ITT Technical Institute Faces Another Lawsuit, Now From Massachusetts Attorney General
Posted By Donna Fuscaldo on April 18, 2016 at 9:47 am
If it wasn’t bad enough for the for-profit colleges, which have been deluged by lawsuits and declining enrollment, earlier this month, the Massachusetts Attorney General set its sights on ITT Technical Institute, lodging a lawsuit against the for-profit college for allegedly inflating job placement rates. This comes on the heels of a lawsuit by eleven nursing students who claim ITT misled students into enrolling in one of its schools, even though it wasn’t accredited. ITT is being sued by a number of states as well as by the Consumer Financial Protection Bureau.
The piling on of ITT is the latest in a long-running for-profit drama pitting regulators, students and watchdogs against the for-profit schools that say they are innocent of all the allegations. ITT may be the latest facing lawsuits, but it’s not the first. DeVry University and the University of Phoenix are also facing increased scrutiny and last year, Corinthian Colleges, another for-profit, crumbled under the pressure of government inquiries.
That has weighed on the enrollment at these for-profits, which have faced recent declines. According to a July report by the Department of Education’s National Center For Statistics, 3,436 for-profit colleges took part in the federal financial aid program in the 2014-2015 year. That’s down from 3,527 in the 2012-2013 academic year. “The non-stop lawsuits against for-profit colleges have taken a toll on the industry, causing declines in new enrollments,” says Mark Kantrowitz, publisher and VP of strategy at Cappex.com. “Even if a lawsuit is unsuccessful, it is a source of negative publicity.”
Attorney General Maura Healey contends in her lawsuit that ITT’s Norwood and Wilmington locations in Massachusetts engaged in “unfair and harassing” sales tactics and exaggerated claims about the success of graduates in its Computer Network Systems program. ITT admission representatives allegedly claimed 80 percent to 100 percent of graduates land a job in their field or in an industry related to it. Placement rates were actually 50 percent or less, according to Healy. “ITT did not disclose that its placement rates included graduates with jobs outside their field of study and graduates with internships or short-term, unsustainable jobs who never received permanent, sustainable employment – including any job that somehow involved the use of a computer,” said Healey when announcing the lawsuit.
“ITT claimed that jobs simply selling computers at big box stores counted as placements, and even counted a graduate as placed who provided customer service for an airline checking travelers into their flights.” The lawsuit is seeking civil penalties and restitution, including returning tuition and fees to students targeted by the deceptive practices in the Computer Network Systems programs.
“Lawsuits from law enforcement, like the Massachusetts Attorney General, are always more serious than lawsuits from private attorneys,” says Kantrowitz. “Attorney General Maura Healey is known for taking action against for-profit colleges. If her lawsuit is successful, there will likely be similar lawsuits against ITT by other states where ITT has campuses.”
In response to Attorney General Healey’s lawsuit, ITT said in a press release that it was “disappointed” and said the lawsuit was a “wide-ranging fishing expedition that lasted for more than three years.” As for the overall increased litigation, it said it “will vigorously defend itself against any such complaints and provide the necessary documentation to set the record straight. We’re hopeful that our day in court will shine light on the claims made and provide an accurate and complete picture to the public.”
At the heart of the lawsuit is what jobs are and should be counted in the placement rates, says Kantrowitz. For instance, should it just be jobs in that specific field of study or a related field and whether or not it should or shouldn’t include jobs that aren’t in the field of study. Same goes with internships. Is it fair to count them as a job placement?
The steady drumbeat of lawsuits against ITT and other for-profits hasn’t done much to help the share prices of the for-profit companies that are publicly traded. In the midst of the lawsuit announcements, competing for-profit Apollo Education Group Inc., which owns the University of Phoenix, reported worse than expected results for its most recent second quarter, saying enrollments fell 24 percent to 162,400 students.
The decline in enrollment is an ongoing trend and spooked investors, who sent shares of for-profit stocks declining. The struggles for-profits are facing from a legal and business standpoint are leading many to question what will come of this industry. Will heavy regulation and costly lawsuits mean doom for the industry or will demand continue to be there from non-traditional students seeking a degree is the million-dollar question.
Although it’s anyone’s guess, you can’t count the for-profits down and out yet. For-profits have been around in one form or the other for 100 years and the honest ones do fill a need. Turns out a pretty big one. According to the Association of Private Sector Colleges and Universities, for-profit schools have produced more than 800,000 degrees in 2015 alone.