40,000 Students In Limbo, 8,000 Employees Fired As ITT Suddenly Shuts Down

The long-running tragic saga of ITT Education Services, which was established nearly 50 ago and operates the ITT Technical Institutes for-profit college chain, finally came to a end this morning with both a bang and a whimper, when it announced that it is shutting down effective immediately, leaving the fate of 40,000 students currently enrolled in limbo, and some 8,000 workers without a job.

The company said the closure is due to an investigation and sanctions by the U.S. Department of Education.

"It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service," the company stated Tuesday. "Effective today, the company has eliminated the positions of the overwhelming majority of our more than 8,000 employees."

As previously reported,  ITT Tech stopped enrolling new students on August 29, just a few days after it was cut off from a significant amount of federal funding by the government. ITT's collapse was catalyzed when the Department of Education effectively killed the company two weeks ago, when it told the company on August 25 that it couldn’t enroll new students who use federal financial aid. The school accused federal officials of forcing the closure and denying it due process. The company has been the subject of state and federal probes for various reasons, including its recruitment tactics, lending practices and job placement figures. 

Among the measures imposed, ITT was been ordered to pay $152 million to the department within 30 days to cover student refunds and other liabilities in case the company closes. The chain, based in Indiana, is still paying another $44 million demanded by the department in June for the same reason.

In order to have access to federal student loans, schools need to be accredited by a government-recognized accrediting agency. ITT Educational Services was found to be out of compliance with its accreditor’s standards twice this year, according to the Department of Education. Needless to say, for-profit schools tend to rely heavily on federal student aid. 

The Accrediting Council for Independent Colleges and Schools recently asked the company for proof of why its accreditation should not be withdrawn or suspended.

ITT's death, while sudden, should not come as a surprise: enrollment has been slipping for a while. In July, the company reported its new student enrollment dropped almost 22% from the same period the year before. 

Meanwhile, the roughly 40,000 students currently enrolled now find themselves in limbo: when a school closes its doors, it can leave its students stuck without a degree and massive student loans. ITT"s collapse is reminiscent of Corinthian Colleges, which filed for Chapter 11 bankruptcy protection in May of 2015 in the wake of alleged predatory lending practices and accusations of inflated job placement numbers, leaving about 16,000 students stuck without a degree, and thousands more with huge debts. Some students were eventually able to receive debt relief.

Cited by PIX11, the Department of Education has said that ITT Educational Services’ students could be eligible for a closed school loan discharge, however that process may take years to complete, meanwhile the prospect of earning a college diploma, even if from a novelty school, has evaporated.  

Enrollment in for-profit schools increased in the years following the recession when job growth was weak and people were looking to hone their skills or switch to more in-demand careers.

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The full statement released by ITT is below:

ITT Educational Services, Inc. to Cease Operations at all ITT Technical Institutes Following Federal Actions

"It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service. With what we believe is a complete disregard by the U.S. Department of Education for due process to the company, hundreds of thousands of current students and alumni and more than 8,000 employees will be negatively affected.

The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter. We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution.

Effective today, the company has eliminated the positions of the overwhelming majority of our more than 8,000 employees. Our focus and priority with our remaining staff is on helping the tens of thousands of unexpectedly displaced students with their records and future educational options. 

This action of our federal regulator to increase our surety requirement to 40 percent of our Title IV federal funding and place our schools under "Heightened Cash Monitoring Level 2," forced us to conclude that we can no longer continue to operate our ITT Tech campuses and provide our students with the quality education they expect and deserve.  

For more than half a century, ITT Tech has helped hundreds of thousands of non-traditional and underserved students improve their lives through career-focused technical education. Thousands of employers have relied on our institutions for skilled workers in high-demand fields. We have been a mainstay in more than 130 communities that we served nationwide, as well as an engine of economic activity and a positive innovator in the higher-education sector.

This federal action will also disrupt the lives of thousands of hardworking ITT Tech employees and their families. More than 8,000 ITT Tech employees are now without a job – employees who exhibited the utmost dedication in serving our students.  

We have always carefully managed expenses to align with our enrollments. 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. We have also always worked tirelessly to ensure compliance with all applicable laws and regulations, and to uphold our ethic of continuous improvement. When we have received inquiries from regulators, we have always been responsive and cooperative. Despite our ongoing service to this nation's employers, local communities and underserved students, these federal actions will result in the closure of the ITT Technical Institutes without any opportunity to pursue our right to due process. 

These unwarranted actions, taken without proving a single allegation, are a "lawless execution," as noted by a recent editorial in The Wall Street Journal. We were not provided with a hearing or an appeal. Alternatives that we strongly believe would have better served students, employees, and taxpayers were rejected. The damage done to our students and employees, as well as to our shareholders and the American taxpayers, is irrevocable. 

We believe the government's action was inappropriate and unconstitutional, however, with the ITT Technical Institutes ceasing operations, it will now likely rest on other parties to understand these reprehensible actions and to take action to attempt to prevent this from happening again."

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