October 6, 2022

The decision follows findings that the school misled hundreds of thousands of students about their ability to get a job or transfer credits and about the accreditation of its associate degree in nursing.

The Education Department announced Tuesday that it will discharge $3.9 billion in federal student loans for 208,000 borrowers who attended ITT Technical Institute from 2005 through 2016.

The announcement marks the second biggest discharge in the department’s history and is the latest round of targeted federal student loan forgiveness by the White House, which now totals close to $32 billion.

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“In recent years too many for-profit colleges and career schools have been caught defrauding and deceiving their students,” Education Secretary Miguel Cardona told reporters Tuesday morning. “Their entire business model relies on driving students deep into debt and then they laugh their way to the bank.”

The decision follows findings based on internal records, testimony from former ITT managers and recruiters and first-hand accounts from borrowers that revealed the school misled hundreds of thousands of students about their ability to get a job or transfer credits and lied about the accreditation of its associate degree in nursing. The Biden administration already approved $1.9 billion in loan forgiveness for 130,000 borrowers who attended ITT in response to the same pervasive misrepresentations.

“ITT Technical Institute was among the worst offenders. ITT spun a web of lies to coerce students into enrolling into their programs,” Cardona said. “Students emerged from their time with ITT having made little to no progress on their education journey and they were saddled with debt that they couldn’t escape, until now.”

The discharge will also cover borrowers who enrolled in ITT but have not yet applied for what’s known as borrower defense – the process through which borrowers can have their loans discharged if they are defrauded by their school or if it closes suddenly prior to them finishing their degree program – and won’t require any additional action on their part, according to department officials.

The decision comes in the wake of a long-standing investigation by the Consumer Financial Protection Bureau that resulted in $498 million in private student loan cancellation. The agency sued ITT nearly a decade ago, alleging that it pressured students into taking out high-cost private loans even though ITT knew most of them would ultimately default.

At its height, ITT operated 149 campuses and one training facility in 39 states and offered online programs to students in all 50 states, and roughly a dozen state attorneys general collaborated on the investigation.

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“Eight years ago when I was director of the Consumer Financial Protection Bureau we filed a lawsuit against ITT Technical institute for intentionally misleading students and saddling them with unmanageable financial burdens,” said Federal Student Aid Chief Richard Cordray, who was also on the press call. “That lawsuit was the first time the CFPB had taken action against a for-profit college.”

Since then, he said, the federal student aid office has “uncovered an institutional culture of deception and corruption that it abused the public funding offered by federal student aid.”

“To date, FSA has reviewed tens of thousands of individual borrower defense repayment applications against ITT with findings of fraud and misrepresentation that have continued to mount over time,” Cordray said.

Rohit Chopra, the current director of the Consumer Financial Protection Bureau, compared the for-profit business model to the subprime mortgage lending, which led to the foreclosure crisis that set off the Great Recession.

“Mortgage lenders dangled the American dream in front of people’s eyes and many of those lenders knew that those borrowers would probably crash and burn,” he said. “Less discussed were the same subprime style lending practices perpetrated by some of the nation’s largest chains of for profit colleges. Some of these companies also peddled the American dream to prospective students looking to climb the economic ladder looking to improve the lives of their families. Repeatedly we saw those companies engaged in widespread deception and fraud and they too structured complex loan arrangements that allowed them to harvest profits even as they set up borrowers to fail.

The Education Department also announced on Tuesday that it notified DeVry University that it is liable for roughly $24 million in approved borrower defense claims. The department announced in February that it had approved the claims after evidence surfaced that DeVry repeatedly misled prospective students from 2008 through 2015 by claiming that 90% of its graduates obtained jobs in their field of study within six months. In reality, the school’s job placement rate was 58%, according to department officials.

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