Students Scramble As ITT Tech Closes Doors

CONCORD (CBS SF/AP) -- Students found themselves scrambling Tuesday after officials with ITT Educational Services, Inc. announced the for-profit college was closing its nation-wide campuses immediately.

ITT Tech -- as it is known -- had Bay Area campuses in Concord and Oakland.

It marked the second time local students found themselves searching for alternatives after a for-profit college system announced it was closing. Heald Colleges shut down its operations in April 2105.

ITT officials said they have been forced to shut down by the U.S. Department of Education.

"The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter," the Indiana-based company said in a prepared statement. "We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution."

The company said the closure will result in more than 8,000 employees losing their jobs and thousands of students losing access to classes.

The chain was banned Aug. 25 from enrolling new students who used federal financial aid, because, Education Department officials said, the company had become a risk to students and taxpayers. The department also ordered ITT to pay $152 million within 30 days to help cover student refunds and other liabilities if the chain closed.

Days before those sanctions were announced, ITT's accreditor reported the chain had failed to meet several basic standards and was unlikely to comply in the future. It had also been investigated by state and federal authorities who accused ITT of pushing students into risky loans and of misleading students about the quality of programs.

ITT Educational Services CEO Kevin Modany told reporters on a conference call Tuesday that ITT was the victim of a "regulatory assault" and never had the chance to defend itself.

"For what appears to be political reasons, there seemed to be an outcome in mind that was going to be forced here," Modany said.

Other education companies had made overtures to buy the chain's schools over the past year, Modany added, and ITT had offered to "wind down" its operations gradually if federal officials eased some of the sanctions against it, but he said federal officials rejected those options.

Department Undersecretary Ted Mitchell, however, said ITT never made a formal proposal, and that the department's "informal conversations" with potential buyers had failed.

"We just didn't see that there was a path forward providing a quality education to the students of ITT Tech," Mitchell said.

One of the biggest for-profit chains in the nation, ITT had been closely monitored by federal officials since 2014, when the chain was late to submit an annual report of its finances to the government.

About 200 ITT employees will help students obtain grade transcripts and apply to other schools, and the chain said it is seeking agreements with other schools that would help students transfer class credits. Education Department leaders are also urging community colleges to contact ITT students and welcome qualified students.

But several students said the closure leaves them in limbo, with little time to find other options. Ed Donayre had eight courses left at a campus in Chantilly, Virginia, before he'd earn an associate's degree as a medical assistant. He'd like to transfer to a community college, but classes have already started.

"I might have to wait for the spring, so basically I've wasted two years of my life dealing with ITT Tech," Donayre said.

On Tuesday, students at ITT's Concord campus came back anyway to salvage what they could of their education.

Randy Heylinger was just 12 weeks away from graduating with an associate's degree.

"I invested in this school. I invested time. I invested my GI bill," said Heylinger. "I can't get that time back."

The for-profit vocational school permanently closed its doors Tuesday, saying it had exhausted the exploration of alternatives.

The move came in the wake of a series of recent state and federal actions aimed at addressing the school's poor performance.

The closure leaves about 40,000 ITT students in 38 states in limbo.

"My husband and I are looking at the $20,000 dollar loan," said one parent.

Veronica Harms of the California Department of Consumer Affairs told KPIX 5 the state will be reaching out to ITT'S students by email in the coming days.

"I know we can't help the students get their time back, but we can help the students get their money back," said Harms.

She said students with outstanding loans can and should apply for forgiveness, or what's officially known as a loan discharge.

She also said ITT has agreed to provide transcripts so that former students can take their credits elsewhere.

But first, they'll have to find a school that will accept them.

Students said that's a big assignment they don't need, especially this time of year.

"It's a very big setback, especially because I'm supposed to starting school on Monday," said student Brandon Duffer.

Students who were enrolled at ITT within the last 120 days can apply to have their federal student loans erased by the Education Department. That's an estimated $500 million worth of loans, a cost that would be covered by taxpayers and $90 million in insurance that ITT previously paid the department.

Under President Barack Obama, the Education Department has led a crackdown on for-profit colleges that have misled students or failed to deliver the results they promise. The now-defunct Corinthian College chain agreed to sell or close more than 90 U.S. colleges in 2014 amid a fraud investigation over advertising practices. The department is also deciding whether to cut ties with the Accrediting Council for Independent Colleges and Schools, the group that accredited ITT and Corinthian.

When education officials announced the sanctions against ITT last month, they said it wasn't intended to force the chain to close. But Mitchell acknowledged Tuesday that officials knew it was a possible outcome.

"Ultimately our responsibility is not to any individual institution -- it's to protect all students and all taxpayers," he said. "I have no doubt that our decision to take action was the right one in service of these goals."

The Federal Student Aid office of the U.S. Department of Education has set up a web page with information and a webinar on what students can do regarding the closure of ITT.

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