INDIANAPOLIS (WTWO/WAWV) — Indiana Attorney General Curtis Hill has secured an agreement to obtain nearly $10 million in debt relief for 1,354 former ITT Technical Institute students in Indiana, part of a settlement in partnership with 46 other states, the District of Columbia and the federal Consumer Financial Protection Bureau.
PEAKS Trust, a private loan program run by the for-profit college and affiliated with Deutsche Bank entities, agreed to the settlement. PEAKS was formed after the 2008 financial crisis, when private sources of lending available to for-profit colleges dried up.
According to a statement issued by Hill’s office, “When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which for many students carried high interest rates, far above rates for federal loans. Pressure tactics used by ITT included pulling students out of class and threatening to expel them if they did not accept the loan terms.”
Founded in 1969, ITT Tech was one of the largest for-profit educators in the US before it closed and filed for bankruptcy in 2016. Headquartered in Carmel, Ind., ITT Tech had more than 130 campuses nationwide, including in Indianapolis, Fort Wayne, South Bend, Merrillville and Newburgh, Ind.
ITT Technical Institute charged among the highest tuition fees in the industry. It also had the industry’s highest rate of loans that went into default within two years of attendance.
The default rate on the PEAKS loans is projected to exceed 80%, due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible, Hill’s office reported, adding that the defaulted loans continue to affect students’ credit ratings.
“This settlement ensures that former ITT Technical Institute students are no longer subjected to the abusive lending practices of PEAKS Trust,” Attorney General Hill said. “This program, like ITT before it, is now defunct. We hope this result eases the financial stress that so many former students have undoubtedly endured.”
Under the settlement, PEAKS has agreed that it will forgo collection of the outstanding loans and cease doing business. PEAKS will send notices to borrowers about the canceled debt and ensure that automatic payments are cancelled. The settlement also requires the PEAKS to supply credit-reporting agencies with information to update credit information for affected borrowers.
Nationally, the settlement will result in debt relief of about $330 million for 35,000 borrowers who have outstanding principal balances.
Last year, Attorney General Hill secured an agreement to obtain $5.4 million in debt relief for 602 former ITT Tech students in Indiana as part of a multistate settlement involving 44 attorneys general. That settlement, separate from but similar to the PEAKS settlement, was with Student CU Connect CUSO, LLC, which offered loans to finance students’ tuition at ITT Tech.