ITT Technical Institute is ceasing operations at its more than 130 campuses nationwide after the Department of Education cut off access to federal financial aid for new students.
The immediate closures by for-profit ITT Educational Services will end the fall quarter before it starts for 40,000 students, and will leave more than 8,000 employees without a job, the Carmel, Ind.-based company said Tuesday.
It also raises questions about everything from outstanding student loans to finding a new school. Secretary of Education John King Jr. addressed those issues in a blog post Tuesday.
“If you are currently or were recently enrolled at ITT, you may be eligible to have your federal student loans for your program at ITT discharged,” King said. “Your federal loan debt will be wiped away and you will have the option of restarting your education somewhere new.”
King said ITT students interested in continuing their educations may be able to transfer their credits to another school. But he said doing so may limit their ability to have their outstanding federal loans discharged.
There are four ITT Tech campuses in Illinois: Arlington Heights, Oak Brook, Orland Park and Springfield.
One semester short of graduating with a degree in graphic arts, Robert Marques was outside the closed Orland Park ITT Tech campus Tuesday looking for information, and in the dark about his academic future.
“I don’t know yet what’s going to happen” said Marques, of Joliet, a former Marine who was attending ITT Tech on the GI Bill.
The recently renovated ITT Tech campus in Arlington Heights also was shuttered Tuesday. Jennifer Bakrins, an Arlington Heights therapist whose office is in the same building, said she was sympathetic to the school’s students.
“The school just went through a big undertaking, remodeling the building,” Bakrins said. “They even made a student lounge with a college atmosphere. A traditional college isn’t for everyone, and this place offered vocational training, so it’s a real shame.”
Last month, the Department of Education banned ITT Educational Services from enrolling new students using federal financial aid funds after it was determined the company was “not in compliance” with accreditation criteria. It also announced stepped-up financial oversight of ITT, building on measures put in place in 2014 due to “significant concerns” about the school’s organization and “financial viability.”
In a statement Tuesday, ITT said the federal sanctions were made “with a complete disregard by the U.S. Department of Education for due process,” forcing the decision to close its doors after 50 years.
“We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a nonprofit or public institution.” the company said.
Citing increased financial risk, the Department of Education told ITT on Aug. 25 the company needed to increase its $94 million surety requirement to more than $247 million, which represented 40 percent of the federal financial aid received by its schools last year.
The increased surety was protection in the event that ITT would “close or terminate classes” before the end of an academic period, the Education Department said.
ITT had 10 days to make a $153 million payment, but chose instead to shut down operations.
“We had no intention prior to the receipt of the most recent sanctions of closing down despite the challenging regulatory environment that now threatens all proprietary higher education,” ITT said Tuesday.
Launched in 1966 with ITT’s acquisition of Educational Services and its three technical schools, the company ramped up offerings and locations, and went public in 1994. In recent years, ITT Tech offered degrees in six areas of study: information technology, electronics technology, drafting and design, business, criminal justice and nursing.
The schools had about 4,100 full-time and 4,300 part-time instructors at the end of 2015, according to financial filings. ITT Educational Services generated net income of $23.3 million on nearly $850 million in revenue last year.
While there are several open federal and state investigations into ITT campuses, the Department of Education actions were based on operational and financial risk, not on a finding that the schools defrauded students. If those investigations do show evidence of fraud, ITT students may be eligible for relief, according to a recent blog post by Ted Mitchell, undersecretary of education.
In its most recent annual report, ITT said 73 percent of its employable graduates in 2014 found work by April 2015 in positions that required the “direct or indirect use of skills” taught in their education programs.
Whether the closure will affect the value of that degree, or the employment opportunities of its graduates, remains an open question. Mitchell offered ITT alumni some reassurances in his blog post.
“You completed your degree at an operational and accredited institution,” Mitchell said. “Nobody can take away your credentials or the skills you gained.”
The for-profit college industry has been facing increased scrutiny in recent years. Sued by regulators for alleged deceptive practices, California-based Corinthian Colleges sold or closed most of its 107 campuses and liquidated its assets through Chapter 11 bankruptcy last year.
The Department of Education has agreed to forgive $171 million in student debt held by former Corinthian students as of June.
Daily Southtown’s Mike Nolan and Pioneer Press’ Karen Ann Cullotta contributed.
rchannick@chicagotribune.com
Twitter @RobertChannick
