google65222aaba5ef6dda
 
A new report issued in the wake of the sudden closing and ensuing bankruptcy of ITT Tech places the blame for the for-profit school's demise on the company's leadership, not the U.S. Department of Education that discontinued federal student loan funding for its students.

As reported in the Huffington Post, PAA Research released a detailed, 17-page analysis suggesting that the cause for the school's demise was the product of ITT Tech's own business model. 

According to the Huffington Post account of the research study, "It’s a detailed confirmation of everything ITT did wrong: (1) it charged sky-high tuition; (2) its educational quality was 'abysmal' with 'shockingly low' spending on instruction; (3) it took about 95 percent of its revenue from government sources, and depended on putting the financial risks on the government and outside lenders; (4) it spent billions on executive compensation and stock buybacks to boost the company’s share price; [and] (5) it engaged in risky schemes to try to stay in compliance with federal rules."
 
 
Picture
The Riverside, California Press Enterprise has published a story detailing the pending federal lawsuit against ITT Educational Service, Inc., which operates one of its campuses in the Riverside area.  
The newspaper interviewed a number of students at the local ITT campus who detailed their experiences with ITT and the heavy debt burden they had developed while attending programs at the school.  One such student, Tyler Keaggy, 23, told the Press Enterprise that he feels trapped in a situation where he has to continue taking classes for a degree in project management, in part to defer beginning to have to pay on student loans that total $63,000.
“They [ITT]  kind of go through a process,” Keaggy is quoted as saying, “where they take you to financial aid and they do it on the computer, so you don’t really get to read it all or know where those private loans are coming from. In fact, I still don’t know."
The newspaper also reported:
"According to the lawsuit, ITT trained its recruiters to get people who inquired about its programs to visit the campus in person where they would be more susceptible to a high-pressure sales pitch that could go on for hours."
"When someone asked about the college’s cost, the recruiters were instructed to make statements such as “I cannot tell you what your exact cost will be...it varies student to student.” They were to add that the person would find out about the cost “when you come in for the tour.”
When a reporter visited the lobby of ITT’s campus in Orange last week, there were no brochures available to describe the degree programs or their cost. An employee said the college doesn’t provide brochures to visitors, but that people are told those details when they take a campus tour. She said much of that information was also available on the company’s website.
The government alleges ITT misled prospective students with statistics that exaggerated how much they would earn and their chances of getting a job with a degree."
"Laura Brozek worked as a top recruiter for ITT in Orange County, and at two of its other Southern California campuses until 2011, when she became concerned about management’s tactics. Brozek provided written testimony about her experience to the Senate Committee on Health, Education, Labor and Pensions in 2012."
"In an interview with the Register, she detailed how recruiters had used a technique called “the pain funnel,” which was meant to manipulate potential students’ emotions to get them to enroll.
“I would focus on people’s shortcomings,” Brozek said in the interview. “We played upon the vulnerable.”"



 
 
The government's Consumer Financial Protection Bureau has filed a potentially  precedent-setting suit against ITT Educational Services, Inc., one of the nation's largest for-profit education companies.  

As reported in the Chronicle of Higher Education, 
"The nation’s top consumer watchdog sued ITT Educational Services Inc. on Wednesday, accusing the for-profit college chain of pushing its students into high-cost private loans that it knew were likely to end up in default.The lawsuit, the first filed by the Consumer Financial Protection Bureau against a for-profit college, alleges that ITT offered its students zero-interest loans to cover the cost of their first year, knowing that they were unlikely to repay at the end of the year. When borrowers failed to do so, the company pressured them into taking out private loans to pay off their balance and finance their second year of education.The CFPB is seeking restitution for the victims, a civil fine, and an injunction against the company."

ITT and another large for-profit education company, Corinthian Colleges, Inc., have been subjects of investigations by the federal agency for more than a year.  The CFPB began  investigating for-profit education companies shortly after the consumer protection agency was created in July 2011.

ITT, which heavily advertises and operates programs across the nation, has been closing campuses during the time when it has been the subject of the federal investigation. In 2013, ITT reportedly suspended enrollment at two campuses and merged five others into existing campuses.

The new lawsuit has been hailed by attorneys who represent students harmed by predatory practices at colleges and trade schools.  Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, told the Chronicle that the lawsuit was  "a signal to the for-profit school industry that business as usual will no longer be tolerated." 

A copy of the lawsuit can be found here.