By Rachel O'Brien

Law360 (May 18, 2020, 4:43 PM EDT) -- Student loan provider Northstar Education Finance Inc. has not suspended interest rate reductions on loans as alleged in a proposed class action and isn't in breach of loan contracts or a 2009 settlement, the company said Friday in Minnesota federal court, calling the claims "unripe."

Northstar is contractually obligated to make payments to a program that lowers interest for student loan borrowers, and the company said Friday in a motion to dismiss that the March lawsuit is without merit because the company hasn't stopped the program, but even if it had, it has latitude to do so.

"Because Northstar has not failed to make a bonus payment or stated with certainty that it will ever fail to make a bonus payment, this action is premature," Northstar said.

The lawsuit filed by Demian Oksenendler claims that a February letter Northstar sent to its borrowers suspended the program that lowers interest rates, or gives a "bonus" to those who pay their loans before being late 60 days. That would violate a settlement from a similar 2009 class action that accused the company of unjustly suspending the program.

But Northstar said the settlement, which came after the early 2008 payment suspension "due to the ongoing disruption in the global markets," doesn't entitle borrowers receiving the Total Higher Education repayment bonus to guaranteed payments in all circumstances.

Because the funding for the settlement bonus trust account would be "dependent on myriad financial, business, and legislative contingencies beyond Northstar's control," the settlement agreement provided that the "settling parties cannot guarantee any particular level of funding," Northstar said in its motion to U.S. District Judge Donovan W. Frank.

The company said the 2009 settlement plainly states that Northstar is only required to make bonus payments if sufficient funding exists, and the company now argues the economic impact of COVID-19 may prevent it from making those payments.

Northstar rejected the lawsuit's characterization of the bonus program as suspended, because while the February letter informed borrowers that "recent economic conditions had jeopardized the funding for its student loan bonus program," the company hasn't ceased it, so the lawsuit is "unripe."

"Plaintiff's claims are premature and baseless," Northstar said. "He does not (and cannot) allege that Northstar actually suspended his bonus payments, and the letter he incorporates into his complaint does not disavow any contractual obligation. The letter merely predicts that funding for bonus payments will soon run out — a result contemplated by the class action settlement, which provides that no particular level of funding is guaranteed."

In the lawsuit, Oksenendler says the 2009 settlement outlines "certain circumstances" that would allow Northstar to suspend the bonus program but argues that no events have triggered a legal suspension, including the "changes in economic circumstance" cited in the February letter.

Attorneys for Northstar and for Oksenendler didn't immediately respond to requests for comment Monday.

Oksenendler 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.

Northstar is represented by Sharon Robin Markowitz, Peter J. Schwingler and Todd A. Noteboom of Stinson LLP.

The case is Oksenendler v. Northstar Education Finance Inc., case number 0:20-cv-00805, in the U.S. District Court for the District of Minnesota.

--Additional reporting by Jasmin Boyce. Editing by Brian Baresch.

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