for-profit collegesFor-profit college ITT Technical Institute (ITT Tech) has been making headlines over the past month after it shut down and subsequently filed for bankruptcy. This shutdown came after the U.S. Department of Education ruled that ITT Tech could no longer admit students who depended on federal financial aid, a decision that hit the for-profit institution hard since it, like most other similar organizations, relied heavily on the money from students taking federal loans to stay in business. ITT Tech is the second for-profit college that has closed down following government sanctions in the past couple of years — Corinthian Colleges shut down and filed for bankruptcy in 2015 — and it likely won’t be the last.

These types of companies have been in hot water for many years, with allegations of fraud and deception growing to the point that the government has finally begun to get involved and take action. What does a sudden shutdown mean for current and former students who’ve already invested time and money into an institution like ITT Tech, and how can prospective students protect themselves from falling victim to a predatory college?

What will happen to ITT Tech’s students?

All told, there were 35,000 students enrolled with ITT Tech at the time of its shutdown. Unfortunately, as this all happened rather quickly, students have been left in the lurch with the start of fall classes abruptly canceled and their campuses closed without proper warning. Fortunately, the government has created some provisions that help students with federal loans who’ve experienced a school shutdown that caused them to not complete their program. Students who were currently enrolled in a college or withdrew 120 days or less prior to the school’s closing can apply for what’s known as a Closed School Discharge. Students are not eligible for this type of loan discharge if they decide to continue their education elsewhere to complete their degree program — which means if an ITT Tech student wants to have their loans discharged, they can’t transfer their existing credits to another school to finish their program.

If every eligible student seeks a loan discharge, it will cost the taxpayers $500 million, as detailed by MarketWatch. While $90 million of that may be offset by money set aside by ITT Tech on government orders in case of a shutdown, because the company has declared bankruptcy, that may be a little more complicated. Former students with federal loan debt who believe they were wronged by ITT Tech can apply for forgiveness through a process known as “defense to repayment.” However, it’s not guaranteed that former students will receive loan forgiveness and reimbursement without proof of defraudment, and those who took out private loans or veterans who used part or all of their GI Bill to fund their education are likely out of luck entirely.

What actions are the Department of Education taking and why?

The overwhelming majority of students at for-profit colleges like ITT Tech rely on federal student aid to afford their education. As a result of a combination of aggressive recruitment tactics, inflated graduation and job placement statistics and false promises of gainful employment in their field after graduation, students at for-profits have been taking out hefty loans, then defaulting at an alarming rate. This is a huge contributor to the current student loan debt crisis, and the Department of Education has begun stepping in to try and prevent these schools from continuing to put taxpayers’ dollars at risk by pressuring students to take out enormous loans. In addition to ITT Tech, DeVry University and University of Phoenix have also been in hot water with the government — and then there’s Corinthian Colleges.

Last year, the Department of Education fined Corinthian Colleges $30 million due to misrepresentation, shortly after which the organization shut down and filed for bankruptcy. The data presented in the press release about the fines is alarming and showcases the types of predatory tactics used by some for-profit colleges to lure students through their doors. For example, one Corinthian graduate with an accounting degree was reported as having a job in her field, when in reality she worked at Taco Bell. In December 2015, the Department of Education announced it would forgive $28 million in student loan debt for more than 1,300 Corinthian Colleges students.

One of the biggest risks to students is their credit

It’s no secret that student loan debt is a crippling problem for millions of Americans. Defaulting on a loan is a fast track to financial ruin, and the impacts of credit mistakes can haunt people for years. It’s bad enough to be dealing with an overwhelming amount of loan debt as a graduate from an accredited college with a degree that you can use, but students who take out loans with for-profit colleges are often left with half-finished degrees and credits that won’t transfer or a degree that few employers will take seriously. This spells certain doom, and the inability to pay down their loans will inevitably lead to their credit reports and scores tanking — closing off opportunities to better their lives like qualifying for a mortgage or being approved for a credit card.

The sense of desperation that comes with a substantial debt that you have no idea how to pay can lead you directly into the waiting arms of scammers who are currently preying on loan debtors with a vengeance. Specifically, many scammers are targeting students and graduates with what’s known as loan forgiveness scams. It’s important for students at ITT Tech and other for-profit colleges to be on alert for these fraudsters, and realize that anything which seems too good to be true probably is. While it is possible for current students as well as some former students with federal loan debt to get their loans forgiven via the government, you will want to be sure that you’re going through the proper channels to do that. When in doubt, listen to your gut and resist any temptation to take the easy way out — you may find yourself in the hole for even more money than you currently owe.

ITT Tech students have hard choices ahead of them

The government is aware of the difficulties facing ITT Tech students as they try to figure out what to do next. Under Secretary of Education Ted Mitchell said that the Department of Education has been reaching out to the presidents of community colleges within the vicinity of ITT Tech campuses that have similar programs, asking them to work with students who want to transfer. Unfortunately, many students may have to cut their losses, apply for loan forgiveness and start over.

Similar to payday lenders, for-profit colleges often target low-income and other vulnerable populations, primarily people with no college-educated individuals in their families. The lack of context to know what’s normal and what isn’t when it comes to paying for schooling helps schools successfully pressure them into taking huge loans to pay for education that more often than not leads to a useless degree. Beyond the work being done by the government to try and bring exploitative for-profit colleges to justice and creating regulations to help prevent them from exploiting their students (or customers), it’s important for prospective students and their loved ones to be aware of the danger signs to watch for when considering a school.

How can current and prospective college students protect themselves?

1. Ask questions and do your research. There are some important questions you can ask when you’re looking at a for-profit college that can help you figure out if it is what it advertises itself to be. One of the most important things to find out from the get-go is whether or not the school is accredited. A school or program that is accredited has been certified to meet the standards required for its graduates to attend other higher education institutes or achieve credentials for professional practice. Essentially, if your school or program isn’t accredited, there’s a good chance you won’t be able to transfer your credits to get a bachelor’s degree after obtaining your associates, or be taken seriously by prospective employers.

Many of ITT Tech’s former students are going to have to start their educational process over because the credits they’ve earned already won’t be transferred (a problem that many for-profit college graduates have encountered for years). The Department of Education has a tool on its website that helps you find information about the accreditation of any school you’re interested in. It’s equally important to make sure that the accreditor itself is reputable; the Accrediting Council for Independent Colleges and Schools, which provided accreditation for ITT Tech and many other for-profit colleges, was recommended for shutdown by a federal panel in June.

2. Be wary of high-pressure sales tactics. Obviously, a for-profit college is going to be focused on money; it is a business, after all. But many of the schools in hot water with the government right now used high-pressure sales tactics and deception to push students into taking out thousands of dollars in federal loans. One ITT Tech graduate recounted to Time recently that the state-of-the-art equipment he was shown during his tour didn’t actually function — something he learned only after making a commitment. This type of deception fits right along with the inflation of graduate job placement statistics that ultimately led to Corinthian Colleges’ downfall.

Even more troublesome is the pressure put on by some of these colleges for students to take out hefty loans they can’t afford to pay back. A 2010 undercover investigation by ABC News revealed evidence that University of Phoenix admissions recruiters were telling students to take out the maximum loan amount whether they needed it or not. If you have to borrow money for your education, you should only be borrowing what is necessary to cover the cost of your tuition and other expenses. It’s also important to note what costs you’re being quoted by a university and compare it to similar schools in your area — you might be surprised to find that for-profit universities which often advertise themselves as an economical choice are actually twice as expensive as your local community college. Another important note when it comes to payment: beware any school that forces you to take out loans even if you have the means and desire to pay with cash upfront.

3. Talk to current and former students. Don’t just take the admissions staff at face value, and remain skeptical of any students you meet while on an official tour. Go online and see what kinds of reviews there are about your school of choice, and consider contacting any current or former students you may know to get an idea of what their experience was. You can also speak with the educators in the program you’re interested in to find out more about the material taught and determine whether you’re going to be a good fit. Many of the more shady for-profit colleges employ educators with very little to no experience or expertise — some research into the background of the educators can be illuminating on its own.

4. Report any unscrupulous behavior you come across. If you do believe that you’ve been the victim of deceptive recruiting practices at your school, whether you’re a current or former student, one of the best things you can do to help yourself and other students is to report the fraud to the FTC. This is especially helpful for students attending a college with help from federal financial aid. If you’re using private lenders to finance your education, consider reporting the scam to the Consumer Financial Protection Bureau. Veteran students who have used their GI Bill money to pay for their education can report fraud on the part of their school to the Department of Veteran Affairs complaint system.

5. Document everything. Keeping records of all interactions, including email exchanges, with a college can be a great way to ensure that you’ll have the information you need in the event that you need to file a report down the road. Make or request copies of any papers you sign, and be sure to also read any documents you’re asked to sign carefully for any suspicious language. Some schools require students to sign arbitration agreements, which essentially strip you of your right to sue the school in the event of misconduct down the road. It’s important to understand what you’re getting into, as well as retain your own documentation for everything so you can produce proof if you believe you’ve been defrauded.

The future of for-profit colleges is uncertain

While the for-profit educational industry has made plenty of money, in recent years student enrollment has been on the decline and with the federal government stepping in to take action against predatory and deceptive practices, it’s likely more school closings are ahead. It’s important for prospective students to be aware of the risks so they can protect themselves from these companies. Student loan debt is one of the few types of debt that can be nearly impossible to get rid of, leading to strain on a person’s finances and credit for years to come. Nobody wants to incur thousands of dollars in debt for a worthless degree, but that’s where many for-profit college graduates have found themselves. For more information on protecting yourself from scams of all kinds, follow our scams blog.