Students stuck with high loan repayments when ‘fraudulent’ Idaho school closed get relief

BOISE (Idaho Statesman) — Former students of Boise’s ITT Technical Institute will have their federal educational loans forgiven, following action by the U.S. Department of Education.

Seventy ITT students who owed $1.7 million — an average of $24,286 per person — will have their debt wiped away after they were defrauded by the for-profit school, a spokesperson for the U.S. Department of Education told the Idaho Statesman by email.

Not only that, but the students, who were left stranded when ITT Tech shut down without warning in 2016, will have any money they paid toward their federal loans refunded. That includes money paid voluntarily or through a collection agency. The discharge will also be reported to credit bureaus so any adverse information is deleted.

The Boise students were among nearly 16,000 nationwide the government says were deceived by ITT, Westwood College, DeVry University and Minnesota School of Business/Globe University. The action will lead to the forgiveness of $415 million worth of student loans.

“Students count on their colleges to be truthful,” U.S. Secretary of Education Miguel Cardona said in a news release. “Unfortunately, today’s findings show too many instances in which students were misled into loans at institutions or programs that could not deliver what they’d promised.”

Loans were provided through the William D. Ford Federal Direct Loan Program, the Federal Family Education Loan Program, and the Federal Perkins Loan Program. Forgiveness does not apply to loans issued by states or private lenders.

Most students affected by the loan forgiveness did not attend other schools in the three years after ITT Tech shut down, and their discharges will be made automatically, the Department of Education said. Students who enrolled elsewhere but did not finish a course of study may still be eligible for a discharge but must submit an application.

ITT operated as a “large-scale predatory for-profit institution” from its beginnings in 1969 until it declared bankruptcy and abruptly ceased operation in September 2016, according to a scathing 209-page report issued last month by The Project on Predatory School Lending at Harvard University.

Hundreds of thousands of students enrolled at ITT Tech at 130 campuses across the country, lured by “promising careers in growing fields with high salaries,” the report said.

“But these promises were outright lies,” the Harvard investigation concluded. “ITT’s business model was both nefarious and simple: get students to enroll and stay enrolled and reap the profits from their federal student aid. ITT incentivized its recruiters to get as many people through its doors as possible. Recruiters preyed on prospective students in vulnerable situations, saying whatever was necessary to sell ITT to unsuspecting individuals.”

The vast majority of ITT students left school without a degree or “were left with a useless degree,” the report said. What they did leave with was “exorbitantly high student debt and the inability to repay it.”

The Project on Predatory School Lending represents hundreds of thousands of former ITT Tech students in a class action lawsuit against the defunct company’s ongoing bankruptcy proceeding.

The study’s authors say they documented 95 instances of wrongdoing at ITT’s Boise campus alone. They included fraudulent enrollment and financial practices; misrepresenting that ITT credits would transfer to legitimate colleges and universities and even other ITT programs (they didn’t); and lying about the cost of attendance, instructor qualifications and job-placement rates for graduates.

Overall, the study reported more than 13,000 verified instances of wrongdoing. They were documented through student complaints, internal company documents, audits, human resources files and other records, the report said.

ITT Technical Institute came to Boise in 1986 after buying the respected Link’s School of Business, which had taught Treasure Valley students since 1906.

ITT Tech was founded in 1969 and went public in 1994, before declaring bankruptcy and closing 22 years later.

By 2014, 58 of ITT Tech’s operations, including Boise, were operating at a loss, the report said. The company gutted administrative and teaching staff, requiring them to obtain those services from the company’s headquarters or another campus.

The Boise operation was forced to have one employee serve as the director of finance and registrar, positions previously filled by two people. Students began complaining about problems with their schedules.

“This issue with the schedule traces back to being reduced to a small campus census and letting our registrar go,” the report quotes the unnamed director of the Boise school from a December 2014 email sent to ITT Tech’s headquarters. “We had to combine the director of finance and registrar position, which took time to hire someone. They trained for the DOF position and started transitioning to the registrar position, became frustrated and resigned.

“Another campus has been managing our schedules and the dean has been trying to assist with schedule changes, transfer credits, etc., after the registrar left.”

The Harvard investigation found that 31% of ITT Tech revenues in 2014 were spent on marketing. That included $50 million for advertising nationally on TV, $48.8 million spent with local TV stations, and $1.7 million for radio advertising across the country.

Since January 2021, the Department of Education has discharged $9.9 billion in loans to more than 678,000 ITT Tech borrowers nationwide. The agency could not provide figures Friday on the total number of Idaho students with loans that were forgiven since then.