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Thursday, June 11, 2015 12:06 am

For-profit school under fire for business practices

Durbin calls for more oversight of ITT Tech and others

 A for-profit college with a branch in Springfield is taking criticism for alleged deceptive practices.

U.S. Sen. Dick Durbin is calling for stronger oversight of ITT Technical Institute and other for-profit schools by the federal government, citing the collapse of a school system that left students with no diplomas and a mountain of debt. Durbin believes the schools entice students with falsified job figures and then overcharge them for worthless degrees.

The CEO of ITT Tech, which has a branch in Springfield located inside White Oaks Mall, says the school system has its students’ best interests at heart.

Durbin’s campaign against for-profit schools began when The Huffington Post revealed in November 2014 that the for-profit school system Corinthian Colleges, Inc., inflated its job placement rate to rake in taxpayer-backed student loans. The company paid temporary agencies to hire graduates of its schools for a certain period of time, allowing the schools to claim that an exaggerated number of graduates got jobs after attending.

Corinthian Colleges and its network of schools collapsed after the scheme was uncovered, and in April the U.S. Department of Education fined the company $30 million. Thousands of students were left with loan debt and credits which wouldn’t transfer to other schools.

The Corinthian debacle focused attention on other for-profit schools. ITT Technical Institute is under investigation by attorneys general in 18 states, including Illinois. The attorney general of New Mexico sued ITT Tech in February 2014, claiming the school misled students about its accreditation status for its nursing program. Additionally, the New Mexico complaint alleged that the school’s enrollment agreement is unfair because it bans students from filing class action lawsuits against the school, among other restrictions.

The school has also been sued by two federal agencies. The Consumer Financial Protection Bureau sued ITT Tech in February 2014, alleging the school pressured students into predatory loans that were likely to default, misled students about job prospects and used the threat of expulsion or loss of tuition to coerce students into remaining enrolled there. Meanwhile, the U.S. Securities and Exchange Commission sued ITT Tech in May 2015, alleging improprieties with the company’s private loan program.

The U.S. Department of Education placed ITT Tech on the first tier of “heightened cash monitoring,” a designation that means the agency is closely watching an institution’s cash management.

Nicole Elam, a spokeswoman for ITT Tech, told Illinois Times that the school is only on the monitoring list because it missed the deadline to submit its 2013 financial statements with the Department of Education. The school’s placement on the list doesn’t affect students or their access to federal financial aid, she said.

Durbin and ITT Tech CEO Kevin Modany have traded barbs through press releases recently. Durbin has accused the company of engaging in “unconscionable practices” and repeatedly called on the Department of Education to aggressively oversee ITT Tech and other for-profit schools. Modany responded in May with an open letter in which he denied the allegations against ITT Tech and said “no one is more concerned about our students than we are.”

As evidence of ITT Tech’s concern for students, Modany wrote that ITT Tech froze its tuition in 2014 and had awarded students more than $240 million in scholarships. Durbin calls that assertion “completely bogus.”

“Compared to community colleges, they’re dramatically overcharging students,” Durbin told Illinois Times. “They kite their tuition to make students think they got a deal.”

Elam says it’s misleading to compare private schools to community colleges because the latter are subsidized by taxpayers. She says community colleges are cheaper for students but cost taxpayers more.

“The facts are irrefutable,” Elam said. “We are cheaper to taxpayers than community colleges and we produce far better outcomes.”

Durbin says he is working on several pieces of legislation to increase accountability among for-profit schools. For example, one measure would hold for-profit schools liable for student loan defaults if the default rate reaches a certain level. But Durbin says the most important change needed is for the Department of Education to step up oversight in case ITT Tech becomes another Corinthian Colleges.

“We need these schools held accountable,” he said. “We need to make certain they have some skin in the game.”

Elam says ITT Tech supports oversight and accountability, adding that ITT Tech is already subject to regulation by 75 state and federal entities in addition to the accrediting agency.

“Our continuing disagreement with Senator Durbin is his drumbeat for increased oversight when we haven’t even had a day in court on any pending allegations,” Elam said. “Allegations are not a finding of fact by a court of law and should not be the basis for regulatory oversight.”

Durbin says the entire story of for-profit colleges can be summed up in three numbers. He says 10 percent of all high school graduates go to for-profit schools, 20 percent of all federal student loans go to students at for-profit schools, and 44 percent of all loan defaults are at for-profit schools.

“They overcharge the kids, the kids aren’t ready for college and they drop out,” Durbin told Illinois Times. “Those that do finish are deep in debt with a worthless diploma and can’t find a job.”

Contact Patrick Yeagle at pyeagle@illinoistimes.com.

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