NEW YORK — One of the nation’s largest for-profit educational companies closed all its campuses Tuesday, putting an end to an operation that has been accused of widespread fraud and abuse.
The move leaves thousands of students and employees in the lurch as a new school year begins.
The company, ITT Educational Services, has been under pressure ever since the federal Department of Education imposed strict new rules that bar it from enrolling new students who use federal financial aid.
In a news release, the company criticized that decision, calling it “inappropriate and unconstitutional” and “taken without proving a single allegation.”
Ted Mitchell, undersecretary for the Department of Education, dismissed assertions that ITT was the target of a political agenda, saying that the issues surrounding its educational quality and financial stability were longstanding and fundamental.
“Over time, the risk was just too high,” for both students and taxpayers, Mitchell said.
ITT, which also faced the loss of its accreditation, said Tuesday that it had no choice but to cease operations after 50 years in business. It said it had “exhausted the exploration of alternatives, including transfer of the schools to a nonprofit or public institution.”
Last week, the owner of a chain of colleges, the Center for Excellence in Higher Education, filed an unusual lawsuit in federal court, saying the department was trying to put the colleges out of business by failing to classify them as nonprofit educational institutions.
ITT’s roughly 35,000 current students and those who withdrew in the last 120 days essentially have two options, Mitchell said.
They can try to transfer their credits to another school to try to finish their education. But some schools may not be willing to accept those credits, although Mitchell said education officials were contacting community colleges to reach out to former ITT students.
“That’s why we’re working so hard with community colleges to encourage them to be flexible with credits for transfer,” he said.
The other alternative would be for students to apply for a loan discharge, which would in effect wipe out their federal student debt. If everyone at ITT who was eligible took that route, the cost could run as high as $500 million, Mitchell said.
Because the government previously demanded that ITT post a surety for a portion of the money, the company would end up defraying about $90 million of that cost, he added.
Any students who believe they have been defrauded can also apply under a separate borrower defense program to have their loan forgiven.
The department has set up a website — studentaid.gov/ITT — and telephone number — 1-800-433-3243 — for ITT students to obtain more information.
As for the failure of ITT to find a buyer, Mitchell said that despite informal conversations with ITT officials and potential purchasers, the department “never saw a path forward.”
Student and consumer advocates were encouraged by the end of an institution that they said lured customers with false promises of training and jobs and then burdened them with unmanageable debt.
Still, they expressed concern that similar for-profit colleges would be working hard to persuade ITT students to enroll — which could result in continued harm for students who they say were victims of poor quality and predatory institutions.
“It’s a good thing in the sense that it was a real terrible performer, and it won’t be around to victimize others,” Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, said of the closings.
“ITT had some decent faculty, and employees who worked hard, but the operation was run very much for the purpose of making easy money,” he said. “Consequently, they ruined a lot of lives.”