PHOENIX - Attorney General Mark Brnovich announced his office secured an agreement to obtain $3,980,230.28 in debt relief for 412 former ITT Tech students in Arizona as part of a multistate settlement with 43 other states. Nationally, the settlement will result in debt relief of more than $168 million for more than 18,000 former ITT students. The settlement is with Student CU Connect CUSO, LLC (“CUSO”), which offered loans to finance students’ tuition at ITT Tech, the failed for-profit college. ITT filed bankruptcy in 2016 amid the multistate investigation and following action by the United States Department of Education to restrict ITT’s access to federal student aid. The CUSO loan program originated approximately $189 million in student loans to ITT students between 2009 and 2011.
A related settlement between CUSO and the United States Bankruptcy Trustee was approved on June 14th. The multistate settlement is contingent on federal court approval of a related settlement between CUSO and the federal Consumer Financial Protection Bureau which is being announced today.
“This settlement holds CUSO accountable for its participation with ITT in subjecting ITT students to abusive lending practices,” said Attorney General Mark Brnovich. “It provides relief to hundreds of Arizona students who attended ITT Tech and incurred debts as a result of questionable student loans that they could not repay nor discharge.”
Arizona, along with the other states, alleged that ITT, with CUSO’s knowledge, offered students Temporary Credit (“TC”) upon enrollment to cover the gap in tuition between federal student aid and the full cost of the education. The TC was due to be repaid before the student’s next academic year, although ITT and CUSO allegedly knew or should have known that most students would not be able to repay the TC when it became due. Many students complained that they thought the TC was like a federal loan and would not be due until after they graduated. When the TC became due, however, ITT allegedly pressured and coerced students into accepting loans from CUSO, which for many students carried high interest rates, far above rates for federal loans. Pressure tactics used by ITT allegedly included pulling students out of class and threatening to expel them if they did not accept the loan terms.
The states alleged that because students were left with the choice of dropping out and losing any benefit of the credits they had earned – ITT’s credits would not transfer to most other schools – most students enrolled in the CUSO loans. Neither ITT nor CUSO allegedly made students aware of what the true cost of repayment for the TC would be until after the credit was converted to a loan. Not surprisingly, the default rate on the CUSO loans was extremely high (projected to exceed 90%) due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible. The defaulted loans continue to affect students’ credit ratings and are usually not dischargeable in bankruptcy.
As a result of a bipartisan coalition of state attorneys general, CUSO has agreed that it will forego collection of the outstanding loans. CUSO, which was organized for the sole purpose of providing the ITT loans, also will cease doing business. Under the settlement’s Redress Plan, CUSO’s loan servicer will send notices to borrowers about the cancelled debt and ensure that automatic payments are cancelled. The settlement also requires CUSO to supply Credit Reporting Agencies with information to update credit information for affected borrowers.
Students with questions about their rights under the settlement will receive information in the notices that are sent. The settlement by CUSO does not mean that any other loans held by other parties have been or will be forgiven. Affected students in Arizona may also contact Stephanie Paine at Stephanie.Paine@azag.gov or 602-542-7736 for more information.
Full copy of settlement agreement.
For Arizona, the matter was handled by Senior Litigation Counsel Shane Foster.
Earlier this year, Attorney General Brnovich announced that his office helped secure more than $22 million in debt relief for over 6,000 former Arizona students of Career Education Corp. and its related entities.
If you believe you have been a victim of consumer fraud, please contact the Arizona Attorney General’s Office in Phoenix at (602) 542-5763, in Tucson at (520) 628-6648, or outside the metro areas at 1(800) 352-8431. Bilingual consumer protection staff is available to assist. Consumers can also file complaints online.