Those cases, according to the council, call into question ITT’s integrity, financial viability and ability to serve students. The company must submit information to address various allegations ahead of the next accreditation meeting, to be held in August. If ITT loses its accreditation, the school would no longer be eligible to receive any federal financial aid, which could topple the chain, because federal dollars are a major source of revenue.
Against this backdrop, the Education Department is asking ITT to provide a letter of credit from a bank assuring the availability of about $124 million, up from the $80 million letter of credit the company already had on file with the department. The letter is meant to protect students and taxpayers if the school is unable to cover federal student-aid liabilities. ITT has 10 days to decide whether to increase the funds maintained in the department’s federal holding account or provide a new letter for the additional amount.
“ITT’s failure to demonstrate compliance with the accreditation criteria … may result in the accreditor’s taking adverse action. This concern from ACICS comes at a point where the company ‘s financial performance is also being questioned, and that discussions about a potential sale have fallen through,” Department official Michael J. Frola wrote in the letter to ITT.
ITT spokeswoman Nicole Elam said the company is reviewing the department’s request and will “continue to cooperate with all regulatory authorities as new mandates are levied upon us.” She said the request is a direct result of the “unexpected action” taken by ACICS “under extreme political pressure.”
ITT, one of the nation’s largest operators of for-profit technical schools, has been fighting a barrage of lawsuits and investigations. Weeks before the accrediting council made its request, Massachusetts Attorney General Maura Healey filed a lawsuit against ITT alleging that it pressured people to enroll in programs of dubious quality. Former recruiters told prosecutors that they were expected to call up to 100 prospective students per day and were publicly shamed or fired if they failed to meet quotas.
Employees are accused of telling prospective students at two campuses in Massachusetts that 80 to 100 percent of graduates found jobs in or related to their field of study, when the actual job placement rates were 50 percent or less and included graduates with internships, according to the complaint. ITT has denied the charges, calling Healey’s investigation a “wide-ranging fishing expedition.”
But the lawsuit is one of many headaches for the company. The Education Department placed additional restrictions on the company’s use of federal grants and loans in October, after ITT failed to account for millions of dollars in aid that was disbursed to students in the past five years. The company originally landed on the department’s watch list, known as “heightened cash monitoring,” a year ago for missing the deadline for filing financial statements. ITT is also battling two lawsuits from the Consumer Financial Protection Bureau and the Securities and Exchange Commission.
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