By Arunima Banerjee

(Reuters) - ITT Educational Services Inc said it would shut its flagship ITT Technical Institutes, following a U.S. Department of Education order, affecting thousands of students and employees.

ITT's move is the latest blow to the over $20 billion U.S. for-profit education industry, which has come under fire from the government in the past couple of years for its poor track record in helping students find employment.

Shutting the institutes will affect more than 8,000 employees and hundreds of thousands of students and alumni, ITT said on Tuesday.

The New York Stock Exchange said it would immediately suspend trading in ITT's shares and delist the company. (http://bit.ly/2cxGirp)

The stock last traded at 38.4 cents in premarket trading before being halted.

"We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution," ITT said.

In August, the U.S. Department of Education banned the company from enrolling students who get federal aid.

Such students accounted for more than two-thirds of ITT's revenue in 2015. The company had 40,000 students at its ITT Technical Institute and Daniel Webster College locations as of June 30.





TOUGH LESSON

U.S. for-profit education providers have struggled to attract students since a 2010 government crackdown revealed high student debt loads, low graduation rates and poor employability of graduates.

In April last year, Corinthian Colleges Inc abruptly closed 28 schools, leaving 16,000 students without classes amid federal and state investigations. (http://reut.rs/2c4n37c)

The company, which filed for bankruptcy the following month, was being investigated for allegations of misleading students and investors about its finances and job placement rates.

U.S. for-profit college operator Education Management Corp also said in November that it would to pay a record $95.5 million to resolve charges that it used high-pressure sales tactics to mislead students.

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Carmel, Indiana-based ITT has been subject to government scrutiny for allegations of fraud and deceptive marketing tactics.

ITT's accrediting agency said in April that ITT Technical Institutes - which provide career-oriented education programs - had not demonstrated compliance with certain accreditation standards.





(Reporting by Arunima Banerjee and Subrat Patnaik in Bengaluru; Editing by Kirti Pandey)