U.S. Government Cuts Off New Funding for ITT Technical Institute
26 August 2016 - 5:50AM
Dow Jones News
WASHINGTON—The Obama administration has ordered the for-profit
education chain ITT Technical Institute to stop enrolling new
students that use federal loans and grants, amid allegations of
deceptive marketing.
The move deals a major blow to the company's finances, as
federal student grants and loans are the main source of its
revenue.
The stock of parent ITT Educational Services Inc. plunged by
about a third after the announcement to $1.40 a share on the New
York Stock Exchange.
The Education Department said it would also step up its scrutiny
of ITT's finances, part of a broad federal crackdown on abuses in
the for-profit school industry.
An ITT spokeswoman couldn't immediately be reached for
comment.
The move comes nearly two months after the department ordered
ITT"s parent to boost its cash reserves, pointing to the risk that
the chain of for-profit colleges could close because of state and
federal investigations.
The Education Department said on Thursday that ITT's accreditor,
the Accrediting Council for Independent Colleges and Schools, has
determined the company "is not in compliance and is unlikely to
become in compliance with accreditation criteria."
ITT, which has 43,000 students nationwide, is under
investigation by 19 state attorneys general and at least two
federal agencies over allegations of shady marketing and
recruiting.
"Our responsibility is first and foremost to protect students
and taxpayers," Education Secretary John B. King Jr. said on
Thursday. "Looking at all of the risk factors, it's clear that we
need increased financial protection and that it simply would not be
responsible or in the best interest of students to allow ITT to
continue enrolling new students who rely on federal student aid
funds."
Write to Josh Mitchell at joshua.mitchell@wsj.com
(END) Dow Jones Newswires
August 25, 2016 15:35 ET (19:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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