09/01/2016

ITT Tech's bankruptcy would strand thousands of students

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ITT Technical Institute, one of the country's largest for-profit college chains, is about to come crashing down.

Accused of defrauding students into paying for classes that did not deliver—among other things—ITT has been banned from enrolling students who depend on federal financial aid. Since that aid represents some 80 percent of the institution's budget, the financial hit will be devastating. The Department of Education, which instituted the ban, also required ITT to increase to $247 million a reserve fund to support students should the schools close. Days after the department sanctioned the company, ITT announced it is no longer enrolling new students at all.

ITT Tech buildingAFT President Randi Weingarten is urging the department to craft a contingency plan for ITT's inevitable shut down, an event that will affect tens of thousands of students. In a letter to Secretary of Education John King, she outlines steps the department should take:

  • Publicly release the department's contingency plan in the event ITT shuts down;
  • Require ITT to create a funding pool for private student loan forgiveness and to use its liquid cash reserves to fully discharge those loans and refund all payments; and
  • Develop a financial stress test for the private colleges and universities, including for-profits, that are currently subject to the department's financial responsibility scoring system, to better anticipate risk of financial harm to students and taxpayers.

ITT enrolls approximately 45,000 students across 137 campuses.

On a personal level, the imminent crackup is just another dire chapter in the disaster story students have already endured. First confronted with inadequate services and high debt, now they are scrambling to find alternative institutions and fighting for loan forgiveness. "I am fully panicked!!" wrote one student on an online forum for people struggling with the news.

Other for-profits may enroll the abandoned ITT students, but education advocates fear they might offer more of the same. In fact, Department of Education staff steered students from Corinthian Colleges, which collapsed in 2015, to other for-profits that were under investigation and subsequently closed.

The community college option

Public community colleges would be a much better option, with higher-quality instruction and lower costs, but ITT credits are unlikely to transfer there. Nevertheless, some community colleges are expecting to help students transition—and perhaps start over—on their campuses.

In Milwaukee, some students from shuttered for-profits (Everest, Sanford Brown, the Art Institute and Kaplan) enrolled at Milwaukee Area Technical College, and the school could absorb ITT students, as well. "After ITT closes, many of those students, at least those who have not exhausted their federal financial aid and are not totally demoralized, will enroll in MATC and other two-year colleges," says Michael Rosen, president of the Milwaukee Technical College Federation/AFT and a professor of economics. The advantages are myriad, he adds: Community colleges are regionally accredited, with transferable credits to four-year colleges; they are significantly less expensive; they invest more in instruction and therefore have a higher-quality, less-transient faculty; and they spend on instruction and student services, rather than the marketing and recruitment typical of for-profits.

Rosen and his local have become known for their activism fighting for-profits, which target Milwaukee's significant low-income population. They convinced the city council to pass a resolution against awarding subsidies to for-profits or developers that use them as anchor tenants, and they are developing an education program to help potential students choose their schools carefully.

Rosen hopes to welcome refugees from for-profits to MATC, but he says many will likely give up on school altogether. "Having been burned, and now deeply in debt, they simply give up their dreams of pursuing education and better employment," he says.

Fighting back

Meanwhile, ITT students are fighting back. "We were promised a quality education, 80 percent job placement and that our credits would transfer to other colleges and universities," reads a petition advocating for loan forgiveness for ITT students and graduates. "Many students were forced to quit their programs before ever gaining their degrees, because they were misled. Others stuck it out, to find out that their degrees hold no value due to the accreditation, value of education and their reputation."

More than 2,800 ITT students are using ITT Tech Warriors, a social media group, to share ideas about next steps, distribute applications for loan repayment and air their grievances. Some have burned their degrees; others have protested in the streets. Among the comments—from people just a few classes short of a degree as well as people still paying off their debt 10 years later—are descriptions of classes taught by instructors who "had no idea" about the content of the classes they were teaching and others who used tech classes to teach anti-evolution with a guest preacher. One student described enrolling in a final class only to be told he'd "flunked" every course and had no recourse to dispute his status—yet had to continue paying off debt. Another, just a few classes short of a degree, was determined to complete her program but afraid to transfer to another school for fear of losing possible qualification for loan forgiveness at ITT.

AFT leaders argue that some advance planning would help students left stranded with no school, no degree and outstanding loans. "ITT's failures are not unique," Weingarten says in the letter to King, listing several "troubling signs" that echo those shown at Corinthian: failing the department's financial responsibility test, rapidly falling enrollment, a dwindling cash flow, and federal and state lawsuits. Despite these indicators of financial decline, ITT showed a 35 percent increase in revenue derived from Title IV funding—from student aid continuing to flow in. ITT receives 80 percent of its revenue from taxpayer dollars, and this doesn't include the money that comes in via the GI Bill and veterans' tuition benefit programs.

Weingarten also calls for an analysis of the Corinthian Colleges collapse, including total taxpayer cost and a review of enforcement (or lack thereof) against predatory for-profits. "It is almost impossible to imagine a failure of similar scope in another industry of similar impact—for instance, banking—resulting in no federal government agency producing any report with an analysis of what caused it or whether it is likely to reoccur," she writes. "We urge the department to instruct the Office of the Inspector General to produce and publish such an analysis. …

"The decisions made by the department in the handling of ITT Educational Services will have a tremendous impact on the lives of tens of thousands of former, current and potential students."

[Virginia Myers/photo from Flickr Commons, Greiner Construction]