Borrower Sues Student-Loan Lender for Allegedly Reneging on Its Contract

A student-loan borrower has filed a class-action lawsuit against student-loan lender Northstar Higher Education for allegedly breaking its contract with borrowers.

In the suit, filed Monday with the U.S. District Court in Los Angeles, Northstar is accused of breaking its contract by eliminating its “Total Higher Education Repayment Bonus,” a program that offers borrowers a 0.75-percent interest-rate reduction for 60 days of on-time payments.

Northstar eliminated the program on February 18 of this year, citing the failure of the auction-rate securities used by lenders to finance student loans, according to an article in the Minneapolis Star Tribune (“Student Loan Firm Sued Over End to ‘Repayment Bonus’ Program,” July 16, 2008).

“While Northstar might be facing financial difficulties comparable to other banking institutions, this does not provide it with carte blanche to breach its contractual obligations,” the suit reads.

The suit, filed on behalf of plaintiff Jennifer So, seeks monetary damages and contractual interest-rate reductions for any borrower who had student loans with Northstar on February 18.

The student loan company had not received a copy of the complaint by the time the Star Tribune went to print on July 16, but Northstar’s General Counsel Mark Lindgren said, “Northstar takes it obligations to its customers seriously and believes it has fully complied with the terms of its agreements. In particular, the company has always sought to provide its customers with the benefits from T.H.E. Bonus but has never guaranteed that the bonus would be available under any and all market conditions.”

Share this post: email this | del.icio.us | reddit