The Veterans Affairs Department is warning thousands of U.S. military veterans enrolled at ITT Tech to brace for the possibility the for-profit college franchise "goes out of business," according to a recent notice.
The parent company, ITT Educational Services Inc., based in Carmel, Indiana, on Monday suspended all new enrollments after the U.S. Education Department barred the college, which has about 130 campuses in 38 states, from accepting students who use federal financial aid. States such as California and Washington have followed suit.
While the moves don't affect veterans' GI Bill benefits, "these actions do raise significant concerns about the financial viability of ITT," the VA wrote in a recent message on its Facebook page. "It's important that you understand that if ITT goes out of business before you complete your education, you will not be able to use your GI Bill benefits to keep attending that school and under this scenario, you would no longer be able to pursue your education at that school."
The message continues, "As you know, finding another school where you can complete your educational objectives may take time as not every school offers the same programs as ITT. Also, it is not guaranteed that another school offering the program you are pursuing will accept transfer credits from ITT."
State and federal officials have been investigating ITT's recruiting and accounting practices. The federal government in 2014 launched its investigation into the company after allegations surfaced that school employees persuaded students to take out high-interest private loans, often with high risk of default and high rates of interest, when their federal loans failed to cover all of their costs
ITT has long catered to military veterans, a demographic that makes up close to a fifth of its enrollment, which is falling fast, according to corporate financial documents. Overall enrollment at the school was 40,015 students as of June -- a decrease of 16.4 percent from the same period a year ago, according to the company's quarterly filings.
A total of 6,842 GI Bill recipients either attend ITT Tech or plan to do so during an upcoming term, according to an email on Tuesday from Terry Jemison, a spokesperson for the VA's Veterans Benefits Administration, which oversees the educational program.
Revenue at the parent company totaled almost $850 million in 2015, down 11 percent from $962 million the previous year, according to financial documents.
The company is now a penny stock, trading at 40 cents a share on Tuesday on the New York Stock Exchange, down from a high of $127 a share in 2007. Just a few years ago, in October 2013, it traded as high as $40 a share.
"ITT is effectively out of business," Peter Appert, managing director and senior research analyst at Piper Jaffray & Co., who follows ITT, told CNN. "I don't see any way they survive this."
If it does file for bankruptcy, ITT wouldn't be the first. Corinthian Colleges, a for-profit chain, last year shut down its 28 locations and more recently was ordered to pay a nearly $1.2 billion fine for false advertising and misleading lending practices.
-- Jim Absher contributed to this report.