Well, that was fast.
Just two weeks after the U.S. Dept. of Education announced that it would cut off access to federal financial aid for ITT Technical Institute – one of the largest for-profit college chains in the country that has been repeatedly accused of improper conduct – the company has announced that it is closing all of its campuses. This is major news, and will have widespread implications not only for the 40,000 students currently enrolled in ITT, but also the tens of thousands of students who have already graduated. ITT’s collapse may also have ripple effects across the entire for-profit industry, as well.
Here’s what student loan borrowers need to know about the ITT closure.
Discharge
Borrowers currently enrolled in ITT campuses can apply to have their federal student loans cancelled because their school is closing. One of the key requirements of this “closed-school discharge” is that the school’s closure must prevent the borrower from completing their degree program. This means that if you transfer credits to another school, or if you enroll in a “teach out” program (where the closing school allows you to complete your program off-campus or at another school), and you then obtain your degree, you may not be eligible for this discharge. This also means, however, that borrowers who are granted the discharge may have to effectively start over on their degree at a different school.
Borrower Defense to Repayment
Federal student loan borrowers who attended ITT may have a second option to try to discharge their federal student loans: defense to repayment. This option allows federal student loan borrowers to request relief on the basis that their school engaged in illegal or deceptive conduct in violation of state law. Importantly, this could apply not just to current ITT students, but to former students as well, and it doesn’t necessarily matter whether or not you completed your degree or are directly impacted by the closure.
The problem, however, is that Defense to Repayment is a relatively new discharge option, and the application process is currently a bit of a mess. According to the Washington Post, the U.S. Dept. of Education already received at least 350 applications for Defense to Repayment from ITT students prior to ITT’s recent announcement, but no loan forgiveness has yet been granted. The U.S. Dept. of Education is in the process of creating new rules and standards for Defense to Repayment, but this likely won’t be finalized until later in 2017.
So Defense to Repayment may be an option for many ITT students, but it’s not going to provide easy, quick, or certain relief for anyone yet.
Transfer Credits?
ITT students impacted by the closure could try to transfer their credits to another educational institution to complete their degree program. That way, the time and money spent on ITT will not go entirely to waste. The problem, however, is that (as noted above) this could effectively eliminate the closed-school discharge option. Moreover, many schools may not accept some or all of ITT’s credits.
Private Student Loan Borrowers
The discharge and loan forgiveness options described above only apply to federal student loans. There is no equivalent discharge option for private student loans. So students who took out private student loans to attend ITT are going to be in a tough position. Some state attorney generals offices may be able to help – for example, some states have recovery funds that students can tap into for some modest relief.
Bottom Line
There is no one-size-fits-all solution for student loan borrowers impacted by ITT. And the information I’m providing in this article is a concise summary – it is not a comprehensive analysis of every possible permutation of options. If you are a current or former ITT student, your best course of action is going to be very fact-specific, and it will be dependent on your unique circumstances and goals. The best advice I can give at this time is to thoroughly research your options, and seek out help if you are lost. You are certainly not alone in this.
