TERRE HAUTE, Ind. - St. Mary-of-the-Woods College should return $42 million in federal loans and grants made to students over a five-year period that they should not have been eligible to receive, a U.S. Department of Education audit has found.
Students at the western Indiana liberal arts college shouldn't have been eligible for Pell Grants, federal work-study programs and other assistance from mid-2005 through mid-2010 because the school's distance-learning classes didn't meet the standards to be classified as telecommunications courses, the audit by the Education Department's inspector general's office determined.
Instead, the audit said those classes should have been categorized as "correspondence" courses, and federal law prohibits such assistance programs for colleges where half or more of the students are enrolled in such courses, the Tribune-Star reported Tuesday.
Dottie King, the president of the private college, said the school would challenge the audit's findings. She said the college's own accrediting agency designated its distance programs as telecommunications courses.
"I'm a little angry," King said. "I know we have done nothing wrong."
The audit also called for the return of similar federal aid given out for the 2010-11 school year, and it recommended that the Education Department "terminate" the college's participation in the federal aid programs.
St. Mary-of-the-Woods said it has about 300 students in its women-only undergraduate campus programs, with some 950 women and men in distance-learning classes.
Michael Goldstein, a Washington attorney representing the college, said the auditors took an "extraordinarily narrow view" of learning by telecommunications, which is difficult to define because of rapid changes in technology.
Goldstein said he didn't know how long it would take to resolve the matter. The audit's findings can be appealed to an administrative law judge and the education secretary, and could be subject to review in federal court.
The lawyer said that even in the worst-case scenario, the amount the college affiliated with the Sisters of Providence order of Catholic nuns would have to repay "is nowhere near $42 million."
"It may ultimately have some money that needs to be repaid and the college will have a period of time to do it," he said. "It is not an amount that would jeopardize the future of the institution."
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