BATON
ROUGE, LA – Attorney General Jeff Landry has secured an agreement to obtain
$6,605,118.07 in debt relief for former ITT Tech students in Louisiana as part
of a settlement between PEAKS Trust and 48 state attorneys general and the
federal Consumer Financial Protection Bureau.
“As Attorney General, I remain committed
to protecting Louisiana consumers from unfair, deceptive, and predatory
business actions,” said AG Landry. “This settlement will provide much-needed
relief to many Louisiana students who incurred debts for questionable education
because of unethical and illegal lending practices.”
The
national settlement with PEAKS Trust, a private loan program run by the
for-profit college and affiliated with Deutsche Bank entities, will result in
debt relief of about $330 million for 35,000 borrowers who have outstanding
principal balances. PEAKS was formed after the 2008 financial crisis when
private sources of lending available to for-profit colleges dried up.
ITT, who
operated campuses in Baton Rouge and St. Rose, developed a plan with PEAKS to
offer students temporary credit to cover the gap in tuition between federal
student aid and the full cost of the education. ITT filed bankruptcy in
2016 amid investigations by AG Landry and many of his fellow state attorneys
general and following action by the U.S. Department of Education to restrict
ITT's access to federal student aid.
According
to the Assurance of Voluntary Compliance filed today: ITT and PEAKS knew or
should have known that the students would not be able to repay the temporary
credit when it became due nine months later. Many students complained that they
thought the temporary credit was like a federal loan and would not be due until
six months after graduating.
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 rates for federal 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 the choice of enrolling in the PEAKS loans or dropping out and losing
any benefit of the credits they had earned, because ITT's credits would not
transfer to most schools.
The
default rate on the PEAKS loans is projected to exceed 80%, due
to both the high cost of the loans as well as the lack of success ITT graduates
had getting jobs that earned enough to make repayment feasible. The defaulted
loans continue to affect students' credit ratings and are usually not
dischargeable in bankruptcy.
Under the
settlement, PEAKS has agreed that it will forgo the collection of the
outstanding loans and cease doing business. PEAKS will send notices to
borrowers about the canceled debt and ensure that automatic payments are
canceled. The settlement also requires the PEAKS to supply credit reporting
agencies with information to update credit information for affected
borrowers.
Affected
students will need to do nothing to receive their debt relief. The notices will
explain their rights under the settlement. They may direct questions to PEAKS
at 866-747-0273 or the Consumer Financial Protection
Bureau at 855-411-2372.
In June 2019, AG Landry was
part of a national $168 million settlement with CUSO that resulted in debt
relief for 18,664 former ITT students – including
$2,818,341.38 in debt relief for 285 students in Louisiana.
In
addition to AG Landry, today’s settlement was signed by the attorneys general
of Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District
of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North
Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island,
South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia,
Washington, West Virginia, Wisconsin, and Wyoming.