[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
H.R. 4283, THE COLLEGE ACCESS AND OPPORTUNITY ACT: ARE STUDENTS AT
PROPRIETARY INSTITUTIONS TREATED EQUITABLY UNDER CURRENT LAW?
=======================================================================
HEARING
before the
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
June 16, 2004
__________
Serial No. 108-63
__________
Printed for the use of the Committee on Education and the Workforce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
or
Committee address: http://edworkforce.house.gov
______
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94-285 WASHINGTON : 2004
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COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN A. BOEHNER, Ohio, Chairman
Thomas E. Petri, Wisconsin, Vice George Miller, California
Chairman Dale E. Kildee, Michigan
Cass Ballenger, North Carolina Major R. Owens, New York
Peter Hoekstra, Michigan Donald M. Payne, New Jersey
Howard P. ``Buck'' McKeon, Robert E. Andrews, New Jersey
California Lynn C. Woolsey, California
Michael N. Castle, Delaware Ruben Hinojosa, Texas
Sam Johnson, Texas Carolyn McCarthy, New York
James C. Greenwood, Pennsylvania John F. Tierney, Massachusetts
Charlie Norwood, Georgia Ron Kind, Wisconsin
Fred Upton, Michigan Dennis J. Kucinich, Ohio
Vernon J. Ehlers, Michigan David Wu, Oregon
Jim DeMint, South Carolina Rush D. Holt, New Jersey
Johnny Isakson, Georgia Susan A. Davis, California
Judy Biggert, Illinois Betty McCollum, Minnesota
Todd Russell Platts, Pennsylvania Danny K. Davis, Illinois
Patrick J. Tiberi, Ohio Ed Case, Hawaii
Ric Keller, Florida Raul M. Grijalva, Arizona
Tom Osborne, Nebraska Denise L. Majette, Georgia
Joe Wilson, South Carolina Chris Van Hollen, Maryland
Tom Cole, Oklahoma Tim Ryan, Ohio
Jon C. Porter, Nevada Timothy H. Bishop, New York
John Kline, Minnesota
John R. Carter, Texas
Marilyn N. Musgrave, Colorado
Marsha Blackburn, Tennessee
Phil Gingrey, Georgia
Max Burns, Georgia
Paula Nowakowski, Staff Director
John Lawrence, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on June 16, 2004.................................... 1
Statement of Members:
Boehner, Hon. John A., Chairman, Committee on Education and
the Workforce.............................................. 2
Prepared statement of.................................... 5
Kildee, Hon. Dale E., a Representative in Congress from the
State of Michigan.......................................... 6
Miller, Hon. George, Ranking Member, Committee on Education
and the Workforce, Press release submitted for the record.. 72
Norwood, Hon. Charlie, a Representative in Congress from the
State of Georgia, prepared statement of.................... 73
Porter, Hon. Jon C., a Representative in Congress from the
State of Nevada, prepared statement of..................... 74
Statement of Witnesses:
Letteny, Dr. Alice, Executive Director, University of New
Mexico-Valencia, Los Lunas, New Mexico, on behalf of the
American Association of Community Colleges................. 17
Prepared statement of.................................... 19
Moore, David G., Chairman and Chief Executive Officer,
Corinthian Colleges, Inc., Santa Ana, California........... 33
Prepared statement of.................................... 35
Nassirian, Barmak, Associate Executive Director, American
Association of Collegiate Registrars and Admissions
Officers, Washington, DC................................... 22
Prepared statement of.................................... 24
Rosen, Andrew S., President & COO, Kaplan, Inc., and
President, Kaplan College, Boca Raton, Florida............. 13
Prepared statement of.................................... 15
Smith, Dwight, President & CEO, Sophisticated Systems, Inc.,
Columbus, Ohio............................................. 9
Prepared statement of.................................... 11
Additional materials supplied:
American Association of Collegiate Registrars and Admissions
Officers, the American Council on Education, and the
Council for Higher Education Accreditation, Statement
submitted for the record................................... 74
American Federation of Teachers, Statement submitted for the
record..................................................... 71
Hackney, Captain Norma Lee, Statement submitted for the
record..................................................... 3
Lundberg, Rolf Th., Jr., Senior Vice President, Congressional
and Public Affairs, United States Chamber of Commerce on
behalf of The Coalition for a Competitive American
Workforce, Statement submitted for the record.............. 77
Rhodes, David, President, School of Visual Arts,
Commissioner, Middle States Commission on Higher Education,
and Vice Chair, Regents Advisory Council on Institutional
Accreditation, on behalf of the Association of Proprietary
Colleges, Statement submitted for the record............... 81
H.R. 4283, THE COLLEGE COLLEGE ACCESS AND OPPORTUNITY ACT: ARE STUDENTS
AT PROPRIETARY INSTITUTIONS TREATED EQUITABLY UNDER CURRENT LAW?
----------
Wednesday, June 16, 2004
U.S. House of Representatives
Committee on Education and the Workforce
Washington, DC
----------
The Committee met, pursuant to call, at 10:30 a.m., in room
2175, Rayburn House Office Building, Hon. John A. Boehner
(Chairman of the Committee) presiding.
Present: Representatives Boehner, Petri, Hoekstra, McKeon,
Castle, Norwood, Isakson, Platts, Tiberi, Osborne, Kline,
Burns, Kildee, Andrews, Hinojosa, McCarthy, Tierney, Wu, Holt,
Davis, Grijalva, Van Hollen, and Bishop.
Staff Present: Kevin Frank, Professional Staff Member;
Sally Lovejoy, Director of Education and Human Resources
Policy; Catharine Meyer, Legislative Assistant; Alison Ream,
Professional Staff Member; Deborah L. Samantar, Committee
Clerk/Intern Coordinator; Kathleen Smith, Professional Staff
Member; Jo-Marie St. Martin, General Counsel; Ellynne Bannon,
Minority Legislative Associate, Education; Ricardo Martinez,
Minority Legislative Associate, Education; and Alex Nock,
Minority Legislative Associate, Education.
Chairman Boehner. A quorum being present, the Committee on
Education and the Workforce will come to order.
We are holding this hearing today to hear testimony on H.R.
4283, the College Access and Opportunity Act, and the question
being, ``Are students at proprietary institutions treated
equitably under the current law?''
Under the Committee rules, opening statements are limited
to the Chairman and ranking Member. If other Members have
statements, we will leave the record open until the end of the
day. And with that, I would ask unanimous consent for the
record to remain open to allow for Member statements and other
extraneous material referenced during the hearing this morning
to be submitted for the official record.
Without objection, so ordered.
STATEMENT OF HON. JOHN A. BOEHNER, CHAIRMAN, COMMITTEE ON
EDUCATION AND TEH WORKFORCE
Good morning to all of you, especially to our witnesses and
all of our guests today. We are here to learn more about the
issues facing proprietary colleges and universities and examine
how current law creates a two-tier system for students seeking
a postsecondary education. And I recognize some of the issues
we will address today remain open to debate, and I welcome the
chance for Members on both sides of the aisle to learn more
about how these issues are affecting millions of American
students.
I can respect differences of opinion when it comes to
finding solutions, but there should be no question today that
we have got a problem. There is a problem when schools serving
some of the neediest students are treated like second-class
citizens. There is a problem when the Federal Government
creates incentives for schools to raise tuition or to leave
inner cities. And there is a problem when innovation is stifled
through outdated regulations.
Today, we ask the question, are students at proprietary
colleges or proprietary institutions treated equitably under
the current law? And I think the answer is no. And that is why
in our bill we are calling for changes. On May 5, Mr. McKeon
and I introduced the College Access and Opportunity Act, a bill
aimed at expanding college access for low- and middle-income
students. Chief among our reform principles is the need to
remove barriers in current law preventing some colleges and
universities from helping students achieve their higher
education goals.
There are three issues in particular I think we would like
to learn more about from our witnesses today that affect
proprietary schools and their students under current law and
areas we reform in the College Access and Opportunity Act. The
first is the current dual definition of institution of higher
education. Under current law, there are two separate
definitions: One a general definition, and one specifically for
Title IV eligibility. The State of New York offers an example
of how, when all degree-granting institutions are treated
equally, a level playing field results in a stronger higher-
education system. In New York, there is no distinction between
a proprietary school and so-called traditional degree-granting
institution. And as a result, all institutions have the same
opportunities to serve their students.
More than a year ago, I received a letter from 18 Members
of the New York congressional delegation asking that the
Federal Government follow suit, treat all degree-granting
institutions equitably. A single definition will move us closer
to that goal of fair treatment and a level playing field.
Now those who oppose the single definition often claim for-
profit organizations should not have access to competitive
grant funding. Yet, throughout Federal law, there are numerous
examples of grants that are open to both nonprofit and for-
profit entities. And I think the chart up on the wall will
indicate that. A brief review of these programs shows scores of
grants available for for-profit organizations. We found more
than 160 examples, including laws under the jurisdiction of
this Committee, including the Work Force Investment Act, the
Individuals With Disability and Education Act, and No Child
Left Behind. It is clear that our exclusion of proprietary
schools in the Higher Education Act is the exception and not
the rule.
The second issue I hope to learn more about today is the
90/10 Rule, which is imposed only on proprietary institutions.
This rule, originally with a ratio of 85/15, was put into place
as part of the larger effort to reduce the fraud and abuse that
plagued the proprietary sector in the 1970's and 1980's. While
I do not disagree that this rule was well intentioned years
ago, but today, it seems not only unnecessary and ineffective
but also potentially harmful to students. The rule requires
proprietary institutions to show at least 10 percent of funds
are derived from sources outside of Title IV student-aid
funding. And while that may not seem like too much to ask,
looking closely at this rule shows how burdensome it may be.
Statistics show proprietary schools tend to serve larger
populations of needy, high-risk minority and nontraditional
students, in other words, the students most in need of
financial assistance. Yet when proprietary schools serve a
large share of needy students, many of whom rely on Federal
aid, the schools compliance with the 90/10 view is put in
jeopardy. And if the school breaks this rule, even by a
fraction of a percentage point, it loses eligibility to
participate in Title IV. This means that the school's students
cannot receive Pell Grants, Federal student loans or any other
type of Federal aid. Worse still, this rule creates an
incentive for proprietary schools to raise tuition or move away
from urban areas where students are more likely to depend on
Federal aid.
Safeguards against waste, fraud and abuse in our Federal
student aid programs are essential. And that is why the College
Access and Opportunity Act maintains dozens of effective
protections that are in current law today. The list on the
screen demonstrates some of the many changes that have taken
place over time to increase accountability and maintain the
integrity of the student aid programs.
The third and final issue I hope to examine is the rapid
growth of distance education and how rules, such as the 50-
percent rule, limit access to innovative learning
opportunities. Technology has changed dramatically since the
last time that we reauthorized the Higher Education Act.
Teachers and students today have access to learning tools we
could not have imagined just a few short years ago. Yet
outdated rules limiting distance education prevents students
and schools from making the most of advanced technology.
I would like to share with you a story about Captain Norma
Lee Hackney of the U.S. Navy.
[The information referred to follows:]
Statement of Captain Norma Lee Hackney
Chairman Boehner, and Members of the Committee, I am pleased to
provide this written statement in support of the provisions of H.R.
4283 that would level the playing field for students attending non-
traditional institutions, and in particular those attending distance
education institutions.
I am a Captain in the United States Navy. I have had the
distinction and honor of being the first woman to command the U.S.S.
Saipan, a United States Navy large deck amphibious assault ship, during
Operation Iraqi Freedom. The U.S.S. Saipan has capacity for more than
3,000 sailors and marines. It operates a 400-bed hospital, supports a
tactical air control squadron and launches marine helicopters from its
flight deck.
While at sea, I was able to continue my studies toward a Ph.D. in
Capella University's School of Business. I completed course work and
participated in course discussions via Internet connection aboard the
ship in the evening, at times that did not interfere with my official
duties. With remote access to education, I am able to continue my
studies without delay or interruption while serving in the military
during this important time. I learned of Capella through word of mouth
because of its positive reputation in the military community. Fifteen
percent of Capella's learners are affiliated with the U.S. Armed
Forces.
I am using Title IV funds to help pay for my education. I am
fortunate that Capella University is a participant in the U.S.
Department of Education's Distance Education Demonstration Program,
which provides Capella students access to Title IV funds. Advancing in
my education would be significantly more difficult without such access.
I understand that, without participation in the Demonstration Program,
institutions offering primarily distance education courses are
prohibited under the Higher Education Act from participating in Title
IV programs, thereby denying their students access to these funds.
I applaud your bill's provisions which set forth the abolishment of
distinctions made in Title IV between traditional institutions and non-
traditional institutions. I am particularly pleased to learn that H.R.
4283 would eliminate the 50% percent rule that restricts access to
funding for students attending distance education institutions. In
these complex times and with an inordinate amount of responsibility
placed on adults' shoulders, it is so important that the federal
government takes steps that will encourage, not dissuade, students to
continue their education in whatever environment provides them the most
flexibility in their lives. I, for one, would have had considerable
difficulty continuing my studies in a classroom setting or without
access to Title IV. I know that others in the military, students living
in rural communities, and single parents in urban cities around the
country share this view.
I appreciate your interest in providing greater access to Title IV
for all students and encourage the Committee to approve these
provisions as part of H.R. 4283.
______
Chairman Boehner. Her experiences show just how valuable
distance education is to Americans facing challenges and unique
circumstances as they pursue their higher education.
Captain Hackney is the first woman to command a United
States Navy large-deck amphibious-assault ship, specifically
the U.S.S. Saipan, during Operation Iraqi Freedom. The U.S.S.
Saipan has capacity for more than 3,000 sailors and Marines,
operates a 400-bed hospital, supports a tactical air control
squadron and launches U.S. Marine Harriers and helicopters from
its flight deck.
And while commanding her ship and serving her Nation,
Captain Hackney was able to continue her studies toward a Ph.D.
through an online education. Through advanced technology,
innovative teaching strategies and online tools, students who
may never have had the opportunity for a college education are
pursuing higher learning through distance education.
Again, we are dealing with antiquated regulations that may
have been well-intentioned when put in place but, today, are
simply a burden on students pursuing a higher education. So I
look forward to a frank and productive conversation about the
issues facing this growing sector of American education. At a
time when more students than ever are choosing to go to
college, millions of adults are interested in going back to
school, and changing technology requires workers to train and
retrain to compete in a changing marketplace. We should be
taking steps to expand access to all sectors of higher
education.
And with that, I would like to yield to my friend and
colleague, the gentleman from Michigan, Mr. Kildee.
[The prepared statement of Chairman Boehner follows:]
Statement of Hon. John Boehner, Chairman, Committee on Education and
the Workforce
Good morning, thank you for joining us today. We're here to learn
more about the issues facing proprietary colleges and universities and
examine how current law creates a two-tiered system for students
seeking a postsecondary education. I recognize some of the issues we'll
address today remain open to debate, and I welcome the chance for
Members on both sides of the aisle to learn more about how these issues
are affecting millions of American students.
I can respect differences of opinion when it comes to finding
solutions, but there should be no question today that we have a
problem. There is a problem when schools serving some of the neediest
students are treated like a second class. There is a problem when the
federal government creates incentives for schools to raise tuition or
leave inner cities. And there is a problem when innovation is stifled
through outdated regulations. Today we ask the question, ``Are students
at proprietary institutions treated equitably under current law?'' I
think the answer is no, and it is time for a change.
On May 5, Buck McKeon and I introduced the College Access &
Opportunity Act, a bill aimed at expanding college access for low and
middle-income students. Chief among our reform principles is the need
to remove barriers in current law preventing some colleges and
universities from helping students achieve their higher education
goals.
There are three issues in particular I'd like to learn more about
from our witnesses that affect proprietary schools and their students
under current law, and areas we reform in the College Access &
Opportunity Act. The first is the current dual definition of
institution of higher education. Under current law, there are two
separate definitions; one general definition and one specifically for
Title IV eligibility.
The state of New York offers an example of how, when all degree
granting institutions are treated equally, a level playing field
results in a stronger higher education system. In New York, there is no
distinction between proprietary and so-called ``traditional'' degree
granting institutions, and as a result, all institutions have the same
opportunities to serve their students. More than a year ago I received
a letter from 18 members of the New York congressional delegation--
including Mrs. McCarthy on this committee--asking that the federal
government follow suit and treat all degree granting institutions
equitably. A single definition will move us closer to that goal of fair
treatment and a level playing field.
Those who oppose a single definition often claim for-profit
organizations should not have access to competitive grant funding. Yet
throughout federal law there are numerous examples of grants that are
open to both non-profit and for-profit entities.
A brief review of these programs shows scores of grants available
to for-profit organizations. We found more than 160 examples, including
laws under the jurisdiction of this committee, including the Workforce
Investment Act, the Individuals with Disabilities Education Act, and
the No Child Left Behind Act. It's clear our exclusion of proprietary
schools in the Higher Education Act is the exception, and not the rule.
The second issue I hope to learn more about is the 90/10 Rule,
which is imposed only on proprietary institutions. This rule,
originally with a ratio of 85/15, was put into place as part of a
larger effort to reduce the fraud and abuse that plagued the
proprietary sector in the 1970s and 1980s. While I don't disagree that
this rule was well intentioned years ago, today it seems not only
unnecessary and ineffective, but also potentially harmful to students.
The rule requires proprietary institutions to show at least 10
percent of funds are derived from sources outside of Title IV student
aid funding. While this may not seem like too much to ask, looking
closely at this rule shows just how burdensome it may be. Statistics
show proprietary schools tend to serve larger populations of needy,
high-risk, minority, and non-traditional students. In other words, the
students most in need of federal assistance.
Yet when a proprietary school serves a large share of needy
students, many of whom rely on federal aid, the school's compliance
with the 90/10 Rule is put in jeopardy. And if a school breaks this
rule, even by a fraction of a percentage point, it loses eligibility to
participate in Title IV. This means the school's students cannot
receive Pell Grants, federal student loans, or any other federal
student aid. Worse still, this rule creates an incentive for
proprietary schools to raise tuition or move away from urban areas
where students are more likely to depend on federal aid.
Safeguards against waste, fraud, and abuse in our federal student
aid programs are essential, and that is why the College Access &
Opportunity Act maintains dozens of effective protections in current
law. The list on the screen demonstrates some of the many changes that
have taken place over time to increase accountability and maintain the
integrity of the student aid programs.
The third and final issue we'll examine is the rapid growth of
distance education, and how rules such as the 50 percent rule limit
access to innovative learning opportunities. Technology has changed
dramatically since the last time we reauthorized the Higher Education
Act. Teachers and students today have access to learning tools we could
not have imagined just a few short years ago. Yet outdated rules
limiting distance education prevent students and schools from making
the most of advanced technology.
I would like to share with you the story of Captain Norma Lee
Hackney of the U.S. Navy. Her experiences show just how valuable
distance education is to Americans facing challenges and unique
circumstances as they pursue higher education.
Captain Hackney is the first woman to command a United States Navy
large deck amphibious assault ship, specifically the U.S.S. Saipan
during Operation Iraqi Freedom. The U.S.S. Saipan has capacity for more
than 3,000 sailors and marines, operates a 400-bed hospital, supports a
tactical air control squadron, and launches U.S. Marine harriers and
helicopters from its flight deck. While commanding her ship, and
serving her nation, Captain Hackney was able to continue her studies
toward a Ph.D. through online education.
Through advanced technology, innovative teaching strategies, and
online tools, students who may never have had the opportunity for a
college education today are pursuing higher learning through distance
education. Again, we're dealing with antiquated regulations that may
have been well intentioned when put into place, but today are simply a
burden on students pursuing higher education.
I look forward to a frank and productive conversation about the
issues facing this growing sector of higher education. At a time when
more students than ever are choosing to go to college, millions of
adults are interested in going back to school, and changing technology
requires workers to train and retrain to compete in a changing
marketplace, we should be taking steps to expand access to all sectors
of higher education. With that, I will now yield to Mr. Miller for his
opening statement.
______
STATEMENT OF HON. DALE KILDEE, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MICHIGAN
Mr. Kildee. Thank you, Mr. Chairman.
I join you in welcoming the witnesses before the Committee
today.
I want to especially welcome David Moore, CEO of Corinthian
Colleges. David and I have known each other for many years,
dating back to when he was the head of the community college in
Flint, Michigan. Before that, he spent time in the military.
And David, it is good to have you, always.
Mr. Chairman, I do not fully agree with the changes made by
H.R. 4283 with respect to proprietary schools. The bill, in its
current form, would fundamentally change some of the most
significant statutory provisions which ensure accountability
for Federal higher-education funding. These changes could
hinder rather than improve access to postsecondary education.
But before I get into some of the issues with this
legislation, I do want to acknowledge the important role that
proprietary institutions do play. Many students--we know in
this Committee, I certainly know--would not be able to access
the educational courses they need without proprietary
institutions. They play a very important and essential role in
the total spectrum of higher education. Flexible scheduling and
innovative course offerings are key elements that the
proprietary sector has brought to postsecondary education.
Opposition to some of the changes made by H.R. 4283 should not
be viewed as an opposition to proprietary schools in general.
Rather, the role the schools play is essential to ensuring that
all students have access to that postsecondary education. And
in my 28 years here in Congress, I have worked closely with
proprietary schools during my tenure.
Unfortunately, H.R. 4283 does raise some issues of concern.
H.R. 4283 repeals the 90/10 Rule. As I have said before, rather
than repeal, we should examine what problems the 90/10 Rule is
causing. How many schools are presently close to the 90 percent
limit? What limitations does this rule actually place on
schools? H.R. 4283 repealing the 90/10 Rule, these questions
have not been satisfactorily answered. Rather than repeal, we
should be examining perhaps a meaningful compromise on these
issues that addresses these problems.
And Mr. Moore and I have discussed--I think you have two
colleges in Georgia, one of which would have a very high Pell
Grant status or numbers through the Pell Grants. And I am
certainly willing to discuss that with you to see whether we
can arrive at some type of formula for a school with a large
number of Pell Grant students where we could waive that 90/10
Rule in the compromise that Mr. Miller and I have suggested.
H.R. 4283 also establishes a single definition of an
institution of higher education. This, I fear, would actually
reduce the amount of aid presently going to minority-serving
institutions. All of us, both Republicans and Democratic
Members, have worked to raise funding for minority-serving
institutions. This provision would only set us back on these
efforts.
H.R. 4238 would also repeal the 50-percent rule.
Congressman Andrews and I introduced a legislation earlier this
year to eliminate the 50-percent rule in exchange for
additional fiscal and academic responsibility through the
accreditation process. This bill does not include the
provisions from the Andrews legislation and therefore, I think,
lacks sufficient safeguards for the expansion of distance
education.
But I certainly feel that expansion is in order, with the
proper safeguards. I think it is--we have to recognize that new
technology that exists out there, and it is a very positive
thing for education.
In addition to these issues, this bill has other
significant issues of concern. The bill's repeal of the low
fixed rate for consolidation loans would translate into
thousands in additional interest costs for students.
The bill also caps the maximum Pell Grant, sending the
message that we should limit future resources for this critical
program. I can recall in the last reauthorization, with Mr.
McKeon in 1998, President Clinton used greatly the increase in
the Pell Grants and increased the Pell Grants significantly.
And they have not been increased significantly much since then.
I think Mr. Bush raised them $250 the first year and then
another $50. And it has been $50, straight level, funding that
increase ever since. So I think leaving room for the President
can be significant, as it was in the 1998 reauthorization.
In closing, I would like to point out that our colleague,
Ms. Waters from California, requested to testify at this
hearing. To my knowledge, her office did not receive a response
to her request. I would hope that the Committee would provide
an opportunity for Ms. Waters to be able to present her views
on this matter. I believe her testimony would be especially
useful to our conversation, given that she was the author of
the original 85/15 provision.
And I thank you, Mr. Chairman, and look forward to working
with you.
And I assure all of you that this is a work in process, and
hopefully, when we are finished with this, we will all be happy
and be able to deliver the services to the students of this
country.
Thank you, Mr. Chairman.
Chairman Boehner. To clarify the record, we had extensive
conversations with Ms. Waters' staff, but there was--we already
had our panel set, and it was our decision not to have two
panels. And she and her staff were in fact informed of that.
Secondly, I would point out that the change in interest
rates the gentleman from Michigan stated that students would be
paying, could be paying higher rates when they start to repay
those. And I would remind the gentleman that the students are
people who are in school. Those who are repaying those would be
out of school, and I would suggest that we should refer to them
as graduates.
With that, we are pleased to introduce our distinguished
panel of witnesses, and to introduce our first witness, let me
call on my colleague from Columbus, Ohio, Mr. Tiberi.
Mr. Tiberi. Thank you Mr. Chairman. It is a pleasure for me
to introduce a constituent of mine, Mr. Dwight Smith, who is
currently the president and CEO of Sophisticated Systems, Inc.
in Columbus and a company that provides system integration and
consulting that specializes in providing integrated solutions
for its clients' system requirements.
On a personal note, Mr. Smith is chairman of the Board of
Columbus State Community College in Columbus and is here today
representing DeVry because, as an employer, he has employed
many of the students of a proprietary school in my
congressional district.
I know you have a plane to catch, and so without further
ado, thank you for being here today. We really appreciate your
time.
Chairman Boehner. Our second witness today will be Mr.
Andrew Rosen. Mr. Rosen currently serves as president and chief
operating officer of Kaplan Incorporated, a broadbased provider
of educational services, including test preparation, K-through-
12 services for students in schools and post-secondary
education and professional training. Mr. Rosen also serves as
president and CEO of Kaplan College, a regionally accredited
degree-granting institution.
And then we will hear from Dr. Alice Letteney. Dr. Letteney
currently serves as director of the University of New Mexico,
Valencia. Dr. Letteney was one of the founding faculty members
at Quinebaug Valley Community College in Connecticut. She has
also served as dean of academic affairs and executive dean of
academic and student affairs at community colleges in
Pennsylvania and Massachusetts.
We will then hear from Mr. Barmak Nassirian. Mr. Nassirian
has been active in higher education policy for over a decade
and currently serves as associate executive director of the
American Association of Collegiate Registrars and Admissions
Officers, a nonprofit voluntary professional association of
more than 9,000 higher education admissions and registration
professionals who represent 2,300 institutions in more than 35
countries.
And then we will hear from Mr. David Moore. Mr. Moore is
one of the founders of Corinthian Colleges and serves as
chairman and CEO of Corinthian Colleges. Previously, Mr. Moore
served as president of the DeVry Institute of Technology in Los
Angeles. Prior to that position, Mr. Moore was employed by Mott
Community College in Flint, Michigan, where he was president
from 1984 through 1992.
We want to thank all of our witnesses for your willingness
to come and testify today. I am sure that the staff has
explained the lights to you; 4 minutes on green, 1 on yellow.
Red means you should be wrapping up. We are pretty lenient
around here, as long as you do not get too carried away.
So with that, Mr. Smith, we would love to hear your
testimony.
STATEMENT OF DWIGHT SMITH, PRESIDENT & CEO, SOPHISTICATED
SYSTEMS, INCORPORATED, COLUMBUS, OHIO
Mr. Smith. Thank you. Thank you, Chairman and Members of
the Committee.
My name is Dwight Smith, and I am the president and CEO of
Sophisticated Systems, an IT consulting firm founded in
Columbus, Ohio, some 14 years ago. It is my pleasure to have
the opportunity to speak with you today as an employer of
proprietary school graduates and to share my perspective on how
these schools are serving a critical role in educating
technology workers that employers need in today's knowledge-
economy.
The United States has no greater opportunity with America's
current and future generations than to educate our citizens and
create a competitive work force. My comments today are limited
to a statement of which I firmly believe that every citizen
should have equal access to the postsecondary education that
best meets his or her educational needs.
I founded Sophisticated systems in 1990, and we quickly
became recognized as a leader in the business community in
Columbus. We have offices in Columbus and Dayton. We currently
serve clients in Cincinnati, Chicago, Wilmington Delaware and
Detroit. We are an $18 million firm that provides IT consulting
services to a number of organizations, including The Limited,
Bank One, the State of Ohio and the U.S. Federal Government. We
currently employ 90 employees and have nearly 40 contractors on
our staff.
In order to achieve our success, we need to employ
individuals with the appropriate technology and business skills
that will help our clients address their needs. These graduates
are very hard to find. We look for graduates with bachelors
degrees and skills that not only include a technical aptitude
but also the ability to work in teams to provide solutions to
complex problems.
One of the institutions that consistently provides us with
high-quality candidates and graduates would be DeVry
University. We currently employ five graduates of this great
institution and, in the past, have employed many more. Many of
our graduates have been hired on as--hired on by our clients in
key positions and at least one has left our organization,
utilizing his education at DeVry and the experience gained at
Sophisticated to go out and start his own business. We have
considered DeVry graduates for all entry-level positions and
hire these graduates because of their ability to be productive
day one, not only because of their technical skills but the
problem-solving skills that they acquire at this organization.
I would like to share with you some examples of some of the
graduates that we have hired from this organization and how
they have contributed to our success at Sophisticated Systems.
First I would like to mention a gentleman by the name of Troy
Stevens. Troy joined us, after graduating from DeVry in 1999,
as a business analyst, assisting our clients with requirements
definition and design. He later supported our e-business
practice and, last year, was promoted to a very key position of
business development manager. In this role, Troy reports
directly to our chief operating officer and is responsible for
leading all major proposal efforts and establishing key
strategic alliances with firms such as Deloitte, Unisys and
CDW. Our firm is continuing to win significant opportunities
based on Troy's outstanding leadership in this area. Again,
Troy is a DeVry graduate.
Next is Harold Ransom, an African-American gentleman who
joined our firm in 1998 as a PC technician and was later
promoted to network engineer. Two years ago, Harold assumed a
lead role in our firms outsourcing contract with the Columbus
Area Chamber of Commerce. Following two 1-year contracts with
this important client, in December of 2003, the Chamber signed
a 3-year agreement with our firm to continue this outsourcing
agreement. In signing this agreement, they expressed great
excitement and enthusiasm that Harold would continue to lead
this effort. The Chamber, as a result of his commitment to
quality and expertise, continues to be one of our finest
references.
My final example is Siu Li. Siu is also a graduate of DeVry
and joined our company as a result of an acquisition in 2000.
Siu is a web developer and has developed and supported more
client engagements and this type of work than any other
consultant in our firm. That aside, Siu's creativity and values
bring a great deal to our company in another area. Our company
is very committed to our community and to giving back.
Several years ago, Siu had a vision that a team from our
company should travel to a local shelter and serve meals to the
less fortunate people in our community. Since that time, Siu
has organized a trip on a monthly basis, without fail, and led
a team. And we have served many, many thousands of meals over
that time. Again, a great DeVry graduate with great business
contributions to the company as well as a contribution to our
mission as it pertains to serving our community.
Clearly, with people like Troy, Siu and Harold on our team,
I think you can understand why our company has achieved such
great success. One of the reasons is that these employees have
received an outstanding education at DeVry. What greater public
good can there be than educating and preparing Americans for
future--for what the future promises.
We are facing increasing competition in the global
marketplace, and like so many other businesses today, the
education and training of our current and future work force is
key to our ability to be successful in the future. I am not an
education policy expert but rather a CEO and very dependent
upon the end product of education. I need and want quality
education. I need and want the quality education that is
provided by schools such as DeVry and proprietary institutions.
When hiring an employee, I look to see that the applicant has
the skills that can meet and improve the needs of our company.
It seems to me that the objective should be of education policy
also that any education institution that is accredited and
meets all the necessary standards and is improving the quality
of graduates is making our Nation stronger and providing a
great benefit to the public.
Thank you Chair and to the Committee.
[The prepared statement of Mr. Smith follows:]
Statement of Dwight Smith, President & CEO, Sophisticated Systems,
Inc., Columbus, Ohio
Mr. Chairman, Mr. Miller and members of the committee, my name is
Dwight Smith and I am the President and CEO for Sophisticated Systems,
Inc. (SSI), an I/T consulting firm founded in Columbus, Ohio some
fourteen years ago. It is my pleasure to have the opportunity to speak
to you today as an employer of proprietary school graduates and to
share with you my perspective on how proprietary schools are serving a
critical role in educating and providing the technology workers
employers need in today's knowledge economy. The United States has no
greater opportunity with America's current and future generations than
to educate our citizens and create a competitive workforce. My comments
today are limited to a statement of my firmly held belief that every
citizen should have equal access to the postsecondary education that
best meets his or her educational goals.
I founded SSI in 1990 and it has quickly become a recognized member
of the central Ohio business community. We have opened branches in
Columbus and Dayton supporting clients in these areas as well as
Cincinnati, Detroit, Chicago, and Wilmington, Delaware. SSI was listed
among the Columbus Fast Fifty for five consecutive years (1996-2001)
denoting it as one of the fastest growing businesses in central Ohio.
In addition the company has been included in Inc. Magazine's list of
the nation's 500 fastest growing businesses on two separate occasions.
We are an 18 million dollar company that delivers professional services
that include staff augmentation as well as the design, development,
implementation and support of computer applications and systems. We
have experience and expertise in all phases of the application
development process, Wide-area and local-area network design,
installation and support, PC and server deployment, and general
computer and technology consulting services. To ensure complete end-to-
end solutions, we provide the related hardware and software products
necessary to implement computer solutions. SSI employs approximately 90
employees as well as nearly 40 subcontractors. Our customers include
Nationwide Insurance, State of Ohio, The Limited, Bank One, Columbus
Public Schools, The Columbus Area Chamber of Commerce and Wright
Patterson Air Force Base.
In order to achieve our success, we need to employ individuals with
the appropriate technology and business skills that will help our
customers achieve their goals. These types of graduates are hard to
find. There continues to be a shortage of workers with the requisite
skills to complete in the knowledge economy. We look for graduates with
bachelor's degrees and skills that not only include technical aptitude,
but also the ability to work in teams to provide solutions to complex
problems. Technology continues to be infused in today's workforce and
the technology itself is continually improving. So, our employees also
must have the desire to participate in life long learning, so we, as a
company, can continue to meet the changing needs of our customers.
One of the institutions of higher education that consistently
produces these quality graduates is DeVry University. SSI currently
employs five DeVry graduates and in the past we have employed many,
many more. Some of these individuals have been hired into key positions
at our client sites while at least one has started his own business
utilizing both the technical and business skills that he acquired at
DeVry as well as experience gained at Sophisticated Systems. One of the
things that impress me about DeVry is that they are one of the top
producers of minority graduates. We have considered DeVry graduates for
all entry-level openings and hire DeVry graduates because they have the
ability to be productive their first day on the job, and because they
not only have the technical skills but also the teamwork and problem
solving capabilities to continue to build relationships with our
customers. I have interviewed graduates from public, private, non-
profit and for-profit institutions, and I believe that our goal is to
hire an individual with the appropriate qualifications and education--
it does not matter to me whether the student attended The Ohio State
University, Case Western Reserve University, or DeVry University--just
as long as they have the skills we need to meet our business goals.
I would like to give you few examples of some of our DeVry
graduates and how they have contributed to the success of SSI.
Troy Stevens joined Sophisticated Systems in 1999 as a Business
Analyst assisting our clients with requirements definition and solution
design. He later supported our E-business practice and last year was
promoted to Business Development Manager. In this role, Troy reports
directly to our Chief Operations Officer and is responsible for leading
all major proposal efforts and establishing key strategic relationships
for the firm including with large international companies such as
Deloitte, Unisys, and CDW. Our firm is continuing to win significant
opportunities due, in large part, to Troy's outstanding leadership
abilities.
Harold Ransom joined our team in 1998 as a PC Technician and later
was promoted to Network Engineer. Two years ago Harold assumed the lead
role in our firm's outsourcing contract with The Columbus Area Chamber
of Commerce. Following two successful one-year contracts with this
important client, the Chamber, in December 2003 signed a new three-
year agreement with Sophisticated Systems. In signing this agreement,
they expressed great excitement and enthusiasm that Harold would
continue to lead this effort. The Columbus Chamber, as the result of
Harold's commitment to quality and expertise, continues to be one of
our company's finest references.
Judy Hardina joined our team in 2000. Judy is responsible for all
hardware/software sales for the organization. She has established
strong relationships not only with our clients but also manufacturers
and distributors such as IBM, H-P, Dell and Cisco. Her results to date
have been absolutely amazing, so much so that it is likely that by the
end of this month Judy will exceed our projections for sales in this
key area for the business for the entire year. I receive unsolicited
feedback from our clients on a regular basis that can be summarized as
``people do business with our company because of the professionalism
exhibited by Ms. Hardina.''
My final example is Siu Li. Siu joined our company as the result of
an acquisition in 2000. Sui is a web developer and has developed and
supported more client engagements for this type of work than any other
consultant in the firm. That aside, Siu's creativity and values bring a
great deal to the company in another area. Sophisticated Systems is
very committed to supporting our community--``giving back''. Several
years ago Siu had an idea, a vision, that a team from the company
should travel to a local shelter and serve meals to the less fortunate
in our community. Since that time Sui has organized this trip, without
fail each month. During this time our team, led by Sui has served
thousands and thousands of meals to homeless members of our community.
Clearly with people like Troy, Harold, Judy, and Siu on our team I
believe you can understand why our company has been blessed with such
success.
One of the reasons these employees are successful is the education
they received at DeVry. What greater public good can there be than
educating and preparing Americans for promising futures? We are facing
increasingly tougher competition in the global marketplace and, like so
many other businesses today, the education and training of my current
and future workforce is the key to my company's competitiveness and
future growth. More than ever, we need to promote and reward success in
the areas of workforce education and training. If an institution is
doing a good job of preparing students and providing businesses with
quality employees, this is clearly in the nation's interest.
I am not an education policy expert, but as a CEO, much of my
success depends upon the end product of the education process. I want
and need quality employees whose education and training allow them to
adapt and keep pace with technological and marketplace developments.
When hiring an employee, I look for a skilled applicant that can meet
my needs and improve my company. It seems to me this ought to be the
objective of our education policy as well. Any qualified and accredited
institution that meets all the necessary standards and is producing
quality graduates is making our nation stronger and providing public
benefit.
If I have a superb employee, I look for ways to give that employee
more responsibility. If I have a product or service that is in demand,
I find a way to increase production. If there is a school that is
producing graduates that are performing well and strengthening our
workforce, then we should make it possible for that institution to do
more of whatever it is that they are doing with such success.
Thank you, Mr. Chairman, for this opportunity to share my
experiences, as an employer, and to offer my thoughts on the
contributions proprietary postsecondary schools, such as DeVry, make
towards helping employers find quality employees.
______
Chairman Boehner. Thank you.
Mr. Rosen.
STATEMENT OF ANDREW S. ROSEN, PRESIDENT AND CHIEF OPERATING
OFFICER, KAPLAN, INC., AND PRESIDENT, KAPLAN COLLEGE
Mr. Rosen. Mr. Chairman, Members of the Committee, it is an
honor for me to appear before you today to discuss equity
issues pertaining to students at proprietary postsecondary
institutions. I am Andrew Rosen, president and chief operating
officer of Kaplan, Inc. I also serve as president of Kaplan
College.
Kaplan, Inc. is a wholly owned subsidiary of the Washington
Post Company. Many of you know Kaplan's roots in test
preparation. But we have expanded well beyond test prep to help
individuals achieve their educational and career goals
throughout their lives. Kaplan's postsecondary education
involvement includes 67 accredited brick-and-mortar schools in
16 States that offer bachelors, associate and certificate
programs. Those schools include Kaplan College in Davenport,
Iowa, which is regionally accredited and anchors Kaplan College
Online.
Kaplan College is one of the original participants in the
U.S. Department of Education Distance Education Demonstration
Program. Because of that, we are exempt from the 50-percent
rules. Kaplan's on-ground and online students are
nontraditional with an average age of 38. The majority of our
students are women, more than half identify themselves as
racial or ethnic minorities and, at our on-ground schools,
approximately 60 percent qualify for Pell Grants. About one-
third of our online population is eligible for Pell Grants.
Most of our online students are adults with families, and many
are working single parents. For them, online education is the
only way to advance their careers and better provide for their
families.
Kaplan College Online has 11,000 students working toward
associate and bachelors degrees in business, information
technology, criminal justice and paralegal studies. Every
student at Kaplan College Online has ongoing relationships with
faculty and a personal academic advisor.
The requirement that, to be eligible for Federal financial
aid, institutions must keep online courses to less than 50
percent of the total courses offered and students enrolled is
anachronistic. The 50-percent rules hinder the power of
distance learning.
We are pleased that H.R. 4283, the College Access and
Opportunity Act of 2004, recognizes this reality and takes
significant steps toward more equitable treatment for online
education. I would also like to acknowledge the efforts made
toward this goal by Members on both sides of the aisle. Because
of that broad support, I am confident that, as part of
reauthorization, Congress will update the laws that govern
access to Federal student aid for online learners to better
reflect the needs of 21st century learners.
Mr. Chairman, I will touch briefly on three other areas
that treat students at for-profit schools inequitably that are
resolved in your bill. The requirement that proprietary schools
obtain at least 10 percent of their revenues from sources other
than Federal student aid has become a disincentive for
companies to serve the neediest students who receive the most
Federal aid. We applaud your decision to eliminate the 90/10
Rule as part of H.R. 4283.
The College Access and Opportunity Act of 2004 also
addresses transfer of credit, which is another equity issue for
students at proprietary schools. Too often our students at
nationally accredited schools are unable to transfer credits
for their courses simply because the sending school is not
regionally accredited. H.R. 4283 maintains institutions'
academic freedom while insuring that decisions on credit
transfers are based on course content rather than on the nature
of the accreditor.
H.R. 4283 also provides for a single definition of an
educational institution. In an era when more than 1 million
students per year enroll in private career colleges, it is time
that the Federal Government stopped relegating them to second-
class status. As a matter of equity and sound public policy,
the single definition is appropriate.
Nontraditional students have different needs and
circumstances than the high school graduate who continues
immediately with postsecondary education. Our students go to
school year-round. Their need for financial aid does not take a
summer vacation. I am pleased that your bill acknowledges this
need by establishing a pilot program for year-round Pell
Grants.
Mr. Chairman, you have also asked me to assess the
potential for increased fraud and abuse resulting from
provisions in H.R. 4283. The only way to maintain the long-term
health and representations of our companies is by providing
quality instruction and training and building enduring
institutions. In addition, for-profit postsecondary education
has multiple reporting requirements at both the Federal and
State levels. The legislative changes you propose leaves most
of these requirements in place.
I would like to close my testimony by telling you about
Christine Forestire, a recent graduate of Kaplan College Online
who is here today. Christine lives in upstate New York and
commutes 2 hours each way into Manhattan to work. She had an
associates degree and no means of continuing her education
anywhere near her home. She became a student at Kaplan College
Online.
On September 11, 2001, Christine was about to go to her
office on the 45th floor of Tower Two of the World Trade
Center. She was shopping and never got in the elevator and ran
when the building shook violently. She watched from a nearby
restaurant as the second plane hit the other tower. Eight of
Christine's coworkers were killed.
Without any prodding, without any of my knowledge, our
staff at Kaplan College Online immediately followed up with
Christine to be sure she was all right, including her
admissions counselor. Her teachers were very supportive, and
rather than abandoning her studies because of the tragedy,
Christine focused even more on her studies.
Christine now works at a law firm in Manhattan and
graduated in December with a bachelor's degree in management.
She has a bright future ahead of her because online education
made it possible for Christine to reach her goals.
Christine, I would like to ask you to rise for a moment.
Thank you, Christine, and congratulations.
Mr. Chairman, I would be pleased to answer any questions
you or any other Member may have. Thank you.
[The prepared statement of Mr. Rosen follows:]
Statement of Andrew S. Rosen, President & COO, Kaplan, Inc., and
President, Kaplan College, Boca Raton, Florida
Mr. Chairman, Other Members of the Committee:
It is an honor for me to appear before you today to discuss equity
issues pertaining to students at for-profit postsecondary institutions.
I am Andrew Rosen, President and Chief Operating Officer of Kaplan,
Inc. I also serve as President of Kaplan College. Kaplan Inc. is a
wholly owned subsidiary of The Washington Post Company, a media and
education company. As many of you know, Kaplan's roots are in test
preparation, and we have expanded beyond those origins to help
individuals achieve their educational and career goals throughout their
lives. We still offer test preparation for college admission, graduate
school, and beyond. In addition, Kaplan K12 Learning Services provides
supplemental education services as part of the No Child Left Behind
law. SCORE! Education Centers offer both enrichment and supplemental
education programs. Our Kaplan Professional division offers continuing
education and certification studies in financial services, insurance,
home inspection, architecture, and real estate.
Kaplan's postsecondary education involvement includes 67 accredited
brick-and-mortar schools in 16 states that offer bachelor's, associate,
and certificate programs. We also have Concord Law School, which is
online and is the second-largest part-time law school in the country.
My focus with you today are the postsecondary students at our 67
on-ground schools, as well as those who study online through Kaplan
College Online. All are non-traditional students, with an average age
of 38. The majority of our students are women, more than half identify
themselves as racial or ethnic minorities, and at our on-ground-
schools, approximately 60 percent qualify for Pell Grants. About one-
third of our online population is eligible for Pell Grants.
One of our on-ground schools is Kaplan College in Davenport, Iowa,
which is accredited by the Higher Learning Commission of the North
Central Association of Colleges and Schools, and anchors Kaplan College
Online. Kaplan College is one of the original participants in the U.S.
Department of Education's Distance Education Demonstration Program.
Because of that, we are exempt from the 50 percent rules, which would
otherwise subject education and training delivered online to rules
drafted for correspondence programs.
Mr. Chairman, we believe that the reauthorization of the Higher
Education Act presents an unprecedented opportunity to ensure that
quality education and training options are available to all motivated
students. Most of our online students are adults with families, and
many are working single parents. They are eager to improve their
education at times that traditional classroom learning would not be an
option because of their job and family responsibilities. For them,
online education is the only way to advance in their careers and better
provide for their families.
The world has changed, and in order to advance economically,
postsecondary education is now a requirement. Ensuring that students
have access to the education that meets their needs will ensure the
continued economic security of our Nation. Recognizing that, the U.S.
Chamber of Commerce has formed the Coalition for a Competitive
Workforce, of which Capella University, Corinthian Colleges, DeVry,
Inc., and Kaplan are founding members.
Kaplan also belongs to the Career College Association, whose
members educate and train one million students each year for employment
in some 200 occupational fields.
Kaplan College Online has over 11,000 students working toward
associate and bachelor degrees, and another 4,500 who are in the school
of continuing education, which offers non-credit certificate programs.
We offer degree programs in business, information technology, criminal
justice, and paralegal studies. Areas of study for continuing education
include forensic nursing and legal nurse consulting, financial
planning, and life care management.
In Kaplan's experience, effective online learning requires more
faculty-student interaction, not less, particularly for longer or more
complex programs. Our online faculty and administrators make an effort
to get to know their students and make themselves available to students
at all hours. Every student enrolled in Kaplan College Online has an
academic advisor.
The requirement that to be eligible for federal financial aid,
institutions must keep online courses to less than 50 percent of the
total courses offered and students enrolled is anachronistic to the
realities of 21st century learning. The 50-percent rules hinder the
power of distance learning. We are pleased that HR 4283, the College
Access and Opportunity Act of 2004, recognizes this reality and takes
significant steps toward more equitable treatment for online education.
I would also like to acknowledge other efforts made toward this
goal by Members of this Committee on both sides of the aisle. Because
of that broad support, I am confident that as part of reauthorization,
Congress will update the laws that govern access to federal student aid
for online learners to better reflect the needs of 21st century
learners.
Mr. Chairman, I will touch briefly on three other areas that treat
students at for-profit schools inequitably and that are resolved in
your bill. The requirement that proprietary schools obtain at least 10
percent of their revenues from sources other than federal student aid
funds had understandable origins. However, today's responsible for-
profit schools are integral components of the higher education system
in our country. Yet the 90/10 provision remains in effect and has
become a disincentive for companies to serve the neediest students who
would receive the most federal aid. The rule is also administratively
burdensome. We would prefer to redirect resources to counseling and
serving students, instead of minutely tracking each school's percentage
of federal funding. We applaud your decision to eliminate the 90/10
Rule as part of HR 4283.
The College Access and Opportunity Act of 2004 also addresses
transfer of credit, which is another equity issue for students at
proprietary schools. Too often, our students at nationally accredited
schools are unable to transfer credits for their courses simply because
the sending school is either not regionally accredited or is not
accredited by the same regional agency. HR 4283 strikes the right
balance, maintaining institutions' academic freedom, while ensuring
that decisions on credit transfers be based on course content rather
than on the nature of an accreditor.
HR 4283 also provides for a single definition of an educational
institution. In an era when more than one million students per year
enroll in private career colleges, it is long past time that the
federal government should have ceased relegating them to second-class
status. As a matter of equity and sound public policy, the single
definition makes sense.
As I indicated earlier in my testimony, non-traditional students
have different needs and circumstances than the high school graduate
who continues immediately with postsecondary education. Our students go
to school year-round; their need for financial aid to pursue their
studies does not take a summer vacation. I am pleased that your bill
acknowledges this need by establishing a pilot program for year-round
Pell Grants. We look forward to working with you to fine-tune the
proposal in the best interests of our students.
Mr. Chairman, you have asked me to assess the potential for
increased fraud and abuse resulting from provisions in HR 4283. I
recognize that some Members of this Committee remember the days when
unscrupulous operators left a trail of disappointed students and debts
to the federal Treasury. The changes in the law passed by Congress
weeded out those bad actors. The for-profit industry, including online
institutions, has matured, and those of us in this business recognize
that the only way to maintain the long-term health and reputations of
our companies is by providing quality instruction and training.
Competition has made our traditional colleges and universities the envy
of the world, and it is having the same impact with private sector
education. In addition, our students are more sophisticated and have
learned to shop for value, and that carries over to their education and
training needs.
For-profit postsecondary education has multiple reporting
requirements at both the federal and state levels. The legislative
changes that I have outlined in the interests of better public policy
and improved service to students will still leave most of those
requirements in place. I have no doubt that scrutiny of our sector will
continue, and that we will pass and thrive as students continue to turn
toward quality, cost-effective programs to help them achieve their
career goals.
I would like to close my testimony by telling you briefly about
Christine Forestire, a recent graduate of Kaplan College Online. Some
of you met her in February when she was honored by the Career College
Association as an outstanding graduate.
Christine lives in upstate New York and commutes two hours each way
into Manhattan to work. She had an associate's degree and no means of
continuing her education anywhere near her home. She became a student
at Kaplan College Online. She usually took one course at night and
another on weekends, using her commuting time and part of each weekend
to study.
On September 11th, 2001, Christine had stopped to do some shopping
on the concourse level of the World Trade Center, prior to taking the
elevator to her office on the 45th Floor of Tower Two, where she would
otherwise normally have been before 8:30 a.m. She never got in the
elevator, but ran from the building when what sounded like a giant bomb
shook the tower. She ran to a nearby restaurant and while waiting to
use a pay phone, watched television coverage, seeing the second plane
hit the other tower. Eight of Christine's co-workers were killed, and
she never again saw a commuter friend who traveled with her daily.
Without my knowledge or any prodding, our staff at Kaplan College
Online followed up with Christine to make sure she was all right,
including her admissions counselor. Her teachers were very supportive,
and rather than abandoning her studies because of the tragedy,
Christine focused even more on her studies, to take her mind off what
had happened.
Christine works at a law firm in Manhattan and graduated in
December with a Bachelor's degree in management, with a concentration
in information technology. She has a bright future ahead of her,
because online education made it possible for Christine to reach her
goals.
Mr. Chairman, I would be pleased to answer any questions you and
other Members may have.
______
Chairman Boehner. Thank you Mr. Rosen.
Dr. Letteney.
STATEMENT OF ALICE LETTENEY, PH.D., EXECUTIVE DIRECTOR,
UNIVERSITY OF NEW MEXICO-VALENCIA, LOS LUNAS, NEW MEXICO, ON
BEHALF OF THE AMERICAN ASSOCIATION OF COMMUNITY COLLEGES
Dr. Letteney. Good morning Chairman Boehner and Members of
the Committee.
My name is Dr. Alice Letteney, and I am the executive
director of the University of New Mexico, Valencia campus, an
HSI that serves 1,700 credit and 7,000 noncredit students in
rural New Mexico. I am pleased to be here today representing
the American Association of Community Colleges comprised of
1,173 public, private and proprietary colleges who enroll over
11 million credit and noncredit students all across this
country.
AACC's leadership and representation on these issues
accurately reflect the policy positions of our members. I have
been asked to address proprietary school and program integrity
issues in H.R. 4283 today. AACC cannot support this key bill at
this time largely because of these issues.
AACC appreciates the role of for-profit colleges in
providing career education and training and has always
supported giving proprietary school students Federal financial
aid. However, the community college role is different from that
of for-profit. We are open admissions colleges, providing a
wide range of programs from adult basic education, remediation,
college transfer to technical and career education. For-profits
generally focus more narrowly on career education.
AACC strongly opposes the single definition which would
make roughly 4,000 for-profit colleges eligible for all HEA
programs and would result in a sure and swift funding cut for
our colleges. We can perhaps live with an HEA bill that has no
new money. But we cannot accept less old money. The single
definition would adversely impact Title III-A Strengthening
Institutions funds which go largely to community colleges and
other resource-poor institutions with high percentages of needy
students.
Of equal concern is the HSI program, which currently funds
165 HSIs, half of whom are community colleges, including my
college. The single definition would immediately make 110 for-
profit colleges eligible, causing many of us to lose grants.
The single definition makes for-profit schools eligible for
scores of non-HEA programs that use its definitions for program
eligibility, including programs at NSF, HHS, Agriculture and
Homeland Security. We understand that no list of these non-HEA
programs has been provided, and we believe that Committees with
jurisdiction may not even be aware of this pending change.
It has been claimed that the single definition is about
serving students. This is a distortion or half truth. Taxpayer
funds awarded to proprietary colleges subsidize corporate
profits, for they are inseparable from funds used for students.
On the other hand, all of the taxpayer funds provided to public
community colleges, accountable to locally elected and
appointed boards, go into education, not profits. The HEA has
always reflected this fundamental difference.
Beyond student financial aid, American taxpayers should not
be asked to subsidize significant shareholder profits at for-
profit colleges. The single definition must be rejected.
AACC recommends the continuation of the 90/10 Rule as a way
to prevent the pattern of fraud and abuse of financial aid that
we saw in past years involving proprietary schools. Hearings by
the Senate Government Affairs Committee in the early 1990's
showed that institutions heavily dependent on student aid
revenues had higher levels of fraud and the NIG has repeatedly
cited continuing problems.
We dispute claims that for-profit colleges provide services
to low-income and minority students that our community colleges
do not and are skeptical when for-profit institutions claim
that they will be forced to increase tuition if the rule is
kept. Please retain the 90/10 Rule.
Lastly, AACC recommends that the 50-percent rule regarding
distance education be modified to allow institutions to exceed
the 50 percent limit, a waiver from the Department of Education
based on specific criteria, including some of the standards
included in the Distance Education Demonstration Project that
is extended under H.R. 4283. We generally support full parity
between on-campus and distance education, but believe that
colleges heavily involved in distance education should have
some additional oversight beyond current accreditation
procedures. Asking the Department of Education to be a back
stop in ensuring that the wrong institutions are not given
access to Federal student aid is simply good prudent government
with no harm to institutions.
Thank you for this opportunity to testify. I will be happy
to answer questions.
[The prepared statement of Dr. Letteney follows:]
Statement of Dr. Alice Letteney, Executive Director, University of New
Mexico-Valencia, Los Lunas, New Mexico, on behalf of the American
Association of Community Colleges
Good morning, Mr. Chairman and Members of the Committee. My name is
Dr. Alice Letteney and I am Executive Director of the University of New
Mexico-Valencia. My college is an Hispanic Serving Institution (HSI)
and a rural community college, serving about 2,000 students. I am
pleased to be here on behalf of the American Association of Community
Colleges (AACC). AACC is the national voice for community colleges and
represents 1,173 community, junior and technical colleges. Included in
that figure are a number of high-quality, for-profit colleges that
carry regional accreditation status, a prerequisite for AACC
membership. We are pleased to present our views on some of the
integrity and proprietary school provisions in H.R. 4283, the ``College
Access and Opportunity Act of 2004.''
Before I begin my testimony, let me provide a few statistics.
Community colleges enroll more than 11 million credit and non-credit
students each year. This includes 45.9% of all undergraduate African
American students in American higher education, and 56% of all
Hispanic-American students. They also enroll 48.6% of all first
generation college students. Hence, we proudly think of ourselves as
being the ``Ellis Island'' of higher education. At the same time, our
colleges are undergoing a difficult period of sharp budget cuts coupled
with dramatic enrollment increases. In the last budget cycle, state
funding, which represents 41% of total revenues, decreased overall by
2.1%. And, over the last 3 years, our credit enrollments have exploded,
by about 20%.
Background on Community Colleges, Proprietary Schools, and the HEA
AACC's overwhelming focus on the Higher Education Act (HEA) always
has been and always will be on student aid. The HEA is essential for
needy students to finance their education. More than two million
community college students receive Pell Grants each year, which is
almost one- third of fall credit enrollments. The ``integrity'' issues
discussed below were not part of AACC's initial reauthorization
position submitted to this committee. Essentially, they were thrust at
community colleges by provisions in H.R. 3039 and, now, H.R. 4283. Our
basic positions on these issues are shared by the American Council on
Education, the umbrella higher education association, and the 44 other
signatories to its May 26 letter on H.R. 4283.
HEA ``integrity'' issues inevitably raise the topic of proprietary
schools. AACC commends proprietary schools, who in many ways are
partners in providing technical training and other essential programs
to millions of Americans. The continued expansion of proprietary
schools testifies to the fact that they are meeting many needs.
However, proprietary schools are businesses. They have a central
and necessary goal of earning profits. Alternatively, community
colleges are, by law and custom, dedicated to the public good. While
community colleges are complex institutions, with multi-million dollar
budgets, any excess of revenues over expenses is redirected to
educational programs and other student services. They do not enrich
owners and stockholders. This is reflected in the different tuition
levels. The average community college tuition this fall was $1,905. As
of this fall, the average two-year, degree granting proprietary school
charged $10,619--more than five times as much.
Congress Should Reject the ``Single Definition'' of Institution of
Higher Education
AACC strongly opposes the inclusion in H.R. 4283 of the ``single
definition'' of institution of higher education. The AACC Board has
indicated that AACC must oppose reauthorization legislation that
includes the single definition. This is largely because the inevitable
and immediate result of the single definition is to reduce funding for
community colleges, and make it even more challenging to provide
necessary services to students. Our colleges can perhaps accept HEA
reauthorization legislation in which o new money is the guiding
principle, but they cannot accept ``less old money.''
The single definition does much more than make proprietary schools
eligible for non-Title IV HEA programs. Even more significantly, it
makes all those institutions eligible for scores of programs outside
the HEA that use its definitions for program eligibility. This dramatic
change to these non-HEA programs will occur without other committees of
jurisdiction taking any affirmative steps to extend them to proprietary
schools.
These additional for-profit institutions amount to about 4,000
institutions, more than all of the non-profit colleges combined.
Degree-granting proprietary schools currently number about 800. This is
more than two-thirds the number of community colleges. For the record,
AACC has never questioned proprietary school participation in the
student aid programs. These programs represent more than 95% of total
HEA expenditures.
The single definition would affect two HEA grant programs that are
of particular concern to our association. One is the Title III-A of the
HEA, the Strengthening Institutions program. On average, community
colleges receive about 70% of these funds, with the remainder awarded
to four-year colleges, public and private. The funds are awarded to
institutions that serve high percentages of needy students and that
have relatively few resources. Competition for these grants is fierce,
and only about 15% of applications are funded in a given year, for
average annual grants of about $350,000. Roughly 120 grants are funded
at any one time. Unfortunately, appropriations for this extremely
valuable program have stagnated. The program was funded at $80 million
in fiscal year 1995; nine years later the fiscal year 2004
appropriation is $81.0 million. Our colleges are understandably
dismayed about the prospect of an immediate and radical expansion of
the pool competing for these limited funds.
Of equal concern is the impact of the single definition on the HSI
program. There are currently 165 institutions participating in this
program and half of them are community colleges. The single definition
would immediately make 110 for-profit colleges eligible for these
grants. Adoption of the single definition could therefore strike a
serious blow to our colleges.
In earlier correspondence to the Committee, AACC asked for a list
of the non-HEA programs that would be affected by the single
definition, but none has been made available. We understand that
compiling this list presents a research challenge, but this very fact
suggests why it must be done before legislative action on the single
definition takes place. We do know that a very broad array of non-HEA
programs will be affected by the single definition (National Science
Foundation, Department of Agriculture, Department of Homeland Security,
Department of Health and Human Services), and most likely without the
relevant committees of jurisdiction even being aware of its potential
impact.
There are further implications for state scholarship and grant
programs embedded in the single definition. Many of these programs also
use the HEA eligibility definitions. Heretofore, there has been no
discussion of this concept. The committee should fully examine this
aspect of the single definition before moving ahead with it.
Lastly, proponents of the single definition and the title of this
hearing suggest that this issue is about serving students. This is only
half true--the services received by students are provided by
institutions, and the single definition is about which institutions are
allocated funds. Taxpayer funds awarded to colleges for students are
not separable from the monies that ultimately flow to school owners and
shareholders. Recent financial statements from some of these concerns
place this into context:
Apollo Group (U. Phoenix): Gross Profits, $860.9 million over 4
quarters ending 2/29/04
Career Education Corp.: Gross Profits, $1.593 billion for 3 years
ending 12/31/03
DeVry, Inc.: Gross Profits, $1.098 billion for 4 years ending 6/30/03
Corinthian Colleges, Inc.: Gross Profits, $541.3 million for 3 years
ending 6/30/03
Community colleges are ``open door'' institutions that are
accountable to their locally elected and appointed boards, representing
the public. Proprietary schools are accountable to their owners and
shareholders. These represent fundamental differences and, until now,
the HEA has always reflected them by creating a strict statutory
demarcation between them. This demarcation should stand.
The ``90/10 Rule'' is Good for Students, the Student Aid Programs,
and Taxpayers
The so-called ``90/10 Rule'' was enacted in 1992 to prevent
institutions from focusing exclusively on recruiting low-income
students in order to profit from federal student aid eligibility. The
primary rationale for this provision, originally the ``85/15 rule''
until it was watered down in the 1998 HEA amendments, was to ensure
that proprietary schools were subject to a limited amount of free-
market testing; that is, that the education was sufficiently high-
quality that students were willing to use their own money to cover a
limited share of tuition. In addition to preventing the misuse of
federal funds, the ``90/10 Rule'' serves as a protection for low-income
students, who are the least informed about the range of postsecondary
choices open to them. Also, the Committee should be aware that the
Departments of Defense and Veterans Affairs use an ``85/15 rule'' for
their education programs because of the vulnerability to abuse of
highly subsidized federal programs.
For purposes of comparison, the committee should know that, on
average, community colleges receive no more than 7% of their revenues
via the federal student aid programs. The notion that a 90% limit on
Title IV revenues presents a barrier for for-profit institutions is
difficult for our presidents to imagine.
How well has the ``90/10 Rule'' worked in practice? In some ways it
is hard to tell, in that the abuses that have been prevented by it
cannot, by definition, be documented. Hearings by the Senate Government
Affairs Committee in the early 1990s did show that institutions so
heavily dependent on student aid revenues were subject to much higher
levels of fraud. In addition, recent reports by ED Office of Inspector
General (OIG) documented serious abuses, primarily in federal student
aid programs. Some of these problems included: schools closing without
warning; routine fabrication of financial aid documents; falsification
of ability-to-benefit test results; widespread failure to comply with
the ``90/10'' rule; overstating program length; and disbursing funds to
ineligible students.
We reject some arguments that have been made to this committee on
behalf of repealing the ``90/10 Rule''. This includes the argument that
the ``90/10 Rule'' should be repealed because for-profit colleges
provide services to low-income and minority students that non-profit
colleges do not. Community colleges are easily accessible in almost all
parts of the country, including inner cities as well as very sparsely
populated rural areas. The claim that proprietary schools have left
inner cities because of the ``90/10 Rule'' is impossible to verify; it
does, however, reflect their owners priorities. In addition, we find
the assertion by for-profit institutions that they will be forced to
increase tuitions if the ``90/10 Rule'' is not repealed difficult to
accept.
While proprietary schools serve large numbers of low-income
students, non-profit institutions do as well. Sixteen percent of
dependent students at both public and private four-year institutions
are from families earning $25,000 or less, and one-quarter of students
at those institutions are minorities. About a third of the students
attend part time, and nearly 20 percent have dependents. Twenty-two
percent of dependent students at community colleges are from families
with incomes less than $25,000.
Community colleges may have lower completion rates than other types
of institutions. In these cases, it is often due to the fact that they
are mandated to maintain an ``open door,'' serving all students who can
potentially benefit from further education, not just those the
institution would like to admit. This includes remedial education and
ESL students. Lower completion rates are also due to the fact that more
than 80% of our students work, more than 30% of them full-time. These
heavy work responsibilities tend to stand in the way of program
completion.
The package of integrity provisions put in place by the 1992 HEA
reauthorization, including the ``90/10 Rule,'' resulted in an
immediate, precipitous, and sustained drop in the student loan default
rate. Students who received an inadequate education, and are unable to
find employment, are at high risk of defaulting on their loans. In
1992, the proprietary school sector default rate was 30.2%. Today,
after more than a thousand proprietary institutions have been removed
from the federal student aid programs, the proprietary default rate is
9%, significantly higher than the 3.5% rate for private institutions,
and the 5.3% rate for public four-year institutions. It is and has been
higher than that for community colleges, which are mandated by law and
policy to maintain an pen door to all students.
Congress will be making a serious mistake if it allows the fraud
and abuse of a decade ago to return to harm students, institutions, and
taxpayers. The ``90/10 Rule'' needs to be kept in place to assure that
students receive the quality education they have been promised.
Eliminate the 50% Rule--But Require a Second Opinion for Institutions
That Go Above That Threshold
AACC supports elimination of the 50% rule, under the conditions as
outlined below.
Community colleges are more heavily involved in distance education
than any other sector of higher education. According to the National
Center for Education Statistics, 90 percent of all community colleges
offered at least one distance education course during the 2001-2002
academic year. 56% of all two- and four-year non-profit institutions of
higher education offered courses.
In general, AACC supports the elimination of the current statutory
provisions that create a lack of parity between courses delivered on
campus and those provided through Web-based or other types of distance
education vehicles. However, it should be understood up front that this
will add significant cost to the student aid programs. Given the fiscal
state of the Pell Grant program, significant program expansion must
always be carefully considered.
H.R. 4283 effectively eliminates any telecommunications course from
being considered a correspondence course. This makes students at
schools that offer programs solely through telecommunications eligible
for student aid. This educational delivery format makes it harder to
assess institutional structures, educational resources and student
learning, and to ensure the integrity of student aid funds. We believe
that this same pattern of fraud and abuse could emerge if this change
is enacted without additional safeguards.
In virtually every case, the 50 percent rule has not prevented the
expansion of distance education at schools that also offer classroom
programs. This is because telecommunications courses (primarily those
offered by television, audio, or computer) are not considered
correspondence courses for degree programs if the number of
telecommunications and correspondence courses do not equal at least 50
percent of the courses offered by the institution.
The 50 percent rule is not currently a barrier to institutional
provision of distance education. Only a few schools are approaching the
current limit. Some that are, and some that are interested in pursuing
a 100 percent distance education program, are included in the
Department of Education Distance Education Demonstration Program. We
think this a good approach that should serve as the model for a
permanent program to allow interested schools to receive waivers of the
``50 percent rule'' on a case-by-case basis. This approach recognizes
the importance of and increasing interest in distance education, but
protects students and student aid programs from being taken advantage
of by easily accessed and highly advertised programs that do not
provide quality education.
We recognize that the Committee may be reluctant to cede to the
Secretary of Education blanket authority to grant waivers for
institutions wanting to exceed the 50% threshold. Therefore, we are
ready to work with the Committee to design specific criteria that the
Secretary should employ when granting waivers. These would involve at
least some of the standards used under the Distance Education
Demonstration Program that H.R. 4283 extends.
We firmly support the role of accreditation in assuring quality
education. But for institutions that offer most or all of their
programs by distance, the need for additional oversight extends beyond
accreditation. Ensuring program integrity is clearly a responsibility
of the federal government, on behalf of American taxpayers, not
accreditors. Opening distance education with no limitations, or without
additional oversight by the ED, is an invitation for increased fraud
and program abuse. The General Accounting Office stated in a February
2004 report that ``the lack of consistently applied procedures for
matters such as comparing distance education and campus-based programs
or deciding when to incorporate reviews of new distance education
programs could potentially increase the chances that some schools are
being held to higher standards than others.''
Asking the Department to play a role as a backstop in ensuring that
the wrong institutions are not given access to federal student aid
funds is good, prudent government, with no harm to institutions and
potential great benefit to the public interest.
We thank you for this opportunity to present our views. I would be
happy to answer any questions that you may have.
______
Chairman Boehner. Thank you.
Mr. Nassirian.
STATEMENT OF BARMAK NASSIRIAN, ASSOCIATE EXECUTIVE DIRECTOR,
AMERICAN ASSOCIATION OF COLLEGIATE REGISTRARS AND ADMISSIONS
OFFICERS
Mr. Nassirian. Mr. Chairman, I appreciate the opportunity
to participate in the hearings and to hopefully be responsive
to some of the Committees' concerns.
My name is Barmak Nassirian. I am associate executive
director with the American Association of Collegiate Registrars
and Admissions Officers, a mouthful. AACRAO is how we refer to
ourselves in shorthand. We are not part of the traditional
lobbying community in Washington. We did not sign any letters
other than our own to the Committee and are only essentially
dragged into matters pending before the Committee when changes
in the law begin to really intrude on the autonomy of
institutions with consequences that I am convinced the
Committee does not intend. So I hope with all humility and with
the spirit of attempting to be helpful to your deliberations,
you consider some of our concerns.
I want to substantially associate myself with Dr.
Letteney's observations on the three particular issues that you
raise. We--it is very easy to go back to the 1970's and 1980's
and look at the history of unfortunate waste, fraud and abuse
in these programs and then declare victory and go home.
The problem is that patterns of disparate outcomes persist.
And we need to be mindful that so much of the good that has
happened since the enactment of the integrity provisions of the
1992 amendments are highly contingent on the particular
provisions that the bill pending before the Committee would
undo.
Now, having said that, I do not disagree that reputable
companies are in student training and in the education market
for the long haul. The question is, what do we do with the ones
who are not at the table? The issue is not whether distance
education is appropriate and whether reputable institutions
like those at the table should be allowed to cross the 50-
percent threshold. They should.
In fact, I will, in the interest of full disclosure, we do
not ourselves have Federal contracts. We have a consulting unit
that assisted a proprietary institution to expand its
participation in the demo program. We have no ideological
objection to proprietary schools, nor do we have any
ideological objections to the profit incentive operating as a
very efficient mechanism in these programs.
The issue becomes, how do we stop every website from
becoming a school? How do we ensure that limited Federal
dollars really finance quality education? And despite
everything this Committee has done, the system is substantially
operating on the basis of an honor system. We cannot be
everywhere at all times. The IG, routinely, every time they
turn a stone over, they find some untoward activity somewhere,
and we need to be mindful, as a certain sailors' proverb: If
you cannot tie one good knot, tie lots of bad ones.
And admittedly, every one of these provisions is not, in an
axiomatic theoretical way, defensible per se because there will
be exceptions that we can all agree should not be caught in the
rule. But the issue becomes, what happens if all of these are
undone? The one area of substantive disagreement that of course
the Committee will have to resolve is the 90/10 Rule.
The real question, I suspect, becomes, what is it that
these institutions are selling? If a dime on the dollar cannot
come--we do not go to the extreme that the VA goes--by the way,
this is a regulation that is in effect today, that says 15
percent of your students should be unaided by the Federal
Government or by the school because that can become a loophole
where artificial tuition hikes are then discounted back. We
simply say, a dime on the dollar should come from sources
outside of Title IV. That is a candid recognition we do not
have good mechanisms of gatekeeping in Title IV. That is to
say, we rely to the tune of 10 percent on somebody else's
judgment, heaven forbid it be private funds but at least some
other program, the labor department, VA, some other source of
funding.
It really becomes an issue of, can that much separation
between the haves and the have-nots be good for this country?
Do we want entire schools populated with zero-EFC students? And
I submit to you, we do not want that anymore than we want
institutions that enroll no federally aided students. We also
have significant reservations about the transfer provisions in
the bill which I urge the Committee to carefully review.
They really do severe damage to the tradition of autonomy
in American higher education. I appreciate the opportunity and
would be delighted to respond to any questions.
[The prepared statement of Mr. Nassirian follows:]
Statement of Barmak Nassirian, Associate Executive Director, American
Association of Collegiate Registrars and Admissions Officers,
Washington, DC
Introduction
Chairman Boehner, Ranking Member Mr. Miller, members of the
committee, my name is Barmak Nassirian and I am Associate Executive
Director with the American Association of Collegiate Registrars and
Admissions Officers. I am honored to have this opportunity to share the
views of our members with the Committee regarding certain provisions of
H.R. 4283, the ``College Access and Opportunity Act of 2004.''
AACRAO is a nonprofit association of more than 2,300 institutions
of higher education and more that 9,000 campus enrollment services
officials. The campus administrative officials that comprise our
membership range from front-line administrative staff to senior
administrators with primary responsibility for enrollment planning,
records management, administrative computing and other important
operations central to the smooth and efficient administration of
colleges and universities. Our membership includes public and private
non-profit institutions as well as for-profit collegiate institutions.
Today's hearing focuses on the characteristics of for-profit
schools participating in Title IV programs and considers whether
students attending such institutions receive equitable treatment under
current law. The question as framed is somewhat strained. Current law
treats all eligible students identically and does not make distinctions
among students on the basis of the type of eligible institution they
attend. In contrast, participating institutions are treated differently
under the Higher Education Act, as they are under a variety of other
federal statutes, most notably the tax code. As it deliberates on H.R.
4283 pending legislation to reauthorize the HEA--the Committee is
understandably interested in eliminating disparate treatment of
eligible institutions that it deems inappropriate, while retaining
differences in the law that can be justified on the basis of real
differences among schools. Clearly identical treatment of different
entities can be as inappropriate as different treatment of identical
ones. The Committee is quite rightly interested in striking a proper
balance and I hope the following comments prove helpful to the members
as they consider possible changes. We believe the bill as currently
drafted removes some of the most important safeguards for students and
taxpayers. In addition to provisions that would weaken federal
financial aid program integrity measures, the bill would shift
significant additional costs to students by failing to authorize
adequately increased Pell Grant maximum awards, eliminating low-cost
consolidation interest rates, and increasing the rate cap on student
loans. Regretfully, we oppose this bill as it currently is written.
Background
The for-profit sector's participation in Title IV was first
authorized in 1972. At that time, the majority of proprietary schools
were small privately-held trade-schools that provided vocational
training. Today, the for-profit sector's participation in Title IV
programs has grown to 2,215 schools, some 789 of which are degree-
granting institutions. Among these are a number of publicly-traded
institutions with large enrollments and multiple campuses. While the
for-profit sector accounts for a significant percentage of the total
number of institutions participating in Title IV, the percentage of
students enrolled in the sector is quite small: students in this sector
represent about 4 percent of the total student population, and only 2.1
percent of those enrolled in degree-granting schools (Attachment 1).
The small size of the population served by this sector should not
detract from a number of trends within higher education that can be
substantially credited to the proprietary sector. For example, for-
profit schools were at the forefront of innovations such as flexible
course scheduling, convenient locations for working adults and
accelerated programs. In addition, their model of student services--a
model that treats students as consumers--has been significantly adopted
by the collegiate sector.
Proprietary schools' track-record of flexibility and innovation is
directly tied to their market orientation and the relative autonomy
typically afforded owners and managers to administer the schools. In
contrast, traditional collegiate institutions in the United States have
a long tradition of shared governance, requiring active faculty
involvement and broad consensus with regard to program offerings and
academic policies. The profit motive that drives proprietary schools'
responsiveness to market conditions has certainly been the primary
force behind many of the positive innovations associated with this
sector. Realistically, the same profit motive can, unless constrained
by reasonable protections for consumers and taxpayers, induce schools
to engage in practices that harm their students and the federal fisc.
Sadly, federal student financial assistance programs have had too many
instances of waste, fraud, and abuse associated with the for-profit
sector. The worst of these was amply documented more than a decade ago
by the Permanent Subcommittee on Investigations of the Senate
Government Affairs Committee under the chairmanship of Senator Sam
Nunn. The range of problems discovered by the Subcommittee included
\1\:
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\1\ Senate Hearings 101-659; Parts 1-4, February 20 and 26,
September 12 and 13, September 25 and 26, and October 10, 1990. See
also Senate Hearings 102-58 (1991) and 103-491 (1993).
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Deceptive recruitment practices;
False claims and representations to prospective students;
Falsification of admissions and financial aid records;
Disbursement of aid to ineligible students;
Schools that consisted of significant recruitment and
financial aid operations, but non-existent or inadequate teaching
infrastructure.
In response, the 1992 reauthorization of the Higher Education Act
included a series of program integrity measures that, together with
more robust enforcement by the Department of Education, significantly
curbed the most egregious instances of fraud and abuse. Since 1992,
components of the program integrity measures have been modified,
relaxed or undone and some of these measures are under review by the
Committee today. It is these provisions that I will discuss.
Single Definition of Institution
Currently, the Higher Education Act includes two distinct
definitions of institution of higher education. The definition
contained in Section 101 is limited to public or private non-profit
institutions and is used to establish eligibility for non-Title IV
programs. An expanded definition is used in Section 102 for purposes of
establishing institutional eligibility for Title IV only. This
definition of institution of higher education was modified in 1998 to
include proprietary institutions, postsecondary vocational schools and
certain institutions outside the United States. The bill pending before
the Committee would adopt a broader definition that is substantially
similar to that contained in Section 102 to establish a single
definition of institution of higher education under the Higher
Education Act.
AACRAO joins the rest of the higher education community in
objecting to the proposed change and respectfully urges the Committee
to consider the following concerns.
First, the public policy goals motivating a change are not
compelling or clear. It is difficult to justify providing federal gift
aid to profit-maximizing institutions unless the Committee believes
that the provision of such federal funding will bring about a public
good. We are unaware of the outcomes that federal subsidies to for-
profit entities would allegedly effectuate. Where the for-profit sector
might have advantages in efficiency or productivity, we believe federal
contracts--not outright grants--would be the proper mechanism of
availing the public of these advantages.
Second, the proposed change is likely to have severe redistributive
consequences that could dilute the effectiveness of meager federal
funds. Such important programs as those funded under Titles III and V
of the Act are already under strain and would be further weakened by
the sudden influx of newly eligible schools with unproven track
records. For example, there currently are 165 grantees in the Hispanic
Serving Institutions program. If the proposed single definition is
approved, an additional 110 schools would become immediately eligible
for the program.
Third, the Higher Education Act's definition of institution of
higher education is relied upon in numerous other federal and state
laws, as well as private contracts and agreements and any radical
changes in definition would likely have significant unintended
consequences. Even if the substantive arguments against the creation of
a single definition were to be dismissed, the sudden change could cause
chaos for the many other parties relying on the current Section 101
definition. We respectfully urge the Committee to carefully analyze the
effects of a change in definition before making any significant
changes.
The 90/10 Rule
The 90/10 Rule is a modified version of a program integrity
provision originally inserted into the 1992 Amendments. At that time,
the rule required that at least 15 percent of a proprietary school's
revenues come from non-Title IV sources. The 1998 amendments reduced
that share to 10 percent. The bill pending before the Committee would
eliminate the rule altogether.
We believe that the proposed elimination of the 90/10 Rule is ill-
advised, and that the elimination of this important market-based
provision would significantly harm the interests of students and
taxpayers.
To better explain our concern, we respectfully ask the Committee to
consider exactly what type of for-profit school would gain eligibility
if the rule were eliminated. Only schools that would be funded entirely
(or nearly entirely) with Title IV dollars would stand to gain under
the proposed changes. The most telling characteristic of such schools
would be not only student bodies entirely consisting of students with
Expected Family Contributions of zero, but also tuition and fees that
mathematically equal the maximum Pell Grant plus the maximum loan
limit. As mentioned above, schools fitting this description did enjoy
Title IV eligibility before 1992, with disastrous consequences for
their students and the taxpayers.
By way of background, we point out that the original rule--the 85/
15 rule--arose from the desire of Congress to protect veterans. In
1952, as it extended the GI Bill after the Korean conflict, Congress
was concerned that the educational benefits not end up funding courses
of little value that flourished only to capture veterans' educational
benefits.
More than 25 years ago, when the 85/15 rule was challenged, the
Supreme Court upheld it per curiam.\2\ The Court's decision described
the 85/15 rule as based on a ``rational assumption'' that allowing the
free market mechanism to operate would weed out those institutions
which could survive only by the heavy influx of Federal payments.\3\
The Veterans Administration still operates under the 85/15 rule
today.\4\
---------------------------------------------------------------------------
\2\ Cleland v. National College of Business, 435 U.S. 213 (1978).
\3\ Id. at 218. The Supreme Court points our that Congress
continually extended the reach of the 85-15 Rule: First version--
Applied only to non-accredited courses not leading to a college degree,
that were offered by proprietary institutions. 435 U.S. at 216.
1974--The 85/15 requirement was extended to courses not leading to a
standard college degree but offered by accredited institutions. 435
U.S. at 216, citing to sec. 203(3) of Pub. L. 93-508, 88 Stat. 1 582.
1976--The 85/15 requirement was further extended to courses leading to
a standard college degree. 435 U.S. at 216.
\4\ 38 CFR 21.4201. ``Except as otherwise provided in this section
the Department of Veterans Affairs shall not approve an enrollment in
any course for an eligible veteran, not already enrolled, for any
period during which more than 85 percent of the students enrolled in
the course are having all or part of their tuition, fees or other
charges paid for them by the educational institution or by the
Department of Veterans Affairs pursuant to Title 38 U.S.C. This
restriction may be waived in whole or in part.''
---------------------------------------------------------------------------
To maintain the 90/10 Rule the Committee need not rely solely on
the rationality of the assumption that a modicum of market value serves
to ensure program integrity. In 1997, at the request of the
Subcommittee on Human Resources of the House Committee on Government
Reform and Oversight, the General Accounting Office initiated ``a study
to address the core of the issue: Is there a clear relationship between
reliance on Title IV revenues and school performance?'' \5\ The GAO did
find such a relationship. The title summarizes its conclusions:
Proprietary Schools: Poorer Student Outcomes at Schools that Rely More
on Federal Financial Aid.''.\6\
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\5\ Ensuring Quality Education from Proprietary Institutions, GAO/
HEGS-96-158 (June 6, 1996).
\6\ GAO/HEHS-97-103. Henceforth Poorer Student Outcomes.
---------------------------------------------------------------------------
The 50 Percent Rule
The advent of the Internet has revitalized interest in distance
education within the traditional collegiate sector and promises to
bring tremendous benefits as web-based delivery technology improves
over time. By far the vast majority of colleges and universities have
embraced distance education and are actively contributing to the
creation of next-generation distance education models and technologies.
The great interest in distance education is combined with concerns
about security and integrity that parallel other deployments of the
Internet. As with all things virtual, our enthusiasm for the great
potential of the Web should be tempered with realistic safeguards
against the greater risks associated with cyber-transactions.
The Committee's interest in promoting utilization of new
technologies in distance education is shared by our members. We are,
however, quite concerned about the potential for abuse if an important
provision of current law that limits the percentage of courses offered
entirely through distance education is eliminated. The fifty-percent
rule limits the number of courses offered via distance education, as
well as the number of students enrolled in distance-delivered courses
only, to fifty percent of the total for each category. The provision
dates back to the 1992 reauthorization's efforts at curbing documented
abuses associated with distance education. We believe this safeguard
continues to be necessary and should be maintained, a conclusion with
which the GAO agrees. In February of this year the GAO concluded
``[o]ur analysis of several factors including the extent to which any
changes would improve access to postsecondary schools, the impact that
changes would have on Education's ability to prevent institutions from
conducting fraudulent or abusive practices, and the cost of
implementation indicates that eliminating the restrictions without
ensuring some form of management accountability would likely incur a
higher risk for fraud and abuse than currently exists.'' The GAO
continues by pointing out that the Department of Education recognizes
that elimination or modification of the 50 percent rule would cost
federal student aid programs.
While we agree that the rule may inadvertently limit the
participation of some providers, we believe, as does the GAO, that
continuation of the Demonstration Program, which allows for waivers to
the 50 percent rule and provides monitoring and technical assistance on
a routine basis is the most prudent approach to the federal financing
of entirely distance-delivered programs.
Transfer of Credit
Since today's hearing focuses on H.R. 4283 and proprietary
institutions, I would be remiss if I did not comment on transfer of
credit proposals in the legislation. The bill contains numerous
transfer-related provisions, virtually all of which address portability
of credits earned at nationally accredited institutions--typically,
proprietary schools--to regionally accredited colleges and
universities. As the national association of transfer practitioners on
campus, AACRAO believes that the proposed legislative language would
have significant adverse consequences for students, taxpayers and the
American tradition of federal non-interference with academic judgments
of colleges and universities. Historically, the federal government has
wisely allowed colleges and universities to autonomously determine the
terms and conditions their students must meet to earn various academic
degrees. H.R. 4283 would, for the first time, create a new federal
mandate on a fundamentally academic issue, i.e., transfer of credit,
and as such, would undermine the ability of institutions to safeguard
the integrity of their own credentials.
The United States has the world's most mobile system of higher
education. The Department of Education's Office of Educational Research
and Improvement has found that the proportion of undergraduates
attending multiple institutions of higher education grew from 40 to 54
percent (and among bachelor's degree recipients, from 49 to 58 percent)
during the 1970s and 1980s. These data suggest that the proportion of
transfer students surpassed the 60 percent mark in the 1990s. In
addition, OERI found that the number of institutions attended by
students had no effect on degree completion.
Not only is there every evidence that student mobility is at an
all-time high without any documented adverse impact on degree
completion, state policymakers and the higher education community are
actively working on improving credit portability and making transfer
even more seamless. AACRAO, for example, maintains a centralized
database of transfer credit practices. The National Transfer and
Articulation Network is working to improve inter-institutional
articulation agreements. A number of states have put various mechanisms
in place to help facilitate inter-institutional portability of academic
credit. In view of all these positive developments, a one-size-fits-all
federal mandate could not have been proposed at a less propitious time.
Congress mandated that the U.S. Department of Education study the
transfer issue during the last reauthorization of the Higher Education
Act in 1998, yet the Department has not fulfilled its mandate. We fear
that federal intrusion into academic prerogatives of the world's best
higher education system will cause irreparable harm to the nation if
Congress acts before it has adequate facts at its disposal. We are
alarmed because the transfer-related provisions of H.R. 4283 are too
blunt an instrument to address any shortcomings in the credit
evaluation procedures, and would certainly harm transfer students,
institutions of higher education and the public.
First, the proposed legislation represents a congressional second-
guessing of campus academic judgments about course-equivalencies. This
imposition of the new transfer mandate represents an unprecedented
federal intrusion on the academic autonomy of colleges and
universities. Academic degrees are made up of credits and federal
regulation of credit-equivalencies is tantamount to a federal degree
recognition policy.
Second, credit evaluation is a complex and deliberate process of
placing students in courses for which they have the necessary
prerequisites. Today's voluntary system of inter-institutional transfer
is based on principles articulated in the industry-recognized Joint
Statement on Transfer of Credit (Attachment 2). AACRAO drafted this
document along with the American Council on Education and the Council
for Higher Education Accreditation. The Joint Statement recommends that
institutions evaluate transfer credit on the basis of three criteria:
quality, comparability and applicability. Specifically, the Joint
Statement discusses the three criteria as:
(1) The educational quality of the learning experience which the
student transfers;
(2) The comparability of the nature, content, and level of the
learning experience to that offered by the receiving institution; and
(3) The appropriateness and applicability of the learning
experience to the programs offered by the receiving institution, in
light of the student's educational goals.
Credit evaluation professionals on campus go to great lengths to
correctly analyze transfer applicants' transcripts and provide fair and
accurate equivalencies that avoid duplication of effort and that
correctly place these students in the sequences of courses for which
they are academically qualified. The proposed transfer provisions would
do away with the subtleties of credit evaluation by federally reducing
the task to course comparability and student performance. As such,
legislation would undermine academic quality at the same time as it
would cause many students to be misplaced in courses for which they are
not academically prepared.
H.R. 4283 would require institutions to disclose a statement on
their transfer policy and, more importantly, would dictate the
substance of an institution's transfer of credit policy to at least
include non-denial of credits solely on the basis of the agency or
association that accredited the sending institution, so long as the
agency or association in question is recognized by the U.S. Secretary
of Education. This provision would essentially do away with specialized
accreditation by explicitly requiring institutions to treat all
agencies and association recognized by the Secretary as
interchangeable--technical school credits with medical school credits,
law school credits with cosmetology school credits. Indeed the
legislation would require institutions relying on non-federal voluntary
accreditation standards--like medical education--to substitute the
Secretary's unrelated judgments for their own autonomous systems of
peer recognition. Further, the proposed legislation would set
Secretarial recognition of accrediting bodies--hitherto deemed to be
the minimal threshold for participation in Title IV programs--as the de
facto ceiling by denying institutions the right to be more academically
demanding than the least rigorous of accrediting agencies recognized by
the Secretary.
Third, the legislation would not only hurt students by distorting
their qualifications and causing incorrect placements, it would
outright deny Title IV eligibility for some transfer students. By
mandating that schools award academic credits even for coursework that
is not applicable to the students' academic program, the proposed
language would push many students out of eligibility for federal
financial assistance by penalizing them under federal Satisfactory
Academic Progress regulations that cap the number of credit hours a
student can take and maintain Title IV eligibility.
Fourth, the proposed legislation would set up new and cumbersome
reporting requirements to generate information of dubious value. The
bill would require production and publication of credit acceptance
statistics based on the accreditation status of sending institutions.
Yet the bill is unclear as to how reporting institutions would
authoritatively determine the accreditation status of each sending
institution to the satisfaction of the provision's enforcement
authorities. In mandating this new data reporting burden, the provision
only adds to the problem of escalating college costs that the Committee
seeks to redress elsewhere in the legislation.
Fifth, the proposed legislation would require accrediting bodies to
serve as federal agents in enforcing the transfer mandates by adding
three new provisions to Section 496(c). Not only would this be a
redundant distraction for accreditors, it would add significantly to
the costs of accreditation and represents another costly federal
mandate working at cross-purposes with the college affordability
provisions. Additionally, the bill contains several additional
references to transfer in various disclosure provisions amending
Section 485(a)(1) of the Higher Education Act.
AACRAO believes that one-size-fits-all legislative mandates on a
complex topic such as credit evaluation would result in poor student
placements, diminished quality and wasted resources. Institutions of
higher education have an obligation to their students, their graduates,
employers, other institutions of higher education and the public to
protect the integrity of the degrees they confer. In an age when
fraudulent credentials are becoming a national and international
security problem as discussed yesterday in the Senate, Congress should
be strengthening, not undermining, the ability of colleges and
universities to control the award of their own credentials.
AACRAO respectfully urges the committee to strike the transfer of
credit provisions in H.R. 4283 and to instead engage in an objective
study of transfer issues. We believe legislative action of this
significance is not prudent before the findings of a properly conducted
study are available to the Committee. AACRAO stands ready and willing
to assist with such a study.
On behalf of the members of AACRAO, I thank you for your
consideration of our views. We are mindful of your extraordinary
contributions to the nation's students and look forward to working with
you as you advance the cause of education.
______
Attachments to Mr. Nassirian's statement follow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Boehner. Thank you very much.
Mr. Moore.
STATEMENT OF DAVID G. MOORE, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, CORINTHIAN COLLEGES, INC.
Mr. Moore. Good morning, Mr. Chairman, Members of the
Committee.
I am David Moore, chairman and CEO of Corinthian Colleges.
We own and operate 133 colleges and 15 corporate training
centers in the United States and Canada and serve over 66,000
students. Our institutions provide education and training that
enables these students to become job-ready and advance their
careers in today's demanding economy. We offer both degree and
nondegree programs principally in health care, business
technology and criminal justice. We have a high rate of
graduate placement, about 82 percent.
To answer the question posed by today's hearing, students
at for-profit institutions are clearly not treated equitably
under current law. Reforms are badly needed to eliminate the
90/10 Rule, remove the 50-percent restrictions on institutions
offering online education, deal with costly and unfair
transfer-of-credit practices and restructure the definition of
institutions of higher education.
To understand why, two points are critical. First, the
traditional student is no longer the norm. Only a small
percentage, about one-quarter of the postsecondary student
population, fits the model of what I think many may have of
higher education. That is the individual who earns a high
school diploma, then enrolls full time in a traditional school,
depends on parents for some financial support and does not work
while attending school.
About three-quarters of postsecondary students today do not
meet this traditional model. These nontraditional students are
older, have family and work responsibilities and are concerned
with preparatory work for entry into the work force or
advancing their careers. For-profit institutions, like
Corinthian Colleges, especially address the needs of these
nontraditional students. One such student is here with us
today.
Ms. Williams, could you stand please?
Mr. Chairman, this is Shirley Williams, a recent graduate
of the medical assisting program at our Olympia Career Training
Institute in Kalamazoo, Michigan. To meet her goal of entering
the health care field she needed concentrated training. She
could not go to a traditional 2- or 4-year program. Ms.
Williams is the mother of three school-aged children and, while
in school, worked part-time at an assisted-living facility. She
just graduated this May and was an honor role student.
Federal student aid was critical to her. All of her tuition
and fees, 100 percent, was covered by aid with about one-third
coming from Pell Grants. She is now employed as a medical
assistant at Marshall Internal and Family Medicine in Marshall,
Michigan, a six-doctor practice group which serves that
community.
Thank you, Shirley.
Ms. Williams is a good example of how for-profit
institutions meet the needs of nontraditional students. She is
also an example of the second key point that I wanted to make,
how for-profit institutions are meeting the purpose of Federal
aid programs. That purpose is not to subsidize institutions or
to give some of them special treatment. Rather, from their
enactment in 1965, the aid programs have been aimed at
educating and training students for productive involvement in
the economy.
These needs are more important today than ever, as Federal
Reserve Chairman Alan Greenspan testified to this Committee
earlier this year. That is also why the business community as
represented by the U.S. Chamber of Commerce has become directly
involved in this reauthorization and is calling for the removal
of impediments in the law to for-profit institutions' ability
to supply the trained work force that employers need.
In re-examining the Higher Ed Act, this Committee should, I
respectfully submit, judge whether provisions in the law meet
or impede its work-force preparation goals. Tested against this
principle, it is clear that the 90/10 Rule should be
eliminated. The 90/10 Rule creates perverse incentives that
push schools away from serving the neediest of students,
especially minorities and women because they need more Title IV
aid and thus put a school at risk of exceeding the 90-percent
limit.
I have included in my written testimony three examples of
our own institutions that demonstrate this point. They are our
schools in Marietta and Atlanta, Georgia, schools in the sister
cities of Portland, Oregon, and Vancouver, Washington, in San
Bernadino and Anaheim, California. In each case, the schools
offer the same or similar programs, are accredited by
recognized agencies and have the same ownership and management.
In short, there is no difference among them in quality or
integrity.
Yet there is a significant difference in their 90/10
ratios, about 10 percentage points. Why? Clearly, it is because
of the student population served in the amount of Federal aid,
especially Pell Grants, to which the students are entitled. I
would add that the 90/10 Rule also creates an incentive to
raise tuition in order to obtain non-Title IV revenue. The 90/
10 Rule therefore inhibits access and exacerbates the problem
of affordability. The time has come to eliminate the 90/10
Rule.
As to online education, this holds tremendous promise to
provide access to higher education for the nontraditional
students about whom I have testified. This is another area in
which we are increasingly involved with over 1,600 fully online
students. The key issue is quality. By using an accreditation
based approach, H.R. 4283 provides the right solution.
I also support the provisions in H.R. 4283 that remove the
wrongful barriers to students' ability to transfer credits
between institutions. There is simply no justification for the
denial of credit transfers based on the accreditation of the
sending institution when it is accredited by an agency
recognized by the Secretary of Education. Such denials
inappropriately deter students access to opportunities and to
advance their education and careers. They raise costs by
requiring payment for the same coursework twice, in some cases
more. H.R. 4283 provides a carefully tailored approach that
would not impair institutional autonomy. Transfer of credit is
a real and ongoing problem for our students.
Finally, we support a single definition of an institution
of higher education. H.R. 4283 takes another evolutionary step
that is well supported by the two key points I made earlier.
Objections to a single definition reflect the outdated
imperatives of institutions, not students, and miss the purpose
of student aid programs, the education and training of students
for productive involvement in this economy.
Thank you, Mr. Chairman. And I am ready to answer any
questions.
[The prepared statement of Mr. Moore follows:]
Statement of David G. Moore, Chairman and Chief Executive Officer,
Corinthian Colleges, Inc., Santa Ana, California
Mr. Chairman and Members of the Committee, thank you for the
opportunity to testify about ``Higher Education Act Reauthorization:
Are Students at Proprietary Students Treated Equitably Under Current
Law?'' I am David G. Moore, Chairman and Chief Executive Officer of
Corinthian Colleges, Inc. I have over 20 years of experience in both
public and for-profit higher education. From 1980 to 1992, I worked at
Mott Community College in Flint, Michigan, where I served as President
for eight years. I then pursued a career in for-profit higher education
at National Education Centers and DeVry Institute of Technology, before
helping to found Corinthian and leading it to become one of the largest
postsecondary education companies in the United States. Corinthian
operates 88 colleges in 21 states in the United Sates, and 45 colleges
and 15 corporate training centers in seven provinces in Canada. Our
institutions of higher education serve the large and growing segment of
the population seeking to acquire career-oriented education and
training to become more qualified and marketable in today's
increasingly demanding workplace. Corinthian's colleges offer Master's,
Bachelor's and Associate's degrees, and diploma programs in a variety
of fields, with a concentration in health care, business, criminal
justice and technology. We currently educate and train over 66,000
students.
To answer the question posed by today's hearing--students who are
pursuing their education and training at Corinthian's colleges and
other for-profit institutions are clearly not treated equitably under
current law. Reforms are badly needed in a number of areas, especially
(1) elimination of the 90/10 Rule, (2) removal of the 50 percent
restrictions on institutions offering online education programs, (3)
elimination of unfair, costly and anti-competitive transfer of credit
practices in higher education, and (4) restructuring the multiple
definitions of an institution of higher education to end the two-tier
classifications of these institutions and their students.
I. Two Key Factors--The Predominance of Nontraditional Students and
Renewed Focus on the Workforce Preparation Purpose of HEA
To understand why these reforms are critically needed, I believe
that it would be helpful to establish at the outset of my testimony two
propositions that are highly relevant to the subject matter of this
hearing and that have profound implications for making good public
policy in this Reauthorization of the Higher Education Act programs.
First, the traditional student is no longer the norm. Only a small
percentage of the postsecondary student population now answers to the
model of what I suspect many still have of higher education.
Individuals who earn a high school diploma, enroll full-time in college
immediately after finishing high school, depend upon parents at least
in part for financial support, and either do not work during the school
year or work part-time are now the exception rather than the rule. As
reported by the National Center for Education Statistics, just 27
percent of undergraduates met all of these criteria in 1999-2000. Thus,
73 percent of all undergraduates were in some way nontraditional.\1\
These students are older, have family and work responsibilities, and
are concerned with preparation for entry into the workforce or
advancing their careers.
---------------------------------------------------------------------------
\1\ NCES, Nontraditional Undergraduates, Findings from the
Condition of Education 2002.
---------------------------------------------------------------------------
With a high school diploma increasingly inadequate to ensure that
an individual can become a productive participant in the economy on a
long-term basis and substantial demographic shifts occurring, we must
abandon the notion that higher education today means spending an
extended period on a traditional college or university campus and
pursuing traditional academic subjects. While this approach may work
well for approximately one-quarter of the postsecondary population, it
cannot drive good public policy. To be sure, institutions that have
such a mission will continue to play an important role in higher
education. That role will be, as it has consistently been for over 50
years, to educate and prepare about 20 percent of the workforce for
entry into professional ranks. But, with the growing demand for a
skilled workforce, institutions that have a mission of workforce
education and training have a more valuable role than ever to play in
higher education.\2\ That role is to educate and train nontraditional
students to fill skilled workforce needs. Institutions that serve these
nontraditional students should be encouraged and facilitated, not
hamstrung with outdated and outmoded restrictions.
---------------------------------------------------------------------------
\2\ According to the Bureau of Labor Statistics, the percentage of
the workforce that requires skills training has grown from 20 percent
in 1950 to 65 percent in 2000. Yet, only 25 percent of all persons over
25 years of age have a bachelor's degree or higher. This means that
workforce education and training must be broadly understood to be more
than traditional vocational education in trades.
---------------------------------------------------------------------------
Second, the federal student financial assistance programs exist to
serve a purpose. That purpose is not to subsidize institutions or to
accord some of them special treatment because of the nobility of the
missions that they have established for themselves. Rather, from their
inception, the federal student aid programs in the Higher Education Act
have been geared toward a more concrete objective: the education and
training of students for productive involvement in our economy. The
legislative history of the 1965 Higher Education Act, which established
the student aid programs as we know them, focused on ``how best to
increase the supply of trained manpower'' and the need for ``competent,
well-trained professional and technical personnel.'' \3\ The bill that
became law ensured that training for gainful employment in a recognized
occupation was among the objectives that eligible institutions
pursue.\4\ In reexamining provisions of the law and proposals for
reform, Congress should, I respectfully submit, test them against
whether they meet these original purposes of the student aid programs.
---------------------------------------------------------------------------
\3\ 1 U.S. Code Congressional and Administrative News 4053 (1965)
(S. Rep. No. 673).
\4\ Id. at 1264.
---------------------------------------------------------------------------
Indeed, these purposes are more vital today than ever before. As
Alan Greenspan, the Chairman of the Federal Reserve Board, testified
before this Committee on March 11, 2004, postsecondary education and
training is critically needed to increase the supply of highly skilled
workers. In response to a question from Congressman McKeon, Chairman of
the 21st Century Competitiveness Subcommittee, on whether Congress
should remove restrictions on distance education and for-profit
institutions to better accomplish this end, Chairman Greenspan replied
that Congress should use ``any means available'' and find new ways to
education and train such workers. Chairman Greenspan's statement has
even greater force because of the severe constraints on public and
nonprofit institutions' ability to expand to meet this need.
The ownership structure of institutions of higher education--
whether they be non-profit, public or for-profit--is irrelevant. The
question is whether provisions in the law, which perhaps had some
rationale or basis in an earlier time under different conditions, now
meet the pressing need to fulfill the purpose of supplying our economy
with highly skilled workers or whether they stand in the way of that
objective. If they present impediments, these provisions should be
removed or modified.
With these two propositions in mind, it becomes readily apparent
why for-profit institutions should play a key role--and be at least an
equal participant--in the student financial assistance programs. For-
profit institutions address the needs of the nontraditional student
population, and prepare and certify them as ready for entry and
advancement in the work force. For-profit colleges enroll a
disproportionate number of minority, lower-income and other
nontraditional students compared to nonprofit and public
institutions.\5\ For-profit institutions also account for a
disproportionate share of degrees earned by minority students.\6\
Moreover, nontraditional students have greater success at for-profit
institutions as measured by such outcomes as student completion
rates.\7\
---------------------------------------------------------------------------
\5\ Career Training Foundation, A Profile of Career Colleges and
Universities 7-10 (2003) (``Profile''). U.S. Department of Education,
National Center for Education Statistics, National Postsecondary
Student Aid Study (NPSAS), Data Analysis System (DAS), 1990, 1993, 1996
and 2000, and IPEDS, Spring 2002.
\6\ Id.
\7\ Id.; Profile at 13-14.
---------------------------------------------------------------------------
Data on students who attend Corinthian's colleges also demonstrate
how our types of institutions serve the nontraditional student. Of our
66,000 students, approximately 73 percent are female, 70 percent are
over 21 years of age, and about one-half are minorities. Our
institutions must meet minimum quantitative standards for completion
and placement established by our national accrediting agencies, all of
which are recognized by the Secretary of Education. Company-wide, 82
percent of our students obtain employment in the field for which they
were trained within six months of graduation.
These data are important to the development of sound public policy.
However, it is necessary to remember that behind these data are real
people, with aspirations, obstacles to overcome, and achievements. An
example is Shirley Williams, a recent graduate of the medical assisting
program at our Olympia Career Training Institute in Kalamazoo,
Michigan. Prior to enrolling, she was not employed. To meet her goal of
entering the healthcare field, she needed concentrated training. A
traditional two or four-year program would not have met her needs. Ms.
Williams is a mother of three school-age children, and worked part-time
at an assisted living facility while in school. She just graduated this
May and was an honor roll student. Federal student aid was critical to
her. All of her tuition and fees--100 percent--was covered by aid, with
about one-third coming from Pell Grants. She is now employed as a
medical assistant at Marshall Internal and Family Medicine in Marshall,
Michigan, a six-doctor practice group which serves that community. Ms.
Williams is a good example of how Corinthian's colleges and other for-
profit institutions serve the nontraditional student.
She is also a good example of how Corinthian's colleges and for-
profit institutions are meeting the purposes of the student financial
assistance programs. These purposes, as I have noted above, are to
supply our economy's demand for well-educated and highly skilled
employees. With the advent of a truly global economy and the rapid
advance of technology, this need has become even more acute.
Organizations like the U.S. Chamber of Commerce, the world's largest
business federation representing over three million businesses of every
size, sector and region, now recognize the importance of workforce
preparation to maintain our competitiveness and preserve our economic
security. They have also recognized that, as businesses seek to hire,
train, and retain qualified employees and to keep pace with an evolving
market place, deficiencies in our higher education system have been
exposed. There is a shortage of well-educated and highly skilled
workers to meet the needs of employers. Accordingly, the Chamber of
Commerce has made Reauthorization one of its top legislative
priorities.
In looking for effective solutions, the Chamber has turned to the
for-profit sector of higher education because enterprising, market-
oriented for-profit postsecondary education and training companies like
Corinthian have identified needs underserved by traditional higher
education institutions and evolved to supply the demand for educated
and skilled employees. We are pleased that the Chamber has chosen to
partner with us and with other leaders in the for-profit sector--
Kaplan, Inc., DeVry, Inc., and Capella University. With the Chamber, we
have created the Coalition for a Competitive American Workforce to
address provisions in the Higher Education Act that are outdated and
obstruct the ability of for-profit postsecondary education companies to
provide innovative solutions to America's workforce needs. The
impediments in the current law that prevent us from being even more
effective in serving students and thereby promoting workforce
development are the very measures identified by H.R. 4283, the College
Access and Opportunity Act, as in need of reform--the 90/10 Rule, the
50 percent restrictions on online education, transfer of credit
practices, and the multiple definitions of an institution of higher
education. I will address these issues specifically in the remainder of
my testimony.
II. Repeal of 90/10 Rule
The Higher Education Act currently requires for-profit
institutions, and them alone, to obtain at least 10 percent of their
revenues from sources other than the federal student financial
assistance programs. Nonprofit and public institutions, even though
they are advantaged through favorable tax treatment and public
subsidies, are free to secure all their revenues from the student
financial assistance programs. For-profit institutions, in contrast,
return funds to the federal government in the form of taxes.
The 90/10 Rule and its predecessor, the 85/15 rule, were enacted at
a time of substantial and justified concern about fraud and abuse
perpetrated by certain for-profit institutions. A host of other
measures to protect the financial aid programs and federal funds were
enacted during this period. These included:
Caps on excessive cohort default rates,
Requirements for strengthened accreditation standards and
procedures,
Federal financial responsibility standards and letters of
credit,
Annual reporting of audited financial statements and
financial aid audits,
Student satisfactory academic progress requirements,
Provisional certification by the Department of Education
to limit an institution's participation in the Title IV programs,
Reimbursement and heightened cash monitoring requirements
that the Department may impose to limit an institution's access to
federal funds to ensure that they are being properly administered,
Incentive compensation limitations on student
recruitment,
Federal requirements for ability-to-benefit tests,
Return to Title IV requirements,
Completion and placement rate requirements for short-term
programs,
Definition of an ``academic year,
Limitations on branch campuses,
Periodic recertification requirements, and
Pre-certification training regulations.
Congress thus attempted to put in place a wide array of measures to
curb fraud and abuse. Overall, the good news is that the problem has
been effectively addressed. For example, default rates, which averaged
22.4 percent in 1990, have fallen substantially. Since the height of
the concerns about fraud and abuse in the late 1980's and early 1990's,
over 1,000 institutions have lost their eligibility to participate in
the Title IV programs.
As the American Council on Education (ACE) recently commented, the
system will never be perfect.\8\ In a complex regulatory environment,
instances of noncompliance will always come to light. The real issue, I
submit, is whether the institutions participating in the Title IV
system take their obligations seriously and have mechanisms established
to try to achieve full compliance--to detect noncompliance and to
rectify it when noncompliance is found. At Corinthian, we do, and so do
the great majority of other organizational institutions.
---------------------------------------------------------------------------
\8\ Letter from David Ward, President of ACE, to Hon. John A.
Boehner and Hon. Howard ``Buck'' McKeon, May 26, 2004 (Attachment, p.
3) (Accreditation ``not perfect,'' but ``it works--better than any
other approach'').
---------------------------------------------------------------------------
It would be surprising if all of the measures enacted over 10 year
ago had been equally effective. Imposed during a time of crisis, these
were the best judgments of Congress at the time as to how to address a
major problem in the student aid programs. With the benefit of over ten
years of experience, it should now be possible to examine how these
measures have worked and fine-tune the law to retain those that have
proven most effective and to reexamine and, if justified, remove those
that have been ineffective or, still worse, have had deleterious
effects. I submit that the 90/10 Rule falls into the latter category.
The hypothesis supporting the enactment of the 90/10 Rule and its
predecessor, the 85/15 rule, was that students' willingness to pay some
portion of their own money would be an indication of the quality of
for-profit institutions. At best, this was an unproven supposition. The
rule never purported to examine the quality of these institutions
directly. Instead, it relied upon an inference about student payments
that could just have easily been explained by other factors--
particularly socioeconomic status. The 90/10 Rule also involved a
second-guessing of the decisions of accrediting agencies that have the
responsibility for assessing educational quality in the Title IV
system. As noted above, however, accrediting agencies themselves have
been obliged to strengthen their standards and procedures since 1992
and to become more effective gatekeepers to the student financial
assistance programs. Their improved performance alone ought to justify
the elimination of the 90/10 Rule. In this regard, we agree with the
recent statements of the ACE that accreditation ``assures students and
the public that institutions participating in the federal student aid
programs have been thoroughly evaluated and offer a high quality
education.'' \9\ If this is so, and we believe it is, there is no
longer any need for the 90/10 Rule, given its premise.
---------------------------------------------------------------------------
\9\ Letter from David Ward, President of ACE, to Hon. John A.
Boehner and Hon. Howard ``Buck'' McKeon, May 26, 2004 (attachment,
p.3).
---------------------------------------------------------------------------
Furthermore, experience gained in the implementation of the 90/10
and 85/15 rule has shown that, rather than measuring educational
quality, it does indeed measure only the financial need of the student
population that an institution serves. The more students that are in
need, the more federal student financial aid the students will qualify
for and receive. The more aid that students receive, the greater is an
institution's 90/10 ratio.\10\ And, as an institution's 90/10 ratio
increases, the greater is the peril that it will exceed the 90 percent
limitation and lose its ability, without any opportunity for
remediation, to participate in the federal student aid programs.
---------------------------------------------------------------------------
\10\ American Economics Group, the 90/10 Rule: Impact on Career
Colleges 14, 16 (September 2003).
---------------------------------------------------------------------------
The 90/10 Rule thus creates disincentives for institutions to serve
those most in need of student financial assistance, especially the
poor, minorities and women. These are the groups who most heavily use
need-based grant assistance, particularly Pell Grants, to gain access
to higher education. Institutions are precluded from denying access to
this financial aid for students who qualify. Yet, the heavy usage of
such Title IV aid puts an institution at risk of violating the 90/10
Rule. Institutions are therefore incentivized to reorient their
missions and programs away from students who are most in need of
assistance--the very students the student aid programs are designed to
serve. These incentives will only be heightened if authorizations for
Pell Grants and loan limits are increased.
The 90/10 Rule also undercuts the aim of improving the
affordability of higher education. The rule creates incentives for
institutions to seek funds that are not covered by financial assistance
under Title IV. Since such aid is limited under the Higher Education
Act, institutions can most easily obtain additional non-Title IV
revenue by raising their tuition and fees. This cuts completely against
the widely-recognized problem of affordability in higher education.
The perverse incentives created by the 90/10 Rule and its failure
as a measure of quality and integrity can readily be seen at
Corinthian's colleges. Corinthian owns and operates the Georgia Medical
Institute, which has campuses in downtown Atlanta and Marietta,
Georgia. Both are accredited and offer virtually the same programs in
allied health. The downtown Atlanta campus has a student population
that is almost 100 percent minority and 94 percent female. The school
president maintains an emergency pantry so that students--primarily
single parent African American women--will be able to feed themselves
and their children and stay in school. In contrast, the Marietta campus
serves a more suburban student population and a significantly lower
percentage of minority students. At the end of our third fiscal quarter
in March of this year, the downtown Atlanta campus had a 90/10
percentage of 90.25 percent. The Marietta campus had a 90/10 percentage
of 81.9 percent.
The difference clearly has nothing to do with the two institutions'
quality or integrity. They are accredited by recognized accrediting
agencies, offer virtually the same programs, and are owned and managed
by the same company. The only significant difference between the two
campuses is the percentage of the revenues derived from Pell Grants--
44.5 percent for the Atlanta school and 33.4 percent for the Marietta
school. This reflects the location and student population served by the
two schools, not their quality or integrity of operations.
Our Western Business College campuses in Portland, Oregon and
Vancouver, Washington, tell a similar story. They are only twenty
minutes apart, but serve very different student populations. The
schools offer similar programs in business, information technology and
allied health. They are each accredited by the Accrediting Council for
Independent Colleges and Schools (ACICS), a recognized accrediting
agency. The Portland campus is located downtown and has a minority
population that is 26 percent of the total students. The Vancouver
campus has a minority population that is only 11 percent of the total.
The Portland school has a 90/10 percentage of 86.75. The Vancouver
campus has a 90/10 percentage of 74.51. Once again, financial need is
the explanation for this 12-point difference. At the Portland campus,
75 percent of the students qualify for Pell and SEOG funds. At the
Vancouver campus, 59 percent qualify.
One more example makes the point. Our Bryman College in San
Bernardino, California, serves an area that has had a depressed
economy. Its student population is 60 percent Hispanic and African
American, and 33.3 percent of its revenues come from Pell Grants and
SEOG funds. Its 90/10 percentage at the end of our third quarter was
87.3 percent. In contrast, our Bryman College in Anaheim, California,
is more of a commuter school, and about half of its students are
Hispanic or other minorities. At the end of the third quarter, 26.4
percent of this school's revenues came from Pell Grants and SEOG funds,
and it had a 90/10 percentage of 79.9 percent. With accreditation at
both campuses from a recognized accrediting agency, similar program
offerings, and identical ownership and management, the two schools
nonetheless have approximately a 7 percent difference in their 90/10
ratio. As is the case at the Georgia Medical Institutes and Western
Business Colleges, the percentage difference in the revenues derived by
the two schools from Pell Grants and SEOG funds, which are a good proxy
for the need of the student population served, parallel their
differences in 90/10 percentages.
These examples make clear that the 90/10 Rule has missed the mark.
Rather than ensuring institutional quality and integrity, it threatens
access for poor and minority students. The time has come to end this
experiment in public policy, and not to mend it. H.R. 4283 takes a
well-justified and much-needed step in eliminating the 90/10 Rule.
III. 50 Percent Rule and Online Education
Other outdated and outmoded provisions in the Higher Education Act
restrict the availability of financial assistance to students in online
courses of study. The 50 percent limitations on courses and students
were among the protective measures enacted over ten years ago. However,
they were aimed at restricting the availability of Title IV aid to
correspondence institutions; online education was not even in existence
at that time. These limitations, and other restrictions in the Act
applicable to students attending institutions that are predominantly
diploma and certificate-granting, have been extended to online
education by equating telecommunications and correspondence courses and
programs.
The need for reform in this area is now beyond question. The
findings of the Web-Based Education Commission, and H.R. 1992, passed
by the House of Representatives in the last Congress, clearly made the
case for change. More recently, the Department of Education released
its Second Report to Congress on the Distance Education Demonstration
Program. The Demonstration Program was a stop-gap measure passed in the
last Reauthorization in 1998 as a temporary solution to allow the
Department to gather more facts and experience with online education
for the Congress to consider in making changes to the law in this
Reauthorization. The Department has now found that it has uncovered no
evidence that waiving the current restrictions in the Higher Education
Act and the Department's regulations that impede online education has
had negative consequences. On the contrary, the Department has stated
that ``[b]ased upon the experience gained to date through the
demonstration program, and the trends that are evident in the
development of distance education generally, the Department recognizes
the need to amend the laws and regulations governing Title IV student
financial assistance in order to expand distance education
opportunities.'' \11\ The Department also stated that there was a
growing consensus that the quality of distance education programs
should be assessed through the same accreditation process that governs
on-campus programs.\12\
---------------------------------------------------------------------------
\11\ Second Report to Congress on the Distance Education
Demonstration Program at iv (July 2003).
\12\ Id. at 20.
---------------------------------------------------------------------------
This conclusion has been reinforced by every bill that has been
introduced to address online education in this Congress--S. 1203,
introduced by Senators Enzi and Bingaman, H.R. 2913, introduced by
Congressmen Andrews and Kildee, H.R. 3039 introduced by Congressman
Cole, and now H.R. 4283, introduced by Chairmen Boehner and McKeon.
Authors of all of these bills have concluded that an accreditation-
based approach should be used to allow online education to become Title
IV eligible. The accreditation community has stepped forward and
demonstrated its willingness and ability to take on the responsibility
for appropriate gatekeeping for online education. The accrediting
agencies that accredit Corinthian's colleges have developed standards
and procedures that address the special issues raised by online
education, and the Council of Regional Accrediting Commissions (CRAC)
has stated its support for the accreditation provisions of the College
Access and Opportunity Act.\13\
---------------------------------------------------------------------------
\13\ Accrediting Commission of Career Schools and Colleges of
Technology, Standards of Accreditation, Section XI; Accreditation
Reviews, Distance Education Programs; letter from Sandra E. Elman,
Barbara Beno, Steve Crow, Jean Morse, James R. Rogers, and Ralph Wolff
to Chairman John Boehner, May 11, 2004.
---------------------------------------------------------------------------
Online education is one of the most promising developments to have
occurred in higher education in recent times. It leverages the power of
technology to enrich learning and create new educational opportunities.
A substantial and growing body of research demonstrates that online
instruction produces quality learning outcomes comparable to, and
perhaps even better than, traditional education programs. Literally
millions of students, especially working adults, will have higher
education opened to them.\14\ The accreditation-based approach of H.R.
4283 provides the right solution to ensure that accrediting agencies
effectively serve as the gatekeepers to expanding access through this
exciting mode of educational delivery.
---------------------------------------------------------------------------
\14\ Babson College and Sloan Consortium, Seizing the Opportunity:
The Quality and Extent of Online Education in the United States, 2002
and 2003.
---------------------------------------------------------------------------
IV. Transfer of Credit
Transfer of credit practices in higher education are another
significant way that students attending for-profit institutions are
treated inequitably. Here, the problem is not with what the law says,
but with what it fails to address. While we are in agreement with those
who contend that the federal government should not intrude upon
institutions' academic decision making, the rhetoric to this effect
masks the real issue. The problem is not whether transfer of credit
practices would be federalized under H.R. 4283, but whether the academy
should be indulged in practices that are unfair, costly and
anticompetitive. The answer is that it clearly should not. The
academy's failure meaningfully to address the problem, despite years of
talk, mandates a solution in federal law, especially when federal funds
are being wasted.
Contrary to the contention there is not a ``sufficient problem with
transfer of credit'' to merit the provisions in the College Access and
Opportunity Act, transfer of credit has been a real and urgent problem
for some time.\15\ Even though proprietary school students attend
institutions accredited by agencies recognized by the Secretary of
Education (most of which are national accrediting agencies), they have
long encountered blanket refusals even to evaluate the credits they
have earned when they seek to transfer to public and nonprofit
institutions accredited by regional accrediting agencies.\16\ These
institutions have been encouraged to adopt and engage in these
categorical restrictions by their own desires to enhance the revenues
they receive by forcing students to retake courses already successfully
completed and by discriminatory policies and practices of their own
accrediting agencies.
---------------------------------------------------------------------------
\15\ Letter from David Ward, President of American Council on
Education, to Hon. John A. Boehner and Hon. Howard ``Buck'' McKeon (May
26, 2004) (attachment, p.5).
\16\ National and regional accrediting agencies meet the same
recognition standards. See 34 C.F.R. Sec. 602 (2003)
---------------------------------------------------------------------------
In 1997, the U.S. Department of Justice was obliged to intervene in
the re-recognition proceedings for the Southern Association of Colleges
and Schools (SACS) before the Department of Education because SACS''
policies and practices made it difficult for students to transfer
credits from an institution accredited by a non-SACS agency to an SACS-
accredited institution. As the Justice Department stated in comments
filed with the Department of Education:
The Department of Justice submits this comment because of its
concern that SACS'' revised transfer of credit criteria may
injure competition, competitors, consumers, and government
agencies funding postsecondary education. SACS'' revised
transfer of credit criteria--most adversely affect technical,
occupational, and vocational students, who wish to continue
their education, but who may be the least able to bear the
burden of unnecessary and redundant courses. They may also
cause the waste of educational resources by placing unnecessary
restrictions on transfer credits that are bad competition,
educational, and public policy.\17\
---------------------------------------------------------------------------
\17\ Letter from Joel I. Klein, Assistant Attorney General, to Dr.
Karen W. Kerschenstein, Director, Accreditation and Eligibility
Determination Division, at 14, September 9, 1997.
---------------------------------------------------------------------------
SACS agreed to change its transfer of credit criteria
``voluntarily'' in order to secure renewal of its recognition as an
accrediting agency from the Secretary of Education.
Restrictive and discriminatory transfer of credit practices have
not been limited to SACS. In 2000 and 2001, the National Advisory
Committee on Institutional Quality and Integrity (NACIQI), a committee
that advises the Secretary of Education on accreditation and other
institutional eligibility issues, held a series of hearings on the
problems associated with transfer of credit. While some may seek to
dismiss the evidence of transfer of credit problems as anecdotal,
instance after instance was presented to NACIQI of arbitrary and
inexplicable refusals by institutions to accept validly earned credits.
These include not only refusals to accept credits earned by proprietary
school students by traditional, regionally-accredited institutions, but
also refusals by such institutions to accept each other's credits.
Witnesses noted examples of public institutions in the same state
university and college system that would not except credits from each
other.
The transfer of credit problem is, in fact, systemic and
widespread. In December 2001, the Career Training Foundation
commissioned the Institute for Higher Education Policy, a nonprofit,
nonpartisan research organization, to conduct a study of transfer of
credit. The study combined the results of an original survey of almost
300 nationally accredited, degree-granting institutions with an
analysis of policies on transfer of credit, with a particular focus on
national guidelines embodied in a publication by the American
Association of Collegiate Registrars and Admissions Officers (AACRAO)--
Transfer Credit Practices of Designated Educational Institutions: An
Information Exchange (TCP). The study concluded that substantial
numbers of students from nationally accredited institutions reported
that they were unable to transfer credit solely due to the sending
institution's accreditation. In addition, nationally accredited
institutions reported that they had been unable to develop articulation
agreements, which can facilitate transfer of credit, solely because of
their accreditation. Moreover, the study found that the TCP revealed a
marked contrast between national and regional accreditation with regard
to acceptance of transfer credit, with a pattern of negative treatment
of nationally accredited institutions. Only 18 percent of nationally
accredited, degree-granting institutions were found to have their
credits generally accepted.\18\
---------------------------------------------------------------------------
\18\ Transfer of Credit from Nationally Accredited to Regionally
Accredited institutions 13 (December 2001).
---------------------------------------------------------------------------
At Corinthian, we have recently experienced first-hand why we need
changes to federal law to address transfer of credit. In April, we were
sued in Florida state court by a former student of our Florida
Metropolitan University (FMU), an institution offering programs up to
the Master's degree that is accredited by the Accrediting Council for
Independent Colleges and Schools (ACICS). ACICS has long been
recognized by the Secretary of Education and, more recently, by the
Council for Higher Education Accreditation (CHEA). The student had
earned an Associate's degree at FMU and contacted three SACS-accredited
institutions to determine whether the credits that she had earned at
FMU could be applied toward a Bachelor's degree program that she wished
to pursue. All three of these SACS-accredited institutions informed
this single African American parent that they would not accept credits
from a non-SACS-accredited institution like FMU. Rather than direct her
justifiable ire at those who had unjustly refused even to examine her
credits, the student has sued FMU and Corinthian. We are, of course,
defending the case (we had disclosed to the student the possibility
that her credits might not be able to be transferred), but the case
vividly illustrates why the higher education community has been unable
or unwilling to solve the transfer of credit problem effectively and
why a federal solution is needed.
H.R. 4283 provides that solution. Contrary to the alarmist rhetoric
directed at these provisions of the bill, the core point that the bill
would establish is that institutions receiving the public's funds in
the form of Title IV aid may not deny credit transfers solely on the
basis of the accreditation of the sending institution, provided that
the institution is accredited by an agency recognized by the Secretary
of Education. The bill would not mandate the acceptance of credit
transfers. Rather, it would de-legitimize what is plainly an
illegitimate practice--the blanket rules institutions still utilize to
refuse even to consider credit transfers, notwithstanding that the
transferor institutions are accredited by established, recognized
accrediting agencies.
It is difficult to understand why the higher education community
could object to this principle. CHEA, which organizations representing
traditional institutions look to for good practices in accreditation,
adopted a statement on transfer of credit in 2000 which said that
``institutions and accreditors need to assure that transfer decisions
are not made solely on the source of accreditation of a sending program
or institution.'' \19\ This statement is consistent with the position
recently expressed by ACE and other higher education organizations that
accreditation ``assures students and the public that institutions
participating in the federal student aid programs have been thoroughly
evaluated and offer a high quality education.'' As this position makes
no distinction--and could make no distinction--between recognized
national and regional institutional accreditation, there can be no
legitimate objection to a rule that would preclude denials based on
accreditation.
---------------------------------------------------------------------------
\19\ A Statement to the Community: Transfer and the Public Interest
5 (November 2000).
---------------------------------------------------------------------------
Accordingly, the College Access and Opportunity Act addresses a
real problem and provides an appropriate, carefully crafted solution.
It also provides the right mechanism to effectuate this solution. By
requiring institutions to have a clear and forthright policy so that
prospective students may understand the criteria by which their
requests for credit transfers will be judged and by giving accrediting
agencies--not the federal government--the responsibility to evaluate
whether these policies are being followed, the bill would avoid the
very federal intrusion that its critics in the traditional higher
education community have already begun to bemoan. Furthermore, the
reporting provisions on transfer of credit will give us the data, which
opponents of these provisions contend is lacking, to determine the
ongoing scope of the problem and whether it is being adequately
addressed. I urge the adoption of the transfer of credit provisions in
H.R. 4283.
V. Single Definition of Institution of Higher Education
Finally, I support the adoption of a unified definition of an
institution of higher education in H.R. 4283. The criticisms that have
been directed at this proposal are, once again, grossly overdrawn, and
ignore the incremental nature of this step and the important conditions
and limitations that are attached to it.
The single definition proposal represents an additional step in a
direction that Congress began five years ago in the last
Reauthorization in recognition of the changes that were occurring in
higher education. Those trends, such as the predominance of the
nontraditional student and the maturation of for-profit institutions,
have continued and accelerated. It thus makes little sense to
perpetuate distinctions that are rooted in history and that represent
the imperatives of institutions rather than the goals and needs of
students. In the Higher Education Amendments of 1998, Congress
transferred all definitions of an institution of higher education from
four different sections of the Higher Education Act to two sections in
a new Title I. This transfer and consolidation recognized that the
purpose of all such institutions is to provide access to higher
education. Furthermore, it made plain that the same core requirements
apply to all institutions--authorization by a state in which the
institution operates, accreditation by an agency recognized by the
Secretary of Education, and certification of eligibility to participate
in the Title IV student financial assistance programs by the Department
of Education. Nonetheless, distinctions between for-profit institutions
and traditional institutions continued.
The College Access and Opportunity Act takes another step in this
evolutionary process. Very simply, an institution of higher education
would be defined in a single section of the Higher Education Act.
However, important restrictions would be continued or enacted that
would limit the ability of for-profit institutions to participate in
federal funding programs. The ``two-year'' rule would continue to apply
only to for-profit institutions, i.e., they must be in existence for
two years before they may be certified as eligible to participate in
the Title IV programs. In addition, for-profit institutions would not
be eligible for funds under Title III of the Higher Education Act for
the building of institutional infrastructure or the support of
endowments. Moreover, for-profit institutions could never be considered
Historically Black Colleges and Universities or tribally controlled
colleges, as those institutions are defined in the Act.
All that H.R. 4283 would do is make for-profit institutions
eligible to compete for certain grants that may be awarded to
institutions from other funding sources. Even then, only two-year,
degree-granting for-profit institutions could apply. Given all these
restrictions, I believe that fewer than 10 percent of all Title IV
eligible for-profit institutions would be able to file competitive
grant applications. Based upon my experience, it is unlikely that more
than a fraction of these relatively few institutions would apply. The
amount of funding that would be available and the involved process of
putting competitive applications together would simply not make it
worthwhile for many for-profit institutions to pursue such grants.
Nevertheless, it is important to recall that all of our higher
education programs, directly or indirectly, are for the benefit of
students. If a for-profit institution, for example, were to have a
substantial number of low income Hispanic students, and it were to
submit an application for funds that would meet their needs, it ought
at least to receive consideration.
This suggests what is truly at issue with the proposal for a single
definition of an institution of higher education and pertinent to the
topic of this hearing--the equitable treatment of students at
proprietary institutions under current law. A single definition would
send an important signal to these students that for-profit institutions
represent an equally valid option for the pursuit of their higher
education and training. It would say to these students that, if they
choose to seek the education, training, and skills that they need to
become productive members of the economy at these institutions, they
will not be regarded under federal law as second class citizens.
______
Chairman Boehner. Well, thank all the witnesses for their
excellent testimony, some of which I agree with, some of which
I did not. But that is why we are having this hearing this
morning.
My good friend from Michigan brought up Pell Grants, and I
just cannot quite let it go beyond. If you look at the maximum
Pell Grant award since 1995, when the Republicans took control
of Congress, we have had a 73 percent increase in the maximum
Pell Grant award, 73 percent. If you look at Pell Grant funding
since 1996, we have had a 95 percent increase in Pell Grant
funding. Why? Because we have more students than ever, low-
income students, attending postsecondary institutions. As a
matter of fact, if you look, since 1996, we have had an
increase of 1.7 million students who are accessing Pell Grants,
an increase of 46 percent.
So for Members to suggest that we are not doing enough on
Pell Grants, I want to set the facts straight. We would all
like to do more. And we all know that every $100 increase in
the maximum Pell Grant costs the Federal Treasury about $400
million, and the challenges that we face in that account, in
the coming years, are going to be even more difficult.
Mr. Kildee. Would the gentleman yield?
Chairman Boehner. Be happy to.
Mr. Kildee. Thank you, Mr. Chairman, for yielding.
We can talk dollars and dollars, but, actually, actual real
dollars, the maximum grant is about $500 less than when the
Pell program was enacted, in real dollars. So we can talk about
nominal dollars, but, in fact, what they are able to purchase
in education is $500 less than when--
Chairman Boehner. Well, reclaiming my time, I do agree that
there is a problem with the purchasing power. But given the
ever increasing cost of tuition and fees, we are doing all we
can to try to keep up with it.
In 1999, we had a great economy. The stock market was
booming. And Americans were very optimistic about the future.
And in that year, the American economy lost 35 million jobs.
Now, the American economy also created 37 million new jobs, a
net increase of 2 million jobs.
So if we go 3 years ahead of time to 2002, the American
economy was in a recession. We were going through the effects
of post-9/11. And the stock market had crashed. And guess what?
The American economy lost 35 million jobs. And the American
economy only created 33.5 million new jobs. The churning that
we see in our economy has always been there, but it has never
been there to the extent that it is today.
And the need for life-long learning, the need for American
workers to get tools that they need to participate in today's
economy, is greater than ever in our history. And if you look
at the traditional schools, what we would call traditional,
postsecondary schools, where are the new seats? Where are the
new schools? And if you begin to look at where these skills are
coming from, by and large, many of them are coming from
community colleges and from the proprietary sector in
postsecondary education.
Mr. Nassirian, I have to ask you a question. In our bill,
we outline three issues on accreditation. We say that you
cannot deny the transfer of credit solely on who the accreditor
is. We say, in the bill, that all postsecondary institutions
should have a transfer-of-credit policy that you decide and,
three, that you ought to live by it. Now, you took--you made
criticism of our proposal. Now which of the three issues do you
have a problem with?
Mr. Nassirian. With all due respect, sir, the bill also
dictates the substance of the policy. If the bill simply stated
that you must have a publicly disclosed policy that you live
by, that is certainly not objectionable. The problem is the
bill then goes into the substance of what thou shalt do and
says you may not deny credit on the basis of the sending
institutions' accreditation status so long as that
accreditation status has been recognized by the Secretary. I
think that is a factual description.
Chairman Boehner. No. No. The bill says you cannot deny
solely based on who the accreditor is.
Mr. Nassirian. That is correct.
Chairman Boehner. And if--that is all it says. It does not
qualify it in any way shape or form.
Mr. Nassirian. May I--
Chairman Boehner. Go ahead.
Mr. Nassirian. In the interest of really sort of
articulating, there is an enormous amount of frustration on our
campuses with this issue that I really do think this is an
opportunity for us to explain. One, the Secretary has never
been thought to be setting ceilings on the quality of
education. I think the Committee would concur, the Secretaries'
activity has to do with establishing thresholds and floors. And
fourth, what the notion that institutions may not make
distinctions amongst accreditors so long as they are
secretarially recognized implies is that no accreditor may
establish higher standards than those acceptable to the
Secretary. That is one issue.
Chairman Boehner. But the--all the bill says is that you
cannot deny the credits, transfer of credits, solely on who the
accreditor is. I realize there are different accreditors, but
all we say there is you cannot deny it solely on that purpose.
Mr. Nassirian. Mr. Boehner, is it possible that some
accreditors may be better than others?
Chairman Boehner. I agree with that.
Mr. Nassirian. And if that is the case, why should a
rabbinical college have to go through the transcripts of a
Baptist institutions' coursework to decide wholesale that the
credits it is interested in happen to be rabbinical credits?
Why should a medical institution--
Chairman Boehner. We do not require that.
Mr. Nassirian. Yes you do. Yes you do, sir.
Chairman Boehner. All we say is you cannot deny solely on
that purpose.
Mr. Nassirian. Well, I submit to you respectfully, sir,
that that is grounds to reject the credits entirely if it so
happens that the accreditor--it is not so much who the
accreditor is; it is more who the accreditor is not.
I will give you a completely non-Federal example, sir.
Medical education in the United States, the LCM, the Liaison
Committee on Medical Education has nothing to do with the U.S.
Department of Education, is not an accreditor that is
recognized for Title IV purposes, really has nothing to do with
this Committee's activities.
Mr. Nassirian. It so happens that medical institutions in
this country require for their reasons on the basis of, I am
hopeful, medical training that institutions that have been
accredited by that organization can send students their way and
students that don't cannot. It may be that a dog grooming
school teaches anatomy. Why should a medical institution have
to go through the trouble of obtaining syllabi, textbooks,
qualifications of staff before it can articulate a simple truth
unless--
Chairman Boehner. They don't have to do that.
Mr. Nassirian. Yes, they do, sir.
Chairman Boehner. No, they do not. The bill says that you
can't deny the credit solely on who the accreditor is. Solely.
Mr. Nassirian. That is what they want to do. They want to
say, unless have you been accredited by LCME, we are not
interested in reviewing your transcripts; and I don't think you
would want them to do.
I appreciate more than I could publicly acknowledge the
efforts of this Committee on the issue of cost. I think these
efforts are appropriate and have resulted in a lot of good
things happening. This is going to be the single biggest cost
driver in American higher education because, in essence, you
are demanding that because the Federal Government buys GM
automobiles and it buys Ford automobiles that the alternator
out of a GM car should fit a Ford; and you know it can happen,
but then all cars will look the same because of
interchangeability of parts.
Chairman Boehner. I think what we are suggesting is that
some schools routinely and arbitrarily deny the credit--the
transfer of credit from a proprietary school to a traditional
school just--without looking at the quality of the content or
the makeup of the class; and all we are suggesting, without
dictating the policy, is that to say that you won't take it
because of who the accreditor is, is over the line. You want to
reject it based on the qualities of the course, fine, you can
go do that.
Mr. Nassirian. Mr. Chairman, we share that frustration,
lest I think we don't share the frustration with regard to
transfer. My organization published a book called Transfer
Students: the Forgotten Student. We are transfer practitioners.
We are extremely concerned.
With all due respect, I would point out, first and
foremost, that insofar as transfer is concerned the challenge
is that of volume. There are hundreds of thousands of courses
that are summarized on pieces of paper called transcript that
come into the admissions office. And the experience of going
through a course-by-course analysis--there is no such thing as
a free lunch, and legislation can't create one. The course-by-
course analysis that the bill would mandate would be
backbreaking to every institution in this country.
We appreciate the motivation, but we ask you to give us a
chance to solve this problem. Because we are all interested in
eliminating duplication of effort. It is in nobody's interest
to force a student to go through the same course twice. The
challenge is when the course entry comes up in the admissions
office we have no clue what is behind--
Chairman Boehner. My time has expired. But I have not
gotten any suggestions from the community about how to address
this other than you don't like what we have done. And if people
are serious about helping students who we all know will go to
multiple institutions solve this problem, I am certainly open
to your suggestions.
Mr. Kildee.
Mr. Kildee. Thank you, Mr. Chairman.
On the Andrews-Kildee bill, or the Kildee-Andrews bill, on
the distance learning, we would drop the 50 percent requirement
and have a certain surveillance on the academic side by the
accreditation agency, on the fiscal side by the Federal
Government. Do you think that that would take care of the needs
if we were to enact that bill?
Mr. Moore. Thank you.
Well, obviously, at the time that the Andrews-Kildee or
Kildee-Andrews bill was introduced, we were very supportive of
it. I am reminded of a late, great statesman who is quoted as
saying, ``If I am offered half a loaf, I will take it, but
depend on me being back the next day to get the rest of it.''
so this is the next day, and we are back to get the rest of the
loaf.
I think that the debate and discussion that was started
with your bill was probably one of the most important
activities that has happened for a while in this whole issue. I
think as we go through this political process, and it is a
political process, we are going to find opportunities to modify
and improve the bill as we go through, while trying to
maintain, I think, the heart of what the two of you were
looking for and what we were supporting at the time. I think
there is a lot of opportunity over here the next few weeks to
sit down and merge what your goals were versus what the current
goals are. Just remember, I am after the whole loaf.
Mr. Kildee. I appreciate your candor and honesty.
Everything is step by step, I guess, on these things. I
think that Rob and I worked together and felt that this would
be a--each reauthorization very often moves us down--it is not
everything in one bill but get some experience in that
reauthorization and maybe the next reauthorization we take
another step. That has been pretty well the history of the
Higher Education Act.
In your memo to me--and I appreciate the memo; it is very
thorough--you mentioned one of your institutions in Marietta,
Georgia, and one in Atlanta; and the one in Atlanta was quite
different. How would the change in the 90/10 help you better
serve your students in Atlanta?
Mr. Moore. The example we gave, Mr. Kildee, for Atlanta,
Georgia, is also the same one in Portland and Vancouver and in
the two schools in California. They are similar urban versus
suburban schools that are essentially running exactly the same
curricula under the same supervision but yet the 90/10
proportions are dramatically different in both of those
schools.
What is going to happen in those urban settings,
particularly if the Pell Grant increases and 90/10 doesn't go
away, is we are going to have to start limiting access to those
students who most need access because we can't jeopardize the
school to continue to award 100 percent of Title IV as our
students who are with us experienced. Right now, that is a
relatively low occurrence, but if Pell goes up or the limits go
up or you change the ratio of the amount of money that is
available in the first couple years--and I can't believe I am
standing here sounding like I could be opposed to that effort
to help students, but that is the corner that we get backed
into.
On one hand, we are arguing to try to support students,
which is why we are here. On the other hand, I am being asked
to jeopardize the institution that is trying to help that
student. So in each one of those cases there is more students
that could be helped and particularly in the area of those who
are the most needy and most need the help.
As you know, I ran a community college in an inner city,
and there were a lot of students that didn't get served very
well that probably should have because the community college
simply couldn't serve them. That is not a reflection on the
community college. That is the nature of the animal. And
without the for-profit schools risking private capital to set
up those institutions and run them, we wouldn't be able to
provide the resources we do.
I hope that doesn't mean my time is up.
Mr. Kildee. No. You are all set.
What you are saying, then, is that, if not now, soon you
feel there may be a necessity to say to certain students we
can't afford to take you because we jeopardize our 90/10 ratio.
Mr. Moore. Yes, sir, that is correct.
Once again, that creates a dilemma. Because the law is very
clear that if a student presents himself to us and is otherwise
qualified--it is like the transfer of credit issue--they are
fully qualified, we are required by law to accept that student.
And if, in fact, they are 100 percent eligible, we can't turn
around and say to that student we are going to discriminate
against you because you are 100 percent eligible. But, on the
other hand, if we enroll too many of those students, we are
going to close the institution; and that is, obviously, an
unintended consequence of 90/10.
The other piece I have to throw in, Mr. Kildee--I don't
want to burn your time--but the supposed intent of 90/10 was to
reduce fraud and abuse. I don't think there is any evidence
either under 85/15 or 90/10 of any incidence of fraud and abuse
that the law has caught. All it has done is discriminate
against students. It really hasn't, that I know of, caught any
institutions or put them out of business--that were put out of
business because of fraud and abuse as it applies to 90/10.
Mr. Kildee. I think my time has expired. Thank you, Mr.
Chairman.
Mr. McKeon. [presiding.] That was a great explanation of
why we should eliminate 90/10.
You know, when the Higher Ed Act was passed in '65, the
purpose, as I understand it--not having been here at that time;
I was just a very young man then--but I understand that it was
to provide increased access and to help those who needed the
help most to participate in the American dream; and that is
what we have tried to do in this bill that we have put forward
in--we are not able to do all the things that we want to do to
cut the tuition and fees and to keep school more affordable,
but what we have really tried to do is expand access. And that
hearing today where we are really highlighting proprietary
schools I just want to thank you for what you have done to
provide increased access.
I have a little chart here before me that shows in 1995 the
top ten universities in the country by population. Starts out,
University of Minnesota, Twin Cities, University of Texas. The
population of the University of Minnesota at that time, 51,445
students.
On the other side, I have what the population of the top
ten schools are now. And in 1995 there were no proprietary
schools in the top ten. Fall of 2003, four of the top ten,
Apollo Group with a population of 200,000 students; Education
Management, 58,858; Corinthian Colleges, 57,580; University of
Minnesota, which was 51,000 in '95, has dropped to 48,000.
Where are we expanding the capacity? Where are we reaching out
to give people an opportunity to participate in the American
dream?
It seems to me the proprietary schools are taking great
steps. Now some of the schools have increased in size. Ohio
State added 1,000 students. But, I mean, in comparison, we
would be in even further problems with trying to provide access
to people if it hadn't been for what the proprietary schools
had done. It seems to me that, because they happen to make a
profit, that there are people that take exception with them;
and I think that is the American dream, is we want people to be
able to make a profit. I think that is what makes the machinery
of this country move.
A couple of questions. Mr. Moore, as you are no doubt
aware, one of the issues under consideration today is the role
of the Federal Government with respect to proprietary
postsecondary institutions. Some people see the enrollment of
students with Federal financial aid at your schools as
equivalent of a Federal contribution to your profits. How do
you respond to that?
Mr. Moore. Thank you.
Let me talk about profit to begin with. We tend to make a
distinction between for-profit and not-for-profit schools when,
in fact, there is no such thing as a successful college that
isn't profitable.
I was a community college president in Flint, Michigan, for
8 years. I was there a total of 12. I can tell you that if we
were not profitable every year we would have been out of
business, because the State of Michigan was in no position to
bail us out. We were told by our accountants, as a matter of
fact, that we should have a goal of building a 10 percent fund
balance at the end of every year. Now, a fund balance is a
difference between income and expenses. The accountants call it
a fund balance because the schools are not-for-profit. In fact,
that is their profit.
It is interesting to point out that that 10 percent bogie
for community colleges is exactly what the profit margin is in
my corporation. Year in and year out, our after-tax profit is
about 10 percent. That is after paying 40 percent of our income
in taxes and all of our employees, some 10,000 of them, having
paid 32 percent of their income in taxes, also.
So this fund balance issue in for-profit, we are clearly in
line. In fact, current Department of Education requirements say
you have to be a profitable by at least 8 percent to continue
in the program.
The other misconception is that, somehow or another, those
funds are going to investors. We have never paid a dime of our
money to any investor anyplace in this country; and unless I go
senile and start paying dividends, which isn't likely, we never
will pay a dime to an investor.
The money that is being made off of the company is being
made in the stock market as people are taking stock risks to
buy shares in our company, but there is no return from that.
There are no dividends paid. There are no options paid to
investors. We pay our employees' options, but there is not a
single dime of our money that is going to investors or people
who are investing in our company.
What the investors are doing, however, which is what we
really need to be concerned about, is they are building the
infrastructure for us. They are the ones that are paying for
the buildings, the computers, the textbooks, the facilities
that are going into those schools, as opposed to using either
tax money or endowment money, which are the other two groups of
schools some--we are for-profit, but so is everybody else.
Our profits are clearly in line, if you consider fund
balances as profits, with everybody else, but, most
importantly, there is no Federal money that is being paid to
investors in my company and, to the best of my knowledge, none
of the other companies that are in this sector.
Mr. McKeon. Thank you.
Dr. Letteney, you talked about the concern of losing money
if we have the single definition. If money were not an issue,
would you have a problem with eliminating the--with going to
the single definition?
Dr. Letteney. I think as a matter of public policy, yes, in
that whether the profits that are available in Mr. Moore's
company or the Apollo Corp. group--
Mr. McKeon. I am saying if money was not an issue, if there
is no money as an issue. Like right now, by going to single
definition, it does put some money at competition. So there is
money available. But if it were written such that money were
not an issue, would you have a problem with going to a single
definition?
Dr. Letteney. Our association has taken the stand that if a
separate program were created then that would certainly reduce
our opposition to this issue.
Mr. McKeon. The issue is the money, not the single
definition.
Dr. Letteney. From the perspective of this Committee's
history, the philosophy and the principles that this Committee
has stood for, we do feel that there is an issue with this
Committee suggesting that not only should taxpayers pay for
financial aid for students which goes to the students and the
students have a choice they go anywhere else, but I would say
that that is something--if there were a separate program
created, it would be more palatable to our institution.
Mr. McKeon. If a school has been in business and operation
and graduating students, granting degrees for almost a hundred
years and been a family business where they are really trying
to reach out and educate and help people, why should they not
have the same status as a school that is a public school that
maybe has been in existence for 5 years or 10 years?
Dr. Letteney. I think the issue is not the status of the
school. The issue is the question--
Mr. McKeon. For these schools, status is a big issue. For
the student that is graduating, it is a big issue.
Dr. Letteney. From my perspective--and, by the way, I have
talked to some of our local businesspeople on this matter; and,
from my perspective, the issue is whether this Committee
chooses to go beyond Federal financial aid as a subsidy of
institutions who have--
Mr. McKeon. We keep coming back to money.
Dr. Letteney. Whether they distribute those profits is
another matter, but our money goes directly back into the
institution.
Mr. McKeon. I guess I can't get an answer to my--what I am
trying to say is, if we exclude money from the issue, do you
see any problem with granting these institutions the same
status as other institutions?
Dr. Letteney. I personally would still see an issue as a
taxpayer, knowing that the dollars that go to, say, community
colleges are going to the public good, as opposed to dollars
that are going to education companies that have significant
dollars available to give to their shareholders, yes.
Mr. McKeon. Mr. Nassirian.
Mr. Nassirian. Mr. Chairman, putting money aside, the
change is ill-advised because of its breadth. We keep talking
about degree-granting institutions being the same; and that is
a middle ground, actually.
Mr. McKeon. In the bill, we are talking about for degree-
granting institutions.
Mr. Nassirian. For degree-granting institutions, if you
insulate redistributive effects and do a careful study to make
sure that nothing unintended--and we defer to your judgment, of
course. You are responsible for enacting the legislation.
Mr. McKeon. We have never caused any unintended
consequences.
Mr. Nassirian. Mr. Chairman, I certainly accept that, but
it is--if one carefully goes through what else may be off
kilter as an unintended consequence of a change that would be
agreeable. But to go to the extreme of treating all Title IV
eligible participants as institutions of higher education, I
think that is--
Mr. McKeon. In our bill, this has nothing to do with Title
IV. It is Title III and Title V.
Again, my question was, if we write it to eliminate the
money, just talk about the definition, any way--
Dr. Letteney. Mr. Chairman, may I suggest that, as I stated
in my testimony, we understand that the impact could be greater
because other Federal agencies use the definition to determine
who is eligible for their grants as well.
Mr. McKeon. I understand that. That is why I was trying to
get the money out of it, find out where we were on just
feelings of the definition.
My time is up. If could you just be very brief. Mr. Smith.
Mr. Smith. As an employer, we want great employees,
irregardless of which institution they come from. I am a very
strong proponent of treating all of our institutions of higher
learning the same. I am a graduate of Ohio State University, a
public institution. I chaired the board at Columbus Day
Community College. I am considering now becoming an adjunct
professor at a private college, and we hire lots of great
people from DeVry, a proprietary college.
As I run this business and grow it, I need a great
workforce. I need to be able to go to the multiple avenues to
source that workforce. I need all of those avenues to be
strong. So let's treat them all fairly, let's give all
Americans the opportunity for a postsecondary education and
then allow them the choice and allow the country to be stronger
as a result.
Thank you, Mr. Chairman.
Mr. McKeon. Mr. Andrews.
Mr. Andrews. Thank you, Mr. Chairman.
I would like to thank each of the witnesses for their
outstanding contribution this morning.
I think higher education is one of the great success
stories in the United States, and I think that success story in
large part owes itself to the diversity of choice that we have
in higher education. I think the failure that lies among these
elements of success and the success story is that we have not
done a good enough job reaching people at the bottom of the
economic ladder; and I think one of the real strengths of the
for-profit sector, as well as the community college sector, is
that these two elements of higher identification make a special
effort to reach students at that bottom part of the economic
ladder.
So I am interested in doing whatever we can in this law to
reach even more students so, as Mr. Smith just said, more of
those students can become productive and dynamic workers and
investors and entrepreneurs in the workforce. I think that is
the way we have to come at this question of the 90/10 Rule.
And, Mr. Nassirian, I wanted to ask you about your comments
about the 90/10 Rule. You indicate that--let me ask you this
first: Do you agree or disagree with the proposition that
students from a modest or low-income background are more likely
to be loan defaulters than students from a high-income
background?
Mr. Nassirian. I do.
Mr. Andrews. Do you agree or disagree with the proposition
that students from a moderate-income background are more likely
to drop out before finishing their program than students from a
high income?
Mr. Nassirian. Regrettably so.
Mr. Andrews. I would agree with that, too. That is why I
would call into question the 1997 study from the GAO that you
refer to in your testimony. You say that there is a
relationship, and you say the GAO says there is a relationship
between reliance on Title IV revenues and the qualities of a
school. I don't think that is true. And one of the reasons I
think that is not true is, as I read the 7-year-old GAO study,
it did not take into account the student body demographics of
the schools that met this requirement. Would you agree with
that?
Mr. Nassirian. I do. The concern, Mr. Andrews, is not so
much with any kind of a theoretical link between the incidents
of default and income status. The real question--and it really
has to do with competing visions of capitalism, I suspect. The
real question is, do we want institutions that are composed
entirely of zero EFC students?
Mr. Andrews. That is the question.
Mr. Nassirian. I don't think that kind of segregation--
Mr. Andrews. It is your testimony that said there is this
relationship. I didn't say this, you did, that there is this
relationship between the quality of a school and how much or
how little Federal financial is. I don't think that is true.
Mr. Nassirian. There is a correlation--I am simply
repeating what the GAO describes as a correlation.
Mr. Andrews. You think the basis of the GAO's conclusion is
suspect because they didn't take into account the demographic
students status of students?
Mr. Nassirian. There is a correlation. I should point out,
to this day, 4 percent--lest we get confused about where the
students are--4 percent of the students are in about a third of
the participating institutions in Title IV, and yet lifetime
default numbers that exceed 40 percent, dollar amount at risk
in excess of 27 percent.
Mr. Andrews. Let's look at those default numbers a little
more closely. You conclude that there is a link between the
presence of the 90/10 Rule and the precipitous drop in defaults
in the proprietary sector over the last 9 or 10 years. You
claim there is a cause-and-effect relationship between those
two. Could you tell us, of the thousands of proprietary schools
that have been excluded from Title IV in the last 10 years, how
many of them had revenues--nonFederal aid revenues of more than
10 percent, how many had less than 10 percent?
Mr. Nassirian. It would be the number of institutions that
have been pushed out of eligibility since the enactment of the
90/10 Rule.
Mr. Andrews. What is the data?
Mr. Nassirian. I believe it was a handful. I want to say
four, for example.
Mr. Andrews. Four had revenues of less than 10 percent.
Mr. Nassirian. Four triggered the modified--
Mr. Andrews. My understanding is the huge majority of for-
profit schools that have been excluded from the program were
because of high default rates, not because they were less than
10 percent.
Mr. Nassirian. That is the issue. We don't have the luxury
of doing double-blind experiments here. In '92, in despair over
the condition of the programs, Congress enacted a variety of
measures, essentially out of a reasonable expectation that some
of them may work. So, in candor, I don't have proof or any kind
of a theoretically robust presentation to prove to anybody that
the 90/10 Rule should or shouldn't be there. It is a matter of
call as the Committee will deliberate.
Mr. Andrews. I think it is important that we establish for
the record the question of how best to avoid fraud. Something,
I think there is unanimous agreement here, that that is the
goal. The question of how best to avoid fraud is not a matter
of factual assertion. To come in here and say that 90/10 is the
reason that the defaults have dropped is a view, but it is by
no means a fact. A lot of us believe that the default rates
have dropped in large part because of the default rate ceiling,
because of more resources put into policing by the Department
of Education, more resources put into the industry itself by
members of the industry and a general increase in quality.
Now I don't dispute that 90/10 may have had something to do
with that, but your conclusion, which seems to be--is that the
absence of 90/10 would put at risk all of those improvements. I
just don't see the data. If I am missing something, you would
be free to supplement the record.
Mr. Nassirian. As you contemplate any change, the question
you should ask yourself is, who does it benefit?
Mr. Andrews. Can I ask one other thing about 50 percent?
You make a similar claim about the 50 percent rule opening
us up to all kinds of fraud and abuse. But isn't it the case
that if a school today offers 40 percent of its courses online
and 40 percent of its students are attending online, it might
be the worst fraudulent school in the country, but a school
that offers 60 percent of its courses online to 60 percent of
its students might be the best school in the country? So isn't
a better measurement of quality of education some robust
accreditation standards like Mr. Kildee and I want, rather than
an arbitrary 50 percent figure?
Mr. Nassirian. The Andrews-Kildee legislation does have
provisions that offer safeguard. The real issue is to make
sure, again, no mathematical proof at hand, but to allow the
Department discretion. We do advocate for expansion of distance
education, and there is nothing magical about it.
Mr. Andrews. The Department has no discretion with a school
that offers more than 50 percent. The purpose of our bill is to
offer that discretion. That is to say, if you meet the robust
accreditation review standards, you can go as high that you
think you need to go. Isn't that better than the ridge of 50
percent?
Mr. Nassirian. It is conceptually a sounder approach.
Mr. Andrews. So can we get your endorsement of the bill? Is
that what you are saying?
Thank you very much.
Mr. McKeon. Mr. Castle.
Mr. Castle. Thank you, Mr. Chairman.
This has actually been a fascinating hearing. We have some
true disagreement on the panel, which is always fun. I walked
in here not certain of exactly where I was on this, and I think
my feelings have become more galvanized as I have heard it. I
think it has been good. So I appreciate it.
Mr. Moore, let me say I am a fan of the distance learning,
I am a fan of the for-profit institutions, and I think we do
need to treat our unconventional students. But, having said
that, I hope you are not teaching economics at Corinthian
College, because I entirely disagree with your premise about
the value of Federal dollars fleeing into the funding of your
institution. It may be correct you are not paying dividends
and, therefore, it doesn't flow directly to the stockholders,
but to suggest that doesn't add value used for the expansion of
the school or just added retained dollars in the accounts of
the corporation is just absolutely borderline logic at best
from an economic point of view. Clearly, that is profitable.
I think we have a very significant issue as to whether
institutions--and my recollection I think in the top 10 stocks
in this country in the last--you may be one of them--in the
last 3 years, three or four of them are these for-profit
institutions; and the idea of opening this up to Federal
dollars is something I think we really need to pay attention
to. We can't go over that too lightly.
I was struck--I walked in the middle of Dr. Letteney's
testimony--by some of the things that she stated. One of the
things I then confirmed in the written statement struck me, and
that is that the average community college tuition this fall
was $1,905 and the average 2-year, degree-granting proprietary
school charged $10,916, more than five times as much. Is that a
substantiated fact, Dr. Letteney?
Dr. Letteney. Yes. Yes. In fact, at my institution--and, I
mean, New Mexico is a poor state by any standards--our
institution charges only $1,056 per year for tuition and fees.
So the $1,905 is fair.
Mr. Castle. Later in that testimony you indicated that--you
named the Apollo Group, Career Education, DeVry, Corinthian
Colleges. You show the gross profits of Apollo being $860.9
million over four quarters ending 2/29/04; Career Education
Corp., gross profits $1.593 billion for 3 years ending 12/31/
03; DeVry, gross profits $1.098 billion for 4 years ending 6/
30/03; and Corinthian Colleges to $541.3 million for 3 years
ending 6/30/03. Are those figures which are--those are
incredible numbers.
Dr. Letteney. Bear in mind those figures that I stated are
gross profits. They are not the net profits. But they come
right from the financial statements of the corporations.
If you look, for example, at the net profits of some of the
largest education companies in this country for the last four
quarters, they would cover the amount for the entire Title III
strengthening institutions grant program, or they would cover
the entire amount for the Title V grant program.
Mr. Castle. I remember reading someplace that the success
of the Washington Post Company lately has been through Kaplan,
not through the Washington Post itself, the illustrious
newspaper there, which would sort of underline some of the
things you are saying as well.
But my concern is that we are dealing with institutions--
and I think actually Mr. Moore is correct about this. That is,
there is no such thing as running a higher education
institution which is not profitable in the sense that at least
it is in the black, if not for profit, in terms of distribution
or stockholders or whatever it may be, and that is significant.
But I assume that in the present definition in which a
community college can take advantage of Federal dollars that
others cannot because of the definitional aspects of it that
that money is of importance to the community colleges and being
able to stay above that line and stay in the black with less
revenues than the for-profits had. Can you expand on that or
correct me if I didn't state it correctly?
Dr. Letteney. Let me give you an example.
Many of our institutions just run on very thin margins. We
have an institution that serves 1,700 credit students, over
7,000 noncredit students, and we do that on $10 million. So if
you look at the numbers of people that community colleges
serve, we are running on very thin margins.
Let me tell you also--and let me thank you, Mr. Chairman
and the Committee, for the Federal programs that are available.
At our little institution we have--we are just finishing up a
Title V program that involves student retention. We are working
on--we have gotten a TRIO grant which has been enormously
helpful to us, has 170 students in it. Twenty-five of those
students--
Mr. Castle. Can you get to the answer of the question? I
don't mean to cut you off.
Dr. Letteney. Would you restate briefly?
Mr. Castle. Basically, I indicated that--I asked,
basically, do you need these dollars in order to keep above the
line in terms of staying in the--
Dr. Letteney. Yes, sir. What I am saying is that,
especially in a State like New Mexico, where in my county our
average income is a little over $21,000, we are dealing with
very, very poor first-generation students, parents don't
understand, have not--
Mr. Castle. Again, I don't mean to cut you off, but I do
need to cut you off.
Dr. Letteney. Yes. These Federal dollars have been critical
to our moving forward.
Mr. Castle. This is apart from the Pell Grants and student
loans. My understanding is that if you have those funds then,
indeed, you can spend other funds--if you get those funds, you
can spend other funds you already have on hand for other
services.
Dr. Letteney. Yes.
Mr. Castle. Therefore, if you don't have to spend those
funds if you are a for-profit, then you could--those would
either go to the bottom line and some sort of retained earnings
or they could spend it on expansion. I imagine most of the for-
profits are expanding, which is fine. I am all for the for
profits, but I am worried about the use of public dollars in
the for-profits.
Let me change subjects for a moment. I want to talk about
the 90/10 business. Because, again, I think it was in your
testimony, I think it was on page 3, the community colleges
receive 7 percent or so of their money from Federal student
aid, is that correct? That seemed low to me.
Dr. Letteney. Well, you have to remember that, because
across the board our tuition and fees are low, the amount of
Federal financial aid that a student may get, a lot of that may
go to their living expenses and other expenses. So the actual
amount that goes to tuition and fees in the community colleges
is relatively low because our tuition and fees are low.
Mr. Castle. You are basically then getting--the 7 percent
of your revenues that you get on the $1,905 which is cited here
are from Federal loans to students. Is that another way of
putting it?
Dr. Letteney. It would be from Federal aid to students.
Then, of course, the students pay for their tuition and fees,
yes.
Mr. Castle. And yet we are trying to eliminate the 90/10
provision, meaning that only the 10 percent of any college paid
for profit or anything else would have to have their fees come
from something other than Federal dollars, is that correct?
Dr. Letteney. Yes.
Mr. Castle. You are saying community colleges aren't even
close to having a problem.
Dr. Letteney. No, it is not a problem for us in terms of
the percentage of Federal financial aid that comes to us
through our students who are getting Federal financial aid.
Mr. Castle. Thank you.
Mr. McKeon. Mr. Bishop.
Mr. Bishop. Thank you, Mr. Chairman.
I want to stay on this 90/10 issue because I think it is
very important as a matter of public policy. Mr. Moore, as I
understand it, there are about 2,500 proprietary institutions
that are Title IV receiving institutions. Do you have any sense
as to how many of them are bumping up against this 90/10
difficulty?
Mr. Moore. I am sure every one of them are bumping up
against the 90/10 Rule.
Mr. Bishop. The 90/10 Rule, as I understand it, is in the
aggregate not per individual student. No more than 90 percent
of the total tuition and fee revenue can be comprised of Title
IV funds, correct?
Mr. Moore. The exact formula is not more than 90 percent of
the revenue on a cash basis can come--
Mr. Bishop. You are saying that the vast majority of
institutions are bumping up against that.
Mr. Moore. Yes, sir. And they are managing it--and that is
probably the other downside of the 90/10. They are managing
because they are denying access.
Mr. Bishop. Where is your institution? What percentage of
your revenue is Title IV?
Mr. Moore. Across the corporation is about 86 percent.
Mr. Bishop. What is the total size of your institutional
financial aid budget?
Mr. Moore. Well, it is--you will have to do the math.
Mr. Bishop. That is not the question I am asking. What
portion of your total revenue do you plow back into
institutionally funded student aid? Not Federal aid,
institutionally funded student aid.
Mr. Moore. Through the scholarships and student loans, we
put about 5 to 7 percent of our revenue back into the students.
Mr. Bishop. On the question of access then, is it not
possible for you to increase that? I mean, what you said is
that this 90/10 Rule creates perverse incentives. You said it
was pushing schools away from needy students. And you are
suggesting that the 90/10 Rule inhibits access.
Mr. Moore. Correct.
Mr. Bishop. Now I come out of an institution that was not-
for-profit. It was, by the way, particularly good at being not-
for-profit.We really were very good at that. But we discounted
tuition at the rate of 35 percent; and that is not unusual for
private colleges in the Northeast, I mean, to have a student
aid budget--unfunded student aid budget somewhere between 25
and 35 percent. You are at about 5 percent.
Mr. Moore. We are not allowed by law to discount tuition.
We have to charge everybody the same route.
Mr. Bishop. We are charging the same thing, but we are
putting it back in. It is called discounted aid.
Mr. Moore. Right. In using your analogy, that roughly 5 to
7 percent allows us to fund students through loans, but we
can't discount tuition, we are prohibited from doing that, and
the scholarships that we grant are, in fact, student loans and
have to be repaid.
Mr. Bishop. So there is not nonrepayable institutional
grant money that you provide to help students pay their bills.
Mr. Moore. We are prohibited from that by Federal law.
Mr. Bishop. Wouldn't it be a better use of public--wouldn't
it be a better public policy issue to allow you to do that? I
mean, if--here is my problem: We are reauthorizing higher ed.
We all agree that we have an access problem. We all agree we
have an affordability problem. But we are addressing it, at
least in this bill, exclusively in terms of increasing loan
limits. We are not doing anything else. We are not raising Pell
Grant maximums.
So if we, in fact, have an access and affordability
problem, which I agree that we do, it seems to me that the only
place where we are allowing Federal dollars to flow in a
greater--to a greater extent than is now the case is to the
proprietary institutions if we were to do away with 90/10. Is
that not correct?
Mr. Moore. We are the only ones that are governed by 90/10;
90/10 does not apply to community colleges.
Mr. Bishop. Wouldn't it be nice if we had to worry about
90/10 at the institution I had been at?
So the fundamental premise of this bill is that it is a
revenue-neutral bill. There will be no new dollars flowing to
higher education. So to the extent that there are no new
dollars flowing to higher education, if we were to take that
pie and divide it somewhat differently so that additional
dollars could flow to the proprietary institutions, would we
not be disadvantaging public sector institutions and private
sector institutions?
Mr. Moore. Well, I think that, Mr. Bishop, it is a function
of what the purpose of the law is. If the purpose of the law is
to provide access to students--let's take the institutions out
of this. This is not an institution funding issue. This is a
student access issue.
So the question is, is the money going to follow the
student or not follow the student? If it is going to follow the
student, then it shouldn't matter what institution they go to.
If Joe Brown wants to go to school, he ought not be limited
between going to a tech school and becoming an auto mechanic or
diesel engineer, as opposed to going to community college
because the money doesn't follow him.
Mr. Bishop. If we are dealing with student access and we
have to agree that we have access all across the system, as a
matter of public policy it seems to me that our priority here
for addressing student access to the proprietary institutions--
we have shortages of physicians. We have shortages of
scientists. We have shortages of mathematicians and nurses.
This is the best public policy decision that--
Mr. Moore. Let me address it slightly different. We are
also talking about capacity. There is probably not a State
university or college in America that isn't crying the blues
that they don't have enough capacity for the students that are
showing up. U.S. News and World Report has an article to that
because schools now have to show they are getting massive
applications for the few students that enroll. It is well known
that capacity doesn't exist.
So the question is, if you are going to rely on traditional
schools to provide that capacity, you--Congress--and the States
are going to have to come up with the infrastructure to do
that. What we are suggesting is private capital is willing to
build that infrastructure, but the money has to follow the
students--not the schools but the student.
Mr. Bishop. My time is up. If the Chairman will allow--
Mr. Rosen. Mr. Bishop, if I could respond on the issue of
access, I can give you some very clear sets of examples.
We have three schools within the Catholic system that are
right up against the 90/10 cliff, and one of the reactions to
that is we have imposed a requirement that every student must
pay $100 a month in order to come to our school. Now the result
of that, these are--two of these three schools are in the
border towns of Texas among the poorest communities in the
United States; and the result is that there are hundreds of
students who want to come to our institution, who want to take
the next step in advancing their career and becoming role
models for their children, but they can't do it because $1,200
a year is absolutely an insurmountable burden for them.
Mr. Bishop. But Mr. Moore said that 5 percent of his
institution's budget is dedicated to repayable assistance that
goes to these students. Is that correct? Now--
Mr. Moore. That doesn't count against 90/10, by the way. We
don't get any credit for that.
Mr. Bishop. That would be a source of tuition. That is a
non-Title IV source of tuition, is it not?
Mr. Moore. But it doesn't count in the 90/10 formula.
Mr. Rosen. Cannot be counted on the 10 side of the 90/10.
Mr. Bishop. So the 10 side relates only to what students
pay out of pocket.
Mr. Rosen. It is money that comes from a student's pocket.
Mr. Bishop. That is the way I read it.
Mr. Nassirian. The mode of analysis, the one way of
thinking about it, you have heard all about the concerns
expressed by the President of Harvard University of lack of
economic diversity at the very top of our system of higher
education. One may ponder why should we be concerned. Access to
what? At the most prestigious institutions, you are looking at
a per capita subsidy above and beyond out-of-pocket expenses
that today, give or take, borders on around $24,000 per head.
In other words, a student who goes to the most selective
segment of our system of higher education is receiving an
additional $24,000 of subsidy from sources other than what he
or she pays.
At the other extreme, you have for-profit institutions
where, by definition--and this is for Mr. Andrews, who isn't
here--this is a mathematical issue. The amount of subsides is a
negative amount. The amount they pay--typically, on this the
school is losing money and may be headed a bad way, is actually
beyond what the expenditure per student adds up to.
So when we talk about capacity issues, we are certainly--as
enrollment planning officials, we are very aware of the
critical role that for-profit sector institutions can play. But
that is good news for them, because that is a way of actually
going beyond 90/10. If the State of New York has a capacity
issue, it can contract with New York institutions and, guess
what, the funds that derived from the State of New York will
actually remedy the 10 percent issue.
The real critical problem is why is it that nobody--why is
it all Title IV money? Why isn't somebody else putting a dime
on the dollar into this pot? And, candidly, that is how $600
toilet seats were sold to the Pentagon. If we required people
to have a market test on the front end, we would have avoided
the--
Mr. Rosen. There is an assumption that students have
thousands of dollars at their disposal to spend on their
education. The purpose of Title IV is to enable the lowest-
income students to acquire the ability to go to school and
improve their lives. The reality is, sure as we sit in
Washington, it seems like, of course, they should be able to
contribute $1,000, but that is not the case with a lot of
students.
Mr. Bishop. That is not the point I am arguing.
Mr. McKeon. Mr. Petri.
Mr. Petri. Thank you, Mr. Chairman. Apologize, I had a
hearing next door on a different Committee.
I guess I just have a general area I would like to explore
with you briefly. That is the area of the competition between
the traditional vocational schools and State schools and the
proprietary education.
It is my impression that proprietary our for-profit
schools, the Kaplans and the Parsons, the Phoenixes of this
world, have grown enormously because they have been meeting a
huge need. They have adjusted the way they provide education to
much more focus on the consumer rather than having the society
adjust to the way they traditionally were doing things. So you
would think that should be rewarded rather than--it probably is
causing enormous change in the government side of education as
a result, rather than us throwing up barriers to that.
One thing that I am curious about is whether in proprietary
education you have the phenomenon of students that we see in
the public sector--I don't know if it is true in vocational as
it is in general--of kids not graduating in 4 years but
stretching it out and using the money to have a good life
experience rather than getting on in the field of work. Nothing
against all that, but that is not what the taxpayers' money is
for.
Could you comment on that and how we can minimize farming
the system for life-style value as opposed to supporting people
acquiring needed skills which benefits us all?
Mr. Rosen. I think, to respond to the first set of
comments, I really believe that what has made the higher
education the best in the world is exactly the competition
between various modes of education from the Harvards to the
State colleges to the community colleges. We put--the Congress
in its wisdom has put the money in the hands of students to
make choices as to what institution meets their needs. It is
not--Congress isn't making those decisions, but students make
the decisions as to what is right for them. The result of that
is schools compete for those dollars, and they try to become
better and more effective at reaching niche audiences that want
their kinds of programs.
Now, one of the ways that traditional schools compete is by
being relatively relaxed on the subject of graduation or moving
along toward graduation. I think you would find at most of the
proprietary schools we tend to be much more disciplined about
moving students from quarter to quarter and on to graduation,
in part because we know that our students are not there for
general life-style issues or for social issues. They are there
because they want to advance in their careers. They want to
make more money and provide for their families. We are doing
them a favor by providing more discipline and insisting that
they come quarter by quarter.
To take a leave of absence at Kaplan College is a very
difficult process. In a family emergency it is possible, but it
is highly discouraged because we know once a student,
especially a student who is has not shown a record of academic
success before, once they step off of the path, it is much
harder to get them back on.
Dr. Letteney. May I respond to that as well? Just in terms
of capacity I think you should know that over the last 3 years
the community college credit enrollment has increased about 20
percent. So we are handling some of that capacity, too.
And I agree with Mr. Rosen that, for example, in the
community colleges we anticipate students are going to step
out. At my institution, I have more part-time than I have full-
time students. We anticipate they may come in needing
remediation. Over 60 percent of our students do. We anticipate
they may have family issues and other issues. Their average age
is 29. Most of them are working adults. So we do things
differently, not to criticize either way that we do it, but we
are providing different opportunities.
Mr. Smith. When we think of education, we think of these
students--these students are individual people. I think
sometimes we think of education as one-size-fits-all. Truly
different personalities, life-style may make it more
advantageous for one student to go to a proprietary school,
another to a public school.
I have a relative who attended Ohio State University for
about 2 weeks and realized it clearly was not the right fit for
her. She left but re-engaged to increase her odds in the
workforce. She is now in nursing school at a community college.
I like the fact that there is competition, and we must
acknowledge that this particular institution or this particular
type of institution may not be the best fit for all students.
So let's give the students a choice.
I really like what I have heard today in regards to
allowing the dollars to follow the students, allowing the
students to get the education and create a stronger workforce.
Thank you.
Mr. McKeon. I don't even look at it so much as competition
as expanded opportunity. I think that is what we need to focus
on.
Mrs. McCarthy.
Mrs. McCarthy. Thank you.
I have to say I am really enjoying the debate that we see
going on here.
Let me first say, when Mr. Boehner was talking about single
definition, New York State has had that for so many years and I
don't understand what the problem is, because our board of
regents has come up with the single definition and it has
worked very well for everybody.
Second part that I would like to talk about, which will go
to the whole panel, hearing the concerns, No. 1, of a lot of my
colleagues here and the debate that is going on in the panel,
even though technically in 6 years we would be looking at this
bill again, would you all be a lot more comfortable if the
concerns that people had with repealing the 50 percent, the 90/
10 and moving to a single definition stem from the well-known
problems that went on with the career colleges going back
almost 10 years ago or even more than that? So, for the panel,
what if Congress repealed these items now but reconsidered some
or all of them the next time the HEA reauthorization comes up?
We can get the GAO to do a report during these next 6 years.
It seems to me that it is--not making the changes permanent
does two things. It would enable schools to prove themselves,
and we can address concerns that some have had with
accountability and stability of the schools.
The other thing is, talking with a number of the career
colleges, some concern which really didn't come up that much
during this discussion was taking money from Title III and
Title V, and a lot of the career colleges have said that is not
a big issue for them. So I guess I would like the response--I
think, on both sides of the aisle, no matter what we are
looking at, we are trying to make sure that access, which I
think is the important word here, that all students, depending
on what college they want to go to, have the ability and the
right to go to that particular school.
And the career colleges, in my opinion, I guess because I
have good experience in New York with a number of the colleges
and have traveled to look at some of the other colleges, that
the access is there, and it fits a lot of students. I think
that is important. I thing that is what our Committee is
supposed to be doing, making sure access and financial help is
there.
There is one other thing in the bill, and I don't know if
you can answer that right now or not. I will find that out
later when we look into the bill a little bit deeper. My
understanding is with the career colleges they cannot make a
profit and the profits that they do make have to go back to the
student and not for brick and mortar, expanding their schools
and things like that. Am I understanding that part of the bill?
Mr. McKeon. Mrs. McCarthy, I just--I will answer that, but
if I could just intervene here a little. Mr. Smith needs to
leave to catch his plane, and we all know what that is like
nowadays. So if we could thank you, Mr. Smith, and excuse you
and appreciate your--
Mr. Smith. I was scheduled at noon, but I enjoyed and was
so honored to be a part of the conversation. I would say, in
closing, thank you and acknowledge that our organization today
is stronger because of the graduates that we are finding at
these proprietary schools. We want to see them grow and see
them be successful in the future. Thank you. Many blessings.
Mr. McKeon. To respond to your question, if a proprietary
school, the way the bill is currently written, would receive
money in a competitive grant, they would have to use it for
student services. They couldn't use it to build brick or mortar
or to increase the endowment or physical facilities.
Mrs. McCarthy. Thank you.
What would you all think about with the question I had
asked before?
Mr. Moore. Well, first off, Congress has the right to
reconsider the law at any time; and certainly 5 years hence you
must reconsider it. I might be a little nervous with leaving an
automatic death sentence on a bill, given, with all due
respect, Congress's sometimes not up to time reconsideration.
It would be too bad to find that these changes were working and
then they arbitrarily died because of the calendar.
But I think, once again, this is part of a political
process, and I think we need to take a look at what it would
imply, because I know that is not the consequence you are
after. But I think we can take a look. As we go through this
deliberation, we would love to sit down with you and get a
little more information.
I think in terms of the Title III, Title V, having again
run a public community college and knowing how dependent public
institutions are on that additional Federal funding above their
local taxes and State taxes and Title IV for student tuition,
it is unlikely that proprietary schools would even be eligible
for those funds. And I can tell you, having been there, that
the likelihood of me investing the resources to apply for one
of those grants is somewhere between zero and nothing. That is
not a good use of my time. If I need to raise money, I will go
back out in the capital markets to do that. I am not going to
try to do that through Title III and Title V.
Now, having said that, if there is an entitlement that
follows students--not the institution but follows students--and
there is a body of students that are eligible, they ought not
be discriminated against simply because of the institution they
are in.
Let me take one more license. The question today was
whether or not for-profit students are being treated equitably.
I think the very definition of the dual definition answers the
question. No, they are not. If there was not a concerted effort
to treat for-profit students differently, there would not be
two sets of definition of higher education. There would only be
a single definition.
Mr. Nassirian. Mrs. McCarthy, if I may, I knew we would
come to agreement at some point; and that agreement is at hand.
They are not being treated equitably by the judgment of recent
history. As I said, the incident of default and disaster is
significantly higher for those students who have attended that
sector. This isn't Corinthian. Corinthian is actually a fine
institution. It is the universalizing of an anecdote, a couple
of good apples making us oblivious to the bad apples that may
be in the mix.
The organization you may have firsthand experience with,
the association of proprietary colleges in the State of New
York, that is a fine collection of institutions; and that model
of legislation would be perfectly acceptable. The problem is
the legislation before the Committee goes vastly beyond that.
That is the real issue. I think there is room to compromise and
model something along the lines of what you just described.
I don't think the bill as currently proposed does that. Nor
do I think experimenting with what is, in fact, a significant
life-altering situation for hundreds of thousands of students
who may be victimized is a chance we should all take. The
burden is on the side that argues for change. Why change the
definition?
Mr. Nassirian. Arguments have been made. I don't find them
very compelling, for my part. Obviously, the Committee will
have to exercise its judgment.
Mrs. McCarthy. But that is the reason we have hearings,
because this is an ongoing piece of legislation; and that is
why we like to reach out to everybody, so that, hopefully, we
can hear from your concerns and then the Committees go back and
possibly look at it. I happen to think that we can put
safeguards in there to make sure, because this Committee
certainly doesn't want to waste its money. So I think that can
be worked out in time.
I yield back. Thank you.
Mr. McKeon. Thank you.
Mr. Tierney.
Mr. Tierney. Thank you, Mr. Chairman; and thank the members
of the panel for what I think has been a good discussion on
this subject that has sort of focused my interest.
I note that the issue raised by Dr. Letteney and
Congressman Castle a little bit earlier still troubles me, is
why it would be appropriate for funds from the Federal
Government, essentially taxpayers' money to fund 100 percent of
the profits of private companies, which is essentially what
will happen if we pass the 90/10 Rule--and I have not really
heard an answer for that, and I have had long discussions with
friends that were in favor of this. But it is a philosophical
and policy issue that I have not yet heard a distinct answer on
as why we would want that to happen.
Mr. Moore do you want to take a shot at that again?
Mr. Moore. Sure. Well, let me kind of turn the question
around. Is it any more morally correct to fund 90 percent--
using your analogy, 90 percent of our profits as opposed to 100
percent?
Mr. Tierney. Well, I suppose we could eliminate it all.
Mr. Moore. And I think that is the whole point that we are
talking about--
Mr. Tierney. Would that be your motion, you know, you want
us to take it out? Because I am not sure I am there either. So,
I mean, we can keep moving back, but what I want to know is why
the last 10 percent when I think our Federal monies are not
reaching the places they have to reach in some of our other
institutions.
Mr. Moore. Correct. The point of the issue has nothing to
do with funding institutions. It has to do with funding
students.
Mr. Tierney. I don't buy that. I am sorry. That is a nice
comment. Tell me how it is that funding 100 percent isn't going
to increase your profits by another 10 percent.
Mr. Moore. It is not necessarily going to increase the
profit by another 10 percent. We will probably reinvest much of
that money back into those students.
Right now, if a student can't come up with 10 percent of
the cash to go to school, as Mr. Rosen previously mentioned, if
they can't pay $100 a month our whatever it is, they can't go
to school. Now when we remove that barrier and students step
down one more level, then we have to provide additional
counseling support for those students. Today, every one of my
teachers has to call a student who misses class that day to
find out why they are not in class and get them back the next
day. Now that is counseling up front and in the face. So if we
have students that are even less well-prepared than we have
today, the cost of that counseling is going to be even greater
than it is today.
Finally--
Mr. Tierney. I thank you for your effort on that, but I am
not sure that--I am not sure that I buy that aspect of it on
that. But--
Mr. Moore. Well, let me make one more--
Mr. Tierney. I am on limited time, so if you can't do it
quickly--
Mr. Moore. I am sorry.
Mr. Tierney. If you have to do it quickly. I have got
limited time.
Mr. Moore. OK. Of the roughly $100 million of profit that
we will make this year after tax depending on 40 percent, $65
million of that is being plowed back into facilities and
support for the students. Nearly everything we make is going
back into those students, and none of it is going to
shareholders.
Mr. Tierney. There is at least--a correlation I think has
been noted here earlier between the fact that the heaviest
users of Title IV funds and the higher default rates--it may
not be a direct causality--I think that--as one gentleman
indicated, but there is at least a correlation on that. I am a
little surprised that we are moving forward on this and we have
yet to see an real data from the Department of Education
indicating that eliminating the 90/10--what the effect would be
and whether or not any remaining protections against fraud and
waste would suffice or would it serve the purpose. I would like
to think that we might not move until we had that kind of
information on that.
Mr. Moore. May we work with your staff on helping to
provide that?
Mr. Tierney. Well, I think you ought to work with the
Department of Education to provide it. That is who has to do
the work on that.
But let me Dr. Letteney a question here. We have focused
here today on proprietary schools, and that is about 7 percent
of the highly nontraditional students that attend private for-
profit institutions compared to about 64 percent who attend 2-
year institutions. Now the community colleges in my district,
they have low-income students there to a higher proportion.
Those students work, many of them full time, most of them part
time at least. We can debate the 90/10 Rule, the 50/50 rule for
a long time. But Dr. Letteney, can you tell me in the short
time I have left what things can we do that would have a
greater impact on opening the doors for those nontraditional
students to remain in school, as well as to get into school?
Dr. Letteney. I think that because capacity has increased
so significantly one of the things that you could do--and I
know that you want this to be revenue neutral here, but,
obviously, increasing Pell is going to be important in coming
years because our students are understanding that without some
kind of postsecondary college or training they are not going to
do well in the 21st century as competitive workers. And so that
is absolutely critical.
I think other things--I would just say to you that the TRIO
program has probably been the single most transforming program
on my campus that we have ever had to deal with poor students
who are unfamiliar with college, because they are getting
significant support. So those are items that I would suggest to
you.
Certainly, I would also suggest please don't cut the amount
of Title III and Title V money that is available to our
students. Our community colleges now serve--of all higher
education students, we serve 45.9 percent of undergraduate
American--African American students and 56 percent of Hispanic
American students and almost 50 percent, 48.6 percent, of all
first-generation students. So capacity is going to be an issue
for us in the coming years.
Mr. Tierney. Thank you.
Dr. Letteney. Thank you.
Mr. Tierney. Yield back, Mr. Chairman. Thank you.
Mr. McKeon. Thank you.
Mr. Hinojosa.
Mr. Hinojosa. Thank you, Mr. Chairman; and I also wish to
thank the witnesses for coming before our Committee today.
I would like to say that I am disappointed that this
discussion on the treatment of proprietary institutions in the
higher education act has been framed as an issue of
discrimination. The issue at hand is not whether we are fairly
providing assistance to the low-income, to the minority and to
the disadvantaged students. It is about whether we are
investing institutional capacity building funds and grant
assistance in institutions that belong to the low-income, the
disadvantaged and the minority communities, institutions that--
my State of Texas, for example, has been systematically
underfunded to such an extent that the courts had to step in--
or in private businesses that exist for the benefit of
individuals and shareholders as do the proprietary schools. To
frame the issue in the language of civil rights is an affront
to those of us who were forced to attend segregated public
schools.
I would like to ask two panelists, Dr. Letteney and Mr.
Nassirian, to further elaborate on how the proposed single
definition of institution of higher education will radically
alter our institutional aid programs and discuss the effects
that the shifting of the focus and resources will have on the
communities that are supposed to be served by these programs.
Start with you, Dr. Letteney.
Dr. Letteney. Thank you, Mr. Chairman, Representative
Hinojosa.
What we see is simply a dilution of current funding. And I
know that you have been a strong champion, Representative
Hinojosa of HACU. HACU has been trying to move the amount of
Title V money up to at least $100 million. If we have
significant numbers of for-profit institutions coming into our
current 165 HSI, the pool of that Title V money clearly--that
is going to severely affect those Hispanic-serving institutions
that serve the majority of Hispanic students who,
unfortunately, are also--most students are also low-income
students in this country.
And the same goes for Title III. Title III has an even
greater impact on 2-year institutions as about 70 percent of
the Title III grants go to resource poor 2-year community
colleges.
Mr. Hinojosa. Mr. Nassirian.
Mr. Nassirian. Mr. Hinojosa, I also associate myself with
the response you just got; and I want to state for the record
our agreement with your observation that the debate is not a
substantive one if we begin to worry about the schools to the
detriment of the students. Contrary to the assertions made
today, aid does not currently and should not follow the
student. It doesn't follow the student from an eligible
institution to an ineligible institution, for example, and it
shouldn't.
The issue of access is critical. We concede, as an
organization that has for-profit collegiate institutions in its
membership, that access has been enhanced around the margins
because of innovations that these institutions have brought to
bear on the education market. But the representation that what
we want to do, that the solution to this country's coming
crisis is to take disproportionately minority students, as luck
would have it, and shift them from high-subsidy institutions
like the one represented right next to me to low-subsidy ones,
I think, is a mistake.
I think we want the minority student population to receive
the highest per capita subsidy because that is generally
associated with the American dream and the opening of doors,
and the notion that we are going to turn them into the likely
marketplace where a profit is squeezed out of the system is,
candidly, not a particularly credible one.
Mr. Hinojosa. Well, thank you for answering my question.
I want to tell you that I have come to Congress and I make
many of my decisions based on experience and from what I learn
from my colleagues.
But I can tell you that, in the region that I come from,
from 1974 to 1994 we depended on proprietary schools. We had a
double-digit unemployment rate that ranged from 20 to 25
percent in an area that today has one and a quarter million
people. We decided that we were going to invest in a community
college, South Texas Community College. In just 10 years, it
has gone from less than 1,000 students to 16,000 students. The
result has been that we have attracted manufacturing companies
into our area and that unemployment of 21, 22 percent when I
was sworn in is now 10.5 percent. They are telling us that we
are producing a trained workforce where, with the proprietary
schools that we had, for that 20-year period where we put so
much emphasis on them we just could not beat that double-digit,
huge, very high unemployment rate.
So I have concerns about how this would impact community
colleges and most of our universities and particularly, yes,
HSIs and HBCUs. In 1996, we were getting $10 million to recruit
Hispanics into colleges. Today, we get $95 million. Where we
used to serve 34 universities with HSI money in 1996, today we
serve a little over a hundred, but we have 250 of those
identified HSIs. So, as you can see, there isn't enough money
in the system today, at least not for education. There is for
many other things but not for this, and so we have to fight
that this money is not diluted and taken away from those that
are now beginning to show us some good results after 10 years.
With that, I yield back, Mr. Chairman.
Mr. McKeon. Thank you. And the gentleman will remember that
last reauthorization we helped you to get the special title for
HSI, and I have been very supportive of reaching out to the
Hispanics and helping them in their education.
One thing that disturbs me--and it sounds like we are kind
of getting to where we are fighting between proprietary and
community college. I have been a strong supporter of community
college. That is not the issue, and that is why I asked the
question: If we took the money out of that equation, do we have
the problem with the single definition? And I think we need to
remember that.
This bill--we will, I am sure, have some changes as we go
through the process. But I think that Mr. Moore pointed out
that he probably wouldn't even compete for those funds.
What we are talking about, last year, we provided--the
Federal Government and the lending institutions provided $70
billion for higher education across the country. Title III was
how much? $95 million? $100 million? Between Title III and
Title V we are talking about $200 million out of $70 billion.
So I think we--and if we took that money out of it, you know, I
think we could work this out.
Mr. Wu.
Mr. Wu. Thank you, Mr. Chairman.
I understand that with Mr. Hinojosa's inquiry we might be
coming around to the single-definition issue for a third time
in this hearing. But I am just trying to drill down and try to
understand this a little bit better, because I did have someone
come to my office after the person had visited Mr. Hinojosa.
Some of the arguments on either side of this issue I find
less illuminating than I would like. Because on the community
college side the argument seems to be that there is a thinning
of the soup, and we don't want to thin the soup any further;
and on the other side of this issue, there is the argument that
Mr. Hinojosa similarly found not completely convincing which
was to cast this as a civil rights issue.
I would like to just give you all an opportunity again to
further address this single-definition issue, and I would like
to throw it back to the panel with this additional inquiry, and
that is, if we were to hold current institutions harmless in
terms of thinning the soup, how much additional resources would
we have to throw in in order to keep the soup, if you will, of
the same consistency?
I would like to ask that question but also just give you
all a further chance to address the single-definition issue and
include Dr. Letteney and Mr. Nassirian and Mr. Moore to give
you all--but all four of you a chance to address this, if you
would like.
Mr. Rosen. Well, I can start off by saying I would join
with Mr. Moore and say I can't imagine that we would be seeking
the Title III or Title V funds. It is just so unlikely as to be
hard to imagine. So, for us, it is much more an issue of
simplifying--to call it a civil rights issue is way overstating
it. But to say that--
Mr. Wu. Well, that wasn't my characterization. That was the
characterization of someone who came to my office, allegedly to
speak on behalf of proprietary schools.
Mr. Rosen. Well, OK. Then I disagree with that
characterization.
It is one of differential treatment, and that is a real
issue. But it is mainly a symbolic issue, and it also is an
issue of confusion. That is, there are a number of States that
follow the Federal definition, and I have talked to legislators
who don't even realize that they are excluding important
elements of their local economies because they don't realize
that for-profit institutions are not included in State
definitions. So I think there is just confusion surrounding it.
When it gets to the actual funding, each funding program
has its own definitions, its own mission; and some of them are
institutionally based. Unlike the Title IV funds which follow
the students, some of these are about institutions; and I think
that within the definition of the programs we can talk about
which institutions are appropriate to get the money.
Dr. Letteney. Mr. Chairman, Representative Wu, I think one
of the issues that we are concerned about is not only the
extension of for-profits to apply for Title III and Title V
funds--and according to my information, the expenditures in
Title III were $81 million this year--
Mr. Wu. I am sorry. Could you repeat that?
Dr. Letteney.--and in Title V, $94 million.
Mr. Wu. What was the first one?
Dr. Letteney. $81 in Title III and $94 in Title V.
So, I mean, by your definitions that may not be a lot of
money. I mean, to some of us that is a lot of money.
Mr. McKeon. If the gentlelady will yield--if the gentleman
will yield, I didn't want to refer it. I have not been here
long enough yet to say $190 million is not a lot of money. I
said, in proportion to the $70 billion that we put into the
program. There has been no argument between moving Pell Grants
from student--you know, following the student. But, again--
Dr. Letteney. I think one of our major concerns about this
issue is what we have talked about before, its unintended
consequences. We do not know how many programs--how many
legislative programs would then be open to for-profit
institutions because a list has not been made available. So
that analysis, as far as our association knows, has not been
done yet. We assume that NSF grant funds would be available,
would be open, health and human services grants would be open,
we assume that grants in other Federal programs would be open,
but we don't know that this research has been done yet, and we
don't know that other Committees who have jurisdiction under
these other grant programs are even aware of the impact of the
change of this definition.
Mr. Wu. Mr. Chairman, with your indulgence, I would like to
give Mr. Nassirian and Mr. Moore a chance to answer the
question, even though my time has expired.
Mr. Nassirian. Mr. Wu, beyond the redistributive effect,
there is sort of an extremism to what the pending legislation
does which is susceptible to compromise. I think the Chairman
might have misspoken when he suggested that the bill limits the
definition to degree granting. I think that would be something
we could all kind of coalesce around after some discussion. But
the bill, as drafted, and I am reading it right now, does in
fact allow programs that are not shorter than 1 year--
Mr. McKeon. Degree granting for Title III and V.
Mr. Nassirian. I am speaking about the single definition,
not so much participation in III and V but in general. The
concept of calling--
Mr. McKeon. As currently written, single definition only
applies--I mean, for III and V, it would have to be degree-
granting institutions.
Mr. Nassirian. Correct. But I think the issue was whether
we can support--whether--leaving monetary redistributive
effects aside, whether the definition as such is agreeable. And
I respectfully submit to you that a 1-year nondegree granting
certificate program shouldn't be called an institution of
higher education. It should be called what it is. I mean, why
do we want to do violence to the language? I don't think that
is the intent.
If there is nothing but a matter of substantive change that
is justified on the basis of real analogous sort of programs
being offered in two different settings, certainly that can be
called an institution of higher education. But the bill as
currently written defines institution of higher education a
little too broadly, and it should be perhaps whittled down to
something that we can all support.
Mr. Moore. A major source of funding for universities and
colleges from Harvard to Cal State Fullerton--not to pick on
Fullerton--are less than 1- year certificates that are granted
out of their graduate schools. Are we suggesting that because
they are less than 1 year that we are going to eliminate those
programs from the provisions of Title III and V? And obviously
we are not.
The issue here has little to do with the nature of the
institution. Somehow we have gotten ourselves adrift here. We
are trying to do a comparison between the value of community
colleges versus for-profit schools, versus others; and that is
not the purpose of what this bill is. This bill is to look at
providing access to low-income and middle-income students that
otherwise are being denied access to an education because of
financial reasons. There could be 10,000 other reasons why they
can't get there, but the purpose of this bill is to deal with
the financial support for those students. So the purpose of
what we are dealing with is to provide that access.
Now, if, in fact, providing that access to a student means
that there is enough students attending a for-profit school to
make those students eligible for a program not currently there
and that school wants to apply for that grant fund, I don't
know why they should be denied it. But, as I said earlier,
frankly I can't imagine any for-profit school turning to that
as a source for infrastructure money. That is all it can be
used for when there is other sources.
Not to brag, but I have a $230 million line of credit that
I can write checks on any time I want. That is more than the
entire entitlement that the Chairman is talking about. So why
would I be concerned about trying to draw down Federal monies
to support my development? And I am one of the smaller
companies in the sector.
So I think we are allowing a certain amount of emotion
about damaging somebody who isn't going to be damaged, at the
same time denying the opportunity to protect students who,
simply because they are low-income, taking aside any kind of
discriminatory issue, just the fact that they are low-income,
they are not eligible for a program that they ought to be
eligible for. So, you know, it is purpose, purpose, purpose.
What we are talking about here is student access and providing
equal access to students across a variety of menus, which
includes for-profit, community colleges, endowment-supported
schools and tax-supported schools.
Mr. Wu. I thank you for your forbearance, Mr. Chairman, and
thank the panel for its answers. I am afraid I am in a markup
right now and have just been notified I have missed at least
one vote up over there, so if you will excuse me. Thank you,
Mr. Chairman.
Mr. McKeon. Well, thank you very much; and I want to thank
the witnesses. I think it has been very enlightening, I think
it has been very productive, and I hope we will be able to, as
we move forward, continue to have more of these--you want a UC
request?
Mr. Kildee. Yes, Mr. Chairman. I ask unanimous consent that
a letter from the American Federation of Teachers be included
in the record of this hearing.
Mr. McKeon. No objection. So ordered.
[The information referred to follows:]
Letter from the American Federation of Teachers
June 16, 2004
The Honorable George Miller
Ranking Member
Committee on Education and the Workforce
United States House of Representatives
2101 Rayburn House Office Building
Washington, DC 20515-6100
Dear Representative Miller:
On behalf of the 1.3 million members of the American Federation of
Teachers (AFT), including the 130,000 higher education professionals, I
write to express our strong opposition to specific provisions in H. R.
4283, the College Access and Opportunity Act of 2004, which are the
focus of today's hearing on for-profit institutions. We appreciate the
opportunity to share our views with you.
In general, the AFT believes this legislation falls short of the
historical mission of the Higher Education Act (HEA), which since 1965
has opened the doors to higher education for students regardless of
their financial circumstances. Unfortunately, H. R. 4283 exacerbates
existing deficiencies in the HEA rather than improving current law.
In addition to the lack of increase in the Pell Grant or any
support for the growing nontraditional student population, the AFT is
concerned with the attention given to for-profit institutions.
Unfortunately, H. R. 4283 promotes the financial interests of the for-
profit higher education industry at the expense of the needs of
students. This is evident in the proposal to change rules and
definitions that would open more federal dollars to for-profit
institutions. For more than a decade, these guidelines have ensured
that student and institutional aid goes to low- and middle-income
students, while also protecting our federal financial-aid system from
fraud and abuse.
H. R. 4283 calls for a ``single definition'' of an institution of
higher education (IHE). This would make all IHEs, including for-profit
institutions, eligible for Title IV programs that currently provide
institutional aid to public and private nonprofit colleges and
universities serving large numbers of minority and other nontraditional
students. Under current law, many for-profits are not eligible to
participate in these programs.
In addition, the bill would repeal a legal provision that prohibits
students who attend institutions offering more than half their
coursework by distance education from receiving federal student aid.
The AFT joins other higher education associations representing faculty
and administrators in opposing changing this 50 percent rule, which has
served to ensure integrity in federal student financial-aid programs
and promote ``face-to-face'' interaction as part of a student's college
education. It is well established that current funding for public
colleges and universities, as well as for federal student aid, is
inadequate. Making a new universe of institutions eligible for student
aid, as suggested in H. R. 4283, without imposing safeguards aimed at
preventing fraud and abuse would be highly irresponsible.
The AFT believes that the federal government should collect more
information and study the impact of lifting the 50 percent rule before
considering such a dramatic change. We support comprehensive research
that evaluates the quality of distance learning, the students it is
serving, and how federal aid programs will be affected by the expansion
of student-aid eligibility to distance learning. We believe Congress
needs to address these and other relevant questions before moving in
this direction.
Finally, we oppose the lifting of the so-called 90/ 10 Rule which
mandates that for-profit schools demonstrate that 10 percent of their
revenue is derived from sources other than federal student-aid funds.
The 90/10 Rule was put into effect to ensure that federal student aid
was not the sole funding stream for these schools. As a result of the
implementation of that rule, fraud and abuse in federal student aid
programs were drastically reduced. There is no evidence to believe this
protection is no longer necessary.
The AFT believes that the current HEA reauthorization represents a
tremendous opportunity to improve access to higher education for
America's low- and middle-income students. It should not be reduced to
an exercise in improving access to federal aid for private
entrepreneurs. To this end, we look forward to working with you on
these issues of great importance to AFT higher education professionals
and the students they serve. If you have further questions, please
contact me or Gabriella Games of the AFT legislative staff at (202)
879-4452.
Thank you for considering our views on H. R. 4283.
Sincerely,
Charlotte J. Fraas
Director, Legislation Department
American Federation of Teachers
______
Mr. McKeon. Thank you very much for being here, and this
hearing is now adjourned.
[Whereupon, at 1 p.m., the Committee was adjourned.]
[Additional material submitted for the record follows:]
Press Release from Hon. George Miller, Ranking Member, Committee on
Education and the Workforce
FOR IMMEDIATE RELEASE: Wednesday, June 16, 2004
CONTACT: 202-225-2095, Tom Kiley or Daniel Weiss
REPUBLICAN HIGHER EDUCATION BILL REMOVES BARRIERS TO FRAUD & WASTE,
SAYS REP. MILLER
WASHINGTON, D.C.--Rep. George Miller (D-CA), the senior Democrat on
the House education committee, today issued the following statement on
Republican higher education proposals that would eliminate safeguards
against fraud and waste at for-profit institutions of higher education.
These proposals were the focus of a full committee hearing this
morning.
``Today's hearing focuses on the significant changes that the
College Access and Opportunity Act, H.R. 4283, makes to institutional
integrity provisions under current law.
``In particular, this hearing focuses on for-profit schools and
asks whether or not students at these institutions receive equitable
treatment. Under current law, all eligible students are treated
equitably, regardless of whether they attend a for-profit or non-profit
institution.
``Therefore, the real question we should be asking is: `What is the
right balance between granting schools flexibility and ensuring that
the appropriate safeguards are in place to protect student and
taxpayers from fraud and abuse?'
``For-profit institutions have participated in the federal student
aid programs for more than 30 years. They have been the forerunners of
many innovations-such as on-line courses, accelerated course time and
flexible scheduling for non-traditional students-that have been
instrumental to increasing access to higher education for students.
``The same business model that allows for-profit schools to
innovate can also breed the types of rampant fraud and abuse that
occurred in the 1980s and early 1990s, absent sensible safeguards. As a
result of these widely documented abuses and ballooning student loan
default rates, in 1992 Congress enacted a series of protections and
integrity measures to safeguard students and taxpayers.
``The good news is that when appropriately enforced by the
Department of Education, these protections have successfully stopped
most fraudulent and abusive practices in the student aid programs. The
bad news is that, although significant problems still exist, many of
these protections have been substantially weakened. The College Access
and Opportunity Act indiscriminately eliminates key safeguards such as
the 90-10 Rule.
``In addition, for the first time the Act makes limited federal
funds for minority serving institutions-with dedicated public interest
missions-available to for-profit entities. As a result, funding long
reserved for community colleges and Minority Serving Institutions will
be cut, just at a time when these schools are struggling to meet the
needs of their growing populations.
``I support easing the transfer of credit process for all students
at both for-profit and non-profit schools. However, the Republican bill
makes changes to the transfer of academic credit that could result in
students losing financial aid eligibility and hurt the integrity of the
transfer process.
``Flexibility and innovation in higher education must be balanced
against the danger of repeating past abuses, otherwise we will end up
placing students in harm's way and wasting taxpayer dollars.
``Unfortunately, the College Access and Opportunity Act not only
eliminates important fraud and abuse safeguards in the student aid
programs, but it doesn't even come close to living up to its name.
Instead it makes college more expensive for millions of low- and
middle-income students and their families as they continue to struggle
to cover rising college costs.
``This bill actually forces students to pay thousands of dollars
more for their college loans, caps the maximum Pell Grant and fails to
provide meaningful relief from rising tuition prices. At a time of
rising college costs, high unemployment and the worst job creation
record in 30 years, we should not be forcing students and their
families to pay more for a college education.
``We should not and we cannot afford to take this path. I urge my
colleagues to reject this bill as it is now drafted.''
______
Statement of Hon. Charlie Norwood, a Representative in Congress from
the State of Georgia
Mr. Chairman, I thank you for holding today's hearing to further
examine the many important issues facing higher education today, and
more specifically, to explore the evolving issues that impact students
who attend proprietary institutions of higher learning. The Committee
on Education and the Workforce has an excellent opportunity to increase
equity for every American student seeking higher education as we
continue the reauthorization process for the Higher Education Act
(HEA), and I appreciate the opportunity to learn from today's
extraordinary panel of witnesses in shedding additional light on how
the College Access and Opportunity Act (H.R. 4283) can achieve that
goal.
Mr. Chairman in today's rapidly changing economy that relies on a
highly trained and technologically advanced workforce, many students
are charting a different course to obtain an education that will
prepare them for the jobs of the future. And while traditional four and
two-year public schools continue to play a critical role in
contributing to the 21st Century workforce, proprietary institutions
throughout America are playing an increasing role every year in
educating our emerging young leaders. Many such students choose to
study at proprietary institutions that focus chiefly on technology and
vocational skills. Still others focus on arts and the humanities. Yet
regardless of their focus, these fully accredited for-profit
institutions offer an attractive alternative to traditional public
universities for American students today.
Yet many questions remain unanswered regarding federal higher
education policy and how it currently serves students who choose to
attend a proprietary school. Does the federal government treat these
students fairly and equitably? Are they receiving their fair-share of
federal higher education funding that will contribute to their academic
achievement? Should Congress change long-standing federal policy in
order to allow for-profit institutions to apply for competitive grants
within HEA?
In reauthorizing the HEA for the next six years, the College Access
and Opportunity Act (H.R. 4283) tackles these questions head on by
dramatically altering federal policy in regards to proprietary
institutions. Most notably, the legislation includes three provisions
that address institutional eligibility, distance education and
accreditation: implementation of a ``Single Definition'' of an
institution of higher learning, the repeal of the ``90-10 Rule'' for
proprietary schools and the repeal of the ``50% Rule'' for distance
education.
I look forward to hearing our witness' thoughts on these critical
issues that H.R. 4283 addresses. As this Committee continues to study
the HEA reauthorization, Congress must find an appropriate solution to
ensure equity and fairness for students attending proprietary schools;
yet it must do so without jeopardizing needed funding for students
attending traditional public schools.
Thank you Mr. Chairman and I yield back.
______
Statement of Hon. Jon Porter, a Representative in Congress from the
State of Nevada
Good Morning, Mr. Chairman. Thank you for convening this second
hearing on the committee's legislation to reduce the burdens and
eliminate the roadblocks facing our students as they attempt to achieve
post-secondary education. I also welcome our panel of witnesses today
and thank them for their testimony on the equality of access between
for-profit and non-profit schools and how this will change under the
proposed legislation.
Ensuring an environment where students, whether high school
graduates or adults attempting to enter different sectors of the
workforce, encounter equitable access to higher education is one of
this committee's highest priorities. As we continue to embrace today's
ever-globalizing and increasingly skill-based economy, we must provide
Americans with the access to high-quality and affordable post-secondary
education.
I look forward to hearing from our panel of witnesses today, as
they help clarify how current restrictions on proprietary institutions
impact student access to these schools that provide many with the
skills they need to progress in their current careers and pursue more
sophisticated and satisfying new occupations.
My state of Nevada provides a perfect example of the need to
utilize all avenues of education in bringing our workforce into the
twenty-first century. Our explosive population growth requires that all
Nevadans are able to find the training and resources necessary to excel
in the knowledge-based economy in which they find themselves. We must
look to both proprietary and traditional colleges and institutions of
higher learning to provide our workforce with the highly-skilled,
professional individuals that will allow for Nevada's, and America's,
continued economic and industrial growth.
Mr. Chairman, I look forward to the testimony of our distinguished
panel and look forward to continuing the work that our committee does
in preparing Americans for the workforce that they will confront today
and the years to come.
______
Statement of American Association of Collegiate Registrars and
Admissions Officers, the American Council on Education, and the Council
for Higher Education Accreditation
The following set of guidelines has been developed by the three
national associations whose member institutions are directly involved
in the transfer and award of academic credit: the American Association
of Collegiate Registrars and Admissions Officers, the American Council
on Education, and the Council for Higher Education Accreditation. The
need for such a statement came from an awareness of the growing
complexity of transfer policies and practices, which have been brought
about, in part, by the changing nature of postsecondary education. With
increasing frequency, students are pursuing their education in a
variety of institutional and extrainstitutional settings. Social equity
and the intelligent use of resources require that validated learning be
recognized wherever it takes place.
The statement is thus intended to serve as a guide for institutions
developing or reviewing policies dealing with transfer, acceptance and
award of credit. ``Transfer'' as used here refers to the movement of
students from one college, university or other education provider to
another and to the process by which credits representing educational
experiences, courses, degrees or credentials that are awarded by an
education provider are accepted or not accepted by a receiving
institution.
Basic Assumptions
This statement is directed to institutions of postsecondary
education and others concerned with the transfer of academic credit
among institutions and the award of academic credit for learning that
takes place at another institution or education provider. Basic to this
statement is the principle that each institution is responsible for
determining its own policies and practices with regard to the transfer,
acceptance, and award of credit. Institutions are encouraged to review
their policies and practices periodically to assure that they
accomplish the institutions' objectives and that they function in a
manner that is fair and equitable to students. General statements of
policy such as this one or others referred to, should be used as
guides, not as substitutes, for institutional policies and practices.
Transfer and award of credit is a concept that increasingly
involves transfer between dissimilar institutions and curricula and
recognition of extra-institutional learning, as well as transfer
between institutions and curricula with similar characteristics. As
their personal circumstances and educational objectives change,
students seek to have their learning, wherever and however attained,
recognized by institutions where they enroll for further study. It is
important for reasons of social equity and educational effectiveness
for all institutions to develop reasonable and definitive policies and
procedures for acceptance of such learning experiences, as well as for
the transfer of credits earned at another institution. Such policies
and procedures should provide maximum consideration for the individual
student who has changed institutions or objectives. It is the receiving
institution's responsibility to provide reasonable and definitive
policies and procedures for determining a student's knowledge in
required subject areas. All sending institutions have a responsibility
to furnish transcripts and other documents necessary for a receiving
institution to judge the quality and quantity of the student's work.
Institutions also have a responsibility to advise the student that the
work reflected on the transcript may or may not be accepted by a
receiving institution as bearing the same (or any) credits as those
awarded by the provider institution, or that the credits awarded will
be applicable to the academic credential the student is pursuing.
Inter-Institutional Transfer of Credit
Transfer of credit from one institution to another involves at
least three considerations:
(1) the educational quality of the learning experience which the
student transfers;
(2) the comparability of the nature, content, and level of the
learning experience to that offered by the receiving institution; and
(3) the appropriateness and applicability of the learning
experience to the programs offered by the receiving institution, in
light of the student's educational goals.
Accredited Institutions
Accreditation speaks primarily to the first of these
considerations, serving as the basic indicator that an institution
meets certain minimum standards. Users of accreditation are urged to
give careful attention to the accreditation conferred by accrediting
bodies recognized by the Council for Higher Education Accreditation
(CHEA). CHEA has a formal process of recognition which requires that
all accrediting bodies so recognized must meet the same standards.
Under these standards, CHEA has recognized a number of accrediting
bodies, including:
(1) regional accrediting commissions (which historically accredited
the more traditional colleges and universities but which now accredit
proprietary, vocational-technical, distance learning providers, and
single-purpose institutions as well);
(2) national accrediting bodies that accredit various kinds of
specialized institutions, including distance learning providers and
freestanding professional schools; and
(3) professional organizations that accredit programs within
multipurpose institutions.
Although accrediting agencies vary in the ways they are organized
and in their statements of scope and mission, all accrediting bodies
that meet CHEA's standards for recognition function to ensure that the
institutions or programs they accredit have met generally accepted
minimum standards for accreditation.
Accreditation thus affords reason for confidence in an
institution's or a program's purposes, in the appropriateness of its
resources and plans for carrying out these purposes, and in its
effectiveness in accomplishing its goals, insofar as these things can
be judged. Accreditation speaks to the probability, but does not
guarantee, that students have met acceptable standards of educational
accomplishment.
Comparability and Applicability
Comparability of the nature, content, and level of transfer credit
and the appropriateness and applicability of the credit earned to
programs offered by the receiving institution are as important in the
evaluation process as the accreditation status of the institution at
which the transfer credit was awarded. Since accreditation does not
address these questions, this information must be obtained from
catalogues and other materials and from direct contact between
knowledgeable and experienced faculty and staff at both the receiving
and sending institutions. When such considerations as comparability and
appropriateness of credit are satisfied, however, the receiving
institution should have reasonable confidence that students from
accredited institutions are qualified to undertake the receiving
institution's educational program. In its articulation and transfer
policies, the institution should judge courses, programs and other
learning experiences on their learning outcomes, and the existence of
valid evaluation measures, including third-party expert review, and not
on modes of delivery.
Admissions and Degree Purposes
At some institutions there may be differences between the
acceptance of credit for admission purposes and the applicability of
credit for degree purposes. A receiving institution may accept previous
work, place a credit value on it, and enter it on the transcript.
However, that previous work, because of its nature and not its inherent
quality, may be determined to have no applicability to a specific
degree to be pursued by the student. Institutions have a responsibility
to make this distinction, and its implications, clear to students
before they decide to enroll. This should be a matter of full
disclosure, with the best interests of the student in mind.
Institutions also should make every reasonable effort to reduce the gap
between credits accepted and credits applied toward an educational
credential.
Additional Criteria for Transfer Decisions
The following additional criteria are offered to assist
institutions, accreditors and higher education associations in future
transfer decisions. These criteria are intended to sustain academic
quality in an environment of more varied transfer, assure consistency
of transfer practice, and encourage appropriate accountability about
transfer policy and practice.
Balance in the Use of Accreditation Status in Transfer Decisions.
Institutions and accreditors need to assure that transfer decisions are
not made solely on the source of accreditation of a sending program or
institution. While acknowledging that accreditation is an important
factor, receiving institutions ought to make clear their institutional
reasons for accepting or not accepting credits that students seek to
transfer. Students should have reasonable explanations about how work
offered for credit is or is not of sufficient quality when compared
with the receiving institution and how work is or is not comparable
with curricula and standards to meet degree requirements of the
receiving institution.
Consistency. Institutions and accreditors need to reaffirm that the
considerations that inform transfer decisions are applied consistently
in the context of changing student attendance patterns (students likely
to engage in more transfer) and emerging new providers of higher
education (new sources of credits and experience to be evaluated). New
providers and new attendance patterns increase the number and type of
transfer issues that institutions will address--making consistency even
more important in the future.
Accountability for Effective Public Communication. Institutions and
accreditors need to assure that students and the public are fully and
accurately informed about their respective transfer policies and
practices. The public has a significant interest in higher education's
effective management of transfer, especially in an environment of
expanding access and mobility. Public funding is routinely provided to
colleges and universities. This funding is accompanied by public
expectations that the transfer process is built on a strong commitment
to fairness and efficiency.
Commitment to Address Innovation. Institutions and accreditors need
to be flexible and open in considering alternative approaches to
managing transfer when these approaches will benefit students. Distance
learning and other applications of technology generate alternative
approaches to many functions of colleges and universities. Transfer is
inevitably among these.
Foreign Institutions
In most cases, foreign institutions are chartered and authorized to
grant degrees by their national governments, usually through a Ministry
of Education or similar appropriate ministerial body. No other nation
has a system comparable with voluntary accreditation as it exists in
the United States. At an operational level, AACRAO's Office of
International Education Services can assist institutions by providing
general or specific guidelines on admission and placement of foreign
students, or by providing evaluations of foreign educational
credentials.
Evaluation of Extra-Institutional and Experiential Learning
for Purposes of Transfer and Award of Credit
Transfer and award of credit policies should encompass educational
accomplishment attained in extra-institutional settings. In deciding on
the award of credit for extra-institutional learning, institutions will
find the services of the American Council on Education's Center for
Adult Learning and Educational Credentials helpful. One of the Center's
functions is to operate and foster programs to determine credit
equivalencies for various modes of extrainstitutional learning. The
Center maintains evaluation programs for formal courses offered by the
military and civilian organizations such as business, corporations,
government agencies, training providers, institutes, and labor unions.
Evaluation services are also available for examination programs, for
occupations with validated job proficiency evaluation systems, and for
correspondence courses offered by schools accredited by the Distance
Education and Training Council. The results are published in a Guide
series. Another resource is the General Educational Development (GED)
Testing Program, which provides a means for assessing high school
equivalency.
For learning that has not been evaluated through the ACE evaluation
processes, institutions are encouraged to explore the Council for Adult
and Experiential Learning (CAEL) procedures and processes.
Uses of This Statement
Institutions are encouraged to use this statement as a basis for
discussions in developing or reviewing institutional policies with
regards to the transfer and award of credit. If the statement reflects
an institution's policies, that institution may wish to use these
guidelines to inform faculty, staff, and students.
It is also recommended that accrediting bodies reflect the
essential precepts of this statement in their criteria.
American Association of Collegiate Registrars and Admissions Officers
American Council on Education
Council for Higher Education Accreditation
______
Statement of Rolf Th. Lundberg, Jr., Senior Vice President,
Congressional and Public Affairs, United States Chamber of Commerce on
behalf of The Coalition for a Competitive American Workforce
Mr. Chairman, Mr. Miller and members of the Committee, I am
grateful for the opportunity to offer my thoughts, on behalf of the
U.S. Chamber's Coalition for a Competitive American Workforce,
regarding the inequities in the Higher Education Act of 1965, as
amended (HEA), as well as the proposed modifications outlined in H.R.
4283, ``The College Access and Opportunity Act''.
In order to provide some context for my comments, it is important
to begin by discussing the challenges employees and employers face, as
they strive to build and maintain a competitive American workforce.
Across America, employers of all sizes share the view that a
skilled workforce is essential to maintaining competitiveness. A
business' quality, productivity and profitability depends upon its
ability to hire, train and retain qualified workers, who can perform on
the job today and adapt to the new demands of tomorrow. It should
concern us that State and local chambers of commerce report that
workforce development is consistently among the top three problems for
their business members.
Over the past three years, The U.S. Chamber's Center for Workforce
Preparation has conducted surveys of small and medium-sized businesses.
These surveys found that employers are experiencing difficulty in
finding qualified workers due to the lack of skills possessed by job
applicants. Even more revealing were employers' responses when asked
about the ability of their current workforce to meet their future skill
requirements. About 30% of the employers surveyed indicated that,
within two years, their employees' skills would be outpaced by
competitive demands.
Technology, demographics and diversity have brought far-reaching
changes to the U.S. economy and the workplace, increasing demand for a
well-educated and highly skilled workforce. In 1950, eighty percent of
jobs were classified as ``unskilled''; today, an estimated eighty-five
percent of all jobs are classified as ``skilled''. Today, few working
adults have the education and skills required for the knowledge
economy--only 40 percent of adults in the workforce in 2000 had any
postsecondary degree, associate or higher. In this decade 40 percent of
job growth will be in jobs requiring postsecondary education; those
requiring associate degrees growing the fastest. Hedrick Smith states
that, ``60% of our corporations are prevented from upgrading
technologically by the low...educational and technical skill levels of
our workers.'' Clearly, there is a greater need for more educated and
highly skilled workers than ever before.
One might think the answer lies in simply replacing unqualified
workers with new, more qualified workers because that has been the
response over the past twenty years. From 1980 to 2000, the size and
skill of the workforce grew significantly. Baby boomers were in their
prime employment years, women entered the labor force in large numbers,
and the number of college-educated workers more than doubled. However,
these trends have ended.
The native-born workforce is aging--no new net growth is expected
through 2020 in prime age workers. Immigrants and those workers
remaining in the workforce longer than expected will account for all
net workforce growth between now and 2020. Between the years 1980 and
2000, growth in workers with education beyond high school was 138%.
Between 2000 and 2020 it is projected to be only 19%. Most of the 2020
workforce is already beyond reach of the K-12 system, which means
employers and workers will need to rely on postsecondary education to
upgrade skills.
These findings suggest the severity of the current workforce
challenges is just a precursor to a disconcerting future. It is
estimated that sixty percent of tomorrow's jobs, while involving
variations of current business operations and practices, will continue
to reflect the rapid advance of technology, requiring skills that are
only possessed by twenty percent of today's workers. Many of tomorrow's
jobs--estimated at forty percent--don't exist today. These jobs will
most certainly require a workforce of highly educated workers,
utilizing skills that have not yet been identified in fields and
operations that today are only being discussed in theory. These
forecasts have led experts and analysts to project that in the future,
4 out of every 5 jobs will require postsecondary education or
equivalent training and that seventy-five percent of the today's
workforce will need to be retrained just to keep their current jobs.
However, if we are to correct these deficiencies, remedy the
current workforce dilemma and alleviate the threat to American
competitiveness and our economy, it is not enough to just consider the
challenges confronting employers. It is critical that we also have an
accurate understanding of the make-up of our workforce, appreciate
current and prospective employees' needs and recognize the obstacles
workers and students encounter in the pursuit of their own dreams and
career aspirations.
Seventy-three percent of all postsecondary students are non-
traditional students. That is to say, they are not individuals who
graduate from high school, immediately attend a four-year college or
university and depend on their parents for financial support. This
large and growing segment of our population is mostly comprised of
working adults who are seeking additional education and training to
return to the workforce, remain current in their field, increase their
earnings potential, pursue another job or consider a career change in
today's demanding economy.
During 1999-2000 almost three quarters of American undergraduates
were non-traditional in some way:
More than half (51%) were financially independent
Almost half (46%) delayed enrolling in college
39% were adults 25 years of age or older
Almost half attended part-time (48%)
39% worked full time
Just over one-fifth (22%) had dependents; 13% were single
parents.
In 1999-2000 most non-traditional students (82%) age 24 or older
worked. Over 80 percent report that gaining skills to advance their
current job or future career was an important consideration in their
postsecondary education. Roughly one-third enrolled to obtain
additional education required by their jobs.
From 1991 to 1999, the number of adults participating in some form
of education increased from 58 million to 90 million. Almost 45 million
were taking work-related courses and 18 million were seeking formal
postsecondary credentials during this same period.
When the Higher Education Act was enacted in 1965, a recognized
purpose of the Act was the development of the workforce directly out of
high school. These policies did not anticipate the role postsecondary
education would have in the ongoing advancement of working adults.
To a greater extent than ever before, employers and workers are
relying on postsecondary education to address the ever-increasing skill
demands of a competitive American economy.
Yet, many of our higher education policies and institutions only
focus on the needs of traditional students, and, in doing so, these
policies and our colleges and universities are failing the non-
traditional and working adult students as well as one of the principal
purposes of the Higher Education Act.
Working adults are trying to balance careers, family
responsibilities, financial and other personal obligations to get the
education they need to advance in the workforce. They often cannot
afford to reduce their hours on the job and risk losing valuable wages
while incurring additional expenses, such as tuition and childcare.
Similarly, at the same time that employers need their employees to
keep pace with the escalating skill demands of the workplace, they are
not able to interrupt their operations for employees who are attending
classes that make them unavailable during normal business hours. This
is particularly true for small and medium-sized businesses.
With longer workweeks, there is limited time for education and
training, and employees find it difficult to sustain even a part-time
commitment over a period of 15 weeks--the length of the traditional
college semester. It is understandable then that working adults and
their employers overwhelmingly prefer short, intensive programs
Employees and employers are seeking curriculums and training
programs that impart relevant knowledge and skills that have a
practical application in the workplace. The availability of flexible
and modularized programs is key to meeting these needs.
Mr. Chairman, any meaningful strategy to combat these workforce
challenges must begin with a comprehensive education and workforce
development system that incorporates the realities of a global economy.
We are already attempting to improve our K-12 system, making it more
competitive with other industrialized nations and leading to a more
knowledgeable and highly skilled American workforce in the coming
decades.
However, it is equally important to note that the deficiencies and
challenges within the existing workforce--individuals who are beyond
the reach of on-going K-12 initiatives--also demand immediate
attention. Absent a sustained investment in a comprehensive educational
system that is responsive to the needs of employers and their incumbent
workers, the American workforce will be ill-equipped to compete in the
global economy, American businesses will become less profitable and the
nation's economic security less certain.
It is, therefore, imperative that employees have access to
continuing education and training that is flexible and responsive to
the rapid changes in the marketplace. Lifetime education and training
is no longer an option, it is a necessity--for individuals, for
employers and for the economy.
The strength of America's postsecondary education system is the
diversity and types of institutions providing courses, programs and
training'' two and four year, public and private, and non-profit and
for profit. However, some institutions are better able than others to
provide coursework that is relevant to the workplace and to adjust more
quickly to the needs of employers with just-in-time training.
One example, of the more relevant, responsive and adaptable
institutions that have evolved to supply this demand for educated and
skilled employees and to rectify workforce deficiencies can be found in
the schools of the enterprising, market-oriented postsecondary
education and training companies. These private sector postsecondary
institutions have developed focused, market-responsive and innovative
approaches that result in immediate and effective improvements in the
workforce.
Proprietary postsecondary education companies offer working adults
access to quality, affordable, convenient and flexible educational
opportunities. In addition, the industry provides employers more
realistic options, such as the ability to work with proprietary
companies in a cooperative effort to develop timely, relevant and
flexible studies and programs, which address deficiencies and improve
the quality of their employees.
The Chamber has partnered with Corinthian Colleges, Inc., Capella,
Inc., DeVry Inc., and Kaplan, Inc. to form The Coalition for a
Competitive American Workforce (CCAW). The U.S. Chamber's partners in
CCAW are leaders among these market-oriented, innovative companies that
contribute to the nation's economic development. Like other private
enterprises, they operate to make a profit for their shareholders. They
employ thousands of instructors, job placement counselors, admissions
representatives, and other personnel. They pay federal, state and local
taxes. They have grown by accessing private and public capital markets
and by reinvesting the income generated from providing educational
services to students. Their success demonstrates how free enterprise
goals can harmonize with a public mission: to provide career-focused
degree and non-degree programs for students seeking educational and
economic advancement and to provide American business and industry with
a skilled and knowledgeable workforce.
Critical financing that enables individuals to pay for the
education and training offered by these companies comes from the
student financial assistance programs authorized by the HEA of 1965, as
amended (HEA). These programs include guaranteed student loans, direct
loans from the federal government, and Pell Grants for those with
substantial financial need. The HEA's goals of expanding access to
postsecondary education and training, improving its affordability, and
demanding accountability for institutions' use of the public's funds
match well with the focus and achievements of the members of the
Coalition.
The proprietary postsecondary education companies comprising the
membership of CCAW provide a vital means by which both those seeking to
enter the workforce and those needing to retrain or upgrade knowledge
and skills can better their lives.
However, a number of provisions in the HEA are outdated and impede
adult workers' access to education and training and limit the ability
of proprietary postsecondary education institutions to provide
innovative solutions to America's workforce needs. The reauthorization
of the HEA provides an opportunity, at a critical juncture in the
development of the economy, for the members of this Committee and this
Congress to modernize the Act to meet the new competitive demands of
the 21st century.
Mr. Chairman, your bill, H.R. 4283, includes four key modifications
to the HEA that will enable proprietary postsecondary educational
institutions to better serve non-traditional students, significantly
improving our nation's ability to maintain a competitive workforce and
helping to meet the new competitive demands of the 21st Century.
First, H.R. 4283 proposes to remove restrictions on the availability of
financial aid to students in online education programs.
The HEA currently equates online education with correspondence
schools and imposes arbitrary 50% rules that impede the offering of
fully online education programs. The Web-Based Education Commission,
the U.S. Department of Education, and Congress itself have all found
that online education is an effective method of delivery of education
and training that leverages the power of technology to create new
educational opportunities, especially for working adults who cannot
afford to stop their lives and to enroll in traditional colleges and
universities. CCAW supports the bills provision to remove the outmoded
restrictions in the HEA and opening up the student financial assistance
programs, with appropriate safeguards, to those who enroll in quality
online educational programs. The U.S. Chamber and members of CCAW
strongly support this provision. Removing this restriction will provide
working adults with more flexible and convenient options, making the
pursuit of necessary education and training more plausible.
Second, the Chairman's bill proposes to repeal the ``90-10'' rule.
The HEA requires for-profit enterprises, like the institutions
operated by the members of the Coalition, and them alone, to obtain at
least 10% of their revenues from sources other than the student
financial assistance programs. Non-profit and public institutions, even
though they are advantaged through favorable tax treatment and public
subsidies, are free to secure all their revenues from HEA programs.
This 90-10 Rule had the ostensible purpose of curbing abuses and
providing an indication of educational quality. Yet, however well
intentioned, the rule has created perverse and counterproductive
incentives that conflict with the HEA's aims. Experience under the rule
now clearly shows that it measures not institutional integrity and
quality, but the socio-economic status of students. Simply put, the
more needy an institution's students, the more they will qualify for
Pell Grants and other forms of financial aid. The more aid they
receive, however, the more the institution is at peril of violating the
90-10 Rule. The consequence of violating the rule is draconian: the
institution and its students cease to be eligible for the critical
financial aid programs. Thus, the rule incentivizes institutions either
not to serve the most needy students or to raise their tuition--results
that are contrary to the purposes of access and affordability in the
HEA. It is time to correct this inequity that penalizes those most in
need of the relevant and timely education and training provided by
proprietary postsecondary schools, and CCAW offers its enthusiastic
support for this overdue modification.
Third, H.R. 4283 increases loan limits and allows year-round
eligibility for Pell Grants.
Limits on the amount of loans that students may take out to finance
their education and training have not been increased in over ten years.
Furthermore, the HEA currently specifies loan limits for first and
second-year students that are significantly lower than the limits for
third and fourth-year students. First-year students are especially
affected, with a limit that is less than half that of third and fourth-
year students. Yet tuition is the same for all these students, and
students in the early stages of education and training need more and
not less help to ensure that they will succeed. Similarly, non-
traditional students, who are now the majority (73%), need access to
education and training on a year-round basis, not on the September-May
schedule of the traditional academy. Pell Grants should be available to
these students throughout the year. This modification will greatly
enhance educational opportunities for working adults and CCAW is
pleased this important change has been included in the proposed bill.
Fourth, the introduced bill modifies the definitions to treat for-
profit institutions and their students more equitably than
under current law.
The HEA currently has multiple definitions of institutions of
higher education and distinguishes for-profit from non-profit and
public institutions. These multiple definitions are a source of
confusion and fail to recognize the maturation of for-profit
institutions and the contributions they make to the education and
training of students. These distinctions and other unfounded
discriminatory practices also impede the ability of students to
transfer the credits they earned at for-profit institutions to other
institutions. The ability to transfer credits is more than a matter of
equity. By requiring students to retake courses, the cost of education
is driven up. And, the ability of the postsecondary educational system
to efficiently respond to workforce needs is constrained. For-profit
institutions should be recognized in the HEA as full and equal
participants in its programs, and anticompetitive rules and practices
should not be allowed to substitute for an examination of what students
have actually learned and achieved. CCAW is supportive of this
modification. The time has come to abolish this statutory distinction,
eliminating any perceived inferiority inferred by this outdated
distinction and treating proprietary postsecondary schools and their
students equitably.
Again, Mr. Chairman, I appreciate the opportunity to offer my
thoughts and comments on this important issue. On behalf of the U.S.
Chamber's Coalition for a Competitive American Workforce, I thank you
for holding this hearing and for continuing to shine a light on our
current workforce challenges and the consequences of these outdated
provisions of the HEA.
______
Statement of David Rhodes, President, School of Visual Arts,
Commissioner, Middle States Commission on Higher Education, and Vice
Chair, Regents Advisory Council on Institutional Accreditation, on
behalf of the Association of Proprietary Colleges
Mr. Chairman, I would like to thank you for this opportunity to
submit written testimony with respect to the Reauthorization of the
Higher Education Act.
My name is David Rhodes. I am President of the School of Visual
Arts (SVA), a specialized master's level institution of the State of
New York. I am also a Commissioner on the Middle States Commission on
Higher Education and Vice Chair of the Regents Advisory Council on
Institutional Accreditation. Both Middle States and the Regents are
recognized by the Department of Education as institutional accreditors
of institutions of higher education for Title IV purposes.
Today, I am representing the Association of Proprietary Colleges, a
group of some 30 degree granting institutions in the State of New York
recognized by the State as institutions of higher education.
What we seek today is the same recognition from the Federal
Government that we already receive from our own State Government. In
fact, what we seek today is simply recognition of reality--the reality
of the changes in higher education in the last 30 years and the reality
that an institution's corporate structure does not determine its status
as an institution of higher education. Rather, it is the institution's
programs, and their outcomes, which determine whether an institution is
recognized as a member of the higher education community. It should be
patently obvious to all that institutions which grant degrees at the
Associate, Bachelor's, Master's or Doctoral level and are accredited by
those accrediting bodies, such as the Middle States Association and the
New York State Board of Regents which are recognized by the Department
of Education as accreditors of institutions of higher education, should
be recognized as institutions of higher education by Congress.
What we are asking the Federal Government to do is follow the
example set by New York over thirty years ago. By way of history, in
1971 the Commissioner of Education, Ewald Nyquist, convinced the
Regents that what mattered was not corporate structure, but student
outcomes. If the outcomes were the same, all institutions should have
the same responsibilities and the same powers. This understanding was
incorporated into the Commissioner's Regulations. Soon after the State
Department of Education began a series of visits to those schools which
wanted to become degree granting. In all about 20 qualified based upon
the standards contained in Part 52 of the Commissioner's Regulations
and were able to begin issuing degrees. (Part 52 defines colleges and
what is required of them in New York State.) The powers under Part 52
are also broad enough that proprietary colleges are allowed to issue
honorary degrees, something heretofore reserved for colleges chartered
by the Regents. At the moment there are two proprietary colleges which
issue doctoral degrees.
The first immediate impact of being degree granting was the
inclusion of all of the degree institutions in the New York State
Tuition Assistance Program (TAP). On a personal note, I remember
receiving the phone call telling us we were in TAP. We had not applied,
but because we were degree granting, we were automatically included.
Over the years a two-tiered system of payments has developed. Non-
degree granting institutions have one set of payments (lower) and all
other institutions, public, independent and proprietary, have another
more generous payment table. The important thing is we are treated
identically with all other degree granting institutions.
Over the years the State has developed a number of initiatives to
help students graduate from high school and go to college. One of these
initiatives was modeled on Eugene Lang's famous offer to a class in the
elementary school from which he graduated. The Cuomo administration
placed the idea into law and called it the Liberty Partnership Program.
All degree granting institutions were eligible to apply. SVA has always
run one of the these programs and in fact ours is one of two in the
State which mentors students from junior high school through to college
admissions.
Finally, higher education in New York is divided into four sectors:
CUNY (City University of New York), SUNY (Sate University of New York),
CICU (Council of Independent Colleges and Invitees) and APC
(Association of Proprietary Colleges). Each sector has representatives
on the Commissioner's advisory task force and on the Advisory Board of
the Higher Education Services Corporation which is New York State's
Loan guarantor and administers the TAP program. As a sector we are also
required, as are the other sectors, to prepare a sector wide master
plan. In short, because New York State sees all degree granting
institutions as institutions of higher education, Proprietary Colleges
are included in all of the State's Higher Education activities.
We understand that the notion of single definition is controversial
for some because of the eligibility for titles other than Title IV.
There is a notion sometimes expressed that for-profit institutions are
somehow less worthy of governmental support than public or not-for-
profit institutions. This is a deeply ingrained prejudice, but one that
I hope you would agree, upon reflection, is wrong. This prejudice would
disappear if you were to think of these funds as contracts and not
grants. The Federal Government contracts with for-profit institutions
for all sorts of goods and services, the largest area, of course, being
military procurement, almost all of which is done with for-profit
entities. Various departments of government contract with universities,
public, private and proprietary, to provide services for a fixed number
of students, usually at a fixed price. The various titles are really no
different. The institutions applying for and receiving these contracts
(grants) are obligated to spend and invest these monies only in ways
that will benefit students. To use the monies in any other way would be
to violate the terms of the contract. Not all money is fungible.
By way of example, the current definition of Institution of Higher
Education precludes proprietary institutions of higher education from
participating in the contracting (granting) process of the Foundation
for the Improvement of Post Secondary Education (FIPSE). Because FIPSE
contracts (grants) specify how the money must be used and that it must
supplement, not supplant, existing funds, no one has ever suggested
that these monies were fungible. The same would be true with funds from
all of the other titles. Like FIPSE, the other titles are competitive
and the uses of funds clearly specified before they are released.
I would hope that this is sufficient to persuade you that
proprietary institutions of higher education, which are seeking
appropriate recognition from Congress, should not be accused of trying
to abuse the public purse.
Thank you again for this opportunity.