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ITT students from SC to get debt relief in settlement

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SC Attorney General Alan Wilson secured a deal to secure $ 8.6 million in debt cancellation for approximately 1,000 former ITT Tech students in South Carolina as part of a deal with 48 attorneys general and the Federal Office for financial protection of consumers.
Nationwide, the transaction will result in a debt cancellation of approximately $ 330 million for 35,000 borrowers who have outstanding principal balances.
The deal is with PEAKS Trust, a private lending program run by the for-profit college and affiliated with Deutsche Bank entities. ITT filed for bankruptcy in 2016 following investigations by state attorneys general and following action by the US Department of Education to restrict ITT’s access to federal student aid.
“These students went to school so they could get better jobs, but instead they were exploited and left with debt and no work to pay them off,” Wilson said. “But it wasn’t just a normal debt; these companies have used unfair lobbying tactics to trap students in a win-win situation. “
PEAKS was formed after the 2008 financial crisis, when private sources of loan available to for-profit colleges ran out. ITT has 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 education.
According to the Assurance of Voluntary Compliance filed on Tuesday:
ITT and PEAKS knew or should have known that students would not be able to repay the temporary credit when it expired 9 months later. Many students have complained that they thought the temporary credit was like a federal loan and wouldn’t be due until 9 months after graduation.
When the interim credit became due, ITT lobbied and forced students to accept loans from PEAKS, which for many students carried high interest rates, far above federal loan rates. The lobbying tactics used by ITT included withdrawing students from class and threatening to expel them if they did not accept the terms of the loan. Many of the ITT students were from low-income backgrounds and had the choice of whether to enroll in PEAKS loans or to drop out and lose any credit benefits they earned, because ITT credits were not being passed on to most schools.
The default rate on PEAKS loans is expected to exceed 80%, both due to the high cost of loans and the lack of success ITT graduates have had in getting jobs that have earned enough to make repayment feasible. Defaulting loans continue to affect students’ credit ratings and are usually not payable in the event of bankruptcy.
Under the agreement, PEAKS has agreed that it will forgo the collection of existing loans and go out of business. PEAKS will send alerts to borrowers about canceled debt and make sure automatic payments are canceled. The transaction also requires PEAKS to provide credit reporting agencies with information to update credit information for affected borrowers.
Students will not have to do anything to receive debt relief. The notices will explain their rights under the transaction. Students can 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, AG Wilson was part of a $ 168 million deal that resulted in debt cancellation for 18,664 former ITT students. That deal was with CU Connect student CUSO, LLC, who also offered loans to fund student classes at ITT Tech.
In addition to SC, the agreement was signed by the attorneys general of Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

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