Financially troubled for more than a decade, Keystone College has begun developing a plan for students to complete their degrees if the school closes.
In a statement issued Friday to WVIA News, the school confirmed the Middle States Commission on Higher Education asked for the plan. The commission accredits colleges, universities and other educational institutions. Accreditation makes schools’ students eligible for federal financial aid.
Keystone characterized the commission’s request as a “normal, expected” follow-up to a failed “substantive change” in operations – the school’s abandoned shift to a new owner. The request requires the school to submit a formal “teach-out” plan by April 12.
“A teach-out plan is designed to safeguard students in the event of an institutional closure,” the college statement said. “There are many reasons an accreditor may ask for a teach-out plan. Having a teach-out plan in place does not mean the college is going to enact it. The purpose of a teach-out plan is to ensure that students can complete their degrees.”
The school has declined to make its president, John F. Pullo Sr., available for an interview. Pullo is a member of WVIA's board of directors.
The college issued the statement in response to questions from WVIA News, which found the summarized Middle States request on its website during a routine check.
Middle States’ request comes at a crucial moment. Students nationwide decide on where to enroll, and schools offer aid packages around this time.
The call for a teach-out plan follows a failed attempt to turn over control of the college to the Washington Institute for Education and Research.
Keystone and the institute mutually pulled out of that arrangement March 8, according to the Middle States post. The school did not say why. An effort to obtain comment from the institute failed.
What's required under plan?
Under its policy and federal regulations, the commission says in the summary, the teach-out plan “must provide for the equitable treatment of students to complete their education and include any signed teach-out agreements that the institution has entered into or intends to enter into with another institution.”
That means Keystone, if it closed or reduced its degree programs, could agree with other colleges to accept Keystone students. In an email, Keystone spokesman Fran Calpin said the plan’s creation doesn’t mean the school will “alter its academic offerings or operations” either.
The school’s statement says Keystone is working “to secure institutional partners and will provide that information to the (commission) by the requested deadline.”
“As we complete the teach-out plan and as Keystone has previously stated, the college will continue to seek new pathways that will bring additional value to its students as well as to provide more agile access to a wider array of learners,” the statement says. “The college believes that partnerships and affiliations are central to that strategy and an essential part of advancing our reputation.”
History of financial problems
Because of Keystone’s financial problems, the U.S. Department of Education has listed the college in a category known as heightened cash monitoring for most of the last 15 years. That triggers closer scrutiny of finances. The department cares about schools’ finances because of its financial aid to students.
Keystone has struggled to even submit annual tax forms and audits on time.
The college filed its annual IRS financial statement for the year ending May 31, 2021, on March 4 of this year. Statements for 2022 or 2023 remain overdue.
In September, the Department of Education cited Keystone for violating department performance standards by filing financial statements and audits late for the fiscal years ending in 2021 and 2022.
The department is requiring Keystone to post a letter of credit equal to almost $3.2 million to cover its obligations in case of revenue shortfalls.
Keystone’s own audit for the year ending May 31, 2020, highlights the school’s trouble filing regular reports that track federal student loans and other matters.
'Independent investigation' underway
Days after Keystone’s deal with the Washington Institute fell apart, the school abruptly placed vice president for finance and administration Stuart Renda on leave. The school ordered faculty and staff to avoid communicating with Renda.
The school said it is cooperating with an “independent investigation,” but did not name the investigating agency.
The school straddles the border between Lackawanna and Wyoming counties.
In a text, Lackawanna County District Attorney Mark Powell said his office is not investigating.
Wyoming County District Attorney Joseph Peters would not confirm or deny an investigation. Peters declined to say if he asked the state attorney general’s office to investigate because of a potential conflict of interest.
In September 2021, the college issued revenue notes totaling $8 million in cooperation with Peoples Security Bank & Trust and through the Waverly Township Municipal Authority.
Wyoming County guaranteed the loan payments by pledging “its full faith, credit, and taxing power,” according to the 2020 Keystone audit. In exchange for the guarantee, county residents who attend Keystone get a 10% break on tuition.
Beyond that, County Commissioner Rick Wilbur sits on the college’s board of directors, according to its website.
The attorney general’s office did not respond when asked if it is investigating, but the office regularly refuses to confirm investigations.
