Nearly $4 billion in federal student loan debt canceled for former ITT Tech students




  • In Business
  • 2022-08-17 05:31:39Z
  • By LA Times
The ITT Technical Institute campus in Rancho Cordova, Calif., is closed in September 2016 after the school
The ITT Technical Institute campus in Rancho Cordova, Calif., is closed in September 2016 after the school's shutdown. Hundreds of thousands of students who took out federal student loans to attend ITT Tech as far back as 2005 will automatically have that debt canceled. (Rich Pedroncelli / Associated Press)  

Nearly $4 billion in student loan debt will be canceled for 208,000 former students of for-profit ITT Technical Institute, the U.S. Department of Education said Tuesday.

The decision came after federal investigations found that the school, which shut down in 2016, had defrauded hundreds of thousands of students with false claims about their ability to get jobs or transfer credits and lied about the accreditation of its nursing program.

It follows a move by the Department of Education last year to wipe out debt for 18,000 former ITT Tech students who had filed loan forgiveness claims through the "borrower defense" program, which allows those whose schools misled them or broke laws to have their debt discharged.

All remaining federal student loans taken out to attend ITT Tech from Jan. 1, 2005, through its closure will be canceled without any additional action on the part of borrowers, officials said, resulting in $3.9 billion in full loan discharges.

"This is a very long time coming," said Thomas Schwarze, a former ITT Tech student who participated in a debt strike that began in 2016, in which dozens of students refused to make payments on federal loans taken out to attend the school.

"The predatory debt accumulated set individual students and their families back decades," Schwarze said in a statement.

ITT Tech was one of the nation's largest for-profit education chains, with more than 130 campuses, including 14 in California. When it closed, it had 35,000 students enrolled and more than 8,000 employees.

The chain offered technical training and degrees in business, computer engineering, information technology and cybersecurity, marketing itself to students looking for the flexibility to pursue an education while working their current jobs.

Its TV commercials featured students who were unhappy with their careers or were "going through some tough times," suggesting that enrolling at ITT Tech had changed their fortunes. Much of this messaging was by design, one report found.

As a part of the school's "pain funnel," ITT Tech's recruiters were trained to build rapport with prospective students, then ask them questions that made them feel vulnerable - about working dead-end jobs or an inability to support their family financially - before suggesting enrolling at the school was "the opportunity to make that pain go away," according to a February report by the Harvard Law School's Project on Predatory Student Lending, which Sen. Richard J. Durbin (D-Ill.) presented to Congress in an April speech.

ITT Tech's closure followed state and federal investigations into its recruiting and loan practices, which resulted in a Department of Education ban on the school admitting any new students who use federal financial aid.

The Consumer Financial Protection Bureau sued ITT Tech in 2014, accusing the school of pressuring students into taking out high-cost private loans even though it knew that most of them, many from low-income families, would default on the loans. The school reached a settlement in 2020, paving the way for $330 million in private student-loan forgiveness for 35,000 former ITT Tech students.

So far, most of the Biden administration's efforts around federal student loan forgiveness have focused on students who were found to have been defrauded by private, for-profit colleges such as ITT Tech and DeVry University.

"The evidence shows that for years, ITT's leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause," Education Secretary Miguel Cardona said Tuesday in a statement. "The Biden-Harris administration will continue to stand up for borrowers who've been cheated by their colleges, while working to strengthen oversight and enforcement to protect today's students from similar deception and abuse."

The Department of Education also announced Tuesday that it had notified DeVry that it was liable for nearly $24 million in approved borrower defense claims.

With the COVID-19-related pause on federal student loan payments, an action taken under President Trump in March 2020, set to expire at the end of August, advocates for student debt cancellation are hoping for a more broad loan forgiveness plan.

Before the pause was extended in May, many were expecting the Biden administration to forgive $10,000 in student debt for those earning less than $125,000 a year. In total, 43 million Americans owe $1.6 trillion in federal student loans, the biggest share of consumer debt in the U.S. after mortgages.

The possibility of such a sweeping move would be a "direct result" of the fight for loan forgiveness for students at for-profit schools such as ITT Tech and the now-defunct Corinthian Colleges, said Thomas Gokey, organizer and co-founder of the Debt Collective, which helped students from both schools organize loan strike campaigns and has advocated for debt forgiveness.

ITT Tech borrowers who took part in that debt strike "were told they were crazy and that they should shut up and pay their loans," said Ann Larson, also a Debt Collective co-founder.

"They kept fighting through three presidential administrations," Larson said. "And now everyone knows they were right all along."

This story originally appeared in Los Angeles Times.

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