Project on Predatory Student Lending Statement on Education Department’s Processing of Automatic Closed School Discharges For Former ITT Students | Press Release

September 19, 2019

BOSTON– The Project on Predatory Student Lending today issued the following statement after the U.S. Department of Education confirmed it has finally begun to process automatic closed school loan discharges for a select group of former students of the predatory for-profit college, ITT Tech.

The Department had fought against discharging bogus student loans from ITT Tech for years. Ultimately, Education Secretary Betsy DeVos and the Department were mandated to take today’s action after a successful lawsuit brought on behalf of students by the Project and Public Citizen (Bauer v. DeVos) that ended the illegal delay of the 2016 borrower defense rule, which included the automatic closed school discharge. The rule requires the Department of Education to automatically (without application) discharge the loans of students whose schools closed while they were enrolled, making them unable to finish their program, if they had not enrolled in another school within three years. Approximately 45,000 students were attending ITT Tech when it closed in September 2016, and were left with massive debt and no diploma.

The following is a statement by Toby Merrill, Director of the Project on Predatory Student Lending

“Today’s action is welcome news for a select few ITT students, but it leaves far too many ITT students waiting for justice,” Project on Predatory Student Lending Director Toby Merrill said. “Betsy DeVos made these students wait years for relief they are owed and only granted these discharges after our lawsuit forced her to implement the automatic closed school discharge rule. But, thousands more ITT students cannot celebrate because their debts are still hanging over their heads, and their lives remain on hold. It is time for Betsy DeVos to finally follow the law and cancel the debts of all ITT students once and for all.

“It was only 3 weeks ago that DeVos published a new borrower defense rule gutting protections for borrowers that will eliminate the automatic closed school discharge and will leave students without a safety net if their school abruptly closes.  Under the rule that the Department proposed, these 45,000 students would still be carrying this bogus debt.

“ITT students were scammed. They were lied to and they are paying the price every single day. All ITT Tech students, and anyone defrauded by a for-profit college, should have their bogus debt discharged so that they can go on with their lives.”

Background

ITT Technical Institute was a publicly-traded for-profit college with campuses across the United States. Over a million former students suffered immense harm from attending ITT, one of the most notorious bad actors in the for-profit college industry. It engaged in a massive fraud against students, regulators, and shareholders. ITT deceived and misled students about financial aid and costs of attendance, job placement and salaries, the quality of equipment and experience of instructors, the desirability of ITT graduates by employers, ITT’s programmatic accreditation, the transferability of its credits, and career placement assistance. ITT also used high-pressure sales tactics to get students to enroll and remain enrolled.

Over the last decade of its existence, ITT took in over $7 billion in student aid, the majority of which came in the form of federal student loans. ITT’s investment in education was dwarfed by its spending on advertising and executive compensation. Data from 2014 shows that on average, ITT graduates earn the same or less than high school graduates with no college education. Approximately one in five ITT students defaulted on their federal student loans within three years.

In January 2017, the Project on Predatory Student Lending, on behalf of former ITT students, filed a class complaint and proof of claim in the school’s bankruptcy proceedings, and won more than $500 million in relief through a settlement approved in 2018.

The Project also led the way to force the Department to implement the 2016 Borrower Defense Regulations, including the automatic closed school discharge rule that led to today’s action. In the landmark case, Bauer v. DeVos, a federal judge ruled that the delays in implementing the rule were illegal and forced the Department to implement the regulations in October 2018. This case directly resulted in the Department of Education’s cancellation of $150 million in debt for 15,000 students whose for-profit schools had closed while they attended. ITT students who were enrolled when the company failed hold about $460 million in federal student loans that now will be discharged.

Unfortunately, on the Friday before Labor Day this year, the Department also issued new borrower defense regulations that gut fair, basic, and needed protections for hundreds of thousands of student borrowers across the country, including many who were defrauded by for-profit colleges. The Project has vowed to challenge these new regulations.

“At every opportunity, Betsy DeVos has turned her back on the very students and taxpayers she is supposed to protect,” Merrill said. “These devastating new regulations would eliminate the very rule that resulted in today’s loan discharges. We cannot and will not let this happen. If Betsy DeVos won’t listen to students, then they’ll make their voices heard through the courts once again.”

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