Students who attended the college chain ITT Tech, which went bankrupt in 2016, will have their student debt forgiven under a nationwide settlement.
This week, the attorneys general of almost all 50 states and the federal Consumer Financial Protection Bureau announced a settlement that will wipe out a collective $330 million in debt for the 35,000 students who attended the school and still have outstanding balances.
The now-defunct school imposed high-interest loan payments through private lender PEAKS Trust, and these debts have continued to affect the credit scores of former students.
"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 Ohio Attorney General's office said in a statement. "The defaulted loans continue to affect students’ credit ratings and are usually not dischargeable in bankruptcy.”
In a complaint filed by the CFPB, government prosecutors said ITT knew borrowers would be unable to repay the high-interest loans. In some cases, the loans were signed by ITT employees without the borrower’s knowledge or permission.
“Their tactics were wild,” Massachusetts Attorney General Maura Healey wrote on Twitter. “ITT offered students temporary credit upon enrollment to be repaid the next year. When some students couldn't pay, ITT allegedly pulled them out of class and threatened to expel them if they did not refinance their debt with a high-interest PEAKS loan."
Former students don't need to take any action to have their ITT debt erased; PEAKS will send students a notice. Students with questions for PEAKS can email the company at firstname.lastname@example.org or call 866-747-0273.