1,008 Arizona Students Will Receive $7.8 million in Student Loan Debt Relief
PHOENIX — Attorney General Mark Brnovich has secured an agreement to obtain $7.8 million in debt relief for more than 1,000 former ITT Tech students in Arizona as part of a settlement with 48 attorneys general and the federal Consumer Financial Protection Bureau.
Nationally, this settlement will result in debt relief of about $330 million for 35,000 borrowers who have outstanding principal balances.
The settlement, pending court approval, is with PEAKS Trust, a private loan program run by the for-profit college and affiliated with Deutsche Bank entities. ITT operated at least four campuses in Arizona. In 2016, amid investigations by Arizona and other attorneys general, as well as U.S. Department of Education action to restrict ITT’s access to federal student aid, ITT filed bankruptcy.
“The predatory tactics ITT used to manipulate students are unacceptable. This settlement provides much needed relief to those victimized by the college and lending entity,” said Attorney General Mark Brnovich. “I will continue to fight to ensure colleges improve access and affordability to higher education in Arizona.”
PEAKS formed after the 2008 financial crisis when private sources of lending available to for-profit colleges dried up. ITT developed a plan with PEAKS to offer students temporary credit to cover the gap in tuition between federal student aid and the full cost of the education.
The Assurance of Discontinuance filed today (Tuesday) alleges:
- 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 they thought the temporary credit was like a federal loan and would not be due until six months after they graduated.
- When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which for many students carried high interest rates, far above rates for 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.
- Many of the ITT students were from low-income backgrounds and were left with the choice of enrolling in the PEAKS loans or dropping out and losing any benefit of the credits they had earned because ITT’s credits would not transfer to most schools.
- The default rate on the PEAKS loans is projected to exceed 80 percent, 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.
Under the settlement, PEAKS has agreed that it will forgo collection of the outstanding loans (over 1,000 in Arizona) and cease doing business. PEAKS will send notices to affected borrowers about the cancelled debt and ensure that automatic payments are cancelled. The settlement also requires PEAKS to supply credit reporting agencies with information to update credit information for affected borrowers.
Students will not need to take additional action to receive the debt relief. The notices, which will be sent directly to those affected, will explain their rights under the settlement. Students may direct questions to PEAKS at email@example.com or (866) 747-0273, or the Consumer Financial Protection Bureau at (855) 411-2372.
In June 2019, Attorney General Brnovich was part of a $168 million settlement that resulted in debt relief for 412 former ITT students in Arizona. That agreement was with Student CU Connect CUSO, LLC, which also offered loans to finance students’ tuition at ITT Tech. Also in 2019, General Brnovich helped secure more than $22 million in debt relief for over 6,000 former Arizona students of Career Education Corp and its related entities.
In Arizona, this matter was handled by Senior Litigation Counsel Rebecca Salisbury.
In addition to Arizona, the settlement was signed by the attorneys general of Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
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.
A copy of Assurance of Discontinuance.