The Student-Loan Scam Killed ITT Tech

ITT Technical Institute announced that it was shutting the doors of its campuses earlier this month, after the Department of Educationbarred the company from accepting federal student aid funds. Thousands of employees have lost their jobs and tens of thousands of students are left saddled with monstrous debt, no degree, and credits that are scarcely accepted elsewhere. This is clearly nothing short of a disaster for those involved, but could this be a glimpse into a grim future for the education sector?
The Government’s Execution Order
The Department of Education’s decision comes after a long investigation into ITT, the quality of the education they provided, and more substantially, the default rate of their students. Colleges must maintain a default rate under a specified percentage. If a college’s default rate is above 30 percent for 3 consecutive semesters or ever reaches above 40 percent, the Department of Education can ban the college from enrolling students who rely on federal funds, as they have in this case. This ban is unquestionably a death sentence for colleges, as the vast majority of students are clearly incapable of paying for their education out of pocket at today’s prices, and almost all student loans are originated by the federal government.

This post was published at Ludwig von Mises Institute on Sept 25, 2016.