INDIANAPOLIS (WOWO): Indiana Attorney General Curtis Hill has announced more than $5-million in debt relief for students left stranded by the closure of ITT Tech in 2016.
The settlement is with Student CU Connect CUSO, LLC (“CUSO”), which offered loans to finance students’ tuition at ITT Tech, the failed for-profit college. ITT filed 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. The CUSO Loan program originated approximately $168 million in student loans to ITT students between 2009 and 2011.
A related settlement between the CUSO and the U.S. Bankruptcy Trustee was approved on June 17. The attorney generals’ settlement is also contingent on federal court approval of a related settlement between the CUSO and the Federal Consumer Financial Protection Bureau.
“Protecting Indiana families is our top priority,” Hill said. “This settlement holds CUSO accountable for its participation with ITT in subjecting ITT students to abusive lending practices, and it provides relief to hundreds of Indiana students who attended ITT Tech and incurred massive debts for an education and loans they could not repay nor discharge.”
The group of attorneys general alleged that ITT, with CUSO’s knowledge, offered students Temporary Credit (TC) upon enrollment to cover the gap in tuition between federal student aid and the full cost of the education. The TC was due to be repaid before the students’ next academic year, although ITT and CUSO knew or should have known that most students would not be able to repay the TC when it became due.
Many students complained that they thought the TC was like a federal loan and would not be due until six months after they graduated. They said ITT pressured and coerced students into accepting loans from CUSO, which for many students carried high-interest rates, far above 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. Because ITT’s credits would not transfer to most other schools, students were left with the choice of dropping out and losing any benefit of the credits they had earned or securing the loans. Most students chose the loan. Neither ITT nor CUSO made students aware of what the true cost of repayment for the TC would be until after the credit was converted to a loan.
Under the settlement, the CUSO has agreed that it will forgo collection of the outstanding loans. The CUSO, which was organized for the sole purpose of providing the ITT loans, will also cease doing business. Under the Redress Plan, CUSO’s loan servicer will send notices to borrowers about the canceled debt and ensure that automatic payments are canceled. The settlement also requires the CUSO to supply Credit Reporting Agencies with information to update credit information for affected borrowers.