Financial troubles at for-profit ITT leaves student vets vulnerable
By ALEX HORTON | STARS AND STRIPES Published: August 26, 2016
SAN ANTONIO — Nearly 12,500 student veterans will not be able to recover lost education benefits if a for-profit school is forced to close its doors, a veterans advocacy group said Friday.
The U.S. Department of Education announced this week it placed ITT Technical Institute on heightened cash monitoring, which bars any new students from using federal student aid at more than 130 nationwide campuses of ITT Technical Institute, a for-profit school beset by legal and financial problems.
The vocational school is a combination of brick and mortar and online campuses with 43,000 students.
The Department of Education has demanded $153 million to be paid in 30 days to ensure the government can reimburse students and cover loan forgiveness in the event ITT goes out of business. The company was already required to pay $94 million to the DOE, according to corporate filings posted Thursday.
GI Bill benefits are not considered federal student aid, which means student veterans will not be able to recoup benefits even if civilian students see their debts forgiven, said James Schmeling, executive vice president of strategic engagement at Student Veterans of America, a national veterans advocacy group.
“I think student veterans at ITT should watch the next 30 days very closely,” Schmeling said. “If they don’t post the additional money, they may be at high risk of closing.”
Officials for ITT could not be reached for comment Friday.
Government programs are in place to forgive federal student aid loans if students prove they were deceived by illegal or deceptive recruiting practices. But the Post-9/11 GI Bill is not part of that relief measure, Schmeling said, which leaves veterans without recourse to reinstate benefits spent at the same schools.
Students attending ITT will not have their benefits interrupted, according to a message posted Thursday to the Department of Veterans Affairs’ GI Bill Facebook page, adding caution flags to its GI Bill comparison tool pages for ITT schools about its financial issues.
ITT’s corporate filings said the accrediting agency responsible for certifying their programs, the Accrediting Council for Independent Colleges and Schools, characterizes ITT as out of compliance with regulations and is “unlikely” to become compliant in the future.
The company has experienced chronic mismanagement of finances and has been the target of numerous state and federal investigations into its recruiting practices, according to the Wall Street Journal. Those ongoing problems have prompted the DOE to doubt ITT’s viability, the paper reported Wednesday.
Inside Higher Education, a university-focused publication, reported in September that the company has been under tight scrutiny by the DOE after it failed to reconcile federal aid accounts and lacked a written policy to address the issue, as well as accusations from the Securities and Exchange Commission that two executives concealed losses in its student loan programs.
Schmeling said he was concerned for student veterans already enrolled at ITT who now face complicated questions about the future of their education. Credits earned at ITT are not guaranteed to transfer to other schools, he said, making it more likely veterans will have to cover tuition out of pocket once their benefits are exhausted.
“Even if veterans complete their degree from ITT, there’s a question about the value of that degree to employers if the school closes,” Schmeling added.
Student Veterans of America will provide assistance to concerned veterans attending ITT, Schmeling said, including recommendations to transfer to a local community college or state university. Building doubts of ITT’s survivability has come at the beginning of the fall semester, which means most ITT students looking to transfer will have to wait until next spring at the earliest to begin a program elsewhere.
Ryan Gallucci, the deputy veterans service director at Veterans of Foreign Wars, said Friday that tighter scrutiny of for-profit schools has been a priority in the veterans community, though the ITT situation illustrates how veterans can slip through regulatory cracks.
“We need to hold schools accountable for impropriety,” he said. “This may happen more in the not too distant future.”
VFW recently widened the scope of its need-base emergency grant program of $5,000 for student veterans affected by school closures like the one facing ITT, Gallucci said.
A provision in the Veterans First Act would restore benefits to veterans during an interrupted term at any school unexpectedly shuttered after 2015. The bill is stalled in Congress, Gallucci said.
ITT’s stock has been in freefall since the announcement, dropping one-third of its value this week, prompting even more doubt that ITT can survive long term without federal money. Nearly 70 percent of its revenue comes from federal aid coffers, according to the Wall Street Journal.
The possibility of massive debt forgiveness for ITT students comes after Corinthian Colleges, Inc. filed for bankruptcy following a similar ban on receiving federal funds. The government absorbed $171 million in student loan debt this year after Corinthian’s liquidation amid allegations of fraudulent statements of job placement rates.