ITT Technical Institutes once was one of the most popular educational institutions. Since 1969, it has been providing education services to more than 35000 students. At its closure in 2016, the school employed more than 8000 people across its 137 campuses. Therefore, the ITT Tech school closure created a negative ripple effect on many individuals. While some people lost their jobs, students struggled with the debt for education worth no pennies. Sure, the government tried to ease the consequences of closure for students by providing some opportunities to eliminate the debt. However, it is impossible to benefit all students as they have diverse loans. This guide will discuss what happened to the school and subsequent ITT Tech Student Loan Forgiveness options that emerged from the questionable operations.
What Happened with ITT Tech?
The controversies around ITT Tech started long before 2016, when it closed. Lawsuits against the school have a significant effect on the closure decision. The main reason for the lawsuits was the questionable loan programs of ITT called PEAKS and CUSO.
Although these loans aimed to help students in financial need during the 2008 crisis, they soon moved from their original purpose. The loans became a very expensive source of funding, and students struggled to repay them. Besides, some students claimed that they were pressured to take loans.
In 2015, the Securities and Exchange Commission claimed that ITT Tech was engaged in fraud. According to the claims, ITT Tech distributed its private loans PEAKS and CUSO even to students who did not qualify. As a result, students could not repay the debt. However, ITT Tech guaranteed the collection through loan pools.
If loans defaulted, ITT Tech should have used huge amounts as guarantee loan payments. Hence, it was alleged that the officials even paid for the debt of some students to keep the loans from defaulting. Allegedly, they hid the poor performance of loans from investors.
Education Department’s Response
Another problem with ITT Tech was that they had a risk of losing accreditation. The Accreditation Council asked the school to prove why they deserved the accreditation. The Education Department knew that if the school loses accreditation, the government would have spent a lot of funds as ITT Tech Student Loan Forgiveness opportunities. Hence, the Education Department required the school to provide a new credit letter- worth $247 million.
A credit letter is an instrument that indicates the organization has this money in a bank account. As a result, the ED would trust that in case of any negative consequence, the school has money to protect the wellbeing of students and taxpayers. However, the problem was that the school already provided $124 million worth of credit letters. Another letter put the school in a financially troubling situation which led to bankruptcy.
Therefore, some blamed ED for the closure of the school, while ED justified the requirement by noting that it was their responsibility to ensure the protection of students and taxpayers.
ITT Tech Student Loan Forgiveness
People enroll in a school with the hopes that their degree will bring further employment opportunities after graduation. Hence, it is understandable how devastating the school closure news is.
Sure, the government created options for students, such as transferring credits to new schools or getting forgiveness for the incurred debt. However, such options still did not compensate for the time and effort wasted. Besides, not all students qualified for the offered opportunities.
If you want to eliminate ITT school debt obligations, you can benefit from multiple options:
- Closed School Discharge – due to closure
- Borrower’s Defense to Repayment – due to fraudulent activities
However, there are also many other graduates who graduated long before and did not qualify for programs due to closure. In this case, they can benefit from:
- Public Service Loan Forgiveness
- Other Forgiveness Options
- Income-Driven Repayment plans, etc.
Now, let’s check each program in detail.
Closed School Discharge
When ITT Tech announced its closure in 2016, it filed Chapter 7 bankruptcy which made students eligible to Closed School Discharge. This ITT Tech Student Loan Forgiveness program benefits students who were enrolled on closure date or withdrew at least on May 6th of 2016. The forgiveness option is highly desirable because it brings 100% debt elimination.
However, there are some downsides to this program. First, it only covers federal debt, including Direct, FFEL, and Perkins loans. Second, if a student decides to transfer credits to a new school, he/she will not qualify for Closed School Discharge.
Closed School Discharge usually happens automatically. If the student qualifies for this forgiveness program as a result of school closure, he/she will be notified directly.
Borrower’s Defense to Repayment
Closed School Discharge is a simple and straightforward program. However, when it comes to Borrower’s Defense to Repayment option, then things get complicated. First, the program involves proving a case with evidence. Second, during the last years, not many students were successful in eliminating the student loan debt through Borrower’s Defense.
Check out the video to learn how to apply for Borrower’s Defense to Repayment program and maximize your chances of getting loan forgiveness:
Borrower’s Defense to Repayment program protects students who faced fraudulent activities by the schools. While it is technically possible to get up to 100% elimination, these days, it can be challenging. We will talk about this challenge more in subsequent sections.
The program only covers direct loans, excluding Perkins or FFEL loans. Students need to prove that the school misled them to get forgiveness. In other words, students should convince the Education Department that if the school did not engage in fraud, the students would never decide to study there and get debt.
If the school officials lie about job replacement rates, the true cost of education, credit transfers, or education qualification, they create excellent grounds for this ITT Tech Student Loan Forgiveness opportunity.
How to Prove a Case for BDAR?
Students can apply to this program via email or mail. They need to fill the application form, which requires a lot of information; personal information, contact details, the explanation of the argument, supporting documents as evidence, etc. If you claim that the school misled you, you have to be able to prove it with additional documents.
For example, if the school officials lied about job replacement rates, you should provide brochures with false information or your email communication copies with the enrollment specialists. Unfortunately, even if you were the victim, you will be ineligible for this ITT Tech Student Loan Forgiveness without proper evidence for the case.
What Happens after Application?
For a long time, previous Education Secretary Betsy DeVos expressed her opposition to Borrower’s Defense program. She mentioned that the program was a “free money” option for debtors.
Hence, she changed the debt discharge calculation method and delayed the review process. Even after the court required resuming the review process, many applicants received rejections.
Luckily, president Joe Biden aims to improve Borrower’s Defense program and bring it back to its glorious days. Hence, it can be expected that more people will be able to benefit from this ITT Tech Student Loan Forgiveness option soon.
Keep in mind that after the application is submitted, the student loan will be put in loan forbearance period. In this period, borrowers do not need to make debt payments, but interest will accrue. In case of rejection, the borrower will be responsible for repaying the accrued interest.
Once the ED decides, the applicant receives a notice. The notice indicates the discharge percent if the decision is positive. On the other hand, it is possible to see the reasons in the notice if the application is rejected.
Public Service Loan Forgiveness
Some borrowers ask about their options if they graduated before the closure date. Hence, in this section and afterward, we will consider additional ITT Tech Student Loan Forgiveness alternatives. If you do not qualify for the above-mentioned programs, you can consider these programs.
Public Service Loan Forgiveness eliminates the remaining debt balance after the borrower makes 120 qualifying payments. In other words, if you repay the debt at least for ten years, you can get rid of the rest of the debt. However, the eligibility criteria for this program are demanding.
As its name suggests, this program is accessible to public service employees. Workers in governmental organizations, such as federal, local and state, and non-profit establishments, qualify for this opportunity.
Besides, applicants need to work full-time, a minimum of 30 hours per week. If you work part-time, you need to have more than one position. In this way, the total working hours can be a minimum of 30 hours.
There also exist conditions for loans. Only Direct loans qualify for this opportunity. If you have FFEL or Perkins loans, you need to check other programs. Moreover, student loan consolidation can still make the loans qualified. However, only the payments after consolidation will count. Once consolidated, all prior payments toward 120 goals will be ignored.
Which Payments Qualify?
As mentioned before, this ITT Tech Student Loan Forgiveness program requires 120 qualifying payments. It means each payment should be made on time, in full amount, and under Income-based repayment plans. Keep in mind that you do not need to repay the debt when you are still studying, or six months have not yet passed since graduation.
Additionally, note that it is not possible to qualify for this forgiveness program by making payments in higher amounts. If you make payments worth three months, you will get three credits for 120 credit goals. However, payment for the next three months will not be required. In other words, a minimum ten-year payment period is necessary, and one cannot make it shorter.
Fill PSLF Form Regularly
If you are progressing toward the 120 payment requirement, you need to fill and submit the PSLF form regularly. In this way, the officials check if your payments qualify for the program. The applicant also gets informed about any potential problems and solves them. Otherwise, the applicants can get bad news when they suppose they finalized 120 payments.
One of the main concerns in forgiveness programs is their taxability. Many people are concerned that they would be required to pay additional taxes due to the forgiveness received.
As it is difficult to afford taxes on such a huge amount, they hesitate to apply for federal aid options. Luckily, this ITT Tech Student Loan Forgiveness is not taxable under Internal Revenue Service code.
Other Forgiveness Options
The Public Service Loan Forgiveness program is not the only debt elimination program offered by the federal government. There also exist other programs like Teacher or Perkins Loan Forgiveness.
Teacher Loan Forgiveness
Teacher Loan Forgiveness can grant either $5,000 or $17,500 debt cancellation depending on the area taught. In return, the program requires full-time five-year service in low-income schools. The service should be consecutive.
After the service period, the applicant gets the benefit. Basic requirements for this program require a bachelor’s degree, full certification as a teacher, and not having a certificate waived on some basis.
Perkins Loan Cancellation
Perkins Loan Cancellation is another program that can grant up to 100% debt elimination. Teachers in low-income schools working full-time can apply to this program. As the name suggests, the program only covers Perkins loans.
In the first and second year of the service, the applicant gets a 15% discharge. In the following two years, the loan discharge percentage increases to 20%. Lastly, in the fifth year, 30% of the debt is forgiven. Besides teachers, firefighters, nurses, military personnel, law officers, or public defenders can qualify for this ITT Tech Student Loan Forgiveness.
Income-Driven Repayment Plan
If you have an ITT Tech Student Loan, moving to an Income-driven repayment plan can also be a good idea. Income-driven repayment plans take income as a base. As a result, the repayment amount per month becomes more affordable than the amounts under other programs. Besides, the remaining amount after the repayment period is forgiven. Besides, there exist different categories of Income-driven repayments, such as:
- Revised Pay as You Earn
- Pay as You Earn
- Income-based Repayment
- Income-contingent Repayment
Each repayment plan has its own rate and payback period. It is possible to repay the debt in 20 or 25 years. The rates differ between 10 to 20% of discretionary income, depending on which program you choose.
What about Private Loans?
Borrowers with private loans do not have many options for ITT Tech Student Loan Forgiveness. The programs mentioned in this guide cover federal loans. Besides, private lenders do not mostly provide forgiveness opportunities.
If you struggle to repay private debt, you can contact the lender directly and explain the situation. Some lenders can grant temporary forbearance periods or reduced interest, but there is no guarantee.
One of the best options for private borrowers can be student loan refinancing. Refinancing involves getting a new loan to cover all existing debt. New loans should have a better term- lower interest rate, lower monthly payment- to help borrowers deal with financial struggles and save money. Otherwise, refinancing does not make sense.
Additionally, debt settlement can be an option, but it should be almost the last resort for the debtor. Debt settlement allows borrowers to stop debt payments and save money in a bank account. As time passes, more money will be collected.
Then, the borrowers partner with debt settlement companies to convince the lenders to receive the lump-sum amount saved, which is usually lower than the originally owed balance. However, again, there is no guarantee that the lender will accept this condition. Besides, borrowers can face negative consequences if they stop debt payments.
Get an Expert Help
The controversies around ITT Tech closure allow borrowers to enjoy some opportunities to eliminate student loans. Others who cannot utilize closure as a reason to qualify for federal aid can still take advantage of other programs like Income-driven repayment plans or Teacher Loan Forgiveness.
If you are unsure about which options to choose or how to progress for the selected option, you can get expert help. In Student Loans Resolved, we gathered debt specialists with years of experience under the roof.
Our experts can analyze your financials and recommend the best option for ITT Tech Student Loan Forgiveness. Besides, we will guide you in each step so that no technical mistakes restrain you from a debt-free future. Take a step now to get rid of ITT Tech loans and contact us now for a free consultation.
Can I Apply to both Borrower’s Defense and Closed School Discharge?
No. Unfortunately, borrowers cannot apply to both programs at the same time. Hence, you need to get familiar with the details of both programs before deciding which one would be the most suitable option. Alternatively, you can contact our experts to guide you in the selection process.
How Can I Get Approval from Borrower’s Defense?
During recent years, Borrower’s Defense has been a challenging program. Luckily, we hope the program will benefit more borrowers with Joe Biden’s support. In all cases, you need to prove the fraudulent activity by a clear explanation of events and additional documents to support the claims.
What is My Option if I Transfer Credits?
If you decide to transfer credits and study in another school for a comparable program, you will not qualify for Closed School Discharge. You can wait till you graduate and start working to become eligible for alternatives like Public Service Loan Forgiveness, Teacher or Perkins Loan Cancellation.
Whom Should I Contact for Forgiveness Options?
Usually, there are loan servicers assigned to each program. The loan servicers assist the Education Department. For Public Service Loan Forgiveness, the loan servicer is FedLoan Servicing. You can get information about other programs on the Student Aid official website.
Is Closed School Discharge Taxable?
No. Luckily, the Closed School Discharge program is not taxable. You do not need to pay additional taxes for this ITT Tech Student Loan Forgiveness. Besides, Public Service Loan Forgiveness is not subject to taxes.
Which Program Should I Choose for My Private Debt?
The mentioned forgiveness programs – Public Service/Teacher/ Perkins Loan Forgiveness- do not benefit private borrowers. There is usually no forgiveness program designed by private lenders. Instead, you can aim to simplify or reduce the debt obligations for private loans through refinancing.
I Graduated before Closure. Am I Eligible for Forgiveness?
You would not qualify for Closed School Discharge if you graduated before the closure – May 2016. However, you can still apply to other programs. For example, if you work in the public sector, Public Service Loan Forgiveness can be helpful. Alternatively, if you faced a misleading action by the school, Borrower’s Defense can eliminate the debt.
Will I Lose My Eligibility if I Study in Another School?
After the school closes, you have two options; either transfer credits to another school or apply for forgiveness to eliminate debt. Alternatively, if your new program is not comparable- totally different from your previous program- you can still qualify for a closed school discharge program.
How is Comparability Defined?
The Education Department will check several factors to determine the comparability of your new program. The academic content, course obligation, and credit transfer process will indicate the comparability level. Keep in mind that you need to answer questions related to comparability honestly. Otherwise, you can lose your chance for ITT Tech Student Loan Forgiveness.
How to Apply for Closed School Discharge?
Usually, loan servicers contact qualifying students for the ITT Tech Student Loan Forgiveness application. The borrower needs to fill and submit the discharge application to the loan servicer. If you did not hear from the loan servicer, you could contact the servicer.