Thousands of former students who attended the failed ITT Tech — including more than 100 students in Kansas and 600 in Missouri— are suddenly freed from millions of dollars in loan debt.
Kansas state Attorney General Derek Schmidt announced on Monday that the Kansas students will get more than $1 million in debt relief as part of a settlement agreement between the state and a private lender set up for the sole purpose of handing out loans to students at the for-profit college. Missouri Attorney General Eric Schmitt said Missouri students will get $4.7 million.
ITT Tech filed for bankruptcy in 2016 in the middle of a state investigation into its practices and after the U.S. Department of Education restricted its access to federal student aid. The school, after 50 years in business, closed its Overland Park campus that September.
The 708 Kansas and Missouri students set to benefit are part of a multi-state settlement that a news release from Schmidt’s office said will result in total debt relief of more than $168 million for more than 22,000 former ITT students nationwide. Missouri officials were not immediately available for comment.
The settlement is with Student CU Connect CUSO LLC of Delaware, which originated approximately $189 million in loans to ITT students between 2009 and 2011.
According to court documents, ITT, with CUSO’s knowledge, offered students temporary credit when they enrolled to cover the gap in tuition between federal student aid and the full cost of the ITT education.
The settlement alleges that the temporary credit was due to be repaid before the students’ next academic year, even though ITT and CUSO “knew or should have known that most students would not be able to repay” the temporary credit. It also says that many students thought the temporary credit worked the same as a federal loan and would not be due until six months after they graduated.
When the temporary credit came due, ITT allegedly pressured students into accepting loans from CUSO, which for many students carried high interest rates, far above rates for federal loans.
Court documents refer to the alleged collaboration between CUSO and ITT as “a scheme,” and accuse the two of taking “unreasonable advantage of student borrowers.”
As part of the settlement, CUSO has agreed to forgo collecting outstanding loans and to cease doing business. Borrowers were to be notified on Tuesday about the canceled debt. Automatic payments are also to be canceled, and credit reporting agencies will be updated for the student borrowers.
Schmidt’s office said the settlement is contingent on federal court approval of a related settlements.
Students with questions about their rights under the settlement may visit www.InYourCornerKansas.org or call the attorney general’s Consumer Protection Division at 800-432-2310.