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.
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.
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.”
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.”
“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.