June 17, 2019 | Number of The Day
Debt relief for NJ borrowers in settlement over predatory student-loan practices

A multi-state settlement has been reached that will lead to $168 million in debt relief for more than 18,000 former students of ITT Tech. As part of that, 48 people in New Jersey will get settlements totaling $625,000.

The 48 obtained loans from an education lender known as Student CU Connect CUSO, LLC (CUSO) in order to attend ITT Tech — which declared bankruptcy in 2016 amid investigations by several states and following action by the U.S. Department of Education to restrict its access to federal student aid. As happened elsewhere, the New Jersey students were pressured into obtaining education loans through CUSO, a consortium of credit unions created solely for the purpose of offering loans to finance the tuition of ITT Tech students. Most of the students could not hope to repay the loans; some of them took out multiple loans. The settlement stops any attempt by CUSO to collect on those loans.

Pressure tactics used by ITT included pulling students out of class and threatening to expel them if they did not accept the loan terms. The default rate on the loans was extremely high (projected to exceed 90 percent) due to both the high cost of the loans and the lack of success ITT graduates experienced in landing jobs that paid enough to make repayment feasible.

The defaulted loans continue to affect students’ credit ratings and are typically not dischargeable in bankruptcy. Under the settlement CUSO, under the threat of litigation, has agreed to forego collection of the outstanding loans. CUSO will also cease doing business.