Thousands lose jobs, credits as ITT Tech shutters its doors

One of America’s largest for-profit college chains was forced to shut down this week, terminating employees en masse and leaving students with limited options.

This fall, back-to-school time is forcing thousands to scramble for options—including lawsuits.

More than 40,000 students and 8,000 employees were dealt a massive blow when ITT Technical Institute recently—and abruptly—shut its doors.

On Tuesday, ITT Educational Services released a statement, which read, in part:

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.

The Department of Education cut off funding for the for-profit college chain—which, at 130 campuses, was one of the nation’s largest—and last month, barred the institution from enrolling new students.

Forbes contributor Preston Cooper explained:

The Department demonstrated its ability to bring down a school in a matter of weeks. The Department required ITT Tech’s parent company to post a letter of credit worth $153 million—on top of the $94 million the school had already posted—to provide a buffer against closed school discharges. At the same time, the Department forbade the school from enrolling new students on federal student aid. The double hit—cutting off the school’s main source of revenue while dramatically boosting their collateral requirements—was, predictably, too much for the school to survive.

The DOE said that students who were displaced—including those that dropped out within 120 days of the institution’s closure—could receive loan forgiveness and posted several options for students on its website. However, many students responded with anger at the news.

The Los Angeles Times shared the story of one student who was enraged by the closure:

“Two quarters ago there were rumors about the school having problems, but they told us that anyone who was already a student would be allowed to finish,” said [Leon Wiggins II], who works as the assistant manager for a family-run auto parts business and went to ITT to open new opportunities.

“Am I angry?” he said. “I’m like angry times 10 million.”

“We kinda thought they were going to close at some point, but at least we’d be able to graduate, at least they wouldn’t leave the students out in the cold, but they did,” student Denise Gardner told KTVB.

Gardner told KTVB she was “pretty devastated,” telling the station, “All that work that we put in, it’s all down the drain.”

Others took to Twitter and Facebook to express their frustration:

The institute’s Twitter account and Facebook page have been silent since Aug. 25, when its social media manager shared messages encouraging enrollment for the fall semester.

ITT Tech’s former staff is responding with anger as well, some filing a lawsuit charging the institution with failing to give the required 60-day notice before terminating employees en masse. RELATED: Keep your cool in a crisis with these tips.

In its press release, ITT Tech placed the blame squarely on the DOE:

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.

Though ITT Tech isn’t the only party criticizing the government for the closure, others called out the DOE for a separate reason. Cooper wrote:

All this raises the question of whether the Department even did its homework before extending billions in taxpayer-backed loans to ITT Tech in the first place. The school had many of the warning signs of a poor-quality institution: aggressive recruiting tactics, high dropout rates, low loan repayment rates, grade inflation, and a large percentage of revenue derived from government subsidies. The school’s accreditor, which acts as a gatekeeper of taxpayer aid money and supposedly considers whether the school actually provides a good education, greenlighted the accreditation of many other poor-quality schools. The school’s main virtue appears to be its age—having existed since 1969, evidently no one thought to make sure it was still living up to its promises.

After all, why should anyone hold the school accountable? The Department of Education does not spend its own money—it spends yours. There is no incentive for the Department to allocate those resources wisely. Should it lose half a billion dollars to the collapse of a giant such as ITT Tech, the Department will face no financial repercussions. The political objective—make sure everyone can go to college, even if that “college” might be a shady institution that could go down in flames—far outweighs the goal of financial responsibility. Then, when the problems with a school to which the Department has given money become too big to ignore, the school gets shut down almost instantly and its students get a bailout.

How do you think ITT Educational Services is handling its crisis, PR Daily readers?

(Image by Dwight Burdette, via)


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