The fall semester has just begun on most college campuses, but tens of thousands of students in 38 states were told Tuesday that, instead, their college is closing its doors.
In a press release, ITT Educational Services announced it would close all campuses of its ITT Technical Institutes. The for-profit college system has become a household name over the past half-century. The company blamed the shutdown on the U.S. Department of Education, which had stepped up oversight of the school and recently imposed tough financial sanctions.
The concerns about ITT involve recruitment and financial practices. For several years now, a group of roughly a dozen state attorneys general had been looking into allegations that ITT misled students about future job prospects and might have accepted students who weren't qualified for the technical programs they offered.
The company hasn't been convicted of wrongdoing; nevertheless, the Education Department recently levied a series of financial sanctions against the company, and the school's accreditor found it out of compliance.
Things came to a head last month when the Education Department essentially cut ITT off from the federal financial aid program. New students would not qualify for federal student loans or Pell Grants, money that is essential to the operation of for-profit colleges. After trying and failing to sell its many campuses, ITT resolved that it had no choice but to cease operations.
In Tuesday's announcement, the school's operator criticized the department for what it called "a complete disregard ... for due process" and called the Obama administration's actions "inappropriate and unconstitutional."
Some 35,000 students now face a difficult choice. The Department of Education will allow them to walk away from their outstanding student loans or transfer all the credits they've already earned to a similar program — but not both.
Speaking to reporters Tuesday, Education Department Undersecretary Ted Mitchell said all students who have been enrolled at an ITT campus within the last 120 days are eligible to apply for what's called a "closed school discharge" of their student loans. Up to $500 million in outstanding loans could be erased.
At the same time, Mitchell said that "we hope many students will look for transfer opportunities." To that end, the department is working with community colleges located near ITT campuses, encouraging them to accept ITT students and their credits.
AUDIE CORNISH, HOST:
The fall semester has just started on most college campuses, but tens of thousands of students were told today that their college is closing. ITT Technical Institutes is permanently shutting down all of its campuses across the country. The for-profit school had become a household name over the past half-century.
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UNIDENTIFIED MAN: Because you can't get the jobs of tomorrow until you get the skills of today. Start by calling ITT Technical Institute. We'll send you an informative brochure...
CORNISH: That's one of their ads from the '90s. And there have been so many others. The company that operated ITT Tech says it's shutting down because of financial sanctions from the U.S. Department of Education. Now, for more, we turn to Anya Kamenetz of the NPR Ed team. And, Anya, first give us the details about these sanctions. What exactly were the allegations against ITT?
ANYA KAMENETZ, BYLINE: So mostly the allegations centered on recruitment and financial practices, you know, beyond those ubiquitous TV ads. A dozen states' attorneys general and other federal investigators have been looking into allegations that ITT systematically misled students about their future job prospects and engaged in aggressive recruitment tactics. None of these charges have been proven in court, but the Department of Education nevertheless levied a series of financial sanctions against the company. And this came to a head last month when they essentially cut off the school from all federal financial aid. So no new ITT students could get any access to federal student loans or Pell Grants, and that money is essential to the operation of most for-profit colleges.
CORNISH: Now, we've been hearing a lot about trouble in the for-profit college industry. Where does ITT fit in all that?
KAMENETZ: So the numbers show in general that for-profit college students are far more likely to default on their loans than students elsewhere. In fact, a report that was released in June showed that students who pursued for-profit degrees on average saw their earnings drop, which is not what's supposed to happen, of course, when you go to college. And so there's been almost like a neck closing on the for-profit industry as a whole. It once enrolled 1 in 10 college students in America. But enrollment's been plunging, different government agencies are investigating them. And ITT, in fact, is the second very large for-profit college system to shut down permanently after Corinthian Colleges last year.
CORNISH: So what happens to ITT Tech students? I mean, they must be still on the hook for loans they've already taken out.
KAMENETZ: Well, so current students - and there are about 35,000 of them - now have to choose between either trying to transfer their credits and finish their programs elsewhere or applying for what's called a closed school discharge of their loans. In other words, the Department of Education has been very vocal in trying to inform students of their options, but it's a limited number of options. They can walk away from their student loans or they can keep the credits they've already earned at an ITT campus, but they can't do both.
CORNISH: Yikes. In a way, they're kind of starting over. How are people responding to this?
KAMENETZ: Well, you know, there's been some criticism of the Education Department for the way it's handled the fate of other for-profit students in the past, particularly Corinthian Colleges. And so perhaps as a result, we've seen the secretary of education, John King, put an announcement out today saying, you know, we'll do all we can to keep ITT students informed of their options. In fact, Under Secretary Ted Mitchell said in a call with the press today that they've reached out to individual local community colleges that are near ITT campuses to try to encourage them to be generous in accepting these transfer students.
CORNISH: That's Anya Kamenetz of the NPR Ed team. She spoke to us about the shutdown of ITT Tech, the for-profit school. Anya, thanks so much.
KAMENETZ: Thanks, Audie. Transcript provided by NPR, Copyright NPR.