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ITT Technical Institute Shuts Down After Government Cut Off New Funding

ITT Technical Institute Shuts Down After Government Cut Off New Funding

Postby smix » Tue Sep 06, 2016 7:28 pm

ITT Technical Institute Shuts Down After Government Cut Off New Funding
The Wall Street Journal

URL: http://www.wsj.com/articles/itt-technic ... 1473163181
Category: Education
Published: September 6, 2016

Description: Company cites actions by U.S. Department of Education for closure; 8,000 employees affected
ITT Technical Institute shut down on Tuesday, ceasing operations at more than 130 campuses nationwide and eliminating most of its 8,000-plus employees after losing access to the lifeblood of federal student aid. The closure of the campuses operated by ITT Educational Services Inc., effective immediately, marks the latest casualty of tighter government oversight in the for-profit college industry. It also is among the largest, affecting about 40,000 students across 38 states. Government officials estimated that current and recent ITT students could seek forgiveness on as much as $500 million in federal loans, on par with what they projected when Corinthian Colleges Inc. liquidated last summer. Taxpayers will be on the hook for most of that amount; ITT currently has about $90 million set aside to cover forgiven loans. The U.S. Department of Education last month banned ITT from enrolling new students who receive federal aid, effectively issuing it a death blow after adding more incremental sanctions for years. The company got 80% of its cash revenue from Title IV federal aid, including Pell Grants and student loans, in 2015, according to securities filings. ITT Chief Executive Kevin Modany said in a conference call with reporters Tuesday that the company had been in conversations with other colleges, as well as education nonprofits, to potentially take over its school operations, but the government rejected proposed alternatives. Education Department Undersecretary Ted Mitchell said in a separate call Tuesday that he knew ITT had been in talks with a variety of organizations, but none ever reached the stage of a formal proposal. “We never saw a path forward in the informal conversation that we had been having with potential buyers,” he said. Mr. Mitchell added that the government wasn’t responsible for brokering a sale of ITT. The Education Department did play a similar role for Corinthian Colleges, however, ushering through the transfer of many Corinthian campuses to Zenith Education Group in late 2014. Corinthian ultimately liquidated in bankruptcy in summer 2015. In a statement, ITT said: “The damage done to our students and employees, as well as to our shareholders and the American taxpayers, is irrevocable.” The for-profit college industry has shriveled in recent years, due in part to a government crackdown on aggressive recruiting practices and stricter policies intended to ensure that schools are preparing students for gainful employment. Enrollments at schools run by onetime giants ITT, DeVry Education Group Inc. and Apollo Education Group Inc. have fallen by half in recent years, forcing the institutions to close campuses, trim program offerings and venture into new areas like corporate training. Shutting off the spigot of federal student-aid dollars has devastated other schools. MedTech College, offering entry-level programs in medical assisting and nursing at a handful of locations, closed this summer after the government cut off student-aid funds, while the Marinello Schools of Beauty closed more than 50 campuses earlier this year once its flow of funds dried up. ITT Tech, among the nation’s largest for-profit college chains by revenue, had been facing accusations from its accreditor of chronic financial mismanagement and questionable recruiting tactics. It is also under investigation by more than a dozen state and federal authorities, including the Massachusetts attorney general, the Consumer Financial Protection Bureau and the Securities and Exchange Commission.
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