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ITT Tech sells an American dream of broken lives and financial ruin

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The hard sell went down in a sun-baked office. Across an aircraft carrier of a desk, an ITT Tech admissions rep looked at Joseph White with a toothy smile.

Did he want to enroll today? she asked.

White, then 24, said nothing at first. As he pondered signing up for an ITT associate's degree, which would require a two-year commitment and $38,000 in debt, he revisited the pinball trajectory of his life.

The son of a Chrysler career man and homemaker mom, he'd already taken two stabs at traditional colleges only to bag because he "was worried there'd be no money studying French."

Now, as he contemplated making a third attempt by way of a computer electronic engineering degree, White was earning just above minimum wage at a McDonald's drive-thru.

"It all sounds great," he finally said, "but I don't know if I'm comfortable doing this today. I'd like to have some more time and think about it."

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Her smile flattened. "Do you really want to work at McDonald's the rest of your life?"

White was soon inking a maelstrom of documents, including ITT's arbitration clause, which he would later learn forbids him from ever being able to sue the school.

"After she said that, I'm like, 'Yeah, you're right,'" he says. "At the time, it seemed like a good decision. ITT said all the right things. How their graduates were in demand by good employers. How I'd be marketable and the career center would help me find a job, which I was told would likely mean a six-figure income."

White earned his degree, graduating with a 3.12 G.P.A.

A few weeks before commencement, an ITT staffer approached him, talking up the school's software engineering bachelor's program. White, the employee insisted, was a natural fit.

He enrolled the next month.

Two degrees, $80,000 in debt, and innumerable rejections later, the 37-year-old is currently unemployed. This spring, he was laid off as a computer support contractor with Enterprise Rent-A-Car.

He's never sniffed that six-figure salary.

"Employers didn't consider ITT a real school and looked at my degree as if it was a joke."

White's is a serial narrative owned by thousands of ITT alums.

Federal and state investigators have suspected the for-profit school of defrauding its students for years. But with protection from powerful members of Congress — like Burnsville Republican John Kline — ITT nonetheless flourished. The Carmel, Indiana corporation now has 57,000 students at 135 campuses, including Brooklyn Center and Eden Prairie.

Its specialty is using multimillion-dollar ad campaigns to carpet-bomb the vulnerable: poor folks, minorities, military veterans, and single moms, people unaware that a degree at half the price and with twice the respect can be had at the community college down the street.

ITT sells career fulfillment and a better life. The reality, however, is thousands of alums with lives unchanged — except for the crushing new burden of student loans.

In May the rot finally spread to the surface. Two of ITT's top executives were indicted for fraud.

The "Pain Funnel"

ITT has been known to drop as much as $252 million annually on marketing. Broken down, its advertising and recruiting amount to $4,600 per student. Compare that to public universities, which drop less than $500 per head, and you begin to see the salesmanship. "I did attend ITT Tech right out of high school," grad Tiffany Edwards testifies in one commercial. "The investment I made in my education was definitely worth it. I'm in a very successful position within my career and I wouldn't be there without my education."

Christina Hammond owes $104,000 in student loans after attending the for-profit college.

Christina Hammond owes $104,000 in student loans after attending the for-profit college.

Joshua Mann starred in another ad.

"I drove past ITT Tech every day on the way to work, and I worked in a warehouse," he says. "I wondered about going there.... I've always wanted to work with technology and on computers, and I knew ITT had those plans. I just needed to figure out a way to get there. That was how I got in the door first, setting up financial aid from the beginning."

Mann, like thousands of others, most likely called the toll-free number from a TV ad. That's where he was probably introduced to the Pain Funnel.

According to leaked internal documents called the "Pain Funnel" and "Pain Puzzle," recruiters are instructed to attack a prospective student's pain, guilt, and anxiety.

If a prospect speaks of dead-end jobs, a recruiter might ask, "What have you tried to do about that?" or "How do you feel about that?"

"Poke the pain a bit," reads another memo. "Remind them what things will be like if they don't continue forward and earn their degrees."

By asking leading questions, ITT personnel chaperone prospects down the funnel and into the "Pain Puzzle" where the hook gets set.

National Guard member Joseph White chose ITT because he didn’t want to work in fast food forever.

National Guard member Joseph White chose ITT because he didn’t want to work in fast food forever.

First, confront them with the ugly truth — i.e., they'll always be poor. Once they admit that life sucks, ITT personnel offer the life jacket... of enrolling at ITT.

In 2012, a former recruiter described the tactic while testifying before a U.S. Senate committee: "Bring a prospect to their inner child, an emotional place intended to have the prospect say, 'Yes, I will enroll.'"

White remembers the funnel well.

"That's exactly what they did to me. The minute I hesitated about enrolling, the deeper they went. The way they put it, if I didn't enroll right now, I was going to work fast food my entire life."

Buyer beware

ITT's real magic happens when prospects are sitting across from a rep. As soon as a prospect signs up for school, financial aid staff check to see how much federal loan and grant money they qualify for.

Jeff Morris enrolled as a 43-year-old online student.

Despite her ITT degree, Niki Howland’s professional life pinnacled as a roller-skating Sonic waitress.

Despite her ITT degree, Niki Howland’s professional life pinnacled as a roller-skating Sonic waitress.

"I had to do something with my life because it sucked," says Morris, who was making $12.50 an hour as a machinist at the time. "They made becoming a student real easy. When it came time to fill out financial aid, they handled all the paperwork."

ITT's customers skew toward the low-income. Most finance school through a mix of federal student loans and grants. Yet government-backed lending rarely covers all of an ITT degree, which comes with an impressive jolt of sticker shock.

Take, for example, an associate's degree in network systems administration, which tops $46,000 at ITT's Eden Prairie campus. A similar program at Anoka-Ramsey Community College costs $10,000.

When Morris first approached ITT in 2007, he was told an associate's degree costing $41,000 would be reduced to $38,000 because he was a Coast Guard vet. He was also assured his entire education would be covered by federal loans and grants.

Morris studied part-time, graduating in 2010 with a degree in information systems administration. It wasn't long before he realized ITT's promised land was a dead zone. The school's work placement center amounted to little more than online job sites available to anyone.

"That was the extent of the career center," says Morris. "I never got as much as an interview."

He still works as a machinist.

Now 50, he sees only one difference in his post-education life: He owes $50,000 in student debt.

Admits one former ITT instructor: "If I were advising someone about going to school, I would certainly ask them to entertain other options. I definitely think you can find better value out there in the marketplace."

An American success story

In 2012, ITT reported revenues of $1.3 billion. Most came directly from taxpayers by way of loans, grants, and veterans benefits. Over the years, the school has aligned itself with some of the biggest players in politics to ensure the money keeps flowing.

One of its major shareholders is Blum Capital Partners, the San Francisco private equity firm run by Richard Blum, husband of California Democratic Sen. Dianne Feinstein.

Former Minnesota Republican Congressman Vin Weber is a former ITT board member who now serves as its "lead independent director." (Weber, also an advisor to presidential candidate Jeb Bush, did not respond to an interview request.)

But the company's greatest fortunes can be traced to George W. Bush.

He appointed Sally Stroup as the Department of Education's assistant secretary, making her the top regulator of higher education. The move was akin to making a sex offender the boss of a convent.

Stroup was a former lobbyist for the University of Phoenix, a for-profit college with a track record of avarice similar to ITT's.

Along with key allies like Rep. John Boehner (R-Ohio) and Rep. Howard McKeon (R-California), Bush began to dismantle the safeguards protecting students from unscrupulous corporations.

Their first move was to kill the so-called 50 percent rule. It required schools that received federal aid to hold at least half their classes on a campus. Bush argued that online education would reach more nontraditional students.

But ITT saw the change as an all-you-can-eat buffet.

From 2006 to 2010, its revenues doubled to $1.6 billion. Nine of every 10 cents it pocketed came from the federal treasury. Its enrollment tripled over a decade. Annual profits reached $614 million.

But while investors and executives were getting rich, students were getting shafted. Christina Hammond was among them.

On mom's couch and dreaming

Hammond can be hard to reach by phone. Hers is conditioned behavior after years of calls from a cavalry of bill collectors.

Things have been better lately.

"I was able to get a new phone number under my friend's name," says Hammond, whose debt totals $104,000.

Her march to insolvency started on her mom's couch. She was 25 years old, living at home, and hop-scotching from one job to another. Bartender. Waitress. Nursing home orderly.

"I just had that moment in my life where I knew I had to do something," she says. "I had seen their commercials, talking about half of it was theory and half hands-on training. I thought to myself, that's awesome because that's what employers need."

With her mother in tow, Hammond visited ITT. After a video presentation and tour, the recruiter asked Hammond if she'd like to meet a few recent grads who "just happened" to be nearby.

"This guy and this girl then came in, saying how they were doing really good. How life was great because they went to this school. How they had good jobs and had no trouble paying back their student loans," Hammond recalls. "My mom was really impressed."

Hammond was "rushed through" the paperwork, signing enrollment forms, loan documents, and the arbitration clause. She was told federal loans and grants would cover her $43,000 computer network systems associate's degree.

"I never looked at going to any other school," she says. "You're rushed through the financial aid like you don't even know what the hell is going on. They throw these videos in your face and you have two people saying how they've been successful. The guy on the phone, he's doing really well after graduating from ITT. The school looks good, it's clean, and the computers look state-of-the-art. It's all impressive."

Well into her two-year program while working an $11.50-an-hour manufacturing job, Hammond was plucked from class.

Her government loans and grants were exhausted, an ITT staffer told her.

"That's when she told me I had to find other funding," she recalls. "If I couldn't, today was my last day."

Hammond was pissed.

"Shouldn't they have known about this when I signed on?" she says. "I mean, don't they do this all the time?"

But the rep had a life raft. ITT was willing float her a loan at zero percent interest until six months after she finished the program.

Hammond felt trapped. If she jumped ship so close to commencement, what would her family and friends think?

She signed up for $12,000 in emergency loans.

Weeks before finishing her degree, school personnel pulled Hammond aside. An instructor was impressed by one of her projects. The school offered a bachelor's program in project management administration. Hammond was told she was a perfect fit. Best of all: ITT would knock 20 percent off the $40,000 price tag.

"I started feeling trapped, again," she says. "Scared about paying my loans back. Worried if I would be able to find a job."

She agreed to enroll on one condition: "I told them as long as I won't run out of funding and it's all done with federal loans, I was fine with doing it. She reassured me, although I didn't get anything in writing. Shame on me."

Semesters into her bachelor's program, Hammond was yanked from class again. Her federal funds had run out, but ITT had a $10,000 emergency loan awaiting her signature.

"I knew then something was wrong," she says. "I knew I was in real trouble. At that point, I felt like I had no other choice. I figured I had more of a chance finishing my degree and paying back these loans than not having a degree at all."

Two weeks later, a bill arrived in the mail. ITT wanted an immediate $180 payment.

"I called them saying I don't understand," says Hammond. "I thought I didn't have to pay anything back until six months after I graduated."

The school rep was unsympathetic. "I don't think you suppose you can go to school for free?" Hammond was told. "You have to pay something."

Begrudgingly, she soon mailed a $75 payment.

In 2013, Hammond finally walked out with a second degree. But employers weren't particularly impressed.

"The responses — or really, lack thereof — that I got from employers was they could have cared less about my degrees, almost like I never had even gone to college," she says. "It's like the school has no respectability and a bad reputation in the business community."

Now 34 and married, Hammond still works at the manufacturing firm, though she's moved up the company ladder. She earns $15 an hour as a quality control inspector, working the graveyard shift.

Hammond estimates she owes 18 different public and private lenders. Her two ITT loans have been sold and resold. One comes with an interest rate of 14 percent.

Her total payments amount to $1,500 a month, a figure she could never hope to meet. Feeling swindled, she launched a debt strike, refusing to pay.

"I can't give them what I don't have," she says. "The career center has been no help and my degrees are worthless. I'm striking because these are fraudulent loans. I was never told I would max out on federal loans.... I feel like they weren't truthful to me."

A bad investment for America

In 2006, ITT was forced to settle a lawsuit brought by the state of California. Company employees had revealed a scam in which ITT inflated grades to qualify for more state education dollars.

The school paid a $730,000 fine.

Five years later, a U.S. Senate report exposed how ITT was spending all that government money. For every $6,100 pocketed in profits, the company was spending just $2,800 on actual education.

But if it was a boondoggle for taxpayers, students had it worse.

To generate all those profits, nine out of every 10 students were taking out loans. Half would drop out, the majority within three months. And nearly three out of 10 ITT students were defaulting on their loans.

From every perspective but an executive's, ITT was a disaster. Politicians repeatedly attempted to rein in the school's one-way relationship with taxpayer cash.

In 2009, Congress proposed invoking a rule requiring schools to get at least 10 percent of their revenue from students who didn't need loans. The idea was to make for-profit schools like ITT prove they were legit enough to attract at least a few students willing to pay out-of-pocket.

The proposal would also close a loophole in which GI benefits were considered the same as paying out-of-pocket.

If passed, the law would prove fatal to ITT. Estimates vary, but as much as 96 percent of its revenue has been said to come directly from the feds.

Before the bill could gain momentum, Minnesota Congressman John Kline intervened.

Kline sent a letter to colleagues decrying the implication that such schools were preying on unsophisticated students. The bill died.

There are few lawmakers with greater influence on American education than Kline. The House Committee on Education and the Workforce chairman happens to be the number-one recipient of campaign contributions from for-profit colleges, taking in close to $200,000 last year alone. ITT sent him $24,000 — or 25 percent of all its campaign contributions over the last two years.

He's worked hard for that money. Since becoming chairman in 2011, Kline has gone to bat for the industry every time its access to federal education funds has been threatened.

When President Obama sought to force colleges to disclose such basic information as median student debt loads and graduation rates, Kline was there to sabotage the effort.

Instead he authored the almost comically named "Supporting Academic Freedom through Regulatory Relief Act." Framing it in the familiar Kline-speak of liberty, personal choice, and limited government, the lawmaker justified his bill by saying that students should be able to attend whatever school they want no matter how poorly the schools performed.

The congressman was at his obstructionist best last summer.

Two California Democrats, Mark Takano and Susan Davis, crashed one of Kline's committee hearings. Armed with a story by the Center for Investigative Reporting, which exposed how for-profit schools were targeting vets to feed off their GI bills, the duo tried to renew the idea that schools should be able to attract at least 10 percent of their students willing to pay out-of-pocket.

Kline crushed the motion in seconds.

In December, he again came out against an Obama proposal that sought to tie federal education money to school performance, such as loan default rates and success in the job market. The idea was to alert students to overpriced colleges that over-promise on the value of their degrees.

In other words, ITT.

Kline blasted the president's initiative as a "fool's errand," resorting to hackneyed rhetoric: "We should be looking for opportunities to empower students and families...."

Translation: Everything's fine as it is.

"John Kline is dirty for what he's done," says ITT alum Niki Howland, a self-described libertarian. "Why should he fornicate with these corporations that get rich preying on people's trust? Politicians like him don't serve the people and he's not doing his job."

School pride turns poison

Motherhood and the balm of time have dulled the serrated bitterness Howland holds for her alma mater.

She earned an ITT associate's degree in computer network systems in 2004, graduating with close to a 3.5 GPA.

Howland, now age 31, admits she was "young and naive" when she enrolled. It's the "trust" she placed in the school and the "passion" with which she attacked her studies that still coagulate into an internal chowder of resentment.

"At the time, I was just so grateful that I'd actually been approved for college that I was like, 'Sign me up! I want this degree!' The whole time I was in there, I was just so proud of being at ITT because it had such a good reputation."

How did she know it had a good name?

"From the commercials, I guess."

As a child of a single mom whose waitress work supported a family of four, Howland didn't have specific career ambitions. All she knew was that "I didn't want to be poor like my mom."

So she signed up for a two-year program at ITT with a sticker price of $33,000. Federal education funds, she was told, would cover the entire bill.

But a ritual soon developed, coming every semester with about two weeks remaining in a term. Students were herded into a room. A packet of personalized financial aid papers was plopped down in front of them. ITT staff said they had to sign the forms if they wanted to continue.

Everyone obliged. Nobody read the fine print.

"I don't think any of us knew what we were getting into," she says.

Looking back, Howland remains stumped about how she received high grades for trigonometry assignments she never understood, or that the school's heralded career center amounted to a stack of photocopied listings from monster.com.

Her degree would prove worthless.

"I got one job interview because of my degree," Howland says. "It was an entry-level tech support job with the government. I was so proud. I brought my ITT leather portfolio that kept all the projects I'd done. When I got to the interview, the person looked at my credentials and said, 'ITT? Really?'"

Before her existence was consumed by marriage and motherhood, the pinnacle of her working life was rollerskating as a Sonic waitress.

For the meek shall inherit the Earth

ITT's house of cards may at last be in peril.

Last year the company confirmed it's in the investigatory crosshairs of no fewer than a dozen state attorneys general, though the number of investigations could be as many as 32.

The probes reportedly focus on a litany of alleged malfeasance: lying about tuition costs, deceptive lending, and fraudulent graduation and job placement claims. If Minnesota is among those joining the hunt, Attorney General Lori Swanson isn't saying. She didn't respond to interview requests.

The federal Consumer Financial Protection Bureau has sued ITT for predatory lending. It accuses the school of rushing students through a loan process while never affording them a chance to understand their obligations.

Some loans came with whopping 10 percent origination fees, while others invoked interest rates of up to 16 percent. ITT is further accused of threatening to expel students if they didn't sign up for such usurious notes.

The consumer agency has also charged the school with failing to tell students that most of their credits wouldn't transfer.

Then a bigger punch landed in May, when CEO Kevin Modany and CFO Daniel Fitzpatrick were charged with fraud.

According to the Securities and Exchange Commission, ITT concocted a loan program targeting high-risk borrowers who were likely to default. Executives gathered investors to fund the loans, but failed to tell them about the risk.

When students began to default en masse, Modany and Fitzpatrick "engineered a campaign of deception and half-truths" to cover up the huge losses.

Fitzpatrick didn't respond to interview requests left at his Indiana home. Calls to Modany were transferred to spokeswoman Nicole Elam, who wouldn't comment on the fraud charges. She downplayed student criticisms, saying, "I think complaints are everywhere."

Elam claims that "14,000 employers have hired one of our former graduates in the last couple of years," and that the school "awarded" $240 million in scholarships last year alone.

She forgot to mention where most of the money came from.

And the beat goes on

Light from an overcast sky spills into "Representative" Jeff Posch's lint-free office at ITT's Eden Prairie campus. He might smile more than any other person on Earth.

"There's a lot of different things you can do with an ITT degree," he says enthusiastically. "There's more opportunities in the [computer] industry than there are workers. They're not making millions of dollars, but it's a career."

Posch's permagrin remains when he breaks the news that the two-year network systems administration program costs $46,588.

"I know, I know, that's a lot," he says. "But here's the thing: When you go through and meet with financial aid, it'll only take two to three minutes."