Dottie King photo

Tribune Star/Sue Loughlin

Dottie King, president of Saint Mary-of-the-Woods College, announces that the college has been successful in its challenge of a federal audit, and it will not have to repay $42 million in federal student aid funding.

Updated, 4:45 p.m.: A  nine-year saga has finally come to a close for Saint Mary-of-the-Woods College, which announced today its challenge of a federal audit has been successful, and it will not have to repay $42 million in federal student aid funding.

"It's total vindication for the school," college president Dottie King said in making the announcement from her office. 

While the college didn't have to pay back financial aid, the challenge has cost it $800,000 in legal fees over the years, she said.

At issue was SMWC's participation in federal student aid programs in 2005 to 2010. The U.S. Department of Education Office of Inspector General initially found The Woods out of compliance with regard to distance education funding.

The 2012 federal audit said the college’s distance learning programs did not meet the regulatory definition of “telecommunications courses” and should instead have been categorized as “correspondence” courses.

Today, SMWC announced the Department of Education has reversed that finding, and it received an administrative judge's order last week dismissing the case.

When asked why it had taken nine years to resolve the matter, King responded, "It's Washington." 

Also, the Higher Education Act under Presidents Bush, Obama and Trump "has been a very contentious thing," she said. In recent years, "It's become very political. I think that has made this a protracted situation for us."  

According to a college news release, SMWC "was indeed eligible to participate in federal student aid programs in 2005 to 2010 and is not required to return $42 million in student aid as determined by a resolution reached with the U.S. Department of Education (DOE)."

The dismissal of the case last week came after a more thorough review of the initial findings by the DOE, including the records of regular and substantive interactions between students and academic staff during the years audited and the favorable findings of The Woods accrediting agency regarding its academic model, the school said.

“This is an affirmation that we were always compliant,” King stated.

The 2012 audit concluded  the college was not eligible to participate in Title IV of the Higher Education Act of 1965 programs and improperly received $42-million in Title IV student-aid funds from 2005 to 2010 because, according to that audit, it claimed that 50 percent or more of its students were enrolled in correspondence courses.

 While the college considered its online courses to be telecommunications courses during this period, the audit concluded they were correspondence courses.

King explained that while the Office of Inspector General recommended repayment of $42 million in 2012, the college then began working directly with DOE, which made a determination and recommended repayment of $7.7 million in 2016.

The college, working with both local counsel and attorneys in Washington DC, continued its challenge.

"We always knew that we were fully eligible to participate in the Title IV program," King said. "We believed we would prevail. So we continued to make our argument and have open discussions directly with DOE and their attorneys." 

It was suggested to King that the college make a financial offer of settlement, and she offered to pay $750,000 "just to end the whole thing," she said. It was verbally accepted but required approval of the U.S. Department of Justice "because it was significantly less than the $7.7 million."

But in the meantime, in January of this year, DOE "walked away" from a similar case involving Western Governors University, which the OIG had said should repay more than $713 million. Again, the issue related to "correspondence" courses.

In January, DOE stated it would not seek the return of the WGU Title IV student aid funds, citing "the ambiguity of the law and regulations and the lack of clear guidance available at the time of the audit period."

King said when she read about the WGU case, "I picked up the phone and called our attorney in Washington." She questioned why The Woods should pay $750,000 if the U.S. Department of Education decided not to pursue the WGU case. 

SMWC and the DOE "began anew our conversations," she said. By June, she understood the case would be dismissed.  And last week, the college received the order signed by a U.S. DOE administrative law judge dismissing the matter.

Over the nine years, students were still eligible for federal student aid and they were not impacted by the matter. But the long, drawn-out process "had a big impact on me," said King, who was interim president when she first learned about the audit and recommended payback of $42 million.

King said the college has received much support from government and education leaders as well as the college's accrediting body. The college's online students remained loyal, despite the confusion. She also praised the efforts of her cabinet, including Darla Hopper, associate vice president for financial aid.

"We're thankful," King said. "We've got big things to celebrate at the Woods ... we have things to accomplish, and this is just something we don't have to worry about anymore."

Sue Loughlin can be reached at 812-231-4235 or at sue.loughlin@tribstar.com Follow Sue on Twitter @TribStarSue

SMWC

Saint Mary-of-the-Woods College file photo 

Original story, 9 a.m.: Saint Mary-of-the-Woods College's challenge of a federal audit has been successful, and The Woods will not have to repay $42 million in federal student aid funding, the school announced this morning.

At issue was SMWC's participation in federal student aid programs in 2005 to 2010. The DOE initially found The Woods out of compliance with regard to distance education funding.

This morning, SMWC announced the Department of Education has reversed that finding.

"Saint Mary-of-the-Woods College was indeed eligible to participate in federal student aid programs in 2005 to 2010 and is not required to return $42 million in student aid as determined by a resolution reached with the U.S. Department of Education (DOE)," the college said in a news release.

The decision made last week came after a more thorough review of the initial findings by the DOE, including the records of regular and substantive interactions between students and academic staff during the years audited and the favorable findings of The Woods accrediting agency regarding its academic model, the school said.

“This is an affirmation that we were always compliant,” Woods President Dottie King said. “We continue to focus on the future by embodying a spirit of student-centered academic innovation, faith and leadership to transform ourselves and to benefit our communities.”

SMWC’s Woods Online program began as the Women’s External Degree program in 1973. It was one of the earliest distance education programs in the nation. In 2005, the former women’s college expanded access to its undergraduate distance program to men and became known as Woods Online.

This story will be updated.

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