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player ready...The U.S. Education Department announced Thursday it would forgive federal student loan debts for 100,000-plus students who attended ITT Technical Institute but left before graduating from the defunct for-profit college chain, which had several campuses in the Chicago area.
Earlier this summer, the Biden administration approved 18,000 loan forgiveness claims from former students of ITT, which filed for bankruptcy in September 2016 and promptly shuttered its campuses nationwide, including Arlington Heights, Oak Brook, Orland Park and Springfield. The closings followed multiple sanctions by the Obama administration and investigations by several state attorneys general for allegedly steering students into predatory loans and deceptive marketing practices.
The Education Department reiterated some of those problems Thursday morning in announcing the latest round of loan discharge, which means some 115,000 borrowers will see $1.1 billion in loans forgiven.
“For years, ITT hid its true financial state from borrowers while luring many of them into taking out private loans with misleading and unaffordable terms that may have caused borrowers to leave school,” U.S. Secretary of Education Miguel Cardona said in a statement. “Today’s action continues the department’s efforts to improve and use its targeted loan relief authorities to deliver meaningful help to student borrowers. At the same time, the continued cost of addressing the wrongdoing of ITT and other predatory institutions yet again highlights the need for stronger and faster accountability throughout the federal financial aid system.”
Students are usually eligible for loan forgiveness if they attended a college within 120 days of its closure and were unable to complete their degrees. But for ITT Tech, the Education Department is extending the window back to March 31, 2008. Officials estimate that 43% of those borrowers are currently in default.
Eligible borrowers under the student loan forgiveness program announced Thursday will automatically get their loans cleared if they did not attend another college within three years of the school’s closure. Those who went to another college but did not earn degrees may be eligible but must apply for discharges, the agency said.
It’s the latest move to clear a backlog of claims in the federal borrower defense program, which provides loan forgiveness to students who were defrauded by their colleges. Claims piled up during the Trump administration, which stalled the program and only started processing claims after a federal court demanded it. There are now more than 100,000 pending claims nationally.
Last year, Illinois Attorney General Kwame Raoul’s office announced that more than 1,000 Illinois students who attended ITT locally could be eligible to receive more than $9.4 million in student loan debt relief. It was part of a $330 million nationwide settlement reached by 46 states, the District of Columbia and the Consumer Financial Protection Bureau with Peaks Trust, a private loan manager.
Peaks, created in 2009 to manage private loans for ITT students, offered students a temporary credit to cover tuition not financed through federal aid programs, according to the settlement agreement.
Peaks acknowledged as part of the settlement it knew or should have known students would not be able to repay the credit when it was due nine months later. It acknowledged that when they couldn’t repay it on time, students were forced to take out a loan from Peaks that typically had higher interest rates than federal student loans or face expulsion, according to the settlement.
The Associated Press contributed.
Twitter @byldonovan
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