ED Penalizes ITT, Bars For-Profit Chain From Enrolling New Title IV Students

By Allie Bidwell, Communications Staff

The Department of Education (ED) on Thursday took harsh action against ITT Educational Services, Inc. (ITT), essentially barring the for-profit chain from participating in Title IV programs, enhancing federal oversight, and restricting compensations for the company’s top executives.

In a letter to ITT, ED explained that the school can no longer enroll new students who receive federal financial aid, that it must disclose to current students that its accreditor – the Accrediting Council for Independent Colleges and Schools (ACICS) – found the institution out of compliance, and that it cannot give its executives raises, bonuses, or retention or severance payments.

Nationwide, ITT operates more than 130 campuses in 38 states, enrolling about 45,000 students. Last year, ED said, more than two-thirds of ITT’s revenue came from federal aid dollars.

As of Thursday morning, however, ITT was still encouraging students via social media to enroll for fall classes.

ED is also requiring ITT to inform the department of its financial stability within 10 days of any major events occurring, and use its own funds to initially disburse Title IV aid to current students. ED will reimburse ITT after the aid is disbursed.

“Our responsibility is first and foremost to protect students and taxpayers,” said Education Secretary John B. King Jr. in a statement. “Looking at all of the risk factors, it’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal student aid funds.”

ED is also requiring ITT to within 30 days increase its Letter of Credit from about $93.4 million to about $247.3 million, or 40 percent of the Title IV aid the school received in 2015. ITT must also develop teach-out agreements with other institutions for students to complete their studies – an indication that these actions could potentially put the company out of business. Teach-out agreements exist as a fallback for students whose institutions shut down before they complete their educational programs.

“When we allow institutions to participate in federal student aid programs, they are obligated to responsibly manage those funds,” said Education Under Secretary Ted Mitchell, in a statement. “More importantly, we trust they will act in good faith and in the best interests of students.”

These actions stem from multiple investigations into ITT over the last several years that have more than once found the institution out of compliance with its accreditors’ standards.

“Over time, ITT’s decisions have put its students and millions of dollars in taxpayer funded federal student aid at risk,” Mitchell wrote in an accompanying blog post.

 

Publication Date: 8/26/2016


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