ITT Tech, PEAKS Trust reach $330M settlement agreement for wronged students

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Former ITT Tech students across the state will receive part of a $330 million nationwide settlement with PEAKS Trust, a private loan program run by the now defunct college and affiliated with Deutsche Bank entities. Some $5 million has been earmarked for formers students in New York State.

“New Yorkers look to institutions of higher learning to help support them in their educational endeavors, not act as bullies,” said New York Attorney General Letitia James, who was one of 48 attorneys general involved in securing the settlement. “PEAKS and ITT Tech took advantage of helpless and low-income students and threatened to kick them out of school if they didn’t take out loans at astronomical rates. Today’s settlement will finally right this wrong and provide hundreds of millions in relief to students across the country, including more than $5 million to New York borrowers, because students should never be saddled with a lifetime of debt and bad credit at the hands of predatory lenders.”

PEAKS was formed following the 2008 financial crisis and recession when private sources of ending available to for-profit colleges dried up. ITT and PEAKS developed a plan to offer students temporary credit to cover the gaps in tuition caused by the difference between federal student aid and the full cost of their education.

James said that while many students thought this plan was a lifeline to continue their college education, most did not realize the quick turnaround in which they were responsible for paying back the loans.

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 the rates of federal student loans. ITT used tactics such as pulling students out of class and threatening to expel them if they did not accept the loan terms.

Many of the students were from low-income backgrounds, according to the attorney general, whose only choice was to enroll in the PEAKS loans or drop out of school and lose any benefit of the credits they had already earned. ITT Tech credits would not transfer to most other schools.

According to the settlement, ITT and PEAKS knew or should have known that students would not be able to repay the loans. Many students complained to PEAKS’ agents that they did not realize they had taken out loans or were not aware of the terms of the loans. Students also complained that in some cases ITT employees signed PEAKS loan applications without the students’ knowledge or authorization.

Under the settlement, PEAKS has agreed that it will forgo collection of the more than 43,000 outstanding loans valued at more than $330 million and will cease doing business. PEAKS will send notices to all borrowers that are covered under the settlement about the canceled debt and will ensure that all automatic payments are canceled. The settlement also requires PEAKS to furnish credit reporting agencies with information to update credit information for affected borrowers.

The default rate on the PEAKS loans was projected at more than 80 percent due to both the high cost of the loans and the lack of success ITT graduates had in getting jobs that earned enough to make repayment feasible after graduation. The defaulted loans continue to affect students’ credit ratings and are not typically dischargeable in bankruptcy, according to James’ office.

In June 2019, James and a coalition of attorneys general helped secure an additional $168 million in debt relief for more than 18,000 former ITT students, more than $2.5 million of which went towards debt relief for nearly 300 former ITT students in New York. That agreement was with Student CU Connect CUSO LLC, which also offered similar high-interest loans to finance students’ tuition at ITT Tech.

ITT filed for bankruptcy in 2016 and had 149 campuses nationwide, including three in New York state.

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