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.