Northstar allegedly suspended their low interest program in light of the coronavirus pandemic

A class action lawsuit has been filed against Northstar Education Finance by a student loan borrower who claims that the company unlawfully suspended its low interest program due to the economic downturn caused by the coronavirus.

Plaintiff Demian Oksenendler says that the company offers a low interest loan called the “T.H.E. Repayment Bonus” to borrowers who were no more than 59 days late in making payments. 

The plaintiff states that in 2000-2001, after he received his undergraduate degree, he started shopping around for student loan options to assist in his law school aspirations.

Oksenhendler says he decided to go with Northstar because they offered the “T.H.E. program” whereby the company would provide a credit on the loan for every on-time payment he made.

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The class action lawsuit alleges that, before he committed to the “T.H.E. program,” the plaintiff contacted Northstar to confirm that his understanding of the program was correct. He argues that at no point did Northstar say that they would stop the savings program for any reason.

The plaintiff graduated law school in 2004 and decided to consolidate his loans with Northstar, understanding that the “T.H.E. program” would be in place for the remainder of his loan period, the Northstar class action lawsuit maintains.

In February of 2008, Northstar notified their borrowers that, because of the “ongoing disruption in the global markets,” they would be suspending the “T.H.E. program,” according to the Northstar class action lawsuit.

The plaintiff claims that the suspension of the program was not legally valid as nowhere in the loan documents does it say that the company could change or stop the program.

In 2009, Oksenhendler says he received notice that a class action lawsuit had been filed against the company because it had unlawfully stopped the “T.H.E. program.”

The plaintiff was allegedly informed that a settlement had been reached with Northstar and that the loan reduction program would be continued for the remaining life of the student loans.

According to the Northstar class action, the terms of the settlement agreement with Northstar included the company’s obligation to honor the “T.H.E. program” to all students for which payments were no more than 59 days late.

In March 2020, Oksenhendler claims that he received another notice from Northstar saying that the “T.H.E. program” would be suspended due to the “changes in economic circumstance.”

According to the Northstar class action lawsuit, Northstar did not even mention its obligation under the previous class action settlement to continue the “T.H.E. program.”

“Northstar’s renewed suspension of the T.H.E. Program is a breach of both its loan contracts and its settlement agreement with Plaintiff and the other Class members, as well as an unfair and/or deceptive trade practice,” the Northstar class action lawsuit says.

Northstar allegedly suspended their interest rate reduction despite a free falling stock market.

The plaintiff claims that he was damaged as a result of the 2008 and 2020 decisions to cease the loan program as his interest rate was increased.

Oksenhendler alleges that he and other putative Class Members complied with the terms of the program by paying student loans on-time and thus should be entitled to the lower interest rates on his student loans, regardless of the financial climate.

“Northstar’s latest failure to honor its contractual obligation to maintain the T.H.E. Program and to pay the T.H.E. Repayment Bonus is a breach of both its underlying loan contracts and its Settlement with Plaintiff and each of the other Class members and is an unfair and/or deceptive trade practice,” the Northstar class action lawsuit argues.

The Northstar class action lawsuit claims that the company breached their contract with borrowers, breached the settlement agreement, violated the Minnesota Uniform Trade Practices Act, the Minnesota Prevention of Consumer Fraud Act, The California Consumer Legal Remedies Act, and California’s Unfair Competition Law.

The lawsuit involves many questions of law, including: 1) whether Northstar committed the wrongful conduct alleged; 2) whether Northstar’s acts constitute a violation of the law; 3) whether the putative Class Members have sustained damages and will continue to have damages due to Northstar’s conduct; 4) whether the possible Class Members are entitled to compensatory and statutory damages; and 5) whether potential Class Members are entitled to injunctive or other relief.

Prospective Class Members include: “All persons and entities in the United States who obtained or co-signed a student loan held by Northstar or a wholly-owned subsidiary of Northstar at the time of the Re-Suspension of the T.H.E. Program in or about February to March, 2020.”

The plaintiff is represented by Robert K. Shelquist of Lockridge Grindal Nauen PLLP, Adam J. Levitt, John E. Tangren and Adam M. Prom of Dicello Levitt Gutzler LLC and Jennie Lee Anderson of Andrus Anderson LLP.

The Northstar Student Loan Class Action Lawsuit is Oksenendler v. Northstar Education Finance Inc., Case No. 0:20-cv-00805, in the U.S. District Court for the District of Minnesota.

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1 Comment

  • Dannica Zow March 31, 2020

    Are there other loan companies other than Northstar who should waive the payment as well? My student loans were automatically withdrawn from my account on March 26, 2020, during these difficult times.

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