TOPEKA – (June 14, 2019) – More than 100 former ITT Tech students from Kansas will receive more than $1 million in debt relief as a part of a settlement agreement between Kansas and the private lender that was organized for the sole purpose of providing loans to students at the failed for-profit college, Attorney General Derek Schmidt announced today.
The multistate settlement, which Kansas joined, will result in debt relief of more than $168 million for more than 22,000 former ITT students nationwide, with 108 Kansans receiving $1,003,007.14 in relief. The settlement is with Student CU Connect CUSO, LLC (CUSO), which offered loans to finance students’ tuition at ITT Tech, the for-profit college that filed bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict its access to federal student aid. The CUSO Loan program originated approximately $189 million in student loans to ITT students between 2009 and 2011.
Under the settlement, the CUSO, under threat of litigation, has agreed that it will forego collection of the outstanding loans and cease doing business. Under the Redress Plan, the CUSO’s loan servicer will send notices to borrowers about the cancelled debt and ensure that automatic payments are cancelled. The settlement also requires the CUSO to supply Credit Reporting Agencies with information to update credit information for affected borrowers.
The settlement alleges that ITT, with the CUSO’s knowledge, offered students Temporary Credit (TC) upon enrollment to cover the gap in tuition between federal student aid and the full cost of the education. The TC was due to be repaid before the student’s next academic year, although ITT and the CUSO knew or should have known that most students would not be able to repay the TC when it became due. Many students complained that they thought the TC was like a federal loan and would not be due until six months after they graduated. When the TC became due, however, ITT pressured and coerced students into accepting loans from the CUSO, which for many students carried high interest rates, far above rates for federal loans.
A related settlement between the CUSO and the U.S. Bankruptcy Trustee was approved today. The multistate settlement is also contingent on federal court approval of a related settlement between the CUSO and the federal Consumer Financial Protection Bureau which is also being announced today.
This is the second legal settlement obtained this year by Schmidt’s office that provides student-loan relief. In addition to today’s settlement, Schmidt’s office in January obtained $2,142,116 in debt relief for 1,077 former students of Career Education Corp.
Students with questions about their rights under the settlement will receive information in the Notices that are sent. Students may also visit www.InYourCornerKansas.org or call the attorney general’s Consumer Protection Division at (800) 432-2310 for more information.
A copy of the settlement agreement is available at https://bit.ly/2WN0Czd.