In the Matter
College, Student Financial
Respondent. ACN: 05-10015
Appearances: Stanley A. Freeman, Esq., Powers, Pyles, Sutter
& Verville, P.C., Washington, D.C., for Catherine College.
Edmund J. Trepacz, II, Esq., Office of
the General Counsel, United States
Department of Education, Washington, D.C., for Student Financial Assistance
Before: Judge Ernest C. Canellos
The material facts of this case are uncontested and clearly established.See footnote 1 1 During the period at issue, Catherine College offered postsecondary education programs in travel, accounting, word processing, computer training, and secretarial skills. The courses offered by the institution ranged from principles of accounting to telephone and mail procedures. Prior to August 1990, Catherine College's programs varied in course length from 1080 clock hours to 1300 clock hours. Students could enroll in Catherine College to attend classes in an evening program, or attend classes in the day. On March 8, 1990, Catherine College's accrediting agency, the Association of Independent Colleges and Schools (AICS), approved Catherine College's request to convert its measurement of course length from clock hour to credit hour.
In August 1990, Catherine College converted its measurement of
course length from clock
hour to credit hour. In doing so, Catherine College altered neither the times its classes were
nor the number of weeks those classes met. Although no changes to the institution's programs
were undertaken, under Catherine College's new credit hour measurement, the length of the
institution's programs significantly expanded. Catherine College informed SFAP of its
from a clock hour institution to a credit hour institution. In response, SFAP requested the
institution to document that the institution's state licensing agency had authorized the institution
to operate as a credit hour institution and to "explain in detail the additional instruction that
students will receive from the expanded (converted) curricula." Subsequently, by letter, dated
September 5, 1990, SFAP "update[d]" Catherine College's eligibility to participate in Title IV
programs.See footnote 2
In the present proceeding, SFAP claims that Catherine College's conversion from clock hour to credit hour was improper and resulted in the institution awarding excess Pell Grants to its students. In support of its position, SFAP relies upon the educational community's generally accepted definition of "semester hour," which routinely includes two hours of outside preparation for each hour of classroom instruction, and argues that Catherine College should be bound by
this definition in its conversion. In SFAP's view, the inherent flaw in Catherine College's
conversion is the institution's failure to prove that the additional length of its programs is
supported by an increase in classroom instruction or the additional need for students to spend
outside of the classroom to prepare for classroom instruction. SFAP argues that as a clock hour
institution, Catherine College did not require students to engage in outside preparation prior to
conversion and, therefore, should not be permitted to do so as a credit hour institution unless the
content of the institution's programs are changed or the institution can otherwise justify using a
conversion measurement that includes outside preparation. To bolster its position, SFAP relies
upon the Secretary's decision in In re Webster Career College, Inc., Dkt. No. 91-39-SP,
U.S. Dep't of Educ. (July 23, 1993) (Webster). In Webster, the Secretary
affirmed the administrative law judge's finding that AICS failed to exercise its professional
judgment, as an accrediting
agency, when AICS approved Webster Career College's conversion from a clock hour to credit
hour institution. In adopting the judge's finding, the Secretary held that significant variations in
the measurement of course length resulting from a clock hour to credit hour conversion without
changing the educational content of the program being measured is "inherently illogical." SFAP
argues that Webster controls the outcome in this case and, as such, requires the tribunal
to reject the accrediting agency's approval of Catherine College's clock hour to credit hour
In its defense, Catherine College argues that SFAP's allegation that
improperly converted the length of its programs from clock hour to credit hour has no basis in
statute or regulation and that SFAP's reliance on Webster is misplaced. According to
Catherine College, its conversion from clock hour to credit hour served the purpose of securing
students credit for outside preparation, which they were required to perform but which was not
accounted for under preexisting clock hour definitions. Catherine College argues that, by
definition, the institution could not measure the outside preparation of its students in its
calculation of clock hours because clock hours only measure the amount of classroom instruction
that occurs in a given course. In the institution's view, students attending clock hour institutions
like Catherine College were exposed to excessive hardship as a result of not being able to obtain
academic credit for the same amount of classroom preparation undertaken by students attending
credit hour institutions that offer programs with substantially the same course content.
In addition, Catherine College points out that AICS reviewed its conversion from a clock hour to a credit hour institution and determined that the institution had complied with the accrediting agency's standards.See footnote 3 3 Catherine College contends that Webster is inapposite because in
this case, unlike in Webster, the record demonstrates that the institution undertook all the
steps required by AICS when it converted from clock hour to credit hour, and that AICS
professional judgment in approving Catherine College's conversion. Instead of relying on
Webster, Catherine College directs the tribunal's attention to In re Associated
Technical College, Dkt. No. 91-112-SP, U.S. Dep't of Educ. (February 23, 1993),See footnote 4
wherein the administrative law judge held that SFAP's position that clock hour institutions
are under an essentially immutable
requirement to measure course length in an equivalent fashion before and after undergoing a
hour to credit hour conversion was unsupported by Title IV regulations.
It is abundantly clear that both Webster and Associated
Technical College are relevant to the resolution of the issue before me. In this respect, I find
SFAP's contention that a
mathematical equivalency formula should be applied to evaluate the reasonableness of
College's clock hour conversion must be rejected. Clearly, SFAP's position, if upheld, would
have the effect of locking many clock hour institutions seeking to convert to a credit hour
institution into a singular system of course measurement: never permitting such institution's
students to obtain the benefit of being awarded credit for outside classroom preparation in
circumstances where the course content does not differ in any significant manner from courses
offered by pre-existing credit hour institutions.See
There is no basis in the case law of this Department or in the provisions of Title IV
requiring this result.
More important, I find that Catherine College has sustained its burden of proof by making a compelling showing that its conversion was reasonable under the standard enunciated by the Secretary and complied with the requisite statutory requirements.See footnote 6 6 Although the Secretary affirmed Associated Technical College without a written opinion, the Secretary addressed this issue directly in In re Baytown Technical School, Inc., Dkt. No. 91-40-SP, U.S. Dep't of Educ. (April 12, 1994) (Baytown). In Baytown, SFAP alleged that the institution improperly converted
its clock hour programs to credit hour programs in order to inflate the number of hours offered
and, thereby, make Baytown Technical College eligible for additional Pell Grant funding.
Rejecting SFAP's position, the Secretary recognized that the Department had not promulgated
any regulation requiring institutions that seek to convert from clock hour to credit hour
institutions do so by maintaining an equivalent ratio of clock hours to credit hours. The
cautioned SFAP that he was "hardpressed to ascribe a regulatory violation on the basis of
regulatory language that does not squarely address this issue," and held that institutions are free
to make clock hour to credit hour conversions as long as the conversion is not unreasonable.
Similarly, in Webster, the Secretary established that the
Department's role in evaluating the propriety of an institution's conversion from clock hours to
credit hours is limited to
determining whether the conversion was unreasonable, and that the Secretary held where a clock
hour to credit hour conversion entitles an institution to increase its level of participation in Title
IV programs, the Department has an obligation to assess whether the conversion was justified.
doing so, the Secretary advised, SFAP should consider whether, in approving the institution's
conversion, the accrediting agency exercised its professional judgment. In both Baytown
and Associated Technical College the Secretary adopted the administrative law judge's
findings that adherence to a mathematical equivalency test for assessing clock hour conversions
is not required
by Title IV regulations, and that the record in each case contained substantial support showing
that the accrediting agency exercised its professional judgment in approving the institutions'
conversions from clock hour to credit hour institutions. In Webster, however, the
administrative law judge found, and the Secretary agreed, that AICS, did not exercise its
in approving the institution's conversion because AICS' review team members failed to follow
accrediting agency's standard procedures when reviewing the institution's measurement of its
clock hour conversion.
In stark contrast to the institution in Webster, Catherine College presented substantial and compelling evidence that its accrediting agency thoroughly reviewed its clock hour conversion, and that the institution followed the normal procedures in obtaining approval for its conversion from the appropriate licensing and accrediting authorities. In March 1990, Catherine College submitted its application for approval of its conversion to the Illinois State Board of Education, Department of Recognition and Supervision. In that application, the institution indicated in substantial detail the programs, courses, and number of classroom and lab hours relating to its credit hour conversion.See footnote 7 7 Clearly, this information was submitted to the state in a manner of
sufficient detail so that the state could, and did, license Catherine College to operate within the
state as a postsecondary credit hour institution. Similarly, the institution submitted a detailed
application for conversion to its accrediting agency in February 1990. On March 8, 1990, AICS
issued an approval letter to Catherine College stating that the institution's calculations for its
conversion from clock hour programs to credit hour programs were "within acceptable
of the Accrediting Commission." There is no probative evidence in the record that either the
State of Illinois or AICS granted approval of Catherine College's conversion in absence of
professional judgment. To the contrary, Catherine College's submissions were substantially
detailed enough to conclude that the state, AICS, and ED, in its notice of eligibility, all acted
reasonably in approving Catherine College's conversion from a clock hour to a credit hour
According to SFAP, program auditors randomly selected 50
student files and discovered
that 13 of the files indicated that Catherine College had disbursed additional Pell Grant payments
to students before they were eligible to receive the subsequent payment. On the basis of this
finding, SFAP requested Catherine College to perform a full review of its files to determine
whether the institution had made additional improper disbursements of Pell Grant funds. Instead
of providing SFAP with a full file review, the institution attempted to document the
appropriateness of its disbursements to the 13 students and further challenge SFAP on whether
Title IV regulations actually precluded subsequent payments to clock hour students in the
disbursed by Catherine College. In response, SFAP projected a liability in the amount of
$679,550 based upon an estimation that Catherine College had made improper disbursements to
26% of its students during the period at issue.
It is abundantly clear that throughout the period at issue Catherine College was not authorized to disburse subsequent Pell Grant payments until its students had completed the required clock hours for which they had been paid a prior Pell Grant award. 34 C.F.R. § 690.75 (1990). In this regard, I am unpersuaded by Catherine College's arguments that SFAP's allegation is only supported by Department policy, but not law. Nor am I persuaded that Catherine College's evidence substantiates its claim that the institution's excused absence policy permitted it to disburse Pell Grant funds to students who had failed to attend class for over 25% of the program. As SFAP points out, these students were not maintaining satisfactory progress even under the institution's own guidelines as spelled out in its course bulletin. Consequently, the
issue before me is whether SFAP has provided sufficient basis for requiring the repayment of
one half million dollars in Pell Grant funds on the basis of documented improper disbursements
a sample of 13 students amounting to $13,950.
Under the unique facts before me, I find that
SFAP's proposed calculation of liability is based upon sufficient foundation requiring Catherine
College to repay $679,550. The nature
of the enforcement of Title IV programs, through the use of program review and audit
determinations, creates the need for institutions to cooperate with SFAP by providing the
agency with complete file reviews when that information is needed to determine whether any,
if not all, Title IV funds disbursed to the institution were spent contrary to statutory and
regulatory requirements. See, e.g., In re Selan's System of Beauty Culture, Dkt. No.
93-82- SP, U.S. Dep't of Educ. (December 19, 1994).
Although Catherine College may have had a
reasonable explanation for failing to provide SFAP with the requested documentation, no such
reason was proffered in this proceeding. Catherine College's failure to provide SFAP with the
data requested regarding the institution's disbursement of Pell Grant funds, undercuts
Catherine College's position that the funds were properly disbursed.
Under Title IV, an institution may permit a dependent student to
assistance funds under the Supplemental Loan to Students (SLS) program if the institution
determines that extenuating circumstances will likely preclude the student's parent(s) from
borrowing under the Federal PLUS loan program and that the student's family is otherwise
unable to provide the expected family contribution toward the student's postsecondary
education expenses. 20 U.S.C. § 1078-1. In making its determination that a dependent
should be permitted to borrow funds under the SLS loan program, an institution is required to
maintain records documenting the circumstances supporting its determination.
In response to the draft audit report, Catherine College provided
supporting its determination to certify SLS loan funds for 11 of 12 students who had missing
documentation in their student files at the time of the audit. For the remaining student, for
which the institution certified an SLS loan in the amount of $3,880, Catherine College failed
to present documentation of extenuating circumstances. Accordingly, I find that Catherine
College must reimburse the Title IV lender $3,880 for this improper disbursement.
2. Catherine College improperly disbursed additional Pell Grant payments to students
before the students were eligible to receive additional Pell Grant funds. On the basis of this
I find that SFAP's proposed calculation of
liability is based upon sufficient foundation supporting requiring Catherine College to repay ED
$679,550 in Pell Grant disbursements.
3. Catherine College improperly disbursed $3,880 in SLS loan
funds to a dependent
student without maintaining the proper documentation in its student files showing that
circumstances precluded the student's parent(s) from borrowing under the PLUS loan
Ernest C. Canellos
Dated: March 6, 1996
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
Stanley A. Freeman, Esq.
Powers, Pyles, Sutter & Verville, P.C.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Edmund J. Trepacz, II, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110