ITT abruptly closes amid increased federal scrutiny
3 Houston campuses are among those shut down by for-profit college criticized over grad rates, debt
One of the nation’s largest forprofit college chains abruptly closed on Tuesday, leaving thousands of students in Houston and across the country grappling with how to proceed with their education and manage their loans.
ITT Educational Services, operator of ITT Technical Institute’s 130 campuses in 38 states, said that it was halting all academic operations after about 50 years in business and blaming federal authorities for its demise.
The closure is the latest in a series of for-profit colleges shutting down campuses as U.S. officials heighten scrutiny of these institutions’ advertising practices, costs, graduation rates and high levels of debt shouldered by students.
The Obama administration stiffened regulation of for-profit academic institutions in 2014, tying their participation in federal student aid programs to graduates’ ability to find jobs in their field with high enough salaries so that loan payments would not exceed 8 percent of their earnings. And over the last few years, several for-profit college operators,
including Corinthian Colleges Inc., ceased operations or shuttered campuses amid fraud allegations.
In August, the U.S. Department of Education blocked Indiana-based ITT from enrolling new students using federal financial aid and required the institution to pay $152.9 million to increase its reserves to cover student refunds and other liabilities in case the chain closed. In June, the department had forced the company to set aside $44 million to offset its liabilities.
The leaders of ITT “have put its students and millions of dollars in taxpayer-funded federal student aid at risk,” said U.S. Education Secretary John B. King Jr. “Last week, the Department of Education took oversight actions to prevent ITT from continuing to add to that risk.”
Cost vs. return
About 40,000 ITT students, including about 1,360 at three area campuses, now must decide whether to try and transfer their credits to another institution or ask the education department to forgive their student loans, then start over with college courses.
Officials at Houston Community College and Lone Star College, the region’s largest public two-year institutions, said they are ready to work with ITT students and some of their credits likely will transfer. Both plan to assign staff to review students’ transcripts and discuss financial aid options.
“We’ll be happy to take them,” Athos Brewer, HCC’s vice chancellor for student services, said of ITT students’ transfer requests.
Stephen Head, the chancellor of Lone Star’s system, said ITT credits could meet transfer requirements, depending on the length of the course and a student’s grades.
On Tuesday morning standing at ITT’s Houston West campus, Philip Dean, 24, said he was struggling to figure out his next steps. Earlier this year, Dean moved here with his pregnant wife from Huntsville to study electrical engineering. Now the campus doors are locked and the lights out in the school’s facilities.
Meanwhile, U.S. enrollment at private for-profit institutions peaked in 2010 at 1.7 million students, but declined 26 percent to 1.3 million students by 2014, according to a May report by the National Center for Education Statistics. The steep decline contrasted with enrollment trends at public colleges (a 3 percent decline) and private nonprofit universities (a 4 percent increase) during the same period.
Ben Miller, a higher education researcher at the Center for American Progress who has studied ITT, said he expects the for-profit college market to continue shrinking, especially among those institutions that focus on certificate programs that do not lead to a bachelor’s degree.
“The problem is the cost versus the return just isn’t there,” said Miller, the senior director for postsecondary education at the nonpartisan Washington D.C. think tank. “It’s easy to look
at ITT’s closure as solely the result of government action, but it’s important to remember that choices and decisions by ITT leadership over years brought it to this point.”
Tuition topped $45K
Two years ago, the Consumer Financial Protection Bureau sued ITT Educational Services, accusing the for-profit college chain of predatory student lending. The bureau, an arm of the federal government, alleged ITT exploited its students and pushed them into high-cost private student loans that were likely to end in default.
“ITT marketed itself as improving consumers’ lives but it was really just improving its bottom line,” bureau Director Richard Cordray said in a statement when the lawsuit was filed. “We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default.”
Last year, ITT reported $850 million in annual revenue, almost 70 percent of it coming from federal student loans.
ITT’s 10 campuses in Texas had more than 3,200 students enrolled as of last month, according to data from the Texas Higher Education Coordinating Board. Two Houston campuses enrolled 1,044 students, while the Webster location south of the city had 319. ITT’s tuition for a two-year associate degree topped $45,000, according to its public filings. By contrast, community colleges, subsidized by taxpayers, cost a fraction of that amount.
More than half of ITT students nationwide who enrolled in 200809 withdrew by mid-2010, and the three-year loan default rate was 26.3 percent in 2008, according to a U.S. Senate report.
ITT, the technical education provider, said in a statement Tuesday that the “actions of and sanctions from the U.S. Department of Education have forced us to cease operations. We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a nonprofit or public institution.” The company said 8,000 people would lose their jobs and tens of thousands of students and alumni would be affected.
Closure ‘heartbreaking’
Officials at Texas State Technical College in Waco, a two-year public state college focused on vocational education, already have heard from displaced ITT students asking for advice, said Adam Hutchison, the college’s provost.
“It’s heartbreaking,” he said. “These are students who want a better career. They want to be able to provide for their family, and they’re looking to higher education to do that.”
Students, who sought guidance Tuesday from ITT after the sudden shutdown, said they struggled to download transcripts online to see which credits may transfer to other area institutions.
The fall quarter was supposed to start Sept. 12.
Wasi Syed, 31, of Sugar Land, said he learned the for-profit University of Phoenix may accept 45 of his 81 credits. One quarter from graduation, Syed said he had taken out about $20,000 in federal student loans to finance his ITT classes in information technology.
Syed called a classmate, who also attended the ITT Houston West campus, telling him not to bother coming to the Gessner Road site.
“The school’s closed,” he said. “There’s no one here. You can turn around.”