Roughly 208,000 student loan borrowers who attended a now-defunct for-profit college chain will have $3.9 billion in federal student debt discharged, the Department of Education announced Tuesday.
The Department’s announcement, which covers borrowers who attended ITT Technical Institute from January 1, 2005 until it closed in 2016, is the latest effort by the agency to make students who were scammed by their college whole. So far, the agency has announced about $13 billion-worth of federal loan discharges for 1 million borrowers who attended schools that closed abruptly or were found to have misled students in the process of enrolling them.
Years of investigation uncovered that ITT “spun a web of lies to coerce students into enrolling in their programs,” Secretary of Education Miguel Cardona said on a conference call with reporters.
“Students emerged from their time with ITT having made little to no progress on their educational journey and they were saddled with debt that they couldn’t escape, until now,” he said.
The federal government also announced that it would be taking steps towards making taxpayers whole in a separate case where former students are set to have their debts wiped away because their school was accused of misleading them during the enrollment process. The Department notified Cogswell Education, the owner of for-profit college DeVry University, which is still operating, that it owes the government nearly $24 million for debt the agency is in the process of discharging on behalf of the school’s former students.
Latest in a years-long saga
The announcements are the latest in a years-long saga over the fate of students who attended for-profit colleges that have been accused of misleading students. For years, borrowers and advocates have been pushing the Department of Education to cancel debt in large batches for student loan borrowers who attended schools during a period when there is clear evidence of wrongdoing. More recently, advocates and lawmakers have also urged the agency to hold institutions and executives financially liable for that relief.
Rohit Chopra, the director of the Consumer Financial Protection Bureau, said for-profit college chains “peddled the American Dream” just like subprime mortgage lenders who lured borrowers into taking on loans the lenders knew could wind up devastating the borrowers.
“Less discussed was the same subprime-style lending practices that were purported by some of the nation’s largest chains of for-profit colleges,” said Chopra, who served as the CFPB’s student loan ombudsman from 2011 to 2015. “Repeatedly we saw those companies engaged in widespread deception and fraud,” and use “complex loan arrangements that allowed them to harvest profits even as they set up borrowers to fail.”
In the case of ITT, federal agencies and state attorneys general have accused the now-shuttered company of wrongdoing for years. Richard Cordray, the chief operating officer of Federal Student Aid, noted on the call with reporters that the Consumer Financial Protection Bureau filed a lawsuit against ITT in 2014, when he directed the bureau, accusing the school of luring students into high-interest private loans they knew the students wouldn’t be able to repay.
The CFPB and state attorneys general reached settlement agreements with the companies that managed ITT’s private student loan programs resulting in nearly $500 million of discharged private debt for former ITT students. But borrowers kept waiting for relief from their federal debts.
“We reaffirmed today that we will do what it takes to protect students,” from predatory schools, Cordray said. “One way we do that is by sharing information and collaborating closely with our colleagues.”
The collaboration between the Department of Education, the CFPB and state attorneys general turned up evidence that school representatives misled students about their ability…
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