Some students may be eligible for loan discharge after ITT closes 130 campuses
The for-profit school ITT Educational Services closed more than 130 campuses Tuesday, blaming the development on a federal aid ban for new students.
The U.S. Department of Education in 2014 expressed “significant concerns” about the school’s organization and financial viability, and recently found that it was not in compliance with accreditation criteria, the Chicago Tribune reports. The department decision followed an August Accrediting Council for Independent Colleges and Schools finding that ITT was not in compliance with the group’s accreditation criteria, nor was it likely to get in compliance.
Besides banning federal aid, the department ordered ITT, a publicly traded company, to increase its $94 million surety requirement to more than $247 million.
“This action of our federal regulator to increase our surety requirement to 40 percent of our Title IV federal funding and place our schools under ‘Heightened Cash Monitoring Level 2,’ forced us to conclude that we can no longer continue to operate our ITT Tech campuses and provide our students with the quality education they expect and deserve,” a press release by the Indiana-based company, dated Sept 6, reads.
The company also claims that the department rejected its proposal to sell campuses, and the administrative process was “inappropriate and unconstitutional.”
“We were not provided with a hearing or an appeal,” the press release reads. “Alternatives that we strongly believe would have better served students, employees, and taxpayers were rejected. The damage done to our students and employees, as well as to our shareholders and the American taxpayers, is irrevocable.”
Additionally, the statement asserts that over the past 50 years, ITT schools have helped “hundreds of thousands” of students improve their lives through technical education, and “thousands” of employers relied on the company for employees.
State and federal authorities see things differently, the Washington Post reports. Besides Department of Education scrutiny, ITT is also under investigation by more than a dozen state attorneys general.
Moreover, the Securities and Exchange Commission accuses ITT—along with its chief executive, Kevin Modany, and its former chief financial officer, Daniel Fitzpatrick—of making false and misleading statements about its in-house student loan programs. That matter is set to go to trial in October 2017.
ITT is also being sued by the Consumer Financial Protection Bureau. According to the Washington Post, CFPB alleges that the school provided zero-interest loans to students, but didn’t disclose that they could no longer take classes if they didn’t repay the money in one year. Students who could not meet the deadline were forced by the school to take out high-interest loans to repay their original ones, the complaint argues.
“The only people responsible for ITT’s collapse are ITT’s executives who sucked students into low-quality education programs so they could boost profits and take home bigger paychecks,” Sen. Elizabeth Warren (D-Mass.), told the paper. “ITT had years to clean up its act and multiple warnings, but instead, it chose to engage in outright fraud to keep the gravy train going to the tune of over $600 million in taxpayer dollars just last year.”
The Chicago Tribune reports that 40,000 students thought they’d start classes at ITT on Sept. 6. If they or recent ITT students have federal loans for the program, they may be eligible for loan discharge, according to a blog post by John B. King Jr., the U.S. Secretary of Education.
Students also could transfer credits to a different school, but that could limit any ability to have federal loans discharged. King’s post mentions College Scorecard, a DOE website that includes information such as which junior colleges have graduates with the highest salaries.
“Restarting or continuing your education at a high-quality, reputable institution may feel like a setback today, but odds are it will pay off in the long run,” King writes.
