A new settlement tied to the now-for-profit ITT Technical Institute would write off $ 330 million in private student loan debt owed by about 35,000 former ITT students.
The nationwide settlement, announced Tuesday by the Consumer Financial Protection Bureau (CFPB) and state attorneys general of 47 states and the District of Columbia, hopes to wipe out debt owed by former ITT students to a program funded by Deutsche Bank called “PEAKS Trust. “
ITT Technical Institute filed for bankruptcy in 2016 and closed all campuses, affecting 149 sites and approximately 40,000 students, in prosecution and investigations into suspected predatory lending practices.
“This settlement brings long-awaited justice to former ITT students who were pressured into taking out predatory student loans that ITT and its associates predicted they would never be able to repay,” Eileen Connor, legal director of the Project on Predatory Student Lending at Harvard Law School. The Legal Services Center, which represents some former ITT students, told Yahoo Finance in a statement.
“All ITT debts should be canceled, including federal student loans,” Connor added.
The regulation stipulated that PEAKS would not only pay off the loans, but also stop collecting them and ask credit bureaus to “remove information about PEAKS loans”. Borrowers will also receive a notice that their debt has been discharged.
The CFPB noted that this is the agency’s third regulation regarding ITT’s private student loan programs. Previously, CFPB had reached a deal with CUSO, another company that handled private loans for ITT students, paying off $ 168 million in debt to borrowers. The CFPB also reached a $ 60 million legal settlement with ITT in 2019 to steer students towards private loans.
‘I have a four-year degree that’s worthless’
During its years of operation, ITT students have been offered two private student loan programs: CUSO and PEAKS.
The PEAKS loans, which were offered to students from 2008, were intended to cover the tuition fee gaps between the amount of federal student aid and the total cost of their studies.
In 2014, the CFPB filed a complaint against ITT, arguing that the school “engaged in illegal acts and practices to pressure students into taking out private student loans as part of a program to improve education. appearance of ITT’s financial statements and its position among investors ”.
The CFPB claimed that ITT knew that the default rate on these loans “would be high” – the default rates were actually over 94% for CUSO loans and 80% for PEAKS loans. Yet these programs continued, the CFPB said, “in order to temporarily improve ITT’s balance sheet.”
A former ITT student, whose federal student loans have been canceled, is also suing Navient to have his private student loans – not CUSO or PEAKS – wiped out over school fraud. The trial is ongoing.
“I didn’t get a good education – I have a four-year degree that isn’t worth anything,” the borrower said in a previous interview. “From 2010 to today it’s been horrible.”
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