ITT Tech's new charter school to offer free AA degree — with a catch

The strongest selling point of the Early Career Academy, a tax-funded charter school scheduled to open next year in Indianapolis, is that its high school students will earn an associate degree free of charge.

But the degree comes with a catch: The credits from that degree likely will not transfer to any major university in the state if the students want to pursue four-year degrees.

There is, however, one institution guaranteed to accept the credits — the for-profit college sponsoring the charter school.

And that college — ITT Tech — is being sued by the federal government, which claims ITT used high-pressure sales techniques to coerce students into loans many are unable to pay off and an education most are unable to finish.

In making its case, the government said ITT charged high tuition rates and exaggerated the value of its diplomas in the job market.

ITT has said the lawsuit is unfounded and filed a motion to dismiss it. The case is pending in the U.S. District Court of Southern Indiana.

In Indiana, however, the Early Career Academy was authorized by an independent state agency in May 2013 with little apparent public discussion of the value of credits that do not transfer.

The Indiana Charter School Board staff "spoke with ITT about that sort of pipeline issue," said board chairwoman Maureen Weber. "Was the goal to create a pipeline of future paying students?"

She said any concerns were mitigated because the charter school said students would graduate with an associate degree in hand, and the board didn't discuss the matter at all in meetings — nor ask whether the credits would transfer.

Early Career Academy board chair Gary Carlson, a former ITT executive, said he is adamant about the separation between the charter school's nonprofit board and ITT's for-profit operation.

"We're not going to promote or sell ITT," he said. "We're going to promote an opportunity that opens doors to students."

That was the clear draw for Jerry Acheson, who planned to enroll his son, Logan. He was excited for career and college opportunities the charter school could open for his son, a high-school junior interested in engineering.

Acheson said having an associate degree could help Logan transition into a more specified degree program later. But when The Star told him ITT's credits don't transfer, he paused.

"I hadn't thought about that in-depth," he said. "It's actually a good question that we probably should look into."

Education and workforce development

On its face, the Early Career Academy lands squarely at the intersection of education and workforce development — exactly the type of innovative career focus that state officials have been raving about recently.

The academy pushes high school juniors and seniors to earn both a diploma and an associate degree upon graduation, and it's all for free.

Early Career Academy wants to attract the same type of students who attend ITT Tech — but at an earlier age, said ITT spokeswoman Nicole Elam.

Many of ITT Tech's students are in their late 20s, she said, so the charter school could equip those same types of students earlier with needed skills.

Early Career Academy officials say the intent of the school isn't to create a pipeline to ITT Tech. Instead, they point to a significant investment that ITT is making into Early Career Academy's start-up costs as proof the for-profit is stepping up to meet a community need.

But the financial backing also tightly ties Early Career Academy to ITT. In addition, the charter school is paying ITT to provide curricula, use its instructors and operate out of its campus on Indianapolis' Northside. While Early Career Academy is governed and authorized through a nonprofit board, its leader told The Star he was selected by ITT.

Suit alleges predatory lending practices

Less than a year after Early Career Academy was approved, the federal government's Consumer Financial Protection Bureau sued ITT Tech's Carmel-based parent company, ITT Educational Services.

The lawsuit accuses ITT of exploiting its students — and the credit transfer issue played a key role.

On its website, ITT warns its credits may not transfer to other colleges: "It is unlikely," the FAQ states, "that any credits earned at an ITT Technical Institute will be transferable to or accepted by any institution other than an ITT Technical Institute."

That's in large part because ITT is nationally accredited, whereas public colleges such as Indiana University or private nonprofit colleges such as Butler University are regionally accredited.

The government lawsuit said ITT threatened students with expulsion unless they took out high-interest private loans to pay ITT's pricey tuition costs, knowing their credits wouldn't transfer elsewhere.

ITT charges $493 per credit hour, according to the lawsuit, compared to Ivy Tech Community College's in-state cost of about $126 per credit hour.

The lawsuit said ITT enticed students to enroll with a temporary loan to cover tuition costs beyond what students received in financial aid. But it knew many students could not repay the loans, which were later converted into high-interest loans, the suit contends.

ITT's predatory lending practices, the lawsuit said, included high-pressure tactics to rush students — sometimes unknowingly — into loans.

The lawsuit says ITT also misled students on their job prospects after graduation, suggesting they would likely land good jobs and be able to pay off student loans.

ITT targeted low-income students, according to the lawsuit, knowing they would need loans but would probably default on them. And most students fail to finish their degrees at ITT. That could leave them with enormous debts and college credits that would be virtually worthless at cheaper, public colleges.

In its motion to dismiss the government's case, ITT denied issuing "unfair" and "abusive" loans, said the government's claims of unfairness were vague, and argued that the Consumer Financial Protection Bureau lacked jurisdiction over ITT.

In the months following the lawsuit, ITT has been ruffled by financial issues and the resignation of its CEO, though its stock has started to gain back some ground.

Credit transfer issue raises questions

The implications for Early Career Academy students, regardless of the lawsuit's outcome, is that if they pursue a bachelor's degree later, they will have to pay for the full four years at most colleges — or face an expensive education at ITT.

Experts say that goes against the point of the dual diploma-degree model. Early Career Academy's link to ITT, some say, could prevent it from truly providing students with the intended head start at college.

David Dresslar has helped run early college models at high schools throughout the state as executive director of the Center of Excellence in Leadership of Learning at the University of Indianapolis.

"With ITT Tech, I would be concerned that the credits are credits that are transferable and the degree is a degree that is employable," he said. "If you're going to get an associate degree, (the credits) need to be transferable."

The same idea was echoed by Carol D'Amico, a workforce expert and executive vice president for the Indianapolis-based higher education nonprofit USA Funds.

Early college models are popular, she said. "You just have to make sure you're not giving (students) false hope — that you're not giving them an associate degree that has no value at a university or employers don't recognize for that job."

Beyond awarding credits that don't transfer, if the idea of Early Career Academy is to ready high school graduates to immediately enter the workforce with college-level skills, that's where another part of the government lawsuit raises concern.

Early Career Academy planned to offer two ITT associate degrees: network systems administration and electrical engineering technology, "two professional tracks that are in demand for Indiana employers," a school news release said earlier this year.

In 2012-13, according to ITT, the job placement rate for both of the programs was 71 percent.

But the federal lawsuit alleges the employment prospects aren't so rosy.

"For example," the lawsuit said, "the placement rates do not include former students who did not graduate (which is the most common outcome for students who begin at ITT), may include jobs that do not require the degrees students paid for (such as retail jobs), and may include positions that were merely seasonal."

Further, the U.S. Department of Education has said for-profit degree-holders on average earn less than high school dropouts.

No cost for dual degree program

Still, is a degree — any degree — better than no degree?

Charter school proponents say Early Career Academy could make a difference for students and will be held to accountability standards.

Because despite non-transferable credits, Early Career Academy will offer what's normally an expensive associate degree for free as part of completing its high school curriculum.

At other high schools, students sometimes must pay up to $25 per credit hour for dual-credit courses. But Early Career Academy students won't have to pay for college-level classes, officials said.

The school also plans to cover textbook and technology costs, and it is required to remediate a student who fails or falls behind at no cost.

Early Career Academy could be particularly beneficial for students from low-income families, said Alex Medler, vice president for policy and advocacy at the National Association of Charter School Authorizers.

"The idea that you would actually expose a low-income, at-risk kid to the concept that they can do college," Medler said, "is actually a pretty powerful intervention."

It's up to the Indiana Charter School Board, an independent state agency whose members are appointed by the governor, top state lawmakers and the state schools chief, to measure the school's financial health and academic performance.

Separate boards, but close ties

School and authorizing officials say the public is adequately protected because the charter school is governed by a separate board from the college.

Any problems with ITT raised by the government lawsuit "don't really translate" to Early Career Academy, said Emily Richardson, director of school performance for the Indiana Charter School Board.

The charter authorizer doesn't work directly with ITT.

"We really have no contractual relationship with ITT whatsoever," Richardson said.

Instead, the charter contract lies with Early Career Academy's nonprofit board set up by ITT.

Carlson, the Early Career Academy board chair, said that's what maintains the charter school's independence from ITT: "The governance board has to make decisions on how this operates, and the governance board is in charge. … We're our own entity."

However, the Indiana Charter School Board did want the school to prove it could eventually become financially independent from the for-profit institution.

According to its charter application, ITT considerably subsidizes Early Career Academy. ITT provided an initial $150,000 to the school for start-up costs and has proposed giving the school nearly half a million dollars worth of in-kind services in its first year — and more each year after as the school is projected to grow.

ITT also agreed to cover the school's possible deficits.

Charter schools are supposed to be set up so that Early Career Academy can essentially fire ITT if necessary — a separation that Richardson said is "never easy," but would be "incredibly difficult" in this case.

Stumbling to get started

Before the school was slotted to open, the Indiana Charter School Board flagged two big problems. The school hadn't yet shown it could eventually be self-sustaining, and "the Board was not driving the vision and the mission of the school."

That's because the original board disintegrated.

Two men who do business with ITT resigned from the Early Career Academy board after they were asked to submit letters confirming their businesses wouldn't profit from school operations.

Later, two prominent members of Indianapolis' charter school scene also stepped down from the Early Career Academy board.

That left only Carlson, a retired ITT Tech executive and former chair of the agency that accredits ITT Tech. He considered stepping down, too — until he said he learned that the Early Career Academy could pick up his commuting expenses from Omaha, Neb., to Indianapolis.

Early Career Academy decided to delay its opening until next year, citing a desire to solidify good governance. About half of its 120 enrollment spots had already been filled, and students scrambled to find different schools.

Carlson has since brought several new people to the board.

Expansion plans in other states

ITT's charter schools have been proposed across the country, with one currently seeking approval in Houston, Texas.

But of several trying to open, only one Early Career Academy has successfully launched in Troy, Mich.

In Tampa, Fla., the charter school's executive director resigned about a month before the scheduled opening this year. The school decided a few weeks later to delay its debut, citing facility issues.

And in Jacksonville, Fla., local school district officials recently recommended rejecting a proposal for another Early Career Academy, the Florida Times-Union reported.

District officials worried about the value of an ITT associate degree that could not be transferred to so many nearby universities.

In fact, district officials said allowing ITT to essentially operate the charter school might even violate Florida law, the newspaper reported.

Early Career Academy couldn't prove it would be accountable, the Times-Union reported, and ITT officials soon withdrew the application.

Call Star reporter Stephanie Wang at (317) 444-6184. Follow her on Twitter: @stephaniewang.