Former ITT Tech students in Massachusetts and New Hampshire will receive debt relief as part of a $168 million settlement between a coalition of 43 states and Student CU Connect CUSO, a private lender, officials announced Friday.
Nearly 200 students in Massachusetts will have $1.6 million of debt canceled, Attorney Genral Maura Healey said in a statement. Ten students in New Hampshire will have $117,020.36 of debt cancelled, the New Hampshire attorney general’s office said in a separate statement.
ITT Tech, a for-profit college, filed for bankruptcy and closed in 2016, stranding thousands of students across the country. CUSO was formed to provide loans to ITT students. From 2009-2011, the organization made $189 million in loans, officials said.
As part of the settlement, CUSO is also required to stop collecting outstanding loans and issue no new loans, Healey said.
They are also required to send notices to borrowers about the canceled debt, ensure all automatic payments are canceled, and provide information to credit reporting agencies to update credit information for students, Healey said.
“ITT Tech pressured vulnerable students to enroll in low quality programs and take on unaffordable debt.” Healey said. “Today’s settlement will ensure that students who took these high-interest loans get the relief they deserve.”
ITT Tech, with CUSO’s knowledge, allegedly offered students temporary credit to cover the gap between financial aid and the full price of the education, Healey said.
Students were required to repay the credit during their next academic year, but most were unable to pay it that quickly, she said. ITT Tech then allegedly threatened to expel students if they did not refinance their debt with a high-interest CUSO loan.
Because ITT credits would not transfer to most other schools, the students “had little choice but to sign up for CUSO financial products,” Healey said.
“Students could not afford these high-cost CUSO loans, and the default rates were extremely high,” the statement said. “The loans, usually not dischargeable in bankruptcy, devastated student credit ratings after the students were, predictably, not able to make their monthly payments.”