U.S. says $168 mln ITT for-profit student loans to be forgiven

ITT Educational Services

14/06/2019 21:18

By Jonathan Stempel
    June 14 (Reuters) - Former students at ITT Technical
Institute will not have to pay $168 million they still owe on
private loans from an affiliated lender to attend the
now-defunct for-profit college, under a U.S. regulatory
settlement announced on Friday.
    Student CU Connect CUSO, created in 2008 to fund and manage
loans for ITT students, reached the settlement with the Consumer
Financial Protection Bureau, 44 states and Washington D.C. to
resolve claims over its alleged shoddy business practices.
    The accord also requires CUSO to stop collecting on loans,
and ask consumer reporting agencies to effectively delete its
loans from students' credit profiles, and tell borrowers they no
longer owe money on the loans.
    Court approval is required. CUSO did not admit wrongdoing.
Its lawyer did not immediately respond to requests for comment.
    ITT Educational Services Inc, which ran ITT Technical
Institute, closed its roughly 130 campuses and filed for
bankruptcy in Sept. 2016, amid growing regulatory scrutiny of
for-profit colleges' recruiting and financing practices.
    The closure affected an estimated 35,000 students and 8,000
employees. Another large chain, Corinthian Colleges, shut down
in 2015.
    Authorities said ITT typically targeted vulnerable students
by first issuing "temporary credits" to cover the gaps between
their tuition and other federal aid.
    Many students thought the credits were similar to federal
loans and would not become due until after they graduated.
    But when credits became due sooner, ITT pressured many
students into taking out CUSO loans with initial fees as high as
10% and interest rates as high as 16.25%, according to
authorities.
    By Jan. 2017, CUSO was projecting an overall 94% default
rate on its loans, authorities said.
    Last November, a federal bankruptcy judge in Indiana
approved a separate settlement forgiving nearly $600 million of
ITT student debt.

 (Reporting by Jonathan Stempel in New York
Editing by Susan Thomas)
 ((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))