In October, the U.S. Department of Education ordered Globe to stop enrolling students, and this month, DOE cut off all federal student-aid funding to Globe. Globe cannot survive without federal student aid money, and it seems likely it will soon file for bankruptcy.
Bankruptcy is a good thing for failing colleges. In fact, several higher education institutions filed for bankruptcy during the last two years, including Corinthian Colleges, ITT Tech Services, Anthem College, and Dowling College. Bankruptcy will allow Globe to shut down operations in an orderly manner and ensure that its creditors are treated fairly and equitably.
If Globe/MSB files for bankruptcy, it will be required to list its assets. Those assets will likely include loans it made to its own students. Kyle McCarthy, writing for the Huffington Post in 2014, reported that 42 percent of Globe's students had private loans; and some of these loans were originated by Globe University, Minnesota School of Business, or Terry Myhre, the owner of Globe University.
Ironically, Globe University has easy access to the bankruptcy courts, where it will be able to shed some if not all of its debt, but Globe's students who file for bankruptcy will find it almost impossible to get relief. And this is true even though a judge found that Globe had committed fraud.
Why is this? Because private student loans issued by for-profit colleges, like federal student loans, cannot be discharged in bankruptcy unless the debtor can show that repaying the loans will cause "undue hardship," a tough standard to meet.
Obviously, this is a grave injustice. In my view, students who took out loans from for-profit colleges that committed fraud should have all their student loans automatically forgiven: federal loans, private loans, and loans issued by the college themselves.
|Terry Myhre, the owner of Globe University, receiving an award from the Daughters of the American Revolution|
Christopher Magan. Fraud ruling threatens Globe U, Minnesota School of Business with closure. Twin City Pioneer Press, September 8, 2016.
Judge Orders Globe University, Minnesota School of Business to Stop Fraudulent Marketing. KSTP Television News, September 10, 2016.
Kyle McCarthy. Globe University: Profiting Off the Backs of Students and Taxpayers. Huffington Post, January 23, 2014.
Shahlen Nasiripour. Corinthian Colleges Files for Bankruptcy. Huffington Post, May 5, 2015.
Andrew Skurria. Dowling College Files for Chapter 11 Bankruptcy. Wall Street Journal, November 29, 2016.
U.S. Department of Education. Globe University, Minnesota School of Business Denied Access to Federal Student Aid Dollars. U.S. Department of Education press release, December 6, 2016.