Settlement erases debt of ITT Tech students
A multi-state settlement will provide $20.6 million in debt relief to former Ohio students of the defunct ITT Technical Institute, according to Ohio Attorney General Dave Yost’s office.
The settlement is with PEAKS Trust, a private loan program run by the failed forprofit college and affiliated with Deutsche Bank entities. The agreement involves 47 states and the District of Columbia.
PEAKS was formed when private lending sources available to for-profit colleges dried up after the 2008 financial crisis. ITT Tech developed a plan with PEAKS to offer students temporary credit to cover the gap in tuition between federal student aid and the full cost of their education. Repayment of the credit became due nine months later, but many students complained that they thought it wouldn’t be due until six months after they graduated, similar to federal loans, according to the settlement.
ITT Tech used “pressure tactics” to coerce students into accepting loans from PEAKS after the credit became due, “pulling students out of class and threatening to expel them if they did not accept the loan terms,” the attorney general’s office said Tuesday. For many students, the loans carried interest rates far higher than those on federal loans.
“Preying on students who were trying to educate themselves and better their lives is heartless,” Yost said in a news release. “It’s these types of bad actors that need to learn the basics of right and wrong — I hope this will be the lesson they remember.”
In 2016, ITT Tech closed all of its 137 U.S. campuses — including nine in Ohio — and filed for Chapter 7 bankruptcy liquidation after the federal government restricted the school’s access to federal student aid. The school had been serving about 35,000 students and employed about 8,000 people.
Under the settlement, PEAKS agreed that it will forgo collection of outstanding loans and cease doing business, Yost’s office said. Peaks will send a notice to borrowers about the canceled debt and ensure that automatic payments are canceled.
Many of the ITT students were from low-income backgrounds and faced taking a PEAKS loan or dropping out and losing the credits that they had earned because most other schools would not accept a transfer of ITT credits, the attorney general’s office said.
The notices sent by PEAKS will explain students’ rights under the settlement, and affected students do not need to take any action to receive the debt relief. Students with questions can direct them to PEAKS at customerservice@ peaksloans.com or 866-747-0273, or to the federal Consumer Financial Protection Bureau at 855-411-2372. jsmola@dispatch.com @jennsmola