Feds Tighten Rules for Pell Grant Payments to Eastern Gateway

STEUBENVILLE, Ohio – The U.S. Department of Education is not backing down on its order that Eastern Gateway Community College suspend its Free College Benefit Program for new students and now is placing the community college on “a Heightened Cash Management Level 2 status” for tuition reimbursements related to current students.

In a letter dated Aug. 8, DOE notified Eastern Gateway that it would no longer receive advance payments for Pell grants that fund the Free College Benefit Program and instead would have to fully document individual claims before receiving any disbursements.

“It’s important to stress that this action does not impact the college’s ability to receive Pell grants from students for tuition and fees,” said Michael Geoghegan, president of Eastern Gateway, in an email Wednesday afternoon to faculty and staff. “It will have no impact on the students themselves. The largest impact will be on the [college’s] Financial Aid Department and an adjustment in timing of cash flows in receipt of Pell grants.”

The Department of Education sent Eastern Gateway the cease-and-desist order July 18 that ordered it to suspend new enrollment in its Free College Benefit Program until the program is redesigned to comply with federal law and Department of Education guidelines.

The community college appealed and posed a series of questions in an effort to resolve “disagreement on the interpretation of last dollar scholarship,” according to Geoghegan, so that it could “submit a concrete proposal for restructuring” the Free College Benefit.

“Let me emphasize that while the HCM2 directive is a setback, it will not affect our ability to continue to receive Pell funding,” he said. “There will be some changes in the timing of our cash flows from Pell but nothing we cannot adjust to. There is no truth to any rumor that ongoing commitments to payroll and payables will not be met.”

The issue is how Eastern Gateway and its third-party servicer, Student Resource Center, use Pell grants to fund the college’s free tuition program and whether all students receiving the grants are carrying the same academic workload. Pell Grants are provided under the Title IV grant program, which funds federal student aid.

Geoghegan’s email, which was distributed to news organizations, said Eastern Gateway planned to submit a proposal to Education outlining how it would rework the Free Tuition Benefit Program to comply with federal law.

The email also contained attachments of two letters received from the Department of Education.  

“To remedy this situation, EGCC could seek funding from outside sources including third-party grants or endowments,” advised Jeremy Early, division chief for the Federal Student Aid office of the U.S. Department of Education, in his Aug. 5 letter.

Early’s Aug. 8 letter was more direct.

“The Department has taken this action as a result of serious and systemic issues identified during the ongoing program review being conducted at your institution. 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,” Early wrote.

“Further, inconsistencies in the data and documents provided to the Department have raised concerns regarding EGCC’s compliance with Title IV student eligibility requirements, satisfactory academic progress standards, and Title IV return requirements,” he said.

Since 2015, more than 75,000 EGCC students have participated in the Free College program, which has saved students more than $175 million, according to Eastern Gateway. Those students went on to pursue additional education at 600 institutions across the United States, the community college said.

“I want to ensure we are focused on our students as the fall semester approaches us quickly,” Geoghegan’s email concluded. “We are doing something unique here, and our students deserve our undivided attention and support this semester. While we work together with the DOE, I ask that we remain committed to helping our first-generation college students, working parents, and students from all different walks of life who are trying to obtain an education to better their lives.”

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