(Boise) – Attorney General Lawrence Wasden announced today that his office has secured an agreement to obtain $1.86 million in debt relief for 215 former ITT Tech (“ITT”) students. The agreement is part of a settlement involving 43 states and the District of Columbia.
Nationally, the settlement will result in debt relief of more than $168 million for more than 18,000 former ITT students. The settlement is with Student CU Connect CUSO, LLC (“CUSO”), which offered loans to finance students’ ITT tuition. ITT Tech was a for-profit college that filed bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT’s access to federal student aid.
A related settlement between CUSO and the U.S. Bankruptcy Trustee was approved on Friday, June 14th. The attorney generals’ settlement is also contingent on federal court approval of a related settlement between CUSO and the federal Consumer Financial Protection Bureau.
“ITT Tech subjected students to abusive lending practices and this settlement is a step toward fixing those transgressions,” Wasden said. “This settlement will provide relief to hundreds of Idahoans who attended ITT Tech and took on debts for a questionable education they could not repay nor discharge.”
The attorneys general alleged that ITT, with CUSO’s knowledge, offered students temporary credit upon enrollment to cover the gap in tuition between federal student aid and the full cost of the education. The credit was to be repaid before the student’s next academic year, although ITT and CUSO knew or should have known that most students would not be able to repay the credit when it became due. Many students complained that they thought the temporary credit was akin to a federal loan and would not be due until six months after they graduated. When the credit became due, however, ITT pressured and coerced students into accepting loans from CUSO, which for many students carried unusually high interest rates. Because students were left with the choice of dropping out and losing any benefit of the credits they had earned – ITT’s credits would not transfer to most other schools – most students enrolled in the CUSO loans.
Neither ITT nor CUSO made students aware of what the true cost of repayment for the credit would be until after the credit was converted to a loan. The default rates on the CUSO loans were projected to exceed 90 percent, due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible.
Under the settlement, CUSO has agreed to forego collection of the outstanding loans. CUSO, which was organized for the sole purpose of providing the ITT loans, will also cease doing business. The settlement also requires CUSO to supply Credit Reporting Agencies with information to update credit information for affected borrowers.
Eligible students will receive notices by mail.
A copy of the settlement agreement is available here