Nearly 600 former ITT Tech students in Pennsylvania are eligible for $5.3 million in debt relief as part of a new settlement announced Monday by state Attorney General Josh Shapiro.
A coalition of 44 state attorneys general reached a settlement with loan company Student CU Connect CUSO that includes more than $168 million in debt relief for more than 18,000 former students of ITT Tech schools nationwide, including 570 former ITT Tech students from Pennsylvania.
The attorney general’s office said the settlement holds CUSO accountable for its participation with now-defunct ITT Tech in subjecting students to deceptive and abusive lending practices.
ITT Tech filed for bankruptcy in 2016. The company had seven campuses in Pennsylvania, including locations at the Pittsburgh Mills mall in Frazer and on Campbells Run Road in Robinson.
“ITT aggressively pressured students to take predatory loan options and deceived them about the conditions of their loans,” Shapiro said in a press release. “As a result, hundreds of Pennsylvania students were burdened with student loan debt and struggled to find jobs.”
Under the terms of the settlement, CUSO has agreed that it will forego collection of the outstanding loans. Under the Redress Plan, CUSO’s loan servicer will send notices to borrowers about the cancelled debt and ensure that automatic payments are cancelled. The settlement also requires CUSO to supply Credit Reporting Agencies with information to update credit information for affected borrowers.
The attorneys general alleged that ITT, with CUSO’s knowledge, offered students temporary credit upon enrollment to cover the gap in tuition between federal student aid and the full cost of the education. Students were supposed to pay the temporary credit before the next academic year.
The attorneys general said ITT and CUSO knew, or should have known, that most students would not be able to pay the credit. Many students complained that they thought the temporary credit was similar to a federal loan and would not be due until six months after they graduated.
They went on to say, when the temporary credit became due, ITT pressured and coerced students into accepting loans from CUSO that often carried high interest rates.
The attorneys general also claim ITT resorted to pressure tactics, such as pulling students out of class and threatening to expel them if they did not accept the loan terms. Neither ITT nor CUSO made students aware of what the true cost of repayment for the temporary credit would be until after the credit was converted to a loan.
The attorneys general said the default rate on the CUSO loans was extremely high due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayments. The defaulted loans have continued to affect students’ credit ratings and are usually not dischargeable in bankruptcy.
Students with additional questions about the settlement can contact the Office of Attorney General’s Bureau of Consumer Protection at 1-800-441-2555 or at [email protected].