Nearly 1,500 former ITT Tech students in Texas with open loans will receive $13 million in debt relief as part of a 43-state class action lawsuit worth nearly $170 million.
Former students with open, active loans held by the CUSO, ITT Tech's parent company, will no longer be required to make any payments and the debts will be canceled according to a multistate settlement agreement announced Friday by Texas Attorney General Ken Paxton's office.
Paxton's office said, "that under the threat of litigation, CUSO agreed to forego collection of outstanding loans, supply credit reporting agencies with information to update students' credit information and cease doing business."
The latest news from around North Texas.
CUSO agrees to "discharge and cancel all outstanding balances of all Affected State Consumers' Loan accounts, including their associated fees, charges, and interest." CUSO has also agreed to notify, within 30 days, all affected consumers and consumer reporting agencies as to the status of the loans.
Paxton said the school's parent company, Student CU Connect CUSO, LLC, offered students temporary credit to cover the gap between federal student aid and the cost of tuition. Unlike federal aid, ITT's credit was due back the following academic year and if it wasn't paid the school threatened to pull students out of class or expel them, "in order to coerce students into accepting high-interest loans from CUSO."
Paxton's office said neither ITT Tech or CUSO made students aware of the true cost of temporary credit repayment until it was converted into a loan and that CUSO loan defaults were projected to exceed 90 percent due to high costs and lack of success ITT graduates had getting jobs with their earned degree.
"Students who attended ITT Tech are burdened with unpayable debts they received while pursuing an honest education. This college and loan program have failed them tremendously," Paxton said. "I am proud of my office for holding CUSO accountable for their abusive loan practices and aiding students who were pressured into signing a loan without knowledge of the full cost or deadlines."
The group that accredited ITT found that the chain, which was among the biggest for-profit chains in the nation, failed to meet several basic standards and was unlikely to comply in the future. On Aug. 25, 2016, the Department of Education announced a ban on enrolling students at the school using federal loans.
Later that year, without the access to federal student aid, ITT Tech declared bankruptcy and shut down more than 130 campuses in 38 states. The closure left students unable to finish their degrees and on the hook for outstanding debts. At the time, they had enrolled roughly 45,000 students and reported $850 million in revenue.
In Texas, that included 10 campuses in Arlington, Austin, DeSoto, Houston (3), Richardson, San Antonio (2) and Waco.
View a copy of the settlement below.