The State College of Florida has a student loan debt problem of its own. SCF must repay the U.S. Department of Education more than $3 million in federal student loans and grants that it mistakenly awarded to nearly 2,000 students during the 2008-09 school year.

During a routine review, auditors discovered that the college had awarded about $7 million in government-funded federal student loans and grants to students who were ineligible to receive the aid. These students failed to qualify for federal financial aid primarily because they were taking too long to finish their degree or had withdrawn frequently from required classes.

College administrators said that their financial aid office was overwhelmed by student applications for financial aid and had used an erroneous formula to calculate eligibility for government-issued student loans and federal Pell Grants.

SCF officials noted that the college did not hire additional employees to help review federal financial aid applications during a recent period of record enrollment.

Preliminary audit results showed so many errors in SCF’s financial aid process that auditors ordered the school to review all federal grants and college loans it had issued during the 2008-09 school year.

Auditors found that the financial aid office did attempt to comply with new regulations governing the awarding of federal financial aid funds, but the software SCF was using to determine eligibility for federal grants and student loans was not configured correctly. The configuration error led the school to conclude that certain students were eligible for federal grants and college loans when, in fact, they were not.

College administrators said that they did not realize their error, even though the amount of federal financial aid issued by SCF jumped from $28 million to $42 million in a single year.

School officials said that they assumed the increase in federal financial aid awards was a side effect of the recession, since the boom in awards coincided with an increase in financial aid applications from students.

However, a former SCF employee who worked in the financial aid office has claimed that the school had regularly and knowingly awarded federal college loans and grants to ineligible students over a period of several years and that these invalid financial aid packages were part of SCF’s deliberate effort to increase enrollment at its three campuses.

The employee said that she repeatedly expressed her concerns about the school’s failure to abide by federal financial aid eligibility guidelines and that she was fired by SCF in October.

Federal financial aid guidelines allow two-year colleges to award government-backed grants and student loans to help students pay for up to 90 credit hours. The credit-hour limit is intended to ensure that students who are using federal funds to help pay for college maintain a satisfactory rate of progress toward a degree.

SCF, however, formerly known as Manatee Community College, was issuing federal financial aid awards to students who had amassed as many as 194 hours of college credit.

In addition, the audit found that the college routinely and improperly granted financial aid appeals to students who claimed an economic hardship. Hardship approvals are usually granted only in cases of serious illness, physical injury, or a death in the applicant’s immediate family.

SCF will be required to repay the federal government nearly $3.1 million that was incorrectly disbursed through the Pell Grant program. The repayment figure also includes some funds to cover standard projected defaults on the student loans that were incorrectly awarded.

Students who received federal college loans will still need to repay their student loan debt to the Department of Education, as agreed in their promissory notes. SCF is attempting to determine whether it can seek reimbursement from the students who were incorrectly awarded Pell Grant dollars.

Federal Pell Grants, which are issued to low-income students, can provide students with awards of up to $5,550 per year. Grants, like scholarships, are supposed to be awards that don’t need to be repaid.

SCF is now using the correct financial aid formula to determine eligibility for federal student loans and grants and will repay the federal government using a portion of the school’s reserve fund. The school has not been sanctioned by the Department of Education and is still eligible to issue Pell Grants, federal student loans, and other federal financial aid.