Here’s one more sign that the for-profit college industry is in trouble

The US Department of Education (ED) will place restrictions on federal financial aid at for-profit college chain ITT Educational Services, in just the latest blow to a beleaguered industry.

“ITT will now be allowed to pay out federal education funds to students only after they have attended classes and been certified as eligible by a school representative,” the Associated Press reported on Monday.

The for-profit chain got in hot water with the ED because of its refusal to provide the proper accounting of federal grants it distributes to students dating back to 2009, the department said in a letter to ITT cited by the AP.

This recent action by the ED will make it harder for ITT students to get financial aid. The development comes on the heels of months of intense scrutiny — by federal agencies and consumer protection groups — of the entire for-profit college industry.

Earlier this month, Apollo Education Group, the parent company of The University of Phoenix (UoP), was suspended from recruiting military students by the Department of Defence (DoD).

That’s notable, and likely problematic, for the for-profit university as it pulls in more money than any other US college, public or private, from military students.

University of phoenix students

UoP, the largest for-profit college in the US, has brought in $US1.2 billion in GI Bill money since 2009 and received $US20 million in tuition assistance from the Pentagon last year alone, according to The Center for Investigative Reporting (CIR).

That outsized share of the market, in addition to alleged predatory tactics at the school to lure in military personnel, resulted in an investigation into the school earlier this year.

Sen. Dick Durbin wrote a letter to the Pentagon this summer asking it to stop taxpayer-funded tuition payments to UoP pending an investigation.

The investigation centres on whether UoP intentionally broke an executive order from President Barack Obama with regard to access to military service members and veterans.

The recent announcement from the DoD that UoP must halt military recruitment appears to have surprised even the university’s administration.

Ryan Shirley Heald Corinthian College Student For Profit
Corinthian College students protest after learning their school was shutting down. Screenshot Via YouTube

“University representatives had been working closely with DoD leaders and we all expected a different response from DoD,” Slottow said in comments provided to Business Insider.

Another for-profit behemoth, Corinthian Colleges, abruptly filed for Chapter 11 bankruptcy protection in April,
after ongoing investigation by the ED and a $US30 million fine.

That fine, which was just the latest blow for the troubled for-profit network, set into motion a number of events that led Corinthian to announce that it would close its remaining campuses for good.

Across the entire for-profit sector, there have been allegations that the schools focus on signing up students and depositing their federal financial aid checks rather than providing a quality education.

Almost all of the biggest players in the for-profit sector have been investigated by state attorneys general, including EDMC, ITT, Career Education Corporation, Kaplan, DeVry, and Bridgepoint.

Business Insider reached out to ITT Educational Services for comment and we will update this post if we hear back.

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