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Indiana for-profit college new federal agency’s first target

Washington’s new consumer protection agency has the first for-profit college in its sights – Indiana-based ITT Educational Services Inc. It should be just the first of many proprietary colleges scrutinized.

ITT, which operates 149 schools in 40 states, including in Fort Wayne, is the target of a predatory lending lawsuit by the Consumer Financial Protection Bureau. About $33 billion a year in taxpayer dollars flow to for-profit colleges as financial aid, and students borrow more from private lenders to pay tuition costs that far exceed the cost of public programs such as Ivy Tech Community College. Former students of ITT and other for-profit schools have long complained they are left with crushing debt and without the skills and training to find jobs paying enough to repay loans.

“ITT marketed itself as improving consumers’ lives, but it was really just improving its bottom line,” CFPB Director Richard Cordray said in a news release. “We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default. Today’s action should serve as a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending tactics.”

The lawsuit seeks restitution, a civil fine and an injunction against the company. It was filed in the U.S. District Court for the Southern District of Indiana.

A spokeswoman for the Carmel-based ITT told the Wall Street Journal that the bureau’s claims are without merit and that the company will vigorously defend itself. ITT’s stock dropped 8 percent following news of the lawsuit.

The company operates campuses in Fort Wayne, Indianapolis, Merrillville, South Bend and Newburgh.

It’s telling that the new federal watchdog agency chose a company running proprietary schools as one of its first targets. States, including Indiana, have been too slow in responding to complaints about the cost and quality of the programs. The low-income students the companies target don’t have the political clout to draw the attention of state regulators, while the for-profit college industry is represented by a powerful lobby.

Indiana lawmakers restructured oversight of for-profit schools in 2012, placing the Board of Proprietary Education under the Indiana Commission for Higher Education. An executive director and two-person staff oversee more than 30 institutions at 60 sites.

Ross Miller, director of accreditation and regulatory compliance, said the board had handled eight complaints directed at ITT. Most challenged coursework grades, but there were also complaints regarding federal student assistance and the quality of education provided.

While for-profit colleges frequently serve low-income students, they are not low cost. ITT’s tuition costs are among the highest in the industry. A two-year degree program can cost $44,000, according to the consumer bureau. Compare that to a two-year degree at Ivy Tech, at about $6,600.

A new survey from Public Agenda finds that nearly a third of for-profit college graduates said that, given the colleges’ relatively high costs, their investment wasn’t worthwhile. More than half of the students attending the colleges thought their institutions were nonprofit. Most became aware of the schools from advertisements and did not consider any other schools.

The Consumer Financial Protection Bureau, created by the Dodd-Frank financial reform law, is quickly showing its worth in investigating an industry that costs taxpayers and students dearly. Its suit against ITT bears watching.