Students File Lawsuit Against ITT Tech
A group of former students at ITT Technical Institutes has filed a lawsuit against its parent company to ensure the ability to participate in bankruptcy proceedings.
ITT Tech’s Bankruptcy Proceedings
ITT Tech filed for bankruptcy in September 2016, just days after it shut down 137 campuses across the United States. ITT Tech’s closure left 8,000 employees without a job and 35,000 students without a college.
ITT Tech’s closure came soon after the Education Department decided to shut down ITT Tech’s access to federal student aid, following the multiple lawsuits and investigations and the accrediting body threatening to pull ITT Tech’s accreditation.
Before it shut its doors, ITT Technical Institutes was being investigated by numerous state attorneys general and two federal agencies for fraud, deceptive marketing and steering students into predatory loans.
The plaintiffs assert that the company violated various consumer protections and breached its contracts. The complaint seeks class-action certification to encompass anyone who attended ITT Tech in the past 10 years. The plaintiffs also seek an injunction to stop the collection of private loans administered by ITT Tech. ITT ran an in-house lending program that is at the center of two federal lawsuits.
The complaint included 108 pages of attestations from 521 former ITT Tech students. Many of the students alleged that ITT Tech administrators misled them about the nature and terms of the in-house loans. One student alleged that a former advisor told her that the in-house loan was comparable to a federal student loan and that she would not qualify for anything else. That student alleges that the advisor promised her a 6.8 percent interest rate, but she instead ended up paying 14.75 percent in interest on the debt.
The suit claims that ITT Tech “engaged in systematic and sustained activities to conceal” and that “ITT’s revenue came almost entirely from tuition, and the vast majority of that tuition was paid through federal financial aid programs administered by the U.S. Department of Education. … Unlike ITT’s obligations, students’ debts cannot be discharged easily in bankruptcy. … ITT students are the true creditors of ITT. They seek recognition as creditors in this bankruptcy, a fair apportionment of the remaining estate, and an adjudication of their claims that will clear the path to loan cancellation in collateral proceedings.”
The Students’ Attorney
Attorney Eileen Connor filed the lawsuit on behalf of the students. Connor also serves as an attorney at the Project on Predatory Student Lending at Harvard Law School. Connor stated that it was critical to file the lawsuit now because the claim deadline is at the end of the month; this is something she suspects few students know. Connor estimates the students' claims at $7.3 billion, which she calculated based upon a rough estimate of student loan revenue ITT Tech took in over the past 10 years.
Connor stated, “There are a lot of people making claims on the estate, and it's really important to get students' experiences out there and that they're creditors of ITT as well.”