Former ITT Tech Students With Loans To See Relief

The former Levittown ITT campus.
Credit: Google Maps

A group of state attorneys general have obtained debt relief for former students of the for-profit ITT Technical Institute, which operated a campus in Middletown Township before closing.

Forty-eight states top prosecutors secured $330 million in debt relief for 35,000 borrowers who have outstanding principal balances. About $11.9 million in relief will help Pennsylvania students left holding the bag from when the for-profit technical school filed for bankruptcy and closed in 2016.

The ITT Technical Institute campus on Veterans Highway (Route 413) in Middletown’s Levittown section shuttered in September 2016 along with more than 100 other locations.

“The settlement is with PEAKS Trust, a private loan program run by the for-profit college and affiliated with Deutsche Bank entities. ITT filed bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT’s access to federal student aid,” a statement from the Pennsylvania Attorney General’s Office said.

“This settlement will provide debt relief for more than 1,400 hardworking students in Pennsylvania who were pressured and coerced into accepting loans from PEAKS for fear of losing the credits they had earned,” said Attorney General Josh Shapiro said in a statement. “As Attorney General, I will continue to hold accountable any student loan company or for-profit college that preys on the students they should be helping and not hurting. Thanks to the hard work of my Bureau of Consumer Protection and colleagues across the country we have canceled unfair debt for thousands of former students.”

Authorities said PEAKS, which was founded after the 2008 financial crisis, helped provide private sources of lending to for-profit colleges. ITT and PEAKS had an arraignment where students could get “temporary credit to cover the gap in tuition between federal student aid and the full cost of the education.”

Below is what the states attorneys general found:

ITT and PEAKS knew or should have known that the students would not be able to repay the temporary credit when it became due nine months later. Many students complained that they thought the temporary credit was like a federal loan and would not be due until six months after they graduated.
When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which for many students carried high interest rates, far above rates for federal loans. Pressure tactics used by ITT included pulling students out of class and threatening to expel them if they did not accept the loan terms. Many of the ITT students were from low-income backgrounds and were left with the choice of enrolling in the PEAKS loans or dropping out and losing any benefit of the credits they had earned, because ITT’s credits would not transfer to most schools.
The default rate on the PEAKS loans is projected to exceed 80%, due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible. The defaulted loans continue to affect students’ credit ratings and are usually not dischargeable in bankruptcy.

The multi-state settlement means PEAKS will no longer collect outstanding loans and stop doing business. They organization also has to supply credit reporting agencies with information to update profiles for borrowers.

The attorney general’s office said students will need to do nothing to receive the debt relief.

Students can direct questions to PEAKS at customerservice@peaksloans.com or 1-866-747-0273, or the Consumer Financial Protection Bureau at 1-855-411-2372.