The Carmel-based company that operates ITT Technical Institutes announced Tuesday that all of their campuses will close, following a set of crippling federal sanctions.
The U.S. Department of Education banned the for-profit college chain from enrolling new students who depend on federal aid, the source of most of the company’s revenue, citing failures of financial responsibility and federal fraud charges.
The department also required the company to increase its reserves to almost $250 million, about 40 percent of federal student aid the company received in 2015 — a move analysts called a “de facto death sentence.”
The sanctions signal a growing priority from President Obama’s education department in its final months: increased oversight of for-profit colleges.
ITT Educational Services, Inc. operates more than 140 locations nationwide, in 38 states, according to their website. The ITT closure will affect over 35,000 students and 8,000 employees nationally. ITT operated six campuses in Indiana.
In recent years, ITT has increasingly been the subject of numerous state and federal investigations, and this year it was twice found out of compliance with its accreditor’s standards. ITT was recently sued by the federal government over accusations of predatory lending.
“It is with profound regret that we must report that ITT Educational Services, Inc . will discontinue academic oparations at all of its ITT Technical Institutes,” a statement from ITT said. “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.”
ITT offered on-campus and online vocational classes to students. ITT said they will not offer classes during the September quarter after having exhausted alternatives, including transfer of the schools to a non-profit or public institution.
In August, ITT’s accreditor, the Accrediting Council for Independent Colleges and Schools (ACICS) determined that ITT “is not in compliance, and is unlikely to become in compliance with [ACICS] Accreditation Criteria,” according to a statement from the U.S. Department of Education.
In a letter to current students, U.S. Secretary of Education John King acknowledged that the department’s sanctions put millions of dollars in taxpayer-funded federal student aid at risk, if the school chose to close rather than take corrective actions.
“The Department of Education took oversight actions to prevent ITT from continuing to add to that risk,” King wrote. “When we made that decision, we did not take it lightly.”
An analysis by Politico estimates the chain’s collapse could put taxpayers on the hook for hundreds of millions of dollars.
The collapse this morning of ITT Tech, the massive for-profit college chain, will put taxpayers on the hook for approximately $485 million in federal student loans owed by current and recent students of ITT Tech. That figure represents the amount of outstanding federal loans owed by all current ITT Tech students (and recent drop-outs) as of Aug. 31.
According to the Indy Star, prior to the sanctions, ITT’s enrollment was on the decline.
In the three-month period ending June 30, ITT enrolled 9,846 new students, an 18.3 percent decline from a year earlier. ITT in July said it expected new student enrollment to fall 45 to 60 percent in the second half of the year.”
And in recent weeks, the for-profit college chain’s stock has plunged. In early 2010 ITT stock traded at over $100 per share. After today’s news, the stuck has plummeted to 36 cents per share.
In the letter to current ITT students, secretary of education King says they will be eligible to have loans forgiven if they want to start over at another school.