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Lawyer’s Suit Alleges a Scheme to Collect Additional Interest on Student Loans

Posted May 3, 2012 7:11 AM CDT
By Debra Cassens Weiss

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A New York lawyer claims in a lawsuit that borrowers are being duped into paying less principal on their student loans because of a misleading notice about an interest rate reduction.

Justin Kuehn, 29, says in the complaint that he became aware of the “scheme to collect additional interest” early this year when his monthly bill from the Student Loan Corp. dropped from $845 to $539, according to ABC News and Courthouse News Service. A letter stated the change reflected reduced interest rates, Kuehn said.

In reality, the interest rate drop accounted for only a small part of the reduced payment. The bulk of the decrease was because of a $293 drop in the amount of monthly principal being paid, the suit says.

"They've basically extended the term of your loan and labeled it as a reduction to the interest rate,” Kuehn tells ABC. He is seeking class action status for the federal lawsuit.

The Student Loan Corp. is a subsidiary of Discover Bank, which purchased Kuehn’s consolidated student loan in late 2011, ABC says. He is seeking treble damages and an injunction, Courthouse News Service says.

Kuehn is a commercial litigation associate with Bragar Wexler Eagel and Squire.

Related coverage:

ProPublica: “Student Loan Borrowers Dazed and Confused by Servicer Shuffle”

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