Colorado share of settlement wipes out $1.6 million in ITT student loans
By MEG WINGERTER | The Denver Post | Published: June 18, 2019
(Tribune News Service) — Some former students of bankrupt for-profit college ITT Educational Services got relief Friday when the Colorado Attorney General’s office announced a settlement that wiped out $1.6 million in loans.
ITT offered students “temporary credit” loans that had to be repaid within nine months, then pushed them into high-interest loans that most couldn’t afford to repay, according to a settlement agreement from the federal Consumer Financial Protection Bureau. The settlement requires Student CU Connect CUSO, an entity set up to manage the loans, to stop trying to collect them.
“This settlement makes clear that those lending to students cannot engage in fraudulent or predatory practices against college students, many of whom already face overwhelming debt for an education,” Attorney General Phil Weiser said in a news release.
ITT filed for bankruptcy and shuttered its 100 campuses in September 2016, one month after the U.S. Department of Education cut off the flow of student loans because of concerns graduates were racking up debt for a credential that meant nearly nothing to employers or other colleges they might try to attend. The bankruptcy case is ongoing.
The settlement applies to 168 borrowers who filed complaints in Colorado. The agreement also includes borrowers from 42 other states and the District of Columbia.
It doesn’t allow students to recover any payments they already made, though it does require CUSO to ask the major credit reporting agencies to wipe the outstanding loans off borrowers’ records.
The Consumer Financial Protection Bureau alleged the loans were developed to solve problems in ITT’s business model. Federal rules require that at least 10 percent of a college’s revenue come from a source other than loans backed by the government, such as private loans or students’ out-of-pocket payments. The average ITT student had an income of only about $18,000 per year and poor credit, however, so most couldn’t afford to pay tuition and couldn’t get private loans.
ITT solved that problem by offering students “temporary credit,” in the form of interest-free loans that had to be repaid in nine months. Few students could repay the loans in such a short time, though, so ITT’s balance sheet showed it had substantial uncollected loans — something that tends to rattle investors.
It was accused of dealing with that problem by using aggressive and misleading tactics to push students into high-interest loans offered by Student CU Connect CUSO. More than half still couldn’t repay the loans, and many didn’t understand what they had signed, according to the consumer bureau.
Hermann Degbegni is one who said he had no idea what he had agreed to. Degbegni enrolled at ITT in Virginia in 2009, three years after he immigrated to the U.S. He said financial aid staff pulled him out during lessons and told him to sign loan papers quickly so he could get back to class. He was left with at least $54,000 in loans when he graduated.
Going to ITT “was the worst mistake I made in my life,” he said. “They took advantage of people who don’t know how the process worked.”
He attempted to pay off the loans until 2013, when he joined the Army and his payments were deferred because of his low income. While he was stationed near Colorado Springs, he sought help from a military lawyer, who forwarded his case to the Attorney General’s office.
“It’s a sad story, because I know that I’m not the only one,” he said.