Government tightens payments to for-profit college ITT Tech
Oct. 20, 2015
WASHINGTON (AP) — Education officials are placing new limits on federal student aid administered by struggling for-profit college chain ITT Educational Services.
The move comes after the government found ITT was failing to comply with previous orders to improve its financial controls.
ITT has not produced proper and timely accounting for the federal grants and loans it distributes to students since at least 2009, the Department of Education says in a letter sent to ITT on Monday. As a result, the letter says, ITT will now be allowed to pay out federal education funds to students only after they have attended classes and been certified as eligible by a school representative.
Along with delaying ITT's receipt of federal funds, the Education Department will also require the company to provide it with additional student information and news about any restrictions placed on it by lenders. In a statement accompanying the letter, Education Undersecretary Ted Mitchell said that the government would take additional actions against ITT if it believed doing so would keep students safe.
ITT — which operates vocational colleges attended by 50,000 students in 27 states — already faces legal challenges from both the Securities and Exchange Commission and the Consumer Financial Protection Bureau. The SEC alleges that the company and its top executives committed fraud by hiding losses in an ITT student loan program, while the CFPB accused it of pushing students into high-cost, predatory loans.
The Education Department had previously imposed a form of additional financial scrutiny on ITT known as heightened cash flow monitoring, and required ITT to provide a letter of credit for $79.7 million, roughly 10 percent of the student aid it processes every year.
ITT did not immediately respond to phone and email messages left at its corporate headquarters Monday evening.