AUSTIN, Texas — On Friday, Attorney General Ken Paxton announced a $13 million debt relief agreement for 1,430 former ITT Tech students in Texas.
The agreement is part of a 43-state settlement with Student CU Connect CUSO, LLC. Nationally, the settlement will result in debt relief for over $168 million for more than 18,000 former ITT Tech students.
According to the AG's office, CUSO offered loans to finance students' tuition at ITT Tech, which filed for bankruptcy in 2016 following action by the U.S. Department of Education to restrict the school's access to federal student aid.
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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 tuition. Most students believed the temporary credit was due to be paid six months after their graduation, like federal student loans, but ITT Tech demanded the credit be paid back the following academic year.
When students couldn't repay their credit, ITT Tech pulled them out of class and threatened to expel them in order to coerce them into accepting high-interest loans from CUSO, according to the AG's office.
Neither ITT Tech nor 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% due to high costs and the lack of success ITT graduates had getting jobs with their degrees.
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"Students who attended ITT Tech are burdened with unpayable debts they received while pursuing an honest education. This college and loan payment program have failed them tremendously," AG Paxton said.
Under threat of legal action, 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 make sure automatic payments are ended.
Students will receive mailed notices with information about their rights under this settlement, according to the AG's office.
"I am proud of my office for holding CUSO accountable for their abusive loan practices and aiding students who were pressured into signing a loan without knowledge of the full cost or deadlines," AG Paxton said.
You can view a full copy of the settlement here.
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