On September 6, 2016, ITT Educational Services declared that all of its ITT Technical Institutes were going to close. The closure of these institutions left 35,000 students without an educational path forward. Thousands of others across the country were impacted.
The majority of the former students are worried mainly about one issue. Will the Student Loan Forgiveness programs cover their loan debts? To find more about available student loan forgiveness programs you just need to scroll down this article.
The Reason behind the Closure of ITT
The closure of ITT institutions is the result of increased regulation and sanctions from the U.S. Department of Education. ITT Tech has decided to terminate its operation. It was after the decision from the Department of Education to ban the for-profit vocational college from enlisting new students who relied on federal aid to pay for their education with them.
The news was a shock as the company had been in operation for more than 50 years since 1969 and before ITT Tech was permanently shut down. Until today, ITT Tech operated on over 130 campuses in 38 states. As a result, all ITT Technical Institutes lost their qualification to receive federal student aid funds from the Education Department.
However, questions continued to arise about the institution’s enrollment and accounting practices as well as its financial viability.
ITT Educational Services, Inc. published a press release on their website that blamed the government for the closure and the impact on students.
ITT Tech offered students an option to the traditional college course. As a for-profit organization, the school provided specialized training in targeted fields of study. In 2015 alone, it had over 45,000 students and $850 million in revenue.
The impact of the closure of ITT institutions
The closure of ITT leaves many students and graduates paying student loans from a now non-existent school. Many are concerned about how they will manage their student loans.
Fortunately, former students and recent graduates of ITT institutions may be eligible to have their federal, not private, student loans discharged as a result of the closure. All federal debt will be forgiven according to student loan forgiveness programs rules. Thus, students have the opportunity to continue their education or pursue their career goals elsewhere.
In 2019, if you attended ITT Tech between 2006 and 2016, you may qualify for ITT Tech student loan forgiveness benefits via either the Closed School Loan Discharge program or The Borrowers Defense To Repayment program.
Closed School Loan Discharge program
This discharge program is for former ITT Tech students now looking for student loan forgiveness options.
You might be qualified for a closed school discharge if you did not complete your education in an ITT school because they were closed while you were attending or soon after you withdrew. A closed school loan discharge is a 100 % discharge of the federal Direct Loans, Federal Family Education Loan Program loans, or Federal Perkins Loans you took out to attend the closed school and recompense of payments you have already made.
To apply for student loan forgiveness through a Closed School Discharge program, you can either
– complete and return the Closed School Loan Discharge Application sent to you by your servicer,
– complete a Closed School Loan Discharge Application and return it to your loan servicer, or
– contact your loan servicer about the application process to discharge your loan.
However, students that transfer their credits to another institution would no longer be qualified. Under the Closed School Discharge program, loan amounts forgiven are treated as taxable income and may trigger a substantial tax burden.
Borrower’s Defense to Repayment Discharges
On Thursday, December 13th, 2018 the Department of Education announced that they’re immediately approving $150,000,000 in Borrower’s Defense to Repayment Discharges (BDAR). It includes discharges for people who attended ITT Tech.
The sanctions of the Education Department on Carmel-based ITT Educational Services Inc. have laid support for past students. The goal is to take advantage of this little-known rule, called defense to repayment, which can wipe out their loans.
The defense to repayment rule falls under the U.S. Higher Education Act. It has existed for years but drew little attention until recently.
In the case of ITT Tech, who faces massive lawsuits and $560,000,000 reimbursement in response to their violations for committing illegal behavior against students just like you, Borrower’s Defense Discharges are readily available.
The best thing about BDAR discharges is that they can completely eliminate your loans. It means you won’t have to pay for student loans, but there’s another added benefit as well: you may even be likely to get a refund for the money you’ve already paid back.
Federal law gives the Education Department discretion to forgive student loans for those who claim they were deceived or that their college broke state laws. The government essentially made the claim that ITT has done that.
Thus, they have invited former students to request what could amount to hundreds of millions of dollars in student loan forgiveness. The rule applies to all previous students with federal loans. However, this does not cover private student loans.
In the meantime, the Education Department is encouraging borrowers to email their claims. Instructions are on the Education Department’s website.
Income-Based Repayment Program
Another great interim option would be an Income-Based Repayment program. The benefit of an IBR is that it’s based strictly on what you earn. It allows for a more affordable monthly payment capped at 10-15% of your discretionary income.
Also, an IBR program offers the long-term benefit of student loan forgiveness after 20-25 years of payments. The period depends on when they took the loan. Currently, under IBR programs, amounts forgiven are also treated as taxable income. It should also be mentioned that President-elect Joe Biden’s student loan plan focuses heavily on Income-based Repayment programs. Hence, it is expected that such repayment plans will be more accessible in 2021.
If you were attending ITT when it shut down on Sept. 6, 2016, or you withdrew from an ITT Technical Institute on or after May 6, 2016, you have another option. You can transfer earned credits to another institution to continue your education in an equivalent program.
Borrowers who are current ITT students, recent graduates, and students who withdrew in the past 120 days can transfer their credits according to the offer by the U.S. Department of Education.
Transfer Your Credits
If you want to continue your program of study, the U.S. Department of Education is connecting you with community colleges that will transfer over ITT Tech credits.
However, if students opt for this option, they may not be eligible for a closed school discharge on their student loans. Instead, you might want to keep the credits from ITT and transfer them to a similar program in another school.
If you do transfer into a related program offered by another school, that school will evaluate your ITT coursework. It will decide whether to give you credit for already completed works. Also what courses you need to take to complete your program of study.
The Education Department is working with ITT officials and representatives from the state and postsecondary education oversight organizations, to process student records from the 136 schools. So that transfer schools could start evaluating students’ remaining qualifications for Federal Student Aid funds.
ITT will take responsibility for any return of federal student aid funds. The Department will work with ITT officials to make sure the loan funds are restored for future eligibility. If you transfer the credits toward a similar program and you completed or are going to finish that program, you will not be eligible to receive a closed school loan discharge.
We encourage you not to pay for companies for student loan forgiveness or consolidation programs that your federal loan servicer provides for free, on behalf of the Education Department. Your loan servicer, the companies that collect your payments, can also support you with these goals for free of charge. If you need help with your student loans, you should contact your servicer, because you never need to pay for these services.
How to Determine Eligibility?
If you want to benefit from ITT Tech loan forgiveness in the form of closed school discharge, you need to meet several requirements. First, you should be studying at the time of the closure or withdrawal a maximum of 120 days before. You should not pursue a similar degree program in another school by transferring credits or through a teach-out agreement. In these cases, you will not receive the forgiveness opportunity.
What is the Impact of Discharge on my Debt?
In case of approval for closed school discharge, you will get 100% elimination for your ITT Tech student loans. Besides, you can be eligible for a refund for the payments you made previously. Lastly, the officials will contact the credit agencies to delete any negative records associated with this debt from your credit history.
How to Apply Closed School Discharge?
Debtors who have not received ITT student loan forgiveness can easily apply to the school closure discharge program. One way for application is filling and returning the form sent to debtors by the loan servicer. Alternatively, it is possible to find the application form online and fill it. If you cannot find the form, contact your loan servicer and ask for guidance to get your loan discharged. In all cases, the application form should be sent to the loan servicer.
Is Closed School Discharge Taxable?
Receiving ITT tech student loan forgiveness through closed school discharge is not taxable. It means the borrower who benefits from this opportunity does not need to report the amount as income and pay tax.
I believe the School Misled Me. What are My Options?
In case of school misconduct, you can apply to the Borrowers’ Defense to a Repayment program. If you can prove that the school misled you and without misconduct, you would not have chosen this institute, you can get full or partial cancellation of the debt. Besides, even if you were not eligible for an ITT Tech student loan refund from the settlement, you can get a reimbursement with the Borrowers’ Defense program’s help.
What is the Chance to Get Forgiveness through Borrowers’ Defense?
Your probability of receiving cancellation through Borrowers’ Defense depends on how you will support your case. An essential element of selection is proving misconduct. Try to be clear and collect as much information as possible regarding the misleading activities of the school. When you apply, submit the documents as facts to support your arguments. These documents can be communication proofs, false ads, etc.