There are no easy answers for former ITT Tech students struggling with student loan debt, but there are a number of actions these students can consider to try to get rid of any unfair debt.
Closed School Discharge, Borrower Defenses, State Tuition Recovery Funds
In previous posts, we discussed the key options for the tens of thousands of students who were unable to complete their program at ITT Tech because of the school’s closure in September. These students may be eligible to have their federal student loan debt cancelled though the closed school discharge program. Key considerations and frequently asked questions about this option are covered here and here.
Many former ITT students are not eligible for closed school discharges because they completed or withdrew from ITT earlier on, or have private debt that is not covered by the federal discharge programs. Their path to relief is less clear. As noted in our earlier posts, borrowers who believe ITT lied to them to get them to enroll or otherwise violated the law may consider applying for a discharge of their federal loans by asserting a borrower defense to repayment. They may also look into whether they are eligible for relief through a state student tuition recovery fund.
Student Claims in the ITT Bankruptcy Proceedings
Another action that ITT students who feel they were defrauded might consider is to pursue or support student claims in the ITT bankruptcy proceeding. The deadline to file a claim in the bankruptcy proceeding is January 30, 2017.
ITT Tech filed for bankruptcy in September 2016. The bankruptcy court will decide who has valid claims against ITT and how ITT’s remaining money and assets should be divided among those with valid claims. Importantly, one of ITT’s bigger remaining assets is the right to collect on loans owed it by former students. A number of financial firms that lent ITT money, as well as federal regulators and state attorneys general that have sued ITT, have asserted claims in the bankruptcy proceeding and are asking for a cut of what’s left of the school’s assets.
Yesterday, a group of former ITT students asked the bankruptcy court to also consider what ITT owes its former students. These students allege that ITT broke consumer protection laws and its contracts with students by using unfair and deceptive practices to recruit students to enroll and sign up for loans, and that the school unfairly profited from them. The students and their lawyers from the Project on Predatory Student Lending at the Harvard Law School Legal Services Center submitted testimony from hundreds of former ITT students in support of their claims.
The students are asking the bankruptcy court for several things, including:
- To find that ITT broke the law and violated the rights of its former students by engaging in widespread unfair and deceptive practices to recruit, enroll, and sign students up for loans.
- To find that ITT owes former students for violating their rights and to award them money through the bankruptcy proceeding.
- To order that ITT and certain private lenders stop collecting on some private ITT student loans.
- To treat their claim as on behalf of all ITT students who attended the school since 2006. This way all ITT students from the past 10 years could potentially benefit from the bankruptcy proceeding.
What the Bankruptcy Filing Means for ITT Students and What Students Can Do
We do not know whether the bankruptcy court will allow the students to proceed with their claims on behalf of all ITT students since 2006. And we do not know whether the court will find that ITT broke the law and that students are entitled to relief, or how much relief they would get.
But the former ITT students have submitted a lot of testimony to support their claims that the school misled students at locations across the country to get them to enroll and sign up for loans. And they make a good argument that the voices of ITT students should be considered when deciding how to divide up ITT’s assets and how to deal with its right to collect on student loans. Additionally, if the bankruptcy court finds that ITT violated its former students’ rights under consumer protection or contract law, that could help make students eligible for federal student loan discharge through the borrower defense to repayment process.
Former ITT students who believe they have a claim against ITT may want to file individual “proofs of claim” in the bankruptcy court. Filing an individual proof of claim would help students to ensure that their claims are properly before the bankruptcy court even if the court decides not to allow the students who filed yesterday to bring their claim on behalf of all former ITT students since 2006. Students may file proofs of claim here. The deadline to file is January 30, 2017.
Former ITT students can find instructions about how to submit a proof of claim and how to receive updates from the ITT students’ lawyers at the Project on Predatory Student Lending here. Additionally, anyone with information that may be relevant to the students’ claims can submit information about ITT to the ITT students’ lawyers by email at email@example.com or voicemail at 617-390-252.
Former ITT students can also submit complaints and information about ITT to the Department of Education here and can submit complaints about ITT student loans to the Consumer Financial Protection Bureau here.