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Lansing — Michigan will receive about $15.4 million in debt relief for some former students of a for-profit college chain that went bankrupt in 2016, the state's attorney general said Wednesday.

The $15.4 million in debt relief is for 1,868 former Michigan students of the ITT Technical Institute, Michigan Attorney General Dana Nessel said in a statement.

The money is part of a legal settlement between 43 states, the District of Columbia and ITT Tech and Student CU Connect CUSO LLC, a lending company. The entire settlement will result in debt relief of more than $168 million for more than 18,000 former students across the country, Nessel said. A federal court approved the settlement Friday.

“Paying for college is challenging enough without contending with unscrupulous and abusive lending practices,” she said in a statement. “This settlement holds CUSO accountable for preying on ITT Tech students eager to expand their education.”   

Under the settlement, CUSO has agreed to forego collection of outstanding loans, cease conducting business, notify all credit reporting agencies of the status for all borrowers and cancel all automatic payments. Affected former students do not have to take any action.

According to officials, CUSO offered about $189 million in tuition loans to students at the former ITT between 2009 and 2011. They alleged ITT and CUSO offered students temporary credit when they enrolled to pay for tuition not covered by federal aid. Those students were then expected to repay the credit before the next school year but many were under the impression the payment, like federal loans, wasn't due until six month after graduation.

ITT pressured students to get loans from CUSO to cover the temporary credit, often at interest rates far above federal loans, according to officials. Students were removed from class and threatened with expulsion if they didn't accept the terms of the loans.

Officials also said because students couldn't transfer their ITT credits to most other schools, they took loan options through CUSO and were forced into default after learning the true cost that had to be repaid.

ITT filed bankruptcy amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict their access to federal student aid. ITT had five locations in Michigan: Canton, Dearborn, Swartz Creek, Troy and Wyoming.

cramirez@detroitnews.com

Twitter: @CharlesERamirez

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