CARSON CITY (FOX5) -- Nevada Attorney General Aaron Ford announced that more than 300 former ITT Tech students would have their student debt relieved as part of a settlement with 44 other states and territories.
Overall, the settlement relieves $3.4 million in student debt for former ITT Tech students in Nevada, a statement from Ford's office said. The multi-state settlement is with Student CU Connect CUSO, LLC, which offered loans to help with students' tuition at ITT Tech.
On a national scale, the settlement relieves more than $168 million of debt for approximately 18,000 former students. According to Ford, a settlement between CUSO and the U.S. Bankruptcy Trustee was approved on June 12.
The settlement with the Attorneys General was contingent on federal court approval on a related settlement between CUSO and the federal Consumer Financial Protection Bureau.
"Education should be the pathway to success, not a scam," said Ford. "These students thought they were furthering their career, only to be subjected to abusive lending practices to pay for an education at a failed institution."
ITT filed for bankruptcy in 2016 amid investigations by state Attorneys General, and following action done by the U.S. Department of Education to restrict ITT's access to federal funding, the statement read.
According to Ford's office, the default rate on CUSO loans was extremely high, projected to exceed 90%, because of the high cost of the loans, as well as the lack of success ITT graduates had attaining jobs that earned enough to make repayment feasible.
The Attorneys General alleged that ITT, with CUSO's knowledge, offered students temporary tax credit upon enrollment to cover the gap in tuition between federal student aid and the full cost of the tuition.
The temporary tax credit was due to be repaid before the student's next academic year, but ITT and CUSO "knew or should have known that most students would not be able to pay the temporary tax credit when it became due," the Attorneys General said.
As part of the settlement, CUSO agreed to forego collection of the outstanding student loans and will cease doing business, Ford claimed. CUSO’s loan servicer will also send notices to borrowers about the canceled debt and ensure that automatic payments are canceled.
"The settlement also requires CUSO to supply credit reporting agencies with information to update credit information for affected borrowers," said Ford.