ITT Tech Shuts Down After Federal Disciplinary Action

ITT Technical Institutes have been under state and federal investigation for fraud.

by Justin L. Mack, Chelsea Schneider and Stephanie Wang, The Indianapolis Star / September 6, 2016
ITT Tech will close all of its campuses after federal sanctions. Dwight Burdette/CC BY 3.0 via Wikimedia Commons

(TNS) — In the wake of devastating federal sanctions, officials from the Carmel-based ITT Educational Services Inc. announced Tuesday that all ITT Technical Institute campuses will be closing.

In late August, the U.S. Department of Education barred ITT from enrolling new students who depend on federal aid and required the company to warn current students that its accreditation is in jeopardy. ITT was also told that it must increase its reserves from $94.4 million to $247.3 million, or 40 percent of federal student aid the company received in 2015.

The finical blow was too much for ITT to bear, so the decision was made to shutter operations, a move that will impact thousands of students and employees.

"It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service," said a statement from ITT. "With what we believe is a complete disregard by the U.S. Department of Education for due process to the company, hundreds of thousands of current students and alumni and more than 8,000 employees will be negatively affected.

"The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter. We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution."

The company said its focus will be using the remaining staff to help  displaced students with their records and educational options. ITT had 40,000 students as of June 30.

Education Department Secretary John B. King Jr. has called the moves against ITT necessary to protect students and taxpayers. The college chain has faced fraud charges from the SEC. ITT also is being investigated by about 20 state attorneys general.

King previously deflected a question about whether his department was looking to put ITT out of business, again saying that the move was made with students and taxpayers in mind.

ITT offered on-campus and online classes in business, nursing and health sciences, electronics and information technology. It operated 137 campuses across 39 states. ITT last year generated $850 million in revenue, about $580 million of which came from federal student loans.

The U.S. Department of Education previously stated that students who attend ITT on federal aid can get their loans discharged if ITT closes. Even past students, who have graduated or dropped out, can file claims to get their federal loans forgiven. But veterans have no recourse.

The Post-9/11 GI Bill gives veterans 36 months of college tuition, plus expenses, to attend the school of their choice. It makes no accommodation for students who are enrolled in a school that closes.

In the statement released Tuesday, ITT officials called the government's action "inappropriate and unconstitutional," stating that its closure, it will fall to other parties to take action to attempt to prevent something like this from happening again.

"We have always carefully managed expenses to align with our enrollments. We had no intention prior to the receipt of the most recent sanctions of closing down despite the challenging regulatory environment that now threatens all proprietary higher education," said the statement. "Despite our ongoing service to this nation's employers, local communities and underserved students, these federal actions will result in the closure of the ITT Technical Institutes without any opportunity to pursue our right to due process."

ITT's enrollment was declining prior to the federal restrictions. In the three-month period ending June 30, ITT enrolled 9,846 new students, an 18.3 percent decline from a year earlier. ITT in July said it expected new student enrollment to fall 45 to 60 percent in the second half of the year.

©2016 The Indianapolis Star, distributed by Tribune Content Agency, LLC. 

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