Should the government forgive debt students racked up at ITT Tech?

Facing accusations of fraud and various lawsuits, ITT Technical Institutes closed its doors last week. What happens for students who have nothing to show but debt?

First Look

Former students at the now-shuttered for-profit college chain ITT Technical Institutes are staging a protest by refusing to repay their student loans to the government, hoping to persuade federal authorities to to cancel the debt of those who allegedly suffered fraud at the hands of the school’s predatory system.

Some 100 protesters have initiated a “debt strike” after the federal government banned the institution from enrolling students who would pay with the help of federal financial aid, leading ITT Tech to close its doors for good, The Washington Post reports. The Department of Education suggested that ITT's roughly 40,000 former students consider transferring their credits to another school or seeking loan forgiveness.

But many other institutions don't accept credits from the school, and students who seek student loan relief after experiencing fraud often struggle to successfully make a case for themselves. 

“We’re not irresponsible brats whining about our loans,” Joseph Smith, a 2008 graduate of ITT Tech who left the institution with more than $80,000 in student loans, told the Post. “ITT lied to us. It’s fraud.”

Authorities say ITT Tech provided students with false information regarding the success of its programs and used predatory recruiting tactics to convince students to enroll in classes. Now, those who shelled out tens of thousands of dollars through high-interest federal loans or used funds from the GI Bill to pay tuition want the wrongs made right.  

Former students at ITT Tech aren’t the first to face the dicey situation. As of June, 26,000 students had filed for loan forgiveness from the Department of Education, according to the Washington Post. Some 14 percent of them had received some approval, and all of them came from former students at Corinthian Colleges, another for-profit education giant that shut down. In that case, the US Department of Education said student loans would be forgiven. 

But forgiving the federal loans of students scammed into a pricey, inadequate education may mean saddling someone else with the burden: taxpayers. Sixty-eight percent of the $850 million ITT Tech raked in last year came from federal funding, and forgiving the students affected could have significant, adverse effects on taxpayers, opponents of the bailout argue.

But the high number of those struggling to manage student debt without the kind of paycheck they were expecting from a college education may be too big to ignore.

“People are defaulting at a rate of two per minute, 24 hours a day, seven days a week,” Barmak Nassirian, the director of federal relations and policy analysis at the American Association of State Colleges and Universities, told The New York Times last month. “The vast majority are victims, not deadbeats.”

Following the Corinthian students' movement for loan forgiveness, President Obama’s administration decided to create a new standard to judge whether or not applicants qualify for debt relief, but those guidelines haven't been set up yet. Organizers in the ITT Tech movement are protesting such a process, arguing that the government has both the authority and the funds — thanks to interest its received from other student loan payments — to wipe out their debt without burdening the taxpayers.

“If you are going to do a claims-based process, you’re not going to provide relief to all students,” Luke Herrine, an organizer working with the debt strikers, told the Post. “The department is using that process as a way of preventing relief.”