Lawsuit: SCC on ‘brink of extinction’ due to federal hold on financial aid
St. Catharine College has sued the U.S. Department of Education and is asking a judge to order it to reimburse the college for more than $640,000 in financial aid it claims it is owed.
NC GAZETTE / WBRT RADIO
STAFF REPORT
Monday, Feb. 22, 2016, 7:45 p.m. — St. Catharine College is at the “brink of extinction” due to a dispute between the college and the U.S. Department of Education over more than $600,000 in financial aid funds the college says it is owed.
DR. CINDY GNADINGER
WDRB reported Monday the Washington County college filed a lawsuit in U.S. District Court in Louisville alleging that the education department failed to reimburse the college hundreds of thousands of dollars in financial aid it gave to students.
As a result, the college has lost students and will close unless a federal judge orders the education department to release the financial aid funds.
In an open letter posted on its website Monday, college president Dr. Cindy Gnadinger said the financial aid disbursements “are being held without reason and we are insisting upon their payment.”
Gnadinger says the college has met the requirements laid out by the Department of Education in order to receive the financial aid for its students.
According to WDRB, the heart of the dispute is the college’s failure to obtain federal approval to disburse financial aid to students enrolled in undergraduate programs that were added from 2011 to 2014. In its lawsuit, St. Catharine did not seek approval because it didn’t believe it was necessary, and that the new program additions did not amount to a substantial change in the college’s course offerings — which would require the approvals.
In its lawsuit, the college is asking the courts to order the release of the funds and other unspecified damages.
In the suit, the college claims it is seeking more than $645,000 in financial aid payments it has not received since April 2015. To cover those costs, St. Catharine used funds from a scholarship program to cover the shortfall in student aid money.
According to WDRB, the lawsuit also sheds light on the exit of former SCC president William D. Huston last year.
At the time Huston said he chose to retire, but the lawsuit states he was replaced in response to sanctions placed on the college in early 2015 when federal officials placed the school on “heightened cash monitoring.” The college was required to distribute aid to students and then apply for reimbursement from education department
In addition to replacing the college president, the lawsuit states the college replaced its entire senior leadership team and 90 percent of the staff it its business and financial aid offices.
The college has about 600 students and 125 fulltime employees.
FINANCIAL BACKGROUND. A March 2015 story in “Inside Education” reported that SCC was one of dozens of colleges the U.S. Department of Education placed on heightened cash monitoring, citing “severe findings” of an audit of the college’s financial aid program.
A school placed on the heightened cash monitoring no longer receives funds under the Advance Payment Method. The school is expected to make disbursements to students from its own institutional funds and the submit requests for reimbursements to the Department of Education.
As of Dec. 1, 2015, St. Catharine College was one of four Kentucky schools still on the list of institutions that remain under heightened cash monitoring, according to the Federal Student Aid website.
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