Millions in debt relief available for former ITT students
Published 6:48 am Saturday, September 19, 2020
ST. ROSE — Louisiana Attorney General Jeff Landry has secured an agreement to obtain $6,605,118.07 in debt relief for former ITT Tech students in Louisiana as part of a settlement between PEAKS Trust and 48 state attorneys general and the federal Consumer Financial Protection Bureau.
ITT Tech operated campuses in St. Rose and Baton Rouge before filing for bankruptcy in 2016.
“As Attorney General, I remain committed to protecting Louisiana consumers from unfair, deceptive and predatory business actions,” said AG Landry. “This settlement will provide much-needed relief to many Louisiana students who incurred debts for questionable education because of unethical and illegal lending practices.”
The national settlement with PEAKS Trust, a private loan program run by the for-profit college and affiliated with Deutsche Bank entities, will result in debt relief of about $330 million for 35,000 borrowers who have outstanding principal balances. PEAKS was formed after the 2008 financial crisis when private sources of lending available to for-profit colleges dried up.
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. ITT filed bankruptcy in 2016 amid investigations by AG Landry and many of his fellow state attorneys general and following action by the U.S. Department of Education to restrict ITT’s access to federal student aid.
According to the Assurance of Voluntary Compliance filed this week, ITT and PEAKS knew or should have known that the students would not be able to repay the temporary credit when it became due nine months later. Many students complained that they thought the temporary credit was like a federal loan and would not be due until six months after graduating.
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. Pressure tactics used by ITT included 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 percent, 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.
Under the settlement, PEAKS has agreed that it will forgo the collection of the outstanding loans and cease doing business. PEAKS will send notices to borrowers about the canceled debt and ensure that automatic payments are canceled. The settlement also requires the PEAKS to supply credit reporting agencies with information to update credit information for affected borrowers.
Affected students will need to do nothing to receive their debt relief. The notices will explain their rights under the settlement. They may direct questions to PEAKS at 866-747-0273 or the Consumer Financial Protection Bureau at 855-411-2372.
In June 2019, AG Landry was part of a national $168 million settlement with CUSO that resulted in debt relief for 18,664 former ITT students – including $2,818,341.38 in debt relief for 285 students in Louisiana.