Students may get assets from defunct ITT Tech
A federal judge approved a settlement Wednesday allowing former students at ITT Technical Institute to participate in the bankruptcy of its parent company, giving them a shot at the remaining assets of one of the nation’s largest for-profit college operators.
The agreement resolves a lawsuit students filed against ITT Educational Services last year to join the line of creditors, federal regulators, state attorneys general and employees seeking redress from the defunct company. It recognizes a $1.5 billion claim that students, who attended the school between 2006 and 2016, asserted against the company for breach of contract and consumer protection violations.
That means if there is money in the estate to pay unsecured claims — debts that are not assured payment — at the end of the bankruptcy, students would receive a share. The agreement must be approved by the full class of students involved in the lawsuit.
“Students are now stakeholders in this bankruptcy,” said students’ attorney Eileen Connor. “The company was run into the ground, so we expect students to get cents on the dollar for the $1.5 billion claim, if anything. But if we hadn’t stepped in on behalf of students, they would still be facing debt collection for money purportedly owed to ITT.”
Under the deal, nearly $600 million that students still owed the defunct school will be erased, while $3 million that students paid the company will be refunded. ITT routinely issued students “temporary credits” to cover remaining tuition after federal and private student loans were taken into account. These credits were allegedly marketed as grants, but debt collectors hounded students for money even after ITT filed for bankruptcy in September 2016. The bankruptcy court halted collection in May.
ITT Tech students submitted more than 10,000 applications for debt relief, according to people who know the process but have no authority to speak publicly. Barely three dozen of those applications have been granted by the Education Department; none since President Donald Trump took office.