Federal Crackdown on USA’s Biggest For-Profit ‘ITT Institute’

The United States department of education has snipped the lifeline of one of the largest for-profit college chains in the country.

ITT Technical Institute, the second major school operator in USA suffered a backlash from the federal education department, leading to immediate cessation of its schools.

This action has led to closure of more than 130 campuses across the country, leaving in lurch almost 40000 students in as many as 38 states, who now face the dilemma of either looking out for new schools or drop out altogether.

The crackdown on ITT institute had become almost inevitable after there was large number of complaints and evidences of poor quality of education, high dropout rates, aggressive recruitment tactics, low loan repayment rates, grade inflation. This clampdown is seen as a measure by the government to ensure that schools prepare students for skilled employment and not just create a factory of worthless degree holders unable to fit in industry.

The institution has also landed in troubles with the Massachusetts Attorney General Maura Healey suing the institution for allegedly defrauding students on its job placement rates.

The government may, as a pre-emptive measure for students affected by the closure, forgive their loans which may cost up to $43 billion. The government has already set a precedent by agreeing to forgive $171 million in student debts for the students of Corinthian College which, too, had suffered the same fate.

When the institute was contacted, its spokeswoman said Tuesday that the company felt its accrediting agency took actions that were “unexpected and, we believe, unwarranted.”

ITT also added: “The damage done to our students and employees, as well as to our shareholders and the American taxpayers, is irrevocable.”

Among various reasons for the shutdown include the stifling of its funding by the government. The U.S. Department of Education had already banned ITT from enrolling new students who receive federal aid last month. The latest clamping acted as the last nail in the coffin for the institute which got 80% of its cash revenue from Title IV federal aid, including Pell Grants and student loans, in 2015, according to securities filings.

The government had earlier demanded that ITT boost its existing surety to $247.3 million, or 40% of all Title IV funds it received last year, up from $94.4 million earlier this year, to protect taxpayers in case of a shutdown, which seemed too big a burden for the institute to sustain its lifeline.

As a relief, the current ITT students including those who withdrew in the past 120 days can seek to have their loans discharged under federal rules and restart their college careers, albeit from scratch somewhere else.

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