ITT Educational Services to cease operations following actions by Department of Education
For-profit education business has been closely aligned with the media business in the US, with the former owner of The Washington Post also owning a major for-profit education business, and other media outlets actively promoting money going to for-profits over public education
The for-profit education company ITT Educational Services Inc. today announced that it would cease operations, closing its over 130 facilities and laying off more than 8,000 employees.
The move comes following sanctions levied against the company by the Department of Education which prevented the company from enrolling new students by using federal financial aid. The business model of for-profit schools is built around federal financial aid, with over 90 percent of students carrying loan debt after attending a for-profit school.
For-profit schools are also expensive, and the schools have been accused of using financial aid as a sales tool to lure students who otherwise would be concerned with the costs. According to the Institute for College Access & Success, nearly 90 percent of 2012 graduates from for-profit schools had student loans, with the average debt among for-profit college graduates who borrowed at nearly $40,000.
According to the government, for-profit colleges enroll between 10 to 13 percent of all college students, but receive 25 percent of all federal financial aid dollars.
TNM has followed the story of these for-profit schools because for many years their story, and scandal, has been tied closely to the story of The Washington Post. That paper was, until its sale to Amazon founder Jeff Bezos, part of the same company that owns Kaplan, another for-profit education company. With the sale, Kaplan now is a major part of Graham Holdings Company.
This is what I wrote about Kaplan last month when Graham Holdings reported its quarterly earnings:
Kaplan, I felt, was the albatross around the neck of the WaPo, though. Here was a for-profit enterprise that took advantage of federal education funding. According to the Brookings Institution, the amount of debt owed by students attending for-profit colleges grew from $39 billion in 2000 to $229 billion in 2014. Could The Washington Post effectively cover this scandal of higher education when its own company was at the center of it?
Despite the terrible track record of these for-profit institutions, and the dollars they siphon away public universities, there are defenders of the schools, especially among right-wing media such as The Wall Street Journal who see any interference in this business as an attack against free enterprise. The media and for-profit education continues to be intertwined in ways that makes solving the US education system difficult and more expensive.
Here is the press release from ITT:
CARMEL, Ind. – September 6, 2016 — Today, ITT Educational Services, Inc. released the following statement:
“It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service. With what we believe is a complete disregard by the U.S. Department of Education for due process to the company, hundreds of thousands of current students and alumni and more than 8,000 employees will be negatively affected.
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. We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution.
Effective today, the company has eliminated the positions of the overwhelming majority of our more than 8,000 employees. Our focus and priority with our remaining staff is on helping the tens of thousands of unexpectedly displaced students with their records and future educational options.
This action of our federal regulator to increase our surety requirement to 40 percent of our Title IV federal funding and place our schools under “Heightened Cash Monitoring Level 2,” forced us to conclude that we can no longer continue to operate our ITT Tech campuses and provide our students with the quality education they expect and deserve.
For more than half a century, ITT Tech has helped hundreds of thousands of non-traditional and underserved students improve their lives through career-focused technical education. Thousands of employers have relied on our institutions for skilled workers in high-demand fields. We have been a mainstay in more than 130 communities that we served nationwide, as well as an engine of economic activity and a positive innovator in the higher-education sector.
This federal action will also disrupt the lives of thousands of hardworking ITT Tech employees and their families. More than 8,000 ITT Techemployees are now without a job – employees who exhibited the utmost dedication in serving our students.
We have always carefully managed expenses to align with our enrollments. We had no intention prior to the receipt of the most recent sanctions of closing down despite the challenging regulatory environment that now threatens all proprietary higher education. We have also always worked tirelessly to ensure compliance with all applicable laws and regulations, and to uphold our ethic of continuous improvement. When we have received inquiries from regulators, we have always been responsive and cooperative. Despite our ongoing service to this nation’s employers, local communities and underserved students, these federal actions will result in the closure of the ITT Technical Institutes without any opportunity to pursue our right to due process.
These unwarranted actions, taken without proving a single allegation, are a “lawless execution,” as noted by a recent editorial in The Wall Street Journal. We were not provided with a hearing or an appeal. Alternatives that we strongly believe would have better served students, employees, and taxpayers were rejected. The damage done to our students and employees, as well as to our shareholders and the American taxpayers, is irrevocable.
We believe the government’s action was inappropriate and unconstitutional, however, with the ITT Technical Institutes ceasing operations, it will now likely rest on other parties to understand these reprehensible actions and to take action to attempt to prevent this from happening again.”