CHARLESTON — West Virginia Attorney General Patrick Morrisey and 47 other attorneys general have reached a $330 million, multistate agreement with a student loan company accused of pressuring students into accepting loans they could not pay back.
This agreement erases $1,085,726 in debt for 138 consumers in West Virginia. All were former students of ITT Technical Institute, a now-bankrupt for-profit college.
The agreement involves PEAKS Trust 2009-1, which was created in 2009 to purchase, own and manage certain loans offered to students enrolled at ITT Technical Institute. PEAKS provided loans to finance students’ tuition at ITT Tech.
“Students seeking to expand their educational and career opportunities shouldn’t be preyed upon by loan companies,” Morrisey said. “This type of unlawful conduct must be stopped so consumers are not deceived.”
ITT developed a plan with PEAKS to provide gap funding through zero interest, short-term loans payable in a single payment due nine months later. PEAKS and ITT offered students this temporary credit, even though they knew or should have known the students would not be able to repay the loan when it became due.
Eighty percent of the loans currently are defaulted.
Many students complained they thought the temporary credit was akin to a federal loan in that it would not be due until six months post-graduation.
The agreement alleges ITT also used pressure tactics and coerced students into accepting loans from PEAKS after their temporary credit became due. In some instances, students were pulled out of class and threatened with expulsion if they did not accept the loan terms.
This left students with the only alternative of dropping out and losing any benefit of the credits they had earned, since ITT’s credits would not transfer to most other schools. As a result, many students ended up enrolling in the PEAKS loans.
The agreement requires PEAKS to cease all collection activities and stop accepting payments from victimized consumers. PEAKS also cannot sell, transfer or assign any loan.
West Virginia joined the agreement with Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming.