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Department of Education Cancels Nearly $4 Billion in Student Loans

On Tuesday, August 16, the United States Department of Education issued a press release stating its intent to discharge all federal student loans that borrowers received to attend ITT Technical Institute from Jan. 1, 2005, through its closure in September 2016, amounting to $3.9 billion in full loan discharges between 208,000 borrowers. This is the second-largest targeted debt relief action the Biden-Harris Administration has taken for defrauded borrowers, second only to the $5.8 billion loan cancellation for 560,000 former attendees of Corinthian Colleges.

Eligible borrowers, including those who haven’t applied for a borrower defense to repayment discharge, will have their debt canceled without any further action on their part. The Education Department’s decision came following findings based on internal ITT policies and records; testimonies from former students, employees, and administrators; ITT recruitment materials and brochures; recordings of ITT’s representatives interacting with prospective students; investigative files and submissions gathered by congressional investigators and state offices of attorneys general; and individual borrower defense applications submitted by former ITT students.

Key Takeaways

  • The United States Department of Education has announced that it will discharge $3.9 billion in federal student loans for 208,000 borrowers who attended ITT Technical Institute from Jan. 1, 2005, through its closure in September 2016.
  • The Biden-Harris Administration and the Consumer Financial Protection Bureau (CFPB) have previously taken action against ITT for misleading students and pressuring borrowers into taking out high-cost private loans, respectively.
  • The Education Department has also taken action against two other for-profit institutions: DeVry University and the Kaplan Career Institute.

The Department of Education’s announcement comes ahead of its pause on student loan repayment, interest, and collections expiring at the end of the month.

ITT’s History of Federal Scrutiny

This isn’t the first time the Biden-Harris Administration has taken action against ITT, which previously resulted in the approval of $1.9 billion in discharges for 130,000 students. ITT was already under scrutiny thanks to borrower defense findings that the for-profit institution misrepresented the ability of its students to get a job or transfer credits to other schools, in addition to lying about the programmatic accreditation of ITT’s associate degree in nursing.

The Consumer Financial Protection Bureau (CFPB) was also working to protect ITT borrowers, resulting in $498 million in private student loan cancellation. The CFPB sued ITT back in 2014, alleging it pressured students into taking out expensive private loans despite knowing most would default. Five years later, the CFPB obtained a judgment barring ITT from offering or providing student loans. The CFPB also obtained judgments against other parties that provided assistance to ITT in violation the Consumer Financial Protection Act by owning and managing the university’s private student loans.

In addition to the CFPB, the Education Department’s received important evidence from half the country’s state offices of attorneys general, led by Colorado and Oregon Attorneys General and supported by evidence from the Iowa and New Mexico Attorneys General. Its findings were also assisted by significant and extensive work by Veterans Education Success.

Other Institutions Targeted by Education Department

Alongside ITT, the Department of Education also formally notified DeVry University that it’s liable for almost $24 million for approved borrower defense claims. The Education Department found, from 2008 through 2015, DeVry had purported 90% of its graduates actively seeking employment found jobs in their field of study within six months of graduation, despite its actual job placement rate of approximately 58%. The Education Department expects the number of approved discharge amounts will grow as it continues to adjudicate additional applications from former DeVry students.

Additionally, discharges for approximately 100 attendees of the Kaplan Career Institute were also approved. The Massachusetts Attorney General provided evidence to the Education Department that established Kaplan had reported a job placement rate of upwards of 70%, when the actual figure was as low as 25%. The Massachusetts Attorney General also found that Kaplan didn’t provide promised career services to borrowers.

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