YOUNGSTOWN, Ohio – The former Eastern Gateway Community College will pay $2.1 million to the company that operated its free college benefit program.

A settlement of the federal lawsuit filed against the college by Student Resource Center was approved last month by the Eastern Gateway Community College Governance Authority. The Business Journal filed a public records request to obtain terms of the settlement.

The lawsuit, which had been set for an August trial, was dismissed Tuesday.

The five-member authority was appointed by Gov. Mike DeWine to oversee the closure of the college. 

Eastern Gateway, which was based in Steubenville with a campus in downtown Youngstown, is the first public Ohio higher learning institution to close.

The college, through the governance authority, will pay $500,000 to SRC within seven days. The college will transfer $1.6 million to an escrow account of SRC’s choice within seven days, to be held for one year.

After a year, the escrow will be released to the company “subject to any claims brought by the Ohio Attorney General prior to the expiry of the escrow period …” and the company “shall be fully released from any claims unasserted by the Ohio AG prior to the expiry of the escrow period with regard to any matters related to EGCC,” the settlement reads.

The prejudgment release, which prohibited the college from selling or otherwise disposing of property, was also dismissed.

Last week, the governance authority gave its executive director the authority to sell the downtown parking deck and former Harshman building that housed the college in Youngstown. The Western Reserve Port Authority plans to buy both for $800,000 and demolish the parking deck, citing its need for repairs exceeding $18 million.

The court’s order of dismissal and prejudgment attachment release also instructs the sheriff in Jefferson County, where Eastern Gateway was based, to release the liens on the two buildings there formerly operated by the college.

The governance authority had previously agreed to sell one of those buildings, the Pugliese Center, to the Steubenville City School District.

Youngstown State University President Bill Johnson said the university hopes to open a campus in the other Eastern Gateway building. The lawsuit had prevented it from happening though.

“We are still on standby,” Johnson said Tuesday. “We are waiting to see where that’s going to go. I’m hearing that after the operating budget is finished, that there should be some news coming out. So we’ll see where that goes. All of our programs are ready to go, so we’re still ready.”

Under the settlement, Eastern Gateway and SRC released each other from all claims. However, “SRC will not provide a release to any individuals formerly employed by or associated with EGCC acting outside of their official capacities for EGCC,” it said.

Eastern Gateway shuttered after years of financial and accreditation challenges linked mostly to its free college program. Under it, union members from across the country attended Eastern Gateway classes and earned degrees at no cost to them. Most attended virtually, and enrollment swelled.

But the U.S. Department of Education placed the college on a restrictive financial monitoring provision and ordered it to stop the free college program. USDOE alleged the college was charging federal Pell grant recipients more than those who didn’t receive the grants. 

Enrollment dropped when the free college program ended.

In January 2024, law enforcement from the state auditor’s special investigations unit, the U.S. Secret Service, Jefferson County Sheriff’s Office, Ohio State Highway Patrol Computer Crimes Unit, Columbus Police Digital Forensics Unit and the Ohio Narcotics Intelligence searched the college’s Steubenville offices.

At that time, Auditor Keith Faber said the warrants were “part of an investigation looking into matters that both have already been charged and are being prosecuted by our special prosecutors and other concerns about financial legal irregularities here at the college.”

A spokesman for the auditor’s office said via email Tuesday that the investigation is ongoing and that no updates are available.