Group delays decision on ITT Educational’s accreditation

Carmel-based for-profit college operator ITT Educational Services Inc. has received a brief reprieve from its accreditor, which has delayed making a decision that could potentially devastate the embattled company.

The Accrediting Council for Independent Colleges and Schools sent a letter to ITT on Wednesday to inform the company that it has continued until December an existing show-cause directive, meaning the company needs to provide more evidence for why its accreditation should not be ended.

ITT Tech announced the letter in an securities filing to its shareholders.

Previously, ACICS has questioned ITT’s “administrative capacity, organizational integrity, financial viability and ability to serve students that complies with ACICS standards.”

Staying in compliance with the ACICS is important for ITT because the company would lose its federal funding for student loans without it. Most of ITT's revenue comes from federal loan funding.

ITT met with ACICS officials in early August in an attempt to prove its compliance with the group’s accrediting standards. Now it needs to provide more evidence to ACICS by Nov. 1.

"We are pleased to provide ACICS with additional information in its review of our current accreditation status,” ITT spokeswoman Nicole Elam told IBJ in an email. "None of the matters cited and pending in the show-cause directive have resulted in any findings of fact by a court of law—which we emphasized in our August hearing with the accreditor."

It’s been a turbulent year for ITT and the for-profit education industry. ACICS is itself under scrutiny from the federal government, which has made steps to shut it down. If that happens, it could affect more than 50,000 Indiana students at a variety of institutions, including ITT Technical Institute, which has campuses across the state.

In June, the Department of Education sent a letter ordering ITT to show that it has more than $123.6 million available to refund students in the event the company shuts down unexpectedly, an increase from its previous required $79.9 million on hand in light of scrutiny from ACICS.

The ACICS said ITT was facing civil investigative demands from 19 state attorneys general regarding marketing, recruitment, financial aid, academic advising, career services, admission practices, accreditation, graduation rates and job-placement performance.

In addition, the ACICS said ITT faces litigation and investigations from three federal agencies related to the school’s “student-lending practices and misrepresentations to investors.”

Elam said the moves are a result of the targeting of for-profit college sector.

"Career colleges continue to be targeted and remain under extremely aggressive regulatory oversight in this highly charged political atmosphere, which has only been further exacerbated by an election year,” Elam said. "As always, we remain focused on serving our students and strongly believe that we have and will continue to meet the ACICS accreditation standards."

ITT shares were up 4 cents Thursday morning, to $2.22 each. The stock has fallen 40 percent since the beginning of the year.