These former students will receive $330 million of student loan forgiveness.
Here’s what you need to know.
Student Loan Forgiveness
Approximately 35,000 former students of ITT Technical Institute, a former for-profit education company, collectively will receive $330 million of private student loan forgiveness. Based on today’s judgment:
- There will be no further collection of 43,000 outstanding private student loan debt from these ITT Tech students.
- Credit agencies will no longer reference this student loan debt on borrowers’ credit reports.
- Former students don’t need to take any action to receive student loan forgiveness. Their student loans will be cancelled automatically, and they will receive more information about the settlement by mail.
Cancel student loan debt
Why will this student loan debt get cancelled? The settlement stems from a 2014 lawsuit regarding private student loans that ITT issued to its students through PEAKS Trust, a private student loan program affiliated with Deutsche Bank. Former students claimed in a lawsuit that the private student loans carried excessively high interest rates, and in some cases, they were allegedly pressured by ITT, which has since filed for bankruptcy, to accept the loan terms. The default rate on these student loans —which are typically not dischargeable in bankruptcy—was projected to reach a whopping 80%. The Consumer Financial Protection Bureau (CFPB) and 48 state attorneys general helped secure the student loan forgiveness for borrowers. The settlement applies only to private students, not federal student loans.
Attorney General: This is ‘predatory’ lending
“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,” New York Attorney General Letitia James said. “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.”
How to pay off student loans
Make sure you have a game plan to pay off student loans. Student loan forgiveness is possible in certain circumstances. However, it’s harder to receive private student loan forgiveness, unless there is an undue financial burden, permanent disability or other case-specific circumstances. If you’re unsure how to pay off student loans, start with these four options, all of which have no fees: