Northstar End of THE Program for Student Loan Repayment Class Action

It’s great that a student loan company would offer a program to its borrowers with advantages if they pay on time. But can the company then terminate the arrangement at will? The complaint for this class action claims that the program offered by Northstar Education Finance, which does business as Total Higher Education (THE), is “a material and binding term” of the loans offered by THE.

The class for this action is all persons and entities in the US who obtained or co-signed a student loan held by Northstar or a wholly-owned subsidiary of Northstar at the time of the resuspension of the THE program around February to March 2020.

Northstar began offering this THE program in 2001. It consisted of a kind of credit to borrowers, that effectively lowered interest rates for those who were no more than fifty-nine days late in making interest payments. According to the complaint, borrowers accepted the offer as part of their loan agreements.

However, in February 2008, Northstar suspended the THE program, an action that the complaint calls “its first unilateral breach of its loan agreements.” The reason Northstar gave for the suspension was “the ongoing disruption in the global markets”—which the complaint calls “a condition or option neither contained in, nor otherwise incorporated into[,] Northstar’s contracts…”

A class action was filed, and Northstar settled it in December 2009. The settlement agreement required Northstar to honor its THE Program for the remaining life of its loans.

Recently, in February 2020, Northstar again suspended the THE Program. This time, the reason was “changes in economic conditions.” The complaint calls this “a breach of both [Northstar’s] contracts and its settlement agreement … as well as an unfair and/or deceptive trade practice.”

The plaintiff in this case, Demian Oksenendler, researched a number of different companies that offered student loans to finance his law school education. The complaint says he chose Northstar “for one benefit alone—it offered a ‘bonus’ program, wherein for every payment paid in full and on time, he, as the borrower, would receive an additional payment or credit on his loan account, made by Northstar…”

According to the complaint, he even contacted the company to ask a representative to confirm that his understanding of the THE program was correct. The complaint says, “At no time did Northstar disclose to [Oksenendler] … that it could revoke” the program for any reason.

After graduation from law school in 2004, he consolidated his student loan debt with Northstar, again because of the THE program benefit.

When Northstar settled the class action about suspension of the program, the complaint says, the notice document assured him that the reinstatement of the program was the “core settlement benefit” from the case. Yet in 2020, Northstar again suspended the THE program. The complaint alleges that this is a breach of the earlier settlement agreement.

Article Type: Lawsuit
Topic: Consumer
Tags: Breach of Contract, Student Loans, Termination of Benefits