19 Rhode Islanders to have loans forgiven, totaling over $150,000 in debt relief
PROVIDENCE, R.I. – Attorney General Peter F. Neronha announced today that Rhode Island has finalized a multistate settlement with a private student loan provider, associated with the now defunct for-profit college ITT Tech, that will secure loan forgiveness for 19 Rhode Islanders totaling over $150,000 in debt relief.
Rhode Island joined 48 states and the Consumer Financial Protection Bureau (CFPB) in the effort to secure the settlement, which totals $330 million and benefits approximately 35,000 borrowers nationally.
The settlement is with PEAKS Trust, a private loan program run by the for-profit ITT Tech and affiliated with Deutsche Bank entities. ITT Tech filed bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITT's access to federal student aid.
PEAKS was formed after the 2008 financial crisis when private sources of lending available to for-profit colleges dried up. ITT developed a plan with PEAKS to offer students temporary credit to cover the gap in tuition between federal student aid and the full cost of the education.
"Over 130,000 Rhode Islanders are burdened with student loan debt and are keenly aware of the effect it has had on their lives," said Attorney General Neronha. "What this company did was take advantage of hard-working individuals who invested in their education and whose futures were on the line. This settlement will not only guarantee PEAKS will no longer do business but also sends a strong message that predatory lending practices are unacceptable."
According to court documents:
• ITT and PEAKS knew or should have known that the students would not be able to repay the temporary credit when it became due nine months later. Many students complained that they thought the temporary credit was like a federal loan and would not be due until six months after they graduated.
• When the temporary credit became due, ITT pressured and coerced students into accepting loans from PEAKS, which for many students carried high interest rates, far above rates for federal loans. Pressure tactics used by ITT included pulling students out of class and threatening to expel them if they did not accept the loan terms. Many of the ITT students were from low-income backgrounds and were left with the choice of enrolling in the PEAKS loans or dropping out and losing any benefit of the credits they had earned, because ITT's credits would not transfer to most schools.
• The default rate on the PEAKS loans is projected to exceed 80%, due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible. The defaulted loans continue to affect students' credit ratings and are usually not dischargeable in bankruptcy.
Under the settlement, PEAKS has agreed to forgo collection of the outstanding loans and cease doing business. Notices will be sent to the identified borrowers about the cancelled debt and ensure that automatic payments are cancelled. PEAKS will also inform credit-reporting agencies to update credit information for the affected borrowers.
Students do not need to take any action to receive the debt relief. The notices will explain their rights under the settlement. Students may direct questions to PEAKS at customerservice@peaksloans.com or 866-747-0273, or the Consumer Financial Protection Bureau at (855) 411-2372.
In 2019, the Rhode Island Student Loan Bill of Rights was signed into law, authorizing several state entities, including the Office of the Attorney General, to oversee the practices of private student loan servicers operating in the state. For more information about your rights as a student loan borrower, or to file a complaint, call the Office of the Attorney General's Consumer Protection Unit at 401-274-4400 or visit https://studentloanrightsri.com/.
In addition to Rhode Island, this settlement was signed by the attorneys general of Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
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