June 14, 2019
Carson City, NV – Today, Attorney General Aaron D. Ford secured an agreement to obtain $3,437,978.59 in debt relief for 335 former ITT Tech students in Nevada as part of a settlement with 44 states and territories.
Nationally, the multistate settlement will result in debt relief of more than $168 million for more than 18,000 former students. The settlement is with Student CU Connect CUSO, LLC (“CUSO”), which offered loans to finance students’ tuition at ITT Tech, the failed for-profit college.
“Education should be the pathway to success, not a scam,” said AG Ford. “These students thought they were furthering their career, only to be subjected to abusive lending practices to pay for an education at a failed institution. I’m proud that my office obtained much-needed financial relief for hundreds of Nevadans through this settlement.”
ITT filed 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 student aid. The CUSO Loan program originated approximately $189 million in student loans to ITT students between 2009 and 2011.
The Attorneys General alleged that ITT, with CUSO’s knowledge, offered students Temporary Credit upon enrollment to cover the gap in tuition between federal student aid and the full cost of the education. The Temporary Credit was due to be repaid before the student’s next academic year, although ITT and CUSO knew or should have known that most students would not be able to repay the Temporary Credit when it became due. Many students complained that they thought the Temporary Credit was like a federal loan and would not be due until six months after they graduated.
The default rate on CUSO loans was extremely high (projected to exceed 90 percent) because of the high cost of the loans, as well as the lack of success ITT graduates had attaining jobs that earned enough to make repayment feasible. The defaulted loans continue to affect students’ credit ratings and are usually not dischargeable in bankruptcy.
Under the settlement, CUSO has agreed that it will forego collection of the outstanding loans and will also cease doing business. Under the Redress Plan, CUSO’s loan servicer will send notices to borrowers about the canceled debt and ensure that automatic payments are canceled. The settlement also requires CUSO to supply Credit Reporting Agencies with information to update credit information for affected borrowers.
A related settlement between the CUSO and the U.S. Bankruptcy Trustee was approved on June 12th.The settlement with the Attorneys General is also contingent on federal court approval of a related settlement between the CUSO and the federal Consumer Financial Protection Bureau, which is also being announced today.