ITT Technical Institute, one of the largest for-profit college chains in the country with nearly 45,000 students, may be on the brink of collapse.
The U.S. Dept. of Education just announced that ITT will no longer be eligible to access federal financial aid. In other words, students attending ITT can no longer finance their education through the federal student loan and grant system. This is in response to growing federal and state scrutiny of ITT over the past several years. ITT has very high tuition (anywhere from $45,000 to $85,000) and has been accused of engaging in high-pressure sales tactics, misrepresenting the quality of its educational programs, and failing to secure adequate career outcomes for its graduates. According to a July 2014 Senate Health, Education, Labor, and Pensions (HELP) committee report, 57% of ITT programs would fail the Department of Education’s proposed Gainful Employment rule. ITT also reportedly has one of the highest student loan default rates in the country.
As part of the federal aid announcement, the U.S. Dept. of Education also announced that it is requiring ITT to substantially increase its access to credit. This requirement is an indication that the federal government views ITT as a potentially significant risk to the taxpayer, should the U.S. Dept. of Education determine that ITT students and graduates are entitled to student loan forgiveness as a result of the school’s conduct.
In response to the announcement, ITT’s stock price has collapsed, and the school has stopped enrolling new students. With ITT’s main source of revenue (federal student aid) cut off, and with potentially crippling new financial requirements, it is very possible that ITT may completely collapse, leaving tens of thousands of students with an incomplete or useless degree – and lots of student debt. It is unclear at this early juncture whether these students would be entitled to student loan forgiveness under the new Defense to Repayment regulations (which are still being finalized) – but this would be the exact type of scenario that those new regulations are designed for.
Federal student loan borrowers currently enrolled in ITT campuses should be aware that if their school closes, and that closure prevents them from completing their educational program, they may be able to apply for a discharge of their applicable federal student loans. This student loan forgiveness program is distinct from Defense to Repayment.
This is an active, evolving story – so stay tuned for updates.