(WASHINGTON) — Students who used federal loans to attend ITT Technical Institute as far back as 2005 will automatically get that debt canceled after authorities found “widespread and pervasive misrepresentations” at the defunct for-profit college chain, the Biden administration announced Tuesday.
According to the Education Department, this action will erase $3.9 billion of federal student loans for 28,000 borrowers. Borrower defense is a federal law that forgives student debt. It protects students from fraud-prone colleges.
“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,” Education Secretary Miguel Cardona said.
It adds to the administration’s growing list of piecemeal student debt cancellations — a similar action in June promised to erase $5.8 billion in debt related to Corinthian Colleges — but it provided no answers on broader student debt cancellation.
As a presidential candidate, President Joe Biden supported the cancellation of debt and has long considered erasing $10,000 for each borrower. He recently promised a decision by the end of August, but Tuesday’s announcement cast no new light on his thinking.
The administration has approved almost $32 Billion in student loans for nearly 1.6 Million borrowers through targeted cancellation.
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All federal student debt remaining from ITT Tech’s opening in 2005 through its close will be cancelled by the new policy.
ITT, which had 130 campuses in 38 states, was one of the most successful for-profit college chains. After being subject to severe sanctions by the Education Department, ITT abruptly closed down. The Education Department accused the company of mislead students about academic quality and pushing them into high-risk loans.
In the past, the Education Department approved $1.9 billion of debt that was held by ITT Tech graduates. This is mainly for those students who claimed they had been misled and applied for relief. No new requirements will be placed on borrowers for applying for relief.
Federal officials relied on the findings of many state attorneys general and also the Consumer Financial Protection Bureau, as well as the non-profit Veterans Education Success to make their decision.
According to the agency, there is ample evidence that ITT Tech claimed students could get jobs once they graduate. They also found that the chain misled students about their ability to get credits transferred to other schools, and about the accreditation of the chain’s nursing program.
“ITT defrauded hundreds of thousands of students,” said Richard Cordray, chief of Federal Student Aid, the federal office that oversees student loans. “By delivering the loan relief students deserve, we are giving them the opportunity to resume their educational journey without the unfair burden of student debt they are carrying from a dishonest institution.”
Students’ groups applauded the decision.
“This is a life-changing announcement for thousands of people who only wanted to improve their lives and trusted the wrong people to help them do it,” said Libby Webster, senior counsel of the nonprofit Student Defense.
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Tasha Berkhalter, an honorably discharged Army soldier, enrolled in ITT Tech to study criminal justice. After graduating, recruiters assured her that she could find work. But after earning her bachelor’s, no one would hire her.
“It was all for a degree that no one takes seriously. Whenever I told employers where I attended college, I was shown the door,” said Berkhalter, of Lima, Ohio.
Berkhalter said previously that much of her almost $100,000 debt was wiped out by the borrower defense rules and she anticipates having more canceled.
“The cloud has been removed from over my head,” she said. “I know there are hundreds of thousands of former students like myself who are finally getting the relief they deserve.”
Separately, DeVry University initiated a process for the Education Department to recover $24 million to pay back loan cancellations that were approved by the federal governments because of fraud.
After the Education Department found that DeVry had lied to its students about their success, $70 million was approved by the Biden Administration to provide relief to 1,800 of them. It was the first time the agency approved such claims for an institution that’s still in operation.
DeVry can now present arguments to support its position and request an appeal hearing.
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