Why did ITT Tech close? Biden cancels student debts worth $3.9bn

Bruno Cooke August 17, 2022
Why did ITT Tech close? Biden cancels student debts worth $3.9bn

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The Biden administration announced Tuesday (August 16, 2022) that it will cancel nearly $4 billion worth of federal loan debt for students who attended ITT Technical Institute (or ITT Tech for short) – why did the for-profit college chain close down?

The debt cancellation will affect 208,000 borrowers from as far back as 2005.

It comes amid assertions that those operating the defunct college chain were guilty of “widespread and pervasive misrepresentations” regarding the quality of ITT’s programs as highlighted in Huffpost.

It also follows the government’s decision to erase $5.8 billion in debt from those who borrowed in order to attend Corinthian Colleges institutions between 1995 and 2015. More on that below.

CHANTILLY, VA SEPTEMBER 6: The Chantilly Campus of ITT Technical Institute sits closed and empty on Tuesday, September 6, 2016, in Chantilly, VA. ITT Educational Services, one of the largest operators of for-profit technical schools, ended operations at all of its ITT Technical Institutes today, citing government action to curtail the company’s access to millions of dollars in federal loans and grants, a critical source of revenue. (Photo by Jahi Chikwendiu/The Washington Post via Getty Images)

When did ITT Technical Institute close its US campuses?

For-profit college chain ITT Technical Institute closed down its 130 US campuses in September 2016, according to NPR

It disseminated letters to its 35,000 students just one week before the fall term was due to begin. The letters informed them that campuses would not open.

The last-minute decision left students “scrambling” for options since many educational institutions had already started their fall classes. 

The Indiana-based parent company ITT Educational Services also reportedly cut more than 8,000 jobs at the same time. 

Sylmar CA – September 18, 2016: ITT Educational Services Headquarter in Indiana. ITT Technical Institute has decided to close all its campuses in the wake of devastating federal sanctions. The school shows its doors closed days after it file for bankruptcy for misleading students into high amounts of debt.

Why did ITT Tech close?

ITT Educational Services blamed the “actions of and sanctions from the US Department of Education” for its closure.

In a press release dated September 6, 2016, the company said the action of its federal regulator “to increase our surety requirement to 40 percent of our Title IV federal funding,” and place its schools under “Heightened Cash Monitoring Level 2,” had forced its hand.

It called the situation a “lawless execution,” citing an editorial in The Wall Street Journal. The editorial argued the Obama administration’s Education Department had given ITT Technical Institute a “de facto death sentence.”

“The ITT story is worth telling,” reads the article, from August 29 that year, “because it shows how a regulatory assault can kill a company without proving a single allegation.”

Photo by Joshua Roberts/Getty Images

What have people said about the company since?

In its report on the Biden administration’s cancelation of $3.9 billion worth of federal student loan debt, HuffPost quotes education secretary (pictured above) Miguel Cardona’s summary of what had really – in his view – been going on at ITT.

“The evidence,” he said, “shows that for years, ITT’s leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs.” They did so, he said, “with no regard for the hardship this would cause.”

The Education Department has approved the cancelation of debt held by former ITT Tech students before. But then, they had to apply for it. This time is different, as borrowers don’t need to apply for the relief to receive it. Nevertheless, there are those that think it still doesn’t go far enough.

Federal officials based the decision to cancel the loan debt on information from various sources: state attorneys general; the Consumer Financial Protection Bureau; and the nonprofit Veterans Education Success.

‘ITT defrauded hundreds of thousands of students’

Richard Cordray is the chief of the federal office that oversees student loans. His line is that ITT “defrauded hundreds of thousands of students.”

Separately, in June this year, the Biden administration announced that students who attended the for-profit Corinthian Colleges chain would automatically have their loans canceled. 

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“Every student deceived, defrauded and driven into debt by Corinthian Colleges,” Cardona said at the time, “can rest assured. The Biden-Harris Administration has their back and will discharge their federal student loans.”

“For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep.”

On the campaign trail, Biden said he supported debt cancelation of at least $10,000 per person; in April, AP News reported that he was taking a “hard look” at it.

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Bruno Cooke has been a freelance journalist since 2019, primarily with GRV Media. He was an early contributor to The Focus, and has written for HITC, Groundviews and the Sheffield University newspaper – he earned his MA in Global Journalism there in 2021. He’s the Spoken Word Poetry Editor for The Friday Poem, and self-published his debut novel Reveries in 2019, which his mum called both a “fine read” and “excellent Christmas present”. Bruno has lived in China, Sri Lanka and the Philippines and likes, among other things: bicycle touring, black and white Japanese films, pub quizzes, fermentation and baklava. In 2023, Bruno will set off with his partner on a round-the-world cycle.