Friday, August 27, 2021

U.S. To Relieve ITT Student Debt

Roughly 115,000 Student Loan Borrowers who attended, ITT Technical Institute, but left without a Degree will have their Federal Student Loan Debt Cancelled, resulting in $1.1 Billion in Relief, the U.S. Department of Education, announced Thursday.

The Loan Cancellation is the latest fallout from the Collapse of ITT, once one of the Largest For-Profit College Chains, before it shuttered in 2016 amid Scrutiny from its Accreditor, State Attorneys General and the Consumer Financial Protection Bureau (CFPB).

Already, the Department of Education has Cancelled, $500 Million in Loans held by 18,000 former Students who attended ITT, during a period when the School misled Students about expected Salaries and Jobs after Graduation and their ability to transfer their Credits to other Institutions, according to the Agency. Some former ITT Students have Received more than $100 Million in Private Student Loan Relief as well.

“Today’s action continues the Department’s efforts to improve and use its targeted loan relief authorities to deliver meaningful help to student borrowers,” Secretary of Education, Miguel Cardona, said in a Statement announcing the Relief. “At the same time, the continued cost of addressing the wrongdoing of ITT and other predatory institutions yet again highlights the need for stronger and faster accountability throughout the federal financial aid system.”

To make this Debt Relief possible, Cardona used his Authority to Extend the Period of time Borrowers would be eligible for Debt Relief after their School went Out-of-Business. That’s a step the National Student Legal Defense Network (NSLDN), which represents Student Loan Borrowers and Former For-Profit College Students, called on the Agency to take, last October.

“This is relief that we’ve been calling for for a while and are excited to see the Department do this,” said Alex Elson, the Vice President for Policy at NSLDN. “This is going to be streamlined relief for borrowers who have been waiting far too long to get here.”

Still, Elson said there are other former For-Profit College Students, in similar situations, still waiting for Student Loan Debt Cancellation. “Our hope is that the Department would treat students from all of these schools in the same way and apply this type of analysis to their situation,” he said.

Typically, Borrowers who attended a School, when it Closed or within several months of its Closure, are eligible to have their Debt Cancelled, as long as they don’t Transfer the Credits they earned to another School. In this Case, Cardona Extended the Window of Eligibility for a Closed School Debt Cancellation to Borrowers who attended the School as far back as March 31, 2008, and left without a Degree.

The Bulk of these Borrowers didn’t transfer to another Institution within Three years, which means they’ll have their Debt Cancelled Automatically, according to the Department. The Agency estimates that about 43% of these Borrowers are in Default on their Loans.

Department Officials picked the March 31st, 2008 date based on a Review of evidence from ITT’s Bankruptcy Court Proceedings as well as Documents filed with the Securities and Exchange Commission (SEC) and the CFPB. Borrowers receiving this Relief attended ITT during a Period when, according to the Department, ITT engaged in Misrepresentations about its Financial Health and lured Students into taking on Costly Private Loans.

In 2014, the CFPB accused ITT of drawing New Students into the School by offering them what they called a Temporary Credit, a No-Interest, Short-Term Loan, to Cover Tuition in Excess of what they could Pay for through Federal Student Loans. When Students couldn’t Pay-Off that Sum, something the CFPB alleged ITT knew, the Bulk of Students wouldn’t be able to do, the School pushed them towards High-Interest, High-Fee Private Loans, the Agency said. At the same time, the School also Allegedly pushed Students into taking on more of these Private Loans to fill Tuition Gaps in their next year of School. The CFPB ultimately Settled its Lawsuit with ITT.

This alleged Scheme was also at the Center of a Suit the SEC filed against the School. The Private Loans that ITT allegedly pushed on Students were offered through Two Private Loan Programs connected with the School. ITT provided the Financiers with a Guarantee that if enough Students Defaulted, ITT would Pay the Loan Program Participants, according to the Lawsuit.

The SEC accused ITT of Misleading Investors about the Poor Performance of the Loan Programs, and the potential impact of the Guarantee Payments on ITT’s Financial Health. The SEC settled with ITT and the Company’s former Chief Executive Officer and Chief Financial Officer over the Allegations. “For years, ITT hid its true financial state from borrowers while luring many of them into taking out private loans with misleading and unaffordable terms that may have caused borrowers to leave school,” Cardona said in the release announcing the debt relief.

Eileen Connor, the Director of Harvard Law School’s Project on Predatory Student Lending, which is Representing former ITT Students in the School’s Bankruptcy, said that the Agency still hasn’t addressed the more than 700,000 Borrowers with more than $3 Billion in Debt from ITT. “We are again calling on the Department to do what is right when it sees evidence of widespread fraud,” Connor said. “Our clients should not have to wait another day for the cancellation of loans that never should have been made in the first place.”

Advocates have also called on the Biden Administration to hold Executives personally Liable when their Schools Collapse amid Accusations of Wrongdoing, in part so that Taxpayers and Borrowers aren’t the Only ones left Paying when the Schools Fail. Advocates have also urged the Agency to make it easier for Borrowers, particularly Public Servants, to Access the Relief they’re already Entitled to under the Law. Leading Democratic Lawmakers are also pushing the Biden Administration to offer some kind of Broad-based Student Debt Cancellation.

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