A multi-state settlement will provide $20.6 million in debt relief to former Ohio students of the defunct ITT Technical Institute, Ohio Attorney General Dave Yost’s office announced Tuesday.
The settlement is with PEAKS Trust, a private loan program run by the failed for-profit college and affiliated with Deutsche Bank entities. The agreement involves 47 states and the District of Columbia.
PEAKS was formed when private lending sources available to for-profit colleges dried up after the 2008 financial crisis. ITT Tech 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 their education. The credit became due nine months later, but many students complained that they thought it wouldn’t be due until six months after they graduated, similar to federal loans, according to the settlement.
ITT Tech used “pressure tactics” to coerce students into accepting loans from PEAKS after the credit became due, “pulling students out of class and threatening to expel them if they did not accept the loan terms,” the attorney general’s office said. For many students, the loans carried high interest rates far above those for federal loans.
“Preying on students who were trying to educate themselves and better their lives is heartless,” Yost said in a news release. “It’s these types of bad actors that need to learn the basics of right and wrong – I hope this will be the lesson they remember.”
In 2016, ITT Tech closed all of its 137 campuses nationwide — including nine in Ohio — and filed for bankruptcy after the federal government restricted the school’s access to federal student aid. The school had been serving about 35,000 students and employed about 8,000 people.
Under the settlement, PEAKS agreed it will forgo collection of outstanding loans and cease doing business, the attorney general’s office said. Peaks will send notice to borrowers about the canceled debt and ensure automatic payments are canceled.
Many of the ITT students were from low-income backgrounds and forced to choose between a PEAKS loan or dropping out and losing credits they’d earned, since ITT’s credits wouldn’t transfer to most schools, the attorney general’s office said.
The notices sent by PEAKS will explain students’ rights under the settlement, and affected students do not need to take any action to receive the debt relief. Students with questions can direct them to PEAKS at [email protected] or 866-747-0273, or the Consumer Financial Protection Bureau at 855-411-2372.