Missouri and Arkansas Attorneys General Announce Debt Relief Agreement for ITT Students

JEFFERSON CITY, Mo. (edited press release) – Missouri Attorney General Eric Schmitt and Arkansas Attorney General Leslie Rutledge announced an agreement to obtain debt relief for former ITT students Tech in a settlement with 47 attorneys general and the federal Consumer Financial Protection Bureau.

ITT operated a campus in Springfield.

In Missouri, this settlement will result in more than $9.1 million in debt relief by waiving loan principal, interest, and fees/charges for more than 1,300 Missouri borrowers. Nationally, the settlement will result in debt relief of approximately $330 million for 35,000 borrowers who have outstanding principal balances.

The settlement is with PEAKS Trust, a private lending program run by the for-profit college and affiliated with Deutsche Bank entities. ITT filed for bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT’s access to federal aid for students.

“Working with attorneys general across the country in a bipartisan way to seek redress for consumers who have been wronged is an integral part of my job, and it’s something we do every day,” Attorney General Eric Schmitt said. “This settlement will provide millions in debt relief to former ITT students in Missouri and across the country who were pressured and forced into taking out high-interest loans.”

PEAKS was created after the financial crisis of 2008, when the private sources of lending available to for-profit colleges dried up. ITT has developed a plan with PEAKS to provide students with a temporary credit to cover the tuition gap between federal student aid and the total cost of education.

ITT and PEAKS knew or should have known that the students would not be able to repay the temporary credit when it fell due nine months later. Many students complained that they thought the temporary credit was like a federal loan and wouldn’t be due until six months after graduation.

When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which for many students carried high interest rates, well above federal loan rates. Pressure tactics used by ITT included removing students from class and threatening to expel them if they did not agree to loan terms. Many ITT students were from low-income backgrounds and had the choice of enrolling in PEAKS loans or dropping out and losing any benefit of the credits they had earned, as the credits from ITT would not transfer to most schools.

The default rate on PEAKS loans is expected to exceed 80%, due to both the high cost of loans and lack of success, ITT graduates had secured jobs that paid enough to make repayment possible. Delinquent loans continue to affect student credit ratings and are generally not dischargeable in bankruptcy.

Under the settlement, PEAKS agreed to waive collection of outstanding loans and cease operations. PEAKS will send notices to borrowers regarding canceled debt and ensure that automatic payments are cancelled. The settlement also requires PEAKS to provide information to credit reporting agencies to update the credit information of affected borrowers.

Students will not have to do anything to receive debt relief. The notices will explain their rights under the settlement. Students may direct questions to PEAKS at [email protected] or 866-747-0273, Where Consumer Financial Protection Bureau at (855) 411-2372.

In June 2019, Attorney General Schmitt was part of a $168 million settlement which resulted in debt relief for 18,664 former ITT students, including $4.7 million in debt relief for approximately 600 Missouri residents. This agreement was with Student CU Connect CUSO, LLC, which also offered loans to fund student tuition at ITT Tech.

ITT had operated campuses in Arnold, Earth City, Kansas City, and Springfield.

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