WASHINGTON—The Obama administration on Monday ordered the parent of ITT Technical Institute to bolster its finances due to risk that the for-profit college chain will close amid state and federal investigations.

ITT Educational Services Inc. must increase its financial cushion to $123.7 million from $79.7 million, the Education Department said in a letter to the Indiana-based company. The money is needed to cover expenses "should the institution precipitously close or terminate classes at other than the end of an academic period," the letter said.

The funds would be used to reimburse students and meet "institutional obligations" to the government, among other expenses, the Education Department said.

ITT receives much of its revenue from federal loans and grants, which students use to cover tuition. The action comes weeks after ITT received a demand from its accrediting body that the school justify its accreditation amid allegations of bad behavior involving a loan program.

In a statement, ITT said the Accrediting Council for Independent Colleges and Schools had asked it to "address various unsupported allegations."

The company said it is reviewing the Education Department's request and would cooperate with regulators.

Write to Josh Mitchell at joshua.mitchell@wsj.com

(END) Dow Jones Newswires

June 06, 2016 17:25 ET (21:25 GMT)

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