Two days ago ITT was forced to shut down amid an investigation by the U.S. Department of Education which restricted new enrollees from acquiring federal student loans (see our post here). Now, with ITT's 29,000 students stuck in limbo, many are asking what's going to happen to their $500mm worth of outstanding student loans. Well, like with everything else these days, taxpayers will likely have the "honor" of picking up the bill.
As Bloomberg reports, the Education Department is "frantically trying to limit debt cancellations" though it likely has few options as federal student loan docs allow for loan forgiveness in the event an enrolled student's school shuts down during their education and that student subsequently fails to enroll in a "comparable" institution.
The Education Department is frantically trying to limit debt cancellations. Students who transfer even one ITT credit toward what the agency considers "comparable" programs at other schools and then complete their studies aren't eligible to have their loans wiped. But federal regulations don't clearly define "comparable"—giving the department the authority to reject borrowers' pleas for forgiveness. The application borrowers must fill out is similarly vague.
All ITT students who don't complete "comparable" programs elsewhere can apply for debt cancellations.
That said, the Education Department has expressed it's view that current rules around student debt cancellation go too far in protecting taxpayers. Apparently, forcing students to actually apply for debt forgiveness, rather than just offering it up, is too large a burden for their millennial souls to bear.
The Education Department has proposed new regulations that call for the automatic cancellation of loans for borrowers who don't re-enroll in college in the three years after their schools shut down—but for now, it still requires borrowers to apply formally. Its own forecasts estimate that a policy change to automatically cancel those students' loans could cost taxpayers about $135 million a year; the proposal, which doesn't require congressional approval, is pending.
Meanwhile, according to Bloomberg, Massachusetts Attorney General Maura Healey is actually encouraging students to stick it to taxpayers by canceling their debts before enrolling in a new institution. She's even holding workshops to help the young, millennial victims of ITT's microaggressions to game the system. Per Bloomberg:
Massachusetts Attorney General Maura Healey, whose own fraud lawsuit against ITT is still pending, is urging students to consider canceling their federal debt before deciding to transfer their credits, her spokeswoman Jillian Fennimore said. Her office will soon hold seminars to help them fill out the required paperwork.
But surely an attorney general wouldn't blatantly suggest that students should force their debt upon taxpayers without at least trying to transfer their credits to another institution, right? Well, we took a look at Healey's website (here: Website of the Attorney General of Massachusetts) and, sure enough, she has the following guidance for ITT students which warns against transferring credits.
If you are a current Massachusetts resident who meets the above conditions, please complete the Massachusetts Attorney General’s ITT Closed School Assistance Request Form below to get help applying for loan forgiveness.
If you transfer your ITT Tech credits to another school and complete your course of study, you will lose your eligibility for a closed school discharge.
ITT Tech has shut down for good. Now we are helping former students CANCEL their federal student loans. Call us at 1-888-830-6277.— Maura Healey (@MassAGO) September 7, 2016
Former ITT Tech students in Massachusetts:— Maura Healey (@MassAGO) September 6, 2016
?? CANCEL any payments
???? Save all paperwork.
???? Call us at 1-888-830-6277 pic.twitter.com/UEH7T919wU
If that weren't bad enough, an activist group, The Debt Collective, is trying to take Healey's scheme one step further by organizing students at a number of for-profit institutions to petition the Education Department for a sweeping cancellation of student loans on the basis of deceptive recruiting techniques.
The Debt Collective—the activist group behind last year's "debt strike" by former Corinthian students who publicly refused to make payments on their federal loans—is trying to organize all former ITT students to help petition the Education Department to cancel their debts on the basis of what they're calling the school's deceptions.
It's also trying to persuade former students at other for-profit colleges under investigation to use a legal provision that lets debtors have their federal loans canceled if they were misled into taking them on—relief for which records show hundreds of former ITT Tech students have already applied. Hundreds of thousands of Americans have collectively taken out more than $3.4 billion in federal student loans to attend ITT Tech over the last six academic years, according to federal data.
While we're at it, we would like to suggest that taxpayers throw in a little extra cash to cover the pain and suffering endured by these poor students. Guess we should also add "ITT" to the official list of trigger words.