Durbin Applauds Move by Department of Education to Better Protect Taxpayers from ITT Tech
ITT Tech will be required to increase the amount of money held by the federal government to offset taxpayer losses in case of potential collapse
[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL) today applauded a decision by the Department of Education to require ITT Educational Services, Inc. (ITT Tech) to increase its surety – money held in escrow by the Department that would be used to offset taxpayer losses in the even the company collapses – from $80 million to about $123.6 million. Durbin has urged the Department of Education to more aggressively use its authority to require Letters of Credit and other forms of surety to better protect taxpayers against losses associated with potential collapses of for-profit colleges, including ITT Tech.
“Today’s move by the Department of Education means that ITT Tech is on the watch list,” said Durbin. “It means that if ITT Tech doesn’t change its ways and collapses as Corinthian Colleges did, the federal government will have more resources to pick up the pieces. The Department should continue to take steps to prepare for this real possibility, including making certain that ITT Tech submits quality teach-out plans so that students have clear options to continue their education should the company collapse.”
ITT Tech is under investigation by at least 18 state Attorneys General related to marketing and recruiting, job placement rates, and other matters. The Consumer Financial Protection Bureau is suing ITT Tech for predatory lending while the Securities and Exchange Commission has charged ITT Tech, CEO Kevin Modany, and CFO Daniel Fitzpatrick with fraud for concealing the poor performance and looming negative financial impact of this loan program from investors. Last October, the Department of Education placed additional reporting requirements on ITT Tech after finding that the company’s actions demonstrated a failure by ITT to meet its fiduciary obligations.
Durbin recently led a letter signed by U.S. Senators Sherrod Brown (D-OH), Al Franken (D-MN) and Richard Blumenthal (D-CT) calling on ITT Educational Services, Inc. (ITT Tech) to follow the lead of the University of Phoenix and DeVry and halt the use of mandatory arbitration clauses in college enrollment agreements. These clauses reduce transparency and accountability for for-profit colleges and force students who have been victimized by fraudulent or abusive conduct into secret arbitration proceedings where the deck is stacked against the student.
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