Settlement provides $15.3M for former ITT Tech students in Virginia
Table of Contents
Virginia Attorney General Mark R. Herring agreed to a settlement worth about $15.3 million in debt relief for at least 1,840 former ITT Tech students in Virginia as part of a larger case settled by 48 attorneys general and the federal Consumer Financial Protection Bureau. Nationally, the settlement will result in debt relief of about $330 million for 35,000 borrowers who have outstanding principal balances.
The settlement is with PEAKS Trust, a private loan program run by the for-profit college and affiliated with Deutsche Bank entities. 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.
“Student loan debt continues to be a significant burden to Virginians and their families across the Commonwealth,” said Attorney General Herring. “I am glad we were able to reach this agreement that I hope will alleviate some of the financial pressure on Virginians who were taken advantage of by this scheme.”
PEAKS was formed after the 2008 financial crisis when private sources of lending available to for-profit colleges dried up. ITT developed a plan with PEAKS to offer students temporary credit to cover the gap in tuition between federal student aid and the full cost of the education.
According to the settlement agreement, ITT and PEAKS knew or should have known that the students would not be able to repay the temporary credit when it became due nine months later. 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. When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which for many students carried high interest rates, far above rates for federal loans.
The default rate on the PEAKS loans is projected to exceed 80 percent, due to both the high cost of the loans as well as the lack of success ITT graduates had getting 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, PEAKS has agreed that it will forgo collection of the outstanding loans, cease doing business, send notices to borrowers about the cancelled debt, and ensure that automatic payments are cancelled. PEAKS is also required to supply credit reporting agencies with information to update credit information for affected borrowers.
Students will not need to take action to receive debt relief; the notices they receive will explain their rights under the settlement. Students can direct questions to PEAKS at customerservice@peaksloans.com or 866-747-0273. They can also reach out to the Consumer Financial Protection Bureau with questions at (855) 411-2372, or contact Attorney General Herring’s Consumer Protection Section at (800) 552-9963 or consumer@oag.state.va.us.
