Students Secure More Than $500 Million In ITT Student Debt Relief As Part of Landmark Settlement Approved Today | Press Release
November 28, 2018
Department of Education Should Cancel All Federal Loans of Former ITT Students
INDIANAPOLIS, IN – In a major victory for ITT students, a federal judge has approved a settlement today confirming that 750,000 former students were cheated by the company and cancelling every dollar of student debt held by the for-profit-school. Now the students must turn to the Department of Education to cancel their billions of dollars in remaining federal student loan debt. The students are represented by the Project on Predatory Student Lending at Harvard Law School and Jenner & Block LLP.
The landmark settlement approved today by the Bankruptcy Court in Indianapolis is the first of its kind for student borrowers and recognized a $1.5 billion claim for ITT students who attended the school between 2006 and 2016 and were subject to systematic unfair and deceptive practices. The settlement cancels all student debts – more than $500 million – that were held by the school and returns $3 million that was paid by students since the company filed for bankruptcy in 2016. It also acknowledges that student borrowers were harmed by the predatory practices of ITT and makes them the largest creditor of ITT’s bankruptcy estate. The final order will be entered in 90 days.
Now it is up to the Department of Education to follow suit and cancel all federal loans of former ITT students. Thus far, only 33 ITT students have received federal student loan cancellation based on borrower defenses, with 13,000 applications outstanding and hundreds of thousands more students who haven’t submitted individual claims.
“This settlement has done more for the cheated students of predatory for-profit colleges than Betsy DeVos has done in her entire administration,” Project on Predatory Student Lending Director Toby Merrill said. “At a time when students are being ignored by their government, ITT students stood up to this predatory college themselves and secured the relief they are owed. Now it’s time for Betsy DeVos and the Department of Education to do the right thing and cancel the billions of dollars in remaining fraudulent federal loans.”
“ITT routinely lied to hundreds of thousands of students. They targeted people who were eligible for federal loans and grants –including low-income people and veterans like me – and took advantage of our dreams and ambitions,” said Lorenzo Boyland, a former student of the for-profit ITT Technical Institute campus in Cordova, Tennessee. “While this settlement is a victory, we are still paying federal student loans that funded a school that no longer exists. All I’m asking for – all any of us are asking for – is a fair shot and a fresh start. I just hope the Department of Education is listening.”
ITT Technical Institute was a publicly-traded for-profit college with campuses across the United States. 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 show 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, former ITT students filed a class complaint and proof of claim in the school’s bankruptcy proceedings, and the settlement received preliminary approval from the judge in January 2018, laying the groundwork for the final settlement approved today.
Key terms of the agreement include:
- All of the more than $500 million in student debts owed directly to ITT are cancelled.
- All of the almost $3 million students paid directly to ITT since ITT declared bankruptcy in September 2016 has been returned to students.
- The student class holds a $1.5 billion allowed claim, making students the largest creditor of the estate. If there is money in the estate to pay unsecured claims, the student class will receive a proportional share based on the size of the allowed claim.
- ITT students keep their rights to seek further relief from the Department of Education and private lenders.
ITT’s fraud has been documented in multiple recent lawsuits. In July 2018, the SEC settled its case against former ITT executives Kevin Modany and Daniel Fitzpatrick for cheating the company’s shareholders and operating the company for their own personal financial benefit. In September 2018, the Trustee in the ITT Bankruptcy sued the Department of Education and the financial backers of the PEAKS private loan program, reinforcing the fact that ITT Tech should have been shut down many years ago and instead was allowed to continue to operate to the detriment of students and taxpayers.
Background on Department of Education actions in this case
Students, state and federal enforcement agencies, ITT, and the Department of Education itself know that ITT systematically cheated students. Former ITT students have submitted over 13,000 borrower defense to repayment applications to the Department of Education. Despite the clear case that students have a defense to the repayment of their loans because of ITT’s fraud, only a handful of those applications have been granted, and no new applications have been granted since the change in administration.
About the Project on Predatory Student Lending
Established in 2012, the Project on Predatory Student Lending is the first legal services practice focused solely on representing former students of for-profit colleges. It litigates on behalf of low-income students and against the legal and financial conditions that allow the predatory for-profit college industry to cheat students and taxpayers. The Project has won a wide variety of cases on behalf of former students of for-profit colleges. It has held the U.S. Department of Education accountable for its failures to meet its legal obligations to police this industry and to stop the perpetration and collection of fraudulent student loan debt.
About Jenner and Block
Jenner & Block (www.jenner.com) is a law firm with global reach, with more than 500 lawyers and offices in Chicago, London, Los Angeles, New York and Washington, DC. The firm is known for its prominent and successful litigation practice and experience handling sophisticated and high-profile corporate transactions. Firm clients include Fortune 100 companies, large privately held corporations, financial services institutions, emerging companies and venture capital and private equity investors. In 2018, The American Lawyer named Jenner & Block to the A-List, which recognizes the top 20 US law firms. The American Lawyer also recognized the firm as the #1 pro bono firm in the United States nine of the past eleven years; the firm has been ranked among the top 10 in this category every year since 1990.
Jenner & Block and The Project on Predatory Student Lending recently received the 2018 Pro Bono Project of the Year Award from the Turnaround Management Association Chicago/Midwest Chapter for their work on this case.
Former students of ITT can get more information here.