Education Department's new sanctions against the for-profit college include a ban on enrolling new students who receive federal aid and tougher financial oversight. The U. The devastating ban, along with a set of increased federal oversight of the for-profit institution, continues several years of federal scrutiny of ITT Tech, which has more than campuses in 38 states and enrolled approximately 45, people last year.
It could mean the end for the institution. Secretary of Education John B. King Jr. The letter has not been released publicly. ACICS held a hearing earlier this month on whether or not to sanction ITT, however, that decision has been placed on hold until after a December hearing.
The national accreditor is also facing scrutiny. Some see the department's move as pushing the for-profit institution one step closer to bankruptcy and closure.
Ben Miller, senior director for postsecondary education at the Center for American Progress, described ITT as a "dead college" and said the department's actions were necessary and appropriate. In addition to the ban, the department is prohibiting ITT from awarding raises or paying bonuses or severance to the company's executives. A letter of credit is collateral the government asks colleges to set aside when officials have concerns that an institution may be unable or unwilling to pay back money it owes the government.
The letter also protects students and taxpayers if the institution can't cover federal student aid liabilities.
The company will have to provide the letter of credit from a bank ensuring the availability of those funds, which may be difficult. The department has also placed ITT on a tighter form of the financial oversight known as heightened cash monitoringwhich requires the institution to use its own funds to cover federal aid disbursements for current students.
The department would later reimburse those funds after verifying the students. Under Secretary of Education Ted Mitchell in a phone call with reporters.
You can continue your courses at ITT with federal student aid, you can transfer credits to a new school, and you can pause your education and wait to see how this matter resolves. If ITT closes before you finish the program and you don't transfer credits, those students are likely to discharge their loans.
Although the department is citing ACICS's censure as the driving force behind the increased oversight, Trace Urdan, a research analyst at Credit Suisse, questions if it was instead ITT's decision to cut back on marketing and the company's announcement that new student enrollment could drop by as much as 60 percent that forced the department's hand.
The move by ITT could have aled that they were freeing up cash to satisfy the department or that they were winding down their operations. Urdan said the department's actions against ITT are a al to other for-profit institutions with regulatory issues, like DeVry Universityfor instance, that the department is taking bold actions against the sector.
U.s. cuts off itt tech
As for ITT, the company did free up some cash by cutting back on marketing, he said, but considering the new financial restrictions placed by the department -- doubling the letter of credit requirements, being placed on the more stringent cash monitoring level, the new enrollment problems, any accreditation disclosures, the negative publicity -- the additional financial restrictions imposed by the department may be too much to handle. Several state and federal investigations and lawsuits against the company also continue, including lawsuits from the Consumer Financial Protection Bureau and the U.
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