Saint Louis University is facing a multi-million dollar problem.

The Department of Education (DOE) is recommending that the University refund $2.6 million awarded through Pell Grants, claiming it was distributed with “unreasonable professional judgment.”

The Office of the Inspector General (OIG) issued the recommendation in a July 1997 final audit report. The audit analyzed a sampling of student financial aid awards during the 1994-95 and 1995-96 award years.

The audit questioned the University’s “professional judgment” in awarding the grants. Specifically, the government agency pointed out that 46 percent of SLU Pell Grant recipients were treated as though “special circumstances” were involved in making the grants. The DOE maintains that this status should cover only rare instances.

The University appealed the 1997 audit to the Office of Financial Assistance Programs (OFAP) of the DOE. In December 1998, the OFAP issued its Final Audit Determination, agreeing with the OIG that the University should refund the $2.6 million.

The University then filed a formal appeal with the DOE Office of Hearings and Appeals. In May 2000, the University received a favorable judgment from the administrative law judge at the DOE Office of Hearings and Appeals, dismissing the $2.6 million liability.

The DOE is appealing the ruling to the Secretary of Education.

The DOE claims, “The University’s practice was to reduce family income by excessive living and other expenses without determining if the expenses were necessary and constituted a special circumstance.”

For example, the audit states that, in one case, one student’s family income was reduced from $100,000 to $15,505 as a result of unidentified annual living expenses. As a result of the deduction, the student became eligible to receive almost $2,000 in Pell Grants.

According to the DOE, SLU’s Financial Aid Administrator (FAA) defended the action by stating that allowances for living expenses were too low, and that, “everyone has a special circumstance.”

The OIG stated in the audit, “We estimate from our sample reviews that unreasonable professional judgment actions resulted in 2,016 students receiving $2,599,709 of additional Pell Grants for award years 1994-95 and 1995-96.” A total of 4,862 Pell Grant recipients were awarded Pell Grants during the audit period.

Pell Grants are federal grants that provide funds based on a student’s financial aid. To be eligible, students must be full-time, part-time or less than half-time undergraduates. Applicants must also demonstrate exceptional financial need and must reapply each new academic year.

According to Hal Deuser, director of the office of scholarship/financial aid, the maximum Pell Grant amount that may be awarded to a student is $3,300, and the minimum amount is $400. In 1998-99 and 1999-2000, the maximum award was slightly less, at $2,700 and $3,000, respectively.

Along with the $2.6 million refund, the DOE recommends that SLU establish procedures for using professional judgment, on an individual basis. The procedure would determine that special circumstances exist and that those expenses were not already included in the statutory needs analysis formula. In addition, the DOE suggests annual documentation for each professional judgment action.

Professional judgment status was introduced when Congress passed the Higher Education Act of 1965. The act gave FAAs the power to use “professional judgment” on a case-by-case basis to determine if students qualify for Pell Grants.

According to the OIG’s audit, Congress discovered that some FAAs “were inappropriately using professional judgment to replace certain aspects of the needs-analysis system for whole classes of students who did not distinguish themselves from their peers by means of special circumstances.” The OIG thought that FAAs were applying special circumstances to broad classes of students rather than on a case-by-case basis.

In 1992, Congress amended the Higher Education Act of 1965. Congress attempted to clarify professional judgment by defining special circumstances as “conditions that differentiate an individual student from a class of students rather than conditions that exist across a class of students.”

The amendment reaffirmed what was originally intended in the 1965 law: that FAAs can give awards to students only if they are considered on a case-by-case basis.

The first year of the new amendment to the 1965 Act began in 1995. The DOE says that SLU exercised poor professional judgment in the school years 1994-95 and 1995-96. The audit on the University was released in 1997.

This year, the DOE intends to audit the Pell Grants distributed by the University for fiscal years 1997 through 1999.

Vice President and General Counsel William Kauffman stated that OIG used SLU’s Pell Grant cases as examples when addressing the U.S. Congress, which initially dismissed the case. The DOE has been lobbying Congress to enact legislation that would strip the FAAs of their power to use professional judgment.

How future rulings affect financial-aid distribution at SLU is yet to be determined.

According to Kauffman, some change has already occurred. “We have modified our procedures to fall safely within what the Department (of Education) would have us do.”

If the DOE wins its appeal with the Secretary of Education, Kauffman said that SLU’s General Counsel would pursue a legal remedy to the situation.

cThe University News, 2000