More than 300 Kentucky students pressured by deceptive lending practices
FRANKFORT, Ky. (June 14, 2019) — Attorney General Andy Beshear announced today his Office of Consumer Protection has secured $2.2 million in student loan debt relief for 325 former Kentucky students of the failed for-profit college ITT Tech.
Beshear’s office and 10 other attorneys general led a 43-state coalition to reach a settlement with Student CU Connect CUSO, LLC (CUSO), which offered deceptive loans to finance students’ tuition at ITT Tech locations in Louisville and Lexington in Kentucky and across the country.
Nationally, the settlement will result in debt relief of more than $168 million for more than 18,000 former ITT students.
“The 325 Kentucky ITT students who fell into debt trying to obtain an education at the failed for-profit college can now breathe a sigh of relief,” Beshear said. “Thanks to our efforts, the high-interest loans that these students were pressured into taking out do not have to be repaid.”
Beshear said impacted students do not need to take any action. They will receive notice and loans will be automatically discharged within 30 days of the final agreement. This settlement does not affect students’ federal loans.
ITT filed bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT’s access to federal student aid.
The investigation by the attorneys general, which began in 2014, uncovered that ITT, with CUSO’s knowledge, offered students temporary credit to cover the gap in tuition and federal student aid.
When the credit payment came due at the end of the each semester, ITT pressured and coerced students into accepting loans from CUSO, which for many students carried interest rates far above those of 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.
Between 2009 and 2011, the CUSO loan program originated approximately $189 million in student loans to ITT students. Due to 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, CUSO’s loan default rate is expected to exceed 90%.
Under threat of litigation, CUSO settled and agreed to forego collection of the outstanding loans and their loan servicer will send notices to borrowers about the cancelled debt and ensure that automatic payments are cancelled. CUSO is also required to cease doing business and supply credit reporting agencies information to update credit information for affected borrowers.
Beshear said the settlement is much needed relief for the students who could not afford to repay their CUSO loans and had their credit ratings negatively impacted.
A related settlement between CUSO and the U.S. Bankruptcy Trustee was approved on June 14. The attorneys general settlement is also contingent on federal court approval of a related settlement between the CUSO and the federal Consumer Financial Protection Bureau, which was filed Friday.
Since taking office, Beshear and his team have worked to protect students from predatory for-profit colleges and lenders.
To date, nearly 8,000 Kentucky students have received more than $8 million in student loan debt relief or restitution from for-profit colleges Beshear has held accountable.
This year alone, Beshear announced that for-profit education company Career Education Corporation agreed to reform its recruiting and enrollment practices and forgo collecting more than $2.3 million in debts owed by more than 1,300 Kentucky students.
Beshear also reached a $1.7 million settlement with Sullivan University in January obtaining debt relief for nearly 700 former Spencerian College students.
Beshear’s office is currently investigating the Pennsylvania Higher Education Assistance Authority (PHEAA) one of the largest loan servicers in the country. Beshear’s office won a decision from the Franklin Circuit Court in July 2018 overruling a petition by PHEAA to halt the investigation.
Students who have questions about the CUSO settlement or believe a private college or loan servicer has treated them unfairly can contact Beshear’s office at 502-696-5300, or by completing an online complaint form.