A federal judge approved a settlement Wednesday that will forgive almost $600 million in student debt owed to the now-defunct ITT Technical Institute, affecting about 750,000 of the for-profit college chain's former students, The Washington Post reported. The settlement, which was announced in January, will also return $3 million that students paid ITT.
Before ITT's collapse in 2016 the college allegedly mischaracterized what it called "temporary credits" as grants to help cover tuition after students had applied loans, but debt collectors then went after the students for repayment.
The agreement also recognizes a $1.5 billion claim former students have against ITT for violating consumer protection laws, meaning students could receive a share of funds ITT has left after the bankruptcy.
The settlement marks a victory for former students of for-profit colleges that have accused the institutions of using predatory marketing tactics and other fraudulent practices, leaving many with debt and some with no degree to show for it. It also contrasts the Education Department's approach to for-profits under Secretary Betsy DeVos, who has used her post to ease regulations governing that segment of the higher education industry.
In her most recent move, DeVos permanently reinstated federal recognition for the for-profit accreditor that oversaw ITT and Corinthian Colleges before their collapses that sparked the Obama administration's tougher oversight of the industry.
The decision could be a boon for the dozens of colleges who remain under that body, the Accrediting Council for Independent Colleges and Schools (ACICS), as they were unable to find a new accreditor when the agency lost its recognition in 2016. Many have faced problems endemic to the for-profit sector, including sharp drops in enrollment and claims of fraudulent practices.
DeVos has also targeted two Obama-era for-profit sector regulations for an overhaul: borrower defense to repayment and the gainful employment rule. The department missed a key deadline to deliver its final regulations, and is facing a lawsuit and other criticism for not implementing the Obama-era version of the borrower defense rules.