Students who used federal loans to attend ITT Technical Institute since 2005 will automatically get that debt canceled after authorities found “widespread and pervasive misrepresentations” at the defunct for-profit college chain, the Biden administration announced Tuesday. .
The action will cancel $3.9 billion in federal student debt for 208,000 borrowers, the Education Department said. The debt is being forgiven using a federal rule known as the borrower’s defense, which is intended to protect college students who make false advertising claims or commit fraud.
“Evidence shows that for years, ITT leaders intentionally misled students about the quality of their programs in order to take advantage of federal student loan programs, without considering the hardship this would cause,” said Secretary of State Education Miguel Cardona.
It adds to the growing list of student debt cancellations by the administration — a similar action in June promised to erase $5.8 billion in debt related to Corinthian Colleges — but provided no answers on broader student debt cancellation.
President Joe Biden supported debt cancellation as a presidential candidate and for months has been considering erasing up to $10,000 per borrower. He recently promised a decision by the end of August, but Tuesday’s announcement shed no new light on his thinking.
Through targeted cancellation of specific groups of borrowers, the administration says it has now approved nearly $32 billion in student debt for 1.6 million borrowers.
The new policy will automatically cancel any remaining federal student debt that was used to attend ITT Tech from January 1, 2005 through its closing in 2016.
At its peak, ITT was among the largest for-profit college chains in the country, with 130 campuses in 38 states. The company abruptly closed after facing heavy sanctions from the Education Department amid accusations that the company pushed students into risky loans and misled them about the quality of academic programs.
The Department of Education previously approved the cancellation of $1.9 billion in debt owed by former ITT Tech students, much of it to students who applied for aid alleging the company misled them. The new policy will not require borrowers to apply for relief.
Federal officials based the decision on findings by many state attorneys general, along with the Consumer Financial Protection Bureau and the nonprofit Veterans Education Success.
Investigators found widespread evidence that ITT Tech made false claims about its students’ ability to find jobs after graduation, the agency said. They also found that the chain misled students about its ability to transfer credits to other schools and about the accreditation of the chain’s nursing program.
“ITT defrauded hundreds of thousands of students,” said Richard Cordray, head of Federal Student Aid, the federal office that oversees student loans. “By providing the loan relief students deserve, we are giving them the opportunity to resume their educational journey without the unfair burden of student debt they carry with a rogue institution.”
The decision drew applause from groups representing the students.
“This is a life-changing announcement for thousands of people who just wanted to improve their lives and trusted the wrong people to help them do it,” said Libby Webster, senior counsel for Student Defense, a nonprofit organization.
Tasha Berkhalter enrolled at ITT Tech in 2006 to pursue a career in criminal justice after being honorably discharged from the military. Recruiters promised that she would easily find a job after graduation. But after getting her bachelor’s degree, no one would hire her.
“It was all for a title that no one takes seriously. Every time I told employers where I went to college, they would show me the door,” said Berkhalter, from Lima, Ohio.
Berkhalter previously had much of his nearly $100,000 debt erased through the borrower defense rule, and he said he hopes more will be paid off soon.
“The cloud has lifted off my head,” he said. “I know there are hundreds of thousands of alumni like me who are finally getting the relief they deserve.”
In a separate action, the Department of Education initiated proceedings to recover $24 million from DeVry University to offset federally approved loan cancellations due to suspected fraud.
In February, the Biden administration approved $70 million relief for 1,800 DeVry alumni after the Department of Education concluded that the school lied about the success of its graduates to enroll new students. It was the first time the agency had approved such claims for an institution that is still in operation.
DeVry will now have a chance to present arguments explaining why he should not be held liable and can request a hearing to appeal the decision.