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Eastern reaches settlement agreement with U.S. Department of Education in response to 2014 program review

12/12/2016

WILBURTON (Dec. 12, 2016) – Eastern Oklahoma State College has reached a settlement agreement with the U.S. Department of Education (DoE) following a standard program review in March 2014 that resulted in a request for substantial repayment of liabilities. The settlement agreement significantly reduces the amount Eastern had been asked to repay.

Eastern President Dr. Stephen E. Smith said the settlement agreement reduced the repayment amount from a little over $1 million to $593,853.42.

“We are very pleased that we were able to reduce the liabilities repayment by 45 percent from the original amount,” Smith said. “We began the appeal process in October of 2015, just two months after receiving the final program review determination. However, the process has been slow and after a year of waiting, we decided to work toward a settlement agreement in order to reach closure on this matter.”

Eastern made an initial down payment of $148,463.36 upon completion of the agreement. The remaining liability will be paid in quarterly payments of $28,432.10 until Oct. 1, 2020. Smith said the college will not have to cut services or programs to absorb the payments.

“We recently completed a 20-year note on a bond and were able to keep that payment figure in our annual budget to prepare for this repayment,” Smith said. “Unfortunately, those funds were going to be used for campus improvements, specifically renovations to classrooms and labs. I’m disappointed that we will not be able to use those funds to improve our academic environment for students. Nevertheless, we will be able to meet our obligation to the Department of Education.”

In addition to the repayment agreement, Eastern also agreed to the following:

  • Eastern must hire a third-party servicer to assist with the Title IV matters until June 30, 2017.
  • Eastern must participate in a compliance assistance visit conducted by the DoE and address all issues identified during the visit.
  • Eastern must resolve all outstanding reconciliation issues including Pell, Federal Work Study and Direct Loans.
  • Eastern must provide a plan to address its high cohort default rates.
Smith said the college has met the first obligation by contracting with FA Solutions, LLC. The company will assist Eastern with the administration of its financial aid program, reviewing student files and offering consultation and training related to federal financial aid regulations.

Eastern’s DoE compliance visit took place in November. The objective of the visit was to address and resolve any compliance issues or concerns in dealing with the Title IV, Higher Education Act (HEA) program requirements and processes.

“The compliance visit team provided guidance on our policies and procedures and identified areas that needed updates. Our staff is in the process of rewriting policies and we should meet all of their requests in the next few weeks,” Smith said.

Eastern staff are also in the process of resolving all outstanding reconciliation issues and expect that portion of the agreement to be completed soon.

Finally, Smith said the college has had a plan in place to address default rates for a number of years, and it is working. Eastern’s default rates have dropped from 31.8 percent in 2010 to 23.2 percent in 2013, according to the latest data available. Colleges and universities with high default rates may lose their eligibility to participate in federal student aid programs if their default rates were either 30 percent or greater for three consecutive years, or were more than 40 percent for the latest year.

Smith said that once all of the items from the compliance assistance visit have been satisfactorily addressed, the DoE will return Eastern to the Advanced method of payment for federal financial aid. Following the 2014 program review, Eastern was transferred to the Heightened Cash Monitoring 2 (HCM2) method of payment. During this time, Eastern’s federal financial aid has been restricted to a reimbursement system pending increased documentation needs and a lengthy review process by DoE officials before the funds are provided to Eastern. At times, this has caused a delay in students receiving their financial aid and loans.

“The HCM2 method of payment has been the biggest hardship for Eastern during this process,” Smith said. “In an effort to help serve our students, the college has fronted the funds so they would not be affected by the anticipated delays. The reimbursement from the Department of Education has not always been timely and we are fortunate that the college has been in good financial condition during this process.”

The 2014 program review was the first time in 26 years that Eastern had been evaluated by the DoE. During a program review, DoE employees examine financial aid, academic and fiscal records, review relevant consumer information and interview institution staff on a variety of topics.

Smith said the college was disappointed with the outcome of the program review and the severity of the DoE’s actions. He said none of the findings were malicious or illegal and all have been corrected.

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