BOSTON – A private lender that specialized in making loans to students at the now defunct for-profit ITT Technical Institute will cancel $1.6 million worth of debt for nearly 200 Massachusetts students, Attorney General Maura Healey announced today.
Under the terms of an assurance of discontinuance filed today in Suffolk Superior Court, Student CU Connect CUSO, LLC (CUSO), will forego collection of outstanding loans and issue no new loans to student borrowers. CUSO’s loan servicer will send notices to eligible borrowers about the cancelled debt and ensure that all automatic payments are cancelled. CUSO is also required to supply Credit Reporting Agencies with information to update credit information for affected borrowers.
“ITT Tech pressured vulnerable students to enroll in low quality programs and take on unaffordable debt.” said AG Healey. “Today’s settlement will ensure that students who took these high-interest loans get the relief they deserve.”
Today’s settlement has been filed in conjunction with resolutions of more than 40 states against CUSO totaling over $168 million. Under the terms of this agreement, CUSO will cease operations in Massachusetts and will make provide debt relief to over 18,000 students nationwide. In Massachusetts, students will receive an average of approximately $8,900 in debt relief.
The AG’s Office alleges that 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 an ITT education. Students were required to repay this temporary credit during their next academic year, but most were unable to repay the debt that quickly.
In those instances, ITT often allegedly pulled students out of class and threatened to expel them if they did not refinance their debt with a high-interest CUSO loan. Because ITT credits would not transfer to most other schools, these students could not transfer to another institution and had little choice but to sign up for CUSO financial products. Students could not afford these high-cost CUSO loans, and the default rates were extremely high. The loans, usually not dischargeable in bankruptcy, devastated student credit ratings after the students were, predictably, not able to make their monthly payments.
AG Healey’s lawsuit against ITT, filed in April 2016, continues both in Superior Court and in federal bankruptcy court. The AG’s Office also continues to pursue student loan relief from other ITT-related debts in other ongoing investigations.
Students with questions about their rights under the settlement should call Attorney General Healey’s Student Loan Assistance Unit, at 1-888-830-6277, ext. 2.
This investigation was handled by the staff of AG Healey’s Insurance and Financial Services Division, including Assistant Attorney General Diana Hooley, Legal Intern Danielle Klee, and Division Chief Glenn Kaplan.