interest rate.

As Cohen points out, students are unable to cover tuition solely with federal loans at some schools due to the exorbitant tuition prices. This certainly seems to be the case with Globe University and others in the Globe Education Network. Though the Globe University website makes it a bit confusing to understand exactly what a student would be paying with tuition and fees, the Minnesota State Colleges and Universities website breaks down the price for every college in the state. According to the list, a student can attend any state or community technical college for about $5,000 a year, any of the state universities for between $6,600 and $7,900 a year, or one of the University of Minnesota campuses for between $12,600 and $13,400 a year. However, attending Globe University/Minnesota School of Business would cost someone more than $17,500 a year.

According to the terms listed at EdOpLoan.com, the interest can be reduced by 1% for students reaching "diploma level," 2% for those getting their Associate's degree, and an additional two percent for students who then graduate with a Bachelor's degree. Cohen took the time to examine and break down the terms of the loan as listed on EdOpLoan.com:

Let's do some fun math. First, I'm not sure how a 1% reduction is possible for diploma level, unless these folks are admitting students that don't have a HS diploma/GED, in which case such folks aren't eligible for Fed Aid in the first place!

We're going to assume our test subject has a high school diploma and starts out with the 18% interest rate, makes it to AA, which reduces the interest rate to 16%. Then the student graduates with BA, reducing it to 14%. According to their own site, the maximum reduction is 4%. And 14% interest is still higher than most private student loans I've seen. After graduation the now 14% interest loan can be reduced by .5% every three consecutive on-time payments. This would mean seven straight years of on-time payments for the borrower to ever have a chance at 0% interest.

Myhre culminates by saying, "the sole reason our schools exist is to educate, graduate, and help the students we serve improve their careers. We're proud to be able to provide our students with the needed financial support to make college possible."

That's rich. This, coming from the same company that has faced lawsuits from two former deans who claim they were fired from Globe University/Minnesota School of Business for blowing the whistle about misleading practices and education fraud. Allegations include violations of accreditation standards, paying commission to recruiters for bringing in students, exaggerating the university's job placement statistics, inflating the university's graduation rates, failing to provide sufficient training for its students and more. This past August, Globe/MSB was forced to pay one of those former deans, Heidi Weber, nearly $400,000 after a jury decided she was unjustly terminated by the school for blowing the whistle.

Currently, Globe University faces a class action lawsuit brought by current and former students to "end the misleading, unfair, deceptive, false, fraudulent, manipulative, and company-wide statements, practices and omissions" which the school is accused of using to profit from these students. According to a former Globe University admissions counselor, admissions counselors are trained use emotionally manipulative language when recruiting students, and to "find their pain."

American Accounts and Advisors Owns EdOpLoan.com
Myhre frames the new StA loan as a great opportunity for those that may not otherwise be able to finance their education. New loan or not, one big question still remains unanswered: Why does the debt collection agency, American Accounts and Advisers, share the same mailing address as the address listed on EdOpLoan.com, the site where students apply for the EdOp Loan? The website EdOpLoan.com also lists Myhre Investments and Globe Education Network schools as lenders for the EdOp Loan. Perhaps, that is because American Accounts and Advisors actually owns the website EdOpLoan.com?

2013-11-19-whois.jpg

Recently, Globe Education Network's CEO, Jeff Myhre, responded to my article questioning the terms of their Educational Opportunities Loan, an institutional loan with an 18% interest rate. Unfortunately, his response is misleading and dishonest in many ways and has led to more questions than answers. Myhre also fails to acknowledge the relationship between the Globe Education Network and the debt collection agency that owns the website which hosts applications for this institutional loan. Globe Education Network students deserve better and so do the taxpayers.