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Following the Securities and Exchange Commission’s decision earlier this week to file fraud charges against current and former executives with ITT Education Services – the operator of for-profit college chain ITT Technical Institute – for their part in concealing problems with company-run student loan programs, one legislator is calling on the Department of Education to further investigate the company.
Today, California Rep. Jackie Speier sent a letter [PDF] to the Dept. of Education demanding an investigation into alleged deceptive and predatory lending practices by ITT Education Services.
With more than 140 institution in 39 states and numerous online operations, ITT Education Services has become one of the largest operators of for-profit colleges in the U.S. But the company, which has previously been party to federal and state investigations, has continuously harmed students with large debt bills, while failing to provide the needed education and skills to repay their hefty student loans.
In fact, Speier says the schools have been plagued with large cohort default rates nearly twice the national average. During the 2009 to 2010 school year, ITT had a higher CDR than their graduation rate.
Even more troublesome for Speier are the company’s recent fraud charges levied by the SEC.
On Tuesday, the SEC filed fraud charges against former CEO Kevin Modany and current CFO Daniel Fitzpatrick stem from their alleged fraudulent concealment of the poor performance and looming negative financial impact of two student loan programs the company financially guaranteed to investors.
The loan programs – called PEAKS and CUSO – provided loans for ITT’s students after the collapse of the student loan markets. ITT guaranteed that the loans carried little risk of loss from the student loan pool to entice financial institutions to finance the loans.
According to the SEC complaint [PDF], the loans performed so poorly by 2012 that the company’s guarantee obligations were triggered. However, instead of disclosing the issue to investors, ITT and its management took a variety of actions to create the appearance that ITT’s exposure was more limited.
“If these allegations are accurate, ITT has engaged in deceptive and predatory lending practices, pushing students into high-interest loans they know cannot be repaid, at costly taxpayer expense,” Speier wrote in the letter. “These students become saddled with unforgivable debt, and their inability to repay it ruins their future job prospects while harming taxpayers who are stuck with the bill.”
Speier urged the Dept. to quickly move to investigate the college and not delay increased oversight, a move she says occurred with now defunct Corinthian Colleges, Inc. – the operator of for-profit schools Heald College, Everest University and WyoTech.
“In fact, Corinthian Colleges, Inc. was investigated by the SEC in June 2013 – a full year before the ED opened their own June 2014 investigation…” The letter states. “This delay harmed student who continued to take on a worthless education, and taxpayers who footed the bill. I ask that in this case you take action quickly and responsibly.”
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