The U.S. Department of Education is tightening the financial reins on ITT Educational Services, placing new limits on the struggling for-profit college chain’s access to federal student aid.
According to the department’s letter to the school, stricter financial oversight is warranted because ITT Tech not only failed to comply with previous orders to improve its accounting and handling of financial statements, but the college is also facing federal fraud allegations for allegedly concealing huge losses in in-house student loan programs.
As a result of its failure to meet its fiduciary obligations, ITT Tech now faces additional reporting requirements on its enrollment and disbursement of financial aid. The embattled college will also have to prove that a student is attending classes and eligible for student aid by a school representative before the college can disburse federal financial aid to the student.
The new restrictions are an effort “to protect students and hardworking taxpayers’ dollars,” said Education Undersecretary Ted Mitchell in an email to The Washington Post.
ITT spokeswoman Nicole Elam said in a statement that the company is complying with the new requirements and is in the process of implementing measures to address the new reporting and administrative rules.
“While the additional requirements will result in an increased administrative burden, [ITT Educational Services] does not believe they will have a material negative impact on our financial results, or in any manner affect the timely award of financial aid to eligible students or the operation of our campuses,” Elam said.
This is the latest hit for the embattled for-profit college chain, which is also fighting two separate lawsuits brought by federal regulators.
A suit filed by the Securities and Exchange Commission accuses ITT Tech and two of its top executives of lying to investors about the failure of two school-run student loan programs. The Consumer Financial Protection Bureau is suing the college for allegedly using those same in-house loan programs to make predatory loans to its students.
According to the Post, ITT is also under investigation from the Department of Justice for allegedly lying to the Department of Education about its executive compensation.
“All told, ITT is being investigated by at least 18 attorneys general and three federal agencies,” the Post reported.
ITT is also struggling to attract new students. In June, new-student enrollment was down 19 percent compared with June 2014. Total enrollment was down 14 percent for the same period. The college chain has about 50,000 students at 135 campuses.
For-profit colleges are taking a beating lately amid growing concern over the schools’ use of financial aid, low graduation rates and the heavy debt many students take on to attend school.
Just this year, Corinthian Colleges closed its doors, shutting its 28 remaining campuses. Education Management Corporation and Career Education Corp., two of the largest for-profit college chains, have also shuttered dozens of campuses across the country.
The cascade of for-profit college closures has many wondering if we’re witnessing the beginning of the end for these schools.
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