- Eastern Gateway Community College, a public institution in Ohio, is advising students enrolling in its Free College Benefit program that they should not plan to receive funding from federal Pell Grants after the U.S. Department of Education flagged concerns.
- The Ed Department said in a July 18 letter that the program violates federal law by charging students who receive Title IV federal financial aid funding more than students who do not.
- Eastern Gateway has objected to the findings and said in a Wednesday news release that annual Title IV compliance audits haven't found problems in the last four years.
Eastern Gateway has touted its free college program as a last-dollar scholarship made possible by partnering with local and national unions. More than 75,000 students have taken part in the initiative since 2015, saving themselves $175 million, according to the college.
But the Ed Department found problems with the way the program functions. Students who receive Pell Grants, which go to students with high financial need, have those federal financial aid dollars credited to their bills, according to the department’s letter. State dollars are also credited toward students' bills. Remaining balances are then credited with a scholarship, reducing the charge students pay to zero. The college also reduces charges to zero for students who do not receive funding from Pell Grants or state aid programs.
Ledgers show scholarship funding coming from outside entities, according to the Ed Department. But it found that outside entities are actually providing almost no funding.
In other words, the department said, the community college is waiving all charges not funded by public dollars and making it look as if students are being supported by outside groups. That would mean students who receive Pell funding are charged — with the government footing the bill — while students who don't receive money from the program pay nothing.
"It should be noted that under the Free College Benefit program, students with lower levels of need have a higher 'write-off' and ultimately fewer charges than the needier Pell students," the Ed Department's letter said. "The ultimate result of the implementation of the Free College Benefit Program is that the Pell Grant Program and the State Grants are funding the educational costs of students whose incomes make them ineligible for either."
The college disagrees with that analysis, its president, Michael Geoghegan, said in a statement.
"Until this issue is resolved, which we hope will be soon, we will continue to enroll students and notify new and prospective students of the situation," Geoghegan said.
Eastern Gateway is telling students who have enrolled or are planning to enroll for the fall that they shouldn't expect Pell funding while the issue is outstanding.
"Free college is closed to enrollments for the fall 2022 semester," the college's website says. "Information about future terms will be shared as soon as it is available."
The college is seeking to resolve the issue with the Ed Department and also turning to federal lawmakers for help.
Enrollment at Eastern Gateway has spiked since it started the free college program in 2015. Enrollment rose from about 5,500 students in fall 2016 to more than 42,500 in fall 2021, according to court documents filed in June by Student Resource Center, the online program manager the college hired to operate the program.
Eastern Gateway and Student Resource Center are embroiled in a breach-of-contract lawsuit.
The college argued to the Ed Department that states including Tennessee and California offer last-dollar scholarship programs similar to its own. But the programs it cited are all paid for by an actual income source, like foundations or state funding, the department replied.
"In none of the programs are charges for non-Title IV students written off entirely, resulting in Title IV students being charged and non-Title IV students not, a result that is prohibited under the Title IV Statute," the Ed Department said in its letter.
The Ed Department also said that Eastern Gateway is in "a very precarious financial position" because the free college program limited the money it had available to educate students and forced cuts in academic and operating expenses.
Colleges and the programs that operate with OPMs are coming under increased scrutiny, particularly after a report issued earlier this year by a congressional watchdog said the Ed Department should strengthen its oversight of the relationships.