As of Tuesday thousands of students nationwide are unable to get their diploma from ITT Technical Institute. The company that operates the for-profit chain of institutes for higher learning, one of the country’s largest, announced that it was permanently closing all its campuses nationwide. The company blamed the sudden shutdown on the recent decision by the U.S. Department of Education to ban ITT from enrolling new students from who use federal financial aid.
But the shutdown came as a surprise to many of those enrolled at ITT. “Two quarters ago there were rumors about the school having problems, but they told us that anyone who was already a student would be allowed to finish,” said Leon Wiggins II, an ITT student in cybersecurity who hoped to soon obtain his degree. The shutdown will affect approximately 35,000 students who had prepared for the start of classes this month. It will also cost more than 8,000 employees their jobs, according to the Los Angeles Times.
So why the sudden shutdown by ITT? The official statement by ITT Educational Services, Inc. explained:
“…ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently…With what we believe is a complete disregard by the U.S. Department of Education for due process to the company, hundreds of thousands of current students and alumni and more than 8,000 employees will be negatively affected.
“The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter. We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution…
“This action of our federal regulator to increase our surety requirement to 40 percent of our Title IV federal funding and place our schools under ‘Heightened Cash Monitoring Level 2,’ forced us to conclude that we can no longer continue to operate our ITT Tech campuses and provide our students with the quality education they expect and deserve…
“This federal action will also disrupt the lives of thousands of hardworking ITT Tech employees and their families. More than 8,000 ITT Tech employees are now without a job – employees who exhibited the utmost dedication in serving our students.
“We have always carefully managed expenses to align with our enrollments. We had no intention prior to the receipt of the most recent sanctions of closing down despite the challenging regulatory environment that now threatens all proprietary higher education. We have also always worked tirelessly to ensure compliance with all applicable laws and regulations, and to uphold our ethic of continuous improvement. When we have received inquiries from regulators, we have always been responsive and cooperative. Despite our ongoing service to this nation’s employers, local communities and underserved students, these federal actions will result in the closure of the ITT Technical Institutes without any opportunity to pursue our right to due process.
“These unwarranted actions, taken without proving a single allegation, are a “lawless execution,” as noted by a recent editorial in The Wall Street Journal. We were not provided with a hearing or an appeal. Alternatives that we strongly believe would have better served students, employees, and taxpayers were rejected. The damage done to our students and employees, as well as to our shareholders and the American taxpayers, is irrevocable.
“We believe the government’s action was inappropriate and unconstitutional, however, with the ITT Technical Institutes ceasing operations, it will now likely rest on other parties to understand these reprehensible actions and to take action to attempt to prevent this from happening again.”
Following ITT’s announcement on Tuesday U.S. Education Secretary John B. King Jr. said, “We made a difficult choice to pursue additional oversight in order to protect you, other students and taxpayers from potentially worse educational and financial damage in the future if ITT was allowed to continue operating without increased oversight and assurances to better serve students”. Furthermore, the Department of Education has made a commitment to allow former ITT students to transfer their credits to another school or to apply to have their federal student loans forgiven.
These processes are described, along with other potential issues for former ITT students, on “Homeroom”, the official blog of the U.S. Department of Education. This page also provides part of their reasoning behind their initial decision against ITT:
“In recent years, ITT Educational Services, Inc. (ITT) has increasingly been the subject of state and federal investigations and this year it has twice been found out of compliance with its accreditor’s standards. Over time, ITT’s decisions have put its students and millions of dollars in taxpayer funded federal student aid at risk. In response, over the last couple of years, we at the Department of Education have increased our financial oversight over ITT and required the school to boost its cash reserves to cover potential damages to taxpayers and students.
“These investigations are still ongoing and last week ITT still failed to address its accreditor’s concerns. In response, today we’re announcing further federal action: To protect prospective students and taxpayers, we’re no longer allowing ITT to enroll new students with federal aid. In addition, in case the school’s actions cause it to close, we’re increasing the amount of cash reserves it must send us and we’re ending its installment payment plan for the amount previously required. Finally, we’re slowing down when ITT receives student aid from the government to ensure that ITT is handling its finances properly.”
These moves follow a determination made by ITT’s accreditor, the Accrediting Council for Independent Colleges and Schools (ACICS), that ITT was not “in compliance, and is unlikely to become in compliance with [ACICS] Accreditation Criteria”. Furthermore, that decision came amid increasingly heightened financial oversight measures put in place by the Department of Education “in 2014 and continued and expanded in June 2016 due to significant concerns about ITT’s administrative capacity, organizational integrity, financial viability and ability to serve students”. As a result, ITT Technical Institute would only be allowed to enroll new students who use federal financial aid dollars under strict conditions. In short, ITT must meet the qualifications for accreditation as laid out by its accreditor. Without doing so these schools were jeopardizing the futures of those who paid to attend a school, many with federal loans.
Simply looking at the Better Business Bureau review of ITT Educational Services, Inc. as well as complaints made to Consumer Affairs it is clear that many former ITT Tech students did not feel they received a valuable educational experience. Whether it be classes not be taught by actual teachers. Or their classes and/or degrees not actually preparing them for their chosen field. Or the fact that many students had to apply for predatory loans in order to pay for their classes. In essence, ITT Tech as well as other for-profit schools exist in order to make money off of their students, no matter if they provide a quality education. And their entire business model relies on recruiting students who have no option but to take federal loan money, which is where such schools get the bulk of their profits:
How for-profit schools leave their students high and dry.
96% of students at for-profit colleges take out loans. 13% of community college students, 48% of public college students, and 57% of nonprofit private college students do.
For-profit colleges enroll 13% of higher-education students but receive 25% of federal student aid.
The 15 publicly traded for-profit colleges receive more than 85% of their revenue from federal student loans and aid.
42% of students attending for-profit two-year colleges take out private student loans. 5% of students at community colleges and 18% at private not-for-profit two-year colleges do.
1 in 25 borrowers who graduate from college defaults on his or her student loans. But among graduates of two-year for-profit colleges, the rate is 1 in 5.
Students who attended for-profit schools account for 47% of all student loan defaults.
In fact, simply watch this segment from Last Week Tonight with John Oliver and you will understand exactly why ITT Tech should have been forced out of business.