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Inquirer editorial: ITT schools have been ripping off students and saddling them with debt for years

For decades, ITT Technical Institutes had a sweet deal: It gobbled up billions in federal student grants and loans in exchange for promised results that it rarely, if ever, produced.

Inquirer editorial: ITT used a predatory loan tactic to keep students hooked.
Inquirer editorial: ITT used a predatory loan tactic to keep students hooked.Read more

For decades, ITT Technical Institutes had a sweet deal: It gobbled up billions in federal student grants and loans in exchange for promised results that it rarely, if ever, produced.

Finally, the Department of Education last month barred ITT from using federal funds to enroll new students. The department said most ITT students were taking on heavy debt loads without ever getting degrees. ITT's records showed 96 percent of its students obtained federal loans or grants, but only 36 percent completed degree programs.

Those numbers are not surprising. Student loans to attend for-profit schools are a poor risk for taxpayers and students. For-profit students receive only 11 percent of federal college loans, but account for 44 percent of defaults.

Unable to stay on the federal loan train, ITT folded two weeks after the Education Department issued its Aug. 25 ban. That left more than 40,000 students nationwide, including 3,000 in Philadelphia and its suburbs, scrambling to figure out what to do next.

Many can't pay their share of the $500 million in loans owed by ITT students. There probably will be a repeat of the government's decision to forgive $200 million in loans taken out by students at another for-profit school, Corinthian College, which declared bankruptcy in 2015.

ITT students have long complained that they weren't getting jobs that paid promised wages. Massachusetts' attorney general accused ITT of telling students that more than 80 percent of its graduates found jobs in their fields when in reality it was less than 50 percent.

ITT used a predatory loan tactic to keep students hooked. It would give students interest-free loans that had to be paid off in one year. But any balance after that had to be repaid through loans with interest rates as high as 25 percent, according to a complaint filed by the Consumer Financial Protection Bureau.

A 2014 Senate Education Committee investigation concluded that spending four years at an ITT school could cost a student almost $100,000. Just think of the reputable colleges a student could attend for that. Just as outrageous is what ITT did with its loot, allocating 37 percent of nearly $1 billion in revenue to profit, spending 20 percent on marketing, and paying its CEO $7.6 million a year. That left little for academics.

ITT's problems have been apparent for years. Federal agents raided its offices in eight states in 2004. In 2005, ITT agreed to a $725,000 settlement with California after employees revealed how they inflated grades to qualify students for financial aid.

Aggressively lobbying Congress couldn't save ITT this time. ITT officials called the government's actions "reprehensible." What's reprehensible is how ITT ripped off students, including laid-off workers trying to develop skills for new careers.

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