Attorney General James Helps Secure $330 Million in Debt Relief for Former ITT Students
Former New York Students to Receive More than $5 Million in Debt Forgiveness
Coalition of 48 AGs and CFPB Secure Agreement Over
PEAKS Loans at Now Defunct For-Profit School
NEW YORK – New York Attorney General Letitia James today helped secure an agreement with PEAKS Trust — a private loan program run by the now defunct college ITT Tech and affiliated with Deutsche Bank entities — that will provide more than $5 million in debt relief to former ITT Tech students in New York. The agreement is part of a national settlement with 48 attorneys general and the federal Consumer Financial Protection Bureau and PEAKS that will provide more than $330 million to approximately 35,000 former students of the failed for-profit college with more than 43,000 loans.
“New Yorkers look to institutions of higher learning to help support them in their educational endeavors, not act as bullies,” said Attorney General James. “PEAKS and ITT Tech took advantage of helpless and low-income students and threatened to kick them out of school if they didn’t take out loans at astronomical rates. Today’s settlement will finally right this wrong and provide hundreds of millions in relief to students across the country, including more than $5 million to New York borrowers, because students should never be saddled with a lifetime of debt and bad credit at the hands of predatory lenders.”
PEAKS was formed after the 2008 financial crisis, when private sources of lending available to for-profit colleges dried up. ITT developed a plan with PEAKS to offer students temporary credits to cover the gaps in tuition between how much federal student aid they received and the full cost of their education. While many students thought this was initially a lifeline to continue their college education, most did not realize the quick turnaround in which they were responsible for paying back the loan.
When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which, for many students, carried high interest rates — far above the rates of federal student loans. Pressure tactics used by ITT included pulling students out of class and threatening to expel them if they did not accept the loan terms. Many of the ITT students were from low-income backgrounds and were left with only the choice of enrolling in the PEAKS loans or dropping out of school and losing any benefit of the credits they had already earned because ITT’s credits would not transfer to most other schools.
As detailed in today’s settlement, ITT and PEAKS knew or should have known that students would not be able to repay the PEAKS loans. In fact, many students complained to PEAKS’ agents that they did not realize they had taken out loans or were not aware of the terms of the loans. Students also complained that in some cases, ITT employees signed PEAKS loan applications without the students’ knowledge or authorization.
Under the settlement, PEAKS has agreed that it will forgo collection of the more than 43,000 outstanding loans valued at more than $330 million and will cease doing business. PEAKS will send notices to all borrowers that are covered under the settlement about the cancelled debt and will ensure that all automatic payments are cancelled. The settlement also requires PEAKS to furnish credit reporting agencies with information to update credit information for affected borrowers.
Before today’s settlement, the default rate on the PEAKS loans was projected to exceed 80 percent due to both the high cost of the loans, as well as the lack of success ITT graduates had in getting jobs that earned enough to make repayment feasible after graduation. The defaulted loans continue to affect students’ credit ratings and are not typically dischargeable in bankruptcy.
Students do not need to take any action to receive the debt relief provided pursuant to today’s settlement. Students will receive notices by mail that explain their rights under the settlement. Students may direct questions to PEAKS by emailing email@example.com or by calling the company at (866) 747-0273, or calling the Consumer Financial Protection Bureau at (855) 411-2372.
In a related settlement, in June 2019, Attorney General James and a coalition of attorneys general helped secure an additional $168 million in debt relief for more than 18,000 former ITT students, more than $2.5 million of which went towards debt relief for nearly 300 former ITT students in New York. That agreement was with Student CU Connect CUSO, LLC, which also offered similar high-interest loans to finance students’ tuition at ITT Tech. Additionally, to help students who have been misled or defrauded by predatory for-profit schools, Attorney General James recently filed a lawsuit challenging the U.S. Department of Education’s rescission of the Gainful Employment Rule, which provided critical protections to students considering enrolling in for-profit colleges.
ITT filed for bankruptcy in 2016, and had 149 campuses across the country, including three in New York: in Albany, Liverpool, and Getzville.
Joining Attorney General James in filing today’s settlement are the attorneys general of Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia.