Student debt is on the rise in the U.S.
More than 100 Kansans will receive more than $1 million in student debt relief as the result of a settlement with a company that was created to shuffle loans for the defunct ITT Technical Schools.
ITT once boasted more that 130 campuses and 35,000 students. It was best known for blanketing daytime television with commercials promising that its “hands-on” and “career focused” approach to education held the key to better careers for young people who had struggled in conventional schools.
ITT collapsed in 2016 after the federal government shut off its tap of guaranteed student loans, amid findings that the school was steering students into debt they had little chance of repaying.
The multistate settlement announced Friday will provide more than $168 million in debt relief to 22,000 former ITT students nationwide.
Of those, 108 are Kansas residents whose forgivable debts amount to slightly more $1 million, according to a statement from Attorney General Derek Schmidt.
The settlement is with an education finance company called Student CU Connect, also known as CUSO.
ITT provided zero-interest short-term credit to students to fill the gap between their federal student loans and the price of ITT’s tuition. But the temporary loans had to be paid back before the students could graduate and earn money to pay them.
ITT used that as leverage to coerce students into taking out high-interest 10-year loans from CUSO, “a private lender that was organized for the sole purpose of providing loans to students at the failed for-profit (ITT) college,” Schmidt’s statement said.
Money from CUSO loans went directly to ITT and could only be used to pay school tuition, the settlement said.
ITT knew much of the debt would never be repaid, but having it recorded made the school’s financial statement look more attractive to potential investors. Eventually, default rates on CUSO debt were more than 90 percent, the settlement said.
As part of the settlement, CUSO has agreed to remove the debts from the former students’ credit reports and to cease doing business.
Former ITT students with outstanding CUSO loans should be notified by mail, or can call the attorney general’s Consumer Protection Division at 800-432-2310 for more information.