U.S. Dept. of Education drops hammer on ITT Tech with devastating restrictions

The U.S. Department of Education this week formally restricted ITT Technical Institutes from accepting new students who rely on federal grants or loans, out of concern the for-profit technical school is not financially managed well and engages in predatory lending practices. File Photo by Mark Van Scyoc/Shutterstock

WASHINGTON, Aug. 26 (UPI) — ITT Educational Services, one of the United States’ largest and most expensive for-profit institutes of higher education, was hit hard by the U.S. Department of Education on Thursday with devastating restrictions that some believe could spell the end of the schools.

The Education Department barred the parent company of ITT Tech from accepting any new students who rely on federal student loans or grants — effectively a renouncement of the organization by the U.S. government.

“In case the school’s actions cause it to close, we’re increasing the amount of cash reserves it must send us and we’re ending its installment payment plan for the amount previously required,” the Education Department said Friday. “Finally, we’re slowing down when ITT receives student aid from the government to ensure that ITT is handling its finances properly.”

Founded in 1969, ITT Tech operates more than 130 campuses in 38 states and enrolled 45,000 new students last year — many of whom had just one option to pay for it: federal loans and grants. Going forward, however, those students will have to find another place to swap that money for an education.

Thursday’s action — which was largely the result of repeated concerns from the Accrediting Council for Independent Colleges and Schools, which accredits ITT — followed several years of scrutiny by federal regulators, including strict oversight of what some view as the company’s shaky finances.

“Since August 2014, the Department has been actively monitoring ITT’s ongoing operations and finances,’ Education official Ron Bennett said in a letter to ITT CEO Kevin Modany on Thursday. “We have also been continuing to monitor civil litigation filed against ITT by federal and state law enforcement agencies.”

If the ACICS pulls its accreditation, ITT Tech could be run out of business and its students would receive federal loan forgiveness. For that reason, federal officials ordered ITT in June to set aside more money to cover that scenario. ITT has a reported credit line of $124 million but Education officials want a figure twice that amount.

“It’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal aid funds,” U.S. Education Secretary John King, Jr., said Friday.

Because ITT has some of the highest tuition rates in the United States — between $426 and $529 per credit hour, the company states — students often need federal assistance to cover the cost.

“Our responsibility is, first and foremost, to protect students and taxpayers,” King added.

Education officials listed three options for current ITT students receiving federal aid: remain at ITT, transfer credits (if possible) to another school, or wait-out the situation and then decide how to proceed — although option two, transferring, typically doesn’t work.

“It is unlikely that any credits earned at the school will be transferable to or accepted by any institution other than an ITT Technical Institute,” the company states on its website.

In recent years, the tech educator has been accused of predatory student lending practices and inflating the quality and potential of an ITT education.

Completely removing federally funded students from the candidate pool is expected to have a devastating impact on the Indianapolis-based operation. In 2015, more than 70 percent of ITT’s $850 million in revenue was provided by federal aid.

In addition, Thursday’s action also requires ITT to get approval from the Education Department before it can give pay raises, bonuses and severance payments to executives — mandates more in line with not-for-profit public colleges and universities.

The company did not immediately comment on the matter — although by Friday afternoon it was still stated on its website that ITT accepts students with federal loans and grants.

“The first step is to complete and file the FAFSA — the Free Application for Federal Student Aid. It will help determine how much financial aid you may be eligible to receive,” the website said.

Some experts say this latest development could be a kiss of death for ITT Technical Institutes in the United States.

“It’s pretty bad. ITT had already announced that they were cutting back on marketing and that new student enrollment was down, so they were already marching in this direction,” Credit Suisse research analyst Trace Urdan told The Washington Post. “But this decision, when you add all of the components together, it looks like the department wants them to go out of business.”


Please enter your comment!
Please enter your name here