Eastern Gateway Settles Dispute with Department of Education

YOUNGSTOWN, Ohio – Eastern Gateway Community College has reached a tentative settlement in its yearlong dispute with the U.S. Department of Education regarding a free tuition program the school offered.

Eastern Gateway voluntarily dismissed its complaint for injunctive relief on Aug. 2, according to papers filed in the U.S. District Court for the Southern District of Ohio.

Eastern Gateway filed a complaint in federal court on Sept. 2, 2022, seeking injunctive relief and damages in connection with a cease-and-desist order issued by the DOE in July 2022 that halted the school’s Free College Benefit program and Pell grant funds for new students.

Terms of the settlement were not disclosed and it is unclear how the deal would impact students or the college.

EGCC has not responded to a request for comment as of this posting. 

In the letter, the DOE alleged that Pell Grant, or Title IV, recipients enrolled in the program were charged more than non-Title IV recipients. The order prohibited Eastern Gateway from dispersing Pell Grant funds, which accounts for approximately 74.5% of EGCC’s overall revenue.

The lawsuit asked the court to stop enforcement of the order and subsequent enforcement actions that it said threatened the community college’s ability to continue operations.

“DOE’s actions create certain and imminent financial losses so severe to EGCC that it threatens its continued operations as a community college,” the complaint stated, impacting employees and thousands of students.

“This has been highly disruptive for students planning their degree programs, whose average age is 34 years old, working full time, and raising families while pursuing a degree,” EGCC said in a press release issued at the time”

The program has provided scholarship funding to more than 90,000 students, the lawsuit said.

According to EGCC’s lawsuit, federal officials exceeded their authority, took “arbitrary and capricious action,” failed to provide any recourse for appeal, and violated the college’s right to due process. 

The DOE said it issued the cease-and-desist order “as a result of serious and systemic issues identified during the ongoing program review being conducted at your institution,” Jeremy Early, division chief for the DOE Federal Student Aid office, stated last year. “In addition to the issues previously raised regarding the financing model of the Free College Benefit Program, the department has identified other concerns that call into question EGCC’s ability to properly administer the Title IV programs and its ability to act in the capacity of a fiduciary.”

In October 2022, EGCC was granted a preliminary injunction as the parties began settlement discussions. In January, the court granted a stay in the proceedings “while their settlement discussion continues.”

However, in a May 22 motion filed by EGCC requesting a summary judgment, the college alleged that the DOE had slowed its processing of Title IV payments, driving down enrollment.

According to the motion, DOE has reimbursed just $8.5 million of the $25 million in federal aid EGCC says it is owed. As such, EGCC requested – and was awarded – a $3.5 million State Share of Instruction subsidy from the Ohio Controlling Board. The board approved the funding Monday, which EGCC said amounted to a two-month advance to ensure “adequate cash flow to sustain operations” as the college works through its issues with DOE.

“In short, ED’s conclusion that EGCC’s program violates Title IV and denial of due process has significantly impeded the college’s operations and pushed the school to the brink of insolvency,” the May 22 motion stated.

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