by Andrew Walden

Action by the Biden Administration is forcing the Hawaii State Teachers Association (HSTA) to stop enrolling teachers in a substandard ‘free’ college scheme which funneled union members into online degree programs at Ohio-based Eastern Gateway Community College and other participating schools.

Apparently the community college was a pass-through entity aligned with a for-profit education provider. According the a July 18, 2022 letter from the US Department of Education, EGCC was illegally looting Pell Grant money to provide ‘free’ tuition--as much as $175M from 75,000 students nationwide since 2015.  A portion of the money was then paid out to a for-profit entity known as ‘Student Resource Center’ (SRC). 

Inside Higher Ed, January 26, 2022, explains: “SRC earns half of the profits Eastern Gateway takes in and walked away with slightly more than $7 million from the partnership in the 2020 fiscal year and about $10 million last fiscal year.  Eastern Gateway paid the Student Resource Center an additional $5 million last year….”

UPDATE: According to a survey by Wallethub, Aug 16, 2022, Eastern Gateway Community College has the worst student-faculty ratio and the lowest per-pupil spending in the USA.

HSTA leaders should have been aware of troubles with the program ever since Inside Higher Ed published a November 22, 2021 expose titled: “Community College’s Contested Corporate Partnership.”  But HSTA continued to steer Hawaii teachers into the scheme for another eight months--stopping only after the US DoE, July 18, 2022, formally ordered EGCC to ‘cease.’  

The ‘free college’ program was part of the ‘Union Plus’ benefit package.  In addition to HSTA, other participating Hawaii unions included, HGEA, IATSE Local 665, UNITE HERE Local 5 via BHMT, and the Hawaii Nurses Association via BHMT.

Inside Higher Ed, July 21, 2022, explains:

(Eastern Gateway’s online programs have) drawn scrutiny because it was delivered in partnership with the Student Resource Center, a for profit online program manager.  Also, some have raised concerns that the college had hired too few faculty and staff members to support the enrollments and had insufficient quality controls in place to ensure a high-quality education.…

Eastern Gateway’s accreditor, the Higher Learning Commission, placed the college on probation in November 2021 for failing to deliver a “high quality educational experience for students,” and the Education Department said in January that it would investigate the program’s use of financial aid, resulting in (the July 18, 2022) letter.

‘Friends and Family Plan’--not just a Hawaii Thing

Meanwhile, the relationship between Eastern Gateway and its for-profit partner has devolved.

In May, EGCC charged that the Student Resource Center had breached their collaboration agreement by firing its then CEO and other top officials. (EGCC president Michael) Geoghegan and the former CEO, Michael Perik, had known each other for years after working together at another Ohio community college.

In June, the Student Resource Center sued Eastern Gateway for breaking their collaboration agreement and allegedly wooing some of the unions to work directly with the college to “develop, offer, and market online courses” to union and professional association members. Last week a federal judge issued a preliminary injunction preventing the college from walking away from its agreement with the company. The stakes are high, as 95 percent of Student Resource Center’s revenue comes from the collaboration, according to the lawsuit.

Meanwhile, in June, the current owners of the Student Resource Center, Sterling Small Market Education Fund and SRC Intermediate Holdings, sued Perik and the other former SRC managers, alleging that in the process of selling their company to Sterling last spring, they purposely failed to disclose that the Eastern Gateway program was under review by its accreditor.

UPDATE: Michael Perlik is a major national Democrat donor.  His wife Liz Perlik is a failed 2021 candidate for Lt Governor of Rhode Island.

According to the July 18, 2022 letter from the US Department of Education: 

Essentially, under this program, students who receive Pell funding are being charged for the program, but students not receiving Pell are not. This is in direct violation of the Higher Education Act of 1965, as amended, 20 U.S.C. 1070 et seq. (Title IV)….  

It should be noted that under the Free College Benefit program, students with lower levels of need have a higher “write-off” and ultimately fewer charges than the needier Pell students. The ultimate result of the implementation of the Free College Benefit Program is that the Pell Grant Program and the State Grants are funding the educational costs of students whose incomes make them ineligible for either. Further, the implementation of the Free College Benefit put EGCC in a very precarious financial position because the funds needed to actually educate students are severely limited forcing EGCC to drastically cut its academic and operating expenses. This calls into question EGCC’s continued viability as an educational institution.

These are the kinds of real-world lessons which prepare the HSTA members of today to become the DoE administrators of tomorrow.

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