U.S. cancels $3.9 billion in ITT Tech students' loan debt
The Biden administration said Tuesday it will grant full, automatic forgiveness of $3.9 billion in education debt held by former students of the defunct, for-profit ITT Technical Institute.
The action covers 208,000 people who were enrolled with ITT Tech from Jan. 1, 2005, to its closure in September 2016. Former students are not required to submit an application and will receive a letter from the Education Department informing them of the pending discharge.
"The evidence 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, with no regard for the hardship this would cause," Education Secretary Miguel Cardona said on a call with reporters Tuesday.
Since taking office, the Biden administration has whittled away at debt-relief claims filed by ITT Tech students who say they were defrauded by the chain. It has approved $1.9 billion in discharges for 130,000 ITT Tech students in the past year based on evidence of widespread misrepresentations by the school.
State and federal authorities, including the Consumer Financial Protection Bureau, found ITT Tech had routinely misled students about the ability to transfer their credits to other schools. They also discovered the for-profit chain lied to students about employment and earnings prospects after graduation.
"Many ITT Tech students were misled, coerced or victimized by other illegal misconduct," said Maryland Attorney General Brian Frosh, a Democrat who helped secure a $330 million settlement against ITT Tech over private student loans. "We are pleased that the Department of Education heeded our recommendation to forgive the federal loans owed by defrauded students."
Before closing in 2016, ITT Tech was being investigated by more than a dozen state attorneys general and two federal agencies over allegations of fraud, deceptive marketing or steering students into predatory loans.
An accrediting body threatened to end its relationship with the chain, and the Education Department curtailed ITT's access to federal student aid. The company filed for bankruptcy protection to liquidate its business.
At the time of its closure, ITT had 35,000 students and 8,000 employees across 137 campuses.
Since then, former students such as Tasha Berkhalter have been fighting for debt relief.
Berkhalter enrolled at ITT Tech in 2006 after leaving the Army to pursue a bachelor's degree in criminal justice. Before she graduated, she had used all of her GI Bill education funds and needed to borrow nearly $100,000 in federal student loans. Employers, she said, deemed the degree worthless, making it almost impossible to find work to repay what she owed.
"Whenever I told employers where I attended college, I was shown the door," Berkhalter, a mother of five, told reporters Tuesday. "The cloud [of debt] has been removed from over my head."
Tuesday's announcement marks the second-largest group discharge of federal student loans to date, following the Education Department's cancellation of $5.6 billion in debt held by Corinthian College students in June.
The administration also announced other steps it is taking to hold colleges accountable and ease the burden of debt on students.
The Education Department said it has formally notified DeVry University that it is liable for nearly $24 million in federal loans the department has discharged through the debt relief program known as "borrower defense to repayment." In February, the department identified about 1,800 DeVry students who were eligible for $71.7 million in debt relief.
DeVry, once one of the largest publicly traded for-profit colleges, changed ownership and became a private entity in 2018, when Adtalem Global Education sold it to Cogswell Education. The university can appeal the department's decision or request a hearing at the agency.
University spokeswoman Hessy Fernandez said that the department's fraud allegations predate the current leadership but that the school disagrees with the agency's position.
"We continue to believe the Department mischaracterizes DeVry's calculation and disclosure of graduate outcomes in certain advertising, and we do not agree with the conclusions they have reached," Fernandez said in a statement Tuesday.
Meanwhile, the department also said it will approve the cancellation of debt held by roughly 100 people who attended Kaplan Career Institute in Massachusetts from July 2011 to February 2012.
Those students were identified by Massachusetts Attorney General Maura Healey in 2016 after an investigation found the now-defunct school had inflated job placement rates and used aggressive sales tactics to get people to enroll in its medical billing and medical assistant programs. The allegations were the center of a 2015 investigation by the Democratic attorney general that resulted in a $1.3 million settlement with Kaplan Higher Education, the parent company, which denied the charges.
Kaplan, a subsidiary of Graham Holdings Co., which once owned The Washington Post, sold or closed dozens of Kaplan Career Institute locations around the time of the settlement.
Healy filed an application for a group discharge that languished at the Education Department for six years. Students involved in the application filed a class-action lawsuit this year, accusing the agency of dragging its feet on a decision. Tuesday's announcement could resolve that case.
With the announcement, the Biden administration has now approved nearly $32 billion in loan forgiveness to 1.6 million borrowers.
Still, activists and liberal lawmakers are clamoring for the president to fulfill a campaign promise to grant some form of widespread forgiveness to the 45 million people with $1.6 trillion in federal student loans. Biden has promised to deliver a decision before the end of the month.