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ITT Tech’s Collapse Might Cost Taxpayers Half a Billion Dollars

Image: AP
Image: AP

ITT Technical Institute closed all of its campuses last year, after the Department of Education blocked it from enrolling students on federal aid as part of their crackdown on the for-profit education company. Now, we finally have a sense of how much the ITT Tech’s closure will cost taxpayers.


New bankruptcy court documents filed by the Department of Education last week show the rising cost of ITT Tech’s downfall in greater detail than ever before. The documents explain how the Department of Education typically discharges, or forgives, federal student loans if the borrower did not complete their program of study because of a school’s closure. The Education Department says it has granted more than $141 million to date in “closed-school discharges” of debt to former ITT Tech students who were attending ITT Tech when it abruptly shut down.

But the true cost of “closed-school discharges” is expected to rise to more than three times that amount in the long run. According to court documents, the Department of Education is continuing to process debt relief claims by former ITT Tech students and “estimates that the total amount of closed-school discharges for former ITT students will reach $460,996,660.”


The Education Department previously required ITT Tech to hold $94 million in order to pay for loan forgiveness in the event that the school collapsed. But that appears to be well-below the estimated cost of loan forgiveness, so taxpayers will be on the hook for the remaining costs.

What’s worse is that the $460 million amount only accounts for “active students.” It does not include former students who have completed their course of study and are asking for loan forgiveness based on the premise that ITT Tech defrauded them.

Those claims appear as “borrow defense to repayment” in the court documents, which show that students currently owe more than $3.3 billion in federal loans that could be covered by fraud claims. In the filing, the Education Department that it “continues to receive and review applications” for this type of claim, but does not say whether it intends to forgive those loans.


Throughout its lifetime, ITT Technical Institute relied heavily on federal loans for money. In 2015, an estimated 70 percent of the school’s revenue came from federal financial aid funds. ITT’s own documents showed that its tenuous bachelor’s degrees were sold for as much as $90,000 while the school was in operation. When sanctions were levied against the college’s use of federal loan money, experts correctly called it a “death sentence.”


Perhaps what’s most terrifying about this ongoing saga is that for-profit schools have been given a new life under Secretary of Education Betsy DeVos, who is an advocate of for-profit education programs. Stock prices of for-profit education companies like DeVry, Grand Canyon Education, and Strayer have surged since Election Day, and many investors believe President Trump will roll back regulations against the for-profit education industry.

Regardless, taxpayers are on the hook for the hundreds of millions—and potentially billions—that these programs have cost unwitting students. Somehow, that is not enough to former ITT Tech CEO Kevin Modany, who claims he’s owed $3.3 million in severance and deferred compensation. While it’s completely absurd, it wouldn’t be the first time that a failed CEO received millions for fucking up.


Technology editor at Gizmodo.

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$500 million for Community Colleges around the country would do so much good.