Predatory Lending At For-Profit Schools
NEW YORK ( MainStreet) The Department of Education (ED) has said no to calls for an investigation of for-profit trade school chain, ITT Educational Services, Inc. ITT is making it harder for them not to say yes.
In response to the lawsuit filed by the Consumer Financial Protection Bureau (CFPB), Senator Dick Durbin (D-Illinois), a long-time critic of ITT, has asked again that the ED look into the school's conduct and treatment of its students.
The CFPB suit accuses ITT of predatory lending and high pressure sales tactics that push students into loans that are likely to go into default. In addition, the CFPB says the trade school chain routinely misleads applicants about their prospects for a job and the likelihood that they can transfer ITT credits to other institutions.
"ITT received nearly 80% of its total revenue from federal student aid funding, approximately a billion dollars in 2012, and last year reported nearly $60 million in profit," wrote Durbin in a February 28 letter to Secretary of Education Arne Duncan. "Federal investment in an institution that engages in these types of predatory practices and misrepresentations to students is an egregious misuse of taxpayer dollars. Today, I am asking the Department of Education to carefully review the CFPB's allegations and use the authorities it has to protect the students and taxpayers from any ITT Educational Services wrongdoing."
The ED investigations can yield unpredictable results including those that are inconclusive. Perhaps the biggest threat to ITT and every other college and university would be a loss of accreditation, which would lead to a loss of federal funds and probably an eventual shutdown. That's a hammer that Durbin has picked up.
Durbin sent a letter to Dr. Albert Gray, president of the Washington, D.C.-based Accrediting Council for Independent Colleges and Schools (ACICS) asking the accrediting agency to hold ITT Educational Services accountable for poor outcomes experienced by its students. He wrote, "Despite being accredited, many of ITT's credits did not transfer to other schools," characterizing the questionable value of ITT's credits and instruction as a trap that ensnares students who are not getting what they pay for, leaving them poorly educated and deeply in debt.
"ITT Educational Services used this trap to its advantage, using the prospect of expulsion and the loss of the money already spent to coerce students into taking even more high cost private loans," Durbin wrote. He had the same message for Dr. Michelle McComis, executive director of the Accrediting Commission of Career Schools and Colleges.
While the ED shows no signs of considering an investigation into ITT, it may be generally moving in that direction. Last month the ED denied an application from for-profit trade school chain Corinthian Colleges for many new programs once the school's deceptive job placement practices came to light. An ED spokesperson could not be reached for comment on ITT.