ITT Technical Institute shutdown stuns Mich. students
Students at ITT Technical Institute’s Michigan campuses were stunned and worried Tuesday by the abrupt nationwide closure of the company’s for-profit technical schools.
Beset by allegations that it defrauded investors and misled students about their job prospects, ITT closed more than 130 campuses, leaving as many as 40,000 students stranded in one of the largest college closures in American history, the Bloomberg News service reported.
All five of ITT’s Michigan locations were affected by the sudden shutdown: Canton, Dearborn, Swartz Creek, Troy and Wyoming. It was not immediately clear Tuesday how many students were enrolled at those locations.
Brittany Nabors, 24, drove to ITT’s Troy campus on Big Beaver on Tuesday afternoon to talk to her adviser about an email she received, which said classes for the fall semester have been canceled.
Nabors completed her associate degree in drafting and design at the school three weeks ago. She planned to start work Sept. 14 on her bachelor’s in project management and accounting. A graduation ceremony for her associate degree was scheduled for Sept. 25.
Save for the early morning email, Nabors has not received word if any of her credits are valid, if they will transfer to another school or if she’ll still receive her associate degree.
“I’m feeling shocked, confused and worried,” she said, standing in the empty school’s parking lot. “Now I’ve got to go look for a different program.”
Josh Stovall, 19, planned to start his first year at the school next week. He said the closure was a sign he wasn’t supposed to attend the college.
He went to the Troy campus Tuesday to try to get his $75 deposit back.
“I can definitely understand the frustration for people who already started and were into their programs,” he said.
The shutdown also affected high school students at East Career Academy, based at ITT’s Troy campus.
Academy student Tyler Cole and his mother, Telisa Cole-McCorkle, went to the school Tuesday morning to get his transcripts but found the building locked.
Students in the school had dual enrollment in the high school and the college, and would earn an associate degree upon graduation, according to Cole-McCorkle.
Cole, who finished his junior year at the academy in June, found out a few days ago by email that his high school was shut down.
“I was devastated,” Cole-McCorkle said.
Added Cole: “They gave us no time at all to find another place for me to go to school.”
Cole and his mother spent Tuesday calling several high schools to find a place for him to attend for senior year.
“But they are not accepting 12th graders,” Cole-McCorkle said.
Campuses in Canton and Dearborn were empty Tuesday afternoon. Like the Troy outpost, the ITT building on Haggerty in Canton was locked. The Dearborn school occupied the basement of an office building on Outer Drive. Classrooms there were locked. Computers and other school property had not been removed from that building.
The company blamed the U.S. Department of Education for its downfall in a statement released Tuesday. Last month, the feds demanded the company produce an additional $153 million in collateral – nearly double its $78 million in cash on hand – to cover possible losses that the government might incur if the company were to suddenly fail, Bloomberg reported.
ITT said it terminated the “overwhelming majority” of its more than 8,000 employees.
“We believe the government’s action was inappropriate and unconstitutional, however, with the ITT Technical Institutes ceasing operations, it will now likely rest on other parties to understand these reprehensible actions and to take action to attempt to prevent this from happening again,” the company said.
It’s a stunning fall for a company whose stock reached highs of nearly $129 per share in 2007. Investors bet that Americans would increasingly flock to for-profit colleges for credentials that would enable them to advance in the economy or gain a foothold in the job market.
Key to that calculation was the assumption that the Department of Education wouldn’t impede colleges’ access to federal student aid.
The government annually doles out more than $100 billion in loans and grants to students. Colleges rarely face any consequences if their students fail to graduate or subsequently default on their debt.
But ITT was hit with an increasing array of allegations that it misled students about its success at placing graduates in their fields while defrauding investors.
The company faces pending lawsuits from the federal Consumer Financial Protection Bureau, Securities and Exchange Commission, and the Massachusetts attorney general led the Department of Education to restrict the company’s access to taxpayer funds, Bloomberg reported. ITT has denied the allegations.
Nabors said instructors told students about the pending litigation a few weeks ago as summer classes were wrapping up. They told students the school likely wouldn’t accept new enrollees, but everyone currently enrolled wouldn’t be affected, she said.
According to Bloomberg, students enrolled at the company’s schools have received close to $5 billion in federal aid since 2010, Department of Education data show. About $3 billion of that was in the form of student loans. Most of that money went to the company.
Students now enrolled at the company’s technical schools will be able to cancel any federal student debt they incurred for their education if they decide against transferring their credits elsewhere.
Other former students are pushing to have their debts canceled by alleging that the company defrauded them into taking out the debt by advertising false job-placement rates.
Taxpayers will record a loss on those debt cancellations. It’s exactly the kind of situation that the feds tried to avoid by demanding that the company produce additional collateral.
Bloomberg News contributed.