Two ITT Technical Institute campuses in Maryland are among more than 130 that were shut down nationwide by ITT Educational Services on Tuesday after the U.S. Department of Education prohibited it last month from enrolling new students who use federal financial aid.
The decision ended the fall quarter before it started for about 40,000 students as the Carmel, Ind.-based company laid off more than 8,000 employees.
About 350 students were enrolled at ITT's campus in Hanover, and about 440 students at its campus in Owings Mills. It employed three full-time and 49 part-time faculty members in Hanover and five full-time and 54 part-time faculty members in Owings Mills, according to the Education Department.
Students left in the lurch with student loans and needing classes were offered some options by the Department of Education. Affected students could have their federal student loans forgiven and start their education over, or they could transfer their academic credits to another college, which could make them ineligible for loan forgiveness.
Federal officials have been ramping up oversight of ITT, one of the largest for-profit U.S. educational firms, and other companies like it.
Last month, the Education Department banned ITT from enrolling new students with federal financial aid, citing its lack of compliance with accreditation standards. It also ordered ITT to increase the amount it set aside to cover liabilities, such as refunds in case the college shut down, from about $90 million to about $247 million.
Instead of complying, ITT decided to shut down after 50 years in business.
The company defended itself in a statement, saying it has worked "tirelessly to ensure compliance with all applicable laws and regulations" and calling itself the victim of "regulatory assault."
"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 company said in a statement.
Launched in 1966, ITT Tech in recent years offered degrees in six areas of study: information technology, electronics technology, drafting and design, business, criminal justice and nursing.
U.S. Education Secretary John B. King Jr. defended the increased oversight of ITT and said the department had concerns about ITT's "administrative capacity, organizational integrity, financial viability, and ability to serve students."
"The school's decisions have put its students and millions of dollars in taxpayer-funded federal student aid at risk," he said in a posting on the department's website intended to inform affected students about the department's action. "Ultimately, we made a difficult choice to pursue additional oversight in order to protect you, other students, and taxpayers from potentially worse educational and financial damage in the future if ITT was allowed to continue operating without increased oversight and assurances to better serve students."
King urged ITT students not to give up.
"Higher education remains the clearest path to economic opportunity and security," he wrote. "Restarting or continuing your education at a high-quality, reputable institution may feel like a setback today, but odds are it will pay off in the long run."
The move comes amid a crackdown by the U.S. Education Department on for-profit educational chains that have come under increased scrutiny and criticism for providing students with substandard educations — and sometimes worthless degrees — and leaving them saddled with huge amounts of debt. Last year, Corinthian Colleges shut down after the Education Department blocked it from enrolling students receiving federal financial aid.
Baltimore-based Laureate Education, a for-profit chain which owns more than 70 colleges around the world, declined to comment. The company, which only has a handful of U.S. schools, has not faced the same federal scrutiny as ITT and Corinthian.
Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, said the federal government's hand was forced by ITT's legal and accreditation challenges.
"The federal government has to play the role of the undertaker at some point as these operations collapse under the weight of their own toxic outcomes," Nassirian said. "At some point, the feds have to step in and say 'enough.'"
Steve Gunderson, president and CEO of Career Education Colleges and Universities, a trade association for career-oriented colleges, said in a statement that the action was not necessary and accused the federal government of attempting to shut down the for-profit educational sector.
"Today's development does not benefit anyone," Gunderson said. "We hope the Department will find a way to help the students most directly impacted by this to continue their education. But more importantly, we hope they will cease their repeated efforts to eliminate private-sector higher education as an option in this country."
The Chicago Tribune and the Associated Press contributed to this article.