Government tightens payments to for-profit college ITT Tech

WASHINGTON — U.S. Education Department officials are placing new limits on federal student aid administered by struggling for-profit college chain ITT Educational Services, which serves about 50,000 students in 27 states.

The move comes after the government determined that ITT was failing to comply with previous orders to improve its financial controls.

ITT has not produced proper and timely accounting for the federal grants and loans it distributes to students since at least 2009, the Education Department said in a letter sent to ITT on Monday. As a result, the letter said, ITT will now be allowed to pay out federal education funds to students only after they have attended classes and been certified as eligible by a school representative.

In a statement, ITT said it would meet the new restrictions, which it said will result in “an increased administrative burden.” It said the company does not believe it will have a significant, negative effect on its financial results or delay financial aid to eligible students.

Along with delaying ITT’s receipt of federal funds, the Education Department will also require the company to provide it with additional student information and news about any restrictions placed on it by lenders. In a statement accompanying the letter, Ted Mitchell, the department’s under secretary, said the government would take additional actions against ITT if it believed doing so would keep students safe.

ITT operates vocational colleges. It has already faced legal challenges from the Securities and Exchange Commission and the Consumer Financial Protection Bureau. The SEC alleges the company and its top executives committed fraud by hiding losses in an ITT student loan program. The CFPB accused it of pushing students into high-cost, predatory loans.

The Education Department had previously imposed additional financial scrutiny on ITT known as heightened cash flow monitoring, and required ITT to provide a letter of credit for $79.7 million, roughly 10 percent of the student aid it processes every year.