Hartford, CT) — Attorney General William Tong has secured an agreement to obtain $292,874 in debt relief for former ITT Tech students in Connecticut as part of a settlement with 48 attorneys general and the federal Consumer Financial Protection Bureau.
Nationally, the settlement will result in debt relief of about $330 million for former students of the failed for-profit college. The agreement affects about 43,000 loans.
The settlement is with PEAKS Trust, a private loan program run by ITT 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.
“This settlement holds PEAKS Trust accountable for its predatory lending practices and the damage it has done to students across the nation. Thirty-nine Connecticut students enrolled in ITT Tech to seek an education, but were instead given debt and empty promises,” Attorney General Tong said. “Students’ hopes and dreams were preyed upon and this settlement should serve as a strong reminder that such lending practices will not be tolerated.”
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 Assurance of Voluntary Compliance filed Tuesday, 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. Pressure tactics used by ITT included pulling students out of class and threatening to expel them if they did not accept the loan terms. Many of the ITT students were from low-income backgrounds and were left with the choice of enrolling in the PEAKS loans or dropping out and losing any benefit of the credits they had earned, because ITT’s credits would not transfer to most schools.
The default rate on the PEAKS loans is projected to exceed 80%, 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 and cease doing business. PEAKS will send notices to borrowers about the cancelled debt and ensure that automatic payments are cancelled. The settlement also requires the PEAKS to supply credit reporting agencies with information to update credit information for affected borrowers.
Students will need to do nothing to receive the debt relief. The notices will explain their rights under the settlement. Students may direct questions to PEAKS at customerservice@peaksloans.com or 866-747-0273, or the Consumer Financial Protection Bureau at (855) 411-2372.
In June 2019, Attorney General Tong was part of a https://portal.ct.gov/AG/Press-Releases/2019-Press-Releases/AG-TONG-JOINS-STATES-IN-ANNOUNCING-$168-MILLION-IN-DEBT-RELIEF-FORMER-ITT-TECH-STUDENTS$186 million settlement that resulted in debt relief for 18,664 former ITT students. That agreement was with Student CU Connect CUSO, LLC, which also offered loans to finance students’ tuition at ITT Tech.
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