Approximately 1,000 former ITT Tech students in South Carolina will receive a share of a national $330 million debt relief settlement with a private loan program.
South Carolina obtained $8.6 million in the settlement involving 48 attorneys general and the Consumer Financial Protection Bureau, according to a news release from S.C. Attorney General Alan Wilson’s office. The settlement with Deutsche Bank entities-affiliated PEAKS Trust run by the defunct for-profit college, which filed bankruptcy in 2016, will apply to a total of 35,000 borrowers with outstanding principal balances.
“These students were going to school so they could get better jobs but instead they were taken advantage of and left with debt and no jobs to pay it off,” Wilson said in the release. “But it wasn’t just normal debt; these companies used unfair pressure tactics to trap students in a no-win situation.”
Under settlement terms, PEAKS will forgo collection of outstanding loans and cease doing business. PEAKS will send notices to borrowers about the canceled debt, ensure that automatic payments are canceled and supply credit agencies with updated information.
PEAKS was formed in the wake of the 2008 financial crisis when private sources of lending available to for-profit colleges dried up, the release said. ITT developed a temporary credit plan with PEAKS to help cover gaps between federal student aid and tuition costs.
According to Tuesday’s settlement, ITT and PEAKS “knew or should have known that the students would not be able to repay the temporary credit when it became due nine months later. Many students complained that they thought the temporary credit was like a federal loan and would not be due until six months after they graduated.”
When payment became due, according to the settlement, ITT pressured students into accepting loans from PEAKS, some of which carried interest rates far above those of federal loans.
“Pressure tactics used by ITT included pulling students out of class and threatening to expel them if they did not accept the loan terms,” according to the release.
The default rate on the PEAKS loans is projected to exceed 80%, based on both their cost and the lack of success of ITT graduates in securing lucrative jobs, the release said.
Students need to take no action to receive the debt relief. The notices will explain their rights under the settlement.
More information is available from PEAKS at [email protected] or 866-747-0273 or the Consumer Financial Protection Bureau at 855-411-2372.
In June 2019, Wilson was part of a $168 million settlement with Student CU Connect CUSO LLC that resulted in debt relief for 18,664 former ITT students.