More than 200,000 borrowers who attended and were victimized by ITT Technical Institute will have their student loans discharged in a sweeping $3.9 billion forgiveness package that the U.S. Department of Education announced on Tuesday.
The borrowers had been defrauded by the now-defunct ITT from the beginning of 2005 through September 2016 with promises that their enrollments would lead to future jobs. ED also put DeVry University on notice that it will be forced to pay back $24 million to borrowers for incorrectly reporting lofty job placement rates unless it can prove otherwise on appeal. In addition, the Department dismissed student loans for some borrowers who attended medical programs at the shuttered Kaplan Career Institute’s Kenmore Square in Boston during a period from 2011 to 2012 over similar claims of inflating placement rates.
The moves are part of efforts by the Biden Administration to seek relief for borrowers who were deceived by their institutions and provide increased oversight over colleges, universities and other education programs that are not in compliance with federal guidelines and regulations. So far, the administration has spared nearly two million borrowers from having to repay nearly $32 billion.
“The automatic loan cancellation announced today will provide life-changing relief that has long been owed to former ITT students,” said Rohit Chopra, director of the Consumer Financial Protection Bureau, which sued ITT eight years ago for targeting students with expensive loans that they knew they couldn’t afford. “Far too many Americans are still on the hook for loans they acquired at colleges that profited from deceiving students, and the CFPB will continue to work with the Department of Education to address predatory student loan debt, to protect students, and to hold wrongdoers accountable.”
The ITT case is one of the most “pervasive” and “widespread” of all being investigated by ED. It had already approved forgiveness for 130,000 borrowers to the tune of nearly $2 billion because of its deceitful practices. Even those who did not complete their studies at ITT were granted relief from the Department.
The ED, along with the CFPB, Veterans Education Success and dozens of state attorney generals all worked together to uncover the massive fraud that occurred. From their investigations, they pulled together “tens of thousands of individual borrower defense applications submitted by former ITT students” as well as individual statements from victims, and recruiting information from the institution to show the methods used to lure students.
“The evidence shows that for years, ITT’s leaders intentionally misled students about the quality of their programs in order to profit off federal student loan programs, with no regard for the hardship this would cause,” said U.S. Secretary of Education Miguel Cardona. “It is time for student borrowers to stop shouldering the burden from ITT’s years of lies and false promises. The Biden-Harris Administration will continue to stand up for borrowers who’ve been cheated by their colleges while working to strengthen oversight and enforcement to protect today’s students from similar deception and abuse.”
The DeVry situation is still ongoing, but its claims that 90% of its graduates would find jobs within six months – when less than 60% did – might be difficult to overcome on appeal. Kaplan’s numbers were even worse (70% claimed compared with 25% of actual job placements). According to ED, DeVry made its numbers look better by counting students who were employed before they reached completion and ignoring those who did not make the effort to search out jobs. ED said the number who may get relief could increase, and it will pursue recovery for them. If DeVry decides not to appeal, it will be subject to paying the full amount determined by ED or may be allowed to pay it back in installments.
As for the future of student loans, ED said it plans to unveil new rules regarding forgiveness that will aim to limit undue burdens on the millions who have racked up some $1.6 trillion in loan debt. As students enter the workforce, officials said the goal is to not have them contending with “mountains of debt and without the skills and preparation to find good jobs.”
So far, the Biden Administration not only has eliminated $13 billion for student victims of fraud but also has trimmed $9.6 billion for 175,000 borrowers in the Public Service Loan Forgiveness Program and cut $9 billion in payback amounts for 425,000 who are totally or permanently disabled.