INDIANAPOLIS — They said they were defrauded, and now they want a seat at the table.
Last week, a group of former ITT Tech students moved to establish themselves as creditors in the school's bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of Indiana.
On Jan. 3, five former students filed a 109-page complaint, seeking to act as representatives for hundreds of thousands who say they have been defrauded by the Carmel, Ind.-based school. Their goal is to have the debt they owe the school canceled. A Newark class action lawyer is following this story closely.
ITT filed for bankruptcy last year after the Education Department cut off the company’s access to federal student aid.
By the time it declared bankruptcy in September, ITT Tech had been subject to lawsuits from the Consumer Financial Protection Bureau, the Securities and Exchange Commission and the Massachusetts and New Mexico attorneys general.
ITT Tech students unsure about next step after closure Government agencies scrutinized the company over alleged failure to disclose bad loans to investors, inflated job placement numbers and aggressive recruiting tactics.
The students' complaint seeks to establish that ITT defrauded students who attended the school during the last 10 years.
The Legal Services Center of Harvard Law School is representing the students. Eileen Connor, director of litigation for the center's Project on Predatory Student Lending, is the lead attorney representing the students. She was unavailable for comment. A Los Angeles bankruptcy attorney is reviewing the details of this case.
Along with legal documents, the students filed more than a thousand pages of first-hand accounts from 541 fellow students who attended ITT, affidavits from several whistleblowers and evidence developed from state and federal law enforcement investigations.
Hundreds of unidentified Indiana students gave testimony about how the loans they racked up while attending the school ruined their credit scores, left them destitute and caused them mental health issues.
One student who was enrolled in the criminal justice program at the Carmel campus from September 2010 to January 2012 said, “I’ve been in financial hardship since then. I do not earn much in my current job. I work as a grocery stocker, and most of my check goes to paying off my loan. I had my hours cut about a year ago, and this led me to default on my loan, which has affected me greatly because I am not eligible for credit anywhere. My credit score is horrible because of this school. I cannot afford anything. I can barely make ends meet.”
Testimonials have come from throughout the U.S. One student who was enrolled in ITT's Network System Administration program at a Washington campus stated, "I joined the Army to pay for school, and ITT Tech mislead my dreams of higher education. Now I'm $10,000 in debt and have nothing to show for it. I'm constantly being harassed by collection agencies and it's making me depressed."
Students who have their pay garnished to satisfy loans are often struggling to support themselves with low-wage or minimum-wage jobs that are a far cry from the high-salary positions promised by ITT recruiters, according to the complaint.
ITT Tech was one of the country’s largest for-profit college chains. Over the last decade, it took in more than $11 billion in revenue, 98% of which came in the form of tuition, according to the Legal Services Center of Harvard Law School. The center said 76% of the tuition was paid through federal student aid.
Originally part of the conglomerate ITT, the school spun off as its own publicly traded entity in 1999.
At the time of bankruptcy, the company operated 137 campuses in 39 states, providing career-oriented programs to 43,000 students under the names ITT Technical Institute and Daniel Webster College.
ITT's closure displaced more than 35,000 students and more than 8,000 employees.
ITT reported assets of $389 million and liabilities of $1.1 billion to the bankruptcy court. The company’s assets include almost $80 million owed by ITT students who were enrolled at the time of the bankruptcy filing.
The students request a court order certifying the case as a class action, an injunction ordering ITT from collecting on all private student loans administered by ITT, actual and compensatory damages against ITT in an amount to be determined and an order awarding disbursements, costs and attorney's fees.
Deborah J. Caruso, the Chapter 7 trustee appointed by the U.S. Bankruptcy Court to oversee the liquidation, responded to the students' lawsuit in an email.
“Since the filing of these Chapter 7 cases in September, we have been working with state regulators, the SEC, the Consumer Financial Protection Bureau, and the Department of Education to better understand and address the causes of ITT’s collapse and develop a path forward,” Caruso said.