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July 28, 2016 Comments (0) Attention

For-Profit ITT Under Pressure from Obama Administration

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(Photo: Susan Goldman, Bloomberg News)

(Photo: Susan Goldman, Bloomberg News)

The US Department of Education has sent a letter to ITT Educational Services requesting that the for-profit chain put some funding aside in order to cover any losses should the company collapse because of ongoing federal and state investigations.

The company, that has 43,000 students nationwide, is currently under investigation by 19 state attorneys general and a minimum of two federal agencies concerning allegations?that ITT is involved with unprofessional marketing and recruitment practices. ?The company could face losing use of federal funding because of the investigations. ?A decision on the matter can come later in the summertime when it appears before its accrediting agency.

The Education Department said the company needs to put aside at least $123.7 million within an escrow account that currently holds $79.7 million. ?The “letter of credit,” expected to equal 20% from the federal funds collected by the school last year, will be accustomed to cover expenses?\”should the institution precipitously close or terminate classes at other than the end of an academic period.\”

The department considers these expenses to include tuition reimbursement for students, any expenses associated with allowing students to transfer with other schools, and “institutional obligations” to the federal government, reports Josh Mitchell for The Wall Street Journal.

ITT has been hit with a number of lawsuits and investigations. ?Most recently, Massachusetts?Attorney General Maura Healey filed a lawsuit claiming ITT pressured students to enroll in a poor-quality program. ?Based on former recruiters, these were expected to call a minimum of 100 prospective students every day and were publicly shamed or fired when they did not.

In addition, employees have been accused of telling prospective students at two campuses in Massachusetts that 80-100% of ITT graduates found jobs either in or associated with their field of study. ?However, the actual job placement rate was discovered to be closer to 50%, including graduates who held internships, writes?Danielle Douglas-Gabriel for?The Washington Post.

Nicole Elam, an ITT spokeswoman, said the organization has done nothing wrong and is currently reviewing the request being produced by the department. ?She continued to say that?the Accrediting Council for Independent Colleges and Schools has been criticized by the government and student-activist groups who reason that not enough was done to prevent abuses by the former Corinthian Colleges, Inc.

\”Under extreme political pressure, the Accrediting Council for Independent Colleges and Schools took an unexpected action with ITT Educational Services Inc. by sending a show-cause letter to request our institution address various unsupported allegations,\” Ms. Elam said. \”We still cooperate with all regulatory authorities as new mandates are levied upon us.\”

Corinthian shut its doors last year, liquidating its assets because of a bankruptcy filed after accusations surfaced from federal and state authorities the school had released advertisements lying concerning the jobs and earnings of their graduates. ?Corinthian maintains it did nothing wrong.

The fifth-largest for-profit chain by revenue, ITT reports over 130 campuses in operation in 38 states. ?The majority of its revenue comes through federal loans and grants used by its students to cover tuition.

ITT must maintain accreditation to be able to continue to receive federal education loan funding, which makes up about 80% of ITT’s revenue. ?The company said that should they lose access to that funding they will not be able to continue to operate.

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