I’ve written extensively about Eastern Gateway Community College in the past few years. EGCC first grabbed the attention of both the US Department of Education and the Higher Learning Commission after EGCC entered an agreement with a group of unions to offer a “free college benefit” to their membership.
This week, EGCC will close its doors for the final time, dissolving itself and voluntarily relinquishing its accreditation from the Higher Learning Commission, which lapses on November 1. EGCC is the only publicly funded higher education institution in the State of Ohio to dissolve as the result of financial failure.
Don’t chalk up EGCC’s demise to bad fiscal management, though reckless financial decisions played a major role in the school’s collapse. EGCC’s failure comes from malign strategic decisions; ill-advised partnerships with third-parties driven by revenue generation; an unbalanced focus on online education; a fundamental lack of oversight; failure to act immediately on the comprehensive, direct and specific warnings of the US Department of Education and the Higher Learning Commission; a complete failure to address student needs; and a host of other missteps that compounded the college’s dire circumstances.
In the space of just a few years, EGCC experienced an astounding increase in revenues – most of which came from the Department of Education in the form of Pell Grants. The flow of cash prompted EGCC to issue long-term bonds they guaranteed with the seemingly endless stream of money the “free college benefit” appeared to generate. There was no thought given to how long this arrangement could last or what could possibly go wrong, or who might be left holding the bag.
Until it was too late.
Who gets the bill for college’s failure?
After all, there is no such thing as a free lunch, right? When it became apparent that EGCC and its Online Program Manager were likely violating federal financial aid regulations, the US Department of Education dragged the school into court. When the EGCC president saw that as an opportunity to sever the contractual relationship between itself and the OPM, he jumped. And the OPM also dragged EGCC into federal court.
In addition to seeking legal relief, the Department of Education placed the school in a special status called Heightened Cash Monitoring 2, which means the school fronts student financial aid from its own resources, and then seeks reimbursement from the US Department of Education. (There’s a long review process that goes along with that.)
At the height of the “free college benefit” program, more than 90% of EGCC’s income came from the US Department of Education. When the tap was shut off, the school failed, even with the millions of dollars the school persuaded the State of Ohio to advance.
EGCC’s failure doesn’t relieve the school of its responsibility to pay its bond debts, or settle its $25M dispute with its defunct OPM.
And no amount of money can ever make up the loss of EGCC to the community that supported it for decades. Jefferson County, which deeded the campus land to EGCC, could now lose the campus land, despite the deed restrictions that – at least in theory – should revert ownership of the land back to Jefferson County on November 1. Worse, due to a quirk in Ohio state law, Jefferson County residents may have become unwilling cosigners on EGCC’s outstanding debts. (Jefferson County is a rural county in Appalachian country, so households there have no money for this.)
Learning from EGCC’s Mistakes
EGCC released its students earlier this year. They scattered to nearly two dozen trade and technical schools, and public universities, including Youngstown State University. In addition to four-year and post-graduate degrees, YSU also issues associate degrees and heavily recruited
Earlier this summer, YSU announced its new tuition rate for associate degree students: $265 per credit hour. That’s 93% higher than EGCC’s published tuition rate ($137/credit) for local students. Not exactly an affordable substitute, but that’s what’s now available to two-year students in Jefferson County.
This all could have been prevented if the EGCC Board had done the one thing it was supposed to do: provide oversight.
The best way to salute the hundreds of former EGCC employees and thousands of former EGCC students, and the current residents of Jefferson County who will likely get the bill for EGCC’s party is to understand exactly what happened at EGCC and ensure that it never happens here.
Photo Credit: Eric Sonstroem
