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Free tuition comes at a high cost

I’ve written about the cautionary tale that Eastern Gateway Community College offers. EGCC cooked up a deal with the AFSCME to provide “free” tuition to its union members. Excluding the Higher Learning Commission, the Department of Education, the Sterling Small Market Education Fund and SRC Holdings, the response to the free tuition program has been fantastic.

According to EGCC officials, enrollment at EGCC was about 95,000 students. The IPEDS data are not quite as generous. In 20192-2020, EGCC reported an unduplicated headcount of 40,637 students, and 17,727 FTE students. (The data for 2020-21 and 2021-22 are not available yet.)

Earlier this year, the Higher Learning Commission, which accredits EGCC, put the school on a two year probation status. The HLC has a list of items it wants EGCC to fix. The penalty for not doing so will likely be the loss of the school’s accreditation.

Following its own investigation, the Department of Education ordered EGCC to suspend the use of Pell Grants to pay for student applicants. It appears that EGCC might have been charging tuition for students who qualified for federal Pell Grant aid and dismissing charges for students who did not. That effectively placed the burden of paying for the program for all students only on the backs of those who were Pell-eligible. (It should go without saying, but that’s against Ed rules.)

Prior to a meeting with the Department of Ed last month, EGCC President Michael Geoghegan was certain EGCC could reach agreement with Ed to continue the program. Following the meeting, President Geoghegan announced that the program would be suspended until further notice.

Free tuition investigation turns up cash handling problems

To make the Department of Education’s displeasure crystal clear, last week it placed EGCC on Heightened Cash Monitoring Status 2. In this state, the Department of Education will require EGCC to credit Pell Grants for eligible students first , then apply for reimbursement. Geoghegan characterized the move as a “minor setback.”

The new restrictions on cash are only tangential to the school’s free tuition benefit program. The new cash requirements come as the result of the Department of Education’s investigation into the program, but they’re meant to address deficiencies in the school’s accounting records and its internal financial controls.

To receive federal Pell Grant funding again, the school must re-design the business model for the free tuition benefit program. Mr. Geoghegan announced that the school would not offer the program until further notice. That leaves the majority of the school’s students out in the cold for the Fall semester.

It also raises questions about the school’s immediate financial stability. EGCC reported enrolling fewer than 200 students who were seeking a degree and not enrolled in any distance education courses. (Those would be the students who were physically present on campus.) Additionally, only about 14% of its students live somewhere in the State of Ohio. Given the school’s large investment in distance learning, it cannot support its current operations serving only local/non-Pell Grant students.

EGCC is also fending off lawsuits from the new parent company of the school’s online program manager (OPM), which believes EGCC misled it by not disclosing the school’s probationary accreditation status before the sale.

Learning these lessons doesn’t require repeating them

The lessons are three-fold here for any community college considering a leap into the online “land rush.” First, have a very clear business model for taking in, managing, and collecting tuition from out-of-district students.

Second, if the school takes in too many out-of-state students, there is little incentive for local residents to continue funding the college. In one’s haste to admit out-of-state online students, one could effectively throw the baby out with the bathwater. Admitting too many out-of-state students would likely result in a drop in state funding, too

Finally, have an exit strategy with very clear markers, and a clear understanding of untenable situations that could require the college to withdraw service for price-sensitive, out-of-state students.

Photo Credit: vfutscher , via Flickr