AUSTIN, Texas (KWTX) Texas Attorney General Ken Paxton Friday announced a $13 million debt relief agreement for 1,430 former ITT Tech students in Texas potentially including those who attended the for-profit college here.
“Students who attended ITT Tech are burdened with unpayable debts they received while pursuing an honest education. This college and loan program failed them tremendously,” Paxton said.
In September 2016 ITT Educational Services, Inc. closed all of its ITT Technical Institutes permanently including 10 campuses in Texas, one of which was in Waco.
ITT had 45,000 students in 38 states.
Nationwide, the settlement with Student CU Connect CUSO, LLC provides debt relief of more than $168 million for more than 18,000 former ITT Tech students, Paxton said.
CUSO provided loans to finance ITT Tech students’ tuition.
ITT Tech, with CUSO’s knowledge, offered new students temporary credit to cover the gap between the full cost of tuition and the amount of federal student aid provided.
“Although most students believed that like with federal student loans the temporary credit was due to be paid six months after their graduation, ITT Tech demanded the credit be paid back the following academic year,” the attorney general’s office said in a press release Friday.
“When students could not repay their credit on short notice, ITT Tech pulled students out of class and threatened to expel them in order to coerce students into accepting high-interest loans from CUSO,” the press release said.
Students weren’t made aware of the cost of temporary credit repayment until the amount due was converted into loans.
The default rate on the CUSO loans was projected to exceed 90 percent, the attorney general's office said.
CUSO agreed to forego collection of the outstanding loans, provide credit reporting services with updated information about the students’ credit and to cease doing business.
Students will receive notices in the mail with information about their rights under this settlement, the attorney general’s office said.
“I am proud of my office for holding CUSO accountable for their abusive loan practices and aiding students who were pressured into signing a loan without knowledge of the full cost or deadlines,” Paxton said.
In late August 2016, after the U.S. Department of Education barred ITT Educational Services from enrolling new students who use federal financial aid, the for-profit college filed for bankruptcy.
Department officials announced the ban among a series of measures meant to increase financial oversight of the company, which had been the subject of state and federal investigations focusing on its recruiting and accounting practices.
ITT also was ordered to pay the department $152 million within 30 days to cover liabilities in case it closes, and the company is barred from giving pay raises or bonuses to its executives.
Then Education Secretary John King says it would be irresponsible to let new students enroll amid concerns about the chain's ability to operate.
ITT said the Department of Education actions and sanctions forced the closure.
In October 2015 Education Department officials placed limits on federal student aid administered by struggling for-profit college chain after the government determined that ITT was failing to comply with previous orders to improve its financial controls.