SUNDAY EDITION | Saint Catharine College closed abruptly -- then - WDRB 41 Louisville News

SUNDAY EDITION | Saint Catharine College closed abruptly -- then sued its students

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SPRINGFIELD, Ky. (WDRB) – When Saint Catharine College shut its doors last summer, displacing hundreds of students, school officials blamed their woes on a fight with the U.S. government over financial aid and a campus construction boom that left the college insolvent.

A federal lawsuit soon disclosed that Ohio-based Huntington National Bank, the trustee for the college’s bondholders, was owed $24.3 million. Court documents now indicate total debts and other claims of more than $29 million.

Since then, the college has sold off houses and passenger vans and auctioned dorm furniture, laboratory equipment, library books and other items that once belonged to the Roman Catholic, liberal arts school, court records show. The entire 91-acre property northwest of town, including eight buildings, is for sale.

But the debt recovery efforts have another target: Saint Catharine’s former students.

College representatives have filed at least 50 lawsuits in state courts, seeking to recover tuition, fees and other financial aid that allegedly went unpaid as far back as a decade ago. The lawsuits aim to recoup annual tuition worth thousands of dollars, as well as smaller $10 physical education fees and $30 parking charges.

The vast majority of former students have not hired attorneys, and many have not even responded to the lawsuits, according to a WDRB News review of cases filed in local county courts. That has prompted judges to rule in Saint Catharine’s favor and order the debts repaid – in some instances with annual interest rates of 12 percent.

“It pretty much messed my life up,” said Ariel Gadd of Mount Vernon, Ky., who was sued last August, more than a year after she left Saint Catharine and not long after the school closed. “I haven’t been able to go to school. My kids pretty much don’t have what they should have – or what I’d like to give them.”

College officials rescinded Gadd’s financial aid to her that had been “paid, awarded and promised” after determining she was no longer eligible for it, according to the Appalachian Research and Defense Fund of Kentucky, which represented her.

The school claimed she owed more than $17,000; ultimately Gadd said she settled and agreed to pay $5,000 this spring, tapping tax refunds to make the payment. Despite the settlement, Gadd said a representative told her she still must pay an additional $20 to get her transcript released.

Following a recommendation by Huntington National Bank, a federal judge last July named LS Associates LLC of Louisville to oversee the school’s assets. In its role as receiver, that company is responsible for collecting all money owed to the college, court records show. 

“How does a lowly student who didn’t get to complete their degree -- how are they able to afford to fight court battles against Huntington Bank and a federal court-appointed receiver? It’s very sad,” said Greg Goatley, a Springfield attorney who helped another student settle a lawsuit.  

“To add insult to injury, not only is whatever degree they may have received not as valuable as it should have been had the school remained open, but they’re chasing these poor kids down, suing them, affecting their credit and – the worst thing is – they’re withholding their transcript.”

Saint Catharine closed after a prolonged battle with the U.S. Department of Education, which it accused of failing to reimburse the college for hundreds of thousands of dollars in financial aid. Goatley said some of the funds now being sought from former students include that aid.

Robert W. Leasure Jr., the president and managing partner of LS Associates, declined to say in a brief telephone interview if former students were being denied their transcripts. “That’s between myself and the students,” he said. “I’ll work it out with them.”

He did not directly say whether the college could have chosen not to file the lawsuits against students. In May, LS Associates filed a report in U.S. District Court stating it had collected $191,110 in outstanding debts, but he declined to say how much of that amount is student debt.

The report says 325 student accounts totaling $1.8 million remain open and have been sent to a collection agency. Roughly 300 accounts totaling more than $2 million are owed but not in collections, according to the report.

A spokesman for Huntington Bank declined to comment for this story.

The debt collection efforts have enraged some students who left school thinking they had settled their accounts.

Hope Couch, who finished her studies at Saint Catharine last year, said she meticulously checked her account balance with a school financial aid official as she neared graduation.

“She said I owed no money,” recalled Couch, who received an associate’s degree in 2016. “Now they’re saying I do.”

She has been offered a $2,600 settlement for an alleged bill of more than $8,000, but she doesn’t plan to pay and insists the charges are bogus.

Couch, 25, has two children and is pursuing her bachelor’s degree at the University of Kentucky while working as a surgical aide.

“I can’t go into collections when I’m closing on a house,” Couch said. “You know, that would ruin something that I’ve worked seven years for. And it’s not fair – especially when I did everything right.”

Since Saint Catharine closed, the Kentucky Council on Postsecondary Education and Kentucky Attorney General Andy Beshear’s office have worked with LS Associates on various matters.

The council has guided students with questions about their transcripts to the receiver, said Travis Powell, its general counsel and associate vice president. He noted that LS Associates has sought to settle recent debts with students without involving collections agencies, slicing some of the amounts owed in half.

But he wasn’t aware of the lawsuits until being told by a reporter.

“If that’s the case, they have not told us that,” he said.

Goatley, the Springfield attorney, told WDRB in an interview that he believes Beshear ought to intervene on behalf of students in federal court and ask for all collections proceedings to be halted.

Beshear spokesman Terry Sebastian said in a statement issued to WDRB that the office will “reach out” to LS Associates.

“We ask any former student with concerns to file a complaint form with our office,” Sebastian said. “We will take the information received by a student, evaluate it and determine the appropriate course of action that provides fair treatment to the students and the school.”

College previously filed lawsuits

Nearly all of Saint Catharine’s students received financial assistance, while about half of its 600 students were from low-income families, the school claimed in the months before it closed.

The college had one of the highest rates of student loan default among the state’s private four-year colleges and universities in recent years, according to a report issued last fall by the postsecondary education council. In 2013, its 14.5 percent default rate topped all other similar schools.

Even before the financial troubles that came to a head in early 2016, Saint Catharine had sued students over unpaid account balances. But the legal actions accelerated after the college closed and LS Associates was named receiver of its assets.

William D. Huston, the college’s longtime president who retired in 2015, did not immediately return a phone message left at his home. But court records show that under his watch Saint Catharine filed a series of lawsuits over tuition in Jefferson and other counties in 2014.

The postsecondary education council does not track tuition-related lawsuits filed by Kentucky colleges and universities, but it doesn’t appear to be a common practice in Kentucky.

The University of Louisville wasn’t aware of any instances of it suing over unpaid tuition and fees, spokesman John Karman said.

The University of Kentucky works with students and parents on payment plans for unpaid balances, getting collections agencies involved only when school officials get no response, spokesman Jay Blanton said.

The Kentucky Department of Revenue collects unpaid tuition for the state’s community college system, using payment plans, offsets of state tax refunds and possibly wage garnishment, a system spokesman, Ben Jackey, said.

But across the country, schools have begun suing over unpaid tuition and financial aid. Such lawsuits are “unfortunate for everyone involved,” said Joshua Upin, a Philadelphia attorney who has represented students sued in Pennsylvania for defaulting on student loan repayment.

“Typically students – especially ones who are freshly graduated – are very poor targets for prosecutorial recovery and debt collection actions because they don’t have anything to actually pay debt with,” he said. “So even if the lender gets a judgment, their recourse for getting paid on that judgment is usually pretty thin.”

 ‘They were supposed to provide her a degree’

In a handful of cases, students who attended Saint Catharine and retained lawyers have pushed back against the college’s claims and contested them.

In late May, Jefferson Circuit Judge Ann Bailey Smith dismissed a case in which the college sought to collect $11,880 from a Louisville man in unpaid tuition, security deposits and other fees dating from 2010 and 2011.

His attorney argued that the lawsuit included an alleged list of money owed but provided no contract or written agreement. Such lawsuits must be filed with five years under Kentucky law, and the judge agreed.

In Nelson County, a former student argued through her attorney that she owed “0 or at least substantially less than alleged” after she was sued for $7,297 in tuition and other fees.

In court filings, her attorney, Bill Hutchins of Bardstown, claimed that Saint Catharine had breached any contract when it closed.

“They were supposed to provide her a degree and an education,” he said in an interview, “and they didn’t.”

Reach reporter Marcus Green at 502-585-0825, mgreen@wdrb.com, on Twitter or on Facebook. Copyright 2017 WDRB News. All rights reserved.

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