02.28.14

Durbin Asks Department of Education to Investigate ITT Educational Services

The Consumer Financial Protection Bureau announced yesterday that it was suing the for-profit college over allegations they pressured and misled students

U.S. Senator Dick Durbin (D-IL) today once again asked the Department of Education to investigate a for-profit college over allegations of deceptive and misleading practices.  It was announced yesterday that the Consumer Financial Protection Bureau (CFPB) had filed suit against ITT Educational Services for predatory lending practices that include pressuring students into high cost loans, misleading students about job prospects and misleading students about the transferability of credits to other institutions.

“ITT received nearly 80 percent of its total revenue from federal student aid funding, approximately a billion dollars in 2012, and last year reported nearly $60 million in profit,” wrote Durbin.  “Federal investment in an institution that engages in these types of predatory practices and misrepresentations to students is an egregious misuse of taxpayer dollars.  Today, I am asking the Department of Education to carefully review the CFPB’s allegations and use the authorities it has to protect the students and taxpayers from any ITT Educational Services wrongdoing.”

 

Durbin sent a similar letter to the Accrediting Council for Independent Colleges and Schools (ACICS) asking the accrediting agency to hold ITT Educational Services accountable.  He wrote: “Despite being accredited, many of ITT’s credits did not transfer to other schools.  ITT Educational Services used this trap to its advantage, using the prospect of expulsion and the loss of the money already spent to coerce students into taking even more high cost private loans.”  ITT Educational Services operates campuses in the following Illinois areas: Oak Brook, Orland Park, Arlington Heights and Springfield.

 

In response to a December 16 investigation in the Huffington Post, Durbin sent a letter to the Secretary of Education, Arne Duncan, asking him to investigate Corinthian Colleges, Inc. and their manipulative marketing practices which included a subsidy program for employers to hire graduates temporarily and outright lying by the company through their advertisement of numbers substantially higher than actual job placement rates.  Durbin’s December 18 letter to Duncan can be found HERE along with similar letters he sent to the Chairman and CEO of Corinthian Colleges, Inc., Jack Massimino, the Accrediting Commission of Career Schools and Colleges, and the Accrediting Council for Independent Colleges and Schools. 

Shortly afterward, the Department of Education denied many of the company’s pending new program applications and increased scrutiny in light of deceptive job placement practices. 

 

Text of today’s letters below:

 

 

February 28, 2014

 

The Honorable Arne Duncan

Secretary

Department of Education

400 Maryland Ave, SW

Washington, DC 20202

 

Dear Secretary Duncan:

 

On Wednesday, the Consumer Financial Protection Bureau (CFPB) announced it filed suit against ITT Educational Services for predatory student lending.  In light of this, I write to ask how the Department of Education will use its authority to investigate these troubling accusations and scrutinize ITT’s participation in the Title IV Program.  

 

According to the complaint, ITT pressured students into accepting high cost private loans without giving them an opportunity to understand what they were signing up for.  In some cases the interest rates were reported to be as high as 16.25 percent.  What’s even more troubling, ITT projected that nearly 64 percent of students would default on these loans.  Despite being accredited, many of ITT’s credits did not transfer to other schools.  ITT used this trap to their advantage – using the prospect of expulsion and the loss of the money already spent to coerce students into taking high cost private loans.  Additionally, CFPB found that ITT misled students about their prospects for getting jobs after completing their programs and new that 

 

While some of these allegations may not be directly related to the federal student loan program, it puts ITT’s ability to be responsible stewards of federal dollars and to do what is best for students in serious doubt.  ITT received nearly 80 percent of its total revenue from federal student aid funding, approximately a billion dollars in 2012, and last year reported nearly $60 million in profit.  Federal investment in an institution that engages in these types of predatory practices and misrepresentations to students is an egregious misuse of taxpayer dollars.  Today, I am asking the Department of Education to carefully review the CFPB’s allegations and use the authorities it has to protect the students and taxpayers from any ITT Educational Services wrongdoing.  I am calling on you and this Administration to work with Congress to respond more aggressively to  abuses against students and the public such as those perpetrated by ITT.

 

Thank you for your attention to this important issue.  I look forward to your reply.

 

 

                                                                        Sincerely,

 

                                                                        Richard J. Durbin

                                                                        United States Senator

 

 

February 28, 2014

 

Dr. Albert C. Gray, Ph.D.

President and Chief Executive Officer

Accrediting Council for Independent Colleges and Schools

750 First Street, NE

Suite 980

Washington, DC 20002

Dear Dr. Gray:

On Wednesday, the Consumer Federal Protection Bureau (CFPB) announced it filed suit against ITT Educational Services for predatory student lending.  In light of this, I write to ask what steps the Accrediting Council for Independent Colleges and Schools (ACICS) will take to hold ITT accountable.  

 

According to the complaint, ITT Educational Services pressured students into accepting high cost private loans without giving them an opportunity to understand what they were signing up for – in some cases the interest rates were reported to be as high as 16.25 percent.  What’s even more troubling is that CFPB found that ITT misled students about their prospects for getting jobs after completing their programs yet ITT knew that most of its students would ultimately default on their private student loans -- it projected a default rate of 64 percent among its own students.

 

Despite being accredited, many of ITT’s credits did not transfer to other schools.  ITT Educational Services used this trap to its advantage, using the prospect of expulsion and the loss of the money already spent to coerce students into taking high cost private loans. 

 

As a Department of Education approved accrediting agency, the ACICS is a gatekeeper of federal funds.  ITT received nearly 80 percent of its total revenue from federal student aid funding, approximately a billion dollars, in 2012 and last year reported nearly $60 million in profit.  In a recent letter you stated that ACICS expects its member institutions to operate with integrity, including “ethical practices demonstrated by all individuals comprising the ownership, control or management” of the institution.  These allegations put ITT’s integrity and ability to be responsible stewards of federal dollars into serious doubt.  This is an egregious misuse of taxpayer dollars and ACICS has a responsibility to protect the students and taxpayers from any ITT Educational Services wrongdoing.

 

Thank you for your attention to this important issue.  I look forward to your prompt reply.

                                                           

Sincerely,

 

Richard J. Durbin

United States Senator