COLUMBIA, S.C. (WCBD) – South Carolina Attorney General Alan Wilson announced nearly 1,000 former ITT Tech students across the state will receive part of an $8.6M debt relief settlement.
The money is part of a larger nationwide settlement of $330 million and comes after ITT filed for bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT’s access to federal student aid.
“These students were going to school so they could get better jobs but instead they were taken advantage of and left with debt and no jobs to pay it off,” Attorney General Wilson said. “But it wasn’t just normal debt; these companies used unfair pressure tactics to trap students in a no-win situation.”
The settlement will result in debt relief of about $330 million for 35,000 borrowers nationwide who have outstanding principal balances.
According to a news release Wednesday, the settlement is with PEAKS Trust, a private loan program run by the for-profit college and affiliated with Deutsche Bank entities.
PEAKS was formed after the 2008 financial crisis when private sources of lending available to for-profit colleges came to a halt. Wilson’s office says 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 the education.
“When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which for many students carried high interest rates, far above rates for federal loans,” Wilson’s office said.
The release stated that ITT used pressure tactics including pulling students out of class and threatening to expel them if they did not accept the loan terms.
Many of the ITT students were from low-income backgrounds and were left with the choice of enrolling in the PEAKS loans or dropping out and losing any benefit of the credits they had earned, because ITT’s credits would not transfer to most schools.
The default rate on the PEAKS loans is projected to exceed 80%, 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 repayment feasible. The defaulted loans continue to affect students’ credit ratings and are usually not dischargeable in bankruptcy.
Wilson’s office said students will need to do nothing 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.