LAS VEGAS (KLAS) — A settlement with the operators of a private loan program is expected to bring more than $6 million in debt relief to former students of a trade school that closed its doors four years ago.
ITT Tech operated schools in North Las Vegas and Henderson.
The for-profit school offered loans through a partnership with PEAKS Trust. ITT Tech went bankrupt amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT’s access to federal student aid.
The agreement announced today is part of a settlement struck with 48 states for about $330 million.
“Thousands of Nevada students have been duped by PEAKS Trust’s mounting interest rates and predatory practices,” said Nevada Attorney General Aaron D. Ford. “In addition to academic rigor, these students had the added pressure of facing expulsion if they didn’t make tuition. My Bureau of Consumer Protection has been working hard to hold PEAKS Trust accountable, and I’m proud that $6,198,820.30 will be rightfully delivered into the hands of Nevada students.”
PEAKS was formed after the 2008 financial crisis when private sources of lending available to for-profit colleges dried up. ITT developed a plan with PEAKS to
offer students temporary credit to cover the gap in tuition between federal student aid and the full cost of the education, according to the Nevada attorney general’s office.
According to the Assurance of Voluntary Compliance filed today, ITT and PEAKS knew or should have known that the students would not be able to repay the temporary credit when it became due nine months later.
When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which for many students carried high interest rates, far above rates for federal loans.
The default rate on the PEAKS loans is projected to exceed 80%, due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible. The defaulted loans continue to affect students’ credit ratings and are usually not dischargeable in bankruptcy.
Under the settlement, PEAKS has agreed that it will forgo collection of the outstanding loans and cease doing business. PEAKS will send notices to borrowers about the canceled debt and ensure that automatic payments are canceled. The settlement also requires PEAKS to supply credit reporting agencies with information to update credit information for affected borrowers.
Students eligible for this settlement will receive notices for debt relief. The notices will explain their rights under the settlement. Students may direct questions to PEAKS at email@example.com or 866-747-0273, or the Consumer Financial Protection Bureau at (855) 411-2372.