Ohio AG Yost Announces $ 6.8 Million Debt Relief for ITT Tech Students | New
COLUMBUS – Attorney General Dave Yost announced a multi-state settlement on Friday that will provide $ 6.8 million in debt relief to about 870 former ITT Tech students in Ohio.
Nationally, the 43-state settlement will result in $ 168 million in debt relief for more than 18,000 former students.
The settlement is with Student CU Connect CUSO, LLC (CUSO), which has offered loans to fund student tuition at ITT Tech, a bankrupt for-profit college. ITT filed for bankruptcy in 2016 following investigations by state attorneys general and following action by the US Department of Education to restrict ITT’s access to federal aid to students. CUSO’s loan program generated approximately $ 189 million in student loans to ITT students between 2009 and 2011.
“These students were misled, pressured and at times threatened to borrow from this lender,” Yost said. “They have had to carry the weight of these unreasonable loans for far too long, but today they can finally breathe a sigh of relief.”
A related settlement between CUSO and the US Bankruptcy Trustee was approved on June 14. Settlement with the Attorneys General also depends on Federal Court approval of another related settlement between CUSO and the Consumer Financial Protection Bureau, which is also announced today.
Attorneys General alleged that ITT, to CUSO’s knowledge, offered students temporary credit upon enrollment to cover the gap between tuition fees and the total cost of education. The credit repayment was due before the student’s next academic year, although ITT and CUSO knew or should have known that most students would not be able to repay it at that time.
Many students thought that the temporary credit was like a federal loan and that it would not be due until six months after graduation. When the credit was due, however, ITT pressured students to take loans from CUSO, which for many students carried high interest rates, well above federal loan rates.
ITT’s pressure tactics included withdrawing students from classes and threatening to expel them if they did not agree to the loan terms. Because students had the choice of accepting a loan from CUSO or giving up and losing all the credits they had earned – ITT credits would not transfer to most other schools – most students signed up for CUSO loans.
Neither ITT nor CUSO told students the true cost of repaying the temporary credit until the credit was converted into a loan. The default rate on CUSO loans was extremely high (expected to exceed 90%) due to the high cost of loans and the difficulties ITT graduates face in finding jobs paying enough to make repayment possible. Delayed loans continue to affect the credit scores of former students and are generally not dischargeable in bankruptcy.
According to the settlement, CUSO, under threat of litigation, agreed to waive collection of overdue loans. CUSO, which was incorporated for the sole purpose of providing ITT loans, will also cease operations. CUSO’s Loan Manager will notify borrowers of the canceled debt and ensure that automatic payments are canceled. The regulations also require CUSO to provide credit reporting agencies with information to update the credit information of affected borrowers.
Former students affected by the settlement will receive notices containing more information about their rights. Those with questions can contact Attorney General Yost’s office by calling 800-282-0515.