ITT Bankruptcy

ITT Students’ $1.5 Billion Bankruptcy Settlement Approved by Judge

On Wednesday, November 28, the judge in the ITT bankruptcy case gave final approval to the settlement between the student class and the estate of ITT. The settlement is a big victory for former ITT students who were defrauded by the school and provides important relief. The court’s final order approving the settlement will become effective in approximately ninety days, during which time state Attorneys General and the U.S. Attorney General may file objections.

Key Components of the Settlement:

– The student class gets an approved $1.5 billion claim in the bankruptcy. In exchange, former ITT students give up their claims against the estate of ITT, and keep their rights to seek further relief from the Department of Education and private lenders;
– Over $500 million in student debt held by ITT is canceled; and
– ITT’s estate has returned the $3 million that students paid directly to ITT after it declared bankruptcy.

As part of the settlement, the parties got an official ruling from the IRS, saying that the estate is not required to treat the more than $500 million of cancelled debt as taxable.

This landmark settlement has provided more relief to defrauded student borrowers than the Department of Education has in the last two administrations combined.

In fact, the Department of Education has taken every possible to step to thwart relief for students. The Department has only approved 33 borrower defense applications for ITT students, while approximately 14,000 outstanding borrower defense applications sit unadjudicated.

To make matters worse, late last month, Betsy DeVos, Secretary of Education, reinstated the Accrediting Council for Independent Colleges and Schools (ACICS), ITT’s long-time accreditor. In 2016, the Department of Education had cut off ACICS’s ability to accredit schools because it failed to comply with federal criteria designed to make sure that schools like ITT followed federal and state laws and provided an education to students that was worthy of federal student loans. Year after year, ACICS enabled ITT to perpetrate its fraud on students, giving the company access to billions of dollars in federal student loan revenue. Now, ACICS has been given the green light from the Department to continue accrediting schools despite its role in defrauding hundreds of thousands of ITT students.

Meanwhile, this past June, the Securities and Exchange Commission gave former ITT executives Kevin Modany and Daniel Fitzpatrick a sweetheart deal on its charges that Modany and Fitzpatrick cheated the company’s shareholders and operating the company for their own personal financial benefit. On the eve of trial, Modany and Fitzpatrick walked away with a slap on the wrist.

Multiple agencies of the federal government have been loud and clear about where defrauded ITT students stand. But students will be louder. This settlement is an important step in acknowledging students’ experiences and the harms they have suffered at the hands of ITT and ACICS. All ITT-related fraudulent debts, including the federal and private loans that are not covered by this settlement, must be canceled, and we will continue to fight on behalf of students until that happens.

Click here to see the Washington Post’s recent story about the settlement.

Visit our website for additional information for former ITT students and to sign up for email updates about the student class claim in the bankruptcy case.

My Future Was Stolen By A Corporation: An ITT Student Story

The author, Lorenzo Boyland, is a former student of the for-profit ITT Technical Institute campus in Cordova, TN and resides in Mississippi.

My future was stolen by a corporation. Now, I’m left waiting for justice.

There are thousands who could tell a similar story. This is mine.

When I graduated high school, I joined the military and served my country. I served a four-year tour, and then re-upped for four more years, finishing in Iraq.

When I returned home, it was time to find a job. I graduated from  high school near the top of my class. I was an honorably discharged veteran. But I knew I needed a college degree.

One of my best friends told me about ITT’s campus in Cordova, Tennessee, which was conveniently located close to my home. When I sat down with ITT’s recruitment person, it seemed like a perfect fit.

I wanted to pursue a career in computer science. The recruiter promised that if I graduated from ITT, I was guaranteed a job. They promised that if I maintained a 3.4 grade point average, I would receive a discount on my tuition. I made the school aware that I was a military veteran and that my G.I. Bill would help to cover the cost of tuition. They told me not to worry about taking out additional loans, because ITT would put me on track for a well-paying career.

I was excited about beginning my higher education, which ITT sold me as the beginning of the next stage of my life. Then I learned that ITT was all a fraud.

I cared about my education, and I worked hard for my degree. I graduated with that 3.4 and honors. ITT never delivered the promised tuition discount.

I went to the career placement office for help finding a job. They pointed me to the job board at the front of the room.  And they referred me to a retail job at Best Buy.

I thought – that’s what you’re recommending to me? I paid thousands of dollars to you and all you can recommend is Best Buy? I could have done that out of high school.

I went out to find a job on my own, but I did not have many connections. I was directly out of the military and had been away for eight years.  I learned very quickly that the ITT diploma was not worth anything to companies looking to hire, and employers frequently laughed at me when they learned I attended ITT. I studied and succeeded, but the computer science job I worked so hard for never materialized.

When I told ITT that I could not get a job in computer networking, they told me that it was because I only had an associate degree, and that I should enroll for a bachelor’s. ITT tried to prey on my inability to get a job due to their broken promises to convince me to further fund their scam. At that point I realized that I, like so many others, had been completely ripped off.

Since I could not get a job in computer networking, I began working as an overnight baker at Panera. That job allowed me to start making payments toward my $34,000 in federal loans from ITT.

Then I got a call that felt like a punch in the gut. It was Chase Bank asking about another $18,000 loan in my name. I had no earthly idea what they were talking about.

Turns out, ITT had signed me up for an additional private loan without my knowledge. And it was 1000 days past due! I was completely blindsided.

I am continuing to pay down my federal loan. But that private loan? I’ll probably get another call today asking me to pay. I don’t blame the people on the phone – they are just doing their job. But that loan is impossible to get caught up on.

My financial situation wears on me every day. I work hard to try to earn enough to live while paying off my loans. I should not have to pay a dime given the egregious lies ITT sold me.

I am not alone. ITT routinely lied to hundreds of thousands of other students. They targeted people who were eligible for federal loans and grants –including low-income people and veterans like me – and took advantage of our dreams and ambitions.

I work hard. I served my country. I went to college to build a better life. ITT profited off of my aspirations and left me nothing.  ITT’s actions were wrong and illegal. It perpetrated a fraud on hundreds of thousands of students. ITT put us all in a hole without a shovel to dig ourselves out.

ITT declared bankruptcy in September 2016, and even then, only stopped collecting money from students after students sued in the bankruptcy. This week, a judge has finally canceled some ITT debts based on that case.

However, like thousands of other former students, I am still paying federal student loans that funded a school that no longer exists.

We are still waiting for justice.

If you are a former student of ITT, click here to sign up for future updates.

ITT Students’ $1.5 Billion Settlement Heard by Judge In Bankruptcy

Today, former ITT students proposed a $1.5 billion settlement claim in bankruptcy court that would cancel more than $500 million in debts. All participants in the case and members of the class have until April 24 to submit their views of the settlement with the court before it is heard for final approval on June 13.  This is good news for former ITT students, but there is still a long way to go.

ITT Tech systematically defrauded students. ITT lied to and misled students about financial aid and cost of attendance, job placement and salaries, the quality of equipment and experience of instructors, the employability of ITT graduates, ITT’s programmatic accreditation, the transferability of credits, and career placement assistance.

It would be simpler to list the things ITT didn’t mislead students about.

Data from 2014 show that on average, ITT graduates earn on average the same or less than high school graduates with no college education. Approximately one in five ITT students defaulted on their federal student loans within three years.

Now, a group of ITT students have reached a proposed a settlement with the bankruptcy estate that includes a $1.5 billion allowed claim. In addition to cancelling nearly $600 million in debts, the settlement would also return the $3 million that students paid directly to ITT after it declared bankruptcy. This landmark settlement shows that the only path forward is to cancel fraudulent and unenforceable debts created by predators like ITT.

The settlement is a good start, but there is still a long way to go to make things right for former ITT students.

More than 7,000 former ITT students have submitted borrower defense applications to the Department of Education to cancel their federal student loans. These loans – and the federal loans of all former ITT students, totaling nearly $4 billion – should be cancelled.  ITT’s estate has cancelled the student debts because of the school’s fraudulent actions, and it’s time for the Department of Education and all private holders of ITT debt to do the same.

As Paul Goodwin, a former ITT student, said: “I have still been struggling to pay back my student loans, which I should not even owe because of the way that ITT systematically lied to students. Getting more relief on temporary credit loans is great news for me and my family, but I am still waiting for the Department of Education to discharge my federal student loans.”

We will continue to fight for the Department of Education to meet its legal obligation to cancel these fraudulent student loans.

If you are a former student of ITT, click here to sign up for future updates.

Proposed Settlement to be Heard January 24

A year ago former ITT students filed a complaint against ITT and a class Proof of Claim in the ITT bankruptcy case. In this last year we have worked hard to fight on behalf of the Student Class, including urging the Trustee to stop collection on all debt owed directly to ITT.

Today we are happy to announce that a motion was filed asking the court for preliminary approval of a proposed settlement between the Student Class and the Trustee. The proposed settlement agreement would recognize a $1.5-billion-dollar claim against ITT by students who attended the school between 2006 and 2016, for widespread, systematic fraud and breach of contract. The Students’ allegations included ITT’s use of high-pressure sales tactics to get students to enroll and remain enrolled. It was also alleged that ITT deceived and misled students about financial aid options and costs of attendance, job placement and salary rates, the quality of equipment and experience of instructors, the desirability of ITT graduates by employers, ITT’s accreditation status, the transferability of credits, and career placement assistance.

Some Key Terms of the Agreement

  • All of the nearly $600 million in “temporary credits” — accounts the company claimed students owed directly to ITT — will be canceled. This settlement only cancels debts that were owed directly to ITT and does not affect private or federal student loans.
  • All of the almost $3 million students paid directly to ITT since ITT declared bankruptcy in September 2016 will be returned to students, and there will be accurate credit reporting showing that these accounts have been deleted or paid in full.
  • The Students’ Proofs of Claim will be allowed in the amount of $1.5 billion as unsecured claims. If at the end of the bankruptcy there is money in the estate to pay unsecured claims, the student class will receive a proportional share based on the size of the allowed claim. Any amount distributed to the student class will be divided among the entire student class, and the distribution must be approved by the court.
  • In exchange for the allowed claim, former ITT students give up their claims against the estate of ITT, and keep their rights to seek further relief from the Department of Education and private lenders.

The motion and the settlement agreement will go before the court for preliminary approval on January 24, 2018. If the court grants preliminary approval, there will be a period of time for student class members to review and comment on the agreement and also choose not to participate. After that, we will seek final approval of the settlement from the court.

In our view, the proposed settlement agreement is a victory for former students who were defrauded by ITT. However, we know that the student class still faces billions of dollars of federal and private student loans from ITT and we will continue fight for all ITT-related debt to be canceled.

ITT Trustee to Stop Collection on All “Temporary Credit” Accounts

MAY 19, 2017

On May 18, the court overseeing ITT’s bankruptcy case approved a motion to stop collection on all ITT “Temporary Credits.” ITT used unfair and deceptive tactics to get students to sign up for Temporary Credits, including by describing Temporary Credits as grants and threatening to expel students if they did not agree to the debt. Even after ITT filed for bankruptcy, its servicers and debt collectors continued to harass students to collect these Temporary Credits.

Former ITT students have consistently objected to ITT’s ongoing collection efforts. In January, the Project on Predatory Student Lending filed an adversary complaint in the bankruptcy case on behalf of hundreds of thousands of former ITT students, arguing that the debts were incurred as a result of ITT’s unfair and deceptive practices and asking the court to block the estate from collecting these accounts. The students then objected to the trustee’s request to hire more contractors to try to collect these Temporary Credits. The class of former students is currently represented by the Project on Predatory Student Lending and Jenner & Block LLP.

Former ITT students are gratified that the trustee has now decided to stop pursuing these accounts. Stopping collection on Temporary Credits is an important first step, but any ongoing collection on ITT-generated debt continues to harm students unjustifiably. Former ITT students continue to face collections on billions of dollars of federal and private student debts that the company generated by its unfair and deceptive practices.

For more information about students’ claims against ITT, click here.

FOR FORMER ITT STUDENTS:

As of yesterday, if you have Temporary Credits from ITT that were serviced by United Accounting Services (UAS), FirstSource/One Advantage or other collection agencies (Premiere Credit NA, General Revenue Corporation, and Security Credit Systems), you should no longer submit any payments. In the next few weeks, the trustee will send out a notice to those students who are affected. In the coming months, the trustee will calculate refund amounts for only those students who continued to make payments on their Temporary Credits after ITT filed for bankruptcy.

ITT issued Temporary Credits to students to pay tuition not covered by federal and private student loans. Many Temporary Credits were later converted to private loans, including Student CU Connect CUSO and PEAKS loans—these debts are no longer considered Temporary Credits. The debts that were not converted to private loans are still considered Temporary Credits, and have been serviced by UAS & FirstSource on behalf of ITT.

This ruling does NOT apply to other types of ITT-related debt, including federal loans, private bank loans, Student CU Connect CUSO loans, or PEAKS loans. This ruling also does not apply to any debt that is not ITT-related, even if UAS or FirstSource are collecting on those debts.

Stopping collection on Temporary Credits is an important first step, but it does not solve all of the problems ITT caused, including federal and private loan collections. The ITT trustee can stop collection on Temporary Credits because ITT’s estate still owns those accounts. The trustee does not own the federal loans or most private loans. Therefore, the trustee has less control over these loans. Below are updates on the status of a few other types of ITT loans:

  • Federal Loans. The Department of Education acknowledged that over $3 billion ITT-generated loans could be eligible for borrower defense discharges. The Department of Education has received over 2,000 applications from ITT students, but to date, we are not aware of any borrower defense discharges granted to ITT students. We will continue to advocate for the Department to grant borrower defense discharges to former ITT students.
  • Temporary Credits converted into accounts with Student CU Connect CUSO/PEAKS. These accounts are currently outside the control of the ITT trustee. These accounts are the subject of multiple investigations, and we are advocating on behalf of students to discharge these accounts.
  • All other private student loans are not part of ITT’s bankruptcy proceeding right now.

Click here to sign up for future updates.

 

 

Update: January 30th ITT Bankruptcy Hearing

On Monday, January 30, the judge in ITT’s bankruptcy granted former ITT students’ request that they be recognized as having filed a group claim despite the trustee’s objection, and recognized the Legal Services Center of Harvard Law School as students’ counsel for this initial stage of their case. Former ITT students requested this group recognition as part of their initial filing on January 3. Although the trustee for ITT’s estate filed a vigorous objection to the former students’ request, Judge Carr agreed with the former students that it was unquestionably appropriate to permit former students to file their claims as a group, rather than individually.  The judge ordered the trustee to meet with the students’ lawyers to begin discussing the issue of class certification in students’ adversary proceeding against ITT’s estate.

The judge also denied—for now—the trustee’s motion to hire a company as a “master servicer,” to supervise ongoing collections by UAS and FirstSource, and to begin collecting on more accounts. Former students objected to this request, arguing that, by undertaking a broad new debt collection campaign on fraudulently-incurred and otherwise poorly-documented debts, the trustee would confuse former students and expose ITT’s estate to liability for collecting bad debts. The Trustee disclosed that the Consumer Financial Protection Bureau had also warned that collecting on ITT’s accounts was likely to cause future legal problems, and acknowledged that many of the accounts were likely not collectible. The trustee argued that the estate should nonetheless be allowed to hire the firm as master servicer, but Judge Carr denied the request for now, ordering the lawyers for the trustee to meet with lawyers for former students to discuss their positions on continuing debt collection against former ITT students.

The court scheduled a status conference with former students and the Trustee on February 9 to discuss both of these topics.

For more information about students’ claims against ITT, click here.

New York Times Calls Former ITT Students’ Legal Action ‘Gratifying’

“It seems only right that victims of predatory for-profit education companies should have their student loans forgiven,” the article begins. It goes on to discuss the validity of students’ claims, their difficulty in getting debt relief, and the thousand of pages of “powerful testimony” submitted with the students’ complaint. As the article explains, the evidence shows “a pattern of practice that dispels any notion that bad behavior harmed just a handful of ITT students.”

Read the full article: Student Victims Seek to Become Creditors in ITT Bankruptcy

Class of Former ITT Students File 7.3 Billion Dollar Claim in ITT Bankruptcy

On January 3, 2017, a group of former ITT Tech students moved to intervene in ITT’s bankruptcy proceedings in the Southern District of Indiana. They seek to act as representatives of hundreds of thousands who have been defrauded by ITT.

Along with legal documents, the students filed over a thousand pages of first-hand accounts from students who attended ITT, affidavits from several whistleblowers, and evidence developed from state and federal law enforcement investigations. The CFPB and multiple state attorneys general are also parties in the bankruptcy proceedings.

For more information on the student intervention, including all of the documents that were filed, background on ITT, and explanations of the legal actions taken today, click here.