Closing of ITT Tech and other for-profit schools leaves thousands of students in limbo

The for-profit college boom has gone bust.

Closures of high-profile schools such as ITT Technical Institute have left thousands of students in limbo while raising questions about the future of an industry that provides training for vocational, technical and other mid-level skilled jobs.

For-profit schools are facing major challenges on several fronts after a period of meteoric growth. 

Federal and state officials have filed suits or launched investigations into allegations of predatory lending and false advertising by some leading chains. At the same time, the Obama administration is trying to reshape the industry by pushing new regulations that would tie student debt limits to job prospects and make it easier for students to have their loans forgiven if they were defrauded — with the school potentially on the hook for the tab.

For-profit schools began aggressively expanding their numbers and enrollments in 2000 as online education became more widespread, attracting students who were more likely to be low-income, minority and part-timers.

Those schools ratcheted up their growth even more after the Great Recession, when many Americans sought new skills in hopes of finding better jobs in a tough labor market. Wall Street drove education company stock prices sky-high.

The problems that followed, including high default rates on student loans and accusations of predatory lending, triggered a crackdown by the Obama administration.

ITT’s parent company blamed  the administration’s actions for the closure of the chain’s 137 campuses last week, meaning 35,000 students who were preparing to start classes this month won’t get the degrees they were seeking.

Alvaro Laborin, a 36-year-old Navy veteran from Los Angeles, said he spent the last few years working all manner of odd jobs — bartender, mechanic, Uber driver, even a walk-on Hollywood extra — to be able to afford cybersecurity classes at ITT’s Torrance campus.

“It felt like home to me,” Laborin said. “This school has been around since before I was born and now it’s gone?”

He was among about 20 ITT students at a clinic Thursday night at the offices of the Legal Aid Foundation of Los Angeles to figure out their options. They include trying to transfer ITT credits to other schools or seeking forgiveness on student loans.

Laborin wasn’t sure if he would try to attend another for-profit school or try a public community college. But he said he would not quit on his goal of a college education.

“I’d rather be in debt up to my neck for the rest of my life than give up now,” he said. “When things like this happen, you have to either change or be the one who gets left behind.”

Less than 18 months ago, thousand of students at another high-profile for-profit chain were forced into the same situation. Corinthian Colleges Inc. closed the doors on its remaining campuses following government allegations of falsified job placement rates. 

Many students at ITT, Corinthian and other for-profit schools paid for their education by taking out federally backed and private student loans. And though borrowing has shot up at all colleges and universities in recent years, students at for-profit schools led the way.

Their federal student loan originations increased tenfold from 2000 to 2011, according to new research from the Federal Reserve Bank of New York.

Those students were more likely to default. Many either didn’t finish school or graduated but were unable to land well-paying jobs in their field. 

“They’ve done their part of the bargain. They took out the loans to pay for their education. They graduated and what the school promised them wasn’t true,” said Debbie Cochrane, vice president of the Institute for College Access and Success, an Oakland nonprofit group that advocates for broader access to higher education.