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SEC Charges ITT Educational Services With Fraud
mpicpp writes with news that ITT Educational Services, the company that operates for-profit college ITT Tech, has been charged with fraud over its student loan programs. The U.S. Securities and Exchange Commission accuses the company of concealing poor financial performance from its investors.
ITT formed both of these student loan programs, known as the "PEAKS" and "CUSO" programs, to provide off-balance sheet loans for ITT’s students following the collapse of the private student loan market. To induce others to finance these risky loans, ITT provided a guarantee that limited any risk of loss from the student loan pools.
According to the SEC’s complaint filed in the U.S. District Court for the Southern District of Indiana, the underlying loan pools had performed so abysmally by 2012 that ITT’s guarantee obligations were triggered and began to balloon. Rather than disclosing to its investors that it projected paying hundreds of millions of dollars on its guarantees, ITT and its management took a variety of actions to create the appearance that ITT’s exposure to these programs was much more limited.
According to the SEC’s complaint filed in the U.S. District Court for the Southern District of Indiana, the underlying loan pools had performed so abysmally by 2012 that ITT’s guarantee obligations were triggered and began to balloon. Rather than disclosing to its investors that it projected paying hundreds of millions of dollars on its guarantees, ITT and its management took a variety of actions to create the appearance that ITT’s exposure to these programs was much more limited.
It's telling that when for-profit education screws over INVESTORS then a federal attorney goes after them.
However, when they screw over actual individuals the same groups act like they don't see it and they don't care.
You sure can see where the values lie in the U.S. right now.
These weren't federal loans, as far as I can tell from RTFA. In short the allegations say that this is what happened:
1) The private loan market cratered
2) ITT said, "No problem we'll sell loans to ourselves, backed by investors, and we'll guarantee those loans" (see equity backed mortgages, for a similar case study)
3) Lots of loans started to default
4) ITT did math and said "Oh Nos", if we pay off those guarantees it's going to look bad. I know, let's pay those loans ourselves for a bit instead, I'm sure they will start paying again.
5) They didn't start paying again
6) They had to come clean to investors, stock tanks
6) They got caught in the coverup
7) SEC sues, stock tanks somemore
8) (profit)*-1
Min
On the whole, I find that I prefer Slashdot posts to twitter ones because I don't get limited to 140 chars before
"A better question may be, why do "federally-guaranteed loans" need to exist in the first place..."
Exactly. If the question is "Why is higher education so expensive," that is the answer.
"National Security is the chief cause of national insecurity." - Celine's First Law
ITT and Phoenix are products of the federal loan industry. College was affordable before federal loans. The administrators scream and wail about losing state funding and blame tuition rises on that, but look at the fucking temples to education that are being built. How does a lazy river contribute to education? Climbing walls are nice, but why am I subsidizing federal loans for students to have a better climbing wall than education. I'm not quite at the "pole barn is optimal" level, but half of the staff and the space they occupy here is absolutely useless, and many of them actively, deliberately interfere with education. We could cut the cost of college education in half and get a better product. Don't believe me? Look at or College of the Ozarks. Both are private colleges that don't charge tuition or room and board. Most universities, the one I teach at included, are scams designed to extract the most money possible from the "students" or "customers" as we've been told to call the millennials. Even major pedagogical decisions, like switching from quarters to semesters, are driven by the same thought ...you get more money out of a student who drops out after a semester than a quarter.
Because, it is better for society to have an educated populace, and not just have the children of the wealthy be able to afford to have one.
Another person operating under the delusion they sprang into existence a fully formed human without any of the benefits provided by society.
Did you go to public school? Did you enjoy the benefits of living in a mostly lawful society? Do you drive on public roads? Do you use any public infrastructure like water?
Do you honestly believe you exist through sheer force of your own will and that you did not reap the rewards of your parent society? If so, you should probably seek some therapy, because you're delusional.
Because a society in which only the children of the wealthy can afford an education, and everyone else is relegated to not having one and working in medial tasks .. well, that society is a complete shithole.
So essentially you are saying "I wish to live in a society in which we have the wealthy and the peasants, and if the peasants wish to rise above their station, too damned bad".
You may want to live in that society, but the rest of us don't.
What princely patron paid for your smug self to get an education and rise up from the gutter? Or are you just some rich kid who thinks having daddy pay for your education is the natural order of things?
Lost at C:>. Found at C.
"A better question may be, why do "federally-guaranteed loans" need to exist in the first place..." Exactly. If the question is "Why is higher education so expensive," that is the answer.
Universities are at this point, are now citadels of management people:
http://www.washingtonmonthly.c...
http://reclaimuc.blogspot.com/...
Lotsa highly paid MBA types, and their staff.
Research - once upon a time, a lot of research was done at the corporate level. Most has been shifted to Universities now. And even though it brings in research dollars, infrastructure for it has to be built, and government research money is focused on the work at hand, not building the infrastructure.
The education system has been groomed for years that the only acceptable path is the 4 year Bachelor's, perhaps followed by a Masters degree. Any other form of education is considered woefully deficient.
So today, parents look at a college education as grades 13 through 16.
Demand is extremely high.
So why the crisis now?
We're at a wobbly sort of point, where while the demand is still there, but the educational supply cost has outpaced the ability of many if not most people's resources to repay. You graduate with the equivalent of a small mortgage, going for an entry level job in your field (and woe onto you if you are in another field beside engineering) making little, and the University is already badgering you for donations. That is a hellava mess.
The cost of a college education is almost at the point of not being worth it.
The federal loan system is in the mix of problems, but is merely following the lead of University trends, established during WW2 and continued to the present day. The overly managed structure is a more recent phenomenon, as managers in my experience always find that more managers are needed.
I do doubt that the research aspect of present day higher education will ever go away. As for the fact that there are more managers and their support staff now than educators, might be something that can be worked on.
That's a little more than a Fox News soundbite, but despite it all, the federal loan program is more reacting to than creating the problem.
The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.