LOUISVILLE, Ky. (WDRB) – The U.S. Department of Education has acknowledged it incorrectly withheld some financial aid from St. Catharine College, according to documents filed last week in a federal lawsuit.

The agency says in a Feb. 24 letter that it has agreed to make $42,671 in aid payments to the college, but is still is reviewing whether to reimburse money given to students prior to 2014.

Two days later, however, St. Catharine president Cindy Gnadinger requested that the college near Springfield, Ky., “immediately” be reimbursed $1.13 million, court records show. “[T]ime is of the essence because your failure to immediately remit the wrongfully withheld amount may well result in the closure of St. Catharine,” she told an education department official in an email attached to the suit.

The letters, and other documents filed in U.S. District Court in Louisville, underscore the small Catholic college’s claim that it is close to shutting its doors because of the dispute over the student-aid funds. St. Catharine estimates it has spent roughly $660,000 of its own money on aid payments it argues the federal agency should have covered.

The college says in court filings that is has dipped into a scholarship and loan program to make up for the shortfall of aid funds.

At issue is whether St. Catharine needed federal approval to give financial assistance to students enrolled in undergraduate degree programs that were added from 2011 to 2014. In the Feb. 24 letter, Dvak Corwin, an education department compliance manager, told Gnadinger that those programs didn’t need his agency’s approval.

St. Catharine has asked U.S. District Judge Greg N. Stivers to order the department to release the money.

“In essence, the DoE poured gasoline on SCC, lit a match, and now wants to give SCC a thimble full of water to stop the inferno. The paltry payment is insufficient to make a difference in the viability of the college,” St. Catharine says in its recent filing.

“Immediate court intervention is necessary to right these wrongs and allow SCC to remain open educating students,” the filing says.

St. Catharine had about 600 students and 125 full-time staff when the lawsuit was filed Feb. 22.

The education department has not responded to the complaint. A telephone conference is scheduled for Tuesday afternoon.

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