Less than two weeks after the Department of Education (ED) prohibited ITT Educational Services, Inc. (ITT) from enrolling new students who receive federal financial aid, the troubled for-profit chain announced it would shut down immediately, leaving tens of thousands of students scrambling, and roughly 8,000 employees without jobs.
In a statement released Tuesday morning, ITT said it came to the decision to cease operations “only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution.” The company went on to call ED’s actions “unwarranted” and “taken without proving a single allegation.”
“We believe the government’s action was inappropriate and unconstitutional, however, with the ITT Technical Institutes ceasing operations, it will now likely rest on other parties to understand these reprehensible actions and to take action to attempt to prevent this from happening again,” the statement said.
Twelve days ago, ED took harsh actions against ITT, essentially barring the institution from participating in Title IV programs, enhancing federal oversight, and restricting compensations for the company’s top executives.
ED also required 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 would also have to 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.
Nationwide, ITT operates more than 130 campuses in 38 states, enrolling about 45,000 students.
The actions came after ITT was found out of compliance with its accreditor – the Accrediting Council for Independent Colleges and Schools (ACICS).
As with the closure of Corinthian Colleges last year, ITT’s closure could come at a substantial cost to taxpayers, as current and recent students may be eligible for loan forgiveness through a closed school discharge, Education Secretary John B. King Jr. said in a blog post published Tuesday. King also noted that students may also choose to transfer their credits, although doing so may make them ineligible for loan discharge.
“Ultimately, we made a difficult choice to pursue additional oversight in order to protect you, other students, and taxpayers from potentially worse educational and financial damage in the future if ITT was allowed to continue operating without increased oversight and assurances to better serve students,” King said. “Whatever you choose to do, do not give up on your education. Higher education remains the clearest path to economic opportunity and security. Restarting or continuing your education at a high-quality, reputable institution may feel like a setback today, but odds are it will pay off in the long run.”
Publication Date: 9/7/2016