JEFFERSON CITY, Mo. (KFVS) - Former ITT Tech students in Missouri and Illinois could receive millions of dollars in debt relief as part of a settlement with 48 attorneys general and the federal Consumer Financial Protection Bureau.
In Missouri, this settlement will result in more than $9.1 million in debt relief by canceling loan principal, interest and fees/charges for more than 1,300 Missouri borrowers.
In Illinois, this includes more than $9.4 million in student loan debt relief to former students.
Nationally, the settlement will result in debt relief of about $330 million for 35,000 borrowers who have outstanding principal balances.
According to Missouri Attorney General Eric Schmitt’s office, the settlement is with PEAKS Trust, a private loan program run by the for-profit college and affiliated with Deutsche Bank entities. ITT filed bankruptcy in 2016 and investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT’s access to federal student aid.
“Working with attorneys general across the country in a bipartisan fashion to obtain relief for consumers who have been harmed is an integral part of my job, and it’s something that we do on a daily basis,” said Missouri Attorney General Eric Schmitt. “This settlement will bring millions in debt relief for former ITT students in Missouri and across the country who were pressured and coerced to take high interest loans.”
PEAKS was formed after the 2008 financial crisis when private sources of lending available to for-profit colleges dried up. ITT developed a plan with PEAKS to offer students temporary credit to cover the gap in tuition between federal student aid and the full cost of education.
By entering into the agreement, or Assurance of Voluntary Compliance, PEAKS acknowledged the following:
- ITT and PEAKS knew or should have known that the students would not be able to repay the temporary credit when it became due nine months later. Many students complained that they thought the temporary credit was like a federal loan and would not be due until six months after they graduated.
- When students were required to start repaying the temporary credit, ITT pressured and coerced students into accepting loans from PEAKS. For many students, the loans carried interest rates far exceeding rates for federal loans. Pressure tactics used by ITT included pulling students out of class and threatening to expel them if they did not accept the loan terms. ITT credits would not transfer to most schools, and many low-income ITT students were forced to choose between enrolling in PEAKS loans or dropping out and losing any credits they had earned.
- The default rate on the PEAKS loans is projected to exceed 80 percent, due to both the high cost of the loans and the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible. The defaulted loans continue to affect students' credit ratings and are usually not dischargeable in bankruptcy.
Under the settlement, PEAKS agreed that it would forgo collection of the outstanding loans and cease doing business. PEAKS will send notices to borrowers about the canceled debt and ensure that automatic payments are canceled.
The settlement also requires PEAKS to supply credit reporting agencies with information to update credit information for affected borrowers.
“This settlement holds PEAKS accountable for its role in misleading ITT Tech students in Illinois about the loans it offered,” Illinois Attorney General Kwame Raoul said. “Especially during this time of uncertainty brought on by COVID-19, the settlement will provide much-needed relief to students who were pressured into taking on these loans. I urge students and their families to utilize the free resources offered by my office before taking out loans for college or other educational opportunities.”
Students will not need to do anything to receive the debt relief. The notices will explain their rights under the settlement. Students may direct questions to PEAKS at email@example.com or 866-747-0273, or the Consumer Financial Protection Bureau at 855-411-2372.