INDIANAPOLIS — In the wake of devastating federal sanctions, officials from the Indiana-based ITT Educational Services Inc. announced Tuesday that all ITT Technical Institute campuses will be closing.
The announcement includes the Breckenridge Nursing School location near Cascade Station in Portland.
In late August, the U.S. Department of Education barred ITT (ESI) from enrolling new students who depend on federal aid and required the company to warn current students that its accreditation is in jeopardy. ITT also was told that it must increase its reserves from $94.4 million to $247.3 million, or 40% of federal student aid the company received in 2015.
The financial blow was too much for Carmel-based ITT to bear, so the decision was made to shutter operations, a move that will impact thousands of students and employees.
"It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service," said a statement from ITT. "With what we believe is a complete disregard by the U.S. Department of Education for due process to the company, hundreds of thousands of current students and alumni and more than 8,000 employees will be negatively affected.
"The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter. We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution."
The company said its focus and priority will be using the remaining staff to help displaced students with their records and future educational options. ITT had 40,000 students as of June 30.
Education Department Secretary John B. King Jr. has called the moves against ITT necessary to protect students and taxpayers. The college chain has faced fraud charges from the Securities and Exchange Commission. ITT also is being investigated by about 20 state attorneys general.
King previously deflected a question about whether his department was looking to put ITT out of business, again saying that the move was made with students and taxpayers in mind.
ITT offered on-campus and online classes in business, nursing and health sciences, electronics and information technology. It operated 137 campuses across 39 states. ITT last year generated $850 million in revenue, about $580 million of which came from federal student loans.
The U.S. Department of Education previously stated that students who attend ITT on federal aid can get their loans discharged if ITT closes. Even past students, who have graduated or dropped out, can file claims to get their federal loans forgiven. But veterans have no recourse.
The Post-9/11 GI Bill gives veterans 36 months of college tuition, plus expenses, to attend the school of their choice. It makes no accommodation for students who are enrolled in a school that closes.
In the statement released Tuesday, ITT officials called the government's action "inappropriate and unconstitutional," stating that with its closure, it will fall to others parties to take action to attempt to prevent something like this from happening again.
"We have always carefully managed expenses to align with our enrollments. We had no intention prior to the receipt of the most recent sanctions of closing down despite the challenging regulatory environment that now threatens all proprietary higher education," said the statement. "Despite our ongoing service to this nation's employers, local communities and underserved students, these federal actions will result in the closure of the ITT Technical Institutes without any opportunity to pursue our right to due process."
ITT's enrollment was declining prior to the federal restrictions. In the three-month period ended June 30, ITT enrolled 9,846 new students, an 18.3% decline from a year earlier. ITT in July said it expected new student enrollment to fall 45% to 60% in the second half of the year.
ITT Educational Services says it is ceasing operations at all of its ITT Technical Institutes permanently, including the Portland nursing school location near Cascade Station.
The company says the closures are due to an investigation and sanctions by the U.S. Department of Education.
"It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service," the company stated Tuesday. "Effective today, the company has eliminated the positions of the overwhelming majority of our more than 8,000 employees."
Last week the Associated Press reported the U.S. Department of Education banned the for-profit college chain from enrolling new students who use federal financial aid.
The company was the subject of state and federal investigations focusing on its recruiting and accounting practices.
Among the measures, ITT was been ordered to pay $152 million to the department within 30 days to cover student refunds and other liabilities in case the company closes. The chain, based in Indiana, is still paying another $44 million demanded by the department in June for the same reason.
The education department also has prohibited ITT from awarding its executives any pay raises or bonuses, and it must develop "teach-out" plans that would help current students finish their programs at other colleges if the chain shuts down.
Under the new measures, current students can continue receiving federal grants and loans.
Education Secretary John King said the government is taking action to protect students and taxpayers following "troubling" findings about the company. This month, a group that accredits ITT found that the chain failed to meet several basic standards and was unlikely to comply in the future.
"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 financial aid," King said during a telephone conference with reporters.
(The Associated Press contributed to this report.)