The U.S. Department of Education on Thursday issued what analysts are calling a death sentence for ITT Technical Institute.

As part of a larger series of restrictions on the for-profit higher education institution, the Department of Education has banned ITT from accepting new students who depend on Federal student aid, which is the source of most of ITT’s revenue. The school is also required to warn current students that its accreditation is in jeopardy.

In a statement, the Department of Education said that this decision is a result of determinations made by ITT’s accreditor, the Accrediting Council for Independent Colleges and Schools (ACICS) that ITT “is not in compliance, and is unlikely to become in compliance with [ACICS] Accreditation Criteria.”

“Our responsibility is first and foremost to protect students and taxpayers,” said U.S. Secretary of Education John B. King Jr. in a statement. “Looking at all of the risk factors, it’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on Federal student aid funds.”

In a letter sent to ITT, the Department of Education outlined new restrictions being placed on the school:

  • Enrollment restrictions: ITT may no longer enroll new students who rely on Federal financial aid dollars for educational expenses.
  • Disclosures to Students: The Department of Education is requiring ITT to inform current students that its accreditor has found that the institution is not in compliance, and is unlikely to become in compliance with its Accreditation Criteria.
  • Compensation and Payment Limitations: ITT is prohibited from awarding raises, paying bonuses, or making retention or severance payments to its executives or to paying special dividends or out of the ordinary expenditures without department approval.
  • Notification of Financial Events requirements: ITT must inform the department of any significant financial or oversight events including violations of existing loan agreements or extraordinary financial losses within 10 days of such events.
  • Title IV payment method requirements (Heightened Cash Monitoring 2): ITT is required to use its own funds to initially cover Title IV aid disbursements for current students. The Department of Education will reimburse funds to ITT after aid is disbursed to students.

The Department of Education also levied a significant financial restriction regarding surety fund. Surety funds are held by the department in a Federal Holding Account and are used to reimburse the department for liabilities related to the investigations, including student refunds, student loan cancellations, and other expenses if ITT closes campuses. Within 30 days, ITT is required to increase its existing surety from $94,353,980 to $247,292,364.

“When we allow institutions to participate in Federal student aid programs, they are obligated to responsibly manage those funds,” said U.S. Under Secretary of Education Ted Mitchell in a statement. “More importantly, we trust they will act in good faith and in the best interests of students.”

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Kate Polit
Kate Polit
Kate Polit is MeriTalk's Assistant Copy & Production Editor covering the intersection of government and technology.