On April 17, 2024, U.S. District Judge Julie R. Rubin granted preliminary approval of a $28.5 million proposed settlement of a class action lawsuit filed by Relman Colfax and co-counsel the National Student Legal Defense Network against Walden University (“Walden”), a for-profit university that offers online degree programs. The lawsuit was filed on January 7, 2022 and brought claims under Title VI of the Civil Rights Act of 1964, the Equal Credit Opportunity Act (“ECOA”) and Minnesota state law. Plaintiffs alleged that Walden engaged in “reverse redlining” by intentionally targeting Black and female students for what it falsely represented to be cost- and time-effective online degree programs, but that actually amounted to an expensive predatory scheme.

Background: Predatory Lending at For-Profit Universities

The firm represents Aljanal Carroll, Claudia Provost Charles, and Tiffany Fair, and Tareion Fluker who represent a class of similarly situated students whom, they alleged, Walden trapped in its Doctor of Business Administration (“DBA”) Program.

As alleged in the complaint, Walden is a for-profit university that offers over twenty online doctoral programs. Walden touts its “intentional inclusivity”: It has conferred more doctorates on Black recipients than any other institution in the nation in the five-year period between 2016–2020, and nearly 80% of its doctoral students are women. These numbers seem laudable at first blush but, as the complaint explained, they are instead a reflection of Walden’s efforts to target its deceptive and predatory practices at Black and female prospective students.

The complaint alleged that Walden deliberately hid the true cost of its DBA program. While advertising a doctoral degree with a specific number of required “capstone” credits, it lured students to the DBA program with the false promise of a swift graduate degree. As alleged in the complaint, Walden inflated the cost of the DBA program by arbitrarily requiring students to complete additional capstone credits. Walden used this ploy to delay degree completion, thereby increasing DBA students’ tuition costs by tens of thousands of dollars. Worse still, Walden targeted Black and female prospective students by advertising in communities with a higher portion of Black residents. The complaint also described how Walden’s advertising is tailored to appeal to Black, female, and “nontraditional” students (who are disproportionately Black and female).

Plaintiffs alleged that, by intentionally marketing its predatory product to Black and female students, Walden engaged in “reverse redlining” in violation of federal civil rights and fair lending statutes and Minnesota consumer protection law.

Process: Significant Milestones

Walden sought to have all Plaintiffs’ claims dismissed. Judge Rubin held “reverse redlining” was a cognizable theory of intentional discrimination under Title VI of the Civil Rights Act of 1964, and that Plaintiffs adequately alleged facts concerning Walden’s targeted advertising towards Black students and misrepresentation of the cost of the DBA program. Judge Rubin also held that the plaintiffs’ Equal Credit Opportunity Act claims could proceed under both disparate impact and intentional discrimination theories, holding that the plaintiffs’ discrimination claims were sufficiently connected to the underlying credit transactions. Finally, Judge Rubin allowed plaintiffs’ state law consumer protection claims to proceed, holding that Minnesota law should apply and that plaintiffs had stated claims for fraudulent misrepresentation and violations of the state’s consumer protection statutes.

After Judge Rubin denied Walden’s motion to dismiss, the parties agreed to participate in mediation, and eventually reached a proposed agreement to certify the class and settle the case. Under the terms of the proposed settlement agreement, Walden will pay $28.5 million in damages and also make additional disclosures on its website clarifying the median time and expense required to complete the DBA program.

Impact: Stopping predatory lending in education

The amount of student loan debt held by American borrowers has increased rapidly over the last several decades. According to the New York Federal Reserve, total student loan debt has increased from $240 billion in 2003 to $1.6 trillion in 2022 and is now the second largest source of consumer debt. The student debt burden is not equally distributed; it falls more heavily on women and students of color.

As for-profit educational institutions have come under increasing fire and face accusations of defrauding their students, the complaint alleged that Walden was responsible for over $800 million in federal student loans in the 2019 academic year alone. Walden’s alleged practice of targeting Black and female students for predatory products has the function and effect of contributing to and exacerbating the stark racial and gender disparities in student debt loads nationwide.

The proposed settlement agreement addresses the problem of predatory lending in two ways. First, it returns millions of dollars in excess tuition to the nearly 3,000 class members who fell victim to Walden’s alleged misrepresentations. Second, it ensures that future applicants to the DBA program receive adequate information on the time and cost required to achieve a DBA degree.

In 2011, Relman Colfax brought the first reverse redlining case against a for-profit university, and, through this case, the firm continues its work fighting against predatory lending practices in the for-profit education space.

The Case Team:

The Relman Colfax litigation team includes Tara Ramchandani, Glenn Schlactus, Alexa Milton, Ted Olds, Lila Miller, Nick Abbott, and Emahunn Campbell, with paralegal support from Kelis Johnson and Don Scales. Relman Colfax is assisted by co-counsel at the National Student Legal Defense Network.

Published Decisions