AU challenges $6 million fine from U.S. Dept. of Ed.

ASHLAND — Ashland University is contesting a $6 million fine levied by the U.S. Department of Education for “improper Pell packaging and return of Title IV funds,” according to court documents. 

The fine, according to a July 10 decision from the U.S. Department of Education’s Office of Hearings and Appeals, has to do with the university’s correctional education program.

Concerns center around the school’s use of 12-week courses for Second Chance Pell Experiment students in 2019-2020 and 2020-2021. 

Pell Grants, a type of funding for undergraduate students with exceptional financial need that doesn’t need to be paid back, are granted based on the length of an academic year. 

According to the Education Data Initiative, an average Pell Grant award is $4,491. The maximum grant amount is $6,895. An overwhelming amount of Pell Grant monies go toward students enrolled in public schools. 

Two formulas are used to calculate grant amounts — one that takes into account an academic calendar that lasts 30 weeks or more, and a second that accounts for academic calendars under 30 weeks. 

At AU, the two semesters of 12-week courses offered during 2019-2020 and 2020-2021 added up to 24-week academic calendars.

But, AU’s lawyers say the academic programs students were enrolled in were the same as the traditional programs, which last over 30 weeks.

Ashland University used the formula for an academic calendar more than 30 weeks long to calculate the Pell Grant funding given to Second Chance Pell Experiment students in its correctional education division.

At issue is whether Ashland University used the correct formula, and gave out Pell money wrongly as a result.

“It’s the way you frame a program and define it,” said Carlos Campo, Ashland University’s president. “This is a rather nuanced and difficult issue, and from our perspective, the Department is misconstruing a number of definitions.”

To Campo’s knowledge, Ashland University has not had other issues with Pell Grant money.

Ashland University responded by filing a complaint in U.S. District Court for the Northern District of Ohio Eastern District at Cleveland.

The complaint is against the secretary of the Department of Education. It claims misconduct on the part of the Department of Education, and asks for relief from having to pay the fine. That complaint was filed Sept. 23.

“As a result of the Secretary’s misconduct, AU finds itself financially hamstrung and improperly burdened in accomplishing its goal of educating American citizens,” the complaint states. 

“Without the sought-after relief, AU’s ability to teach its students will be significantly diminished and these students will be adversely affected, particularly incarcerated students who will lose a proven tool that has placed many lives on a more productive and more successful trajectory.”

Ashland Source reached out to the U.S. Department of Education for comment on the litigation. It was told the Department does not comment on active litigation.

What is the Second Chance Pell Experiment?

Jim Cox, Ashland’s assistant vice president for correctional education, said the school’s correctional education program came as a result of its Brethren Christian belief system. The whole individual should serve, and be served. 

“Teaching and engaging in correctional education has been part of our DNA for many years,” Cox said. 

The school’s correctional education division has been around since 1964. Today, it serves over 3,000 incarcerated students across 13 states and the District of Columbia. 

If we really believe in justice — and we do at Ashland — if we really believe in restitution and second chances, we have to be at the front of the pack leading. To us, this is a program that’s deeply missional.

Carlos Campo, president of ashland university

These students haven’t always received financial help with college. In 1992, incarcerated students stopped being eligible for Pell Grant funding. 

From 1992 to 2015, even as Pell Grants weren’t available to incarcerated students, Cox said AU continued offering coursework to these students.

They couldn’t get degrees, he said. But they received college credits to transfer to a school upon their release. 

In 2015, the Department of Education started the Second Chance Pell Experiment. It provided Pell Grants “to incarcerated individuals to allow them to participate in eligible postsecondary programs,” according to Federal Student Aid.

For universities to participate, they submitted letters of application. Institutions also gave information about the academic programs they’d be offering to the Second Chance Pell students.

Ashland University submitted information and was approved through the Second Chance Pell application process in June of 2016. It has participated in the Second Chance Pell Experiment since. 

“If we really believe in justice — and we do at Ashland — if we really believe in restitution and second chances, my goodness, we have to be at the front of the pack leading,” Campo said. “To us, this is a program that’s deeply missional.”

Cox said the school’s participation ensured that incarcerated students’ coursework counted toward degrees. He also said Pell Grant restoration helped schooling become a reality for many students.

In 2020, Congress passed the Free Application for Federal Student Aid Simplification Act. 

That act reinstated Pell eligibility for “otherwise-eligible confined or incarcerated individuals enrolled in eligible prison education programs,” according to the Federal Student Aid website.

It ended the Second Chance Pell Experiment, and currently is in a transitional phase. 

Ashland University continues to work with the U.S. Department of Education in the transitional version of this program, Cox noted.

But wait, what about the fine?

Baked into the requirements of the Second Chance Pell Experiment was one that stated Second Chance Pell courses needed to have “the same quality, assessments, learning outcomes, and requisites as their corresponding traditional courses.”

That was part of the statement in the July decision against AU. 

“Additionally, course content, student learning objectives, amount of class time, resulting transcript entries, and the degrees earned by students are the same for both SCP and non-SCP students.” 

Typically, traditional AU students are enrolled in 16-week semesters, which means an academic year lasts for more than 30 weeks. Pell awards are calculated based on whether programs’ academic calendars last longer or less than 30 weeks.

But in the academic years of 2019-2020 and 2020-2021, AU’s Second Chance Pell students received 12-week semesters, and the award year lasted only 24 weeks. 

Campo, AU’s president, said online class formats can last longer or shorter time frames for students. Still, he said, they have the same syllabi and requirements to receive credit. 

According to Cox, AU’s VP for correctional ed, online offerings make up around 90% of the offerings to incarcerated students. 

“It’s not the length of the course,” Campo said. “It’s the outcomes and the content.”

In September 2021, Federal Student Aid’s Chicago/Denver School Participation Division performed a review of AU. The review’s purpose was to determine the university’s compliance with regulations under Title IV of the Higher Education Act. 

Title IV of the Higher Education Act deals with student assistance to attend colleges.

In the process, the Second Chance Pell Experiment grants came up. According to the July 10 decision, Ashland University was questioned about the 12-week courses it offered to Second Chance Pell students. 

The school’s response: “Twelve-week, rather than the 16-week courses provided to traditional students are provided to incarcerated students because 12-week courses work better in prison because they are shorter.

“Ashland’s correctional education students may not take a 16-week course at Ashland. A non-incarcerated student may take 12-week courses in programs other than the correctional education program.”

Ten findings came from the Chicago/Denver School Participation Division’s review of AU. 

Two became the focuses of the school’s appeal and the Department’s July decision.

The review’s findings and the July decision

The first finding was that, since AU offered 24 weeks of instruction to SCP students instead of 30, the school miscalculated Pell Grant funds it gave to Second Chance Pell students. 

The second was that AU incorrectly calculated the amount of Pell Grant earned by a student who withdrew during a payment period. Thanks to the withdrawal, the student only should have received three-quarters of a Pell amount.

The first finding came with a fine of $6,131,790.46. The second didn’t come with any liability. 

Ashland University filed a brief asserting it wasn’t responsible for the liabilities in the first two findings.

It also argued the fine was applied based on “misapplication of a regulatory standard that did not exist during the review periods at issue,” the decision stated.

Ashland’s argument that the degree programs authorized by the Ohio Department of Education define the academic program for Pell Grant calculation purposes is not persuasive.

Judge elizabeth figueroa’s decision

Second Chance Pell programs met standards from the Ohio Department of Higher Education, which are approved degree programs through the U.S. Department of Education.

Jim Newberry, Ashland University’s lawyer with Steptoe & Johnson, said that’s significant.

“Students can only receive federal financial aid if they are enrolled in an eligible program as defined by the financial aid regulation,” Newberry told Ashland Source in an Oct. 6 interview.

Those standards from the Ohio Department of Higher Education require 30 weeks of instruction. Ashland’s lawyers argued, thanks to that, the school used the correct formula.

Federal Student Aid responded, outlining reasons why the findings should be upheld. Ashland replied, and oral arguments were scheduled and took place in May.  

On July 10, Elizabeth Figueroa, a chief administrative law judge in the Department of Education’s Office of Hearings and Appeals, found against AU. She ordered AU to pay the $6 million-plus fine to the U.S. Department of Education. 

“Ashland’s argument that the degree programs authorized by the Ohio Department of Education define the academic program for Pell Grant calculation purposes is not persuasive,” Figueroa wrote.

Her decision spanned 22 pages.

Ashland’s response

On Sept. 23, Ashland University responded by filing a complaint with a jury demand against the U.S. Department of Education. It is seeking “declaratory and injunctive relief.” 

It asked Secretary Miguel Cardona of the Department of Education to “comply with the law governing AU’s participation in a federal student aid program established under Title IV of the Higher Education Act.” 

“Failing to correctly apply the provisions of the HEA or requirements imposed in the Secretary’s own regulations, the Secretary has impermissibly redefined AU’s curriculum in an attempt to support the imposition of this unwarranted and unsupported fine,” the complaint states. 

The complaint states that despite shorter semesters, incarcerated students were “enrolled in the same academic program as ‘traditional’ AU students, which meets the 30-week requirement …”

It argues that AU’s correctional education programs satisfied the requirements of the Ohio Department of Higher Education, which requires “30 weeks of instruction exclusive of compressed terms.” 

Thanks to that, the university claims its programs were eligible for the Pell Grant funding it applied for and received.

Also, the university’s complaint argues the Second Chance Pell program wasn’t eligible for Title IV of the Higher Education Act purposes. Therefore, it argues the fines under that Act cannot be enacted against it.

The university’s lawyer, Newberry, said these students were enrolled in degree programs approved through the Ohio Department of Higher Education. Those programs were the basis of the Pell Grant applications.

Campo said the issue isn’t with AU’s incarcerated students not receiving the same outcomes as its traditional students.

“It’s simply a matter of a quotient that they have reduced to numbers,” Campo said. “That’s not what education is about.”

What comes next?

Newberry said, at this point, the case is in the hands of the U.S. District Court. 

“We requested that the district court review the agency decision under the terms of the Administrative Procedures Act,” Newberry said. “Now, we’ll be arguing the Department of Education in federal court about whether their interpretation is correct or ours is.”

Newberry said the school will be expecting an answer from the Department about the complaint it filed, likely sometime this month. Then, both parties will discuss how the case will proceed.

“There’s really no factual dispute here,” Newberry said. “There’s just a dispute over how you interpret the regulation.”

Campo said any institution AU’s size likely couldn’t take a $6 million hit and not experience some issue. But, he said, the litigation is ongoing.

“There is room for arbitration here, there is room for negotiation,” Campo said. 

He added the school is in close contact with its auditors and accrediting body. If the $6 million fine needs to be paid in full, that will be significant.

But, that one-time fiscal event wouldn’t be crippling or threaten the continued existence of the institution.

Campo said these types of disputes arise, and the school is hopeful it will be settled. He added it won’t hurt the work the school is doing with correctional education.

The university president said the dispute about the 2019-2020 and 2020-2021 academic years doesn’t negate the quality of the program.

“They didn’t withdraw us from the program, reduce our allotment, nothing like that,” Campo said. “Our program continues. It continues to thrive, we continue to enroll students in more than a dozen states, and so all of that continues and we think it speaks to the quality of the program.”

This independent, local reporting provided by our Report for America Corps members is brought to you in part by the generous support of the Ashland County Community Foundation.