Chopra: Without Reform, ITT Tech Will Continue to Harm Students and Shareholders
Today, Rohit Chopra, former regulator at the Consumer Financial Protection Bureau and now senior fellow at the Center for American Progress, shared that he will meeting with major investors of ITT Tech to enlist their help to end ITT’s culture of deception. In advance of these meetings, he shared a letter outlining some of these concerns.
According to Chopra:
“Based on my review of ITT’s public filings and performance metrics, I have serious concerns that ITT is not properly managed. Unless investors provide more vigorous oversight over management and the board, ITT will continue to harm both its students and its shareholders.”
At Higher Ed, Not Debt, in partnership with SEIU, we’ve heard from over 750 ITT Tech students who have relayed their concerns about ITT Tech on our petition site: sellingoutstudents.org/itttech. As we have previously described, the stories suggest that ITT Tech consistently engaged in aggressive and deceptive recruitment, misled students during enrollment about program costs and post-graduate earnings, provided poor quality instruction, lured students into high interest private loans and used unlawful debt collection practices, and failed to provide the job placement assistance students believed they paid to receive.
We hope to bring these stories to ITT Tech’s principal investors and creditors. Along with sharing what we have heard from students, we will also relay how ITT Tech’s failing business model relies on deceiving students and fleecing taxpayers:
- Even though ITT Tech gets around 96% of its revenue from the federal government, it spends more on marketing its programs and profits for its executives* than it invests in instruction for students.
- ITT aggressively pursued vulnerable students, instructing its recruiters to find “the pain of each and every prospective students” in order to exploit a prospective student’s dream to attend college.
- Typically, more than 50% of ITT Tech students withdraw before completing the program. Because ITT Tech typically charges more than $40,000 for a two-year Associate’s Degree, students who withdraw are stuck with substantial debt and without a degree.
- Overall, 20% of students who left ITT Tech end up defaulting on their student loans, much higher than 13.2% of students who attend two-year private and nonprofit institutions. At 45 ITT Tech campuses, more students ended up defaulting than graduating.
As a result of these practices, ITT Tech now faces unprecedented oversight from federal and state regulators:
- The Consumer Financial Protection Bureau sued ITT for pressuring students into high-cost private student loans that were destined to default and alleges that ITT Tech violated other consumer protection laws.
- The Securities and Exchange Commission announced fraud charges against ITT Tech, its chief executive officer Kevin Modany, and its chief financial officer Daniel Fitzpatrick. The SEC concluded that ITT lied to investors and hid the long-term financial implications of its predatory loan program.
- ITT Tech is also subject to a multi-state investigation for intentionally misrepresenting job placement rates and graduate salaries in order to enroll new students in high-priced programs. Attorneys General in Arkansas, Arizona, Colorado, Connecticut, Hawaii, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Oregon, Pennsylvania, and Washington are actively investigating ITT Tech. Additionally, the state of New Mexico’s filed a civil complaint against ITT Tech for falsely marketing its nursing program as accredited.
As other partners have noted, shareholders and creditors need to know that their investments are supporting a company that takes advantage of vulnerable students and drains limited education dollars from state and federal coffers. And because these firm have a duty to prudently invest their clients’ savings, hopefully after hearing student stories and from a former regulator, these investors will join with current and former students to demand ITT reform.
* ITT’s Executive Compensation (Data is derived from the company’s most recent DEF 14A):
Kevin Modany, CEO
2014 – $3,206,324
2013 – $2,972,627
2012 – $8,763,384
2011 – $6,412,454
2010 – $6,745,967
Daniel Fitzpatrick, CFO
2014 – $1,136,664
2013 – $1,004,126
2012 – $1,898,591
2011 – $1,527,927
2010 – $1,429,072
Eugene Feichtner, COO
2014 – $919,914
2013 – $731,774
2012 – $1,767,294
2011 – $1,453,708
2010 – $1,327,513
Posted on 24 June 2015