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The Department of Education’s move against the tech school throws further questions on the Springfield campus.Photo courtesy ITT  EDUCATIONAL SERVICES INC.
The Department of Education’s move against the tech school throws further questions on the Springfield campus.

Photo courtesy ITT EDUCATIONAL SERVICES INC.

New federal aid pulled from ITT Tech

Posted online
The U.S. Department of Education issued a ruling yesterday prohibiting ITT Educational Services Inc. (NYSE: ESI) from accepting new students with federal aid.

The news could be a further blow to Springfield’s ITT Technical Institute campus, which already temporarily stopped accepting new students as the company conducts an assessment of local market viability.

ITT, which also is facing a potential loss of accreditation through Accrediting Council for Independent Colleges and Schools, has been on the Department of Education’s radar in recent years over allegations of putting students and millions of dollars in taxpayer-funded federal student aid at risk. The department found ITT allegedly failed to reconcile its federal aid accounts in a timely manner and did not have a proper written policy to guide that process, as well as conflicting information about Pell Grant awards over several years. ITT executives also have faced fraud allegations, according to a government blog post.

The department has required the school to boost its cash reserves to cover potential damages to taxpayers and students, but last week, ITT had failed to address the concerns.

“In addition, in case the school’s actions cause it to close, we’re increasing the amount of cash reserves it must send us and we’re ending its installment payment plan for the amount previously required,” Department of Education Under Secretary Ted Mitchell wrote in the post. “Finally, we’re slowing down when ITT receives student aid from the government to ensure that ITT is handling its finances properly.”

The department in June increased the amount of surety on file from ITT to $123.6 million from $79.7 million, according to InsideHigherEd.com.

Current ITT students with federal loans may continue their education at the tech college, transfer their credits to a new school or put their studying on hold to see how the matter resolves itself in the coming months.

Those students who don’t transfer their credits, should ITT close, likely would be eligible to discharge their federal loans, according to the post.

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