Update | CFPB and States Settlement with Private Loan Lender to Cancel Millions of Dollars in Student Loan Debt
September 15, 2020
Once Again, Settlements Do More for Cheated ITT Students Than DeVos
As Betsy DeVos and the Department of Education issue blanket denials on borrower defense applications to former ITT students, the CFPB and a group of 47 states and the District of Columbia filed proposed settlements with one of ITT’s private lenders, known as PEAKS. Once the settlements are approved by the court, PEAKS will:
- Stop collection of all outstanding PEAKS loans;
- Direct credit reporting agencies to delete entries for PEAKS loans; and
- Ask the IRS not to treat the cancelled loans as income to borrowers.
The claims being settled alleged that PEAKS and ITT perpetrated 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. PEAKS participated in the scheme, which was designed to help ITT evade federal regulations and write off bad debt, because the private lender stood to make a profit—at the expense of the students that ITT swindled.
This is the second time that the CFPB and a group of states have gotten millions of dollars in debt relief for former ITT students on private loans. And yet again, this means that nobody has done less for the cheated students of ITT Tech than the Department of Education.
These settlements are certainly a step in the right direction, but the reality is, there are still billions of dollars in unenforceable federal and private student debt outstanding.
Any private loan debt that comes from predatory for-profit schools, like ITT, must be cancelled.
Until all fraudulent debt, both federal and private, is canceled, we will continue to fight for the justice that students deserve.