Oregon Attorney General Ellen Rosenblum today announced a $2.2 million settlement that provides debt relief to 242 former Oregon ITT Tech students. Oregon ITT Tech was a for-profit college that filed for bankruptcy in 2016 and had campuses in Salem and Portland. The agreement is part of a $168 million multistate settlement with 43 states and the District of Columbia, resulting in debt relief for more than 18,000 former ITT students nationally.
The actual settlement is with Student CU Connect CUSO, LLC (“CUSO”), which financed approximately $189 million in student loans to ITT students between 2009 and 2011. The Attorneys General allege that ITT, with CUSO’s knowledge, offered students “Temporary Credit” (TC) upon enrollment. The TC covered the gap in tuition between federal student aid and the full cost of the education, but was to be repaid before the student’s next academic year—which most students cannot achieve.
“This settlement holds CUSO accountable for subjecting ITT students to abusive lending practices. These pressure tactics to get students to accept high-interest loans, and then to require them to repay the loans with an impossibly short turnaround, were nothing short of unconscionable,” said Attorney General Rosenblum. “Going to college should not require incurring unreasonable debt. Oregon students and their families deserve better.”
Many students thought the TC was like a federal loan and would not be due until six (6) months after graduation. When the TC became due, however, ITT pressured and coerced students into accepting loans from CUSO. ITT pressure tactics included pulling students out of class and threatening expulsion if they did not accept the loan terms. These loans carried high interest rates, far above rates for federal loans, for many students.
Most students were forced to enroll in the CUSO loans. Their other choice was to drop out and lose earned credits—ITT’s credits would not transfer to most other schools. Neither ITT nor CUSO informed students of the TC repayment cost until the credit converted to a loan.
Unsurprisingly, the default rate on the CUSO loans was extremely high (projected to exceed 90%). Contributing factors included the high cost of the loans and graduates’ inability to land high-paying jobs to repay the loans. The defaulted loans continue to affect the borrowers’ credit ratings and are usually not dischargeable in bankruptcy.
Under the settlement, the CUSO, under threat of litigation, has agreed that it will forego collection of the outstanding loans. The CUSO, organized for the sole purpose of providing the ITT loans, will also cease doing business. The CUSO’s loan servicer will send notices to borrowers about the cancelled debt and ensure cancellation of automatic payments. The settlement also requires the CUSO to supply Credit Reporting Agencies with information to update credit information for affected borrowers.
Affected students will receive notices containing relevant information and a contact phone number and webpage.
The Oregon Department of Justice (DOJ) is led by Attorney General Ellen Rosenblum, and serves as the state’s law firm. The Oregon DOJ advocates for and protects all Oregonians, especially the most vulnerable, such as children and seniors.