Student First Technologies, based in Bloomington, Indiana, won the contract to handle the finance side of school vouchers in the second year of Arkansas LEARNS.
The company replaces Kleo Inc., which does business as ClassWallet, who provided the online platform to distribute Educational Freedom Accounts and literacy tutoring funds for the 2023-24 school year, the first year of the voucher program.
The contract is worth $15.17 million over seven years, Brooke Hollowoa, communications director for the Arkansas Department of Transformation and Shared Services, said Thursday.
The contract will run for four years. The state can extend the contract without bidding for up to three years, not to exceed a total of seven consecutive years.
Student First Technologies will charge a 2% service fee for every transaction. ClassWallet currently charges 2.5%.
The LEARNS voucher program uses public money to pay students’ tuition and other costs at private schools, but the state does not directly pay participating families. Instead, a third-party vendor, which will now be Student First Technologies, acts as a middleman between parents and private schools. Parents upload invoices to a portal and the education department then approves the expenses and disburses payment to the schools.
According to the bid solicitation, the state Department of Education anticipates 14,000 voucher participants in the second year, with an estimated $97 million in scholarship funds. Participation in the $500 literacy tutoring grants is estimated at 17,000 participants with an estimated $8.5 million in funds.
An Arkansas LEARNS voucher is equivalent to 90% of the amount public school districts received the prior year in per-student state foundation funding, which is about $6,672 for the current year. The amount increases to $6,994 for the 2024-2025 school year, or 90% of $7,771.
Four companies, including Student First Technologies, bid on the contract. They were ClassWallet with a bid of $18,584,500; Primary Class, Inc. doing business as Odyssey of New York City, with a bid of $16,430,000; and Merit International, Inc., of Melbrae, Calif., with a bid of $16,275,000.
This was the second bidding process for the contract. The state Department of Education canceled the first round of bids because the first solicitation caused some confusion necessitating a few adjustments and a re-do of the bid request.
The third-party payment company ClassWallet contracted with the state with no bidding required for the first year of the voucher program, but state law required the contract to be put out for bid for the second year.
ClassWallet, the highest bidder this go around, has seen its fair share of controversy. The company was sued twice by the state of Oklahoma after federal and state audits found that about $1.7 million in grant money meant to be used for educational purposes was instead spent on kitchen appliances, power tools, video games and other non-educational items.
The first lawsuit was filed in 2022, with the second filed on Jan. 29. Both have been dismissed.
ClassWallet officials have maintained the company did nothing wrong. Federal and state auditors said government officials, not ClassWallet, were at fault for failing to put proper guardrails in place.
It was also discovered that ClassWallet employs a lobbyist, Legacy Consulting, who also represents a political action committee for former Gov. Mike Huckabee, the father of current Gov. Sarah Huckabee Sanders.
The contract will now go to the Arkansas Legislative Council Review on April 17.
