Justin L. Mack, Chelsea Schneider, and Stephanie Wang

IndyStar

Niel Smith would have finished his degree in less than a year.

But Tuesday morning, he found out all ITT Technical Institute campuses were closing nationwide in the wake of devastating federal sanctions. He drove to his South Bend campus, but nobody was there to answer his questions: "Is there going to be any way for me to finish my degree? What's happening here?"

Smith, 27, said he is left with $30,000 in student loan debt and credits for an information technology degree that likely won't transfer to another college.

"When I took out those loans, my goal was to get a degree," he said. "It wasn't my goal to stop halfway through and have to pay back something that I have nothing to show for."

ITT Tech's closure disrupts the education of about 40,000 students across the country and leaves about 8,000 employees without jobs, said Carmel-based parent company ITT Educational Services Inc.

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But the shutdown was unsurprising to many who followed the recent unraveling of ITT Tech, which reached a critical point in late August. The U.S. Department of Education banned the school from enrolling new students who rely on federal financial aid — ITT's main source of revenue — and required it to put aside $247.3 million in case the school went out of business.

Experts called it a death sentence. On Tuesday, ITT blamed its closure on those sanctions, calling them "unwarranted," "inappropriate" and "unconstitutional."

“The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter,” ITT said in a news release. “We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a nonprofit or public institution.”

The sanctions came after ITT's accrediting agency threatened to withdraw accreditation. The Obama administration also has been ramping up its scrutiny of for-profit colleges, which led to the bankruptcy last year of Corinthian Colleges.

The ITT Tech shutdown: What we know

In a blog post Tuesday addressing ITT students, U.S. Secretary of Education John B. King Jr. said the decision to impose increased sanctions upon ITT was not made lightly, because federal regulators understood the possibility that the school would close.

“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 wrote.

Even as ITT bristled over the federal actions in its closure announcement, higher education experts say the blame lies with ITT.

"The department's actions were what ultimately precipitated the closure today, but the company put itself in this position through years of bad choices and management," said Ben Miller, senior director of postsecondary education for the Center for American Progress.

State and federal investigations into ITT began in 2002. ITT currently faces fraud charges from the Securities and Exchange Commission and a lawsuit from the Consumer Financial Protection Bureau. It has been under investigation by at least 19 state attorneys general.

Trace Urdan, an analyst for Credit Suisse who follows ITT, said the Department of Education could have worked more cooperatively with ITT to keep it from closing, as it has done for nonprofit colleges.

ITT said it had no opportunity for hearing or appeal of the sanctions. The company had asked for leniency and said it proposed alternatives that were not accepted, though ITT did not describe the terms it was seeking.

"Some of ITT's attitude is justified," Urdan said. "But it's certainly not the case that the Department of Education did this to them. They did this to themselves."

Experts say there's still a market for for-profit education, but ITT's closure proves a diminishing patience for poor outcomes and financial instability.

"Overall, it's a pretty chilling move by the Department of Education," Urdan said. "For a lot of other schools, it will help make them more prudent in their financial decision-making for sure."

ITT has operated for about 50 years, running more than 130 campuses across the country. It offered on-campus and online classes in business, nursing and health sciences, electronics and information technology. Last year, ITT generated $850 million in revenue, about $580 million of which came from federal student loans.

Its Facebook page erupted Tuesday with comments from angry and confused students seeking their next steps.

Recent ITT Tech students can file claims to have their federal student loan debts erased. Politico reported that current ITT Tech students and recent dropouts owe about $485 million in outstanding federal loans.

But veterans have no recourse. The Post-9/11 GI Bill gives veterans 36 months of college tuition, plus expenses, to attend the school of their choice. It makes no accommodation for students who are enrolled in a school that closes.

Byron Sumpter, a sergeant in the U.S. Army National Guard who attended an ITT Tech campus in South Carolina, said he learned of the school through a commercial. He thought what better way to use his military education aid than “go back to school and get a better job.”

“Now I can’t get the education I was studying for,” said Sumpter, 32, who served tours in Iraq and Afghanistan.

He enrolled in the school’s network system administration program in September 2015 and was set to complete school this coming June. Sumpter said he was looking into schools that would accept his credits.

“I’m still in shock, to be honest with you,” Sumpter said hours after learning of the closure.

In Indiana, six ITT campuses closed. On Tuesday, its headquarters off U.S. 31 in Carmel was dark and locked, its parking lot empty.

ITT did not provide a figure on how many employees in Indiana would be affected by the closure. Most of its faculty worked part time, according to national data. In 2014, ITT employed 620 workers in Indianapolis.

Gov. Mike Pence has asked the Department of Workforce Development to contact ITT Tech employees to assist them with job placement, according to the governor’s office.

"ITT Tech's situation is due in part to the Obama administration's over-regulation, which is sadly killing jobs nationwide,” Pence spokeswoman Kara Brooks said.

Enrollment has plummeted in recent years. State records show nearly 12,000 students were enrolled at ITT's Indiana campuses in 2014. That number dwindled to just over 1,800 this year.

Indiana Commissioner for Higher Education Teresa Lubbers said the state is working to help students continue their education even if ITT credits don't transfer. Ivy Tech Community College, for example, said it doesn't accept ITT credits but is looking for ways to allow students to earn credit for past experiences and credentials, such as through prior learning assessments.

The state is also seeking help for students who paid through private loans to attend ITT Tech, through repayment from ITT's line of credit or the state's $650,000 assurance fund, Lubbers said.

To Anna Cobb, who lives on Indianapolis' east side, ITT Tech seemed like a good school, where the staff and faculty were polite and helpful as she pursued the college education that she had put off for a long time.

At 41, she works in health care at a job that pays $8.25 an hour. She has a car payment that she didn't want and now a student loan she can't afford. She wanted a degree and a career in information technology, and she believed an instructor who said a couple of weeks ago that even though ITT Tech wasn't allowed to take new students, she would be fine.

"I guess I should've researched a little more," she said.

IndyStar reporter James Briggs contributed to this story. Call Star reporter Stephanie Wang at (317) 444-6184. Follow her on Twitter: @stephaniewang.

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Call IndyStar reporter Justin L. Mack at (317) 444-6138. Follow him on Twitter:@justinlmack.