CHARLESTON, W.Va. (WOWK) – A $330 million, multistate settlement has been reached with a student loan company accused of pressuring students into accepting loans they could not pay back.
West Virginia Attorney General Patrick Morrisey stated that he joined with 48 attorney generals from around the country to erase $1,085,726 in debt for 138 consumers in West Virginia who had attended ITT Technical Institute, a now-bankrupt for-profit college.
According to the settlement lawsuit, ITT developed a plan with PEAKS Trust 2009-1, which was created in 2009 to purchase, own and manage certain loans offered to students enrolled at ITT Technical Institute in order to provide gap funding through zero interest, short-term loans payable in a single payment due nine months later. Officials say PEAKS and ITT offered students this temporary credit, even though they knew the students would not be able to repay the loan when it became due.
Morrisey says that eighty percent of the loans currently are defaulted and many students complained due to the fact they thought the temporary credit was like a federal loan, in that they would not have to begin making payments until six months after graduation.
Morrisey says the agreement also alleges ITT to used pressure tactics and coerced students into accepting loans from PEAKS after their temporary credit became due. Some students say they were pulled out of class and threatened with expulsion if they did not accept the loan terms. Students say they were given the alternative of dropping out and losing any benefit of the credits they had earned since ITT’s credits would not transfer to most other schools. Students enrolled in PEAKS loans out of need.
Morrisey says this agreement requires PEAKS to cease all collection activities and stop accepting payments from victimized consumers. PEAKS also cannot sell, transfer or assign any loan.
Other states involved in this settlement include Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming.