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Feds to repay $3.9 billion in ITT student loans, seek $24 million refund from DeVry

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Diving Brief:

  • The U.S. Department of Education will discharge all outstanding federal student loans for borrowers who attended ITT Technical Institute for nearly 12 years before the for-profit channel closed in 2016, wiping out $3.9 billion debt for 208,000 people, officials said on Tuesday.
  • Separately, the Department of Education officially notified DeVry University — a still-operating for-profit institution — on Monday that the agency wants it to pay nearly $24 million to cover the cost of rejected loans for students who enrolled there from 2008 to 2015. The department rejected loans under Borrower Defense Until Repayment, a debt cancellation program for students whose institutions misled them . He could ask DeVry for additional money as he handles more defense claims from borrowers, but the university can challenge the refunds.
  • The Education Department also approved the releases of nearly 100 borrowers who enrolled in a physician assistant, biller and coder program at a long-closed Kaplan Career Institute in Kenmore Square, Massachusetts, in 2011 and 2012. The step comes after the state’s attorney general found the for-profit institution engaged in deceptive practices, including lying about its placement rates.

Overview of the dive:

The actions announced Tuesday are the latest in a complex series of steps the Biden administration has taken to shore up the nation’s struggling student loan system. They understand proposed regulatory changes as good as tries to eliminate a backlog of borrowers requesting debt forgiveness under several programs.

Officials also frame the efforts as holding bad actors accountable, particularly for-profit colleges and vocational schools.

“Most colleges and universities are honest,” Education Secretary Miguel Cardona said on a conference call on Tuesday. “They are honest about the quality of education they provide. But, as we saw today, that is not always the case.”

Another federal agency, the Consumer Financial Protection Bureau, has been involved in efforts targeting colleges deemed problematic. CFPB director Rohit Chopra said on Tuesday’s call that he would push to look at private and institutional student loans.

“We hope that continued monitoring will prevent further abuses like those seen with ITT Tech, where students were subjected to high interest rates and illegal debt collection practices,” Chopra said.

Tuesday’s ITT action represents the second-largest group discharge in Education Department history, Cardona said. It’s behind only a $5.8 billion landfill announced in early June for 560,000 borrowers who attended the now closed, for-profit Corinthian Colleges.

The Department of Education said ITT exhibited a long list of problematic behaviors, including misrepresentations about students’ job prospects, ability to transfer credits, and accreditation.

The U.S. Securities and Exchange Commission previously pursued sanctions against the former ITT CEO and CFO. This reached a settlement in 2018 which forced them to pay hundreds of thousands of dollars and barred them from being officers or directors of public companies for five years. The leaders neither admitted nor denied the allegations against them.

Meanwhile, the Department of Education’s actions regarding DeVry have been closely watched as they represent the first time regulators have granted a borrower’s defense pardon to students who attended a college that is still open and who receives federal financial assistance.

In February, the department said he was unloading $71.7 million in DeVry student loan debt and that he would attempt to recoup those costs. He revealed that Devry misled prospective students about their job prospects from 2008 to 2015. DeVry has since been sold to a new owner, but the Department of Education takes the position that liability passes when a college changes hands.

The department called the $24 million it is currently seeking from DeVry an “initial request” related to the first group of dumps the loan servicers are processing.

DeVry may fight reimbursement. He has 20 days to take action which could include requesting a hearing with a Ministry of Education appeals office.

The university is reviewing the notice that the Department of Education is seeking a refund, according to an emailed statement.

“We continue to believe that the Department is misrepresenting DeVry’s calculation and disclosure of graduate results in certain advertisements, and we disagree with the conclusions they have reached,” the statement said.

Student Defence, a nonprofit that pushed the Department of Education to automatically process borrower defense requests, welcomed Tuesday’s developments. Its lead attorney, Libby DeBlasio Webster, released a statement saying the group hopes more applications will be approved soon.

“Nearly 6 years after ITT closed, many of the students it defrauded are finally getting the relief they deserve,” the statement read. “This is a life-changing announcement for thousands of people who only wanted to make their lives better and trusted the wrong people to help them do it.”

Jason Altmire, president and CEO of Career Education Colleges and Universities, a group that advocates for for-profit organizations, said in a statement that he supports helping borrowers hurt by schools that cheated on them. on purpose.

“We are concerned that the U.S. Department of Education may promote indiscriminate debt relief to maximize the number of loan repayments, without considering the resulting reputational damage to affected schools.” , Altmire said. “This is particularly concerning given the possibility for the Ministry to couple landfills with recovery from establishments.