By the time ITT Technical Institute (ITT) closed its doors earlier this month, the for-profit college had been selling tenuous diplomas at exorbitant prices for more than 20 years. The company had been taking millions in federal grant money, burying low-income and first-generation students in insurmountable debt, and evading regulators since the early 1990s—all while its CEO and other executives personally profited from the fraud.
ITT finally shut down all campuses following a federal crackdown led by the Department of Education, which found the school was earning most of its revenue from taxpayer dollars. An estimated 70 percent of the school’s revenue came from federal financial aid funds in 2015. As soon as the DOE blocked ITT’s access to federal aid, the school stopped enrolling students. ITT then quietly discontinued operations at many campuses ahead of Labor Day weekend and announced the decision publicly the following Tuesday. A week later, ITT filed for bankruptcy.
“They sought out people who thought that this was their only option,” a former Charlotte campus faculty member says. “[The students] were really trying to make a difference in their lives and trying to make a difference in their families lives,” she says, adding that the campus reps saw them as “cash cows.”
As a “for-profit” college, ITT operated as a business. The company had a product (bachelor’s degrees), customers (students), shareholders, and quarterly revenue goals. The school was even publicly traded under thestock ticker ESI from 1994 until September 2016, when it was delisted after ceasing all operations. By that time, the damage was done. ITT had drowned thousands of students in debt.
ITT charged an estimated $77,000 for a bachelor’s degree and $45,000 for an associates degree, according to a Deutsche Bank analyst. ITT’s own internal documents show bachelor’s degrees were sold for as much as $90,000. The Senate investigation reported ITT had “the most expensive programs of any for-profit college, forcing many students to borrow the maximum available Federal aid and to take on additional private debt.”
“ITT was one of the few colleges offering the program I was interested in [called] digital entertainment and game design,” he says. “At the time, I didn’t really know how to get into the game industry. When I visited the campus, everything sounded perfect. They told me I was accepted in the program [on the spot], so I didn’t do much college searching after that.”
Valladares took out $65,000 in federal and $7,000 in private loans to pay tuition. Four years later, he now owes more than $200,000 on his loans due to compounding interest. When he first applied, he was told by ITT recruiters he’d graduate with a bachelor’s degree and find a good job. Instead, he found himself buried in debt and, like all of the former students interviewed by Gizmodo, he was placed in a job that did not require professional training and had little do with his field of study.
“I wound up getting placed in a telemarketing job for $5.95 an hour,” a former student named Veronica, who studied electrical engineering at the Tampa campus from 1988 to 1990, says. “They thought they were doing me a favor. It was totally worthless.”
ITT was good at hiding its crummy job placement from prospective students. A 2012 Senate investigation found ITT’s internal documents loosely defined graduates working in a related field as people who spent “20-49 percent of time spent on the job using the skills taught in the core courses.”
Students who applied to jobs on their own often found the experience humiliating. “I went on interviews with employers, and they really wouldn’t take you seriously,” Veronica says. “It was hilarious. You could see the smile on their faces. It was comical to them.”
Jonathan, a former electrical engineering student at the Louisville campus (2012-2015) who recently lost his job, says interviews have not been going well. When he mentioned his ITT degree to his most recent interviewer, “he just looked at me as if it wasn’t a real degree.” Jonathan expects to be paying his student loans back “for as long as [he lives]” or “until he hits the lottery.”
Until July 2011, recruiters were compensated based on how many students they could enroll and incentivized to enroll as many students as possible. Recruiters were instructed to make 140 calls a day or 100 calls if they had an appointment.
Alcorta, like many students, paid more than triple the cost of a typical community college. While ITT charged $77,000 for its bachelor’s degrees, respected community college networks such as City University of New York (CUNY) were charging about $25,000 for a four-year degree. Community college degrees and vocational schools also have the added benefit of actually being valued by professional organizations. ITT recruiters were trained to lure potential community college students by asking questions like, “Do you want a discount education, or a valuable one that will give you a return in the future?”
A recently deleted job ad for an ITT “admissions representative” appears to corroborate the faculty member’s description of the job. The ad identifies the perfect candidate as someone with a “strong ability to persuade others” and as someone with “at least two years direct sales experience.” In contrast, “admissions counselors” and “admissions officers” job ads at nonprofit universities and colleges do not include this kind of predatory language. (They tend to focus on mentorship and communication skills.)
ITT recruiters even manipulated prospective students using pain-based sales techniques. Recruiters used a sales strategy called the “Pain Funnel” that encouraged them to ask progressively more hurtful questions to get prospective students to enroll in the school.
Recruiters were also encouraged to focus on prospective students eligible for military benefits, to maximize the amount of federal aid the college could receive. Between 2009 and 2011, ITT was the second-highest recipient of post-9/11 GI Bill funding, collecting $178 million from a program created to provide educational assistance to military service-members and veterans.
ITT’s predatory recruiting practices help explain why enrollment skyrocketed more than 200 percent between 2000 and 2010. Enrollment was particularly high during the recession, when Americans were eager to seek new skills and find better jobs. In 2010, the school had more than 88,000 enrolled students (compared to just 53,000 in 2007). Enrollments had a direct correlation with the amount of money ITT executives made in salary and bonuses every year.
The Senate investigation also found ITT spent a large majority of its revenue on profit and marketing, rather than investing it into the curriculum, which was a red flag for federal investigators. In 2009, ITT spent $2,839 per student on instruction, compared to $3,156 per student on marketing, and $6,127 per student on profit. The company’s 37 percent profit margin was the highest of any for-profit college investigated by the feds. In short: ITT executives made it a point to funnel money from tuition revenue into their private accounts.
ITT’s outsized marketing budget should be no surprise to anyone who grew up with the school’s TV commercials from the 1990s and early 2000s. Former creative director of the ad agency on the account, Paul Friederichsen, recently published an article saying the ad agency’s “mantra was simply to ‘Get Asses in Classes.’”
“We were the first two to have a degree out of an entire family,” says one of two hispanic brothers in a commercial from 2008, in which they drive a good car to a nice beach. The brothers compliment each other and their family holds hands, wading through the waves. Then comes the call-to-action. “We are educators helping people build a foundation for the rest of their lives,” the narrator says. “Call 1-800-372-4052.”
While most of ITT’s revenue was allocated to marketing and profits, its ever-expanding campuses were left to wither.
“I saw syllabuses that were four years old,” she adds. “This was supposed to be a technical school. I thought that was a huge oversight.”
“It was a YouTube education,” Valladares says. “In a lot of our classes, especially toward the end, we would go to YouTube and watch tutorials. I was paying a lot of money for this school. I could have just done that from home.”
“There was a book with the curriculum in it. Some instructors provided no assistance whatsoever,” Powell says. “If you asked them anything technical, they’d look it up or give you the page number. I would occasionally help the other students with the more hands-on stuff.”
Even if a teacher was inspired to create an interesting curriculum for the students, there was very little room to make a difference.
Meanwhile, for more than a decade, ITT’s executives masterfully dodged federal regulators. The company seemed to use every trick in the book (and even made up its own) when the feds aggressively pursued the company for misconduct. For example, when student loan defaults became an issue at dozens of campuses in 2011, ITT consolidated them into two unanalyzable entities to avoid regulation. When the feds started to measure graduates’ earnings to see if they were making enough to pay back loans, the company reformatted its curriculum to interfere. ITT also partnered with a Wall Street investment bank to set up a private lending program called PEAKS, which, through a complex series of transactions, helped the company bend the law to legally meet the definition of a “private” loan.
In 2010, ITT consolidated 26 campuses tracked by federal regulators into one entity to obfuscate financial information. The same year, the school created an off-balance-sheet trust to increase the amount of private loans it could make available to students. Through a complex series of transactions, ITT moved money around to skirt the “90-10 Rule,” a federal law that prevented for-profit colleges from receiving more than 90 percent of revenues from federal taxpayers.
In 2012, when the Senate launched an investigation into 30 for-profit colleges, it used ITT as an example of misconduct. The report found “all for-profit education companies derive the majority of revenues from Federal financial aid programs.” It also found that by 2010, $32.2 billion of Title IV Federal financial aid funds were taken by for-profit schools. When federal regulators clamped down on the company, ITT CEO Kevin Modany responded by scolding them publicly.
“The proposal would have a negative impact on minorities, low income individuals, and nontraditional students,” Kevin Modany said during an interview on Bloomberg TV in 2012. He was asked to clarify why, according to the Education Department, the for-profit college sector had the highest default rate in 2008 at 11.6 percent. (ITT’s student loan default was actually more than double, at 26.3 percent in 2008 and projected at 34 percent in 2009, according to a Senate inquiry.)
By 2013, things really started to unravel for ITT Tech. The company was almost delisted from the New York Stock Exchange for failing to report financial information on time. The company’s largest institutional investor, Blum Capital Partners, then divested its shares (about 10 percent of the company).
Even as investors fled, ITT Tech continued doing business. In 2014, theSEC accused CEO Kevin Modany and CFO Daniel Fitzpatrick of fraud, saying they “made various false and misleading statements and omissions to defraud ITT’s investors” and “engaged in a series of deceptive acts to hide the poor performance of the student loan programs and their financial impact on ITT.”
“If could go back in time, I’d stop myself from going to that school,” Valladares says. “For the amount of money, it was just not worth it. There were so many promises that were not fulfilled.”
“I would have avoided them like the plague,” Veronica says. “By the time I figured out [the cost of my loans], I was in the fourth quarter. By then, you’re in for a penny, in for a pound.”
Students who left the school within the last 120 days might be eligible forloan forgiveness. In this scenario, federal loan debt would be wiped away and students would have an opportunity to start their education somewhere new. But ITT credits would not be transferred, and students would lose the time they spent working toward an ITT degree.
Students in limbo may also be able to transfer their credits, in which case they wouldn’t qualify for loan forgiveness. About two dozen Senate Democrats are urging the DOE to make sure students are not lured into other for-profit colleges facing state and federal investigations and lawsuits after leaving ITT.
There are plenty of other schools out there that want “your ass in a class” and don’t seem to care what happens next—as long as you’re paying.