Update | ITT Trustee, CFPB, and States Settle with Private Lender to Eliminate Millions in Debt
June 14, 2019
Settlements Do More for Cheated ITT Students Than DeVos
As Betsy DeVos and the Department of Education continue to sit idly, indifferent to massive fraud committed by ITT against more than 750,000 former students, the CFPB and a group of 44 states and the District of Columbia filed proposed settlements with one of ITT’s private lenders, a group of credit unions called “the CUSO.” This coincides with a federal bankruptcy court approving a settlement between the ITT bankruptcy trustee and the CUSO. The settlements will provide important relief for former students who took out private CUSO loans. Once the settlements are approved by the court, the CUSO is compelled to:
- Stop collection of all outstanding CUSO loans;
- Direct credit reporting agencies to delete consumer trade lines associated with the CUSO loans; and
- Request that the IRS not require the CUSO to report the cancelled loans as income to borrowers.
The CUSO and ITT are charged with perpetrating a scheme in which interest-free loans made by ITT to students (“temporary credits”) were converted into high-interest, private loans that students were likely to default on. CUSO participated in the scheme, which was designed to help ITT evade federal regulations and write-off bad debt, because the credit unions stood to make a profit—at the expense of the students that ITT swindled.
Yet again, this means that everyone else has done more for the cheated students of ITT Tech than the Department of Education has ever done.
Cancellation of ITT student loan debt makes a real difference for borrowers, but does not begin to address the millions of dollars in unenforceable federal and private student debt that is still outstanding.
While over 14,000 borrower defense applications from former ITT students are pending—thousands submitted over three years ago—the Department continues to move at a glacial pace, having approved only 33 applications to date. This unreasonable, unnecessary, and unfounded refusal to acknowledge students’ claims is an indignity to borrowers who sought an education and better life, but were instead cheated, lied to, and defrauded.
The Department continues to shirk its duty to process borrower defense applications and remains complicit in the ITT-related fraud it oversaw and approved. That needs to change, and we will continue to pressure the Department to eliminate ITT federal student loan debt.
- ITT Bankruptcy Settlement Does More for Cheated Students Than DeVos
- ITT Students’ $1.5 Billion Bankruptcy Settlement Approved by Judge