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Student Loans: Law Graduate Sues Lenders for Interest 'Scheme"

A law school graduate is suing his student loan lenders saying they had a "scheme" to collect additional interest from students in debt.

Justin Kuehn, 29, a graduate of George Washington University Law School, accuses Citibank, Discover and Discover's subsidiary, The Student Loan Corporation, of "deceiving" borrowers into believing that their monthly payments had been reduced because of an interest rate reduction when the payment toward the principal had just been lowered. He says he hopes his case becomes a class-action lawsuit.

Kuehn, who practices commercial litigation in New York City with the law firm Brar Wexler Eagel and Squire, is requesting an injunction and unspecified damages from the defendants for systematically breaching contracts and violating business law.

By the time Kuehn graduated from law school in 2007, he had four separate private graduate school loans. He consolidated the four -- two with Citibank and two unsubsidized loans with Sallie Mae -- with the Student Loan Corporation in November 2007. The original balance of his consolidated loan, with a fixed interest rate of 9.55 percent and standard payments, was $99,148.19.

Kuehn had an automatic debit monthly payment of $845.72 from his checking account for four years, occasionally making additional payments to the principal to repay the loan faster, until January 2012. That's when he said the Student Loan Corporation "unilaterally" dropped his monthly payment to $539.27, but his interest rate was only reduced by 0.5 percent to 9.05 percent from 9.55 percent.

"They claimed it was due to an interest rate reduction but I knew that, just by the amount of that drop, that couldn't be correct," Kuehn told ABC News.


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