One of the largest for-profit college chains in the country is officially shutting down, leaving more than 30,000 students in the lurch.

ITT Educational Services ESI, -3.89% announced Tuesday that it would permanently discontinue operations at all of its campuses. The announcement comes just a few weeks after the Department of Education said the school would be banned from enrolling new students who use federal financial aid.

The collapse of ITT, once one of the largest for-profit college chains in the country, is the latest signal sign that we may be in the midst of a transformation of the for-profit college sector after years of complaints for consumer advocates, increased regulatory scrutiny and sharp enrollment declines. The school’s shut down is the second in as many years; Corinthian Colleges filed for bankruptcy last year amid allegations the school used inflated job placement and graduation rates to lure students.

“More is coming for sure,” said Barmak Nassirian, the director of federal relations and policy analysis at the American Association of State Colleges and Universities. “I would not at all be surprised if we get a third very large publicly traded for-profit chain to go under within the next couple years.”

In their announcement, ITT officials blamed steps taken by the Department of Education to reign in the school’s finances for the shutdown, writing that “the actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes.”

Ted Mitchell, the under secretary of education, defended the Department’s decision to sanction ITT and said on a conference call with reporters that officials had accepted the possibility that these steps could result in the school’s closure. Though the shutdown leaves thousands of students in limbo and could potentially cost taxpayers hundreds of millions, Mitchell said Department officials didn’t feel comfortable continuing to allow ITT to enroll new students without increased oversight.

“We didn’t take our action several weeks ago lightly and I think that was absolutely the right decision to make and we did it with our eyes open that this was a serious possibility,” Mitchell said on the call. “It’s important to remember that when we took our action, we took it in the face of growing evidence that ITT was a risk to both students and taxpayers.”

Still, he acknowledged that Tuesday’s announcement could mean “disruption, confusion and disappointment,” for ITT students. He said the Department is reaching out to affected students via email to make them aware of their options.

Federal student loan borrowers either attending ITT when it closed or who withdrew 120 or less before the school closed can have their loans wiped away through what’s known as a “closed-school discharge.” They could also choose to transfer to a similar program at another school, though if they would lose their ability to have their loans forgiven. Mitchell said he’s reaching out to community college presidents located near ITT campuses with similar programs to encourage them to work with ITT students interested in transferring.

(For more information from the Department on options for ITT students, click here.)

Still, many students may be better off applying for the discharge and starting over, experts say. Nassirian said many of the institutions that would accept ITT credits are likely for-profit colleges that produce degrees worth little in the labor market. And since ITT programs often cost more than similar credentials, students could have the opportunity to pursue a new degree at a lower cost, he said.

If every eligible student seeks a loan discharge, it would cost taxpayers about $500 million, according to Department figures. Some of that would be offset by roughly $90 million the Department previously asked ITT to set aside in the event of a shut down.

“A lot of ITT’s programs did not justify the cost and debt charged versus the quality of what they offered,” said Ben Miller, the senior director of postsecondary education at the Center for American Progress, a left-leaning think tank. “And so for a lot of folks, it’s a chance to get out from under loans that were going to be almost impossible for them to repay.”

But these options may not be enough to make all affected students whole. Students who took out private loans to attend ITT can’t use the government’s process to have their loans discharged. And though former ITT students who may believe they were misled by their school can apply to have their loans wiped away through a process called defense to repayment, there’s no guarantee it will be successful.

Then there are veterans like Joel Straten. Though the 31-year-old had heard rumors on and off about ITT’s troubles for the past few years, he was hesitant to transfer because he had already used some of his GI bill funds at the school. The benefit provides 36 months of tuition payments and living expenses to eligible veterans and servicemembers, but it can’t be recouped if it’s spent on a poor-performing school or one that closes.

“Being a veteran using the GI bill, we’re already invested with them,” he said. Straten is not alone — up to 12,500 veterans used the GI bill to attend ITT in 2015, according to estimates from Student Veterans of America, a student veteran advocacy organization. Straten, who was about three-fourths of the way done with his bachelor’s degree, said he’s luckier than most because he has a savings cushion to fall back on until he figures out his next steps. But if he had to do it over again, he would have chosen a different school.

“It was all just smoke and mirrors, to be honest,” he said of ITT.

Are you an ITT student? We want to hear about your experience. Email jberman@marketwatch.com.