ITT Tech announces full closure after sanctions, 40,000 students affected

September 6, 2016 at 13:52

For-profit higher education company ITT Technical Institutes is ceasing operations in response to a series of prohibitions applied by the US Department of Education that included a ban on accepting new students who rely on federal aid.

ITT Educational Services, the parent company of ITT Technical Institutes,announced Tuesday that it "will discontinue academic operations at all of its ITT Technical Institutes"based on actions taken by the US Department of Education (DoE) in late August. The DoE said at the time that it was levying deep sanctions on ITT Tech out of a responsibility "to protect students and taxpayers."

The for-profit chain of technical schools — with more than 40,000 students at 130 campuses in nearly 40 states — has been the subject of a variety of state and federal investigations over its recruitment and accounting practices, among other issues.

"The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter," the company said in a news release. "We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution."

The company blamed its decision on the "inappropriate and unconstitutional" DoE requirements, which included a demand that ITT Tech increase its surety to 40 percent of its Title IV federal funding, or to about $247 million from $94 million, within 30 days.

The company was also banned from accepting new students who rely on federal aid. In 2015, ITT revenue reached $850 million, with around $580 million coming from federal student loans. DoE also tightened its financial oversight of ITT Tech.

"Looking at all of the risk factors, it's clear we need to increase financial protection and it wouldn't be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal student aid funds," Secretary of Education John B. King Jr. said in late August.

In response to ITT Tech's announcement, King said Tuesday that the DoE is "committed" to helping students move on.

A message to @ITTTech students from @JohnKingatED: https://t.co/dYaao43ZT6 #ITTtech
— Dorie Turner Nolt (@EDPressSec) September 6, 2016

Student enrollment at ITT Tech has dropped dramatically in recent years amid several state and US government investigations of the company, including a federal fraud probe. ITT has been sued by the Consumer Financial Protection Bureau over loan practices in addition to a spate of other lawsuits brought by states and students alike.

Nevertheless, ITT Tech said Tuesday that the "unwarranted" DoE sanctions were applied without due process and will hurt its students and more than 8,000 employees the most.

Damn I feel bad for ITT Tech students. I would be blown on a whole other level if my school just shut down on me
— Gordon Gekko (@Rikk_Flair) September 6, 2016

The DoE "rejected" proposed "alternatives that we strongly believe would have better served students, employees, and taxpayers," the company added.

DoE Secretary King said in August that current ITT students won't "shoulder the burden of the school’s bad behavior." Those students can continuing applying for federal loans, the DoE said in a blog post detailing students' options.

ITT students: TAKE THE LOAN DISCHARGE, then apply to a legitimate school, and instead of transferring credits, try to get credit by exam
— Barmak (@BarmakN) September 5, 2016

Upon announcing the sanctions, the DoE cited actions made by ITT's accreditor, the Accrediting Council for Independent Colleges and Schools, which has said ITT "is not in compliance and is unlikely to become in compliance with [ACICS] accreditation criteria" related to the company'sfinancial structure, admissions practices, recruitment, job placement, management, and overall institutional integrity.

Shortly after the DoE's August announcement, the California Department of Consumer Affairs' Bureau for Private Postsecondary Education demanded ITT Tech halt acceptance of new students at the company's 15 California outlets. ITT Tech has since said on its website that credits earned by current students are "unlikely to transfer."

Supporters of ITT Tech have decried the federal actions. A recent Wall Street Journal editorial called the sanctions a"lawless execution" that came "without proving a single allegation."

ITT Tech is closing. Now if people want to blow money on a degree that isn't worth anything, they'll just have to go to college.
— Matt Fernandez (@FattMernandez) September 6, 2016

Supporters of the DoE actions included US Senator Dick Durbin (D-Illinois), who said the department's moves would "help prevent additional students from being harmed and more taxpayer dollars from being wasted on this company faltering under the weight of its own wrongdoing."

In July 2015, the DoE announced a rule aimed at predatory practices of for-profit colleges, demanding that education institutions would lose federal funding unless they can show their graduates can actually get jobs and repay student loans.

On the brightside, you won't see 200 ITT Tech commercials when you're watching Catfish marathons. https://t.co/qY4YTLG0jv
— Darian Somers (@StuffSomersSays) September 6, 2016

In addition to ITT, another major for-profit education company, Corinthian Colleges, was effectively shut down in April 2015 after being fined $30 million by federal regulators for reportedly falsifying job placement claims. The DoE offered debt relief to some 16,000 students affected by the company's closure.