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Biden administration erases $500 million in debt owed by defrauded ITT Tech students

The Department of Education decided that the now-defunct institution misled students

The Biden administration has announced that it’s erasing $500 million in student loan debt for 18,000 former ITT Tech students. 

ITT Tech was shut down in 2017 after the government revoked its federal funding and decided that the for-profit institution had cheated students out of money. The Department of Education said Wednesday that the school misled students about how much they could expect to earn after graduating, as well as how their credits would transfer to other ...

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    For-profit schools riding high under Trump regulation rollback

    Education Department delays Obama-era rules cracking down on money-making schools

    With the founder of Trump University in the White House, for-profit education is riding high once again. After years of increasing federal oversight, the for-profit college industry sees President Trump's regulation rollback as its ticket to renewed growth.

    The Education Department last week announced it would delay enforcing the "gainful employment" rules drafted by the Obama Administration to crack down on schools that leave their students with huge debts and scant job opportunities.

    “This action is taken to allow the Department to further review the GE regulations and their implementation,” the agency said.

    The rules cut off access to taxpayer funds for colleges and vocational training institutions if their graduates spend at least 20% of their discretionary income, or 8% of their total earnings each year, paying off student debt.

    Regulations challenged

    Schools have challenged the data used to make the determinations. 

    The industry's lobbying group, Career Education Colleges and Universities, has taken the position that all schools -- public, private, and for-profit -- should be treated equally.

    Education Secretary Betsy DeVos is an advocate of private education and said during her confirmation hearings that she would work to promote trade schools as an alternative to four-year colleges. 

    President Trump's now-defunct Trump University claimed to offer training in real estate and finance but closed after a series of lawsuits and challenges from regulators and former students who said they got little for their money but sales pitches.

    In November 2016, Trump agreed to pay $25 million to settle a class action lawsuit filed on behalf of about 7,000 former students. 

    One of the named plaintiffs in the case, Sonny Low, said he still had $9,000 in credit card debt and had to take a job at Home Depot to try to finally pay off the remainder, attorney Rachel Jensen said.

    With the founder of Trump University in the White House, for-profit education is riding high once again. After years of increasing federal oversight, the f...
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    Claim: former Corinthian students hounded for student loans they don't owe

    Sen. Warren blasts Department of Education for its role

    Once you take out a student loan, you have to pay it back. It can't be discharged in bankruptcy, for example.

    But there is one scenario where you might be able to walk away. The law allows consumers to discharge some student loans if the school they were attending closed its doors.

    It happened last year when Corinthian Colleges shut down, and more recently when ITT went under. As we reported just a few weeks ago, students who were attending ITT when it closed and had not completed a degree program may be able to cancel their student loans by applying for a student loan discharge.

    So Sen. Elizabeth Warren (D-MA) was not pleased when she learned that the U.S. Department of Education was working to collect loans from former Corinthian students who might have otherwise been eligible to cancel their debts.

    Troubling new data

    "These troubling new data suggest that instead of focusing on getting these students the relief they are entitled to under federal law, the Department's student loan bank - working with its loan servicers and debt collectors - is instead intentionally collecting on debt that it knows may be eligible for discharge," Warren wrote in a letter to Secretary of Education John King.

    Warren says the evidence suggests that, instead of helping borrowers who might be eligible to discharge their debt, the government is assisting debt collectors who she said are hounding former students for money they might not owe.

    The lawmaker said she received information provided by the Department of Education that showed only a small number of former Corinthian students have been able to discharge their student loan debt. But she says it appears as though some 80,000 former students might be eligible for the relief.

    Instead, she says most of these students have had tax refunds and other government benefits seized. She suspects many of these former students are unaware of their rights.

    Adding insult to injury

    "Instead of adding insult to injury for tens of thousands of Corinthian victims by pushing scores of them into debt collection, the Department of Education should stand up for these students as it has promised to do for more than a year and immediately halt all collections on this debt," Warren wrote.

    Warren says the government agency should use its existing authority to discharge Corinthian borrowers' debts and make sure that no other students are being hounded for debts they don't owe.

    Who's eligible

    If you attended Corinthian or ITT using Direct Loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans and were enrolled when the school closed, you may be eligible for relief.

    First, contact your loan servicer about the application process to discharge a loan. The Consumer Financial Protection Bureau (CFPB) says you may also need to contact your school to obtain your academic and financial records.

    You may also need to contact the licensing agency in the state where you attended school to get help in acquiring those records. The documents may help support your discharge claim.

    You can get more information about that here.

    Once you take out a student loan, you have to pay it back. It can't be discharged in bankruptcy, for example.But there is one scenario where you might...
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    Accrediting agency for for-profit schools loses its accreditation

    The agency will be permitted to continue operating while it appeals the decision

    In another blow for the for-profit college industry, the U.S. Department of Education is withdrawing its recognition of the independent agency that accredits many for-profit schools.

    The Accrediting Council for Independent Colleges and Schools (ACICS) is appealing the decision and will continue to operate while the appeal is processed. It accredits about 245 colleges that enroll 600,000 students. Many of its colleges are for-profit schools.

    “While we are disappointed in this decision, ACICS plans to continue diligent efforts to renew and strengthen its policies and practices necessary to demonstrate this agency’s determination to come into full compliance with the Department of Education’s recognition criteria and, most importantly, to improve outcomes for the estimated 600,000 students currently attending ACICS-accredited institutions," the agency's interim president, Roger Williams, said in a prepared statement

    ACICS was the accrediting agency for ITT Tech and Corinthian, both of which collapsed under the pressure of multiple investigations by federal and state agencies. 

    Is your school affected?

    If the appeal is not successful, schools accredited by ACICS will have 18 months to find a new accrediting agency. Is your school accredited by ACICS? Find out here.

    In September 2015, a report by the Center for American Progress faulted ACICS for not taking action sooner against Corinthian Colleges.

    “In April 2014—while the Department of Education was actively investigating the company for its questionable job placement rates and just a few months before the department acted to start Corinthian’s closure—ACICS renewed the accreditation of two Corinthian campuses and authorized a new branch campus,” the report noted.

    The report also found that one out of every five borrowers at an ACICS-accredited college defaults on his or her loans within three years of entering repayment, 50% higher than the national average. Many of those loans are backed by federal agencies, meaning that the defaults wind up costing taxpayers.

    In another blow for the for-profit college industry, the U.S. Department of Education is withdrawing its recognition of the independent agency that accredi...
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    DeVry says it will limit federal funding

    For-profit schools have been feeling the heat of stepped-up oversight following several failures

    For-profit colleges are barred from receiving more than 90% of their revenue from federal financial aid, but following the collapse of ITT, Corinthian, and other for-profit chains, DeVry says it will accept no more than 85% of its revenue from the feds.

    “This is a significant pledge that DeVry Group is voluntarily making for the long term and it underscores our commitment to finding solutions to the issues facing higher education today,” said Lisa Wardell, president and CEO of DeVry Education Group. “This is part of a broader effort to improve our policies and demonstrate the quality and value of our programs.”

    DeVry is working with "a variety of stakeholders on those commitments," which will be announced later this year, Wardell said, adding: “As we continue to engage with key stakeholders, we look forward to sharing details of the other commitments when they are finalized.” 

    Cracking down

    Federal and state agencies have been cracking down on for-profit schools, which tend to enroll large numbers of military veterans and students seeking vocational training. Many such students qualify for federal financial aid, meaning that taxpayers wind up paying for programs that critics say do little to prepare the students for careers.

    ITT Institute shut down earlier this month after the Education Department cut off its flow of federal funds. Corinthian College closed down in 2015, leaving many students adrift. It was hit with a $1.1 billion judgment in March, some of which may be available to help students retire outstanding loans.

    DeVry has had problems of its own. In January, the Federal Trade Commission sued DeVry, charging it used deceptive advertising to lure students. Last year, the school closed 14 campuses, moving students to its online program.

    DeVry Education Group operates schools under several names, including  American University of the Caribbean School of Medicine, Becker Professional Education, Carrington College, Chamberlain College of Nursing, DeVry Brasil, DeVry University and its Keller Graduate School of Management, Ross University School of Medicine, and Ross University School of Veterinary Medicine.

    For-profit colleges are barred from receiving more than 90% of their revenue from federal financial aid, but following the collapse of ITT, Corinthian, and...
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    Are you an ITT student stuck with student loans?

    Good news. You may be able to walk away from them

    It's been a rough week for students at ITT. On Tuesday they learned their school was closing its doors after the U.S. government cut off the flow of federal funds.

    Students who just started a new term suddenly had to find an education alternative. Worse still, many were stuck with student loans.

    Fortunately, there may be some options. The Consumer Financial Protection Bureau (CFPB) reports ITT students who were attending ITT when it closed and had not completed a degree program may be able to cancel their student loans by applying for a student loan discharge.

    Who's eligible?

    Students may be eligible for a complete discharge of Direct Loans, Federal Family Education Loan (FFEL) Program loans, or Federal Perkins Loans if they were enrolled when the school closed, or the school closed within 120 days after they withdrew.

    The first step is to contact your loan servicer about the application process to discharge a loan. CFPB says you may also need to contact your school to obtain your academic and financial records. CFPB suggests contacting the licensing agency in the state where you attended school to get help in acquiring those records. The documents may help support your discharge claim.

    You can get more information about that here.

    You can't transfer the credits

    There's another thing to consider. If you are successful in discharging your student loans, you won't owe the money you borrowed to pay ITT, but you won't be able to transfer any credits you earned there either. Essentially, you'll be starting over.

    However, that might prove to be a good option since it is highly likely you'll be able to pursue the same course of study at a community college, or online public school at much less cost. In July, we reported on a new program allowing employees of National Federation of Independent Businesses member companies to pursue a degree for $3,000 a year.

    Private loans may be a problem

    If you were attending ITT using private student loans, you'll find your options are more limited. In most cases, you'll have to pay it back. However, CFPB notes that some states have programs to assist students with private student loans in their college shuts its doors.

    The U.S. Department of Education barred federal funds from being used at ITT because it said the for-profit school was not in compliance with accrediting criteria and probably would not be able to get in compliance. Secretary of Education John B. King Jr. said the department acted out of its responsibility to both students and taxpayers.

    It's been a rough week for students at ITT. On Tuesday they learned their school was closing its doors after the U.S. government cut off the flow of federa...
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    California orders ITT to stop accepting new students

    The action follows the feds' decision to shut off the flow of federal funds to ITT

    California has ordered ITT to stop enrolling new students. The order came Friday, just one day after the U.S. Department of Education banned ITT from enrolling new students using federal financial aid funds in certain locations. It also vowed to increase its financial oversight of the chain of for-profit schools.

    “The federal action raises grave concerns about the continued financial viability of ITT,” said Joanne Wenzel, chief of the state Department of Consumer Affairs Bureau for Private Postsecond Education (BPPE). “We took today’s action in the interest of protecting potential students who are considering enrolling in ITT.”

    The order becomes effective Sept. 1 and affects all 15 ITT locations in California.

    BPPE said it will file an accusation on the charges and allegations set forth in the emergency order within 10 days. The accusation will seek to revoke ITT’s approval to operate in California.

    Students who have questions or need additional information can call BPPE toll-free at (888) 370-7589 or visit the bureau’s website.

    The U.S. Department of Education said it took the action after ITT's accrediting agency found that the institution was not in compliance with accrediting criteria and was unlikely to be able to correct its deficiencies.

    “Our responsibility is first and foremost to protect students and taxpayers,” said Education Secretary John B. King Jr. in a statement. “Looking at all of the risk factors, it’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal student aid funds.”

    California has ordered ITT to stop enrolling new students. The order came Friday, just one day after the U.S. Department of Education banned ITT from enrol...
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    For-profit schools' accrediting body may lose federal accreditation

    The agency that accredited defunct Corinthian Colleges ignored warning flags, report finds

    The end may be near for the organization that issues accreditations to for-profit universities. Department of Education staff members who have been investigating the Accrediting Council for Independent Colleges and Schools (ACICS) have recommended cutting ACICS' federal recognition. 

    “The staff recommendation is to withdraw recognition, which would mean the agency could not remedy its compliance issues,” the staff report said, charging that the ACICS had ignored warning flags at Corinthian Colleges, allowing billions of dollars of federal aid to flow to the now-defunct schools.

    The report follows calls for action from consumer advocates, educators, and state attorneys general, including California's Kamala Harris who earlier this month said the accrediting group's actions hurt thousands of students. 

    "The predatory scheme devised by executives at Corinthian Colleges, Inc. was unconscionable. And despite enforcement actions by the California Department of Justice and the federal government against Corinthian, ACICS continued to accredit Corinthian, hurting thousands of students in the process,” Harris said. “Students relied on Corinthian’s accreditation status, believing they were obtaining a high quality-education with real job prospects."

    The staff report found “extensive and pervasive deficiencies” at ACICS and recommended to the National Advisory Committee on Institutional Quality and Integrity (NACIQI) that it terminate the organization’s federal recognition.

    But the wheels grind slowly in federal agencies, and final action is still likely to be at least 18 months away, a DOE official said. A federal advisory body will discuss the staff report next week and additional reviews will follow.

    What happens to students?

    ACICS currently accredits 243 institutions, most of them for-profit schools. If the Education Department finally denies recognition to ACICS, those schools will be unaccredited and ineligible for federal aid.

    In a blog posting, Matt Lehrich, communications director at DOE, said students at ACICS-accredited schools shouldn't panic.

    "The chain of events that plays out next will take – at minimum – more than 18 months. That means that many of the students who already have started at one of these schools will be able to complete their certificates or degrees before there is a chance of anything changing," Lehrich wrote.

    "Generally speaking, if you’re near the end of your program or you’re preparing to transfer to another college or university, this news probably won’t interrupt your program."

    Lehrich has other advice for students in his blog posting, which you can read here

    The end may be near for the organization that issues accreditations to for-profit universities. Department of Education staff members who have been investi...
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