A major victory was won against for-profit educational institutions that have been accused of predatory lending practices. A federal bankruptcy judge in Indianapolis gave final approval to a $600 million settlement that will affect about 750,000 former students of ITT Technical Institute.
The now-defunct institution was once based in a suburb of Indianapolis, Carmel, Indiana. The school had over 136 campuses in 38 states when it shut down in September 2016. This $600 million settlement cancels all the student loan debt owed to the school.
The agreement specifically deals with student borrowers who attended ITT Tech between the years 2006 and 2016. The settlement also returns $3 million to students who paid payments on their loan to the school after the school’s parent company, ITT Educational declared bankruptcy in 2016.
After the school closed in 2016, students filed claims against ITT Educational and ITT Tech, alleging that they were subject to “systemic unfair and deceptive practices” by the school. The class of students argued that ITT violated consumer protection laws and also were in violation of breach of contract.
This settlement agreement may wipe out the debt that was owed directly to ITT, the issue of federal and private student loans that ITT students took out to pay tuition still exists. Only 33 of the former ITT students have been granted federal student loan cancellation. This number pales in comparison to the 13,000 borrowers who are unable to pay their student loan debt and have applied for cancellation.
However, despite this fact, proponents of student loan reform practices praise the settlement and believe that it has done more for students who fell prey to the predatory tactics of for-profit schools like ITT Tech.
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