ITT’s former students file lawsuit, request recognition as creditors

By Caroline Salls

Pittsburgh, Jan. 3 – A class of ITT Educational Services, Inc.’s former students filed a lawsuit against the company Tuesday in the U.S. Bankruptcy Court for the Southern District of Indiana that alleges consumer protection violations and breach of contracts.

“This pleading is supported by testimony of thousands of former ITT students, describing extensive, widespread, and systematic deceit,” the lawsuit said.

“ITT perpetrated these illegal actions pursuant to corporate policies and imperatives directed at churning students through a costly sham.”

Specifically, the former students said ITT pitched itself to students as a sound investment with a healthy return in the form of guaranteed or near-guaranteed entry-level employment in a lifelong career.

However, the plaintiffs alleged that ITT “deliberately and severely underinvested in resources needed to deliver on these promises, leaving students with an expensive but valueless credential,” and former ITT students have an easier time obtaining employment when they remove ITT from their resumes entirely.

In addition, the former students alleged that ITT “silenced whistleblowers and threatened students” in an effort to conceal its actions, it falsely reported job placement statistics to its accreditor, and it invented complicated ploys to achieve the appearance of regulatory compliance, “all while students faltered.”

In the last 10 years alone, the plaintiffs said ITT took in more than $11 billion of revenue, including $8.4 billion of federal student aid.

ITT generated this revenue almost exclusively by facilitating student loan debt, according to the lawsuit. In the past 10 years, the students said ITT created $7.3 billion of student loan debt, both federal and private, and lifetime default rates on these loans reach as high as 80%.

“ITT students are the true creditors of ITT,” the lawsuit said. “They seek recognition as creditors in this bankruptcy, a fair apportionment of the remaining estate and an adjudication of their claims that will clear the path to loan cancellation in collateral proceedings.”

ITT Educational Services provided postsecondary degree programs and is based in Carmel, Ind. The company filed for bankruptcy on Sept. 16 under Chapter 7 case number 16-07207.

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