Pennsylvania Office of the Attorney General issued the following announcement on June 17.
Attorney General Josh Shapiro announced that a bipartisan coalition of 44 Attorneys General reached a settlement with Student CU Connect CUSO, LLC (“CUSO”) that includes more than $168 million in debt relief for more than 18,000 former students of ITT Tech schools nationwide. In Pennsylvania, 570 former ITT Tech students are eligible for $5.3 million in debt relief. The settlement holds CUSO accountable for its participation with now-defunct ITT Tech in subjecting students to deceptive and abusive lending practices. ITT Tech filed for bankruptcy in 2016.
“With the private student loan program that ITT and CUSO established, ITT Tech was able to take advantage of thousands of hardworking students who were simply trying to complete their education,” said Attorney General Shapiro. “ITT aggressively pressured student to take predatory loan options and deceived them about the conditions of their loans. As a result, hundreds of Pennsylvania students were burdened with student loan debt and struggled to find jobs. As Attorney General, I will hold accountable any student loan company or for-profit college that preys on the students they are technically supposed to help. I’m grateful for the hard work of my Bureau of Consumer Protection and my colleague Attorneys General to secure relief for these students and prevent CUSO from taking advantage of anyone else.”
The Attorneys General alleged that ITT, with 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. Students were supposed to pay the TC before the next academic year; although, ITT and CUSO knew or should have known that most students would not be able to do so. Many students complained that they thought the TC was similar to a federal loan and would not be due until six months after they graduated.
When the TC became due, ITT pressured and coerced students into accepting loans from CUSO. For many students, these loans carried high interest rates that were far above rates for federal loans. ITT resorted to pressure tactics, such as pulling students out of class and threatening to expel them if they did not accept the loan terms. Since ITT’s credits would not transfer to most other schools, most students enrolled in the CUSO loans.
Neither ITT nor CUSO made students aware of what the true cost of repayment for the TC would be until after the credit was converted to a loan. Not surprisingly, the default rate on the CUSO loans was extremely high (projected to exceed 90%) 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.
Representatives of Attorney General Shapiro’s team served on the Executive Committee of this effort, which was led by Kentucky. Under the terms of the settlement, CUSO has agreed that it will forego collection of the outstanding loans. Under the Redress Plan, CUSO’s loan servicer will send notices to borrowers about the cancelled debt and ensure that automatic payments are cancelled. The settlement also requires CUSO to supply Credit Reporting Agencies with information to update credit information for affected borrowers.
Pennsylvania has the second-highest student debt load in the United States—averaging $36,854 in debt per graduate. Attorney General Shapiro has prioritized holding accountable predatory student loan companies and for-profit colleges that take advantage of students and compound this debt load. In October 2017, Attorney General Shapiro sued the nation’s largest servicer of federal and private student loans, Navient Corporation, and its subsidiary Navient Solutions, LLC, over widespread abuses in their student loan origination and servicing businesses. He has also secured relief for students harmed by the practices of for-profit schools and companies such as American Beauty Academy, Career Education Corporation, and Aequitas Capital Management.
Original source can be found here.