ITT Loan Escape Plans

If you’re an ITT student, or know one, you know that ITT is closed effective September 6, 2016. No matter how it went down, the question you want answered now is what to do about your student loans. The short answer is, I really don’t know. What follows is my suggestions, as The Student Loan Lawyer. Ultimately, it’s your choice what to do. I’m going to provide some information so you can make an educated choice, and not just shoot in the dark based on your emotions.

If you haven’t already visited the Department of Education’s website to see what they’ve got to say, click here. There you can read more about what ED can offer, which isn’t much. You can also register for a webinar they are running on a continuous basis through the month of September. I watched it and I’m very saddened by what I DIDN’T hear. It’s exactly what we have come to expect from ED – no relief for those who should get some. NOTE: if you’re a veteran, you could benefit from watching the webinar.

Federal Loans

If you were a student when the school closed, or within 120 days of the closure (meaning still enrolled anytime after May 6, 2016), you are eligible for a Closed School Discharge, IF your are not transferring your credits. Many places don’t accept ITT credits, though ED and State Education agencies are working with community colleges to get them to accept these credits. That could be a good thing if you want to continue your education and aren’t worried about being able to finish. That’s the catch. If you transfer and don’t complete the program at the new school, you’re stuck with the loan. The Closed School Discharge is no longer an option. Think carefully about what you want to do. Also, if you do the Closed School Discharge and then later go back to school, your ITT credits are useless and no longer transferable. Then again, you may consider your ITT credits useless anyway.

But what about all those students that were not enrolled as of May 6, 2016? Does it matter if you dropped out or graduated? Does it matter how long ago you attended? Maybe, maybe not.

The only avenue is likely to be DTR – Defense to Repayment. This is an option that took center stage with the Corinthian debacle. ED was caught off guard by the Corinthian collapse and had to make things up as they went along. DTR was a rarely, if ever, used option. For Corinthian, ED created a streamlined approach to DTR. What makes this more complicated for ITT is the fact that DTR regulations have not yet been finalized, and ED has not mentioned anything about creating a streamline track for ITT like it did for Corinthian. My bet is that no such thing will happen. ITT folks will be stuck with whatever DTR is, with no special exceptions. And therein lies the problem. We don’t know what the final DTR regulations will say. I have a rough idea, but I won’t say because things can still change in the next two months.

The options available for those who can’t take advantage of the Closed School Discharge is one of two choices, as far as I’m concerned.

1. File a DTR application and enjoy a forbearance of payments until a final outcome. We don’t know what ED will do with the mountains of ITT applications they’ll receive. Will they hold them for special treatment, or rubber stamp deny them? The problem with the forbearance is simple – interest continues to accrue AND if the DTR is denied, the accumulated interest capitalizes. You then end up with a larger loan than you did when you started.
2. Enroll in an Income Driven Repayment (IDR) to get the lowest possible payment now, and wait for the final DTR regulations to be published. Then we’ll know what the odds are for discharge. This route allows you to rack up time towards IDR forgiveness. If DTR looks good, you can apply. If you lose, at least you have some forgiveness time accumulated. If you decide DTR isn’t going to work, you’ve got a head start on IDR forgiveness time.

Honestly, I don’t have high hopes of DTR working for ITT students. Corinthian folks are getting a break because ED was caught with its pants down. ED was ready for ITT folding. If you’d like to get more information about DTR and other options for ITT students once the regulations are finalized, click here for my ITT page. I’ve created it specifically for the ITT closure.

Private Loans

If you thought the Federal loans were an issue, private loans will be worse. Fed loans have a prayer with DTR. Private loans have nothing. Any potential escape for private loan borrowers will be based primarily on State law. What is required for fraud? Is there an Unfair Trade Practices Act, and is it any good? Will your claim pay your attorney’s fees or will you have to pay out of pocket? Everything will be very fact specific. Visit the my ITT page for updates, if any. I also suggest you contact your State Attorney General to see if they are doing anything for ITT students.

The End

I don’t know how this will shake out for ITT students. Recent grads likely have a better argument for discharge than students from a decade ago. But again, we don’t know. We don’t know what ED will do, if anything. We don’t know if there will be State based actions. We just don’t know. But we will…eventually.