West Virginia, Ohio reach settlement with loan company
CHARLESTON — The attorneys general in Ohio and West Virginia Friday announced a $168 million settlement with a loan company connected to a bankrupt college.
The settlement with Student CU Connect CUSO LLC, which offered loans to finance tuition at the for-profit ITT Tech, will erase $508,026 in student loans for 61 former students in West Virginia and $6.8 million in debt for 870 students in Ohio. More than $168 million in student loan debt will be erased for 18,664 students across the nation through the agreement.
“Those students who put forth time and effort toward a degree — and ultimately a career — only to have it interrupted in this manner deserve the relief they will receive,” West Virginia Attorney General Patrick Morrisey said.
ITT filed bankruptcy in 2016 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. Morrisey and Ohio Attorney General Dave Yost were involved in a coalition of more than 40 attorneys general who claimed ITT, with CUSO’s knowledge, offered students temporary credit upon enrollment to cover the gap in tuition between federal student aid and the full cost of the education.
The temporary credit was due to be repaid before the student’s next academic year, although the attorneys general contend ITT and CUSO knew or should have known most students would be unable to repay the temporary credit when it became due.
Many students complained they believed the temporary credit was similar to a federal loan and would not be due until six months after graduation.
The attorneys general alleged ITT coerced students to accept CUSO loans once the temporary credit was due. Pressure tactics included pulling students out of class and threatening expulsion if they did not accept the loan terms.
Neither ITT nor CUSO told students the true repayment cost of the temporary credit until after the credit was converted to a loan. The default rate on CUSO loans was projected to exceed 90 percent due to the high cost of the loans and difficulties ITT graduates had finding jobs that earned enough to make repayment feasible.
The defaulted loans continue to affect the credit ratings of former students and are usually not dischargeable in bankruptcy.
“These students were misled, pressured and sometimes threatened into borrowing from this lender,” Yost said. “They’ve had to carry the heavy weight of these unreasonable loans for far too long, but today they can finally breathe a sigh of relief.”