[Senate Hearing 109-126]
[From the U.S. Government Publishing Office]
S. Hrg. 109-126
PROVIDING QUALITY POSTSECONDARY EDUCATION: ACCESS AND ACCOUNTABILITY
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
ON
EXAMINING ACCESS AND ACCOUNTABILITY RELATING TO PROVIDING QUALITY
POSTSECONDARY EDUCATION, FOCUSING ON THE FEDERAL GOVERNMENT'S ROLE IN
MAKING POSTSECONDARY EDUCATION FINANCIALLY AVAILABLE FOR AMERICANS
__________
APRIL 28, 2005
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
MICHAEL B. ENZI, Wyoming, Chairman
JUDD GREGG, New Hampshire EDWARD M. KENNEDY, Massachusetts
BILL FRIST, Tennessee CHRISTOPHER J. DODD, Connecticut
LAMAR ALEXANDER, Tennessee TOM HARKIN, Iowa
RICHARD BURR, North Carolina BARBARA A. MIKULSKI, Maryland
JOHNNY ISAKSON, Georgia JAMES M. JEFFORDS (I), Vermont
MIKE DeWINE, Ohio JEFF BINGAMAN, New Mexico
JOHN ENSIGN, Nevada PATTY MURRAY, Washington
ORRIN G. HATCH, Utah JACK REED, Rhode Island
JEFF SESSIONS, Alabama HILLARY RODHAM CLINTON, New York
PAT ROBERTS, Kansas
Katherine Brunett McGuire, Staff Director
J. Michael Myers, Minority Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
STATEMENTS
Thursday, April 28, 2005
Page
Enzi, Hon. Michael B., Chairman, Committee on Health, Education,
Labor, and Pensions, opening statement......................... 1
Dodd, Hon. Christopher J., a U.S. Senator from the State of
Connecticut, opening statement................................. 7
Alexander, Hon. Lamar, a U.S. Senator from the State of
Tennessee, opening statement................................... 9
Haycock, Kati, director, Education Trust; Trninity Thorpe,
student, Pepperdine University; Brian Bothworth, president,
FutureWorks; Robert M. Shireman, director, the Institute for
College Access & Success, Inc.; and Phillip F. Van Horn,
chairman of the board and president, Wyoming Student Loan
Corporation, and president and ceo, Western States Learning
Corporation.................................................... 12
Prepared statements of
Ms. Haycock.............................................. 14
Overview of testimony by Ms. Haycock..................... 19
Ms. Thorpe............................................... 22
Mr. Bosworth............................................. 25
Mr. Shireman............................................. 35
Mr. Van Horn............................................. 43
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Response to questions of Senator Enzi by Kati Haycock........ 55
Response to questions of Senator Enzi by Trinity Thorpe...... 57
Response to questions of Senator Enzi by Brian Bosworth...... 57
Response to questions of Senator Enzi and Senator Murray by
Robert Shireman............................................ 62
Response to questions of Senator Enzi by Phillip F. Van Horn. 69
(iii)
PROVIDING QUALITY POSTSECONDARY EDUCATION: ACCESS AND ACCOUNTABILITY
----------
THURSDAY, APRIL 28, 2005
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:00 a.m., in
Room 430, Dirksen Senate Office Building, Senator Enzi,
chairman of the committee, presiding.
Present: Senators Enzi, Alexander, Burr, Dodd, Bingaman,
and Murray.
Opening Statement of Senator Enzi
The Chairman. Good morning. I call the hearing to order. I
want to thank the witnesses for participating in today's
hearing.
It has been 40 years since Congress first enacted the
Higher Education Act. During that time this important program
has provided billions of dollars in student financial
assistance to millions of students. I am pleased to be able to
hold this hearing as we continue the process of reauthorizing
the Higher Education Act. In fact, there is no better way to
mark the 40th anniversary of the enactment of this legislation
than by continuing the Federal commitment to postsecondary
education and every student's dream of a higher education.
The American postsecondary education is renowned throughout
the world. More than 6,000 colleges and universities enroll
more than 14 million students, providing access to all types of
academic and training programs. We are doing our part in
Wyoming but we only have a handful of the total. We have only
one 4-year university and 7 community colleges. The recent
opening of the University of Phoenix campus in Cheyenne brought
us to a grand total of 10 accredited institutions of higher
education in the State, and that is the smallest of any State
but Alaska.
This country's institutions are good enough that students
all over the world make enormous sacrifices to be able to come
here and study. Today's students at these schools will be
tomorrow's leaders in the fields of health care, technology,
manufacturing, business, just to name a few. These schools are
also helping to prepare tomorrow's generation of teachers, who
will help our children to begin to mold their future and shape
their destiny in classrooms throughout the country.
Today more postsecondary students are receiving Federal
Pell grant assistance than ever before. Over 5 million students
received Pell grant assistance in the 2003-04 school year, with
the greatest number of those students enrolled in public 2-year
colleges. All together the Federal Government has provided or
helped to leverage more than $70 billion in student financial
aid in the past year.
Enrollment in postsecondary education has increased for the
past 30 years and it is expected to continue to do so,
particularly in 2-year programs. By 2008 the number of students
enrolled in postsecondary education will have doubled from 1970
levels.
At the same time, the face of today's average college
student is changing. The average student enrolled in
postsecondary education or training these days is most likely
to be older than 24 years. They are more likely to be
independent and more likely to be female. These changes should
not surprise any of us. Higher education in America is in the
middle of a revolution. We are facing monumental changes in the
American workforce and the need for employees with a higher
education is growing at a faster rate than ever.
As the American workforce changes, so do the needs of
today's college students. The need to provide broad access and
strong accountability with respect to higher education has
never been greater. Our economy is on the threshold of the most
significant transformation in history. In the next 10 years
about 12 percent of the workforce will be leaving their careers
behind for retirement. In addition, today's jobs are requiring
more of workers than ever before. It is estimated that by 2015
three-quarters of all workers will have some postsecondary
education or training, but 2020 we will need 14 million more
skilled workers in this country than we are currently able to
provide.
As we stand on the brink of this workforce revolution,
Congress has an important opportunity to meet the coming
challenges head on with the reauthorization of the Higher
Education Act. The availability of seamless, lifelong education
opportunities is critical for our long-term competitiveness. In
this global economy learning is never over, school is never
out. The Higher Education Act is part of the comprehensive
approach to education and training that this country needs.
This approach must effectively coordinate programs such as the
Workforce Investment Act, the Perkins Career and Technical
Education Act and other Federal education and training
initiatives to ensure that we remain competitive.
Congress must also consider change to the law that will
help today's students attend and succeed in college, such as
permitting greater access to distance education, ensuring that
students have reliable information about the cost of attending
college, and that schools are partners with businesses in
supporting a strong American economy.
Today's panel will help build on the themes that we have
looked at through a number of hearings so far this year. Our
panelists will look at issues relating to access and
accountability with higher education. They will suggest ways we
can ensure more students are able to attend postsecondary
education and that they leave these programs with a certificate
or degree prepared for future success, whether that be in the
workforce or additional education or something else all
together.
I look forward to the testimony of our witnesses. I hope
this hearing will help provide the committee with information
we need to take a great step forward in securing our long-term
competitiveness. Postsecondary education will play a critical
role in that process. I look forward to working with my
colleagues on the committee in a bipartisan manner and in the
Senate to reauthorize the Higher Education Act.
Senator Dodd.
Opening Statement of Senator Dodd
Senator Dodd. Thank you very much, Mr. Chairman. Let me
begin by thanking you for the hearings that we are conducting
on this critically important piece of legislation.
It is always dangerous to call one piece of legislation the
most important, but I cannot think of another piece of
legislation as important as the reauthorization of the Higher
Education Act. It has been a part of our critical success as a
nation going back to the earliest days of our republic. One of
the first acts ever passed by Congress was the Northwest
Ordinance at the very end of the 18th century as we were a new
Government; this act set aside lands for education. We passed
the Morrill Act in the middle of the Civil War. Here was a
nation preoccupied with how it would survive as a people, and
yet Abraham Lincoln and the Congress found the resources and
the time to create the land Grant Colleges. The University of
Connecticut in my State is one of those institutions that was
founded as a result of the Land Grant College Act under Senator
Morrill of Vermont.
Even before the end of World War II the GI Bill was enacted
into law, and then of course the Higher Education Act later on,
but throughout our history, even at times of great crises we
have always understood the value of education, and in the 20th
century the importance of a higher education. There are a lot
of reasons why we are successful as a people, but if I had to
pick one quality more so than any others, it is our commitment
to education over the years. I think it is tremendously
worthwhile that we are going to spend as much time as we are
this year on this issue.
You have identified already, Mr. Chairman, in your opening
comments the statistics today. 6,600 roughly degree and
nondegree granting institutions are eligible to receive Federal
aid as higher education institutions. They enroll more than
15.5 million students, 15.6 million to be exact. Of those 6,600
institutions, 75 percent of students are enrolled in public
colleges or universities. Over 70 percent of those students
receive financial aid, which is a tremendously high number.
Since the inception of the Higher Education Act the face of
postsecondary education has changed dramatically. I think it is
worth noting what has happened in these last 40 years or so.
There were 5.7 million students in 1965 when we passed the
Higher Education Act, we have more than 10 million more
students today, 40 years later. In 1965 women composed 38
percent of the student body. Today, more than half of the
student body is women. In 1965 only 6 percent of the students
identified themselves as being black. Today African-Americans
make up more than 14 percent of the incoming class. Hispanic
enrollment has increased from less than one percent in 1975--to
more than 9 percent in the year 2000. Today 73 percent of
students are nontraditional students, as the chairman has
pointed out, in some way or another. They are either older,
have children, are more likely to be working or are attending
institutions on a part-time basis.
When I think of higher education, Mr. Chairman, I find
myself thinking about access. That is an important question
obviously. It has to do with academic access, to what extent we
have prepared students for their university experience. It has
to do with information, to what extent we made students aware
of their higher education opportunities. And it has to do with
cost, to what extent can Americans afford to go on to a higher
end. More and more I am particularly concerned, as I know many
of my colleagues are, with the issue of cost. According to the
College Board last year the average cost of attending a public
4-year college including tuition fees, room and board,
increased by 7.8 percent to over $11,000. For private 4-year
colleges the average cost increased 5.6 percent to over
$27,000.
I asked my staff, because as my colleagues know, as the
father of a 2-month-old and father of a 3\1/2\-year-old, I
thought it might be interesting to extrapolate what kind of
costs I would be looking at 15 or 18 years from now, and I had
better find another job quickly here if I intend to do this.
[Laughter.]
I think at my public institution I will be paying $31,000
for my oldest to go to college, if these numbers hold up over
the coming years. At any rate, cost is an issue we will have to
confront in the coming years.
In comparison, how are family incomes holding up? The share
of family income required to pay total college cost has
increased to 29 percent of an average family's income for
public university tuition payments, and 41 percent of a family
income to pay private university tuition, 29 percent and 41
percent. These are huge numbers, Mr. Chairman, I know you
agree. In comparison, the average family mortgage payment is 29
percent of income. Clearly, college is not just an expensive
investment, it is becoming unaffordable for millions and
millions of people in this country.
Worse still is the amount of debt students are taking on.
In my State of Connecticut the average student graduates in 4
years with over $15,000 in debt. Nationally, the figure rounds
out closer to $17,000. If a student comes from a low-income
family or is a minority, they are more likely to graduate in
significant debt. I have to wonder to what extent does student
indebtedness dictate career decisions. Are students foregoing
careers in public service, education, and the like, because
they just cannot afford to do it any longer?
I am concerned about the lack of information many parents
have as it relates to financial aid. A recent poll shows that
45 percent of low-income and 50 percent of hispanic families
have no idea how they are going to put their children through
college. The survey also showed that low-income families
receive financial aid information nearly 2 years later than
upper income families, and lower income families are least
likely to be able to identify common sources of aid.
I am concerned about the basic academic preparation at the
high school level, keeping kids out of college or causing them
to drop out. In March, Cal State officials released a study
that showed that only 43 percent of first-time freshmen were
sufficiently prepared for college work in both English and
mathematics. Similar figures have been reported throughout the
country. Suggestions for changing this include making college
preparatory curriculum the standard for all students, providing
financial aid commitments earlier so that students begin to
take the prospect of college seriously, or more seriously, at a
younger age, and using data and assessments to develop
effective support programs so that all students can achieve at
a college level. Expansion of the TRIO program, programs that
help motivate and prepare low-income students for college,
would also I think be helpful.
As global competition intensities, and I know again all my
colleagues understand this and I am sure our panelists do as
well, I find myself worried, Mr. Chairman. Will we be able to
compete in a world today that is very, very different than it
was even a few years ago in terms of the level of educational
support, with our major competitors globally? The only way to
ensure that is to ensure a world-class educational system for
our children here in this country, to ensure that they are
prepared and can access it once accepted, and then ensure that
we do all we can to keep students in school until they
graduate.
One of today's witnesses will discuss research showing that
fewer than 40 percent of college students graduate in 4 years.
Again, we understand with the nontraditional student there is
some rational for that. For minority students the rates are
even lower. Today we will also touch upon the issue of
accountability, and accountability for Federal dollars is
something I strongly support. I would, however, caution the
committee to proceed slowly and thoughtfully as we explore the
proposals that are currently out there.
Mr. Chairman, it is with great hope that I attend this
morning's hearing. Again, as I said at the outset, I think
there is no other set of issues that is as important as these
and the cost issue. If we just look at this in terms of raising
additional dollars to meet demand without looking at what can
be done to hold down costs, the 7.8 percent number rising all
the time, outstrips almost anything else occurring in our
economy. We have with us today a former college president and
someone who knows a great deal about the subject in our
colleague from Tennessee. I know when I talk to my own college
presidents about this, they get a little tense when I start
talking about what can be done to bring down these costs, but
we have got to figure some way to do this, otherwise these
numbers are going to make it almost impossible for
educationally eligible families to meet these responsibilities.
So I thank you immensely for having today' hearing.
The Chairman. Thank you.
Senator Alexander, as Subcommittee Chairman for Education,
would you like to make some comments?
Opening Statement of Senator Alexander
Senator Alexander. Thank you, Mr. Chairman and Senator
Dodd, and I appreciate the chance to be here, and I thank the
chairman for his approach on this, getting early on into the
importance of higher education and thinking of it as part of a
seamless learning process.
I would only say these things briefly, and then I will look
forward to listening. I am convinced that we have an
extraordinary asset in our system of colleges and universities.
I remember President Cardozo of Brazil, who was here at the
Library of Congress before he went back, was asked by Senator
Hutchison what he would take back to Brazil about the United
States. He said the American university, there is nothing like
it in the world. And I believe that.
I also think our next big surprise coming is to our
pocketbooks. First big surprise was terrorism; next big
surprise is to our pocketbooks and that we need to make sure
over the next 10 years that we take a look at our brain power
because that is where our standard of living comes from. While
are outsourcing jobs we have been insourcing brains, and that
is why we produce a third of all the money in the world for
only 5 to 6 percent of the people. So how we keep doing that is
what Senator Enzi is focusing on and it is exactly the right
focus.
I also believe that we stumbled into the right model for
higher education. In some miraculous way after World War II
with the GI bill for kids. We did not give the Federal dollars
to Notre Dame and the University of Tennessee, we gave it to
the soldiers and they spent where they wanted to. Our system of
K through 12 would be much better off if we did that which is
another debate.
We did the same thing with the Pell grants and we did the
same thing with the Stafford loans, and so as a result we have
this system where no one tells me I have to go to the
University of Alabama, I can choose to go to Vanderbilt or the
University of Tennessee or even Connecticut if I wanted to, and
I can go to a for-profit institution----
Senator Dodd. Even Connecticut?
Senator Alexander. Even Connecticut. [Laughter.]
I can go to a for-profit institution----
The Chairman. Or Wyoming. [Laughter.]
Senator Alexander. So I will be keeping my eye--or
Wyoming--I will be keeping my eye on this model we have in
higher education, which is, number one, autonomy for the
institutions, and number two, Federal dollars, and number
three, following students to the institution of their choice.
The last two comments I would make have to do with the cost
issue. I want to look at the cost issue too, but I would
emphasize that community colleges' tuition is about $2,000 a
year. It is a pretty good bargain. University of Tennessee,
University of North Carolina, pretty good institutions, tuition
there is a few thousand dollars a year, maybe 3 or 4. Costs are
going up but I think we ought to understand the reason. I think
it is because State support is going down. I mean the tin cup
is in Nashville, not Washington. Federal dollars for Pell
grants are up 40, 45 percent, two or three times what State
support for higher education is up in our State and probably
other States.
So the best thing perhaps we could do about the cost of
higher education is to get the Medicaid program under control
so States did not have to spend all their money on health care
and had a little left for the colleges.
So, finally, I will be looking at these issues: simplicity
of applications, this committee has done some work on that and
there is some good work, Mr. Chairman, that could be part of
the Higher Education bill to simplify the forms for grants and
loans; year-round schools and year-round attendance, which
means amending how Pell grants and loans are dealt with.
I would like to see deregulation of colleges and
universities, not more regulation of colleges and universities
because I think autonomy is why they are good. I want to make
sure we continue to attract foreign students to help us have a
high standard of living in this country, and to go home and
spread democracy. I want to find out whether State funding is
damaging the prospects for higher education in the future. And
I want to make sure that we have ample funds for research
because half our new jobs since World War II came from advances
in sciences technology.
So I can think of no more important subject, and I am
delighted the chairman is holding this hearing.
The Chairman. We will now hear from our panel of witnesses.
I will introduce our five witnesses. They will give their
statements and then we will move to questions. We do have a
great panel of witnesses who will speak on providing
postsecondary education and increasing access and
accountability.
The first member of our panel is Ms. Kati Haycock. Ms.
Haycock is one of the Nation's leading child advocates in the
field of education. She is the director of the Education Trust,
which is a Washington-based organization that provides
assistance in improving student achievement in education.
The second member of our panel is Ms. Trinity Thorpe. Ms.
Thorpe is a graduate of Laramie Senior High School in Laramie,
WY and is currently a junior at Pepperdine University. She is
also the recipient of the Gates Millennium Scholarship. We are
very proud of Ms. Thorpe's success and her academic
achievement, and we hope other students from Wyoming will
follow in her footsteps. I mentioned to her earlier that she is
probably the youngest person testifying on the Hill today, and
she said, ``Actually, there are two of us from Pepperdine
testifying today.'' [Laughter.] So Pepperdine is well
represented on the Hill today, and as we will see in a moment,
so is Wyoming.
The third member of our panel is Mr. Brian Bosworth. Mr.
Bosworth is the president of FutureWorks, which is a private
consulting and policy development firm that helps design and
build the strategies and institutions that promote sustainable
skill-based regional economic growth.
The fourth member of our panel is Mr. Robert Shireman. Mr.
Shireman is the director of the Institute for College Access
and Success. He also served on the Federal Advisory Committee
on Student Financial Assistance, and is an adviser at the Aspen
Institute.
And our final member of the panel is Mr. Phillip Van Horn.
Mr. Van Horn is the president of the Wyoming Student Loan
Corporation. In addition, Mr. Van Horn was appointed by the
Governor of Wyoming to chair the Wyoming Workforce Development
Council in 1999 through 2002 and is still an active member of
that council. I have known Mr. Van Horn for many years, and I
am pleased that he was able to be here with us today and
provide this excellent information that always comes out of
Wyoming.
I would ask all of the members of the panel to limit their
oral statement to 5 minutes. Your entire written statement will
be included in the hearing record. And I would mention that
after all of you finish your statements, then we will have
questions from the Senators, and then after that the testimony
will remain open so that you can expand on remarks if you have
some other things you wanted to comment on. Also since you are
on the panel, we have the opportunity then to ask you some
questions in writing. Sometimes the questions are more detailed
than what you might have information for here at the hearing,
or that anybody in the general public might be interested in.
So we would appreciate the answers to those questions as well.
So let us begin. Ms. Haycock.
STATEMENTS OF KATI HAYCOCK, DIRECTOR, EDUCATION TRUST; TRINITY
THORPE, STUDENT, PEPPERDINE UNIVERSITY; BRIAN BOSWORTH,
PRESIDENT, FUTUREWORKS; ROBERT M. SHIREMAN, DIRECTOR, THE
INSTITUTE FOR COLLEGE ACCESS & SUCCESS, INC.; AND PHILLIP F.
VAN HORN, CHAIRMAN OF THE BOARD AND PRESIDENT, WYOMING STUDENT
LOAN CORPORATION, AND PRESIDENT AND CEO, WESTERN STATES
LEARNING CORPORATION
Ms. Haycock. Thank you, Mr. Chairman, Senators, members of
the committee.
As I think all of you know, for many decades the American
education system led the world on almost every measure. We had
the highest high school completion rate in the developed world.
We had the highest college going rate and the highest
proportion of our young people college educated.
Higher education, as all of you know, has long been one of
the main drivers of opportunity, of social mobility, and of
economic progress in our country.
Over the past decade, however, a surprising array of
countries has run right past us. We have slipped from first in
the world to 17th in high school completion rates. We have
slipped from first to 7th in college entry rates. We no longer
even lead in a proportion of our young people who get a college
diploma.
Moreover, while our results remain essentially flat, a
surprising array of countries is poised right beneath us and
has a much steeper upward trajectory, will soon pass us. And
sadly, we are the only developed country in the world where the
literacy levels amongst yours and my generation are actually
higher than those of our children.
Underneath that overall story, as dismal as it is, the
numbers are even more worrisome for low-income students and
students of color. They are less likely to complete high
school, less likely to enter college and less likely to
complete once they get there. We have got to get our systems
back on track for the students, for our democracy, and for our
economy.
In reauthorizing the Higher Education Act this year, you
have an opportunity to address at least some of the major
problems that interfere with these results. Let me mention just
three things that you could do.
First, preparation. Every year thousands, hundreds of
thousands of American high school students follow all the
rules. They take all the courses they are required to take,
they pass all the tests they are required to pass, with the
full expectation that if they do so they will be ready for the
next level of education. Unfortunately, as I think you know,
when they get to college--and most of them are now going--they
fall very short in many cases of having the skills and
knowledge they need to succeed there. Nearly a third actually
end up in high school level course, otherwise known as remedial
or developmental course instead of the college courses that
they expected to start. Why is this? Because we have not
aligned the standards for high schools with the requirements of
college and of today's workplace.
Now, fortunately, as I think you know, many States are
beginning now to do just that, some through the American
Diploma Project, others on your own. You could help by
providing some incentive funding for States that are willing to
give their high school diploma real meaning by aligning their
standards for high school exit with the standard courses
requirements and assessments necessary to show readiness for
both college and for work.
Second, money matters. It did not help much if students are
prepared for college if they cannot afford to go. The financial
burden, as all of you know, of paying for college is a huge
barrier for many young people. Low-income young people have
been particularly hard hit by increased college costs, in part
because of the diminished buying power of the Pell grant
program. It is very important that you act to restored
educational opportunity for our low-income young people by
committing to a 5-year trajectory of restoring the buying power
of the Pell grant program. Students also need to know about all
this, so continuing your support for the TRIO and GEAR UP
programs is important as well.
College education, as all of you know, is in fact the
surest route out of poverty, but it is now a route for only a
handful of low-income young people. College going rates amongst
our highest achieving low-income students are now exactly the
same as college going rates amongst our lowest achieving high-
income students. And if you look at American families in the
bottom economic quartile, ask how many of their kids have a
bachelor's degree by age 26, the answer is 7 out of 100; for
upper middle class kids it is 60 out of 100. Hugely important
that we turn that around.
Finally, college success. Far too many students who enter
our colleges and universities fail to earn a degree. Overall
fewer than 4 in 10 of students get a 4-year degree in 4 years.
Only about 6 in 10 get one in 6 years, and the rates are much
worse for low-income students and students of color.
Now, because the number of students entering colleges and
universities has continued to go up, not much attention has
been devoted to this success problem. Better preparation and
more generous financial assistance would of course help, but it
turns out that what colleges and universities do matters a lot
too.
As I think some of you know, this last year was the first
time that the Federal Government released data publicly on the
success rates of colleges and universities around the country.
And it turns out that even after you control for factors like
the size and mission of the institution, its financial support
and the academic and financial characteristics of its students,
some colleges routinely do a much better job at getting their
students through to a degree. And these colleges are a range of
institutions from Elizabeth City University, a historically
black college in North Carolina, to Miami of Ohio, a much more
elite college, to East Carolina University. These are
institutions that when compared with institutions that serve
students just like theirs routinely do a far better job than
their peers.
But even as individual institutions distinguish themselves,
what is important for you to remember is that our higher
education system as a whole is stuck. We have made virtually no
progress. Improving student success is now an option. You can
by asking States to put in place accountability systems that
will set some stretch goals for our colleges and universities,
ask them to step up to the success achieved by their
counterparts. You can begin to get some much-needed progress in
improving student success across the country.
Thank you very much.
The Chairman. Thank you.
[The prepared statement of Ms. Haycock follows:]
Prepared Statement of Kati Haycock
For many decades, the American education system led the world on
almost every measure. We had the highest high school completion rate,
the highest college-going rate, and the highest proportion of college-
educated citizens. Collectively, our colleges and universities are
unparalleled, attracting students and scholars from all over the world.
Higher education has long been one of the main drivers of
opportunity, social mobility, and economic progress in our society. And
that promise has been supported through Federal policy--through tax-
exempt status, establishment of land-grant institutions in the 19t
century, the G.I. Bill after World War II, and Pell grants since 1972.
Our historical national commitment to education has paid fantastic
dividends; the United States has long had the best-educated, most
productive workforce in the world.
Over the past decade, however, we have allowed a surprising array
of countries to pass by us.
We are now 17th in the developed world in high school
graduation rates;
We are now 7th in college-entry rates;
And we are no longer first in the proportion of young
people completing a college degree.
Moreover, we are the only developed country where college-education
rates are not improving and the only developed country where the
literacy levels of older adults are higher than those among young
adults.
Underneath this overall story, the numbers are even more worrisome
for low-income students and students of color. These students are less
likely to graduate from high school; those who do graduate are less
likely to be prepared for college or work. To make matters worse, low-
income students and students of color who do go on to college are also
less likely to complete college after entering.
What is going on here? Simply put, there are problems at several
key points in the education pipeline, each of which must be addressed
to turn these patterns around.
Better Aligning High School and College
Every year, hundreds of thousands of American high school students
follow all the rules--that is, take all of the courses they are
required to take and pass all of the required tests--expecting that, if
they do so, they will be prepared for the next level of education.
Unfortunately, when they get to college--as most do--they often aren't
even close to prepared for the challenges they face there. Nearly one
in three end up in remedial--or high school level--courses. Why?
Because the standards for American high schools have not been aligned
with the requirements of college and today's workplace.
Fortunately, many States are beginning to do just that--some
working through the American Diploma Project, others on their own. You
could help by providing incentive funding for States willing to give
the high school diploma real meaning by aligning their standards,
course requirements, and assessments across high school and college.
Reauthorization of the Higher Education Act provides Congress with
several opportunities to promote better preparation for work, for
college, and for life. First, Congress should support State efforts to
align the standards for high school exit with those for beginning
postsecondary study. With a relatively small investment, Congress could
help States to link their K-12 and higher education data systems, would
allow States to significantly advance alignment and articulation
activities. What should States have to do to receive these funds? Quite
simple:
K-12 and higher education systems need to agree on common
definitions of the knowledge and skills required to begin postsecondary
work.
K-12 systems need to review State standards and course
requirements required for a high school diploma and develop a process
to bring them into alignment with the skills and knowledge required to
begin postsecondary work.
K-12 and higher education together need to agree on common
assessments for measuring whether students possess the skills they
need, and a curriculum that prepares students adequately for the
challenges of postsecondary education.
Higher Education needs to ensure that teacher preparation
is aligned--both in terms of quality and quantity--with the
expectations of what needs to be taught in the K-12 system.
States willing to make a college- and work-ready
curriculum the default curriculum for all students should receive
additional Federal financial assistance to provide the professional
development that will be required.
In addition, Congress can provide extra encouragement to low-income
students to prepare for success in postsecondary education by providing
additional financial aid to low-income students who have completed the
college prep curriculum.
Many wonder whether the emphasis on preparing students to be
successful in college neglects the needs of our non college-bound
students. Large scale, national research, including research by the
American Diploma Project and others, has established that the academic
skills required for work are comparable to those required for college.
The point is that high school graduates should be prepared to choose
college or work. Right now, they are not being adequately prepared for
either.
Money Matters
Second, it is clear that some of the students who should be going
on to college aren't. In the most recent year for which data are
available, for example, low-income students in the top quartile of
academic achievement nationally are entering college at rates exactly
the same as high-income students in the bottom quartile of academic
achievement. Though college-going rates for all groups of students are
up, the gap in college attendance between White high school graduates
and graduates of color is larger today than it was two decades ago.
In a century where some postsecondary education is essential to
gain a foothold in our economy, this is a tragedy for the young people
themselves, for their families, and for our country. Providing
financial incentives for students to complete a more rigorous college-
prep curriculum would begin to address another contributor to low-
graduation rates--the cost of attending college. But this step alone is
by no means sufficient. The financial burden of paying for college is a
huge barrier for many young people. Low-income young people are
particularly hard hit, because the relative value of Pell grants has
diminished by 50 percent since the late 1970s. Whereas Pell grants used
to cover 84 percent of the average fixed cost at a public, 4-year
institution, in 2001-02 they covered only about 40 percent of these
costs. It is hugely important that you act to restore educational
opportunities for our most vulnerable young people.
Congress should commit to a 5-year trajectory to recoup
the buying power of Pell grants.
Beyond providing more help to low-income students, though, it is
important for Congress to consider how it might provide stronger
incentives to colleges to enroll low-income students. As college-going
increases, colleges often have less incentive to educate more low-
income students. Despite the unique importance of higher education in
breaking the cycle of poverty for students from low-income families,
increases in student financial aid over the last 10 years--at the
Federal, State, and institutional levels--have disproportionately
benefited upper-middle and middle-class students. So even as the
dollars for financial aid have grown, truly low-income students have
been asked to shoulder more of the burden of paying for college through
loans. Institutions of higher education should be eligible for
supplemental financial assistance for enrolling and graduating low-
income students.
Both Federal grants to individuals as well as Federal aid
to institutions should be designed to better serve the Federal priority
of increasing the access and success of low-income students.
In addition, the process of simply arranging college financing
presents a daunting morass of confusing, sometimes duplicative,
programs. In some instances, the Federal Government is providing rich
subsidies to private lenders without commensurate benefits to the low-
income students the programs were established to serve. To make matters
worse, private lenders can use their subsidies to entice college and
universities into their programs and out of the more efficient, less
expensive direct loan program. These subsidies should be limited and
the savings should be redirected to need-based aid for low-income
students.
Congress should eliminate excessive subsidies and directly
administer a greater portion of federally guaranteed student financial
assistance, and use the savings to expand need-based financial aid.
As Congress works to make college more affordable for students from
low-income families, it must not cut back on prior commitments to
increase college access among low-income and minority students. The
GEAR UP and TRIO programs represent a lifeline to college for some of
our most disadvantaged young people. Given the inequitable access to
college that exists right now, it would be unfair and unwise to
eliminate these programs.
Increasing College Success--What Institutions do Matters a Lot
Third, far too many students who enter our higher education system
fail to earn a degree. Overall, only about 4 in 10 students who begin
full-time at a 4-year college get a bachelor's degree within 4 years
and only about 6 in 10 get a degree within 6 years, according to the
U.S. Department of Education's Beginning Postsecondary Survey.
Graduation rates are even worse for BA-seeking students who begin in a
2-year college. Moreover, in both types of institutions, completion
rates are substantially lower for minority students and students from
low-income families.
While approximately two-thirds of White freshmen in 4-year colleges
(66.8 percent) obtain a degree within 6 years, fewer than half of
African-Americans (45.7 percent) and Latinos (47.3 percent) do so.
There are also significant differences in completion between students
in terms of family income: 77 percent of students from high-income
families graduate, compared to only 54 percent for students from low-
income families--a 23 percentage point difference. And remember: These
figures represent the outcomes only of students who began as first-time
degree-seeking freshmen in 4-year institutions--that is, the students
who are most likely to persist and graduate.
Because the number of students entering the Nation's colleges and
universities has been rising overall, not much attention has been paid
to these low-completion rates. The percentage of high school graduates
going on to 2-year or 4-year colleges and universities increased from
less than half in 1975 to almost two-thirds in 2001. But graduation
rates among first-time, full-time students in 4-year colleges have
remained stagnant for decades--we are successfully getting more young
people to college, but not getting proportionally any more of them
through college.
While these disturbing patterns--low overall graduation rates and
big gaps between groups--have remained stubbornly consistent, the
consequences of not graduating have changed drastically. People with a
4-year degree or higher now earn much more relative to high school
graduates than they did 30 years ago, and the gap increases with the
level of the degree. By contrast, those who enroll in college but fail
to get a B.A. have made only slight gains.
Unless we change current trends, we will become a society that is
even more polarized by class distinctions. Consider this: Only 7
percent of young people from the poorest one-quarter of American
families earn a bachelor's degree by age 26, while 60 percent of young
people from the top quartile of family income do so. College degrees
may be the best route out of poverty, but they are a route now for only
7 of every 100 youngsters born to a low-income family.
It would certainly help if more of these young people entered
college well prepared and if they didn't have to struggle to cover
college costs. Preparation and ability to pay are important, but they
do not tell the whole story. What is becoming increasingly clear is the
critical role institutions themselves play in securing the success of
their students. How do we know? Because right now, institutions that
serve similar students with similar preparation and similar family
incomes have widely divergent graduation rates. Our recent report
focusing on this issue revealed that some colleges and universities are
doing much better than others in graduating their students, even once
we account for student characteristics.
Last year for the first time, institution-level graduation-rate
statistics were released to the public, disaggregated by student gender
and race/ethnicity. Examining the numbers closely, we find that some
institutions stand out--even after controlling for factors such as
institution size, resources, mission, degree programs, and the
financial and academic background of their entering students. Some
colleges and universities have much higher graduation rates than other,
very similar institutions.
These exceptional higher education institutions range from
Elizabeth City State University, a historically Black institution in
North Carolina whose student body is predominantly low-income, to Miami
of Ohio, a highly selective public university, to the University of
California at Riverside, which serves a highly diverse mix of White,
Black, Asian, and Latino students, to the University of Northern Iowa,
a mid-sized comprehensive institution.
These institutions are different in many ways--their size,
location, mission, selectivity, and students vary tremendously. But
they're similar in one fundamental respect--they consistently and
significantly outperform their peers in graduating students.
And the data reveal that high performance doesn't have to be for
some students at the expense of others--institutions like East Carolina
University in North Carolina and Binghamton University in New York
outperform their peers without gaps in graduation rates between White
students and students of color. We even know that rapid improvement is
possible, thanks to the example of the University of Florida, Louisiana
Tech, and others that have upped graduation rates for 5 years running.
This newly available data establishes that what institutions do
makes a very big difference when it comes to student success. Indeed,
earlier this year, the Education Trust made all of this data publicly
available through an interactive database on our web site. Visitors to
the College Results Online database can select a given institution and
see how it compares to similar, peer institutions in graduating
students. We will be happy to provide Senators and their staffs with
information and analysis from this database.
Even as individual institutions have distinguished themselves, our
higher education system has, collectively, made virtually no progress
in improving graduation rates over the last three decades. That must
change--both for the students and for our country. Institutions of
higher education must be accountable for doing what they can to enable
the success of the students they admit.
Leaders in many States are beginning to step up to this
responsibility:
For example, The University System of Georgia, led by
Chancellor Tom Meredith, has begun to study the graduation rates of its
34 colleges and universities, with the aim of setting graduation-rate
goals, both overall and for student subgroups, for which campus
presidents will be held accountable.
In Massachusetts, a graduation-rate task force has been
appointed to find out why the number of undergraduate degrees awarded
by 24 State and community colleges has dropped steadily since 1997,
particularly in economically depressed areas served by the schools.
Spurred by upcoming implementation of a new State performance funding
system, the task force is expected to outline a series of concrete
recommendations by December.
And it is no coincidence that two of the unusually high-
performing institutions I mentioned earlier are from North Carolina.
Some years ago, the UNC system began publishing graduation rates and
holding campus presidents accountable for these numbers.
The traditional State role in regulating and funding higher
education suggests that States are currently in the best position to
create robust accountability systems that hold institutions
appropriately responsible for the success of their students. But given
the national interest in tackling this problem, Congress should ask
States to design and implement goals and accountability systems for
higher education access and outcomes. While the quality of currently
available data and the limited knowledge of best practices advise
against a uniform system nationally, it is important that States and
systems of higher education begin to see increasing student success as
a responsibility, not a choice.
Congress should require States to put in place an
accountability system for 4-year colleges and universities.
States should have broad discretion in designing systems that meet
the particular needs and characteristics of their institutions, and
that fit with systems that have already been established. But each
system should share several common characteristics: (1) accurate,
publicly available graduation rates that are disaggregated by student
gender, race/ethnicity, and income status; (2) specific goals for
improvement at each institution, including both overall improvement and
closing gaps between groups; and (3) public reporting of institutional
success in meeting graduation-rate goals. And States should develop
plans to integrate 2-year institutions into their accountability
system, once appropriate measure are developed that account for the
diverse missions those institutions pursue.
Some States are already well on the way to developing graduation-
rate measures that improve on the federally-collected data, by taking
into account student mobility between institutions. These States should
be allowed to use these fuller measures as they implement
accountability systems. States that have not yet made the investment in
the data systems they need should use the federally-collected measures
in the meantime.
Accountability for higher education should also incorporate
measures of access and quality of learning, to ensure that increasing
student completion doesn't come at the expense of academic standards or
education opportunities for low-income students. Measures of
institutional success must include both the institution's performance
in graduating traditionally underserved students, and its success in
recruiting and admitting such students. Too often, success in higher
education is measured in terms of increasing the so-called ``quality''
of the students who are enrolled, which can come at the expense of
serving the students whose need for an accessible, affordable high-
quality postsecondary education is greatest. Congress must help to
counterbalance those pressures by recognizing and encouraging those who
give access and success equal attention.
Building Even Better Data Systems
We recognize that the institutional graduation-rate statistics
currently gathered by the Department of Education aren't perfect,
because they don't fully account for students who transfer from one
institution to another. This is less of a problem than is sometimes
suggested, though. Less than a quarter of beginning 4-year students
transfer, and only a third of those students who transfer end up
graduating within 6 years. As a result, 80 percent of all students who
start college at a 4-year institution and earn a B.A. finish where they
began. The current graduation-rate statistics are more than enough to
know that some institutions are doing much better than others, and we
should act on that information now.
But we can and must do better. The U.S. Department of Education
should be directed to work with States to develop a next generation of
graduation-rate statistics that appropriately account for mobility and
other factors. By moving to a more streamlined, powerful data
collection system that allows the tracking of student success at
multiple higher education institutions, we could increase the
efficiency and utility of the data collection process while reducing
the expense in the long run. We can also answer vital questions that
currently lie beyond the scope of the data system, such as: What are
the graduation rates of low-income students and students receiving
Federal financial aid? How does the success of students seeking
different academic majors compare? How successful are institutions in
graduating students, after taking into account those who transfer?
Such a system would also give us much more information about the
pipeline of students between 2-year and 4-year colleges. We currently
know even less about the success of our community colleges than our
baccalaureate and graduate institutions, despite the fact that 2-year
colleges represent a growing sector of higher education, particularly
for low-income, minority, and non-traditional students. A more
integrated, powerful data system will change this, providing a clearer
picture of success across higher education sectors.
With this new data in hand, Congress can help promote public
scrutiny of higher education outcomes by disseminating and drawing
public attention to a free, easy-to-understand, uniformly-comparable
public information system. Such a system would allow students, parents,
and policymakers to better understand how different colleges and
universities compare on crucial performance benchmarks, including
access, affordability, and graduation rates, as well as available
information regarding academics and safety. Honest, objective, reliable
information about the success of individual institutions of higher
education needs to become more easily accessible and this data needs to
permeate discussions of institutional quality.
Moving forward, we need to know much more about which institutions
are doing better, and then we need to learn more about what these
institutions are doing. Gathering richer data about student progress
and success is an important component of any strategy to improve
outcomes in higher education. Better data will help researchers and
higher education leaders identify high performers and learn from them.
There are some promising initiatives underway in this regard, such as
NSSE, the National Survey of Student Engagement, developed at Indiana
University. NSSE and similar projects are exploring the connections
between institutional practices and student success. But indepth ``best
practices'' studies whose results are transferable from one college or
university to another are far too rare in higher education, in part
because there hasn't been enough good data to reliably know who the
``high performers'' really are, and in part because neither tradition
nor policy have created sufficient demand for such studies.
Congress can advance the conversation on both of these issues
through the HEA reauthorization.
Better data systems should be developed to more accurately
identify the most successful institutions and research should be
supported to discern the policies and practices that distinguish these
institutions from their peers.
ETo spur interest in the colleges and universities that
truly stand out in their service to their students, Congress should
establish a program akin to the Blue Ribbon schools in the K-12
context.
The Federal Government should very publicly recognize and reward
the colleges and universities that are serving the greatest number of
low-income and minority students and demonstrating the greatest success
in graduating these students. Our initial research suggests that these
institutions come from all sectors of postsecondary education, from
large research universities to small private colleges to minority-
serving institutions. By very publicly identifying the best of the
best, and rewarding them for their success, Congress could set a
standard against which all other institutions would be measured.
Why is all this so important?
Nationally, there are 772 colleges where at least 5 percent of the
undergraduates are black. In 299 of those institutions the 6-year
graduation rates for black students are less than 30 percent. In 164 of
those institutions the 6-year graduation rates for black students are
less than 20 percent. In 68 of those institutions the 6-year graduation
rates for black students are less than 10 percent.
Similarly, in colleges where more than 5 percent of the students
are Latino, 25 percent have 6-year graduation rates for Latinos less
than 30 percent.
Surely, we can do better. Some institutions already are.
There are now about 890,000 African Americans between 25 and 34 who
hold a bachelors degree. If we could simply cut the black-white
graduation rate gap in half--which some institutions already have--the
number of black college graduates would grow by 10,000 per year. Over a
decade, that would produce 100,000 more African Americans with access
to a wide range of opportunities currently denied to them.
If we went further and closed the gap--which some institutions
already have--we could produce 200,000 more African Americans with such
access. Similar improvement for Latino students would mean another
20,000 Latino college graduates in Texas alone.
Thank you for this opportunity to testify on this important
subject. I look forward to answering your questions.
______
Overview of Testimony by Kati Haycock, Director, Education Trust
For many decades, the American education system led the world on
almost every measure. Over the past decade, however, we have allowed a
surprising array of countries to slip by us. We are now 17th in the
developed world in high school graduation rates and 7th in college
entry rates. We don't even lead any longer in the proportion of our
young people completing a college education.
Underneath this overall story, the numbers are even more worrisome
for low-income students and students of color.
To get our country back on an upward trajectory will require action
on a number of fronts. As it reauthorizes the Higher Education Act this
year, Congress can make an important contribution to solving key
problems at several levels.
To ensure that high school students are better prepared
for college, Congress should support State efforts to align high school
requirements with the demands of college and work. You can help by
providing financial support for linking K-12 and higher education data
systems, for aligning course and exam requirements, and for ensuring
that teachers have the help they need to teach to these standards.
Congress should also provide an extra incentive for students to
complete more challenging courses by providing additional financial
aid.
To ensure that low-income students are have the support
they need to continue their educations, Congress should commit to a 5-
year trajectory to recoup the buying power of Pell grants, use Federal
aid to institutions to provide incentives for institutions to enroll
more low-income students, and eliminate excessive subsidies to lenders,
using the savings to help more low-income students. Also, because it
would be a cruel hoax to add additional financial aid for low-income
students, but remove the main programs--like TRIO and GEAR UP--for
helping them prepare for college, Congress should continue to fund
these programs.
To ensure that colleges focus on both access and success,
Congress should require States to set stretch goals for their 4-year
colleges and put into place accountability systems to monitor progress.
What institutions do matters a lot, and at the moment, institutions
don't have strong incentives to improve student success.
To enhance our ability as a country to identify problems
and track progress, Congress should direct the U.S. Department of
Education to work with States to develop better data systems and create
a next generation of graduation rate statistics that are capable of
better tracking the progress of our highly mobile students.
Why is all this so important?
Nationally, there are 772 colleges where at least 5 percent of the
undergraduates are black. In 299 of those institutions the 6-year
graduation rates for black students are less than 30 percent. In 164 of
those institutions the 6-year graduation rates for black students are
less than 20 percent. In 68 of those institutions the 6-year graduation
rates for black students are less than 10 percent. Similarly, in
colleges where more than 5 percent of the students are Latino, 25
percent have 6-year graduation rates for Latinos less than 30 percent.
Surely, we can do better. Some institutions already are.
There are now about 890,000 African Americans between 25 and 34 who
hold a bachelors degree. If we could simply cut the black-white
graduation rate gap in half--which some institutions already have--the
number of black college graduates would grow by 10,000 per year. Over a
decade, that would produce 100,000 more African Americans with access
to a wide range of opportunities currently denied to them.
If we went further and closed the gap--which some institutions
already have--we could produce 200,000 more African Americans with such
access. Similar improvement for Latino students would mean another
20,000 Latino college graduates in Texas alone.
The Chairman. Ms. Thorpe. I know that you have some family
support here today too. We will not count it against your time
if you make the introduction. [Laughter.]
Ms. Thorpe. OK. This is my foster mother, Geri Hanly, in
the pink, and my foster brother, Eric Hanly. He is in the Air
Force. He is a captain right now. I am very pleased to have
them with me today.
Good morning, and I am truly, truly honored to be here
today. This is something that I never had imagined myself
doing. In fact, the majority of my accomplishments, my resume
bullets, you could say, would not be where they are or even in
existence if it had not been for the Upward Bound program or
the TRIO program as many people know it. I am firm in my belief
that if it were not for this program and its constant
encouragement, their belief and acceptance of me, I would not
be who I am or where I am.
I need to tell you about my early life so you can fully
understand what I mean. To this day I do not remember
completing an entire year of school until the 8th grade. This
truancy was not in any way my own choice. Coming from my
background, education was not viewed as an important thing.
When your bed is the floor of a truck and the way you get your
meals is to beg on a street corner, education is not a
priority.
My biological mother did not feel it necessary for me to
attend school. In fact, she saw my joy with school and would
ground me from it. Constantly on the move, switching homes,
there was no constancy or stability in my life. Then when I was
in the 7th grade, not even 2 months after my 13th birthday, my
mother finally enrolled me in school.
I was thrilled, but at the same time I was crying for help.
I needed someone to rescue me. Eventually I was rescued but not
in the way I thought I would be. After only 2 weeks in the 7th
grade I was kicked out for distributing drugs. I had taken
these drugs from my mother's stash while living in our 7-foot
by 9-foot pole trailer in a trailer park. I wound up in the
juvenile justice system.
Three months after being admitted to my last and best
foster home, the courts allowed me to attend school. I was
given achievement tests. I was 13-years-old, unable to fully
comprehend reading, with little knowledge of mathematics or
science, taking a test to determine what grade and school I
would be. They put me in all remedial learning classes. I can
still remember celebrating my very first completed semester. I
had earned a 2.4 GPA.
After that first semester in the 8th grade my life began to
change. My foster mother, Geri, pushed for me to join the
Upward Bound program to take advantage of the after school
tutoring that they offered. I agreed and joined the Upward
Bound program in the 9th grade. My improvement was rapid and
drastic. My grades shot up to a 3.75 and I switched from
remedial to honors courses, and eventually later on in high
school these were all AP courses.
With this new feeling of accomplishment I had a new self-
image. I did not want to be like my mother or my old friends. I
wanted something more for myself. I always had wanted something
more for myself. I just did not have a way to access it until
the Upward Bound program came into my life.
Through Upward Bound I was given a myriad of opportunities.
The first difference I noticed with Upward Bound was that the
field trips were free. I never felt poor and people believed in
me. Education was becoming something I never thought it would
be--for everyone. Although I began to believe in what this
country refers to as equal opportunity, I developed a sense of
fear. I knew I wanted to go to college. I just did not think it
was right for me. I did not have a way to go.
When my senior year rolled around I told my Upward Bound
coordinator that I was not going to college. After knowing me
for 4 years she was shocked. I still cannot remember if her
reaction was an anger one or if she sincerely had thought I had
gone crazy. She told me I would be wasting my mind, wasting a
good chance that I might never have again. Although my foster
parents had tried to convince me of this fact many times, it
just was not sinking in. It did not sink in until my Upward
Bound coordinator put it so squarely before me.
Instead of letting me get away with applying to one school,
Upward Bound got me to apply to 10. I received acceptances, but
the issue of money was still there. I had no way to pay for
college. I expressed this to my Upward Bound coordinator, who
happily informed me that I had a lot of options. She introduced
me to the FAFSA, helped me fill it out, and to a million
different scholarship applications. She did not stop there. She
went on to write me letters of recommendation, including one to
the Gates Millennium Scholarship Fund.
Pepperdine University accepted me and offered me the
largest scholarships and grants including the Pell grant. Plus,
the Gates Millennium Scholarship covers the difference. I went
on to receive the Anton Kollars Scholarship and the Jim Casey
Family Program Scholarship. This was the first time in my life
in which I actually felt financially stable.
And here I am in front of you, a newly-minted senior at
Pepperdine University who is taking full advantage of the
opportunities provided for her, and giving back in every
situation possible. I now have the ability to point my life in
whatever direction I see fit for it to go. This ability, with
all of its blessings, is something I would not have had had it
not been for the Upward Bound and the TRIO program's help and
encouragements.
This summer I will be giving back to my community through
service as a team member for TRIO's Upward Bound summer program
at the University of Wyoming.
Currently, as well, I work as a researcher for a program
called Los Angeles Bridges. This program is an outreach to
high- and low-risk students of Fulton Middle School. This is
where I learn to what extent programs like Upward Bound are
necessary on a much larger scale. The mean grade point average
of the 85 high-risk students that I work with is a 1.9. These
kids will be the beneficiaries of the Upward Bound program upon
admittance into high school. These kids may never see another
opportunity to release themselves from the cycle of poverty if
these programs are eliminated.
I was a child like those I work with, crying for help, who
needed someone to believe in her. Had it not been for the
Upward Bound program I would not have made it this far, nor
will I make it on to my next school.
I thank you for your support for these programs and for
inviting me to come here today to speak.
The Chairman. Thank you very much. I am very proud of you,
and I can tell that you are deservedly proud of what you have
done, and I can hardly wait to see what you will do.
Ms. Thorpe. Thank you.
Senator Dodd. I have a feeling she is going to be sitting
on this side of the dais. [Laughter.] If I were you, Senator, I
would be very careful about it. [Laughter.]
Ms. Thorpe. We will see.
[The prepared statement of Ms. Thorpe follows:]
Prepared Statement of Trinity Thorpe
Good morning/afternoon Senators. I am truly honored to be here
today. This is something I never imagined myself doing. In fact, the
majority of my accomplishments, my resume bullets you could say, would
not exist if it weren't for a program called Upward Bound. I would not
be where I am or who I am if it weren't for the constant encouragement,
belief, and acceptance of the Upward Bound staff.
I need to tell you about my early life so you will understand what
I mean.
To this day I don't remember completing an entire year of school
until the eighth grade. This truancy was not in any way my own choice.
Coming from my background, education was not viewed as an important
thing. When your bed is the floor of a truck and the way you get your
meals is to beg on the street corner, education is not a priority.
My biological mother did not feel it was necessary for me to attend
school. In fact, she saw my joy in education and would ground me from
school. Constantly on the move, switching homes, there was no stability
or consistency in my life. Then, when I was in seventh grade, not even
2 months after my 13th birthday, my mother finally enrolled me in
school.
I was thrilled, but at the same time I was crying for help. I
needed someone to rescue me. Eventually, I was rescued but not in the
way I had imagined. After only 2 weeks in the seventh grade I was
kicked out of the school for distributing drugs. I had taken the drugs
from my mother's stash while in our 7- by 9-foot pull trailer. I wound
up in the juvenile justice system.
Three months after being admitted to my last and best foster home,
the courts allowed me to attend school again. I was given achievement
tests. I was 13 years old, unable to fully comprehend reading, with
very little knowledge of mathematics or science, taking a test to
determine my school grade. They put me in remedial learning classes. I
can still remember celebrating my first completed semester, I had
earned a 2.4 GPA!
After that first semester in the eighth grade my life began to
change. My foster mother pushed for me to join Upward Bound to take
advantage of the after-school tutoring they offered. I agreed and
joined Upward Bound in the ninth grade. My improvement was rapid and
dramatic. My grades shot up to a 3.75 GPA and I switched from remedial
to honors courses.
With this new feeling of accomplishment I had a new self-image. I
didn't want to be like my mother and my old friends. I wanted something
more for myself. I always had wanted something more I just didn't have
a way to access it until Upward Bound came into my life.
Through Upward Bound I was given a myriad of opportunities. The
first difference I noticed with Upward Bound is that the field trips
were free. I never felt poor, and people believed in me. Education was
becoming what I never thought it would be--for everyone. Although I
began to believe in what this country refers to as equal opportunity I
developed a sense of fear. I knew I wanted to go to college I just
didn't think it was right for me.
When my senior year rolled around, I told my Upward Bound
coordinator that I wasn't going to college. After knowing me for 4
years, she was shocked. I will never forget her reaction. I still can't
tell if she was angry or if she sincerely thought I had gone crazy. She
told me I would be wasting my mind, wasting a good chance that I might
never have again. Although my foster parents had tried to convince me
of this fact, it didn't sink in until my Upward Bound coordinator put
it so squarely before me.
Instead of letting me get away with applying to one school, Upward
Bound got me to apply to ten. I received acceptances, but the issue of
money was still there. I had no way to pay for college. I expressed
this to my UB coordinator who happily informed me that I had options.
She introduced me to the FAFSA and to a million different scholarship
applications. She didn't stop there. She wrote letters of
recommendation, including one to the Gates Millennium Scholarship Fund.
Pepperdine University accepted me and offered me the largest
scholarship. Plus, the Gates Millennium Scholarship covers the
difference . I went on to receive the Anton Kollars Scholarship, and
The Jim Casey Family Program Scholarship totaling amounts that went
well beyond the cost of my education. Not to mention that if I needed
to have the scholarships increase for any particular reason there would
be no problem. This was the first time in my life in which I actually
felt financially stable.
And here I am in front of you, a junior at Pepperdine University,
who is taking full advantage of the opportunity given to her and giving
back in every situation possible. I now know I have the ability to
point my life in whatever direction I want it to go. This ability, with
all its blessings, is not something I would have had without the
guidance, mentoring, and encouragement of the Upward Bound Program.
Currently I work as a researcher for a program called Los Angeles
Bridges. This program is an outreach to high and low risk students of
Fulton Middle School. This is where I learn to what extent programs
like the Upward Bound are necessary on a much larger scale. The mean
grade point average of the 85 high risk students in the program is a
1.9. These kids will be the beneficiaries of the Upward Bound Program
upon entrance into high school. These kids may never see another way
out of the cycle of poverty if programs like this are eliminated.
I was a child who was crying for help, who needed someone to
believe in her. Had it not been for the Upward Bound program I would
not have made it this far nor will I make it my next goal.
Thank you for listening.
The Chairman. Mr. Bosworth.
Mr. Bosworth. Mr. Chairman, members of the committee, I
have a lot of very smart things to say, but there could be no
more compelling testimony about the importance of higher
education in America, no more strong evidence of its success
than this very poised and articulate young lady sitting on my
right.
Congratulations.
Ms. Thorpe. Thank you.
Mr. Bosworth. Thank you for the opportunity to summarize
today some of our work about the education needs of working
adults who did not prepare for this economy when they were of
traditional school age.
Let me turn first to the easy part: what is the problem?
Here is what I suspect you already know. Almost all of the good
jobs demand postsecondary credentials, yet 60 million working
adults in America between the ages of 25 and 65--that is over
half of that working age population--have no education after
high school. Most are stuck in low wage jobs. Few can buy homes
or build family assets to pass on to their children, and most
probably will not send their own children to college.
If we cannot do a better job in getting working adults back
to college, the Nation faces a major shortfall of educated
workers. High school graduation rates are not increasing.
College completion rates are increasing only very slowly. This
problem will get worse.
Working adults face huge barriers to postsecondary access
and success. Many have very poor or at least very rusty basic
skills, but colleges have limited ability to help them
remediate those skills, and our adult basic education system is
of almost no help at all. With full time work and family
responsibilities, few adults can attend college on the half-
time basis required for most grant and loan aid. The Lifetime
Learning Tax Credits are poorly marketed, too small to make
much difference, and irrelevant to low-income workers with
limited tax liability.
Financing barriers aside, most colleges do not offer
accessible programs, flexible schedules or modularized
credentials that might work for working adults. Most programs
are still seat time based in 15 week semesters, not the
competency-based, smaller, more digestible chunks that would be
accessible to working adults.
Of course there are wonderful exceptions to this generally
dismal picture of how higher education responds to the needs of
working adults, but they remain isolated best practice, far
from common practice. All working adults pay a high price for
inflexibility and traditionalism in postsecondary education.
Now to the more hard part: what can be done?
these are deeply embedded problems. They are not going to
yield to quick solutions. Still there are some things that this
committee could begin now to fix, some as part of the
reauthorization of the Higher Education Act and some as
closely-related initiatives. I offer four recommendations for
your consideration.
1. Modify eligibility requirements for existing loan and
grant programs. My written testimony recommends a few specific
changes in Pell eligibility, and also suggests it is time to
reconsider the limitation on Federal direct and insured loans
to less than half-time students.
2. Develop a new Federal/State partnership to promote
higher education for working adults. Barriers to continues
learning go very deep in the structure and financing of higher
education, and just squeezing a little more money out of title
IV will not help much. Solutions can come only through broad
reforms and how the States manager their postsecondary
education responsibilities. I recommend a modestly-funded
temporary program of grants to States to promote access and
success for working adults by reforms in education governance,
financing, curricular program development policies,
accountability systems, accreditation, credentialing, and
faculty development.
3. Make education tax credits more meaningful to working
adults. This would include increasing the percentage of
qualified educational expenses allowed under the Lifetime
Learning Tax Credit from the current 20 percent of the first
$10,000 to 50 percent, capping that credit at $2,000. Also make
the credits refundable to low-skilled adults working in low-
wage jobs with low tax liability. With refundability many low-
skill, low-income workers could begin to use these credits for
literacy and for occupational skill development.
4. Reform adult basic education. The lack of basic literacy
skills is the greatest single barrier to postsecondary
education facing most working adults. Current Federal and State
adult literacy programs do not work and should embarrass us all
by their obvious failures. We need fundamental reforms that
would involve employers and directly link adult basic skill
development to postsecondary participation.
Of course some of these ideas go well beyond the
reauthorization of the Higher Education Act, but this is a
systemic problem we face and it requires a systemic response.
I look forward to the opportunity to discuss these ideas
and others in more detail. Thank you.
The Chairman. Thank you very much.
[The prepared statement of Mr. Bosworth follows:]
Prepared Statement of Brian Bosworth
Mr. Chairman, and members of the committee: My name is Brian
Bosworth. I am the president of FutureWorks, a consulting and policy R
& D firm focusing on the strategies and institutions that promote
sustainable, skill-based regional economic growth. I am grateful for
this opportunity to discuss problems and opportunities in strengthening
access and accountability in postsecondary education.
For the past few years, our firm has devoted an important part of
our work to exploring the policies and practices that will promote
training and education for millions of working adults who did not
prepare for this economy when they were of traditional school age. I am
pleased today to have this opportunity to summarize some of our
findings and suggest their implications to the work of this committee.
This testimony is further informed by our consulting work in regional
economic and workforce development with business-civic institutions,
workforce boards, and community colleges.
In the 21st century economy, skill has become the most critical
determinant of economic success--for individuals, for businesses, and
for regions. The economic returns to education and skill development
are growing. The most obvious and the widest divide between those who
are doing well and those who are not is education attainment. For the
unprepared individuals, businesses, and regions, the increasing bias
toward education and skill demands wrenching adjustments. However, the
good news is that these are not fixed regional or personal endowments.
Unlike natural resource and location advantage in the last century, the
chief determinates of region economic success in the 21st century
economy--education and skills advantage--are not immutable; they can be
changed. With the right policies and with aggressive leadership, a
region can increase its stock of skills and create flexible and
responsive educational institutions that will attract new investment
and make old investments more efficient.
Federal policy can make a big difference. I will focus the balance
of my remarks on suggesting how this committee might craft strategies
that better support the skill attainment objectives of million of
working adults. First, I want to explore the problem in more depth and,
secondly, I want to offer four specific recommendations for attacking
these problems. Those recommendations include:
1. modifying eligibility requirements for existing grant and loan
programs;
2. developing a new Federal-State partnership in higher education
for working adults;
3. making education tax credits more meaningful to working adults;
and,
4. reforming adult basic education.
Postsecondary Access and Success for Working Adults: What's the
Problem?
In 2004 there were about 115 million full-time workers from age 25
to 64 in the U.S. civilian labor force. Only 40 percent of them have a
college degree (associate's, bachelor's, or advanced). Another 19
percent went to college, but never got a degree. While some of this
last category may have gained a 1-year academic certificate or an
industry-recognized certification, most probably dropped out of college
before completing even 1 year.
We can reasonably conclude that there are at least 60 million adult
workers in America who have no postsecondary credential of any kind.
They were not prepared by their education for success in today's
skills-biased economy and most are struggling. They don't make much
money; they can't buy a home nor accumulate other assets to pass on to
their children; and their own children are very unlikely to go to
college. This isn't just their problem--America's lack of educated and
skilled workers is the most significant drag on national economic
growth.
There is no reason to believe this problem will abate over the next
generation because more young people recently have completed or will
attempt college. In fact, the college attainment rate of the workforce
is increasing only very slowly. While the percentage of young adults
age 25-35 with some college is much higher than those age 65 plus, it
is not appreciably higher than those still in the active workforce.
Nationally, the rate of increase in high school graduation has stalled.
Only a large recent increase in the number of GEDs awarded has
prevented an actual decrease in high school completion rates. The
recent history of depressingly low attainment among the fastest growing
demographic segments of those young people beginning high school over
the next 10-20 years points to a further erosion of both high school
and college completion.
Conservative projections by the Bureau of Labor Statistics about
the number of net new jobs that will require some college and
optimistic projections of net new workers with some college credentials
suggest a shortfall of about 12 million educated workers over the next
15 years. The lack of educated workers in the United States already
threatens the competitiveness of firms in technology, healthcare,
manufacturing, and most other sectors paying average or above average
wages. Barring a dramatic, and unlikely, change in U. S. immigration
policy, the skills gap will get worse. We cannot stop this gap from
widening, much less begin to close it, until we develop policies that
will help millions of working adults without college get postsecondary
credentials.
Any college matters some, but degrees and credentials matter most.
According to the Census Bureau, full-time, year-around workers with at
least 1 year of college and no degree can expect to earn 15-20 percent
more than those with no college at all, but other research indicates
the benefits of less than a year's worth of postsecondary courses may
generally be too small to be significant. Full-time, year-around
workers with associate's degrees can expect to earn 30 percent more
than those with no college and those with bachelor's degrees, 50
percent more. These financial returns to postsecondary education are
growing every year and, over a lifetime, make a huge difference to
workers, to their family assets, and to the likelihood of postsecondary
education for their own children.
Many working adults understand the importance of further education
but relatively few are finding success in gaining postsecondary
credentials. The National Household Education Surveys (NHES) report
stunning increases over the past decade in adult education enrollment,
especially among those who have no previous postsecondary credential.
However, the NHES also reports that few of these adults are enrolled in
programs leading to degrees, certificates, or certification.
Unfortunately, efforts by working adults to gain those credentials
are not well supported by their Federal or State Governments or by the
institutions of higher education that ought to be encouraging them.
Notwithstanding the rhetoric of ``lifelong learning,'' higher education
financing, programming, scheduling, and credentialing policies still
are skewed narrowly toward traditional students coming directly out of
high school into higher education. Working adults, because they have
full-time job and family responsibilities, often lack the time, money,
and flexibility of schedule to fit into the mode of higher education.
Many working adults away from school for many years have poor or at
least very rusty basic skills. Our review of the research literature
suggests that an astonishing 40 percent of the labor force probably
lacks the basic literacy skills to be successful in higher education
(and, of course, this means they also probably do not meet the basic
skill demands of employers struggling to remain competitive in the
global economy). In our work with community and technical colleges, we
hear often that that 50-75 percent of their applicants fail the tests
designed to predict success in the academic and occupational programs
to which they seek admission. Some low literacy applicants with skills
at, say, an eighth grade level are allowed to enroll in the colleges'
remedial or developmental studies and, if they stick with it, can
progress over several months to an acceptable level of proficiency.
But, most of these adults have approached the postsecondary institution
looking for technical or occupational credentials and they frequently
lose all interest when diverted into basic skill courses. Few colleges
have integrated basic skill building curricula into their for-credit,
credential or degree-oriented courses. Those applicants with literacy
skills below an eighth grade level are simply turned away or referred
to adult basic education programs (and seldom are heard from again).
If they can get past the basic skill threshold problems, working
adults still face major barriers to postsecondary study (especially
time, program availability, schedule, and cost). Evidence shows that
working adults do take courses outside of working hours, but usually on
an intensive basis only for a short time--4 to 6 weeks or so.
Sometimes, they are able to take one course at a time for a whole 15-
week semester. However, especially if they have a family (and of course
most do), they very seldom are able to sustain education and training
at what colleges and universities consider a half-time pace.
Less-than-half-time students get little financial support.
Government direct or guaranteed loans (subsidized and unsubsidized)
require half time or more attendance. Working adults who must pursue
college on a less-than-half-time basis receive almost no Pell grant
money because several eligibility criteria (involving income and cost
calculations, eligible programs and institutions, and the pace of
attendance) effectively eliminate them from consideration. State
programs generally minor Federal limits (although there are some
innovative state-based practices).
Education tax credits are not helping. The more generous credit--
the Hope Scholarship Credit--demands half-time or more attendance and
goes mostly to the middle income parents of traditional students who
are in their first 2 years of college. The Lifetime Learning Tax
Credits available to less-than-half-time students are far less generous
than Hope, they are poorly marketed, and they are not effectively
targeted to modest income families.
Recall that the average annual earnings for full-time, full-year
workers with only a high school degree were only $30,400 in 2000. Even
if a family has a second wage earner (probably not full-time, full-
year), that family is hard pressed just to cover its basic living
expenses. Educational expenses of $1,500 to $2,000 per year for a
family struggling to cover these basic expenses can easily make
postsecondary study seem out of reach.
The lack of student aid for working adults squashes demand for
accessible programs and stifles experimentation and innovation, such as
creating more digestible modularized programs and sequencing
credentials. It increases the skepticism of working adults and their
employers about the support they can get from their government or the
higher education system.
But the problem is not just the absence of financing. Few
institutions of higher education have developed programs and schedules
that work for working adults. Even at community colleges, programs that
will lead to degrees and academically recognized credentials are
frequently campus-bound; even if not, they often have prerequisites
that are tough to fit in the schedule of adults with full-time work and
family responsibilities.
Degree and other credential requirements often seem too daunting
for a working adult attending part-time. Associate degrees that require
60 to 75 credit hours can seem an almost insurmountable barrier to a
student who can take only three of four credits at a time. Most
programs continue to require seat time in lieu of competency
demonstration as a chief criterion of credentialing. Extended use of
evening and weekend programs often requires programming arrangements
that can raise accreditation problems for the programs and
institutions. Their response frequently has been to make those
offerings ``non-credit'' and to deny students shunted off into those
classes the opportunity to build a pathway of credentials to advance
their career.
Few public colleges have successfully integrated preparation for
industry-based certification into their for-credit, academically
credentialed programs. Students who choose to pursue such credentials
(as in information technology fields) are often required to pursue
these programs in more flexible but also more expensive proprietary
training schools where they sometimes sacrifice future ability to
articulate their study into higher-level programs in favor of short-
term credentials. Workers seeking continuing credentialed education as
they navigate toward higher paid positions in their occupation are
often frustrated to discover that credentials earned in one institution
cannot be applied to advanced study at another school.
Of course, there are important exceptions to this generally dismal
picture of how higher education systems meet the needs of working
adults. Notwithstanding a decade of increases in tuition and fees that
exceed the rate of inflation, many 2-year community colleges are still
financially accessible for limited income families. There are several
colleges, 4-year as well as 2-year, that have worked hard to develop
programs that work well for working adults and are affordable. They
have organized credentialed programs that generally require 1 or 2
years of full time study into shorter modules, each with distinct
credentials that can be ``stacked'' together over time into more
conventional degrees and certificates.
Some community colleges are making more extensive use of ``career
ladders'' in high-growth occupations that enable students to earn
basic, industry-recognized certification quickly to gain entry to
higher wage occupations with the option to continue training for more
advanced credentials. Some program offerings include open-entry/open-
exit classes that allow students to progress at their own pace, classes
that meet on weekends, and course offerings that combine distance-
learning and on-campus support. Some colleges have created short-term
intensive programs with curricula and scheduling formats that can
better accommodate the schedule limitations of working adults.
Regrettably, however, these are exceptions--best practice, not
common practice. In terms of cost and programs structure most
institutions of higher education institutions are not easily accessible
to working adults and they do not promote success.
In fact, this is not just a problem facing low-skilled working
adults. A defining characteristic of the early 21st century economy is
the emergence of high wage, high skill, occupational clusters not
generally seen as professional or managerial and requiring sub-
baccalaureate credentials at entry. Jobs in these clusters (like
advanced manufacturing, biotechnology, logistics, health care) pay well
and offer opportunities for career advancement. They provide careers
that can support middle class expectations for producing family
sustaining earnings and building inter-generationally transferable
assets.
However, a central feature of these high performance occupations is
that they require advanced and credentialed skills on a continuous
basis. People in these occupations need postsecondary education not
just to get ready for the job, but also to adapt to the job or
occupation as skill requirements change and as they pursue better
opportunities within the occupational cluster.
The implications of these labor market changes for education and
training are far more significant than has been generally understood.
We need demand-side oriented, postsecondary institutions that can help
pull young people through high schools and pull adult workers back into
education to build a solid foundation to enter these high performance
occupations. These market-based institutions then need to stay with the
workers as they and their employers discover the need for new skills.
Upwardly mobile workers developing a portfolio of credentialed skills
must rely on local education and training institutions that can deliver
programs in short, intensive, and credentialed packages that are
accessible to people who have full-time jobs and usually full-time
family responsibilities. The institutions must develop more systemic
credentialing systems that certify both the strong foundation and the
addition of new increments of knowledge and capability. In these high
skills occupations, successful workers and their employers will need
more comprehensive and more fine-grained credentialing pathways than
those currently offered by our current system of 1-year certificates
and 2-year and 4-year degrees.
In the old economy, postsecondary education helped people prepare
for their first jobs and the beginning of their careers. In the new
economy, postsecondary education must help people prepare for lots of
jobs over their lifetime, building career competencies through
continuous education and skill development.
In summary then, there are big economic returns for workers, their
employers and the national economy to postsecondary education for
working adults, especially for those with no previous after high school
credentials. However, there are even bigger barriers to postsecondary
access and success for working adults. The obvious question is, ``What
do we do about it?'' Or, more to the point, ``What does this committee
do about it?"
This committee can begin now the task of helping postsecondary
education in America organize itself to deal more effectively with the
on-going education and skill development needs imposed by the 21st
century economy. It will take time but there are some things that can
be done now in re-authorizing the Higher Education Act and some things
that can be done in the near term through the strategic adjustments of
closely related Federal policies affecting higher education.
What Can This Committee Do in Reauthorizing the Higher Education Act?
1.Modify Eligibility Requirements for Existing Grant and Loan
Programs: This committee might consider some relatively low-cost
modifications to Title IV of the Higher Education Act that would help
working adults and promote lifetime learning. Very low-income adults
could be helped by changing the way that ``Expected Family
Contribution'' and ``Cost of Attendance'' are calculated to better
reflect living costs, by permitting Pell grants for summer school to
allow for year-around attendance, by simplifying access to Pell grants,
and by more aggressive marketing of their potential eligibility.
For other working adults who are able to incur education debt, it
certainly seems appropriate to reconsider the limitation on Federal
direct and insured loans to less than half-time students. In fact,
working adults (because they have a credit history and income) are
probably more able to manage education debt than young people coming
out of college and looking for their first career job. The returns to
credentialed learning are dramatic enough to justify this investment. I
further encourage the committee to investigate how employers might be
asked to play a supportive role in new adult loan programs, perhaps
through financial incentives for helping repay worker debt.
I understand that the President's 2006 budget has proposed a small,
new loan program, jointly administered by the Departments of Education
and Labor, to help dislocated, unemployed, transitioning, or older
workers and students. I have very few details of this budget
initiative, but to the extent it seems to have merit, this committee
may which to consider its inclusion in the reauthorization of the
Higher Education Act.
However, beyond these modest changes, I don't see much enthusiasm
among postsecondary institutions themselves for major changes in Pell
grant or student loan eligibility that might better accommodate the
financial needs of working adults. Most see Title IV of the HEA as a
``zero sum game'' where allocating more Federal support to non-
traditional students, like working adults, means diverting it from
traditional students. Certainly, Federal resources are tight; this
hardly seems to be the right climate to consider new government
entitlements for higher education. And it doesn't help low-income
working adults to set their needs in opposition to the needs of low-
income young people.
Even more importantly, we are increasingly convinced that squeezing
a little more money out of title IV will not help much. The problems
that discourage access and success for working adults seeking
postsecondary credentials also discourage the continuous learning that
is required by the new economy. These are historic problems that go
very deep into the governance and financing of higher education and
adult education. Solutions must come through broad reforms in how the
States manage their postsecondary education responsibilities.
The current title IV programs for traditional students pretty much
ignore the State role in favor of direct entitlements and institutional
aid programs. Perhaps the more appropriate Federal role for such non-
traditional students as working adults might be to work directly with
the States, helping them promote institutional change for student
access and success.
2. Develop a New Federal-State Partnership in Higher Education for
Working Adults: We suggest inclusion in the reauthorization of the HEA
of a modestly-funded, temporary program of grants to States to promote
postsecondary access and success for working adults. These grants would
help States develop and implement a plan to reform higher education
governance, formula financing, student aid, curricula and program
development, accreditation, credentialing, and faculty development in
ways that would promote access and success for working adults seeking
their first postsecondary credentials as well as those seeking the new
skills and additional credentials of career advancement.
This would not create new Federal student financing programs. Nor
would it seek to divert existing program like the Pell grants and the
direct and guaranteed student loans away from traditional students
toward working adults. Rather, this new approach would be focused on
helping the States--the biggest financial stakeholder in higher
education--explore how changes in the way they govern and finance
higher education can create better opportunities for access and success
for working adults.
We suggest a time-limited approach (the 6 years of the new
reauthorization) under which each State would receive a planning grant
in year 1 followed by annual, formula-based implementation grants in
years 2 through 6. There would be monitoring, assessment, and
enforcement mechanisms to keep States on track of the plans they
develop with incentives for outstanding work and sanctions for poor
performance. Alternatively, the entire process could be made
competitive, with grants going only to those States prepared up front
to make a strong commitment to the postsecondary education of working
adults. Under any approach, it seems important to make the Federal
grants annually renewable, subject to performance, rather than
allocating each State full funding in one large grant.
Use of the Federal grants would vary from State to State depending
on their particular diagnosis of problems and opportunities. Some
States might place a special emphasis on developing new financial aid
instruments aimed at working adults. Others might choose to focus their
efforts around the development of new program and credentials that fit
the scheduling barriers facing many working adults. Some States might
look chiefly at their community colleges to implement this initiative
while others might ask their 4-year State colleges to play a major
role. This diversity of approach would provide a rich learning
environment and State teams working on these issues could be brought
together regularly to exchange information and experience.
This does not have to be a costly program for the Federal
Government. Giving the States modest discretionary funding to help
their institutions with careful research and with the design, testing,
and piloting of new programs will be enormously important to States
facing serious fiscal constraints. Consider a 6-year Federal
authorization of just $500 million or $85 million per year, providing
the States an average of $10 million for this multi-year initiative.
A scaled-down version of this idea could be piloted with just some
States (perhaps 10-15 selected through a national competition) who
commit to assess and improve their State postsecondary education
policies to increase the number of working adults with postsecondary
credentials. The participating States would assemble planning teams
representing the Governor's office, the State higher education
commission, the postsecondary student aid agency, the State department
of workforce development, the State human services agency, the State
finance or budget officer, the community/technical colleges, key
legislators, and major business associations. With some sort of careful
annual review, Federal funds would support a 1-year planning process
and perhaps 3 or 4 years of funding for project implementation. Federal
resources would also support national technical assistance and
dissemination.
We have been working on a small project using this model for the
past 2 years. With grant support from the Lumina Foundation, we have
partnered with the National Governors' Association in what we have
termed the Pathways to Advancement project. Several of the eight
participating States have made important progress toward improving
their State's higher education for working adults; however, there is
much more work to be done. Under this project, there has been no
funding to support program development and piloting at the State level
and, in these days of severe fiscal constraints, it is very hard for
States to change institutional behavior with no new money. However, our
experience is that States are serious about making these changes. They
have had strong support from their Governors. They work together and
learn from each other. Federal leadership and a little Federal money
could make the difference.
This new Federal-State program, even at a pilot scale, would be
both good economics and good politics. This strategy would find
enthusiastic support from business and labor groups. It does not
require a large or open-ended financial commitment from the Federal
Government. It would build a partnership with States and their
institutions of higher education around the target of working adults as
a huge new market segment. It would kick-start the systemic
repositioning toward lifelong learning that is important for
postsecondary education.
What Other, Closely Related Change Might This Committee Consider?
In the reauthorization of the HEA, this committee can begin to
promote changes and reforms in the regulatory and policy frameworks of
higher education that will help those institutions respond better to
the needs of the millions of working adults who lack any postsecondary
credentials and who will fall further behind in this economy.
However, changing institutional behavior is only one part of the
challenge. We also have to think of how to change the behavior of
individual workers and their employers. Adult workers need better
information about the returns to postsecondary and greater incentives
to invest their own energy, time, and money into earning postsecondary
credentials. Employers need more information about the productivity
returns to investments in workforce skills and how to help their
workers understand the importance of these investments.
Strengthening employer commitment to the credentialed postsecondary
education of their workers is a difficult challenge and the potentially
effective Federal role is not clear. Employers may need more financial
incentives as they step up to a higher standard of responsibility for
helping their employees gain credentialed and portable skills.
Employers spend a lot now, but most of their spending goes to support
further education for already highly educated workers in professional
and managerial occupations. Very little information is available about
employer education assistance programs permitted under IRC Section 127.
Anecdotally, tuition reimbursement programs for lower skilled workers
don't seem to be very effective as employers report extremely low
takeup rates among their employees and colleges report very little
tuition and fee income from employers. Perhaps this committee might
encourage more research and pilot experiments with employers and
employer associations to help determine how best to encourage a
stronger employer role in promoting postsecondary access and success
for adult workers.
While I understand the committee is focusing this hearing on the
Higher Education Act, I would like to take this opportunity to
encourage two very closely related policy initiatives or opportunities
that could have a big impact on the postsecondary education achievement
of working adults. The first opportunity lies in changing the Lifetime
Learning Tax Credit and the second lies in a reform of adult basic
education as currently promoted through Title II of the Workforce
Improvement Act.
1. Making Education Tax Credits More Accessible to Working Adults:
The Hope Scholarship (Hope) and Lifetime Learning Tax Credits (LLTC)
were initiated by The Taxpayer Relief Act of 1997 to increase college
affordability and to encourage lifelong learning. The two credits were
designed to complement each other by targeting different groups of
students. While the Hope may be used only for a student's first 2 years
of postsecondary education, the LLTC is available for unlimited years
to those taking classes beyond their first 2 years of college,
including college juniors and seniors, graduate students, and working
adults pursuing lifelong learning.
Eligible expenses for each credit include only tuition and required
fees at an educational institution eligible for aid administered by the
Federal Department of Education (DOE). Tax filers may claim tuition and
fee amounts after subtracting grants, scholarships, and other tax-free
educational assistance including Pell grants, employer-provided
education assistance, and Veteran's educational assistance. The Hope
provides a credit equal to 100 percent of the first $1,000 plus 50
percent of the next $1,000 of net tuition and fees paid during the tax
year, for a maximum credit of $1,500. The student must be enrolled at
least half-time (at least 6 credit hours per semester, which typically
is two classes) and be pursuing a degree or other recognized
educational credential in order to be eligible.
In contrast, individuals are not required to enroll at least half-
time or pursue an educational credential in order to be eligible for
the LLTC. This makes the LLTC available to adults taking an occasional
college course or to those enrolled in any course aimed at acquiring or
improving job skills. Note that this could include adult basic
education, including remediation of basic literacy skills in a college
setting. Currently, the LLTC is equal to 20 percent of the first
$10,000 of net tuition and fees, for a maximum credit of $2,000.
Both credits reduce the amount of taxes filers owe. The Hope credit
can be claimed for multiple eligible students in a family while the
LLTC is capped at $2,000 per tax return, no matter the number of
students in the family or the amount of their combined educational
expenses. Families are allowed to claim the LLTC for some members and
the Hope credit for others in the same year. However, the same student
cannot take both credits.
The benefits of the tax credits phase out for higher-income
taxpayers. The phase out begins at an adjusted gross income (AGI) of
$83,000 for a joint return ($41,000 for single filers) with no benefit
for families with incomes above $103,000 ($51,000 for single). With
these relatively high thresholds, tax credits for higher education
expenses have the most extensive eligibility of any Federal program.
(In comparison, Pell grants are strictly limited to families with
incomes below $40,000. Nearly 90 percent of Pell grant funds are
awarded to families with incomes under $30,000 and 54 percent of those
families has incomes under $10,000.)
In 2003-04, FutureWorks investigated the use of the Hope and LLTC
using three primary data sources: Internal Revenue Service's Statistics
of Income, the National Household Education Survey, and the National
Postsecondary Student Aid Survey. We were limited then to 2001 tax
information (and have not been able to update our research since). Some
quick highlights from our research include:
7.2 million filers received $5.2 billion in credits;
Only 21 percent of adults in the general population had
heard of the credits;
44 percent of the filers received a Hope credit only and
they received 60 percent of the total benefits, 52 percent received a
LLTC only and they received 31 percent of the benefits, and 5 percent
received both credits and 9 percent of the benefits;
The mean credit for Hope recipients was $969 and the mean
for LLTC was $432.
Overall, we found that the tax filers who benefited the most from
these higher education tax credits were those who claimed them on
behalf of dependent college students. Those who benefited the least
were students who claimed the credit(s) for their own or their spouse's
educational expenses and who did not indicate that they were
``students'' on their income tax return.
Based on our research findings, we conclude that the Hope and LLTC
are not working effectively to address the significant education and
skill shortages in America's workforce. They are not inducing greater
numbers of working adults who need to upgrade their education and
skills to earn postsecondary credentials. They are not supporting to
any significant degree those who are currently enrolled. As a policy
device to address the employment and economic challenges discussed
above, the higher education tax credits as currently marketed and
structured do not work well.
These conclusions lead us to recommend four major changes to the
education tax credits to make them more accessible and beneficial for
working adults who pursue the postsecondary educational credentials
needed in today's economy:
1. Raise Awareness of the Credits: Especially, work with employers
to market and improve the takeup rate of the education tax credits
among workers. Only 17 percent of working adults without a bachelor's
degree had heard of them. These percentages decline with lower levels
of education and income as well as among Hispanic adults and those for
whom English is not their primary language. Among enrolled college
students, only one-third of apparently eligible independent students
actually claimed an education tax credit in the 1999-2000 school year.
2. Increase the Percentage of Qualified Educational Expenses
Allowed Under the Lifetime Learning Tax Credit: Specifically, increase
the percentage from the current 20 percent of the first $10,000 spent
on qualified expenses (tuition and fees) to 50 percent and cap the
credit at $2,000. The current structure of the Lifetime Learning Tax
Credit mostly benefits full-time students who attend higher cost
institutions and minimally benefits students who attend lower cost
institutions like community colleges, and who are enrolled less than
full-time. Working adult students attending community colleges part-
time or less-than-half-time seldom spend over $2,500 in eligible
expenses (tuition and fees) annually.
3. Expand the Definition of ``Qualified Expenses'' for Both
Education Tax Credits: Specifically, include in the definition of
``qualified expenses'' not only the direct costs of attending school,
i.e., tuition, fees, and room and board, but also indirect costs, i.e.,
books, supplies, equipment, transportation, child care, and others as
currently defined by the U.S. Department of Education in Title IV
student aid formulas. It is important to note that this change will
benefit only those students who do not already receive financial aid to
cover these expenses. Both education tax credits already stipulate that
tax filers can only include in ``qualified expenses'' those amounts
above and beyond what is. covered by tax-free education assistance and
refunds, including the tax-free parts of scholarships and fellowships,
Pell grants, employer-provided educational assistance, Veterans'
educational assistance, and any other nontaxable payments other than
gifts or inheritances received as educational assistance.
4. Make Both the Hope Scholarship and Lifetime Learning Tax Credits
Refundable: Specifically, using the guidelines for the Earned Income
Tax Credit, change the Hope and Lifetime Learning Tax Credits to allow
low-income working adult students to keep their full credit, including
the portion above any tax liability they have. Many low-skill adults
working in low-wage jobs have low tax liabilities and without
refundability will see no benefit from the education tax. With
refundability, low skill, low income workers could begin to use these
the credits for literacy and occupational skill development
These changes in the education tax credits are, of course, not
without fiscal consequence and it may be necessary to phase them in
gradually. On the other hand, building demand for accessible
postsecondary education programs by making these credits more
responsive to the needs of working adults should work to expand the
supply of the flexible programming and credentialing arrangements most
needed in postsecondary education.
2. Reforming Adult Basic Education: The biggest single barrier to
postsecondary access and success for many working adults is their low
literacy proficiencies and there is very little help available to them
to improve their basic skills. Current adult basic education strategies
and programs are not working for working adults. Literacy deficits in
the workforce are on the increase. Current programs enroll only a tiny
fraction of those who need help, the programs achieve very nominal
literacy gains for participants, and most program participants are not
even working adults. Adult basic education needs to be reformed and the
Federal Government should take the lead through the Adult and Family
Literacy Act (now Title II of WIA).
While there is widespread recognition of severe basic skills
deficits in American workplaces, there is no current statistical
information that fully and accurately quantifies the extent of the
problem. The best source of information remains the 1992 National Adult
Literacy Survey (NALS) of a nationally representative sample of 13,000
individuals age 16 and over who responded to detailed in-home
interviews and completed a series of literacy tests.
The NALS respondents received proficiency scores in three literacy
scales--prose, document, and quantitative. There is no ``pass-fail''
threshold in the NALS; the proficiency scores are grouped in five
levels--level I being the lowest and level V being the highest. Adults
in the bottom Level I could perform simple, routine tasks involving
brief and uncomplicated documents (i.e., total entries on a deposit
slip and locating the time and place of a meeting on a schedule), but
they could not locate information in text or make low-level inferences
using printed materials. They could not integrate easily identifiable
pieces of information nor perform even one-step arithmetic operations.
Those with proficiency only at Level II could handle simple one-
step arithmetic (e.g., determining the price difference between two
tickets) but lacked such written communication skills as the ability to
write a short letter explaining a billing error. Nor could they use a
bus schedule to get to a destination by a specific time. Generally,
employers would understand the middle level III as representing the
degree of literacy appropriate to successful completion of tasks
usually associated with front-line production or customer service
workers; most employers would see this as the minimum standard for
workplace success.
In 1992, over 40 percent of labor force participants age 16 and
above performed below this mid-point standard--they were in the lowest
two levels of proficiency as defined in the survey. That means that
about 53-54 million workers probably did not possess the literacy basic
skills desired by employers. Of these, 21-22 million workers scored
only in the bottom Level I.
The 2003 NALS data will soon provide information about changes
between 1992 and today. However, big changes are unlikely. Over the
past 10 years, there have been only very modest gains in educational
attainment of the workforce. In fact, the percentage of 18-24 years
olds with a high school diploma or its equivalent actually decreased
from 76.5 percent in 1990 to 74.7 percent in 2000. The immigration of
poorly educated adults also has heightened the problem.
In fiscal year 2003, the Federal Adult Education and Family
Literacy Act (Title II of the Workforce Development Act) allocated
$491.5 million to the States for all adult literacy programs. The
States in turn allocate these funds to local providers, usually local
education agencies and community-based organizations and often to
correctional institutions. Most States match these Federal grants with
more than the required 25 percent (total State/local matching funds
have been about $1 billion annually for the past few years), but
overall State funding has actually decreased since 2000. Most programs
fall into three categories: adult basic education; English as a Second
Language, and adult secondary programs (for GEDs or high school
diplomas). Basic eligibility requirements are to be 16 or older and be
without a high school diploma.
Most adult education provider organizations are public K-12 schools
offering evening classroom programs to very low proficiency adults or
young people using adult education to compete high school. These
providers typically have weak linkages at best to employers. Mostly
part-time instructors staff the adult education programs; few
instructors have credentials in adult education and fewer still have
training in workplace basic skill programs. Not surprisingly, most
employers know little about these providers or what help they may
provide.
During much of the 1990s, enrollment in these publicly supported
programs was between 3.5 and 4 million people, but in recent years the
number of participants has slipped to about 2.7 million. Only about one
third of these 2.7 million people are adult workers.
The majority is unemployed. A large and rapidly increasing share of
Federal-State adult basic education program resources is devoted to GED
preparation for youngsters under the age of 21 who enroll in adult
education program to prepare for the GED test. While the GED was
originally designed as a way for older adults who had not completed
high school to gain equivalency, it has become an alternative pathway
to high school completion by millions of high school age young people
who have dropped out of school. GED preparation for high school age or
slightly older adolescents is now consuming a large portion (perhaps
40-50 percent) of Federal-State adult basic education programming. Yet,
evaluation evidence suggests no economic return to GEDs unless they
lead directly to postsecondary credentials.
The current systems of adult basic education are supply-side
approaches focusing around public providers typically offering evening
courses taught by K-12 teachers who often are not trained as adult
educators and have little experience with workplace or work oriented
programs. Postsecondary institutions in most States are rarely involved
with the design or delivery of adult basic education programs and few
States set postsecondary access and success as a central objective of
adult education. There is very little educational infrastructure for
demand-side strategies where employers and workers themselves might
take on more responsibilities for developing stronger basic skills.
I understand that reform of Federal-State approaches to adult basic
education is a big job and not the immediate subject of this committee.
On the other hand, I understand that the committee is interested in how
the different education programs under its jurisdiction work together,
or don't. Here is a case where policy objectives, as least as they play
out on the ground, are at cross-purposes with each other. Adult basic
education as presently implemented in most States does not yield
economic return to participants and does not support postsecondary
access for working adults. I urge this committee to begin to assess
this problem and how to solve it.
The Chairman. Mr. Shireman.
Mr. Shireman. Thank you very much, Mr. Chairman and members
of the committee.
As a country we need to boost the education levels of our
population, but at the same time we need to make progress at
the postsecondary level. We need to come to grips with the fact
that debt has become the way that Americans pay for college.
Two-thirds of students at 4-year colleges graduate with an
average close to $20,000 in debt. This is up 60 percent in just
7 years.
Now, on average that is not a problem because on average
the college graduate will earn $900,000 more over a lifetime
than the average high school graduate. But as Milton Friedman
pointed out when he first suggested a Government student loan
program 50 years ago, there is much variation about that
average in the income that people have over a lifetime. People
have different careers that have different levels of earnings,
even within careers. People live in different parts of the
country, urban, rural, they specialize in different things
within their career and earn different amounts, and there is
even an element of luck that provides some people with greater
earnings than others.
This threat of looming student loan payments creates
problems. One is the disincentive to engage in service
professions, teaching, a disincentive to go to places where
salaries are lower, rural areas, for example. It also makes it
more difficult for people to buy a home, to save for
retirement, to pay for their health insurance. And now with
students or borrowers out of school, extending their debt to up
to 20 or 30 years into their own 40s or 50s, it makes it more
difficult for them to help pay for their own child's college
education and increases the amount that that child will end up
having to borrow for college.
How do people get around these problems? One way they do it
is they do not go to college. Kati Haycock mentioned some of
those data about the number of highly-qualified low-income
students who end up choosing not to go, and part of the reason
they choose not to go is they do not want to have to take on
that much debt. It is scary.
Another way that people cope is by going to school part
time. It is wonderful to have the option of going to school
part time, but a part-time student is much less likely to
complete their education and get their degree and get those
increased earnings.
Another way that people cope is that they work, and they
work a lot. One-third of full-time dependent students in
college work more than 20 hours per week. And for most of the
majors that students are in, that is too much work to be able
to learn what they need to learn and complete. It is difficult
to do.
These behaviors that are in part caused by the structure of
our financial aid system rob our Nation of the productive
potential and the creative contributions that these young
people can provide to society and to the economy. It robs us of
that brain power that we heard we need for our economy.
We can do better by college students and potential college
students without spending more tax dollars. President Bush in
his budget says that the guaranteed student loan program has
unnecessary costs for taxpayers that prevent the program from
achieving the efficiencies the market is designed to provide.
He suggested $25 billion in savings over 10 years. Senator
Smith and Senator Kennedy have another approach which the
Congressional Budget Office said would increase financial aid
for students by $17 billion over 10 years.
Now, I suggest two ways that we can invest these savings.
One is to provide incentives to colleges and States to better
serve students from lower income families so that they seek
them out, counsel them, support them when they are in college
and graduate them from college. I think it is interesting that
two of the witnesses already have indicated support for the
idea of support to States.
Second, one of the things that Milton Friedman suggested in
his testimony was to make loans hurt less--not in his
testimony, sorry, what he had to say 50 years ago--to target
assistance so that payments are not too large a proportion of
income.
Mr. Chairman, let me just mention a couple of other items
that have come up already because I also serve on the Advisory
Committee for Student Financial Assistance, and there has been
much discussion of the need to help foster youth as they apply
to higher education, and there is also an issue with a question
on the financial aid form regarding drug convictions that
scares a lot of young people and causes them to not apply for
financial aid.
So thank you very much for the opportunity to testify.
The Chairman. Thank you very much, and you have a strong
enough voice that none of us realized the microphone was not
on.
[The prepared statement of Mr. Shireman follows:]
Prepared Statement of Robert M. Shireman
Mr. Chairman and members of the committee: Thank you for allowing
me the opportunity to testify regarding the Federal role in promoting
college access and success. Through the Higher Education Act, the
Federal Government plays a critical role in making postsecondary
education financially within reach for millions of Americans. But more
than just serving individual students, the programs help to drive the
economy. As Federal Reserve Chairman Alan Greenspan said in testimony
last year, our versatile higher education system serves ``the practical
needs of the economy by teaching and training and, more significantly,
by unleashing the creative thinking that moves our economy forward.''
With some urgency, Chairman Greenspan called for a more aggressive
effort to expand educational opportunity. ``As history clearly shows,
our economy is best served by full and vigorous engagement in the
global economy. Consequently, we need to increase our efforts to ensure
that as many of our citizens as possible have the opportunity to
capture the benefits that flow from that engagement . . . [O]ne
critical element in creating that opportunity is the provision of
rigorous education and ongoing training to all members of our society.
This proposal is not novel; it is, in fact, the strategy that we have
followed successfully for most of the past century and a strategy that
we now should embrace with renewed commitment.''
More recently, Chairman Greenspan has also warned of the dangers of
the large Federal deficit. As I will testify today, this committee has
the opportunity to address both of these critical economic concerns: to
significantly expand Americans' opportunities for postsecondary
education and training, and to do so without adding to the budget
deficit.
The Debt Generation
Over the past 20 years, the way Americans pay for college has
changed dramatically. A system once based primarily on subsidized
tuition and need-based grants is now dominated by student loans. For
students from all socioeconomic backgrounds, debt has become a primary
method of financing higher education:
Just 15 years ago, only one in six full-time freshmen at
4-year public universities took out a Federal student loan; now more
than half do.
By the time they graduate, nearly two-thirds of all
undergraduate students have accumulated debt, up from less than one-
half just 7 years earlier.
Between 1993 and 2000, the average student debt for recent
graduates from 4-year colleges increased by 60 percent, to $19,300; the
proportion of parents taking out loans to help pay for their children's
education also rose.
In the baccalaureate graduating class of 2000, more than
one-fourth had in excess of $25,000 in loans. That is triple the
proportion just 7 years earlier, when only seven percent carried that
much debt (adjusted for inflation).
Borrowers who go to graduate and professional school carry
even larger debt loads. A 2002 Nellie Mae survey found average debt of
$45,900; for those who attended law and medical schools, the average is
$91,700.
Today's young adults are the first generation in American history
to experience college debt on such a mass scale. How does this new
reality affect the educational opportunities and outcomes that we want
and need in this country?
At the Institute for College Access & Success, we have been
exploring the perceptions that students, counselors, teachers,
financial aid administrators, and education policy experts have about
borrowing for college. We are finding an enormous amount of confusion
and anxiety. It shows in the conflicting messages that people hear when
they are thinking about continuing their education:
Message 1: Invest in yourself. ``Student loans are a good
investment. Your education will empower you to earn far more than you
borrow.''
Message 2: Protect yourself. ``Student loans can destroy your life.
If you default, your credit is ruined, and you can't get any more
student aid. To avoid default, you might have to work two jobs, or
forego the career you most want, just to keep up with your loan
payments.''
So, are student loans good, or bad? The real answer is, ``it
depends,'' which is why even college financial aid officials struggle
with how to counsel students about loans. For example, Ohio State
University has made a valiant effort with its financial counseling web
site (http://sfa.osu.edu/basic/debt.asp). It provides tools for
budgeting college costs and offers guidance for figuring out how much
borrowing is too much.
The American Council on Education and others recommend that student
loan repayments not exceed eight percent of a borrower's earnings. They
call anything higher than 10 percent the ``Red Zone''--the danger zone
for default, diminished savings, and other risks associated with too
much student debt.
But how many high school or even college students can predict with
any level of certainty what job they are going to have, much less what
their income is going to be? The only thing they can say for sure is
that if they don't graduate, or they don't get the kind of job they
want, or they don't get the salary they expect, then they risk
defaulting and undermining their own financial future and possibly
their families' as well.
Some observers criticize families who are more reluctant to borrow
for college than to take on other types of debt. After all,
postsecondary training is an investment that pays off handsomely in
future earnings. But there are understandable reasons for such
reluctance. If you have a mortgage, then you have a house. If you have
an auto loan, then you have a car. But if you have a student loan, you
do not necessarily have the increased income that you need to pay it
off. While education does boost earnings in society in general, there
is much variation around that average. And you can't return your
education to the store for a refund in order to pay off the loan.
Student loans do offer real opportunities for millions of students.
But with the promise comes real peril as well. This reality affects the
behaviors and attitudes of students and potential students and their
families--and thus has an impact on our educational outcomes as a
nation. For Americans from all backgrounds, the looming threat of high
loan payments--the Red Zone--has potential negative effects well before
high school and long after a borrower completes--or fails to complete--
a postsecondary program. These effects include:
Diminished college access and completion. Some students of
limited means are extremely reluctant to take out loans. This leads
them to forego college altogether, or to engage in behavior that
reduces their chances of completing a degree (such as attending part-
time, enrolling at less supportive institutions, or working excessively
while in school).
Disincentive for service careers. Recent graduates who
want to go into teaching, social work, religious service, and other
helping professions find that their college debt pushes them in other
directions.
Delay of marriage, family, and home ownership. Student
loan debt makes it more difficult for young adults to afford a home
mortgage. Borrowers also report that it has delayed their plans for
marriage and children.
Reduced ability to save for retirement--and for their own
children's college education. Increasingly, borrowers are extending
student loan repayment across 20 or even 30 years. This reduces their
ability to save for their own retirement, and to help pay for their own
children's higher education expenses.
In my testimony today I will focus mostly on how college students
and potential college students and their families think about loans. I
will touch briefly on some of the other key issues, and then turn to
what can be done about the problems.
Aid, Loans and College-Going Behavior
``I didn't get any financial aid. I got a loan''
Disappointed Student
One of the great attributes of our postsecondary education system
is that there are so many different ways to enroll in so many different
types of institutions. There are traditional residential colleges,
commuter campuses, community colleges, career-focused night programs,
intensive weekend courses, and online courses. This diverse array of
options is a positive feature of our system. It means that people who
would not enroll in one type of program have other options to consider.
The problem is that financial considerations prevent too many students
from choosing the approach that is the best fit for their
qualifications, interests, and needs. This reduces their likelihood of
enrolling in any program; and for those who do enroll, it diminishes
their likelihood of success.
In the traditional model, high school graduates who cannot cover
the full costs of college take loans and other aid, enroll full-time in
a 4-year school, and keep their work to less than 20 hours a week. By
focusing on their studies, these students are the most likely to
graduate and to play productive roles in the economy and as citizens.
Research consistently shows this is the most certain route to
significant upward mobility.
The image we like to have of our system is of the hard-working
student from a tough background who leaps far beyond his parents'
educational and income levels. But this American dream doesn't come
true as often as it should. It is students from high-income families
who are most likely to take the 4-year-college route.
Set aside all of the students who drop out of high school, and set
aside the high school graduates who are not qualified for college--two
factors that disproportionately affect low-income families. There is
still a large gap in college-going by family income. Among high school
graduates who are from higher income families and are college-
qualified, 83 percent enroll in 4-year colleges. But among low-income
families, only 52 percent enroll in 4-year colleges within 2 years of
graduating high school.
Where do the other college-qualified low-income students go?
Twenty-one percent enroll at community colleges and may be as
successful as they would have been at a comparable 4-year institution.
But more of them--22 percent--do not enroll in any type of
postsecondary program at all. The comparable figure for high-income
recent high school graduates is only 4 percent. In other words, almost
every college-qualified, high-income high school graduate enrolls
within 2 years, while more than one in five qualified low-income
students does not go at all.
For lower income students, affordability--perceived and actual--
plays a major role in whether and where they go to college. It also
affects how they approach their studies and, therefore, how likely they
are to graduate. Research has found that if a young adult sees herself
as a student, she is more likely to persist. And it is much more
difficult to maintain that self-perception as a student if you are
enrolled part-time while working, a pattern that is more common for
students of modest means.
For full-time students, work is a factor, too. Up to around 15
hours a week, work is a positive contribution to achievement and
college completion. But much more than that and it becomes an
impediment. Nearly a third of full-time dependent students work more
than 20 hours a week on top of their schooling. The lower your income,
the more likely you are to be in this group. Of these full-time and
hard-at-work students, 60 percent did not take out a student loan. In
other words, 60 percent could have reduced their work burden with a
student loan, but chose not to. Should they be congratulated for their
commitment? Or pitied because they are more likely to drop out, or
graduate with lower grades than they are capable of? How many talented
students turn away from tough majors like science and engineering
because the courses don't leave enough time for the work hours required
to pay the bills?
Financial aid is certainly not the only factor behind these gaps in
the quality and intensity of enrollment between lower and higher income
students. But it is a contributing factor. Here is a taste of what we
are hearing from college officials in interviews conducted for an
upcoming report by researcher Pamela Burdman:
``Parents are very leery about loans. Sometimes it filters down to
a student . . . For some, it seems that they weren't optimistic about
their future. It's more acceptable if you were going to borrow money to
purchase a car. It's more tangible. It can get you back and forth to
work. They've seen people before them who have cars. Nobody before them
has borrowed money to go to school.''--Jennifer Roller, GEARUP
director, Youngstown State University, Ohio
``Retention has been a problem at Carbondale. We did quite a few
studies and we started to see that working over 20 hours a week started
to disintegrate academic performance. Those students who were working a
lot just to be able to go to school were not academically successful.
They were defeating the purpose. There clearly seemed to be an issue
that finances were affecting academic performance for some students.''
--Dan Mann, former financial aid director, Southern Illinois
University at Carbondale.
``I have actually had students tell me they aren't going to school
because they can't get any grant money and they refuse to take on any
loans.''--Bill Nowlin, Dean of Enrollment Management, Northeastern
State University, Oklahoma
``How can we better explain this process, what it means and why it
might be good to take out the loan when we all wish they wouldn't have
to take out the loan? . . . Even though we wish that these students
weren't having to take out these loans and graduate in debt, lacking
other choices, we want our students to enroll, and do well and we don't
want them working 25 hours a week.''
--Karen Rice, financial aid administrator, University of
California, Berkeley
After College: Staying Out of the Red Zone
While in college, the borrower's student loan experience is brief
and relatively painless. The truly meaningful relationship with a
student loan begins about 6 months after leaving college. That's when
the bills start coming in.
College is an excellent investment. On the average, it pays off in
additional earnings far more than it costs. But for the graduating
class of 2000, it certainly didn't feel that way. A year out of
college, a large proportion--36 percent were making payments that
represented more than 8 percent of their income. These borrowers are
not all doomed to a long-term struggle with student debt. Many of them
will see their incomes rise substantially over time, and they will be
able to pay off their loans without great difficulty.
But untold numbers make enormous life and career sacrifices to pay
their student loan bills. They forego a career as a teacher or
community health worker. They take a higher-paying job ``for a few
years to pay off the loans,'' then find themselves stuck in a career
path that does not represent the best contribution that they can make
to their community. Or they work two jobs, too tired to excel at
either, and miss out on promotions that would ease their debt burden,
or on time with their children during the critical early years. They
delay buying a home, and then watch as prices rise for the home they
could have had. They forego adequate health insurance, delay saving for
retirement, and make other tradeoffs with potentially devastating
consequences.
Millions of borrowers have gotten some relief because the recent
low interest rates in the economy meant lower rates on student loans.
Hundreds of thousands of them have taken the opportunity to lock in low
rates through consolidation; more will do so prior to a rate increase
scheduled for July 1. While some observers are concerned that the rate
is ``too low,'' it is the only real relief that struggling borrowers
can currently get.
In the refinancing frenzy, it is easy to forget that there are many
borrowers who are currently prisoners of their lenders, stuck with high
fixed interest rates because of Federal rules that prohibit them from
consolidating more than once. President Bush proposed granting them the
right to refinance. Congress should follow up on his recommendation.
The borrower relief offered by refinancing opportunities is
important. But there is a dark side of the refinancing boom. Many
borrowers are being placed in the longest repayment plan for which they
are eligible. In the first 6 months of 2003, Sallie Mae reported that
half of the company's new consolidations were for 20 years or longer.
This reduces the borrower's monthly payments, providing many with the
help they need. But total interest costs are higher over the life of
the loan, and extending repayment into most borrowers' 40s interferes
with the need to save for retirement and for their own kids' college
education.
Solutions
Congress can address these problems by using the Federal
Government's current investments more effectively. It is not necessary
to spend additional taxpayer dollars or to reduce student benefits as
long as Congress takes the steps to make the loan program more
efficient. This section focuses on how to spend the money; the next
section focuses on where to get it. On the spending side, I recommend
two strategies: (1) grant aid with accountability; and (2) loans that
hurt less.
1. Grant aid with accountability. Elite universities are abandoning
loans in order to recruit high-achieving students from low-income
families. In the last few years, Harvard, Princeton, the University of
North Carolina at Chapel Hill, and the University of Virginia all have
launched new programs that promise students from low-income families
that they will not have to take out any loans to pay for college.
Initial reports indicate that low-income students, and minority
students in particular, respond favorably to these programs.
Of course, most colleges and universities cannot afford to make
blanket no-loan promises. They don't have the large endowments of more
elite schools, and they enroll many more students from low-income
families. But the strategy that high-status institutions are using
suggests that increasing grants may be the most effective way to get
more low-income students onto the college track.
What gets measured, gets done, and currently colleges and
universities do not have enough reason to pay attention to their
enrollment and retention of students from modest backgrounds. By
attaching some campus funding to higher levels of Pell grant enrollment
campuses would be more likely to implement and improve programs to
increase those numbers all the way through to the baccalaureate. The
Federal Government should provide some funding for grant aid to
colleges--either directly or through States--in proportion to the
number of low-income students that the institutions enroll and/or
graduate.
This policy would have different positive effects at two different
types of colleges. At higher-priced and more selective institutions, it
would create incentives both to recruit high-achieving students from
low-income families and to offer the financial aid that they need to
enroll. To some degree, this has already begun to happen. Three years
ago, with the help of Don Heller at Pennsylvania State University, I
wrote articles in the New York Times and the Los Angeles Times that
pointed out the low proportion of Pell grant recipients at some
colleges and universities. Others then started drawing the comparisons
between colleges, and the leaders of elite colleges are now paying
closer attention to the economic diversity of their student bodies.
Low-cost institutions have a different problem. Too many of their
students who likely qualify for aid are not getting it because there is
no one to tell them that aid is available or to help them fill out the
application. These are students who, if they had more aid, might attend
full-time instead of part-time, or might enroll at a different
institution, or might be able to get the child care they need in order
to attend class consistently. At low-cost colleges right now, more
students applying for aid just creates additional administrative work
for the college. By providing some institutional funding with each Pell
grant, the campus has an incentive to help all the students who are
eligible.
This funding could be provided directly to colleges by the Federal
Government. Another, probably better, option has been suggested by the
Advisory Committee on Student Financial Assistance, on which I serve as
a congressional appointee. This approach would create a Federal-State
partnership, providing States with matching funds for policies and
programs that improve college affordability, enrollment, and completion
for their residents.
2. Loans that hurt less. Fifty years ago, the economist Milton
Friedman said that the creation of a government student loan program
would ``do much to make equality of opportunity a reality, to diminish
inequalities of income and wealth, and to promote the full use of our
human resources.'' He suggested income-based repayment so that people
could more safely take out the loans. Let's finally put his idea into
meaningful practice.
Public policy should help hard-working borrowers stay away from Red
Zone of burdensome debt without forcing them to spend half their
working lives paying off their student loans. Past approaches, as well
as the current income-sensitive and income-contingent repayment
options, fail this test. They are better than nothing, but they provide
inadequate relief, and they can extend repayment for too long.
We need a simpler, more effective design for income-based loan
repayment assistance. This is critically important for two reasons.
First, we need to be able to provide some assurance to students and
families that a student loan will not ruin them. Our economy suffers
when they decide against postsecondary education or when they work
excessively during school. The purpose of the student loan program,
after all, is to get people to give postsecondary education the old
college try.
Second, we need to minimize the negative life and career effects
that student debt can have on borrowers. A system that assists
borrowers who are working but are still facing excessively burdensome
loan payments will let graduates consider the best use of their skills
and interests, even if it is not the career choice with the highest
starting salary. It will make room for homeownership, entrepreneurship,
retirement savings, and commitment to family, and reduce economic
insecurity across the spectrum of student loan borrowers.
Improving Efficiency
There are a variety of ways that Congress could improve the
efficiency of the student loan programs, and use those savings to ease
the burdens of student loan debt.
A. According to President Bush's fiscal year 2006 Budget, ``the
Federal Government assumes almost all of the risk for the [student]
loans, while Federal subsidies to intermediaries--lenders and guaranty
agencies--are set high enough to allow the less efficient ones to
generate a profit. These problems lead to unnecessary costs for
taxpayers and prevent the program from achieving the efficiencies the
market is designed to provide.'' To address this problem, the Bush
administration identified $25 billion in savings over 10 years. Some of
those savings negatively affect borrowers. But at least half are
positive improvements in efficiency, freeing up funds you could use to
help borrowers when their payments are excessively burdensome.
B. Colleges have no incentive to keep taxpayers costs down in the
loan programs; those costs are invisible to the institutions.
Bipartisan legislation has already been introduced that would address
this problem. Under the provisions of the Student Aid Rewards Act, the
Secretary of Education would give colleges a share of the taxpayer
savings when they utilize the loan program that the Secretary
determines is ``the most cost-effective for taxpayers.'' By aligning a
college's incentives with taxpayer costs, this proposal, according to
the Congressional Budget Office, would generate an additional $17
billion in grant aid for low-income students over 10 years.
C. Taxpayers are currently spending $240 million every 3 months to
subsidize a guaranteed 9.5 percent interest rate for some student
loans. Congress tried to fix this problem last October, but the
payments have actually increased. Part of the problem with the new law
is that it did not ban the ``recycling'' of loans carrying the excess
subsidies. Recycling allows the loan companies to create new loans
carrying the 9.5 percent guarantee by using collections and profits
from prior 9.5 percent loans as capital. The lure of such large,
taxpayer-assured returns is an invitation to abuse and the reason for
the ballooning taxpayer costs over the last 2 years. I join with the
Congressional Budget Office in recommending that this recycling be
ended.
D. Congress should take a serious, independent look at all of the
efficiencies that could be tapped in the government student loan
programs without harming those the program was designed to help. First
identify more cost-effective ways of providing students with the same
loans and terms that they receive today. Then consider any changes in
the design or distribution of student benefits. Compare them to the
reforms proposed by President Bush. Compare them to other options. And
give taxpayers the return they have every right to expect: real
educational opportunity and a better educated workforce.
Fighting for efficiency is not easy. Those who benefit from the
inefficiencies will resist change. Identifying improvements,
particularly in a program that is financially complex like student loan
systems, inevitably leads to competing and confusing interpretations of
the data. Rely on the experts who work for taxpayers: CBO, OMB, GAO,
the Education Department, and the Treasury Department.
We have a real opportunity to advance the education and training of
our population, improving our economic competitiveness and making good
on the American dream. Thank you for providing me with the opportunity
to share my views. I look forward to working with you in the months to
come.
The Chairman. Mr. Van Horn.
Mr. Van Horn. Thank you, Mr. Chairman.
Wyoming Student Loan Corporation is a private non-profit
corporation founded in 1980 at the request of former Governor
Ed Herschler, who believed postsecondary education should be
more accessible for Wyoming students. As a non-profit, Wyoming
Student Loan Corporation returns its earnings after expenses to
current, former and future students.
In its 25 years Wyoming Student Loan Corporation has
provided more than $900 million of educational loan assistance
to more than 65,000 students and parents of students, and it
has provided $130,000 in scholarship assistance to Wyoming
students attending Wyoming postsecondary institutions. For the
Federal fiscal year 2002, the most recent year for which the
Department has calculated default rates, our corporation's
default rate is 4.9 percent, well below the national average of
5.2 percent.
In the past 6 years alone we have returned almost $9
million to students in the form of reduced origination fees,
interest rates reductions, loan principal forgiveness for those
who graduate, and for any soldier in the armed forces including
those in the Reserves and the National Guard.
However, our mission is not limited to today's college
students or those high school juniors and seniors who already
know that they are college bound. Equally important, if not
more so, is the imperative to instill in the minds of
elementary students and their parents the absolute necessity
for post high school education and training so that as many
young people as possible have both the vision and the believe
that college is indeed accessible and affordable.
Our corporations have placed more than $3.4 million in
outreach and early awareness activities in the past 5 years,
including our College for a Day Initiative. Just last week, as
we have done for the past several years, we hosted Wyoming 6th
graders, many from low-income families, as they attended Casper
College and University of Wyoming, experiencing life on a
college campus. For too many young students in rural States
such as Wyoming, the word ``college'' simply has no imagery
attached to it. By getting these younger students to a campus,
they can have hands-on experience in a science lab or an art
class, have lunch in the cafeteria, browse the library, and
hear from college students about the importance of good grades,
staying in school and setting goals in life.
The University of Wyoming and the 7 community colleges
around the State are proactive in developing outreach campuses
and distance learning curricula in order to meet as many needs
of our residents as practical. The number of distance education
courses in the State has grown dramatically in the last several
years from just a handful in 1995 to more than 300 today. That
is a sizable increase for Wyoming.
Yet even with these advancements, access to higher
education in Wyoming and other rural States remains difficult
and challenging. The cost of distance education is more
expensive for the schools simply because there are fewer
students to enroll in such courses. Not all courses lend
themselves easily to web-based instruction, and there is still
no substitute for classroom and laboratory instruction. Greater
distances to travel to attend classes means greater expenses
for students of all ages. Median family incomes in rural
communities trend lower than more populated towns and cities.
Need-based financial aid is an absolute necessity for moderate-
and lower-income dependent students and for working adults
looking to upgrade their education and their skills.
The fastest growing occupations in Wyoming all require
postsecondary education. Our population is expected to increase
by 22 percent by the year 2015, far exceeding the national
average of 13 percent. Yet during the same period the number of
high school graduates in Wyoming is expected to decline by 23
percent. In addition, Mr. Chairman, Wyoming's baby boomers are
reaching retirement age, and in the next 5 years significant
numbers of our educators, engineers and business owners will be
retiring. If these trends continue, half our State's population
will be retirement age by the year 2020.
The implications of these figures are dramatic. The demand
for a highly skilled and educated workforce will be greater
than ever before, yet the supply of qualified individuals could
be severely inadequate to sustain let alone grow our economy.
These implications are the driving force behind our
corporation's concerted outreach efforts to expand access to
students who historically have low postsecondary participation
rates. These include minorities, rural families and
nontraditional adult students.
Workforce changes require lifelong learning. Pell grants,
campus-based aid programs, the Federal student loan programs,
and State and institutional aid programs all have one goal, to
increase access to education. Student financial aid programs
are the key to affording access to higher education and
developing the Wyoming workforce necessary for the diversity of
industries and professions.
Mr. Chairman, I would not have received the education I am
fortunate to have received without the assistance of grants,
work study and student loans. That is also true for my wife and
our two sons.
Mr. Chairman, I applaud your efforts and the efforts of
your colleagues to promote access to and affordability of
higher education. Simplifying the Federal student aid
application process and form will be an important step toward
promoting access. I commend the Department of Education for the
great strides in making the electronic version of the FAFSA
quite user friendly. I noticed from recent experience.
But we know from recent studies that almost half of
enrolled students across the country do not complete the FAFSA.
Not have these individuals automatically eliminated for
consideration under the Federal student programs, they miss
opportunities for local and institutional scholarships. We have
to ask, why do so many students opt out of the process before
they even being?
WSLC has provided countless free FAFSA seminars over the
years. Parents and students come for help simply to understand
the instructions. Time and again parents tell us the FAFSA
process is as complex as filing one's Federal income tax
return. Surely part of the reason for the complexity in the
document is the complexity of the underlying need analysis
formula. Mr. Chairman, we support the recommendations made by
the Advisory Committee on Student Financial Assistance in their
January 21, 2005 report to you.
I thank you, Mr. Chairman, and members of the committee,
for this opportunity to testify, and I will be happy to answer
any questions as time is appropriate.
The Chairman. Thank you.
[The prepared statement of Mr. Van Horn follows:]
Prepared Statement of Phillip F. Van Horn
Mr. Chairman, members of the committee, I am Phil Van Horn,
chairman of the board and president of Wyoming Student Loan Corporation
and president and chief executive officer of Western States Learning
Corporation, which administers the student loan portfolio for Wyoming
Student Loan Corporation and provides other educational support
services. I am pleased and honored to have this opportunity to describe
the importance of student aid programs in the development of Wyoming's
higher education and workforce development initiatives.
Wyoming Student Loan Corporation is a private, non-profit
corporation, founded in 1980 at the request of former Governor Ed
Herschler who believed postsecondary education should be more
accessible for Wyoming students. As a non-profit corporation, its
earnings after expenses are returned to current, former and future
students.
In its 25 years of service, Wyoming Student Loan Corporation has
provided more than $900 million of educational loan assistance to more
than 65,000 students and parents of students and $130,000 in
scholarship assistance to Wyoming students attending Wyoming
postsecondary institutions. Thanks to one of the best employee teams
I've ever had the pleasure of working with, Wyoming Student Loan
Corporation's default rate has consistently been among the lowest in
the Nation. For fiscal year 2002, the most recent year for which the
Department of Education has calculated, the corporation's default rate
is 4.9 percent, below the national average of 5.2 percent.
In the past 6 years alone, the corporation has returned almost nine
million dollars ($9,000,000) to students in the form of reduced
origination fees, interest rate reductions and loan principal
forgiveness for those who graduate and for any soldier in the Armed
Forces, including those in the Reserves and National Guard.
However, our mission is not limited to today's college students or
those high school juniors and seniors who already know they are college
bound. Equally important, if not more so, is the imperative to instill
in the minds of elementary students and their parents the absolute
necessity for post-high school education and training so that as many
young people as possible have both the vision and the belief that
college is, indeed, accessible and affordable. Both our corporations
have placed more than $3.4 million in outreach and early awareness
activities in the past 5 years including our College For a Day
initiative. Just last week, as we've done the past several years, WSLC
sponsored and hosted Wyoming sixth graders, many from low-income
families, as they attended Casper College and the University of
Wyoming, experiencing life on a college campus. For too many young
students in rural States such as Wyoming, the word ``college'' simply
has no imagery attached to it. By getting these younger students to a
campus, they can have hands-on experiences in a science lab or an art
class; have lunch in the cafeteria; browse the library; and hear from
college students about the importance of good grades and setting goals
in life.
Mr. Chairman, you and I certainly know, and I'm confident other
members of the committee are aware, that Wyoming is the least populated
State in the country. Providing access to higher education in rural
States presents unique challenges in terms of distance and
technological infrastructure. The State's only baccalaureate and
advanced degree institution is the University of Wyoming in Laramie.
The University and the seven community colleges around the State are
proactive in developing outreach campuses and distance learning
curricula in order to meet as many needs of our residents as practical.
The number of distance education courses in the State has grown
dramatically in the last several years, from just a handful in 1995 to
more than 300 today. Adult learners have greater opportunities for
embarking on a new career path or upgrading their current skills.
Yet, even with these advancements, access to higher education in
Wyoming and other rural States remains difficult. The cost of distance
education is more expensive for the schools simply because there are
fewer students to enroll in such courses. Not all courses lend
themselves easily to web-based instruction and there is still no
substitute for classroom and laboratory instruction. Greater distances
to travel to attend classes mean greater expenses for students of all
ages. Median family incomes in rural communities trend lower than more
populated towns and cities. Need-based financial aid is an absolute
necessity for moderate and lower-income dependent students and for
working adults looking to upgrade their education and skills.
The fastest growing occupations in Wyoming are in the fields of
medicine and allied health, dentistry, engineering, communications,
pharmacy, extraction, and education. All of these require postsecondary
education. Our population is expected to increase by 22 percent by the
year 2015, far exceeding the national average rate of 13 percent. Yet,
during the same period the number of high school graduates in Wyoming
is expected to decline by 23 percent. In addition, Wyoming's baby
boomers are reaching retirement age and in the next 5 years significant
numbers of our educators, engineers, and business owners will be
retiring. If certain demographic trends continue, half our State's
population will be retirement age by the year 2020.
The implications of these figures are dramatic: The demand for a
highly skilled and educated workforce will be greater than ever before,
yet the supply of qualified individuals could be severely inadequate to
sustain, let alone grow, our economy. Even greater demands will be
placed upon our institutions of higher education to provide education,
training and retraining. These implications are the driving force
behind our corporations' concerted outreach efforts to expand access to
students with historically low postsecondary participation rates:
minorities, rural families and non-traditional adult students.
Workforce changes require lifelong learning. As the workforce needs
create demand for more courses, more instructors and more facilities,
the cost of education and training will increase. Pell grants, campus-
based aid programs, the Federal student loan programs, and State and
institutional aid programs all have one goal: to increase access to
education for all. Student financial aid programs are the key to
affording access to higher education and developing the Wyoming
workforce necessary for a diversity of industries and professions. Mr.
Chairman, I would not have received the education I am fortunate to
have received without the assistance of grants, work-study and student
loans. That is also true for my wife and our two sons. We know first-
hand the difference that Federal student aid dollars can make in access
and affordability in higher education.
Mr. Chairman, I applaud your efforts and the efforts of your
colleagues to promote access to and affordability of higher education.
Simplifying the Federal student aid application process will be an
important step toward promoting access. I commend the Department of
Education for the great strides made in making the electronic version
of the Free Application for Federal Student Aid (FAFSA) quite user
friendly. I know this from first hand and recent experience. But I've
also been in the student aid profession for 30 years.
We know from recent studies that almost half of enrolled students
across the country do not complete the FAFSA. Not only are these
individuals automatically eliminated for consideration under the
Federal student aid programs, they may miss opportunities for local and
institutional scholarships. We have to ask: Why do so many students opt
out of the process before they even begin? WSLC has provided countless
free FAFSA seminars over the years. Parents and students come for help
simply to understand the instructions. Time and again parents tell us
the FAFSA process is as complex as filing one's Federal income tax
return. Surely part of the reason for the complexity in the document is
the complexity of the underlying need analysis formula. Mr. Chairman,
we support the recommendations made by the Advisory Committee on
Student Financial Assistance in their January 21, 2005 report to you.
I thank the committee for this opportunity to testify and I will be
happy to answer any questions you may have at the appropriate time.
Thank you Mr. Chairman.
The Chairman. And again, I would mention that your full
statements will be a part of the record, and I appreciate the
additional information that is contained in that text as well.
We will now have a round of questions, and I get to start.
Mr. Van Horn, we know that rural students face many
challenges getting to school and especially postsecondary
school, and I congratulate you on the tour that you give for
the 6th graders to finally get an image of what college is and
think that could help across the country. Are there any best
practices from Wyoming or other States you can suggest for
Congress to look at as we amend it in regard to the rural
students, and could you touch just a little bit on what impact
the 50 percent rules had on access to higher education in our
area?
Mr. Van Horn. Mr. Chairman, rural communities do have their
unique challenges and distance education, while the university
and the community college have made great strides, it still is
an expensive proposition for the schools within a State. In
terms of the 50 percent rule and the practices within the
State, because of Wyoming's uniqueness, Mr. Chairman, I do not
feel confident to address that at this time.
The Chairman. OK. Then as I mentioned, we will be putting
some of these questions in writing so that we can get an
opinion from all of you on it, and also so that you can help us
to get some additional expertise on it.
Ms. Thorpe, I really appreciate your impassioned testimony,
and your ability to persist in spite of the tremendous odds is
just outstanding. I congratulate on all of your
accomplishments.
In your testimony you mentioned that after-school tutoring
and guidance and encouragement are what allowed you to work
through the Upward Bound and to even consider college. Can you
tell us what factors were important in your ability to complete
high school and succeed in college? Are there any things in
particular?
Ms. Thorpe. There were a lot of things in particular, but I
believe the most important thing was my skills at math. When
you miss the critical periods in math, you kind of miss out on
a lot of things, and since math was a big part of school you
had to take math every single year. I had no knowledge of how
to do algebra, really of how to do fractions. I could not
divide. And Upward Bound really took the time out to help me to
be able to learn fractions. They would pay for me to go to
extra tutoring sessions. When I was a senior in high school
they actually paid for me to take a course at the University of
Wyoming to help me out in math as well. So that was really
helpful. And I am taking math now in college too.
The Chairman. Oh, good.
Ms. Thorpe. So there you go.
The Chairman. Math and science is something that is
disappearing a little bit among American born students. We are
having a lot of foreign students that are doing that.
Something that we are really concerned about is the
availability of information about student financial aid as well
as the availability of the student aid, and ways to simplify
the process. How can we get information sooner to people to
might be encouraged to go to college, and any ideas on how we
might simplify that application process? This is a question for
the whole panel, but I will start with Ms. Thorpe.
Ms. Thorpe. I think perhaps providing some sort of a
session maybe inside the high school or a class. I know at my
high school in particular they had a class dedicated for
basically a study hall and it was mandatory, so maybe perhaps
during one of those sessions. In other high schools as well, to
have a class where you actually learn how to fill it out,
because a lot of parents do not know. I was fortunate to have
people who were helping me out with these applications such as
the Upward Bound coordinator and the director of the program
and my foster parents, but a lot of the kids that I was going
to school alongside who were not in the Upward Bound program
had no way or no knowledge of how to fill these things out even
though they were eligible. So, perhaps having classes, sort of
like taking the LSAT or something like that.
The Chairman. Anyone else? Mr. Shireman.
Mr. Shireman. Thank you. I would say that the GEAR UP and
TRIO type programs that can provide early counseling and
information, as early as middle school, to parents and to
students are critically important. Also Congress asked the
Advisory Committee on Student Financial Assistance a year ago
to look at simplification and issues of earlier application.
And the Advisory Committee a few months ago, on which I serve,
came out with a number of recommendations. Some of those were
eliminating some questions and simplifying for everyone. We did
find that because this is all an effort to try to ration a
particular amount of money that is available, that you cannot
eliminate as many questions as might be--as people would like
you to eliminate. However, there are people who are very low
income where complicated issues about assets probably do not
need to be asked, and the Advisory Committee recommended that
they be provided with an easy type form for families with
income of under $25,000 and some other recommendations like
that. So that not everyone has to fill out an application with
100 questions on it.
Also on the question of earlier application, we are in the
situation where now the traditional college student, in October
of their senior year, fills out an application to go to a 4-
year university, and then 2 months later on January 1st, they
can fill out the form to figure out what their financial aid
might be. For a lot of people getting a sense of what your
financial aid might be has a lot to do with where you might
apply to college, and the Advisory Committee suggested that
people be allowed to apply and get their estimate of financial
aid earlier, like they could apply in September or they could
apply at the same time that they are applying to the college.
There has been a lot of interest in that recommendation and it
is not something that would cost the Government any more than
the way the process works now.
So there are some steps that can be taken that could
improve the process for students and families.
The Chairman. Thank you. My time has expired.
Senator Murray.
Senator Murray. Thank you very much, Mr. Chairman, for
having this hearing.
And thank you to all of our witnesses for being here. I
think the reauthorization of the Higher Ed Act is one of the
most important things we can do to make sure that our students,
especially low-income, minority have access to higher
education. It is key to our country's economy, so I appreciate
everybody being here.
Mr. Shireman, let me start with you. As you probably know,
Senator Kennedy and I have been working on a complete closure
of the 9.5 percent loan loophole. Last year we were successful
in closing part of that, but we still know these loans are
being recycled. In fact I saw in the New York Times recently
that the Federal Government is still, what they said,
hemorrhaging money to lenders who figured out how to abuse some
of these loans.
You mentioned in your testimony that taxpayers are
currently spending $240 million every 3 months to subsidize
these loans. Can you talk to us today about how some lenders
are figuring out how to continue to manipulate these and how
much it is costing us?
Mr. Shireman. A little bit of background on this issue.
Some years ago the Government decided that student loans made
from the proceeds of tax exempt bonds needed to have some
different subsidy rules than other loans. And during a period
of high interests rates, we, the Federal Government, guaranteed
that holders of those loans would never have to receive less
than 9.5 percent interest on those loans even if students are
paying less. Now, of course for the past few years students
have been paying, borrowers have been paying much less than 9.5
percent, and so these loans--and this is a rule from 1980--
started looking to be quite the money maker. And some of them
had moved from non-profit organizations into for-profit
lenders, so that the proceeds from making more money would just
go to shareholders' pockets with no risk, rather than to the
good uses that might go from a non-profit organization.
Some of those lenders made the case that they had this
limited pot of funds that was supposed to be for 9.5 percent
loans. And they said, well, if we put a loan in there for a day
and take it out, we think it still should get the 9.5 percent
for the life of that loan. And they started dipping these loans
into this pot and taking them out. And over the last 2 years
the amount, the dollar amount, a volume of these loans
increased from $11 billion to $18 billion, costing the Federal
Government to subsidize those.
Congress said no more, except when people pay off these
loans you can take those proceeds and make new loans with those
proceeds. Now, that essentially means it will go on for many
years to come, and now we are seeing that actually the costs
are increasing even after Congress stopped the provision.
What I think is happening is that you have this pot that
pays 9.5 percent and you have other loans that lenders have,
and that they are figuring out how to switch loans, because
they can take proceeds here and use them to make new loans.
They can move a loan from one pot to another to figure out how
they can maximize the amount that taxpayers are paying, and
that is what this recycling provision allows. It is something
that in their----
Senator Murray. So we still have a problem that needs to be
fixed, and it is costing us.
Mr. Shireman. So we still have a problem and this could
just go on for years and years.
Senator Murray. Right. I very much appreciate that.
Trinity, thank you very much for your testimony today. You
certainly are a compelling witness for TRIO and GEAR UP and
programs like that that really allow students without who do
not think they have a chance, to have a chance.
I actually was with Bill Gates this morning. I wish I had
have met you before because I could have told him what a
difference he is making in the world. So I am delighted that
you have been able to take advantage of that.
You talked a little bit in your testimony about being a
foster child.
Ms. Thorpe. Yes.
Senator Murray. Senator DeWine and I have worked for a long
time together on making sure we decrease barriers especially
for foster kids. One of the things that I have heard repeatedly
from students who are foster students is the particular
barriers they have in going to college because once you are 18
you are no longer in the foster system. You do not have that
parent support network. You are very lucky to have your foster
mother still here with you. But financially it makes a
difference. But for this committee, could you talk a little bit
about what the particular challenges are for a foster student
in applying to college and financial aid?
Ms. Thorpe. I think I was an exceptional case for a foster
kid because I did have very supportive parents, foster parents,
and my biological mother and I are actually still very close.
So in that I might not be able to speak on behalf of all foster
kids.
But in particular some of the challenges that I faced were
just self-esteem challenges. As a foster child I often was not
wanting to tell other people that I was a foster child or that
I was poor, that I had grown up at a certain situation. So the
biggest challenge that I faced was being able to write that in
applications or write that on my FAFSA, you know, check the
little box for ward of State. It kind of makes you feel like
you do not really have a home or that you do not really belong
anywhere, that you actually belong to the State instead of to a
family. So just the self-esteem issues really posed a problem
for me, and thinking about going to college especially.
My mother did go to college for a little while and she
still has dreams that she wants to go back. This is my
biological mother. But the truth of the matter is she will not
ever be able to go back because she will not have the
opportunities to do that. That also posed some problems for me
because my mother did not have an education. She does not see
the value of an education, and actually not very long ago she
asked me why I was not pregnant yet and why I was not married.
So this is the kind of background I grew up in, you know, with
people kind of telling you other things.
My freshman year I met my birth father for the first time,
my freshman year in college. When I went to go and tell him
about my accomplishments he completely did not understand it
because he does not have a college education. He is a bus
driver in Mexico, just completely cannot comprehend the
challenges or the struggles that I faced and what I have
overcome to be where I am.
Senator Murray. You have done well and we are all very
proud of you and delighted to look at you here in front of us
today.
Ms. Thorpe. Thank you.
Senator Murray. You are a role model for many other young
kids in your same circumstances, so thanks for being here.
Ms. Thorpe. Thank you.
Senator Murray. Mr. Chairman, I know my time is up, and I
do have to go to another committee hearing. I do want to submit
some questions for the record in particular to Ms. Haycock
because I have been working on some of the realignment issues
between high school and college which I think are very critical
for this committee to look at as we try and encourage States to
make sure that high school graduation and college entrance
exams work together, and how we as the Federal Government can
help encourage that. So I will submit those for the record, and
look forward to your response.
Thank you.
The Chairman. Thank you.
Senator Alexander.
Senator Alexander. Thank you, Mr. Chairman.
I want to thank the witnesses and say to Ms. Thorpe how
impressive she is, and I thank you very much for being here.
I want to make two or three quick comments in my time and
then ask a question of any of the panel members who may want to
comment. One, I want to commend the Department of Education and
the Advisory Committee that has been mentioned in the testimony
for its work on simplification of student forms. I mean they
have really done some good work, Senator Enzi, as you well
know, and really at the request of this committee, and 8 of
their 10 recommendations do not cost anything. Some of them are
complete common sense. I mean a large part of the complication
of the form had to do with questions California insists on
knowing the answer to. If you just take those out you simplify
it for everybody else in the country.
My humble suggestion is to change the name of the thing,
because why would anyone go to conference on FAFSA who had
never heard of FAFSA. They would not know what you were talking
about, and I am quite serious about that. It needs a name that
someone who is not from Washington would understand.
Second, another contribution I think we can make in this
bill has to do with the testimony on loan eligibility and
limits on loan to better fit the traditional student, I mean
the students who are actually in higher education today. We
have impediments to what we are talking about here which we are
causing by our limits on loans and grants, and we can afford to
do those changes. That could happen.
A third thing I would like to mention, I am all for the
college/high school articulation as they say, but I am very
leery of doing it from here. Our colleges and universities did
not get to be the best in the world because somebody in
Washington made them that way. So I think we have to be very
careful with our well-intentioned orders from Washington not to
actually over regulate colleges and universities and in effect
make them worse while we are trying to make them better.
I am sensitive to the point you made about the question
about drugs. I mean Congress gets excited about things. We are
all excited about drug use and so we order it stopped from
here, while what we may be doing in an unintended way is adding
to the complexity of an application form and discouraging low-
income students from applying for loans. I am working on
legislation--I have talked to Senator Enzi about it--about
actually looking to deregulate in some ways colleges and
universities.
Here is my question. Cost is very important. It was 20
years ago, it is today. Its always hard to pay for college even
today. But I think it is important to keep this in perspective
and understand what we are talking about. Community colleges
are $2,000 or so, at least where I come from, a year for
tuition, and there are multiple scholarship opportunities for
students to go there. When I was at the University of Tennessee
we used to encourage students to go there and then come to the
University of Tennessee. We would save places for them after
their first 2 years. But the big change it seems to me is lack
of State support for higher education, and I think we need to
talk about that. I mean Federal funding for higher education
between 2000 and 2005 went up nearly 50 percent. We are
actually spending 50 percent more dollars on higher education
from here than we were 5 years ago.
Now, what was happening in the States during that time?
According to the American Association of State Colleges and
Universities--and I mention them because this seems so low that
I am going to go back and double check it--in 2001 State
spending was up 3.4 percent. In 2002 and 2003 it was actually
down, it was down. In 2004 it was up 3.8 percent. If my math on
the back of my page here is correct, Mr. Chairman, that means
that over the last 4 or 5 years Federal funding for higher
education was up 14 or 15 times more than State funding, and I
think I know why. I think it is because we failed to give
States the ability to restrain the growth of health care
spending and it is soaking up all the dollars, and as a result
there is no money left for higher education because it is the
one that gets cut first when money goes to health care.
I wonder if there are any comments on that from any of the
panel members about how we keep this in perspective as we
reauthorize higher education?
Mr. Shireman. Senator Alexander, thank you. I think you
were right on target in terms of the number one reason that we
have seen significant increases in tuition has been the lack
of, the declines in State support. We are in a situation now
where we have more students graduating from high school and
therefore more students going to college, and less State
support at the same time. The $2,000 price of a community
college can be $2,000 because of that State support, because
the actual cost of providing that education is of course much
higher than that $2,000. So the natural result, even if there
is no increase in the actual cost of providing the education,
the lack of State support has to drive up those tuitions in
order to maintain the provision of the education to the
students.
So, absolutely, the issue of health care costs in addition
to being an issue for States to the extent that costs are
increasing for colleges and universities. They also are paying
health care costs that are getting difficult for them. So that
is right on target.
Senator Alexander. Thank you, Mr. Chairman.
The Chairman. Thank you. I am going to ask a few more
questions because I have some of a general nature that more
than one of you may want to comment on. I am pretty sure this
one Ms. Haycock and Mr. Bosworth would want to comment. We are
interested in finding out what Congress can do to develop a
system that holds institutions accountable for the persistence,
for the completion, for the graduation rates of the students
while still recognizing that institutions have varied missions
and serve students with different needs and responsibilities.
What kind of ideas could you share with us?
Ms. Haycock. Thank you, Mr. Chairman. As I indicated
before, one of the basic problems that we have now is that a
lot of folks within higher education think that their current
success rates are about as good as they can do, and we will
certainly find, when we visit a college or university, we ask
about their 6-year graduation rates, and they will say, you
know, 28 percent. We will say, what is with that? And the
answer typically is, well, that is about what you get for
students like ours.
As I indicated earlier, it is actually quite clear that
that is not the case. Yes, student preparation matters, and
yes, student financial aid matters. But even when you take
institutions that serve very similar kids with very similar
resources, they have quite different results. So the question
is: how you sort of break through the mindset that says, we are
doing about as well as we can, and begin to get some energy
into student success.
At the moment there are not real incentives to do that.
What happens now is if you look at 4-year colleges, for
example, of those who enter as full-time freshmen about a
quarter do not even make it to the sophomore year, but frankly,
it does not matter much to the institution because there is
another wave of entering freshmen to take their places.
Mike Kirst at Stanford University says it is a little bit
like French warfare in World War I; a set of soldiers comes up
out of the trenches, gets mowed down, but that does not really
much matter, right, because there is another set right behind
them, and that is essentially how the economics work. And those
freshmen, who are cheap to educate by comparison, actually
subsidize the upper division students who are more expensive.
So the question is how to turn those incentives around.
Our sense, as we look at the data, is that what you really
want to do at this point--because from a national level it does
not make sense to mandate a particular one, sort of one
approach--is to ask States to design systems that make sense in
their State, to say to institutions, here is a set of stretch
goals on the access side, and here is a set of stretch goals on
the success side, and we are going to monitor your progress,
provide rewards for those that improve their access and
success, and some penalties for those who do not, and some
support for institutions that frankly have rates that are
unacceptably low.
Again, I think that if you ask States to do that, then 6
years from now we will know something more as a country about
what works and what does not. We do not know that now because
virtually nobody is trying.
The Chairman. Mr. Bosworth.
Mr. Bosworth. Just a couple of observations focusing
perhaps more on 2-year schools than on 4-year schools with
these. Schools are paid for enrollment, not for success. Most
community colleges, if you show up on the campus the 11th day
after the semester has begun, you will notice a sharp drop-off
from the 10th day because it is the 10-day count that
determines how much money a school is going to get in its next
year budget. So it is all about building enrollment. It is not
all about building completion. Colleges are not rewarded for
degrees or other credentials that they provide to their
students. They are rewarded for boosting enrollment. It should
not come as a great shock to us to realize then that that is
what we get.
I think it is useful to look at some examples in the
proprietary postsecondary arena where proprietary schools,
particularly those dealing with technical and professional
credentials, are not paid for enrollment, they are paid for
success. There are some behavioral differences between those
schools, the private 2-years and the public 2-years in how they
manage enrollment and the kind of flexibility that they offer.
I am not suggesting that we just go out and try to emulate the
2-year private college system. It is extraordinarily expensive.
People are paying $10,000 to $20,000 in a private 2-year
technical school, but they are getting success. As the head of
one such institution said to me, ``We cannot attract students
if we cannot demonstrate to them that if they come here and
spend that much money, $10,000, $15,000, $20,000, they are
going to get the credential they thought they were paying for.
It is going to be there. So success is really important to
us.''
Imagine if that were the attitude in public postsecondary
education.
I also want to note that in the community college arena, I
think it is essential to be a very fine-grained approach to
these accountability measures. When a student enters a
community college with the intention of gaining a 4-year degree
but starting at a community college, the objective is transfer,
it is not an associate degree. And so the community college
should not be held accountable for whether or not it awards an
associate degree after 2 years to that individual. What it
should be held accountable to is, have we successfully
transferred this individual after 6 months, 1 year, 18 months,
2 years, however long it takes, to a 4-year institution because
that is their objective, the 4-year degree.
On the other hand, if they are entering the labor market
and they are looking for a credential that has labor market
consequence that means something out there to employers, they
should be held accountable for providing that particular
credential. It is difficult when all the credential in the
academic arena are--you have to cram them into a 4-year or a 2-
year associate degree. A lot of the labor market credentials
that would be very useful do not require a 4-year or a 2-year
degree. Some might require a 3-year degree, some might require
a 1-year certificate, but we are trapped in an environment
where the educational institutions have packages, and some of
these packages have no labor market consequence.
The Chairman. Thank you. My time has expired again.
Senator Alexander.
Senator Alexander. Thank you, Senator Enzi.
I appreciate the issue the witnesses were just discussing
and I notice that they are being I think appropriately
restrained in recommending a heavy Washington hand and figuring
out how to do it. One might argue that some of it has taken
care of itself. We have in higher education, which we do not
really have very much in K through 12, a big marketplace out
there. The fastest growing part of the Pell grants is not in
the public sector, it is in the for-profit sector. Maybe it is
because there are some schedules and rigor and credentials
being offered in the for-profit sector that are more
attractive, more meaningful, more convenient than people are
finding in the public sector, and fortunately we have a market-
based system where the money follows the student to an
institution which may include a for-profit institution or a
private institution or in many cases a distant learning
institution. So in that sense the entrepreneurial spirit of the
marketplace is putting some pressure on the more hide-bound
public institutions.
I would argue too that in my experience the community
colleges and technical institutes, the 2-year schools, are a
big part of that marketplace. They are very entrepreneurial,
enterprising, often operating in effect year round, constantly
changing their curricula to meet the needs of the market.
The other things I think have to be considered are that
many students go to higher education not to get a degree. They
go to learn something and then to go on to a job or go back and
live a better life, and we have to be careful in the way we
count all this to make sure we do not penalize that. I mean the
typical student now is not a high school graduate, it is
somebody who is a working mom going from this job hopefully to
a better job, and she may not need a degree to get there. She
just may need a course or two, or three or four, and that is
somewhere in the statistics.
Just a couple of other points on that. And so many of these
students who need so-called remedial help getting into college
are not the high school graduates. They are, as has been
mentioned, the adults who are going to go back again and back
again and back again, that we need to recognize that most of us
when we go out of school for a while and then go back to school
are going to need a little ramp up to that even if we are
pretty smart and pretty well educated. It is not easy just to
get right back into a rigorous algebra course or statistics
course, which is what you have to have if you want to work in
the Saturn plant today. You have to know these things.
So I was wondering, listening to your suggestions, whether
maybe a grant to encourage our big market-based higher
education system to pay more attention to getting people
through more rapidly where appropriate, I mean two ways to look
at it would be one for us to get out of the way. We can do that
with our limits on loans and changing Pells and loans so year-
round students can do that. We have some actual impediments to
what you are talking about. We should certainly look for those.
And rather than tell States what to do, maybe we could make
some large grants to States who are interested in doing this. I
have had more confidence in a State gathering of institutions,
public, private, non-profit, and say, how are we going to
approach this, rather than a group of people in the Department
of Education or on the congressional staff here trying to think
of ways to do it, because I have been both those places and I
did not get any smarter when I flew up here at the beginning of
the week than I was when I was back in Tennessee. [Laughter.]
So I ask you. Let me start with Ms. Haycock. What about a
large grant to two or three or four States to say, figure this
out as best you can in your State and let us see what you come
up with and see if we learn anything there that might affect
Federal policy?
Ms. Haycock. You could certainly do that, Senator. I would
argue, however, that the problem is much more serious. While
the phenomenon you talked about may well be putting some
pressure on institutions here and there around the country to
get better results, when you stand back and you look at higher
ed output in the country as a whole, we are stuck. As I said
earlier----
Senator Alexander. Output measured by what?
Ms. Haycock. As measured by the proportion of young people
getting a college education. We are no longer first in the
world. We are 7th in college going. We are not first in college
education. We need more students with baccalaureate degrees.
And you are putting a lot of public dollars into students who
are going on to institutions with every expectation of getting
a degree, and those institutions are not taking responsibility
for helping them get through.
You could again, not by telling States what to do in every
detail, but by asking States to put into place a system that
will measure student success, will set some stretch goals for
institutions, and monitor their progress in getting there.
Senator Alexander. That sounds like No Child Left Behind
for colleges to me. [Laughter.]
Ms. Haycock. That is actually not at all like No Child Left
Behind. It is simply saying----
Senator Alexander. All it does is ask States to adopt
standards and measure progress toward standards.
Ms. Haycock. Right, but there is a fixed way for measuring
progress, as you know, which given the differences among the
States in terms of data systems, in terms of the capacity to do
this, does not make sense to do at the higher education level.
That does not mean, however, that you ought not to ask them to
do something.
Let me just give you a couple of statistics. There are
about 771 institutions in this country, 4-year colleges where
at least 5 percent of the students are black. In like 271 of
those institutions, the 6-year graduation rate for black
students is less than 30 percent. In 160 of those institutions,
the 6-year graduation rate for black students is less than 20
percent. In about 70 of those institutions, the 6-year
graduation rate for black students is less than 10 percent. We
can do better than that.
And if we were willing simply to say institutions, you need
to take that seriously, you need to set some stretch goals,
that is not suggesting that a very nonselective college needs
to have a graduation rate like Harvard's which happens to be
best in the world. It does suggest that 10 percent of your
students getting through in 6 years is not as good as you could
be doing.
What I am simply suggesting is our stake as a country, both
in having more college graduates, and in particular in making
sure that higher education continues to be a route out of
poverty, our stake in that is huge. We have said since our
beginning that we will provide to talented young people the
opportunity to continue their education regardless of their
family income. That route is essentially closed now. Seven out
of 100 low-income students now gets a college degree, compared
to 60 out of 100 middle-income kids.
Senator Alexander. Mr. Chairman, my time is up. I would
just observe I agree with all the factors. My fear is that in
devising a Federal plan to deal with that limited number of
examples you mentioned, it would then apply to everybody and
create one more big level of Federal regulation, one big more
thick book that college presidents would have to do. You would
not suggest just applying it to the schools that have black
students because that would not seem fair.
I think the better solution would be either to ask States
to do it or I would create a Pell grant for kids. The reason
these children are not succeeding in college is because they
are not prepared when they get there, and if we gave them a
scholarship to go to a good school when they are a kindergarten
student or in first grade or second grade of third grade, that
I think would be more of an appropriate Federal response.
Ms. Haycock. I actually think we do not disagree, Senator.
I did not suggest one Federal approach. What I did suggest is
that you ask the States to take this on.
The Chairman. I want to thank all of the panel for their
outstanding testimony, their presentation, their answers to
questions. One of the joys of this job is that we get an
education almost every day. I think we probably get the
equivalent of a college course every month, and it is all
helpful. Hopefully we are able to turn that into legislation
that makes a difference. That is what we are always counting
on. These panels never give us the opportunity to really get
into some details that you have suggested in your testimony
that we need to explore a little bit further so that we can
come up with some logical answers.
I really appreciate all of you being willing to testify. I
know that we made the request on a very short notice, and we
are appreciative that you complied with that and were here.
What you have said was stimulating and thoughtful. I am an
accountant so I do have some more detailed questions that I
have learned not to ask when we are at these kind of
gatherings. [Laughter.] And particularly for Mr. Van Horn,
because I am fascinated the how your organization has a lower
default rate than others, and want to explore a little bit how
you might perceive that that comes about.
So we will be submitting questions to all of you and would
hope that you would respond. We will leave the testimony open
for 10 days. You can also expand on anything that you have
said. We appreciate it.
The hearing is adjourned.
[Additional material follows:]
Additional Material
Response to Questions of Senator Enzi by Kati Haycock
Remedial Education
Question 1. The need for remedial education has important
connotations for today's students. How can the HEA be shaped to reduce
the need for remediation, and what changes should Congress make in the
TRIO and GEAR UP programs to focus more on academic preparation?
Answer 1. The need for remedial education can be minimized (1) by
making sure that higher education clearly articulates the level of
knowledge and skills students need to successfully complete college-
level work, and (2) ensuring more students are prepared to meet these
standards.
Students should know whether they are being prepared to succeed in
college. With more and more students entering college, it is imperative
that we have clear, public statements about the knowledge and skills
college freshman need to be successful in credit-bearing courses. For
too long, this information has been treated as proprietary information
by institutions and systems of higher education. Students, their
families, and their schools need to know what higher education expects
of college freshman when they arrive on campus. Community colleges must
be involved in this process, so their students also know where they
stand in terms of preparation; our experience working on articulation
projects in higher education suggests that the standards for credit-
bearing work are quite similar across 2-year and 4-year institutions.
Some places are making sure high school students have this
information. The California State University system, for example,
offers its placement exams as an add-on to the assessment taken by
every California 11th grader. With these results, students know whether
they are ready for college-level work, and have a chance to focus on
their weak areas before entering college. Congress could support
alignment and articulation activities, and could expand programs that
seek to align high school assessments with college-readiness standards.
These activities would ensure that more students know where they stand
in academic preparation as they aspire to enter and succeed in higher
education, and minimize the need to remediate students once they have
arrived in postsecondary education.
In addition, we know that the courses students take in high school
are the single best predictor of whether they succeed in college.
Congress can minimize the need for remedial education by (1) supporting
States that are willing to make an academically rigorous, college-prep
curriculum the default curriculum for all students and (2) by boosting
Pell grants for students who complete this college prep curriculum.
This should not substitute for restoring Pell grants to their
historical buying power, but should be seen as a complementary strategy
that could entice more students from low-income families to complete
the curriculum that is most often associated with success in college.
Transfer of Credit
Question 2. Given that a growing percentage of students will attend
more than one postsecondary school or college during their academic
career, what changes can we make in the Higher Education Act so that
students do not have to duplicate coursework unnecessarily?
Answer 2. The most efficient way for Congress to ensure that
students do not have to duplicate coursework unnecessarily is to
support articulation agreements between 2-year and 4-year systems and
institutions. For instance, it should be clear to students in community
colleges whether the courses in which they are enrolling have been
certified by the State's 4-year college system as courses for which
transfer credits will be accepted. If not already required, Congress
could ask States to ensure that a system is in place for institutions
to work together to certify courses that will be accepted for credit at
other institutions (and to clearly indicate which institutions), and to
require that courses are clearly tagged with this information in course
registration materials.
Integration of Programs with Higher Education
Question 3. At our April 14 hearing on lifelong learning, we
learned a lot about education silos and programs that are not as
effective as they could be because they are not coordinated or well
integrated. What can Congress do during reauthorization of the Higher
Education Act to facilitate better coordination among the TRIO and GEAR
UP programs so they provide comprehensive services to help students get
ready for college? How can non-traditional students who have the same
kinds of needs be identified and served?
Answer 3. Both TRIO and GEAR UP play critical roles in exposing
students to college aspirations and in helping students navigate the
complicated college application process. The success of both programs
could be extended by the kinds of activities described in response to
Question 1.
If higher education were more clear about the level of reading,
writing, and mathematics that incoming freshmen need, then high
schools, and those that administer TRIO and GEAR UP programs, would
have clearer targets for making sure their students were on-track to
succeed once they arrived at college.
Too many students who aspire to college are not taking the
challenging, rigorous courses that will prepare them to succeed--and
this problem is most prevalent among the low-income students and
students of color who are the primary beneficiaries of the TRIO and
GEAR UP programs. Congress could bolster programs that increase college
access by making sure that States provide schools, counseling programs,
and students themselves with better information on the benefits and
importance of taking the college-prep curriculum. Congress could also
provide incentives for students from low-income families to complete
the college-prep curriculum.
In addition, Congress could encourage TRIO and GEAR UP programs to
utilize federally collected data on institutional graduation rates.
Using disaggregated college graduation rates, TRIO and GEAR UP programs
could counsel students to evaluate colleges in part on the
institution's track record of helping students stay in school and earn
diplomas.
Each of these proposed activities would build on the good work
being done in TRIO and GEAR UP to ensure more students are prepared for
and succeed in college.
______
Response to Questions of Senator Enzi by Trinity Thorpe
Transfer of Credit
I don't have any suggestions to offer.
Parental Involvement in the Financial Aid Process
Question 1. What role should parents play in helping students (with
success in education)?
Answer 1. Parents should play the role as supporter but one of the
largest problems with this for low-income families is that there is a
lack of information concerning education. Most low-income parents feel
that continuing education is going to be a burden; they do not realize
that there are many opportunities for their children to attend an
institution for higher education such as scholarships and financial
aid. Once low-income parents realize there are ways for their children
to go on to college and carry little debt while their, parents will
probably be more supportive. Many parents discourage their children
from even the thought of going on to college based on their financial
situations.
Question 2. Awareness activities for students with limited or no
parental involvement.
Answer 2. I believe that if programs such as the TRIO programs are
eliminated from the budget than financial aid awareness for students
might never take place. I feel that increasing these programs by
bringing them into more high schools can aid more students by offering
the activities for financial aid awareness, which are already present,
to a larger population. Often times school counselors have too many
students to be able to reach each one, but through the TRIO programs
more students, who might not otherwise be made aware of their financial
options, will be made aware through their increased involvement in
programs that already exist.
______
Response to Questions of Senator Enzi by Brian Bosworth
Question 1. Transfer of Credit.
Answer 1. Out of area of expertise.
Question 2. TRIO and GEAR UP programs.
Answer 2. Out of area of expertise.
Question 3. What works for persistence and completion for non-
traditional students?
Answer 3.
title x of the higher education act
a new federal-state partnership in higher education to meet the skills
challenge of the 21st century knowledge economy
Quick Summary
This short policy brief outlines a new Federal strategy for helping
working adults gain the postsecondary educational credentials they need
for success in the 21st century economy, and which America needs to
strengthen our global competitiveness. This brief suggests embodying
this strategy in a new ``Title X'' of the Higher Education Act that
would be focused explicitly on working adults and aimed at helping the
States make those changes in their higher education governance,
financing, and programs that would promote access and success for
working adults.
Problem Statement
The 2000 census revealed that of 110.5 million adults in the U.S.
workforce, only about 40 percent had any postsecondary degree
(associate's, bachelor's, or advanced). About 10 percent of all adult
workers had not even finished high school, and 31 percent had not
attempted college after high school graduation. An additional 19
percent had ``some college, but no degree.'' Some of these may hold
certificates from programs shorter than 2 years (or hold industry
recognized credentials), but most probably attended college briefly
after high school and dropped out before achieving any credential.\1\
---------------------------------------------------------------------------
\1\ Over the past decade, more high school graduates (almost 75
percent) are going on to college but a third fail to return after their
first year and only one-half of the rest earn any degree.
---------------------------------------------------------------------------
We can conclude that about 60-65 million working Americans have no
postsecondary educational degree or credential of any kind. Without it,
they are at risk of slipping into the bottom ranks of the economy, or
never climbing out of them. Just a few decades ago, a high school
degree, a strong back, and a good attitude may have been adequate to
guarantee entry to middle class occupations. But this is no longer
true. Over the last 20 years, men with only a high school degree have
seen their wages fall by nearly one-fifth (from $679 per week to
$559).\2\
---------------------------------------------------------------------------
\2\ U.S. Department of Labor. 1999. Futurework: Trends and
Challenges for Work in the 21st Century.
---------------------------------------------------------------------------
Additionally, the wage premium for skills and credentials has
grown. Average earnings for associate degree recipients are nearly 1/3
higher than are earnings for workers with merely a high school degree.
Earnings for those with a 4-year degree are nearly 2/3 higher than high
school graduates with no college. Moreover, the earnings gap between
those with college credentials and those without is growing at an
accelerating pace. The Bureau of Labor Statistics estimates that the
real wages of men in the bottom 10 percent of full-time workers fell by
22 percent from the late 1970's through the mid-1990's. In the late
1990's, these workers earned an average of $275 per week, compared to
$1200 per week for the top 10 percent of workers.\3\
---------------------------------------------------------------------------
\3\ Ibid.
---------------------------------------------------------------------------
Over a lifetime, these huge gaps in annual earnings translate to
crushing disparities in the lifetime accumulation of assets. The Census
Bureau estimates that individuals with a bachelor's degree will earn on
average $2.1 million over their work-life (40 years of full-time, full-
year work). This is about a third more than workers with only some
college education and nearly twice as much as those with only a high
school diploma.\4\ Consigned to low-wage labor markets, few of these
non-college-educated workers will be able to buy their own homes or
send their children to college.
---------------------------------------------------------------------------
\4\ Cheeseman Day, Jennifer and Eric C. Newburger. 2002. ``The Big
Payoff: Educational Attainment and Synthetic Estimates of Work-Life
Earnings.'' U.S. Census Bureau Special Study # P23-210. U.S. Department
of Commerce: Washington, DC.
---------------------------------------------------------------------------
This is a serious economic problem for America. The next few
decades will see growing skill gaps that will not be closed with the
small increases in the numbers of high school students entering and
graduating from college. Simply, the percent of high school graduates
gaining postsecondary credentials is edging up very slowly--too slowly
to meet the growing skill demands of employers and the American
economy. Moreover, the size of the graduating high school cohorts is
much smaller than the older baby boomer cohorts now making their way
through the work force toward retirement.
Even if more high school students graduate from college, they will
add only a net gain of perhaps 3 million workers with college
credentials to the workforce by 2020.\5\ At the same time, the skill-
based economy will continue to shift inexorably toward occupations
requiring postsecondary skills. For example, the BLS projects a 22
percent increase by 2008 in jobs that will require at least some
college. As Anthony Carnevale of ETS points out, the continuation of
that trend until 2020 will produce about 15 million new jobs requiring
college preparation and will result in a huge deficit of workers with
postsecondary credentials.\6\ This estimated gap of 12 million college-
educated workers will have a crippling impact on the U.S. economy. It
can be filled only by a new commitment to helping adults already in the
workforce get access to postsecondary education and gain the
credentials associated with economic success.
---------------------------------------------------------------------------
\5\ Judy, Richard and Carol D'Amico, 1997. Workforce 2020: Work and
Workers in the 21st Century. Indianapolis IN: Hudson Institute.
\6\ Carnevale, Anthony and Richard Fry, 2001. The Economic and
Demographic Roots of Education and Training. Washington D.C.: National
Association of Manufacturers.
---------------------------------------------------------------------------
Millions of working Americans know that they need these additional
skills and that the economy will produce good jobs for those with good
skills. According to the National Household Education Survey, 90
million adults were in some form of adult education in 1999, a stunning
increase from just 58 million in 1991. Almost half of these were
enrolled in work-related education and 18 million were seeking a
postsecondary credential. About 3.5 million were seeking their first
postsecondary credential.
Unfortunately, their efforts to gain those credentials are not well
supported by their Federal or State Governments nor by the institutions
of higher education that ought to encourage them. Notwithstanding the
rhetoric of ``lifelong learning,'' higher education financing,
credentialing, and governance policies still are skewed narrowly toward
traditional students coming directly out of high school into higher
education. Working adults, because they have full-time job and family
responsibilities, often lack the time, money, and flexibility of
schedule to fit into this traditional mode of higher education.
Recent studies by FutureWorks and MDRC discovered that working
adults get very little financial aid from Federal or State sources.
First, those that hold full-time jobs are typically able to attend
school only on a less -than-half-time basis, which renders them
ineligible for most aid. Loan programs authorized by Title IV of the
Higher Education Act are available only for those attending accredited
institutions at least half time. Eligibility guidelines and
institutional practices preclude Pell grants to all but a tiny group of
less-than-half-time working adult students.\7\ Most State financial aid
programs follow Federal eligibility guidelines.
---------------------------------------------------------------------------
\7\ FutureWorks discovered that of 270,000 working adults with
children and with family income of less than 200 percent of the poverty
level who were enrolled at title IV eligible institutions in title IV
eligible programs, only 7.7 percent got any form of aid--Federal,
State, private, institutional, grant or loan. Only 3.5 percent of
these, 34.000 families, got any Pell grant aid.
---------------------------------------------------------------------------
Education tax credits are not helping. The more generous credit--
the Hope Scholarship Credit--demands half-time or more attendance and
goes mostly to the middle income parents of traditional students who
are in their first 2 years of college. The Lifetime Learning Tax
Credits available to less-than-half-time students are far less generous
than Hope, they are poorly marketed, and they are not effectively
targeted to modest income families. Moreover, because they are not
refundable, they do not benefit low-income families.
The average annual earnings for full-time, full-year workers with
only a high school degree was only $30,400 in 2000. However, not all
workers are in full-time, year-round employment; this is especially
true of lesser-educated workers. The average earnings for high school
graduates across the workforce was only $25,900. Women in the workforce
with only a high school diploma earned an average of only $19,156, just
over the poverty level for a family of four. Non-white workers with
limited credentials had similarly lower earnings.\8\ Even if a family
has a second wage earner (probably not full-time, full-year), it is
hard pressed just to cover its basic living expenses. Educational
expenses of $1,500 to $2,000 per year \9\ for a family struggling to
cover these basic expenses can easily make postsecondary study seem out
of reach.
---------------------------------------------------------------------------
\8\ Cheeseman Day, Jennifer and Eric C. Newburger, 2002.
\9\ FutureWorks found no reliable summary data of college costs for
less-than-half-time working adult students and estimates that tuition
and fees might average in the range of $750-$1000 (much higher for
those pursuing highly targeted, certification-focused programs at
proprietary institutions) with other expenses of a similar magnitude.
---------------------------------------------------------------------------
But the problem is not just the absence of financing. Few
institutions of higher education have developed programs and schedules
that work for working adults. Programs that will lead to degrees and
academically recognized credentials are frequently campus-bound; even
if not, they often they have prerequisites that are tough to fit in the
schedule of adults with full-time work and family responsibilities.
Degree and other credential requirements often seem too daunting
for a working adult attending part-time. Associate degrees that require
60 to 75 credit hours can seem an almost insurmountable barrier to a
student who can take only three of four credits at a time. Adults who
have been out of school for several years often require developmental
or remedial courses and few colleges have integrated such basic skill
building curricula into their for-credit, credential or degree-oriented
courses. Many programs continue to require seat time in lieu of
competency demonstration as a chief criterion of credentialing.
Extended use of evening and weekend programs often requires programming
arrangements that can raise accreditation problems for the programs and
institutions. Their response frequently has been to make those
offerings ``non-credit'' and to deny these students the opportunity to
build a pathway of credentials to advance their career.
Few public colleges have successfully integrated preparation for
industry-based certification into their for-credit, academically
credentialed programs. Students who choose to pursue such credentials
(as in information technology fields) are often required to pursue
these programs in more flexible but also more expensive proprietary
training schools where they sometimes sacrifice future ability to
articulate their study into higher level programs in favor of short-
term credentials. Workers seeking continuing credentialed education as
they navigate toward higher paid positions in their occupation often
are frustrated to discover that credentials earned in one institution
cannot be applied to advanced study at another school.
There are important exceptions in the higher education system.
Notwithstanding a decade of increases in tuition and fees that exceed
the rate of inflation, some institutions, especially 2-year community
colleges, are more financially accessible for limited income families.
There are several colleges, 4-year as well as 2-year, that have worked
hard to develop affordable programs that work well for working adults.
They have organized credentialed programs that typically required one
or 2 years of full time study into shorter modules, each with distinct
credentials that can be ``stacked'' together over time into more
conventional degrees and certificates. These schools are making more
extensive use of ``career ladders'' in high-growth occupations that
enable students to earn basic, industry-recognized certification
quickly to gain entry to higher wage occupations with the option to
continue training for more advanced credentials.
Additionally, some program offerings include open-entry/open-exit
classes that allow students to progress at their own pace, classes that
meet on weekends, and course offerings that combine distance-learning
and on-campus support. Some colleges have created short-term intensive
programs with curricula and scheduling formats that can better
accommodate the schedule limitations of working adults.
Regrettably, however, these are exceptions--best practice, not
common practice. In terms of cost and program structure, most
institutions of higher education institutions are not easily accessible
to working adults and they do not promote success.
Searching for Solutions
There appears to be little enthusiasm in the Congress or the
Administration--or for that matter among postsecondary institutions--
for changes in Pell grant or student loan eligibility that might better
accommodate the financing needs of working adults. Concerns about the
deficit probably will preclude any authorization changes that would
lead to big increases in available funding. Groups representing the
higher education institutions see Title IV of the HEA as a zero sum
game and will oppose any efforts to ``divert'' Federal support from
traditional to non-traditional students.
Even more importantly, we are increasingly convinced that squeezing
a little more money out of title IV will not help much. The problems
that discourage access and success for working adults seeking
postsecondary credentials go very deep into the governance and
financing of higher education. Solutions must come through reforms in
how the States manage their higher education responsibilities.
For these reasons we have shifted our strategy toward the concept
of a new title in the HEA aimed explicitly and exclusively at working
adults. This new ``Title X'' would provide formula-driven grants (with
incentive kickers) to States. These grants would help develop and
implement a plan to change systems of governance, formula financing,
student aid, curricula and program development, accreditation,
credentialing, and faculty development in ways that would promote
access and success for working adults seeking postsecondary
credentials.
The proposed Title X of the HEA would not create new Federal
student financing programs. Nor would it seek to divert existing
program like the Pell Grants and the direct and guaranteed student
loans away from traditional students toward working adults. Rather,
this new approach would be focused on helping the States--the biggest
financial stakeholder in higher education--explore how changes in the
way they govern and finance higher education can create better
opportunities for access and success for working adults. Title X would
provide modest formula-based grants and incentive funding to support
States who choose to make these changes.
Basic Features of a New ``Title X''
The Federal initiative embodied in title X would be time-limited
(the 6 years of the new reauthorization). Under this program, each
State would receive a planning grant in year one followed by annual,
formula-based implementation grants in years 2 through 6. There would
be monitoring, assessment, and enforcement mechanisms to keep States on
track in their plans. Grants could include incentives for States to
make linkages through the higher education system to other parts of the
workforce and economic development systems, i.e., the Workforce
Investment Boards and TANF agencies. These linkages are currently
encouraged through the Workforce Investment Act and TANF legislation,
but not reinforced through higher education legislation. In addition to
the State grants, there might be some resources set aside for
competitively awarded research grants and some demonstration grants
directly to colleges and universities.
We would recommend the creation of a reserve for additional
allocations to high performance States, providing incentives for
outstanding work as well as sanctions for poor performance.
Alternatively, the entire process could be made competitive, with
grants going only to those States prepared up front to make a strong
commitment to the postsecondary education of working adults. Under any
approach, it seems important to make the Federal grants annually
renewable, subject to performance, rather than allocating each State
full funding in one large grant.
This concept is loosely modeled after the State Systemic Initiative
(SSI) for math and science education carried out in the 1990s by the
National Science Foundation, a program that was viewed favorably by the
Congress, by the States, and by the State K-12 education establishments
that were its beneficiary. First, SSI was explicitly ``systemic'' in
its orientation. It gave the State grantees wide authority and
discretion to deal comprehensively with all aspects of the multiple
challenges of improving the student performance in math and science.
Second, it was not financially open-ended. SSI had a fixed duration and
the budget was planned in advance and known to all the key
organizations in the process. Third, it had a mechanism to hold States
accountable to their own performance objectives. SSI was not heavy-
handed but it did monitor performance, assess results, and enforce
corrective action as necessary.
Such a process lends itself well to this new initiative. Use of the
Federal grants would vary from State to State depending on their
particular diagnosis of problems and opportunities. Some States might
place a special emphasis on developing new financial aid instruments
aimed at working adults. Others might choose to focus their efforts
around the development of new program and credentials that fit the
scheduling barriers facing many working adults. Some States might look
chiefly at their community colleges to implement this new act while
others might ask their 4-year State colleges to play a major role. This
diversity of approach would provide a rich learning environment and
State teams working on these issues could be brought together regularly
to exchange information and experience.
While this new legislation should avoid prescription and support
flexible responses by the States, it should insist, like the SSI, on a
systemic approach. Barriers to access and success for working adults
are not just financial or curricular or schedule; they are all of these
and more. States should be encouraged to examine a wide range of
problems and solutions. The first year planning grant will be an
especially important device to encourage the States to look widely at
how their system of postsecondary education could better meet the needs
of working adults.
The Department of Education would administer this program. Both the
Office of Vocational and Adult Education and the Office of
Postsecondary Education should be directly involved in its design and
management. The Department may find it useful to establish an external
authority to help monitor and assess the work of the States. An
independent authority such as a commission may find it easier to make
critical assessments when necessary and to enforce rigorous performance
standards.
Additionally, coordination with the Workforce Investment Act,
Temporary Aid to Needy Families, and Perkins Vocational Education
programs will be important to the success of any State efforts to
assist working adults in their educational pursuits. Representatives
from these programs should be part of each State's planning and
implementation process.
This does not have to be a costly program for the Federal
Government. Giving the States modest discretionary funding to help
their institutions with careful research and with the design, testing,
and piloting of new programs will be enormously important to States
facing serious fiscal constraints. For example, a 6-year Federal budget
of just $750 million ($125 million per year) would provide the States
an average of $15 million for this multi-year initiative. (Of course
the grants would be actually allocated on a population-adjusted
formula.)
Success
The objective of this program is not simply getting adults to
pursue continuing studies while they work; they are doing that in huge
numbers, especially those that already have some postsecondary
attainment. Rather, the challenge is to help significantly larger
numbers of working adults with only high school degrees gain recognized
postsecondary credentials. The objective is to get them into and
through programs leading to a degree, certificate, or other credential
that can help them improve their standard of living and that can
improve the productivity rate and the U.S. economy.
This new Federal-State program would be both good economics and
good politics. It does not require a large or open-ended financial
commitment from the Federal Government. It would build a partnership
with States and their institutions of higher education, which already
see working adults as a huge new market segment. This strategy would
find enthusiastic support from business groups as well as labor
organizations. Facilitating the entry of adults to postsecondary
education would send an important message to their children about the
value of education and lifelong learning. As our economy continues to
shift toward education and skills as the basis of competitive success,
we cannot afford, economically or politically, to ignore the
postsecondary educational needs and aspirations of millions of adults
already in the work force.
______
Response to Questions of Senator Enzi and Senator Murray by Robert
Shireman
TICAS, The Institute for College Access and
Success, Inc.,
May 19, 2005.
Hon. Mike Enzi,
Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, D.C. 20510-6300.
Dear Chairman Enzi: Thank you for providing me with the opportunity
to testify at the April 28 hearing on access and accountability in
higher education. I am honored to have been included. I hope the
hearing provided you and the members of the committee with a helpful
introduction to many of the critical issues that the Nation faces as we
attempt to improve postsecondary educational attainment.
A theme that was repeated throughout the hearing was the important
role States play in college access, and the need for a more thoughtful
and productive connection between Federal- and State-level
postsecondary policies. The approach that I would recommend is Federal
encouragement for States and institutions to pay attention to their
enrollment of students from the lower half of the economic spectrum.
This could be accomplished through block grants to States, which the
States would then use to provide modest incentives for campuses to
enroll students who do not come from high-income families.
For example, a State could use its Federal funds to provide each
campus, public and private, with a small amount of additional funding
for each student who qualifies for a Federal Pell grant. The campus
could use the funds for financial aid or for pre-college outreach to
disadvantaged communities, or to provide assistance to families in
completing the financial aid application. This would have several
effects. First, selective universities that enroll few low-income
students would have a reason to review their policies and practices to
determine if there are ways that their numbers could be increased.
Second, all colleges would have greater incentives to retain their
lower-income students through to graduation. In fact, a State may
decide to link its incentive to low- and moderate-income students who
transfer or graduate. (As Brian Bosworth said at the hearing, colleges
get paid for enrollment, not for the degrees they confer.) In addition,
campuses would have a small incentive to ensure that low-income
students are aware of the financial aid available, and that they have
assistance in completing the paperwork.
There are a variety of ways that such a Federal program could be
designed, and ways that States might implement it. Given the number of
times that the State's role was mentioned at the hearing, I would
encourage you to explore possible approaches, or to ask the Advisory
Committee on Student Financial Assistance, on which I serve, to seek
input from researchers, State officials, and the higher education
community.
Below I respond to each of the written questions that you provided
last week.
Question 1. Transfer of Credit. Given that a growing percentage of
students will attend more than one postsecondary school or college
during their academic career, what changes can we make in the Higher
Education Act so that students do not have to duplicate coursework
unnecessarily?
Answer 1. The U.S. higher education system is revered worldwide for
its excellence and its diversity. That is, not only the diversity in
ethnicity, gender, age and socioeconomic background of the students,
but the enormous variety--and level of rigor--of the course offerings
and majors. Even courses with the same names--introductory
microeconomics, biology, or political science, for example--are often
not alike at all. Part of the strength of our higher education system
is the independence of each institution. This includes the prerogative
of each college and university to determine what courses from other
institutions will count toward a degree. In the college marketplace,
students who don't like those decisions can go elsewhere, putting
competitive pressure on the institutions to reconsider their denials of
credit.
That said, there is a problem when students take courses they
believe will transfer, only to discover later that they do not. The
issue seems to be poor information, or, in some cases, misleading
claims by a school. It would be worth exploring whether there is a role
that the Federal Government could play in improving the information
that students have about the portability of credits from any particular
institution. The American Association of Collegiate Registrars and
Admissions Officers has made some recommendations in that regard.
Question 2. Parental Involvement in the Financial Aid Process.
Parental involvement is one of the strongest indicators of success in
education, regardless of whether it is early, elementary, or
postsecondary education. What role can and should parents play in
helping students? When there is limited or no parental involvement,
what kinds of early awareness activities can help low-income students
understand their options to continue their education and learn about
available support?
Answer 2. From stimulating early brain development to planning and
saving for college, there are many efforts around the country to
encourage parents to get more involved in the education process and to
help children who lack parental support. A growing number of States,
schools, and community-based programs are trying to raise awareness
about college: why it's important, what it takes to get there, and how
to pay for it. They create online resources, develop and distribute
pamphlets, workbooks, and posters, and use various marketing
techniques. Some deliver direct services such as workshops,
scholarships, hands-on assistance with financial aid and college
application forms, counseling and mentoring.
Here are just four examples of the many current programs and
resources aimed at increasing college awareness and educational
success:
Indiana's Learn More Resource Center (http://
www.learnmoreindiana.org) offers checklists, tips, and planning tools
for parents of children at different stages of development, from
infancy through high school. Its resources for students range from a
learning-style assessment tool to college profiles, cost comparisons,
and financial aid information. It also provides a range of material for
elementary, middle, and high school counselors.
College for Texans (http://www.collegefortexans.com) is a
wide-ranging statewide program with elements such as a theater troupe
that performs motivational, student-developed plays at high schools; a
storybook for elementary students with a companion teaching curriculum;
radio and television advertisements; and online resources about how to
choose a college and explanations of the different tests that are
important for high school graduation and college admission.
California Cash for College (http://
www.californiacashforcollege.org) raises awareness of available
financial aid resources and holds workshops to help students and
parents fill out the application forms.
Cleveland Scholarship Programs (http://www.cspohio.org/)
offers scholarships and other services, such as one-on-one help through
online mentoring and placing advisors in schools and neighborhood
sites.
While awareness efforts may try to reach children and families as
early as preschool or as late as senior year, the one thing successful
programs have in common is recognizing that awareness is only the first
step. In fact, surveys consistently find that a large majority of
students across the income spectrum already think college is a good
idea and say they hope to attend. Most parents would like to see their
children go to college, including parents with no college experience
themselves. The real challenge is to help translate these aspirations
into actions, such as taking higher level courses and studying hard in
school, visiting a college campus, applying for financial aid, or
registering for the SAT.
To try to increase college preparedness and participation, more and
more national, State, and local college access campaigns are using
marketing techniques aimed at students, parents, teachers, and others
who play important roles in the education process. Some campaigns are
built on a strong understanding of how to use marketing to change
behavior, not just awareness, while others are still making that
connection.
Working with a coalition of State agencies and national non-profit
organizations, TICAS has developed an extensive web-based resource to
support effective marketing and outreach practices in the college
access field. The site, to be launched later this year, provides a
forum for college access professionals to share effective strategies,
avoid common mistakes, and find creative ideas. It includes a step-by-
step guide, a multimedia gallery of materials, campaign profiles, and
helpful tools and resources. The site's sponsor, the Pathways to
College Network (www.pathwaystocollege.net), also maintains a database
of the latest research on pre-college outreach and family involvement,
as well as a searchable list of pre-college programs around the
country.
As the college access field expands and evolves, and we learn from
the results of current efforts, policymakers and others will have many
opportunities to advance best practices for young people who need more
help preparing for college than their parents can provide.
Question 3. Non-traditional Students and Financial Aid. Today's
college students are very different from a decade ago. Working adults
and independent students with dependents have different challenges and
needs. How might Congress help to personalize student aid packages to
address individual circumstances to better assist disadvantaged
students and workers who are returning to school because they need
additional training?
Answer 3. In order to be more successful in postsecondary education
and training programs, the students you describe need adequate
financial aid, so that they can invest more time in the learning
process. By doing so, they are more likely to emerge with knowledge,
skills, and credentials that will help them secure a higher-paying job.
The Advisory Committee on Student Financial Assistance recommended some
changes to the Federal need analysis process that would help working
adults and independent students with dependents, including:
Allow dislocated workers to report their projected current
year income. The prior-year income that is used by most applicants is
not relevant when a worker has lost a job.
To reduce the work penalty and encourage savings, increase
the Income Protection Allowance by at least $1,000 for all students.
This would allow students to earn more during the year without it
affecting their aid eligibility for the following year.
Reduce the assessment rate on student earnings for
independent students without dependents from 50 percent to 40 percent
(for those with dependents, the rate is already as low as 22 percent,
depending on their income and other factors). This would protect more
of their earnings above the Income Protection Allowance from need
analysis.
Automatically provide the maximum Federal aid (i.e.,
assume zero expected family income) for independent students with
dependents whose income is below $25,000. (This auto-zero threshold is
currently $15,000.)
I would also suggest carefully exploring the role of loans for non-
traditional students. Borrowing money is not likely to be a welcome
prospect for a dislocated worker or a low-income parent. The dangers,
and the competing demands, are too great. Congress needs to address
this problem, either by providing greater grant aid, or by reducing the
hazards of loans by protecting vulnerable borrowers from the prospect
of excessively burdensome payments.
Question 4. Student Loan Programs. In your testimony you suggest
that Congress could create some more efficiencies within the student
financial aid system by encouraging schools to participate in what you
call ``the most cost effective'' student loan program, and using the
assumed savings for additional Pell grant funds for the schools that
participate. I am concerned, and I know many of my colleagues here are
concerned, that such an approach would create a clear inequity in the
student financial aid process. But my larger concern is how small,
rural States like Wyoming would be affected by such an approach. Since
many of our financial aid offices are very small, the schools in my
home State of Wyoming are poorly equipped to run a student loan program
themselves, and are much better served by allowing a private lender to
provide services to students. If your approach were adopted, it seems
to me the result would be a discriminatory policy between schools in
smaller, rural settings and larger schools in more urban areas. Can you
explain to me how the approach you recommend would be fair to students
in States like mine?
Answer 4. I will address your question in three parts:
A. School duties in the Federal loan programs.
B. Inefficiency and inequity in the Federal loan programs.
C. The options for the committee.
A. School duties in the Federal loan programs. It does seem logical
that there would be a lot of duties that lenders perform in the
government-guarantee program (FFEL) that would become school
responsibilities under direct lending. But that is not the case. Even
in FFEL, schools already do most of the work, including:
determining borrower eligibility;
calculating the loan amount;
determining the disbursement schedule;
certifying loan eligibility;
performing entrance counseling;
accepting the loan proceeds from the lender;
delivering the loan proceeds to the student;
monitoring student enrollment; and
providing exit counseling before students enter repayment.
What's left to be done by the lender? One duty that schools don't
perform in FFEL is generating the promissory note. In direct lending,
schools may choose to take on this extra duty. But they are also
offered an alternative originator (a private contractor hired through a
competitive contract by the Department of Education) that can perform
the function.
In a report last year, the Government Accountability Office did not
find significant added burdens on direct loan schools. Instead, GAO
found that the direct loan program offers schools several
administrative advantages, including: ``(1) streamlined loan delivery,
(2) greater control over loan processes, (3) timely delivery of money
to students, and (4) ease of tracking loans over time.'' (GAO-04-107).
So why do some schools complain of extra work in direct lending?
GAO did find one duty that some schools found difficult, and
contributed to some of them moving back into FFEL. These schools had
trouble reconciling their records of the loan funds they received with
the amount of funds actually provided to students. In the FFEL program,
there is no attempt to reconcile the amount of loans that lenders claim
at a school with the amounts the school actually delivers to students.
In other words, some schools prefer the guarantee program because there
is less accountability for the funds.
Schools of all types participate in the Direct Loan Program: big,
small, urban, rural, public, non-profit, for-profit, 2-year, 4-year,
graduate, certificate. To be sure, some of the responsibilities and
processes in direct lending are different than in FFEL, and school
officials do need training when they switch from one loan program to
the other. These differences are not significant enough to justify
billions of dollars of additional taxpayer spending. Also, the added
accountability protects taxpayers from fraud, abuse and costly errors.
B. Inefficiency and inequity in the Federal loan programs. Since
the creation of the Direct Loan Program, FFEL lenders and
intermediaries--many of them, ironically, at State government
agencies--have attempted to create the impression that FFEL is a more
``private sector'' program. But, as President Bush pointed out in his
latest budget, the guaranteed student loan program specifically fails
to make use of market competition to reduce program costs for
taxpayers. The President's budget singles out FFEL for criticism,
saying its problems ``lead to unnecessary costs for taxpayers and
prevent the program from achieving the efficiencies the market is
designed to provide.''
The Department of Education has no mandate or authority to use
market competition to keep costs down in the FFEL Program. Instead, the
program operates through a long list of subsidies set at arbitrary
levels by Congress. When circumstances change, or when providers do not
perform as they should, the Secretary of Education can do little about
it. Often, the committee-drafted provisions are vague and subject to
abuse. The recent experience with loans carrying a 9.5 percent interest
rate guarantee is a case in point. Another example is the enormous
future taxpayer costs of the current low-rate consolidation loans. The
same low rates could be provided at lower taxpayer cost if the lender
subsidies were set by a market process rather at rates set in statute.
There is no market-based explanation for any of the FFEL fee and
subsidy entitlements, which are cemented into the law by congressional
action, requiring the government to pay high fixed prices regardless of
actual market costs. A sampling of the federally guaranteed payments to
FFEL lenders and intermediaries includes:
Thirty-six federally-backed ``guaranty agencies'' are
entitled to a .4 percent ``loan processing and issuance fee,'' paid by
the Federal Government.
These agencies are also entitled to a .1 percent ``account
maintenance fee,'' paid by the Federal Government, and they have the
legal authority to charge students a 1 percent ``guarantee fee.''
Thousands of banks, as well as secondary market entities
that purchase loans from banks, are entitled to quarterly returns equal
to the rates on commercial paper plus 2.34 percentage points during
repayment and plus 1.74 percentage points during the in-school and
grace period, assured by the Federal Government. And some are entitled
to payments that are much higher than that.
If a borrower's payments are late, the guaranty agency has
an opportunity to encourage the borrower to make a payment. If
successful, the agency is entitled to a 1 percent ``default aversion
fee.''
If the borrower defaults, the lender or secondary market
is entitled to receive a minimum payment of 98 percent of the principal
and interest.
If a loan defaults, the guarantee agency is entitled to
keep 28 percent of any amounts it is able to collect.
In contrast to all of the above, the only obligation in the Direct
Loan Program is to students. The program's costs are determined using
market competition by private sector providers of capital and private
contractors that do loan servicing and collection. The most recent
servicing contract was very competitive, resulting in a billion-dollar
reduction in administrative costs. Many of the companies that work at
competitive rates for the Direct Loan Program are simultaneously
working for FFEL lenders who are paid excessive subsidies for the very
same kinds of work.
You asked about inequities associated with a college's choice of
loan programs. The answer is that while campus administrators may
prefer one program to another, they are able to administer either loan
program without serious difficulty. The real inequity in the Federal
student loan system is shown in the chart above: the large costs paid
by taxpayers over the past 10 years to support the FFEL program. If the
goal is to have two loan programs that compete on a ``level playing
field,'' then the programs as currently designed do not approach that
goal. The taxpayer costs of FFEL--no matter how you add them up--are
huge compared to the Direct Loan Program. This inequity has been
documented repeatedly by highly respected budget analysts and
accountants, including OMB, GAO and CBO.
C. The options for the committee. There is an enormous need for
increased investment in higher education and other postsecondary
training. A good case can be made for increased public investment,
given the economic and social returns to education. But another way to
increase the Federal investment is to make the current funds go
further, by making aid programs more efficient.
The Student Aid Rewards Act is an important approach to consider.
But as the chairman of the committee, you do not need to accept it as
written. I would recommend you consider its salient points separately,
rather than as a package, and develop your own approach. The key
questions raised by the proposal are:
Should the Federal student loan system be as efficient as
possible, without imposing unreasonable administrative or risk burdens
on institutions of higher education?
How should efficiency be measured?
How can efficiencies be achieved?
And most importantly:
How should the resources freed up through improved
efficiency be used?
Efficiency generates new investments that can help students, and
expansion of the Direct Loan Program is one way to achieve
efficiencies. The program was proudly developed by a number of
officials in the first Bush Administration. A group of them, including
a chairman of the Republican National Committee, wrote:
Over the years, the guaranteed student loan program has
developed a degree of regulatory and administrative complexity
that now undermines its fundamental integrity and
effectiveness. Replacing the GSL structure with a streamlined
structure will mean not only enhanced accountability and budget
savings, but also a more rational delivery system that will
particularly benefit students and educational institutions. In
particular, we believe direct loans will also ensure greater
responsibility and accountability by participating educational
institutions.
A direct loan program will mean replacing the role currently
played by many banks, guarantee agencies, and secondary markets
with a more competitive approach. The intent is not to harm
these participants in the existing program but rather to
recognize that more competitive, efficient, and practical ways
exist to provide student loans. We hope that as the Congress
considers direct loans it will look beyond the misleading
information that is being spread by representatives of those
entities who have a direct financial stake in preserving the
status quo.
By making better use of competition and markets, the Direct Loan
Program has produced the efficiencies its designers hoped it would
achieve. But neither it nor the details of the FFEL Program are
immutable. There are certainly other designs, should you choose to
explore them, that could serve students equally well while reducing
costs and risks to taxpayers. The resulting savings could still be
invested in reforms to assist dislocated workers, improve enrollment
and graduation of low- and moderate-income students, or provide early
information about college to children in high-poverty schools.
Many people will oppose improvements in efficiency. Listen to them,
but then seek independent advice from experts and accountants who do
not have a conflict of interest. Then make up your own mind.
Question 5. 9.5 percent loans--Response to Senator Murray. In your
response to Senator Murray's question, you mentioned the increase over
the last 2 years in the volume of 9.5 floor loans. It appears that this
was overwhelmingly the result of the transferring and refunding
opportunities that were closed off under the Taxpayer-Teacher
Protection Act. My understanding is that the volume of 9.5 floor loans
has gone down since passage of that Act--the intended result of the
statute. You also said that the 9.5 percent subsidy payments may
actually be increasing because recycling allows lenders to ``take
proceeds from one pot and move them to another.'' Could you explain in
detail the process by which you believe lenders can increase floor loan
billings via recycling alone? Also, could you explain why this process,
if it is indeed occurring, has not resulted in growth in the volume of
loans being billed at the 9.5 floor rate?
Answer 5. Under the recycling provision, loan companies can create
new loans carrying the 9.5 percent guarantee by using proceeds from
prior 9.5 percent loans as capital. Specifically, the law that Congress
passed last fall gives the favorable interest rate treatment to new
loans made from ``collections or default reimbursements on, or interest
or other income pertaining to'' prior loans carrying the 9.5 percent
guarantee. This allows a lender to maintain or even increase the total
volume of 9.5 percent loans, even as borrowers repay the old loans.
The most recent data on lender billings (``Closed Loophole Hasn't
Cut Subsidies for Student Loans: Payments to Lenders Are as High as
Ever,'' New York Times, April 10, 2005) raised the further question of
how billings could increase if volume was unchanged or reduced. The
example that I described at the hearing works like this:
Assume a simplified portfolio in which a loan company has two pots
of loans, one guaranteeing the 9.5 percent return, and the other
carrying the interest rate guarantee that applies to other Federal
loans. In period 1, the two portfolios contain the same mix of loans,
simplified here as just two fixed-rate consolidation loans each:
In this scenario, under today's interest rates, the loan company
would receive little or no special allowance payments from the
Department of Education for Loans A and B in the regular pot. In the
9.5 percent pot, the Department of Education would be required to pay
the loan company the difference between the 9.5 percent rate and the
borrower rate, a subsidy that would equal $250 for Loan C and $650 for
Loan D, for a total government payment of $900. On the $40,000 in
loans, the loan company would take in a total of $2,000 in interest
paid by the borrowers and the additional $900 from taxpayers, for an
average return of 7.25 percent.
But it makes sense for loan companies to do everything they can to
maximize their returns. How might they improve upon the 7.25 percent
return? The recycling language allows the company to use any ``income
pertaining to'' a 9.5 percent loan to make a new loan. This means that
a company could ``sell'' Loan C to the Regular Pot, and use the
proceeds to ``buy'' Loan B into the 9.5 Percent Pot. In other words,
Loans B and C switch places. The result would be as follows:
With the same number of loans and same amount of loan volume in
each pot, and with the borrowers paying the same rates as in year 1,
the loan company is able to increase the special allowance payments,
which the Department of Education is contractually obligated to pay
under Federal law, by more than 40 percent through recycling. With the
volume of loans unchanged, the borrowers still pay $2,000. But the
total taxpayer subsidy increases to $1,300. The company's average
return jumps to 8.25 percent, a nearly 14 percent increase.
The use of statutory entitlements, rather than market competition,
to determine loan subsidies is an invitation to abuse and the reason
for the ballooning payments to student loan companies over the last 2
years. Instead of analyzing and fixing each problem as it surfaces,
Congress would be wise to authorize market-based approaches that keep
program costs down.
I have heard that part of the reason for maintaining the 9.5
percent payments and other excess subsidies is that some non-profit
organizations use their proceeds for good works. One could achieve the
same end far more efficiently by ending the subsidies and using the
savings to provide such groups with as much or more direct aid.
Ending recycling is not the only way to reduce the costs of the
abuse of the 9.5 percent provision. In addition to stopping recycling,
Congress could further reduce Federal payments by authorizing a program
to offer repayment incentives or re-consolidation opportunities to
borrowers with 9.5 percent loans. By paying off their loans quicker, or
shifting to capital providers whose returns are set competitively,
voluntary borrower actions would significantly reduce taxpayer costs.
Congress could apply those savings to increased student aid.
Again, I really appreciate the honor of testifying before the
committee. Please do not hesitate to contact me if you have any further
questions, or if any of my answers require clarification.
Sincerely,
Robert Shireman,
Director, TICAS, Inc.,
Visiting Scholar,
U.C. Berkeley Center for Studies in Higher Education.
______
Response to Questions of Senator Mike Enzi by Phillip F. Van Horn
Question 1. Rural Access to Postsecondary Education. We know rural
students face many challenges getting to school, and especially
postsecondary school. Are there any best practices from Wyoming or
other States you can suggest Congress look to as we amend the Higher
Education Act to address the needs of rural students, and what impact
has the 50 percent rule had on access to higher education in rural
areas?
Answer 1. While Wyoming Schools have done an admirable job in
balancing workforce training demands placed on them by employers and
all stakeholders in their communities, the 50 percent rule means
schools are forced to limit the number of students and the number and
kinds of courses that can be offered through distance-learning methods.
The decades-old regulation has a greater negative impact on rural
students and particularly older working adult students who desire to
upgrade their workforce skills, but who can't find the time within
their family and work obligations to travel to a classroom.
Question 2. Transfer of Credit. Given that a growing percentage of
students will attend more than one postsecondary school or college
during their academic career, what changes can we make in the Higher
Education Act so that students do not have to duplicate coursework
unnecessarily?
Answer 2. Respectfully, the matter of unnecessary duplication of
coursework is almost non-existent in Wyoming. There may be anecdotal
exceptions, but the community colleges and the University of Wyoming,
have collaborated to make transfer of credit a relatively seamless
process for students. Our recommendation is that institutions across
the country look at the Wyoming model.
Question 3. Parental Involvement in the Financial Aid Process.
Parental involvement is one of the strongest indicators of success in
education, regardless of whether it is early, elementary, or
postsecondary education. What role can and should parents play in
helping students? When there is limited or no parental involvement,
what kinds of early awareness activities can help low-income students
understand their options to continue their education learn about
available support?
Answer 3. Countless research studies and initiatives over the years
all agree on at least one common variable: Parental encouragement and
intervention is the key to a young person's ambition to pursue higher
education. Parents should talk about college as a reality as soon as a
child can read.
Absent parental involvement, encouragement and intervention by a
significant mentor is critical. Federal programs such as the TRIO and
GEAR UP are notable programs, but are inherently limited by the Federal
budgetary and reauthorization processes. Private initiatives provided
by the student loan industry are significantly contributing to early
awareness efforts. As I stated in my oral testimony 3 weeks ago, our
job goes beyond working with students who are already college bound.
WSLC early-awareness programs include taking 6th graders to college
campuses under our College For a Day program and sponsoring the Women
In Science program that encourages elementary and secondary female and
male students to explore education and a career in the sciences. We are
working with the Hispanic Organization for Progress and Education
(HOPE) and Latina and Latino leaders in communities to instill the
confidence among young Hispanic students that post secondary education
is accessible, affordable and imperative. Successful early awareness
efforts will include private sector involvement, similar to what WSLC
and other members in the FFELP community are doing.
Question 4. Non-traditional Students and Financial Aid. Today's
college students are very different from a decade ago. Working adults
and independent students with dependents have different challenges and
needs. How might Congress help to personalize student aid packages to
address individual circumstances to better assist disadvantaged
students and workers who are returning to school because they need
additional training?
Answer 4. Frankly and respectfully, personalization of student aid
packages is best founded with school financial aid professionals. These
men and women have one overriding commitment: To serve all students in
need and to the extent practical they will individualize each student's
aid package. Congressional assistance should come in the form of
simplifying the Federal student aid process and the underlying student
aid formula as recommended by the Advisory Committee on Student
Financial Assistance in January 2005 and allowing financial aid
professionals on campuses the greatest flexibility possible to address
individual needs.
Question 5. Student Loans. When Congress made the decision to
establish a 9.5 percent return on certain tax-exempt bonds, would you
say that the intent of Congress was to increase or decrease the
subsidies to holders of these bonds and was the initial effect of this
differential treatment an increase or a decrease in the subsidy to
these bond-holders?
Answer 5. For clarification purposes: subsidies do not go to the
bondholders. Bondholders are the creditors, providing the capital used
by the issuers who make and acquire student loans. We assume your
question is meant to be directed to the loan holder.
As for the Congressional intent for creating the 9.5 percent floor
return, it was neither to increase nor to decrease the return to the
lender or loan holder. Rather, it was to provide stability for tax-
exempt issuers and holders of student loans so that there would
continue to be a reliable source of funding for educational loans and
was applicable only to bonds originally issued prior to October 1993.
Bond interest rates were significantly higher at that time.
Less than one-quarter of Wyoming Student Loan Corporation's
portfolio is eligible for the 9.5 percent floor. These earnings allow
the corporation to invest in early awareness programs. The corporation
will experience a 28 percent reduction in its 9.5 percent floor-
eligible portfolio by December 31, 2006. Another 31 percent of the
remaining portfolio will begin amortizing in May of 2007. Other
outstanding bond issues, refinanced under the intent and letter of the
law, will amortize over the next 25 years. We have not increased our
9.5 percent holdings; contrary to those who would have us believe all
student loan lenders are taking advantage of the program.
Question 6. Also, what would be the impact on the ability of loan
providers, and financial markets in general, to originate additional
student loans if the Federal Government took a position that the terms
and conditions of bond issues or other asset-backed securities could be
changed after the original issue? Would the savings to the Federal
Government be worth the market instability that such a change could
trigger?
Answer 6. The potential adverse effects of the scenario described
in #2 above are so numerous; I cannot contemplate them all. At a
minimum, the following would occur:
For Wyoming Student Loan Corporation: The underlying economics of
ALL outstanding debt financings, not just the 9.5 percent portfolios,
as well as future financings, would no longer be valid, triggering a
likely downgrade of our bonds, with a corresponding increase in the
rates we would have to pay. The end result would be the corporation's
inability to meet its contractual commitments to bondholders and our
ability to meet the need of Wyoming's students. This scenario would be
played out across the country.
One of the great strengths of the FFELP for the past 40 years has
been the elasticity of the private financial markets to expand or
contract with the demand for student loans. Any retroactive change
would have a broad impact because it would raise the possibility of
future retroactive changes and would disrupt markets so significantly
that many FFELP providers could no longer operate.
Mr. Chairman, Wyoming Student Loan Corporation and the other non-
profit student loan providers across the country are in a unique
business: We are constrained by laws that permit us to offer one
product at a price mandated by Congress and we are regulated by our
competitor (the Department of Education and the direct loan program) to
whom we pay fees.
The only efficiencies the corporation can achieve come through
controlling our liabilities and overhead, including executive
compensation, in order to continue to provide low-cost loans so that
more students have access to higher education.
Beyond just the student loan financing markets, the imposition of a
retroactive change would have a much greater impact than simply the
cost of the change. The message to all financial markets would be
clear: the reality that the Federal Government would change laws
retroactively would destroy the full faith and credit principle. Any
debt financing, including municipal bond issues for streets, water,
sewer and other needs would come to a halt, or, at the very least,
would carry a risk premium, forcing municipalities to pay higher rates
to attract bondholders, resulting in higher local taxes.
Mr. Chairman, I can see no scenario in which purported ``savings''
to the Federal Government would be worth the risk of eliminating
private capital from the student loan program and destabilizing the
financial market for municipal securities.
Thank you for the Opportunity to respond to these questions. On
behalf of Western States Learning Corporation and Wyoming Student Loan
Corporation, we look forward to providing any additional information we
can to assist you and the committee.
[Whereupon, at 11:34 a.m., the committee was adjourned.]