Attorney General Ken Paxton announced a $13 million debt relief agreement on Friday for 1,430 former ITT Tech students in Texas as part of a 43-state settlement with Student CU Connect CUSO, LLC.
The settlement will result in debt relief for more than $168 million for more than 18,000 former ITT Tech students nationwide.
CUSO offered loans to finance students’ tuition at the failed for-profit college, ITT Tech, which filed for bankruptcy in 2016 following action by the U.S. Department of Education to restrict ITT Tech’s access to federal student aid.
ITT Tech, with CUSO’s knowledge, offered new enrollees temporary credit in order to cover the gap in tuition costs between federal student aid and the full cost of their education. Although most students believed that like with federal student loans the temporary credit was due to be paid six months after their graduation, ITT Tech demanded the credit be paid back the following academic year.
When students could not repay their credit on short notice, ITT Tech pulled students out of class and threatened to expel them in order to coerce students into accepting high-interest loans from CUSO.
Neither ITT Tech or CUSO made students aware of the true cost of temporary credit repayment until it was converted into a loan. The default rate on the CUSO loans was projected to exceed 90 percent due to high costs and lack of success ITT graduates had getting jobs with their earned degree.
The defaulted loans continue to affect students’ credit ratings and are usually not dischargeable in bankruptcy.
Under threat of litigation, CUSO agreed to forego collection of the outstanding loans, supply credit reporting agencies with information to update students’ credit information and cease doing business. CUSO’s loan servicer will also send notices to borrowers about the canceled debt and ensure that automatic payments are ended.
Students will receive mailed notices with information about their rights under this settlement. You can view a copy of the settlement here.
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Source: Office of Attorney General Ken Paxton