Sept. 16 (UPI) — Tens of thousands of former students at the now-defunct ITT Technical Institute will be eligible to receive student loan forgiveness as part of a $330 million settlement, according to a judgment Tuesday.
The settlement provides relief to students who had used the school’s PEAKS loan program, which lent money to those who had already borrowed the most they could from the federal government.
Prosecutors called the program “reckless” because many students didn’t understand the terms or couldn’t afford them. Some didn’t even know they had the loans, the Consumer Finance Protection Bureau said.
The short-term loans were due to be repaid nine months after being administered, a time when most of those who took out the loans were still in school. The loans also carried interest rates exceeding the rates of federal loans.
Attorneys general from 48 states and the CFPB secured the settlement under which ITT Tech and affiliated Deutsche Bank agreed to stop collecting on the PEAKS loan debts.
The debt relief includes more than $9.4 million for Maryland students, state Attorney General Brian Frosh said.
“Maryland students were deceived when they were pressured into taking on these predatory loans,” he added. “PEAKS will be required by this settlement to provide debt relief to Maryland students who we allege were misled while they were working hard to further their education.”
Frosh said ITT Tech used “high-pressure tactics” to force students to accept the terms of the loan, including pulling them out of class and threatening to expel them. Students felt compelled to agree to the terms since ITT Tech’s credits didn’t always transfer to other schools.
ITT shuttered its doors in 2016 after the Education Department said it wouldn’t allow students who enroll there to receive federal financial aid.
ITT Tech said it operated more than 130 campuses nationwide in 39 states and online with more than 40,000 students in undergraduate and graduate programs at the time of its closure. The school received about $580 million in federal funding in 2015.