A defunct Laurel trade school claims that illegal acts by the state's student loan guarantee agency and a major bank forced it to go out of business, and the school wants $560 million in compensation.
In a suit filed Wednesday in Prince George's County Circuit Court, National Training Systems Inc. and the school's owner, Charles R. Longo, charge that Signet Bank of Maryland abrogated its responsibility as "lender of last resort" for the state when it slowed, and finally refused, loans to the school's students in 1989 and 1990.
As a result, the suit says, the truck driving and computer training school had no money with which to teach new students and went out of business.
The suit also charges the Maryland Higher Education Loan Corp., the quasi-independent agency that guarantees federalloans for Maryland students, with failing to guarantee loans for students or to provide another lender of last resort when Signet did not come through.
Federal regulations require that state guarantee agencies, which administer the federal student loan program, find a bank to serve as a lender of last resort for those students who cannot obtain loans elsewhere or, alternatively, make the loans itself.
Officials for the Maryland loan agency could not be reached for comment and officials of Signet Bank, which makes $140 million in new loans annually, declined to comment. However, Senior Vice President Benjamin A. LeBorys III said the bank continues to make loans to needy students as the designated lender of last resort in Maryland. While the bank will loan to students, he said, it can reject individual schools it chooses as credit risks.
NTS once served up to 4,000 students ayear and grossed millions of dollars in tuition from student loans. It filed for bankruptcy under Chapter 11 and went out of business last year.
Higher education officials charged the school with a "systematic pattern of unethical recruiting practices" and with falsifying student records to avoid refunding tuition. Mr. Longo said the charges were never proved.