ITT Tech Alumni Get $3.9 Billion Debt Forgiveness

WASHINGTON (AP) — Students who used federal loans to attend ITT Technical Institute as early as 2005 will have that debt automatically canceled after authorities uncovered “widespread and pervasive misrepresentations” at the now-defunct for-profit college chain, the Biden administration announced Tuesday.

The measure will cancel $3.9 billion in federal student debt for 208,000 borrowers, the Education Department said. The debt is being canceled under a federal rule known as “borrower defense,” which is designed to protect students from colleges that make false advertising claims or commit other fraud.

“The evidence shows that for years, ITT leaders intentionally misled students about the quality of their programs in order to take advantage of federal student loan programs, with little regard for the hardships that would entail,” said Education Secretary Miguel Cardona.

It adds to the administration’s growing list of partial student debt cancellations — a similar action in June promised to erase $5.8 billion in debt tied to Corinthian Colleges — but it has provided no answers on broader student debt cancellation.

President Joe Biden supported debt cancellation when he was running for president and has been considering for months canceling up to $10,000 per borrower. He recently promised to make a decision by the end of August, but Tuesday’s announcement doesn’t shed any new light on his thinking.

Through targeted cancellation of certain groups of borrowers, the administration says it has now approved nearly $32 billion in student debt for 1.6 million borrowers.

The new policy will automatically cancel any remaining federal student debt that was used to attend ITT Tech from Jan. 1, 2005, until its closure in 2016.

At its peak, ITT was one of the nation’s largest for-profit college chains, with 130 campuses in 38 states. The company abruptly closed after facing stiff penalties from the Department of Education, which accused it of pushing students into taking out risky loans and misleading them about the quality of its academic programs.

The Education Department has already approved the cancellation of $1.9 billion in debt held by former ITT Tech students, much of it for students who sought relief because they claimed they had been defrauded by the company. The new policy will not require borrowers to seek relief.

Federal officials based their decision on findings from multiple state attorneys general, as well as the Consumer Financial Protection Bureau and the nonprofit Veterans Education Success.

Investigators found extensive evidence that ITT Tech made false statements about its students’ ability to find jobs after graduation, the agency said. They also found that the chain misled students about their ability to earn transferable credits to other schools and about the accreditation of the chain’s nursing program.

“ITT has defrauded hundreds of thousands of students,” said Richard Cordray, head of Federal Student Aid, the federal agency that oversees student loans. “By providing students with debt relief, we are giving them the opportunity to resume their education without the unfair burden of student debt they are carrying because of a rogue institution.”

The decision was applauded by groups representing students.

“This is a life-changing announcement for thousands of people who simply wanted to improve their lives and trusted the wrong people to help them do so,” said Libby Webster, senior attorney at the nonprofit Student Defense.

Tasha Berkhalter enrolled at ITT Tech in 2006 to pursue a career in criminal justice after being honorably discharged from the military. Recruiters promised her she would easily find a job after graduation. But after earning her bachelor’s degree, no one would hire her.

“All this for a degree that no one takes seriously. Every time I’ve told employers where I went to school, they’ve shown me the door,” said Berkhalter, of Lima, Ohio.

Berkhalter had already managed to wipe out much of her nearly $100,000 in debt through the borrower defense rule, and she said she expects more to be forgiven soon.

“The cloud over my head has lifted,” she said. “I know there are hundreds of thousands of alumni like me who are finally getting the relief they deserve.”

In a separate action, the Department of Education has begun proceedings to recover $24 million from DeVry University to compensate for loan cancellations approved by the federal government due to alleged fraud.

In February, the Biden administration approved $70 million in aid for 1,800 DeVry alumni after the Education Department concluded the school lied about the success of its graduates to entice new students to enroll. It was the first time the agency had approved such requests for an institution that is still operating.

DeVry will now have the opportunity to present arguments as to why it should not be held liable. DeVry officials are reviewing the department’s opinion, spokeswoman Hessy Fernandez said. She noted that the school has changed ownership and management since the allegations were made.

“We continue to believe that the department misrepresented DeVry’s calculation and disclosure of graduate scores in certain advertisements, and we disagree with the conclusions they reached,” Fernandez said.

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