ITT tech lawsuit update created two in-house student-loan programs as private lenders retreated from the market at the peak of the 2008 financial crisis. Banks stopped extending credit to students at for-profit colleges, due to their historically high default rates.
ITT Tech issued students “temporary credits” to hide remaining tuition after federal and personal student loans were taken under consideration . Some former students said the credits were marketed as grants, while others said they were told the credit wouldn’t need to be repaid until six months after graduation. But when the temporary credit became due, ITT Tech allegedly pressured students into accepting loans with double-digit interest rates from PEAKS.
According to the complaint, students said they were pulled out of sophistication or threatened with expulsion if they refused to simply accept the loan terms. Many of the previous students lacked the means to continue their education and said they felt there have been no other options than to simply accept the loans. Eighty percent of the loans fell into default as students couldn’t continue with payments.
Even as students began defaulting in great numbers around 2011, ITT Tech continued issuing the high-cost loans. The tactics landed the company’s administration within the crosshairs of the Securities and Exchange Commission. The agency settled fraud cases in 2018 against former ITT chief executive Kevin Modany and former chief treasurer Daniel Fitzpatrick for allegedly deceiving investors about high rates lately payments and defaults on student loans backed by the corporate .
ITT Tech Lawsuit Update: How to Benefit from Debt Relief Options?
ITT Technical Institute had been a for-profit school since 1969 and got closed in 2016. Before the closure, it had 137 campuses, around 35000 students, and 8000 employees. Hence, it is no wonder that such a huge for-profit educator’s closure affected thousands of people.
Though the government and other parties tried to make this process less damaging to students and employees, it was impossible to benefit all. Like several other for-profit institutions, ITT Tech students also had massive debts and a high default rate. ITT Tech even had two private loan programs to provide funds for the students. That is the main reason why lawsuits still continue, and the ITT Tech lawsuit update is announced almost every year.
The controversial loan program left thousands of students struggling with the payments. As the institution declared bankruptcy, all affected stakeholders – creditors, employees, federal regulators, and students tried to get their share from the liquidated assets.
ITT Tech Lawsuits
Though the educational institution closed in 2016, the controversies around ITT Tech started long before. Several years before the closure, the university faced lawsuits due to the failure of its two loan programs – PEAKS and CUSO. The programs aimed to help students pay tuition fees during the financial crisis of 2008. However, these funding sources had high-interest rates, and students were pressured to get loans. Soon, they became ineligible for the student debt repayment, which was the start of chain events that led to the closure.
In this guide, we cover the details of the ITT Tech lawsuit and explain thoroughly how it all started. Next, we will present different ITT Tech lawsuit update news throughout recent years, including the most recent announcement of $300 million worth forgiveness. Lastly, borrowers will get familiar with possible debt relief programs and Biden’s approach to student loans.
Why did ITT Technical Institutes close?
In 2016, ITT Educational Services announced the closure of all ITT Technical Institutes. This organization was the operator of the institutes, and it ‘blamed’ the government for the closure. In fact, many different parties involved in ITT tech issues blamed each other for the sad ending. ITT officials said that the closure happened due to the Education Department’s pressure. Financial analysts also supported this argument by adding that the Education Department required ITT Tech to provide a credit letter worth $247 million. A bank usually gives such a credit letter, and it shows that the organization has the amount in the bank account. In this way, the Education Department guarantees that the students and taxpayers are protected with those funds if the ITT Tech is not available to meet federal aid liabilities.
While the Education Department’s requirement seems reasonable as it attempts to protect large groups of people, this letter was devastating news for ITT Tech. They already had a $124 million worth letter of credit, and the officials could not provide more. In fact, the Education Department’s requirement indicated that the institute could not continue operating. As a result, ITT Tech lost its right to enroll students, access federal aid, pay bonuses, etc. Following, the news influenced the stock prices, and they reached ever-low rates. Therefore, the ITT Tech officials ‘blamed’ the government- Department of Education for the closure. They even said that due to this department’s disregard, thousands of students, alumni, and employees were affected negatively. At that time, ITT Tech employed 8000 people, and it had around 35000 students in 137 campuses.
What was the Response?
On the other hand, the Undersecretary of Education noted that while they understand the negative consequences of closure, it was their responsibility to protect all students and taxpayers. Additionally, the officials tried to make events less-damaging for the students. They contacted all students to inform them about the possible options and created webinars to guide the confused individuals. After the closure, students could transfer the credits to different institutes if they wished to continue education. However, in that case, the students could not apply to the loan forgiveness program, called Closed School Discharge. The officials made sure that students know their options and decide reasonably.
Was ITT Tech Responsible for the Closure?
Although the organization saw the Department of Education as responsible for the closure, there were some opposing ideas. A critic of for-profit colleges said that ITT Tech was responsible for closure because they attracted students to low-quality education to get higher profits. ITT had several opportunities to make things right, but instead, they continued with fraud. In fact, ITT Tech also faced some allegations like deceptive marketing and predatory loans even before the closure.
Besides, the reason behind the Department of Education’s new letter of credit requirement was ITT’s accreditation threat. First, the accreditation council asked the educational institute to prove why it deserves accreditation. As concerns increased about the accreditation, the Education Department asked the ITT Tech to allocate new funds to protect students. They knew that if ITT Tech loses accreditation, thousands of students will be eligible for student loan forgiveness options.