[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
 AFFORDABILITY IN HIGHER EDUCATION: WE KNOW THERE'S A PROBLEM; WHAT'S 
                             THE SOLUTION?

=======================================================================

                                HEARING

                               before the

              SUBCOMMITTEE ON 21st CENTURY COMPETITIVENESS

                                 of the

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             July 10, 2003

                               __________

                           Serial No. 108-24

                               __________

  Printed for the use of the Committee on Education and the Workforce


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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN A. BOEHNER, Ohio, Chairman

Thomas E. Petri, Wisconsin, Vice     George Miller, California
    Chairman                         Dale E. Kildee, Michigan
Cass Ballenger, North Carolina       Major R. Owens, New York
Peter Hoekstra, Michigan             Donald M. Payne, New Jersey
Howard P. ``Buck'' McKeon,           Robert E. Andrews, New Jersey
    California                       Lynn C. Woolsey, California
Michael N. Castle, Delaware          Ruben Hinojosa, Texas
Sam Johnson, Texas                   Carolyn McCarthy, New York
James C. Greenwood, Pennsylvania     John F. Tierney, Massachusetts
Charlie Norwood, Georgia             Ron Kind, Wisconsin
Fred Upton, Michigan                 Dennis J. Kucinich, Ohio
Vernon J. Ehlers, Michigan           David Wu, Oregon
Jim DeMint, South Carolina           Rush D. Holt, New Jersey
Johnny Isakson, Georgia              Susan A. Davis, California
Judy Biggert, Illinois               Betty McCollum, Minnesota
Todd Russell Platts, Pennsylvania    Danny K. Davis, Illinois
Patrick J. Tiberi, Ohio              Ed Case, Hawaii
Ric Keller, Florida                  Raul M. Grijalva, Arizona
Tom Osborne, Nebraska                Denise L. Majette, Georgia
Joe Wilson, South Carolina           Chris Van Hollen, Maryland
Tom Cole, Oklahoma                   Tim Ryan, Ohio
Jon C. Porter, Nevada                Timothy H. Bishop, New York
John Kline, Minnesota
John R. Carter, Texas
Marilyn N. Musgrave, Colorado
Marsha Blackburn, Tennessee
Phil Gingrey, Georgia
Max Burns, Georgia

                    Paula Nowakowski, Chief of Staff
                 John Lawrence, Minority Staff Director
                                 ------                                

              SUBCOMMITTEE ON 21st CENTURY COMPETITIVENESS

            HOWARD P. ``BUCK'' McKEON, California, Chairman

Johnny Isakson, Georgia, Vice        Dale E. Kildee, Michigan
    Chairman                         John F. Tierney, Massachusetts
John A. Boehner, Ohio                Ron Kind, Wisconsin
Thomas E. Petri, Wisconsin           David Wu, Oregon
Michael N. Castle, Delaware          Rush D. Holt, New Jersey
Sam Johnson, Texas                   Betty McCollum, Minnesota
Fred Upton, Michigan                 Carolyn McCarthy, New York
Vernon J. Ehlers, Michigan           Chris Van Hollen, Maryland
Patrick J. Tiberi, Ohio              Tim Ryan, Ohio
Ric Keller, Florida                  Major R. Owens, New York
Tom Osborne, Nebraska                Donald M. Payne, New Jersey
Tom Cole, Oklahoma                   Robert E. Andrews, New Jersey
Jon C. Porter, Nevada                Ruben Hinojosa, Texas
John R. Carter, Texas                George Miller, California, ex 
Phil Gingrey, Georgia                    officio
Max Burns, Georgia











                                 ------                                
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on July 10, 2003....................................     1

Statement of Members:
    Kildee, Hon. Dale E., a Representative in Congress from the 
      State of Michigan..........................................    10
    McKeon, Hon. Howard P. ``Buck'', a Representative in Congress 
      from the State of California...............................     2
        Prepared statement of....................................     4

Statement of Witnesses:
    Baum, Dr. Sandy, Professor, Skidmore College, Saratoga 
      Springs, New York..........................................    12
        Prepared statement of....................................    14
    Kirby, Dr. Patrick, Vice President and Dean of Enrollment 
      Services, Westminster College, Fulton, Missouri............    53
        Prepared statement of....................................    55
    Ross, Scott, Executive Director, Florida Student Association, 
      Tallahassee, Florida.......................................    35
        Prepared statement of....................................    37
    Twigg, Dr. Carol, Executive Director, Center for Academic 
      Transformation, Troy, New York.............................    62
        Prepared statement of....................................    64
    Wegenke, Dr. Rolf, President, Wisconsin Association of 
      Independent Colleges and Universities, Madison, Wisconsin..    21
        Prepared statement of....................................    23














    HEARING ON AFFORDABILITY IN HIGHER EDUCATION: WE KNOW THERE'S A 
                     PROBLEM; WHAT'S THE SOLUTION?

                              ----------                              


                        Thursday, July 10, 2003

                     U.S. House of Representatives

              Subcommittee on 21st Century Competitiveness

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 10 a.m., in 
room 2175 Rayburn House Office Building, Hon. Howard ``Buck'' 
McKeon [Chairman of the Subcommittee] presiding.
    Present: Representatives McKeon, Isakson, Petri, Ehlers, 
Tiberi, Osborne, Cole, Burns, Kildee, Tierney, Kind, Holt, 
McCollum, Ryan, Payne, and Andrews.
    Also present: Representatives Kucinich and Bishop.
    Staff present: Kevin Frank, Professional Staff Member; 
Alexa Marrero, Press Secretary; Alison Ream, Professional Staff 
Member; Deborah L. Samantar, Committee Clerk/Intern 
Coordinator; Kathleen Smith, Professional Staff Member; Holli 
Traud, Legislative Assistant; John Lawrence, Minority Staff 
Director; Ellynne Bannon, Minority Legislative Associate; 
Ricardo Martinez, Minority Legislative Associate/Education; 
Alex Nock, Minority Legislative Associate/Education; and Joe 
Novotny, Minority Legislative Assistant/Education.
    Chairman McKeon. A quorum being present, the Subcommittee 
on 21st Century Competitiveness of the Committee on Education 
and the Workforce will come to order. I mentioned to our 
witnesses that we are going to have a vote. And being 
omniscient, I was able to say that. But they said now that it 
might not happen for 10 or 15 minutes. So I think what we will 
do is go ahead and get started with our opening statements and 
get as much of that out of the way as we can so that when we 
get back from the vote we can turn the time to our witnesses.
    We are meeting here today to hear testimony on 
affordability in higher education. We know there is a problem. 
What is the solution? Under Committee Rule 12(b), opening 
statements are limited to the Chairman and the ranking minority 
member of the Subcommittee. Therefore, if other members have 
statements, they may be included in the hearing record. With 
that, I ask unanimous consent for the hearing record to remain 
open 14 days to allow member statements and other extraneous 
material referenced during the hearing to be submitted in the 
official hearing record. Without objection, so ordered.
    I will begin now with my opening statement.

    STATEMENT OF HON. HOWARD P. ``BUCK'' McKEON, CHAIRMAN, 
          SUBCOMMITTEE ON 21st CENTURY COMPETITIVENESS

    Good morning. Thank you for joining us for this important 
hearing today to hear testimony on college affordability, 
discuss the effects of ever-rising college tuition, and debate 
some of the possible solutions to this problem. This is our 
eighth hearing examining issues that affect our nation's 
colleges and universities and the students they serve as the 
Committee continues to look at the reauthorization of the 
Higher Education Act.
    In 1965, Congress enacted the Higher Education Act, which 
took on the central mission of ensuring that every low-income 
student in the country could be afforded the opportunity to 
pursue his or educational goals. Because of this commitment, 
our country has made great strides in ensuring that millions of 
eligible students can go to the college or university of his or 
her choice. However, thousands of highly qualified students 
cannot afford to attend college and fulfill their dreams 
because higher education institutions or states increasing 
their tuition and fees beyond the reach of students.
    According to the Advisory Committee on Student Financial 
Assistance, which provided testimony last year, cost factors 
prevent 48 percent of all college-qualified, low-income high 
school graduates from attending a 4-year college, and 22 
percent from attending any college at all. Students from 
moderate-income families do not fare much better. Forty-three 
percent are unable to attend a 4-year institution and 16 
percent are unable to enroll at any college. At the rate we are 
going, by the end of the decade, more than two million college-
qualified students will miss out on the opportunity to go to 
college.
    As college prices have continued to rise, the Federal 
Government has repeatedly increased financial support for 
higher education. In the 4 years since the last reauthorization 
of the Higher Education Act, Federal student aid has grown by 
$23 billion. Last year, Congress also raised the maximum Pell 
grant to $4,050 a year. Student loan interest rates are at 
their lowest levels in the program's 38 year history.
    I realize that the recent decisions of state legislatures 
to reduce their spending on higher education have exacerbated 
the problem. Appropriations have dropped in 14 states. At the 
same time, average tuition at 4-year colleges has increased by 
more than 10 percent in 16 states; in Iowa and Missouri, 
tuition has risen by more than 20 percent, and in Massachusetts 
it has jumped 24 percent. But that only tells half the story. 
It does not acknowledge that state support for higher 
education's operating expenses has grown by more than 60 
percent over the last decade. And it does not explain why 
tuition and fees continue to rise even in years past when state 
coffers have overflowed with tax money.
    I believe that it is time that we, the Federal Government, 
states, institutions of higher education, the lending 
community, parents, and students all take our role in 
addressing this crisis seriously. There are some here in 
government and out in academia who will say that the Federal 
Government should not get involved in higher education. They 
say, ``we are doing a great job and should do nothing more, 
just send more money.'' There are some who say that all we need 
to do is to increase the Pell grant award and change the loan 
programs and that will solve the problem of college costs. I 
respectfully disagree. I think that we need reforms. We need 
them now because the rhetoric of the past decade has done 
nothing to stem the rapidly rising cost of college in America.
    Earlier this year, I put forth a proposal to closely 
monitor tuition and fee increases by developing a college 
affordability index that will serve as a standard measure for 
institutions of higher education to measure increases in 
tuition and fees and a tool by which students and families can 
measure the extent of those increases in relation to the 
Consumer Price Index. The proposal would also create College 
Affordability Demonstration Programs for those colleges and 
universities that want to try new innovative approaches to 
improving higher education while reining in uncontrolled cost 
increases. Also, it would prohibit the denial of transfers of 
credit based solely on the accreditation of the institution 
from which the student is transferring, and encourage states to 
emulate Federal efforts to streamline red tape in the student 
aid system.
    While the details have not been released yet, some people 
in higher education have even gone as far as to say that the 
proposal will result in Federal price controls and jeopardize 
institutional quality. While I do not argue with the fact that 
our higher education system is the best in the world, I do 
think that we can do a better job of making college more 
affordable and more accessible. The last thing that I want to 
do is tell colleges how to run their business. But I will not 
stand idly by as they continue to raise their costs each year 
to a level which has jeopardized students' ability to have 
access to post-secondary education.
    While this hearing is not on my particular proposal, I look 
forward to ongoing discussion on solutions that address the 
increase in college costs. There are many institutions 
developing creative ideas and taking action to stem the tide of 
ever growing crisis of rising college costs. Their students 
have not suffered a loss in services and, more importantly, 
have not suffered a decrease in quality. But many more higher 
education institutions must think outside the box to ensure 
that low-income families are not priced outside of the market.
    With the Federal Government providing between 30 and 35 
percent of all funding for higher education, which totals 
approximately $90 billion annually, it is a Federal issue and 
one where hard questions must be asked and solutions must be 
considered.
    And so as this Committee continues its effort to 
reauthorize the Higher Education Act, we will examine the issue 
of college affordability. We know that there is a problem. 
Today, we will begin to find solutions.
    [The statement of Mr. McKeon follows:]



    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    
    Chairman McKeon. I now yield to Mr. Kildee for his opening 
statement.

STATEMENT OF HON. DALE E. KILDEE, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF MICHIGAN

    Mr. Kildee. Thank you, Mr. Chairman. I am pleased to join 
you today at today's hearings on college costs. I know that 
both of us are looking forward to the testimony of today's 
witnesses. And I am hoping that the bipartisan spirit of the 
Teacher Quality and Loan Forgiveness bills that the House 
passed yesterday continues as we construct legislation on 
college costs. You and I did a great job in 1998 and look 
forward to writing a higher education bill as good as that bill 
and with the improvements we need today.
    The title of today's hearing really is an appropriate means 
to start our discussion, ``Affordability in Higher Education: 
We Know There's a Problem; What is the Solution?'' As Mr. 
McKeon has noted, tuition and fees at post-secondary 
institutions have increased over the past three decades 
dramatically. The College Board has reported that tuition has 
risen by 38 percent over the past 10 years. The question for 
this Subcommittee should be why has this happened and what is 
the appropriate, and I stress appropriate response, indeed, is 
there a Federal response?
    First, let me say that I share Chairman McKeon's concern 
over the rising sticker price of a college education. We 
certainly do not want the cost of a college education to deny 
even one student access to a post-secondary education. We know 
that an individual holding a bachelor's degree earns an average 
of 80 percent more than someone with just a high school degree. 
Over a lifetime, this earning gap for an individual with just a 
high school degree widens to over $1 million. These statistics 
are startling and make access to college education even more 
important today.
    Much attention has been given to the proposal by Chairman 
McKeon to place Federal price controls on tuition at our 
colleges and universities. I know that Chairman McKeon is 
motivated by the financial impact that rising tuition is having 
on students. Unfortunately, this proposal may have exactly the 
opposite effect on students. It will bar the neediest of 
students from attending a university simply because state 
legislatures have cut higher education spending or endowments 
and charitable giving are down due to the souring economy. They 
will be denied Pell grants and student loans because of some 
fault beyond themselves, some reason beyond themselves, the 
economy, the state legislature or whatever.
    In addition, it will likely lead to institutions reducing 
the amount of need-based grant aid and sacrificing high-quality 
programs and staff. This is likely to lead to the hiring of 
more adjunct professors rather than maintaining a seasoned, 
tenured faculty. Rather than creating new problems to solve an 
existing one, this Subcommittee should be considering what is 
the appropriate response to rising tuition. We should provide 
incentives to colleges and universities to hold down costs and 
to coordinate purchasing and administrative functions. It is 
critical to consider that most of our students receive some 
form of financial aid when they attend college. This impacts 
the actual price they pay to attend an institution. Also, we 
must remember that increasingly financial aid comes in the form 
of a loan rather than a grant too increasingly. We should 
reverse these priorities and increase the buying power of Pell 
grants and other forms of Federal aid and institutional grant 
aid.
    Lastly, we must be mindful of the fact that the cost of 
college will never impact many of our most disadvantaged 
students who don't consider college a viable option regardless 
of cost.
    This Subcommittee should be focusing our efforts on early 
intervention and other programs that ensure that all children 
realize the importance of a college education. Programs such as 
TRIO and Upward Bound are great programs to assist in that 
area.
    In closing, I want to stress again that the focus on this 
Subcommittee on what assistance we can provide to students 
facing rising college costs is a sound focus. However, we 
should not be instituting proposals that will actually shrink 
resources and access for our most disadvantaged students.
    We have an excellent panel of witnesses today, and I look 
forward to hearing their testimony. And I yield back the 
balance of my time.
    Chairman McKeon. Thank you, Mr. Kildee. As you said, we do 
have a very distinguished panel today, and I would like to 
begin to recognize them at this time. First, we will hear from 
Dr. Sandy Baum, who is a professor of economics at Skidmore 
College in Saratoga--Sarasota is in Florida, isn't it?--
Saratoga Springs, New York. She studies and writes on higher 
education finance, particularly on access, affordability, aid 
policy, need analysis, and student debt. In addition, Dr. Baum 
directs the Trends in Student Aid and Trends in College Pricing 
Projects for the College Board.
    I understand Mr. Petri would like to introduce our next 
witness on the panel today. And I now yield the time to the 
gentleman from Wisconsin, Mr. Petri.
    Mr. Petri. Well, I am delighted to introduce to the members 
of the Committee, Dr. Rolf Wegenke, who is the president and 
the chief executive officer of the Wisconsin Association of 
Independent Colleges and Universities, known familiarly as 
WAICU. He is a native of the Sixth Congressional District that 
I have the honor of representing, having grown up in Montello, 
Wisconsin and beautiful Markette County and graduating from the 
University of Wisconsin. And he has his doctorate degree from 
the University of Chicago. He has a distinguished career of 
public service in our state, having served in five Governors' 
administrations. And under his leadership, the Association of 
Independent Colleges in Wisconsin has undertaken a significant 
cost reduction project, which we are going to hear about today. 
So I welcome him to this hearing.
    Chairman McKeon. You notice he had no problem at all with 
that name. He said there are lots of Wegenkes in his district.
    Next, we have Mr. Scott Ross, who is the executive director 
of the Florida Student Association, where he lobbies for over 
240,000 students, big job, in Florida's state university 
system. Prior to his appointment, Mr. Ross was a practicing 
lawyer at College Legal Services, PA, a legal practice which 
focused primarily on cases dealing with college students.
    Then we will hear from Dr. Patrick Kirby, who is the dean 
of student life, director of alumni and parent relations, vice 
president and dean of enrollment services at Westminster 
College in Fulton, Missouri. Dr. Kirby has spent over 37 years 
in higher education, holding esteemed positions such as 
director of Work Studies Programs at the University of Iowa and 
dean of student life and assistant professor at the United 
States International University, CalWestern.
    And, finally, we will hear from Dr. Carol Twigg, who is the 
executive director for the Center for Academic Transformation 
and an internationally recognized expert in using information 
technology for instruction in higher education. Previously, Dr. 
Twigg served as vice president of Educom, a national 
association of colleges and universities dedicated to the 
effective use of information technology in higher education, as 
well as the associate vice chancellor for the learning 
technologies for the State University of New York and director 
of the Center for Learning and Technology.
    As I mentioned earlier, we expect to have a vote at any 
time but by not waiting for the vote we have been able to make 
some progress. Before the witness begin their testimony, I 
would like to remind the members that we will be asking 
questions after the entire panel has testified. In addition, 
Committee Rule 2 imposes a 5-minute limit on all questions.
    Now, the witnesses notice that we have some lights there 
before you. When we start with Dr. Baum, there will be a green 
light there you will see. And you have 5 minutes. We have your 
full testimony that will be inserted into the record. We would 
like you to just feel free to talk to us as you feel fit. And 
then you will see when you have a minute left the yellow light 
comes on and then finally when the world comes to an end, the 
red light goes on. But we would like to recognize now Dr. Baum 
to begin her testimony.

STATEMENT OF SANDY BAUM, PROFESSOR, SKIDMORE COLLEGE, SARATOGA 
                       SPRINGS, NEW YORK

    Dr. Baum. Chairman McKeon, Congressman Kildee, Committee 
members, I would like to thank all of you for giving me the 
opportunity to participate in your very important conversation 
about the vital issue of college access and affordability. I 
certainly share the concerns that have been voiced so far this 
morning. Prices are certainly out-pacing incomes, and we do 
need to worry about costs at institutions. And certainly there 
are ways that costs can be more effectively controlled. That 
said, the real issue, as has already been articulated, is the 
issue of access for low-income students. And the issue, the 
thing that matters for those students is the amount that they 
are asked to pay, not the posted sticker price so much. If we 
look at the evidence, I think that we can see pretty easily 
that the appropriate reaction is not one of panic. I do not 
believe it is one of imposing external monitoring of prices.
    Let me just state a few facts that I think contribute to 
this conclusion. One, prices are increasing too rapidly but the 
increase over the last decade in real terms was slower than it 
was in the preceding decade. This is not an accelerating 
spiral.
    Two, most students still attend colleges that have 
relatively low prices. About 6 million of the current 15 
million college students are in 2-year public institutions that 
charge an average of $1,700 a year. Of those students who are 
enrolled in 4-year colleges, about 40 percent attend 
institutions with sticker-posted tuition prices of less than 
$4,000 a year.
    Third, prices are increasing relative to incomes for lower 
and moderate income students but this is not true for more 
affluent students. For families in the upper 20 percent of the 
income distribution, the sticker price of a 4-year public 
college has been between 5 and 6 percent of income for at least 
the last 30 years. So the issue is what is going on for lower 
and moderate income students. And, in fact, in the latter part 
of the 1990's, as income started to grow at a more healthy 
rate, tuition stopped rising as a percentage of their incomes.
    Most important is that it is the net price again that 
students are expected to pay that matters. In the year 2001, 
2002, we distributed $35 billion in grant aid to college 
students. And, in fact, it is this grant aid that is 
significantly driving college budgets. At both public and 
private institutions, grant aid is the most rapidly growing 
component of the budgets. And institutional grant aid and state 
grant aid both doubled in real terms during the 1990's. This is 
very important because if we start monitoring college prices, 
what we will find is that they will be forced to lower the rate 
of increase and lower their spending even on need-based grants. 
So we really have to make sure that attention goes to the net 
price that is charged to students.
    The proposal that we should penalize students who attend 
institutions that raise their sticker price too rapidly would 
have some very perverse results. For states, it would mean that 
they would have an incentive to cut their need-based grant 
budgets in order to hold tuition down. This would actually 
raise the prices charged to low and moderate income students. 
The same would be true of institutional budgets. They would 
have an incentive to reduce their need-based grant budget and 
therefore be able to lower their tuition to meet these 
guidelines. But that would actually hurt the low and moderate 
income students. It would hurt those students that the 
proposals are designed to protect.
    Second, it is a problem just to look at the percentage 
increase in prices. In 2002, community colleges raised their 
tuition by about 8 percent. That was $127. We need to look at 
the diversity of prices at institutions and think not just 
about percentage increases. Already prices are much too high 
for low-income students to pay without assistance. Even if we 
froze prices forever, low-income students would not be able to 
enroll in college without considerable help in the form of 
grant aid.
    And, finally, the idea of imposing price controls on an 
industry that is composed of diverse institutions, with lots of 
different characteristics and lots of different prices and 
where there is considerable competition is quite questionable 
from an economic perspective. There is a lot of competition. I 
think it is also useful to look at what is happening in terms 
of in-roads of the for-profit sector. And you can see there 
that that is making a big difference. That is going to have an 
impact in forcing institutions to control their prices.
    I think that we should focus on net prices, on the tuition 
minus grant aid available to students. And I think we should 
focus on low and moderate income students. Given the scarce 
resources in our economy, it is important that those who can 
afford to pay are going to have to be asked to pay. We can only 
do that by charging different levels of tuition to different 
students.
    We have shared goals of access and success for as many 
students as possible in high-quality institutions. And to that 
end, I think we should focus on providing incentives for 
institutions and states to enroll low-income students and 
providing information to students about the opportunities 
available to them, not on imposing external price controls.
    There are more details in my written testimony. I am happy 
to answer questions. Thank you.
    [The prepared statement of Dr. Baum follows:]


    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
    Chairman McKeon. Thank you. We will now take a 10-minute 
recess, which will give us time to go over and vote and get 
back. And then we will begin with the next testimony. Thank 
you.
    [Recess.]
    Chairman McKeon. The Subcommittee will come back to order. 
We will continue with the testimony of Dr. Wegenke.

STATEMENT OF ROLF WEGENKE, PRESIDENT, WISCONSIN ASSOCIATION OF 
             INDEPENDENT COLLEGES AND UNIVERSITIES

    Dr. Wegenke. Thank you, Chairman McKeon, Representative 
Kildee, and members of the Committee. I appreciate the 
opportunity to be here today to talk to you about the WAICU 
Collaboration Project. Your question is what is the solution? I 
think in Wisconsin we have a solution for the issue of college 
costs.
    WAICU, the Wisconsin Association of Independent Colleges 
and Universities, was organized 43 years ago for the purpose of 
promoting collaboration among Wisconsin's 20 private or 
independent colleges or universities. In 1992, the decision was 
made by our board, the presidents of these 20 colleges and 
universities, to change the way we do business, to see if 
through collaboration we could help control our costs. And 
beginning in 1992, we took some incremental small steps to 
purchase certain goods and services together, natural gas, for 
example, to see if in fact we could save money. We found, yes, 
we could do it.
    In 1997, the presidents made the decision to put everything 
on the table. That is to look at all administrative support or 
back-office functions that these 20 colleges and universities 
provide and see if we could perform them on a collaborative 
basis with three objectives. The first objective being to save 
money. The second objective being to improve the quality of 
goods and services provided to our students, to faculty and 
staff. And, third, I think in line with what this Committee is 
doing, to serve as a national model we believe for how costs 
could be controlled.
    In 1999-2000, with support from The Teagle and Bradley 
Foundations we undertook a feasibility study of our back-office 
operations to see where the potentials were for us to 
collaborate. And we identified some of our biggest cost 
drivers. The conclusion of that feasibility study was that we 
could collectively, among these 20 institutions, save on an 
annual basis between $17 and $46 million a year. And for us 
that is significant money.
    And so we began with the assistance of some Federal money, 
which we received with support of Representative Petri and Kind 
and Representative Obey, all of Wisconsin. We began last July 
1, 2002 with what we have called the WAICU Collaboration 
Project. And it works.
    In just 1 year we have, for example, organized a 
cooperative health plan. The estimated first year savings of 
this cooperative health plan for our faculty and staff, the 
savings potential, I should be careful to say, is $3.4 million. 
It did not just happen. You cannot go to your local discount 
store and get a cooperative health plan organized. We had to 
have all of our members come together and agree on a level of 
benefits. We actually improved benefits to our faculty and 
staff under this plan. We had to agree on a third-party 
administrator, stop-loss insurance, rating, in other words, how 
we are going to price this so we have the necessary reserves, 
and compliance with all state and Federal laws. I would like to 
come back to that question a little later.
    We have nine of our 20 members participating in the first 
year. I expect another six to come in within the next 3 years. 
And between September 1st and January 1, 2004, we will be 
enrolling our faculty and staff in the health plan, which we 
are calling the WAICU Benefits Consortium and thereafter the 
savings will be realized, that first year of savings will be 
realized by January 1, 2005.
    The other major cost driver identified is information 
technology. I should say identified in our feasibility study. 
And we are assisting our members right now to migrate to a 
common administrative academic system. This is the great 
computer in the sky. We are moving them to one system, which we 
intend to operate off-campus at an application service provider 
environment. That is the jargon these IT people have. And we 
expect to save in the millions of dollars on this on an annual 
basis. We will also provide common IT staff for our members who 
will circuit ride virtually and literally among the colleges 
and universities, again to save money. Again, this is not easy. 
We have identified 40,000 what we are calling decision points 
that our members have to come to an agreement on before we can 
go out with a RFP to vendors to purchase a common 
administrative system. We are in the process of achieving those 
40,000 points of agreement right now. So, again, it is not 
easy.
    Other things that are not underway but we think have high 
potential is, one, administration of Federal financial aid. 
There are a number of savings to be had there but we have not 
had the resources to proceed. There are recommendations and 
things we have learned as we have proceeded. One is it takes 
money to save money. Our members did not have the money for the 
startup costs. And, two, again regulations need to be addressed 
if in fact we are going to be able to proceed because there has 
been opposition, not only from government regulators but also, 
frankly, from the vendor community who do not like to see the 
consumer organized. But we are on track to saving money. It is 
working. We believe it can work for others with appropriate 
resources.
    I will be happy to answer any questions.
    [The prepared statement of Dr. Wegenke follows:]



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    Chairman McKeon. Thank you very much.
    Mr. Ross?

  STATEMENT OF SCOTT L. ROSS, EXECUTIVE DIRECTOR, THE FLORIDA 
                   STUDENT ASSOCIATION, INC.

    Mr. Ross. Good morning. Mr. Chairman and distinguished 
Committee members, I would like to thank you for inviting me 
here to testify today. It is an honor to appear before this 
Committee and such a distinguished group of representatives.
    I would also like to take the opportunity to introduce the 
chairman of the Florida Student Association who came with me 
today, Mr. Patrick Sullivan. Patrick currently serves as the 
Student Government Association president at Florida State 
University and he was recently elected as the chairman of the 
Florida Student Association by all of the voting student body 
presidents in the State of Florida. I am proud to have Patrick 
with me today because he puts a face on the issue. The people 
who are affected by this issue of college affordability are the 
students, and I think that that is important to remember. I 
have the unique opportunity to represent the 240,000 students 
in the state university system of Florida, and I am proud to do 
so.
    I would like to thank the Committee again for bringing this 
important issue of an affordable quality education to the 
forefront. As I said before, my name is Scott Ross and I 
represent the Florida Student Association, which is a student 
issues group formed in 1976 to represent the students in our 
state university system. The Florida Student Association is 
composed of the student body presidents of the state 
universities and their respective staffs. FSA coordinates the 
collective efforts of each of our member institutions and each 
of our member student governments, helping to provide a 
cohesive and unified voice before the Florida Department of 
Education, the Florida Board of Education, the Florida 
legislature, the Executive Office of the Governor, and the 
respective university boards of trustees. FSA advocates for 
student concerns before these and other policymaking bodies, 
ensuring that the students have a voice in the state 
decisionmaking. With a full-time staff in Tallahassee, FSA has 
proven to be an extremely effective tool in advocating for 
student concerns.
    I would like to begin by presenting you with some numbers 
that may seem staggering. These numbers reflect educational 
costs in the state of Florida. Please note that these figures 
do not include the 8.5 percent tuition increase for in-state 
resident students passed by our legislature this year.
    Since the 1995/96 fiscal year, tuition has increased by 
approximately 39.2 percent. Student fees have increased by an 
additional 25.7 percent. The cost of books another 30.4 
percent. The cost for a student's room and board has increased 
by 54.2 percent for a total increased cost of education of 
almost 150 percent.
    During our most recent legislative session, the Florida 
legislature, as we previously stated, called for an 8.5 percent 
across-the-board tuition increase for in-state undergraduate 
students. The legislature also allotted for an additional 6.5 
percent of flexibility for the local boards of trustees to set 
graduate tuition, as well as non-resident tuition. By allowing 
for this flexibility on the local level, the legislature is 
almost ensuring astronomical tuition increases.
    In its nationwide report on public 4-year, post-secondary 
institutions with the largest tuition increases, research noted 
that the top 10 nationwide tuition increases were all set on 
the local level, albeit by a standard local board. Further, in 
a report released by the nonprofit College Board in 2002, it 
showed that the tuition and fees at 4-year public institutions 
now average $4,081 for a rise of approximately 9.6 percent. 
Tuition and fees at private 4-year colleges increased an 
average of 5.8 percent, reaching an average cost of $18,273.
    While FSA's primary work is done within the State of 
Florida, I would like to note that tuition is increasing at a 
fast rate on the national level. Research that has been 
compiled by our staff shows the following. In studying the 50 
states, the average increase in tuition will reach 
approximately 12 percent, with some states rising at the 
alarming level of more than 30 percent.
    Some may argue that a tuition increase is nothing more than 
an adjustment or an increase in the cost of living. I would 
like to note that while it is true that consumers face yearly 
price increases for products and services, if you factor in the 
increase in the costs of housing, books, et cetera, you will 
see that there has been almost 21.9 percent increase per year. 
If such an increase were on a consumer's insurance rates, their 
rent, or any other necessary goods and services, the consumer 
would more than likely be apt to find other goods and services.
    In Florida, our students are very fortunate to have a 
program known as Bright Futures, which rewards the best and the 
brightest students. This program was in jeopardy over the 
course of our legislative session. But we were able to save it 
based on the fact that it is important to keep the best and 
brightest students in our state.
    You will see the cost of college skyrocketing. You will see 
more and more students taking student loans, some of these 
loans reaching over $100,000 in debt if you include graduate 
school. We are sending our students out into the workforce with 
a monumental amount of debt with no way to pay it back.
    Some may say that the tuition increases are only small 
percentages. However, if you consider for those students the 
increase with the interest, you will see that we are sending 
our students out in a situation where it is very difficult for 
them.
    I think I am out of time. I will be happy to answer any 
questions. Thank you.
    [The prepared statement of Mr. Ross follows:]



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    Chairman McKeon. Thank you.
    Dr. Kirby?

   STATEMENT OF PATRICK T. KIRBY, VICE PRESIDENT AND DEAN OF 
   ENROLLMENT SERVICES, WESTMINSTER COLLEGE, FULTON, MISSOURI

    Dr. Kirby. Good morning. My name is Pat Kirby and I am the 
dean of enrollment services at Westminster College, a private, 
traditional, liberal arts and sciences college located and 
founded in 1851 in Fulton, Missouri, a town of 12,000 people. 
Many people remember our college as the site of Winston 
Churchill's famous Iron Curtain speech in 1946. And we are now 
the home of the Winston Churchill Memorial and Library.
    A large portion of our students come from Missouri, 
Arkansas, Illinois, Kansas, Oklahoma, Tennessee, and Texas. 
International students make up 5 percent of our enrollment. To 
put some faces on our students, we have our current student 
body president, Sara Goss from Arkansas and Sara Weir from 
Kansas, who is our 3-year soccer player, captain of the soccer 
team. But she pointed out to me that she is really an avid 
Nebraska football fan, which surprised me a great deal. In any 
event, they put faces on who we are and they are doing 
internships here with the Children's Defense Fund and Homeland 
Security. They are having a fabulous experience, and I 
appreciate their being with me here today.
    Thank you again for this invitation to share some views on 
this topic of great mutual interest, affordability. Your 
Subcommittee has identified one of the greatest issues facing 
many college students and their families today and, in turn, 
the colleges and universities. It is my hope that our recent 
experience with a successful tuition reduction plan at 
Westminster will serve the Subcommittee as a helpful case study 
of one possible path toward the types of solutions you are 
seeking.
    In the past decade, Westminister, like many private 
colleges has struggled with the same issues as what your 
Subcommittee is now focused. If we could make our college more 
affordable, could we enroll more students and simultaneously 
provide more choices to these students who are seeking a post-
secondary education.
    In October 2002, we announced our tuition reduction program 
for new students planning to enroll for the fall 2003 semester. 
In my written testimony, I have submitted more background and 
details about the research and mind-set we used in our approach 
to this decision. Here are some of the underlying guiding 
principles that were necessary for this tuition reduction 
program to work at Westminster College: One, an ability to grow 
our enrollment and keep students as our top priority; two, an 
ability to be more cost-effective without sacrificing quality; 
and, three, a financial commitment to a diverse student body 
from all walks of life.
    For example, Westminster College was fortunate to have the 
room to grow carefully our enrollment and to be more cost-
effective when utilizing our facilities, our personnel, and 
programs, all while staying committed to more student diversity 
and retaining the academic and personal social advantages that 
a small college offers to its students, faculty, and staff.
    By making our college more affordable, we thought we could 
increase our enrollment and broaden the socio-economic 
backgrounds of our students on campus. Thus far, that is 
exactly what is happening for our fall 2003 enrollment. We are 
now expecting the largest enrollment in our college's 152 year 
history, bolstered by a much larger, more diverse freshmen 
class. And this is in the midst of a tough economy for many 
students and their families.
    Frankly, our tuition reduction program will probably not 
work for most public colleges and universities. Most of these 
state institutions have full enrollments and serious budget 
challenges. But here is a somewhat unique perspective and 
question to consider: What if just a portion of the 1,800 
private colleges and universities could absorb some of these 
students and relieve some of the burdens faced by public 
universities? It might allow public universities to reduce 
their budget problems, as private colleges and universities 
absorb more of these students. It could be a win/win for 
everyone.
    We are only one private college but we serve as a leading 
example of what private colleges have to offer. Our 16 to 1 
student/faculty ratio keeps classes small, interactive, and 
seminar-oriented. Students can get the classes they need and 
they graduate in 4 years, not five or six. Our faculty members 
are full-time and extremely dedicated, whose priorities are 
excellent teaching and a thoughtful personalized approach to 
advising. Of course, our faculty members do some research and 
write books and journal articles but teaching and their 
students are their top priority. We also sponsor additional 
resources on our campus, such as our Center for Teaching 
Excellence and the Center for Leadership and Service.
    In the last 3 years, Dr. Fletcher Lamkin, our current 
president and a retired brigadier general and former academic 
dean at West Point, has helped the college to refine its core 
mission in higher education and has taken an unapologetic 
approach to emphasizing the importance of leadership, 
character, and values-based educational opportunities 
throughout our college. Our hallmark values are integrity, 
fairness, respect, and responsibility. Morever, we expect our 
graduates to become leaders of character, to pursue lives of 
success, significance, and service.
    One of the greatest strengths of the American system for 
higher education has been its diversity of institutions, around 
4,000 of them. Almost half of them are private. If many 
students cannot seriously consider various types and sizes of 
college, we are all disadvantaged. Making all colleges and 
universities more affordable is perhaps unlikely. But to the 
extent we can journey closer toward that goal for a larger 
proportion of our students, our entire country will benefit. 
There is no greater insurance for our freedom and way of life 
than educated citizenry.
    Thank you for making college affordability a high priority 
for your Subcommittee. And thank you for this opportunity to 
share what Westminster College has done to make higher 
education more affordable to prospective students while 
improving the College's economic situation and enrollment 
trends.
    I will be happy to answer your questions. Thank you.
    [The prepared statement of Dr. Kirby follows:]



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    Chairman McKeon. Thank you.
    Dr. Twigg?

  STATEMENT OF CAROL A. TWIGG, EXECUTIVE DIRECTOR, CENTER FOR 
   ACADEMIC TRANSFORMATION, RENSSELAER POLYTECHNIC INSTITUTE

    Dr. Twigg. Mr. Chairman and Members of the Subcommittee, 
thank you for inviting me to testify. I am executive director 
of the Center for Academic Transformation at Rensselaer 
Polytechnic Institute. A key goal of our center is to 
demonstrate how effective use of information technology can 
both improve student learning while reducing instructional 
costs. Our focus is on undergraduate higher education.
    Now, in my view, higher education has a productivity 
problem. Unlike other industries where information technology 
has been used to change the way in which we do business such 
that we can both reduce costs and improve quality of services, 
higher education by and large has not been able to do this. But 
I say this can be done in higher education as well. And, like 
my colleagues, we have a solution, not the solution to the 
problem.
    For the past 4 years, our Center has managed a national 
program in course redesign, whose purpose is to demonstrate how 
colleges and universities can change the way they do business 
in teaching and learning to both improve learning and reduce 
costs. As part of this program, 30 institutions from around the 
country have each designed one large enrollment course. 
Collectively, these 30 courses impact about 50,000 students 
each year.
    What are the results that we have achieved thus far? All 30 
institutions have reduced their instructional costs by 40 
percent on average, with cost-savings ranging from a low of 20 
percent to a high of 84 percent. Collectively, the 30 
redesigned courses produce a cost-savings of about $3.6 million 
a year. And that is just 30 courses using these techniques. Now 
reducing instructional costs by 40 percent in higher education 
is by itself a significant achievement, especially when just 
about everyone in higher education says this can't be done.
    But what about quality? Each of the 30 participating 
institutions has conducted a rigorous evaluation focused on 
student learning, comparing the outcomes from the traditional 
way of teaching to these new methods of teaching. And the 
results of these evaluations show that 22 of the 30 projects 
have demonstrated significant improvements in student learning, 
statistically significant improvements in student learning. The 
other eight have shown equal quality. They have also shown 
improved retention. Fifteen of the 30 projects have shown 
improvement in course completion rates, reducing the numbers of 
drops, failures, and withdrawals.
    Now I wanted to say a bit more about the program. All of 
these redesign projects focus on large enrollment introductory 
courses, the freshmen level course, a kind of key part of 
student success because these courses have the potential to 
effect large numbers of students and generate substantial cost-
savings. If you do a study of undergraduate enrollment in the 
United States, you will find that just 25 courses generate 50 
percent of the enrollment at all community colleges, and 35 
percent of the enrollment at 4-year colleges. Taken together 
these 25 introductory courses make up about 42.5 percent of 
undergraduate enrollment. So this is why we selected these 
courses as a focus. In addition, completion of these courses is 
critical for student progress toward a degree. But failure 
rates in these intro courses, which range from about 15 percent 
in research universities to 30 to 40 percent in comprehensive 
state colleges and as high as 50 percent in community colleges, 
contribute heavily to overall institutional dropout rates 
between the first and second year. So if we can make 
improvements in these courses, we will directly contribute to 
overall student retention in our institutions.
    Now to say a bit about the institutions participating. We 
have all kinds of institutions; research one universities, like 
the University of Wisconsin and Penn State, comprehensives, 
like the University of Southern Mississippi or the University 
of Southern Maine, community colleges, Riverside Community 
College in Los Angeles and Tallahassee Community College, and 
private institutions like Fairfield University and the 
University of Dayton because we are trying to demonstrate that 
these techniques can be used across the board in higher 
education.
    The projects are in all disciplines, in the humanities, 
natural sciences, mathematics, and social sciences. My written 
testimony details the techniques that we have used to achieve 
these accomplishments. I am happy to answer questions.
    Let me just say there are four key ideas in this redesign 
program. The first is these projects move students from a 
passive learning role, which is the norm in most freshmen 
courses, and frequently the cause of high failure rates, to 
active engagement in learning. The second thing they do is use 
interactive, high-quality instructional software, where 
appropriate, in the learning process. The third thing is that 
they enable good pedagogy to scale because it is easy to have a 
high-quality course with 10 students in it. But how do you have 
a high-quality course with 500 students in it? You need to 
think about how you can scale those techniques and technology 
can be an assistance. And then, finally, what the redesign 
process does is encourage college faculty and administrators to 
think outside the box, to really sit down and examine who does 
what and why and where can we make changes that will lead to 
better student learning and reduce instructional costs.
    And I would be happy to answer questions.
    [The prepared statement of Dr. Twigg follows:]


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the Committee's official files.]
    Chairman McKeon. Thank you. This has been very 
enlightening. As I mentioned in my opening statement, this is a 
problem. We all understand the seriousness of the problem. But 
it is one that we all have to come together to grapple with, 
Federal officials, state, local officials, parents, students, 
lending institutions, everyone involved in the higher education 
system. But since I have talked about my proposal of 
affordability, I have heard lots of negative, why it can't 
work, how it is going to be terrible for quality. Very few 
people have come forward with anything positive about what we 
could do to cut the costs. So when I hear of these things that 
are happening, I really feel good about the potential and what 
we can do as we move forward.
    Dr. Baum, in your testimony, you equate holding the line on 
tuition costs to reducing educational quality. Why must reduced 
quality be an automatic results of institutions reducing the 
cost?
    Dr. Baum. I would not say that all cost reductions 
automatically reduce quality. That is certainly not what I 
intended to say. I think that the examples that we have heard 
today of cost-cutting efforts are terrific. We should 
absolutely find ways to encourage institutions to innovate and 
cut costs.
    However, it is also true that there are many cost-cutting 
measures that do cut quality. And there is a limit to the 
extent to which we can go with this. We should always expect 
that tuition will rise more rapidly in the consumer price index 
because productivity increases are very difficult to come by 
without threatening quality. And it is certainly possible that 
some courses can be offered on a larger scale and cut costs.
    But the fact is that having instructors teach more students 
is not really the solution to the tuition problem. So that 
cost-cutting efforts are very important, but that doesn't mean 
that if you say you can't raise tuition more than a certain 
percentage, you are going to be able to do that certainly in a 
rapid way that is not going to have serious impact on the 
quality of the educational opportunity that is provided.
    Chairman McKeon. Thank you. Dr. Wegenke, you mentioned in 
your testimony that nearly 7,000 Federal regulations impede you 
from cost savings in the Student Financial Aid Program 
administrative function. What do you estimate your cost savings 
to be if the regulations were streamlined and eased without 
compromising the integrity of the student aid programs?
    Dr. Wegenke. I have a two-part answer to that, if I might. 
One, our feasibility studies show that when it comes to Federal 
financial aid, 65 percent of our cost is attributable to 
Federal regulations and Federal reporting requirements. So we 
have some documentation when we are talking here, it is not 
just made up. We estimate if we could consolidate those and do 
the back office functions through the association instead of 
having each college duplicate it, we would save our 20 colleges 
in the neighborhood of $2 million a year.
    But beyond that, I think what we could do is actually 
improve the quality of administration and the level of 
accountability for the Federal Government. For example, when 
the functions are dispersed, and say you have a student is 
forthcoming, say, on their marital status, which can affect 
your student aid, if you have a central clearinghouse for doing 
the checks, you can catch errors more at a higher rate and make 
sure that people are truly qualified. So it is not only the $2 
million we could save.
    But it is also, I think, a level of accountability we could 
offer to the Federal Government if those regulations could be 
waived, consolidated, given a serious look. I know you have 
made particular efforts in addressing regulatory issues, and we 
salute you for that. We would like the opportunity to do more.
    But, again, we have not had the support; 7,000 regulations 
fills three file drawers, and multiply that times 20. It would 
take a lot of staff time, a lot of legal talent, which we as an 
association, frankly, cannot afford to proceed. So it is one of 
the things that inhibits us is again resources. But we are 
committed to taking it on as soon as we can get the resources.
    Chairman McKeon. Well, that is great. Are you are familiar 
with Fed Up?
    Dr. Wegenke. Yes.
    Chairman McKeon. And the attempt we made there. We have not 
been able to get that bill finalized yet. But, again, we need 
some resources to finish that one up. When we get that, we will 
get that done. That was just a start.
    Dr. Wegenke. Yes.
    Chairman McKeon. So we want to work on addressing, getting 
rid of those regulations.
    Dr. Wegenke. Thank you.
    Chairman McKeon. Mr. Ross, what do students in Florida 
believe to be the reasons that college costs are rising? What 
do the students believe are the costs? What can be done to 
address those cost increases?
    Mr. Ross. Well, there is a couple of reasons. First and 
foremost, the students are concerned about the fact that the 
legislature has posted severe cuts to the university system as 
a whole.
    Chairman McKeon. The state legislature?
    Mr. Ross. The state legislature, yes. I will make that 
clear. The state legislature has posted severe cuts to the 
university system, which has forced the universities to make up 
the revenue somehow. It has forced them to basically balance 
their budget crisis on the backs of students. That is one of 
their major concerns.
    As far as solutions, one of the most productive ways, I 
mentioned the Bright Future Scholarship. And the Bright Future 
Scholarship, 7 cents from every lottery dollar that the state 
receives goes toward a merit scholarship for students. Students 
in the Florida Academic Scholars, those who have a 3.5 GPA with 
a 1270 SAT score coming out of high school, receive 100 percent 
of their tuition and those with a 3.0 GPA and a 970 or above 
will receive 75 percent.
    What this does is twofold. First, it keeps the best and 
brightest students in the state university system, in the 
state, because they can utilize that at private institutions as 
well. And, second, it serves as kind of a regulator on tuition 
because it is tied directly to tuition and fees. So if tuition 
were to go up much further, Bright Futures would cost more and 
they would not have the funding. It kind of serves as a check 
and balance. So I think that is why students in Florida are 
such big supporters of the program.
    Chairman McKeon. Thank you. My time is up. Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman. Mr. Ross, we will 
continue with you. In your testimony you mentioned that the 
McKeon proposal is a good first start. Can I take that to mean 
that you support this proposal even though the proposal would 
actually deny students with Federal financial aid to attend 
certain colleges and universities, namely, those colleges and 
universities where tuition has increased by twice the rate of 
inflation for two consecutive years? Would they not be locked 
out from those universities?
    Mr. Ross. Well, I think that one of the important things to 
remember is that what they are attempting to do is to regulate 
tuition from increasing at that astronomical rate. And it is 
going to force universities as a whole to get creative in their 
thinking and in their budgeting process. If universities know 
at the beginning that this is an effect of increasing their 
tuition at monumental levels, I think it will force them and 
their state legislatures and whoever is funding them to get 
creative in their budgeting process. So I will think it will 
serve kind of as a defense at the beginning rather than the 
effect on the back-end.
    Mr. Kildee. So you say pass this law and we will never have 
to use it?
    Mr. Ross. You never want to say ``never,'' but I think it 
would act as more of a deterrent, so to speak.
    Mr. Kildee. Well, this is a very serious business we are in 
right here. And just to hang a thread out there and hope that 
Damocles Sword is never going to drop is probably not the best 
legislative approach. And I do worry about that. In effect, 
what you are saying is that pass the law and--
    Mr. Ross. Well, I mean I think what we have seen is that 
there has to be something done because in the end students 
aren't going to attend those colleges anyway. If the cost 
becomes too high, they are not going to go there. And all of a 
sudden we are going to have students who have an inability to 
go to any college. So what we are doing in turn is we are 
giving the universities an opportunity to say, hey, we are 
going to step back, we are going to find a creative way to 
budget, and we are no longer going to balance our budget crisis 
on the backs of our students.
    Mr. Kildee. First of all, the State of Michigan is in dire 
shape right now and the state legislature is right now trying 
to write a budget. We know the universities and colleges, 
public universities and colleges of Michigan are either going 
to be frozen or cut. This is a very difficult time. So to say 
that this bill will help the legislature not do what it is 
going to have to do and will do, I think is unrealistic.
    Dr. Baum. I just wanted to comment that if you think about, 
for example, a state like Florida or any of the states with 
huge tuition increases this year in a very low inflation time, 
twice the rate of inflation is pretty low now. And in the State 
of New York, the State of Massachusetts, the State of Florida, 
many of these states, students could easily be locked out of 
state institutions. And they are not going to have many other 
alternatives if that happens. Even 1 year, it would be an 
incredibly serious problem.
    Mr. Kildee. I really think that one thing Congress has to 
do is I know Mr. McKeon is worried about the fact that maybe 
the Federal role of being a third-party payer in higher 
education may be the factor in tuition rates going up. I do not 
hold that. But I think that if we are going to make sure we do 
not keep students from going to college, that we have to think 
of such things as, for example, we have a $5,800 authorized 
level for Pell grants. And yet today on the House floor we are 
going to pass a bill for $4,050 rather than $5,800. Now if we 
had it at $5,800, a lot of students would be able to have some 
choices, either to go to college period or which college they 
wanted to go to. I think this Congress has the ability to 
assist so many students to go to college if it would increase 
the Pell grants. I am worried about loans. Students are really 
taking on a great deal of debt, a great deal of debt.
    Mr. Kind. Will the gentleman yield for a question?
    Mr. Kildee. I will be happy to yield.
    Mr. Kind. I think the gentleman from Michigan is raising a 
very serious issue because this twice the rate of inflation 
rate that will go into effect in cutting off financial aid for 
institutions and what Dr. Baum just indicated, the inflationary 
rate is incredibly low right now. And in the last fiscal year 
it was just 1.6 percent. And this year it is hovering right 
around 2 percent. So if you have a tuition increase of 4 
percent even at state colleges and universities, students are 
out. They are just out of luck under this proposal.
    So I would hope that there are some more creative ways of 
being able to address this issue than just relying on what the 
inflation is right now and tuition increases.
    I appreciate the gentleman yielding.
    Mr. Kildee. Mr. Kind has well used the rest of my time.
    Chairman McKeon. Thank you. The gentleman's time has 
expired.
    I think before we focus too much on the Chairman's 
proposal, which has not been submitted yet, we ought to 
probably focus on the problem of the cost of education and the 
students that are not able to attend school. Once we get the 
bill dropped, then we will have plenty of time to pick it apart 
and talk about it. We ought to focus on really what the problem 
is before us here today. I now yield to the gentleman from 
Wisconsin, Mr. Petri.
    Mr. Petri. Thank you. I wonder if I could address a 
question to two of the panel members, Dr. Twigg and Dr. 
Wegenke. Just as kind of an open-ended question is whether 
either of you, based on your experience in wrestling with the 
issue of maintaining or improving quality and at the same time 
lowering cost, improving access to education, are those at war? 
Are we condemned to basically keep on sending the bill to the 
general community so that life goes on as usual? Could you 
comment on this, is this a false dichotomy or is this a real 
problem that we have to assume as a given that the cost will go 
up inevitably higher in education than in other areas?
    Dr. Twigg. No, I believe very strongly it is a false 
dichotomy. I think it is what most people in higher education 
believe because traditionally the way that we have increased 
quality is to in essence throw money at the problem. And so if 
you are a well-endowed institution, you have more money and you 
have a better quality program. And that has been the common 
assumption.
    But what our program has demonstrated, beyond the shadow of 
a doubt, and we call it a proof of concept, is that if you 
redesign the way in which you conduct education and take 
advantage of the capabilities of information technology, you 
can indeed both improve the quality of student learning. As I 
noted, we have statistically significant improvements in 
learning while reducing the cost of instruction. But the key 
idea is to re-think the way in which you are conducting 
instruction.
    There is an editorial in the New Yorker by the financial 
editor, who says that you can achieve greater productivity in 
the public sector. And he uses as an example that college 
professors, it still takes them an hour to lecture. Well, if 
all you do is lecture for an hour, you are never going to 
change anything. But if you change the method of instruction 
and have more open-ended lab experiences for students and 
different sorts of personnel providing assistance to them, not 
only single faculty members, you start to think about it in a 
completely different way, and that is what makes this possible.
    But just one other thing that I would add is that I think 
many people in higher education firmly believe that there is a 
direct correlation between quality and cost. I think that part 
of what we are trying to do is teach them that there are other 
ways to think about it because without models that can 
demonstrate that it is possible, I think the kind of status quo 
is going to persist. But we firmly believe it can be done.
    Dr. Wegenke. I think there are ways to square the circle 
here, that you can go too far. I think everyone knows that. We 
could make it very cheap and worth nothing. Or we could do it 
the right way. Let me give you a couple of examples. As our 
friend from Westminster indicated, Wisconsin's private colleges 
also emphasize the small class size and graduating in 4 years. 
Our average class size is just 17 students; so it is quite 
small. But a lot of our savings, the things that we are trying 
to do collaboratively are to maintain that level of class size. 
We have already a collaboration where we are using 
technologically mediated means to share courses.
    So most of them at the advanced level, a little different 
from what Dr. Twigg said. But sharing advanced language 
courses, which are often under-enrolled. And so we have been 
able to do that and keep up the quality. We do find it labor 
intensive when you are offering courses on the net, we have a 
number of full degree programs on the net. It actually takes 
more time than less. Savings and accessability is possible. As 
I indicated, our low-range estimated for savings is $17 million 
a year.
    Last year, our 20 members raised and distributed $183 
million in financial aid to our students. That was an increase 
of coincidentally of $17 million. If we can save money, we can 
give more financial aid to our students and maintain 
affordability. With the financial aid, if we can take over that 
administrative costs, our presidents have indicated that what 
we would do, many of them would do, not all, would be to 
increase counseling, not necessarily reduce tuition but provide 
more counseling to help students manage their loan costs and 
other financial aid costs. There are ways to control costs and 
to maintain quality or even improve quality but it has to be 
done discreetly.
    Chairman McKeon. Mr. Andrews?
    Mr. Andrews. Thank you, Mr. Chairman. I would like to thank 
each of the witnesses for very provocative testimony. I would 
like to thank you for your continuing diligence in calling 
attention to this problem of skyrocketing college costs. I must 
say that fundamentally I disagree with the notion of any 
explicit or implicit price controls emanating from the Federal 
Government. I think there are voluminous problems with that. 
And I think that that policy prescription, whether or not it is 
in the chairman's eventual proposal, needs to be avoided 
because it mis-identifies the problem.
    Dr. Baum, I wanted to come back to some of the things that 
you said. I think I read in your testimony that if you look at 
net tuition, which you define as the top-line tuition minus 
grants but not minus loans, that in the last 7 years the real 
increase in net tuition on the average has been 7 percent in 
the aggregate, correct? So it is 1 percent per year in real 
terms, did I read that correctly?
    Dr. Baum. Yes, you did. The National Center for Education 
Statistics did studies that indicated that the price students 
are paying has not increased significantly.
    Mr. Andrews. And that net figure does not take into account 
loans or work?
    Dr. Baum. No, it does not.
    Mr. Andrews. It is purely grant. The second fact that I 
read in your testimony is that for both private and public 
institutions a significantly larger share of the university 
budget is going into scholarship aid that the university 
provides. In the case of the publics, it went from 2.9 percent 
of their budgets in 1999 to 4.5 percent in 1998. In the case of 
the private institutions, it went from 7.5 percent in 1985 to 
11.4 percent in 1995. That means a bigger piece of the pie is 
really cross-subsidy, if I understand it correctly. You are 
taking tuition paid by some students and using it to offset the 
cost of tuition for other students. Is that a fair 
characterization?
    Dr. Baum. That is true except that virtually every college 
student in the country is being subsided, not paying the full 
cost of their education.
    Mr. Andrews. I appreciate that.
    Dr. Baum. That is important.
    Mr. Andrews. I think that a more precise statement of the 
problem is middle class squeeze. I think a more precise 
statement of the problem is that people in the second, third, 
and fourth income quintiles or the second and third income 
quartiles are seeing their net tuition go up rather 
considerably because it is an average that we are looking at 
here. Do you have any data on that? What is the net tuition 
increase for people in the second and third--
    Dr. Baum. This same study divided it by income levels and 
that does not appear to be the case actually. I know that 
people think that because there is maybe less financial aid 
available to middle income students but the fact is that state, 
Federal, and institutional grant aid are going much more now 
toward middle and upper income students than they were a decade 
ago. So actually, that is not so much the case as people might 
think.
    Mr. Andrews. Well, let me ask you this question, though, 
because it appears to me that you can account for anywhere from 
30 to 40 percent of the real increase in tuition to this cross-
subsidy that I talk about. If you do the rough math. If the 
average share of the pie that is devoted to cross-subsidy has 
gone from 1 percent to 3 percent, from 1.5 percent to 3 
percent, that increase that has taken place, about a 3 percent 
increase in the share of the pie. If you divide three into 
seven, it accounts from anywhere to a third to 40 percent of 
the real increase in cost, which leads me to this question. If 
the Pell grant were worth today what it was in 1980, in 1980 
the Pell grant was worth about I think 85 percent of the 
average cost at a public institution. Today, it is down below 
45--well below 45. If the Pell grant were worth 75 or 80 
percent of the average cost of public tuition, how do you think 
institutions would respond to that and what do you think that 
would do to that cross-subsidy increment of the cost increase?
    Dr. Baum. If Pell grants were higher, than institutions 
would not have to provide as much need-based grant aid to 
students. There has been a lot of study of the question about 
whether this Federal aid drives tuition. In the non-profit 
private and public sectors there is absolutely no evidence that 
it does.
    Mr. Andrews. So it is fair to draw the conclusion that if 
institutions did that, and the Pell covered the cross-subsidy 
institutions are now providing, you subtract maybe three points 
out of that 7 percent increase, that 7 percent real increase, 
that the increase over the last 5 years will be very close to 
the rate of inflation. By my calculation it would be about 4 
percent in real terms, which is less than 1 percent per year. 
Is that a fair conclusion?
    Dr. Baum. I have not done the numbers in the way you have 
but the logic is correct.
    Mr. Andrews. I would suggest to you that the most powerful 
tool I believe in holding the fort on net tuition increases for 
students is an increase in the Pell grant. It is astonishing 
that within the next two or 3 hours, they are going to do 
exactly the opposite on the House floor. I see my time has 
expired. I thank the witnesses.
    Chairman McKeon. Mr. Osborne?
    Mr. Osborne. Thank you, Mr. Chairman. I would like to thank 
those of you who have come to testify today. I spent 36 years 
in an institution of higher learning, and I did see some 
tremendous increases in cost. I believe that Mr. Ross stated 
that the average tuition increase nationally this year was 
somewhere around 12 percent, is that correct?
    Mr. Ross. Yes, sir.
    Mr. Osborne. And the cost of inflation I believe is 
somewhere less than 2 percent. So however we juggle the 
numbers, that is 600 percent. It was my experience in a 
university that the cost of going to that school considerably 
out-paced tuition by multiples. And mathematically at some 
point, that breaks down. You cannot increase by two, three, 
four times each year and not eventually hit the wall. And so I 
think certainly universities have been very creative in how 
they have tried to address the problem.
    The other thing that I would like to mention, and again no 
matter how we juggle the numbers, we would have to say that 
students are leaving school with more debt today than they did 
10 years ago or 15 years ago. And that is even adjusting for 
the cost of inflation. We see kids who are now leaving school 
who have no way of paying that off until they are in their 30's 
or maybe their 40's and that is really unfair to do that.
    I was impressed, Dr. Wegenke and Dr. Twigg, in your 
mentioning some cooperative ventures because the traditional 
model in universities and colleges is competitive rather than 
cooperative. And so by cooperating in IT, cooperating in health 
care, and in instruction, I think you are doing some things 
outside the box that make sense. And you are talking about 
private schools in your case that are natural competitors. This 
is not part of a state system. I think those are excellent 
ideas.
    Dr. Kirby, I was impressed by the fact that you mentioned 
that your students graduate in 4 years. The average public 
institution is probably five, five and a half years, some 
places six. And when you start throwing that in there, the cost 
of attendance at a public institution becomes very high. And 
that load increases tremendously.
    So anyway, those are just some comments. I might also 
mention this, that my experience at a public university was 
that ofttimes the highest price professors have very little 
interface with the students. They write books. They do 
research. This is a tremendous cost if you are looking at 
actual instruction to the students. Universities feel they have 
to do this I guess for prestige purposes. But for instructional 
purposes, it does not really serve much of a purpose. So 
anyway, those are my observations.
    Dr. Baum, I would like to ask you a question and that is 
you mentioned that the net cost, the only thing that is 
significant is tuition minus the grants. You did not address 
housing costs, which I think have increased. The grants come 
from somewhere. And so my point is that we can increase Pell 
grants. We can increase grants. We can do all these things, but 
somebody pays for it. And if the total numbers keep going up by 
multiples of the cost of inflation, somebody, it is either the 
taxpayer, it is the students or somebody that pays for it. I 
think this is what the Chairman is trying to get at.
    I would also like to emphasize that I do not think he has 
thrown out a mark yet. We do not know what we are talking about 
here. We are trying to get information. So if you could address 
that issue as to who is going to pay for it, I would appreciate 
that.
    Dr. Baum. One thing is I would like to say is that net 
price is most important but I think that sticker price does 
matter too, particularly because there is sticker shock for 
students. I think students do not apply because they see how 
the tuition is. So I do not mean that it is not important.
    Someone does has to pay. And I think that there are shared 
responsibilities among the various constituents but one of the 
issues that is absolutely reality is that students who cannot 
afford to pay, students get a significant part of the benefit 
of their education and those who cannot afford to pay do have 
to bear a significant portion of the cost. And I think that we 
have to be careful that we do not ask the Federal Government or 
the state governments to pay too much of the tuition for 
students from families who really can pay. The costs have to be 
shared among all of the beneficiaries.
    Mr. Osborne. So you are suggesting some type of means 
testing, which I think--
    Dr. Baum. Which we do.
    Mr. Osborne.--as Mr. Andrews suggested, I think that does 
go on subtly. Sometimes people are not aware of it, but it does 
happen.
    My time is out, Mr. Chairman, and I yield back. Thank you.
    Chairman McKeon. Thank you. Mr. Kind?
    Mr. Kind. Thank you, Mr. Chairman. Mr. Chairman, I want 
thank you and commend you for holding this very important 
hearing today. I apologize for any pre-emptive questions that 
we might have had in regards to the Chair's mark but we are 
trying to influence the process every opportunity we have here. 
I want to thank the witnesses for your testimony. It is 
thought-provoking. There are a variety of solutions being 
offered here today. Mr. Wegenke, I appreciate what you have 
done in our home state in Wisconsin since your election in 1992 
as WAICU president. Your leadership has been exemplary. And, in 
fact, Dr. Medlin of Viterbo University in my home town has been 
an active participant in the Collaboration Project too, and I 
commend your work.
    And of the 54,000--I don't know if you mentioned this in 
your testimony or not, but of the 54,000 students in the 
independent colleges and universities in Wisconsin, they are 
coming from a socio-economic background which is on average 
less than the public university students, too. So when you are 
taking a look at setting up this Collaboration Project, I guess 
you have got a few options to look at. One was the increased 
tuition, which wasn't a good option for the students who you 
are servicing. Another is to raise more private funds or focus 
on the costs, which you have decided to do through this 
Collaboration Project. And I concur. I think this is an 
excellent model, one that other universities and colleges 
nationwide need to take a look at and see whether or not it 
works. In fact, it is my understanding that the National 
Association of Independent Colleges and Universities have taken 
this up on their national agenda, in trying to develop a 
similar type of project on a national scale.
    Mr. Ross, I want to thank you for your testimony as the 
voice and representative of the students out there. You are 
after all the ones who are most adversely impacted by these 
rising costs and rising tuition and state budget issues. Again, 
in my home state in Wisconsin, the average university student 
is looking at a college loan debt of about $16,000 debt. And it 
is particularly difficult with the tough job market we have now 
for the students.
    I cannot help but draw the analogy, since Mr. Kirby is 
here, that I hope that we are not creating a new Iron Curtain 
in this country, making it more difficult for students to gain 
access to post-secondary education. Yet, the way tuition 
increases are going and the way budgets at the Federal and 
state level are heading, we are creating that Iron Curtain, 
which I think is going to be adverse to the national interest 
and to future prosperity and growth opportunities in this 
country. And that is what this Committee has to focus on during 
the course of this reauthorization program.
    But, Mr. Wegenke, let me go back to you again and ask you 
whether or not what you have done in the private college and 
university format is something that can be transferred into the 
public university and college setting? And maybe you can relate 
this back to the university system in Wisconsin. Because it is 
my understanding there is some type of prohibition, which makes 
it either impossible or difficult for them to establish the 
same type of collaboration model that you have done at the 
independent level. Could you respond to that?
    Dr. Wegenke. I think it is generally true, not just the 
University of Wisconsin but nationwide. Very often public 
institutions are required to do their purchasing, for example, 
through the state government agencies. And often they are 
buying a different range of goods and services. And they don't 
exactly fit educational needs and the pricing often isn't 
always the best for a college or university. Dr. Kathryn Lyle, 
the president of the UW system, has had discussions with me and 
said she wished she could be part of WAICU and I told her just 
take the university private, and we would be glad to have her 
as a member. But, yes, there are inhibitions.
    And also, as I tried to say in my oral remarks too, this 
takes an enormous amount of work. You just cannot go to a 
discount store and get a cooperative health plan. And there is 
a lack of resources on campuses to do the organizational work, 
to hire the legal--we spent hundreds of thousands of dollars on 
legal counsel and actuaries for our health plan. And colleges, 
despite what you may think, do not have that kind of 
discretionary funds to organize that, especially if the benefit 
goes to a lot of other colleges besides their own. So there is 
a lack of resources that inhibits people. And there are special 
inhibitions for public institutions.
    Mr. Kind. Thanks again for your testimony today and the 
work you are doing. Let me shift quickly with what time I have 
remaining to Dr. Twigg, because I have been intrigued with your 
testimony of finding some cost-efficiency on higher ed is 
delivered to the students. In the health care sector, at least 
back home in western Wisconsin, we have got a collaboration 
between some private industries and health care providers to 
train the health care providers with Six Sigma techniques, 
trying to find cost efficiencies on how they are delivering 
health care. It sounds like it is something somewhat comparable 
to what you have been looking at and recommending for 
universities. Are you familiar with Six Sigma and some of the 
work being done?
    Dr. Twigg. No, I am not.
    Mr. Kind. It is a very popular program, a lot of Fortune 
500 companies have been using it to try to reduce their per 
unit costs and that. And now they are trying to transfer that 
into the health care arena, because obviously they are being 
impacted. And I am just wondering if that might be something 
applicable to the post-secondary education market as well, as 
far as training, to get them to break down their department 
costs in delivering the education product that they are, as a 
way to contain costs?
    Dr. Twigg. I can see the analogy. One of the roles that our 
Center played in this process was helping institutions break 
down their instructional cost, just as you are talking about. 
And so we developed a spreadsheet-based, we call it the course 
planning tool, which asks people to sit and analyze how do you 
spend your time, both in developing a course and in delivering 
it. Where is there unnecessary duplication? Where is there 
something that maybe a professor is doing that software could 
in fact do better?
    To give you a concrete example, at the University of Iowa, 
in their introductory chemistry course, they would pose 
something like 16,000 problems to students in the course of a 
semester. But because human beings could not possibly grade all 
those problems, all they could do was spot check and not give 
particular feedback. By using instructional software, they are 
able to grade all 16,000 problems, pinpoint student weaknesses, 
point them to a place where they can work to improve their 
learning.
    And so it is an example of the technology being used in a 
way that is appropriate that really gives students better, 
higher quality feedback and then the faculty are free to do 
other kinds of things. So doing that kind of analysis, just as 
in Wisconsin, they are doing it on the administrative side, you 
can go through that process on the instructional side.
    Mr. Kind. Right, thank you. Thank you all again. Thank you, 
Mr. Chairman.
    Chairman McKeon. Thank you. Mr. Isakson?
    Mr. Isakson. Thank you, Mr. Chairman. I consider myself an 
expert in the rising costs of higher education. From 1989 to 
1999, I sent three kids to college. They were bright enough to 
get in great schools and my wife and I were successful enough 
to not qualify for financial aid, so I paid for all of it. I 
was in the state senate at the same time when Georgia passed 
and executed the Georgia lottery, which pays for all tuition, 
books, and fees to students in Georgia attending the 34 units 
of the university system of Georgia. The largest increase that 
we experienced in tuition from the state universities was the 
first year of the lottery inception. I have a fundamental 
belief, more in public universities than in private, that cost 
tends to chase available dollars in the climate of the 
university system. And I do not say that in a harsh way but I 
say from a great deal of experience. And I associate myself 
with the questions of Mr. Petri and the remarks of Mr. Osborne 
to that end. Because it is terribly expensive and it is 
terribly critical that higher education be available to all 
children and to all young people. And, in particular, probably 
an even higher priority as availability of resources goes down 
rather than up.
    I want to commend Dr. Twigg. I did not get the chance to 
hear your testimony. I have quickly gone through it. And I just 
make a statement and I would like for you to amplify it if I am 
wrong. We did the Web-Based Education Commission here a few 
years ago. Your examples are replete with examples where 
technology has been used to change the model, lessen the labor 
intensity, improve the efficiency, and improve the delivery 
system. And it appears to me, as the bubble of students goes 
through the systems over the next number of years, as the Baby 
Boomers' kids become parents themselves and the trailing 
population is less, you have got an even greater problem in 
affordability of higher education. But it seems to me that 
although technology's cost appears high now because it is a 
spread over a relatively small basis of revenue, as it has 
expanded, its efficiency should be great in the operational 
sense of the university and the delivery sense of the 
professor, and in the management sense of student information 
and student finance. Would you elaborate--there is some great 
information in here, and I commend you for what you have done.
    Dr. Twigg. Thank you. Let me start by commenting about what 
my colleague from Wisconsin mentioned, that online education is 
more expensive and more labor intensive. That is certainly true 
the way many colleges and universities practice it because 
there is a belief among many institutions that you need to have 
a small online class in order to be able to interact with every 
student. So that is one way of using technology. Our way is 
fundamentally different than that because we are trying to see 
where you need to use technology versus where you can use other 
kinds of techniques in combination.
    Let me give you an example. One of the reasons for the 6-
year graduation rate is that students face bottle necks because 
they cannot take the courses that they need in order to finish 
their degrees. And a typical area of bottle neck is Spanish, 
because it is hard to find enough Spanish instructions at the 
collegiate level.
    Well, three universities in our project, the University of 
Illinois, the University of Tennessee, and Portland State 
University redesigned the way they teach introductory Spanish 
by moving all those things that could be done online, such as 
grammar, exercises, vocabulary, things that students inevitably 
have to practice, they do all that online, reserving their in-
class time for things like speaking in conversation. And the 
result of those changes has been that they have been able to 
double and even triple the number of students that one 
instructor can handle. Because, again, the technology is 
handling what can be handled by the technology, reserving the 
professor's time for those things that require face to face 
interaction.
    It really is a kind of re-thinking of these different 
functions rather than assuming that every class has to be one 
faculty member with 25 students or whatever the ratio happens 
to be.
    Mr. Isakson. I appreciate that example. I read the 
Tennessee example, they reduced their cost by a third. My time 
is running out, but I want to re-state what I said before. I 
believe that, and I appreciate your statement about cost 
because it is a correct statement in the timeframe we are in 
now and in the usage that technology is being utilized in our 
universities, but as they really take advantage of the 
opportunities that technology offers, that cost plummets 
because of the base upon which you spread that. I think as a 
false belief in the American public today, particularly in 
higher education, that technology is too expensive and that we 
can do it better the same old way. I do not think that is 
correct. I am all for lecture. I am all for relationships. I am 
all for interaction and intellectual stimulation. But I am 
telling you so much of the cost component in universities has 
nothing to do with that cost. And there are a lot of things 
that they can do and a lot of things that the accreditation 
agencies can do, I might add, to provide incentives for that to 
take place.
    I am sorry I went over my time.
    Chairman McKeon. Thank you. Ms. McCollum?
    Ms. McCollum. Thank you, Mr. Chair. This is a very 
important discussion because it is not only the future for our 
children, it is the future for our Nation as to whether or not 
our technical, vocational, and higher education institutions 
are reaching and functioning in a way that allows for increased 
productivity. Mr. Chair, I am just going to make a couple of 
comments about some of the things that we have done, and I say 
the collective ``we'' because some of these laws were passed 
before I was elected. But they were impacts that I felt when I 
served in the Minnesota statehouse.
    With some of the funding cuts that took place in the 90's, 
the University of Minnesota saw their medical school have 
dollars cut. Well, it is expensive to train doctors and it is 
expensive to have research. But it is even a challenge to keep 
expenses down in a teaching hospital. Those funds had to be 
replaced somewhere. And when the state decided that it could 
not afford to pick up all the Federal cuts, university had to 
pick them up.
    We have had hearings in higher education here, dealing with 
our folks who come from all over the world because the world 
sees us as having some of the best higher education 
institutions. We felt, and rightly so, that we needed to make 
sure that we had accurate accounting for international foreign 
students. But did the Congress supply the college the money 
that was needed in order to do the tracking? No. The money had 
to come from somewhere and it came from tuition.
    In Minnesota, we have done mergers. We have what is called 
MINSCU, our state university 2-year colleges and even our 
technical colleges are merged together. We have done some of 
these cost-savings and yet we still see tuition increase.
    When I was on the Higher Education Committee, I firsthand 
toured facilities with leaky roofs, bad buildings, elevators 
that didn't work. They are still there today. Buildings that 
could not be wired to provide some of the technology that you 
are discussing.
    The private systems in Minnesota have done some different 
but some collaborations. I represent St. Paul where we have 
many private colleges. I am a graduate of St. Catherine's. I 
took my social science blocks at the University of Hamlin. 
There is actually a shuttle bus that goes around trying to save 
money. So many colleges and universities have been struggling 
with this.
    But I would like to--because we are going to come up with a 
program that is going to be one-size-fits-all. That is what 
happens with programs up here. And each state has looked at 
doing different collaborative models. What do we do about 
states that have postponed building maintenance? What do we do 
about states 15 years ago when they went through budget 
shortfalls, did not cut higher education and have never gotten 
those institutions back to the current inflation level today? 
And when a state like Minnesota had a surplus for 10 years, 
continued, continued to cut higher education.
    Mr. Chair, and I know we do not have a bill in front of us, 
I do not want to be punishing by a Federal approach a one-size-
fits-all. Students in my state, the children that I know that 
are adults now in college that are friends of my children, I do 
not want to punish them for the actions of a state legislative 
branch and a Governor that I did not agree with. And that is 
what I am afraid, Mr. Chair, if we do not craft this carefully, 
that is what we are going to do. Maybe people deserve the 
government that they elected. But many of these young adults, 
18, 19, and 20, they did not vote. They did not have a vote. 
They did not have a say. And now they are trying to deal with 
tuition increases and that.
    Mr. Chair, some of the responsibility does lay at our 
doorstep here with some of the choices that we have made not to 
be collectively responsible to support higher education.
    Chairman McKeon. The gentlelady yields back. Mr. Burns?
    Mr. Burns. Thank you, Mr. Chairman. I appreciate the panel 
and their input today. I would like to associate myself with 
Mr. Isakson's comments. I spent 20 years in the university 
system of Georgia. I was on the faculty at the university 
system school in Statesboro. I taught at the College of 
Business as recently as a little over a year ago. I am very 
close to the challenges that you face. I also have educated two 
sons in the last 10 years or so. And successfully through the 
Hope program in Georgia, which is an excellent program and we 
are fortunate, but, yet, because of the requirements of that 
program, we do lose probably 50 percent or more of those 
students as they go from their freshmen to their sophomore and 
senior years because of the academic requirements.
    I want to go back to something that Mr. Isakson was 
focusing on. I think that in our business of education, 
especially higher education, we are dealing with unique 
students and ones who are generally motivated, who are very 
focused, who have a career objective, who are looking to gain a 
skill and expertise. I do believe that technology is the 
option. I have taught distance learning. I have taught Web-
based courses. I have been involved in those things, and I am 
convinced that you can have quality and affordability. I 
acknowledge the fact that if we are spreading the cost over a 
small pool of people, that is not going to work very 
effectively. But I will tell you that in my recent experiences 
in the classroom with classes of 250 students in introductory 
courses and information management, I could supplement lectures 
exceedingly well with technology--not replace it, but 
supplement it.
    Again, I appreciate the input from the panel, especially on 
technology, Dr. Twigg, which you have done. I would like to 
recognize that we have a shared responsibility. I would also 
say that our budgets in Georgia were cut dramatically. Tuition 
increases were significant, ranging from just $75 or so in a 2-
year college to over $200 in a university level school. We are 
seeing tremendous increases in tuition costs in our state 
alone. That is going to put a burden on the student, the 
family, as well as our Hope Program. We have got to control 
costs. We have got to manage costs.
    But it is a shared responsibility between the student, the 
institution, and then certainly the government, both state and 
Federal. Most concerned about low-income students because they 
are the ones, like you suggested, Dr. Baum, tend to have 
sticker shock and they will not necessary consider a school 
that might have a tuition cost. What can we do to ensure that 
all of our students have access to the top-quality schools in 
our states and in our Nation and not be as concerned about that 
sticker shock?
    And, again, I am not a debt fan. I do not think that we 
need to encourage our students to burden themselves with an 
excessive amount of debt or debt at all. I would like to see 
our students go through their undergraduate, at least their 
undergraduate curriculum with no debt. What can we do to ensure 
those low-income students have access to quality education? 
Yes, Mr. Ross?
    Mr. Ross. Well, I think first and foremost programs like 
the Hope Scholarship in Georgia and Bright Futures in Florida 
are a good start because regardless of income or regardless of 
socio-economic levels, it is based on pure numbers as to how 
they do in school. So that is a good start, I think. Merit-
based financial aid I think is always a good start.
    The second, they had mentioned potential increases to the 
Pell grant. I think that that is also something that we can 
look at.
    Mr. Burns. Do you see that as a solution?
    Mr. Ross. I do not think that alone is a solution.
    Mr. Burns. I agree.
    Mr. Ross. I think that it is part of a solution because I 
do not think that there is one Band-Aid that you can come with 
that is going to fix the problem. I think it is a matter of 
institutions getting with their state governments, as well as 
with the Federal Government and getting creative and finding 
ways to create aid for these students because I think there are 
some students where you are talking about in the lower economic 
levels that regardless of what the tuition is, regardless of 
where it is at, they just forever reason they cannot afford it. 
I think that we need to find ways as far as more merit-based 
financial aid based on purely how they do in school. Because if 
you give the children the incentive when they are in high 
school to perform and say that you do have opportunities if you 
do the work and you raise that bar, one thing that we have 
found in Florida especially is as you raise the bar, students 
meet that challenge.
    And I think that that is something. We are very big 
supporters of merit-based financial aid because it gives 
students, regardless of what their parents do or who their 
parents are, it gives them a chance on their own merit and who 
they are to get to that next level of education.
    Dr. Baum. Could I just add that the fact is that these 
merit-based programs in states have been studied extensively. 
They go disproportionately to middle and upper income and non-
minority students. I think we have to be very careful about how 
these programs are targeted. The fact is that many low-income 
students, because of the realities of our society, do not have 
access to those programs. And so they may in fact be hurting 
low-income access.
    Mr. Burns. I know my time has expired but may I have just a 
moment. I agree with you. I think that is a challenge that we 
face. We have to find a way to correct that problem. I will 
tell you also that one of the best things that I have seen, as 
I work in my district, is where I have secondary schools that 
are integrating technology in at those middle grade levels and 
those high school levels, especially in low-income communities 
where they provide a laptop computer to a seventh grader and 
say, ``Take it home. Use it. Get familiar with it. Make your 
friend. Now you can play video games if you like but you can 
also do your homework and research your assignments via the 
Internet.'' I think as we see more of that technology going 
down at that level, we are going to see a much better prepared 
student at the university level who would then be able to 
perform at a much higher level of proficiency.
    Thank you. Thank you, Mr. Chairman.
    Chairman McKeon. Mr. Payne?
    Mr. Payne. Thank you very much. Unfortunately, I had a 
conflict and was unable to hear the testimony, although I think 
this was a very extremely important topic. I did want to though 
talk about the concept, I do think that there should be 
certainly some way to try to put a limit on the increase in the 
cost of education. Education is very key to the growth and 
development of our nation. I formerly taught school in a local 
elementary and high school.
    And so I realize the importance of education. And paid for 
tuition for my children to go through college. And the goal was 
simply to have them debt-free, and that happened. So I feel 
good that I have accomplished that much.
    But I do have a question about the recipient of the penalty 
of no financial aid to a university will be those students who 
need financial aid. So I can't see how this proposal is going 
help the young people that need the aid the most. As a matter 
of fact, I have even heard the Georgia Lottery program touted 
because merit-based and Mr. Ross talks about the merit 
business. And it is great because many very wealthy youngsters, 
parents who are very wealthy are now saying send my kid to 
maybe Princeton or the University of Maryland or somewhere else 
but I am going to allow them to stay right here, we have got 
pretty good schools in Georgia. But the top thing is that I 
don't have to pay anything.
    And I am not denigrating or bringing down merit-based. I 
think merit is the way we do it in the country. However, 
especially the point Mr. Ross was bringing up that it is a good 
incentive and the kids--said students can meet the challenge if 
they are motivated and all that. When I taught in schools in 
Newark, the schools I taught in had 40, 41, 42 children in the 
classroom. The science high school even up to about eight or 9 
years ago had no actual laboratory, no Bunsen burner. You 
didn't have the test tube that you fiddled around with.
    So, Mr. Ross, tell me how will some youngsters who have 
substitute teachers in the important subjects because people 
would rather go to the easier to teach schools, I mean it is 
not your problem. We debated this a couple of weeks ago when we 
had Title 1 and those kind of programs come up.
    Mr. Ross. Right.
    Mr. Payne. And so I know that you are on a higher ed and 
you wish all these kids were given great opportunities. So when 
they come to your institutions, it will be easy to give them 
this higher education. But because we have such differences and 
the disparate impact of what they get in those elementary and 
secondary schools certainly impact on the merit business. Do 
you have any idea how we can assist or some plan that would 
somehow have a more level playing field? Because I fear that if 
it is going to be strictly merit, you simply have--all kids are 
bright. They are all born intelligent. It is the exposure that 
they have to develop their intelligence quotient.
    Mr. Ross. Absolutely. Well, first and foremost, I think 
that you had a good start with discussing loan forgiveness for 
teachers. One of the things that I found when I was in college, 
and now as the director of the Florida Student Association 
dealing with a lot of students, a lot of students don't want to 
go into education because they are in school based on college 
loans. And let's face facts. When they go and they teach, 
starting out they cannot make enough money to pay back their 
college loans. I think when you talked about loan forgiveness 
for people who go teach, especially giving them incentive to go 
teach in maybe areas where there is a lower socio-economic 
demographic, in offering loan forgiveness, I think that will 
give students when they graduate an incentive to teach. I think 
you will get better and brighter teachers in the classroom. I 
think that that is a start.
    And I did not mean to imply that merit-based financial aid 
was the end-all, be-all solution because I think that failing 
to address need-based financial aid would just be negligent. I 
think that that is something that needs to be discussed, and I 
think that we need to also find ways to get more need-based 
financial aid so we are able to compensate for those students 
who maybe just missed the bar or maybe for whatever reason did 
not meet the actual grades to get the top scholarships. I think 
that if we are creative in our states and in our Federal 
Government, we can find the money to make education a priority. 
I think it is just a matter of doing that, just being creative.
    I think it starts--you said that I am on the higher 
education level and that is true. But I think education starts 
from K through 12th. And I think that if we miss the boat in 
kindergarten, starting in kindergarten, then we are never going 
to get the best students to the higher education level.
    Mr. Payne. Thank you very much. My time has expired. But 
your point is well taken about loan forgiveness. I made a 
proposal that Title 1 teachers, people going into Title 1 
schools, stay in the system for at least 5 years, that they be 
given loan forgiveness. Of course, it was defeated. We are 
never going to get people--you have got to give some incentive. 
Why teach in a tough school, where it is tough to teach, kids 
don't come as prepared, the first opening comes, I am getting 
out there. And so you are going to constantly have the answer 
was we just simply didn't budget enough money.
    But if we are going to leave no child behind, we are going 
to have to get serious about education. I don't think making it 
punitive to kids who need financial aid at an institution, the 
victim becomes victimized again. And I think that we really 
need to take a very serious look at the differences. And 
Jonathan Kozol, the great author, talks about these disparities 
in education. So I hope that we can come up with something, but 
I am not sure the punitive approach is the way to go.
    And, actually, on the floor yesterday and today we are 
going to reduce Pell grants this year. Trillions of dollars we 
spend, we spend close to $1.2 billion a day for defense, but we 
cannot--and we need to have a strong defense, don't get me 
wrong. But we can't keep--we had to reduce Pell grants this 
year because we have got to budget, and the budget is tight. It 
makes no sense to me.
    I yield back the balance of my time.
    Chairman McKeon. Great sense of humor. We have a new member 
of our full Committee this year, Mr. Bishop, from New York, who 
is not on this Subcommittee, but he has great interest in what 
we are doing in higher education because of his background. And 
he has very patiently sat through this hearing. And by 
tradition--I do not know if it is tradition or rule--but if we 
have members that are on the full Committee and not on the 
Subcommittee, they have to wait until the end for their 
testimony. I want to thank Mr. Bishop for his patience and for 
the things that he is lending to this discussion, and turn the 
time to him for his questions.
    Mr. Bishop. Thank you, Mr. Chairman. And thank you for 
allowing me to participate in this hearing. I should say by way 
of background that I spent 29 years as a college administrator, 
so I thank you all for the work that you are doing. I can say 
without exaggeration that there was not a single day during 
those 29 years that I didn't grapple with the issue of student 
costs and didn't work with an individual student or family in 
trying to get them to meet the costs. There was a period of 
time, Dr. Kirby, in which I had your job. Let me just simply 
say that I would much rather be sitting here than where you are 
sitting.
    I have a question for Dr. Baum. In your written testimony, 
you talked about the three factors that are driving increased 
cost. And you cited them as increased cost of operation, which 
presumably are largely personnel costs and fringe benefits 
costs, and I would guess instructional, technology costs, and 
scientific instrumentation, and so on. You talked about the 
decline in revenues from philanthropy and from endowment. And 
you talked about the increase in institutional student aid 
budgets. Can you either factually or impressionistically assign 
a relative weight to those three? In other words, which, if we 
were truly, if we were going to try to attack the issue of 
cost, which of those three would we attack first?
    Dr. Baum. Well, it is a little complicated by the fact that 
the student scholarship and fellowship budgets are growing most 
rapidly. But, of course, part of why they are growing is 
because the other costs are growing, driving tuition up. 
Clearly, personnel costs are huge. Health care are a very, very 
significant factor. And if you can solve that problem, that 
will be a major accomplishment. I think given the reality that 
state budgets--state institutions are the issue that we are 
most concerned with, looking at state budget formulas and 
trying to give states incentives to--many of these formulas do 
not provide any incentive for the institutions to control costs 
and that is obviously a problem. Any entity reacts to 
incentives. And so state budgets are an important factor there, 
in looking at those formulas. But, in fact, this issue of 
inadequate student aid is a very, very significant one.
    Mr. Bishop. So would it be reasonable to conclude then, at 
least from the work that you have done, that if we were 
successful in increasing external aid available to students, 
either in the form of Federal dollars or state dollars, that 
rather than cost chasing available dollars, as some believe, 
that having increased student aid dollars, external to the 
institutional aid budget, would in fact have an inhibiting 
influence on tuition increases?
    Dr. Baum. I am quite sure that it would. It would not solve 
all the problems--
    Mr. Bishop. I am not suggesting that, either.
    Dr. Baum. But, yes, absolutely.
    Mr. Bishop. It would inhibit the rate at which student 
tuition rises?
    Dr. Baum. Yes.
    Mr. Bishop. OK. Dr. Kirby, I am interested in how 
replicable your experience at Westminster is. And I have some 
personal experience here. We modeled several times exactly what 
you did. We couldn't find a way to make it work. And so I am 
interested, if you would be willing to share with us some 
specifics, the extent to which you had excess capacity, size of 
your endowment, so therefore the extent to which you had a 
cushion, if your experiment failed, your ability to cut student 
aid budget, and what proportion your student aid budget is of 
your revenue? So could you expand on some of those things?
    Dr. Kirby. We were fortunate that we had just received a 
huge gift that allowed us to double our science center, which 
really allows us to grow from about 800 to 1,200 students in 
terms of having our academic space. And we have plenty of space 
on campus for housing for additional students. So that really 
was a criteria for us in making our decision.
    In some ways, I think what we are doing is applicable to 
the public universities. And in some ways, as I sit here 
listening to all the testimony, and you think about what has 
happened over the last decade and over the last 10 years, it is 
like anywhere from our individual families to our institutions, 
our organizations, we have in all ways perhaps lived beyond our 
means. And these days it is like there is not enough Federal 
money available. There is not enough state money available. It 
is like every family, every organization, every college and 
university I think has a mandate almost to examine what they 
are doing and figure out a way to do it a little bit 
differently along the lines of what some of my colleagues here 
have suggested.
    I think in some ways, and I am a product of a state 
university, graduate, et cetera, I still follow big time 
football, et cetera, but I think that if the state colleges and 
universities place students as a higher priority for them than 
they do, along the lines of what Dr. Osborne was saying, is 
that I think that they could find ways to make colleges a 
little bit more affordable, a little bit more reasonable for 
students. But I think in some ways that maybe the Federal 
Government you are going to be the daddy or the leverage that 
is going to force all of us to make some changes.
    The other analogy, I think, was one he was talking about, 
if you had this kind of proposal, then the states would 
respond. I think the analogy is when the Federal Government 
threatened to withhold funds from the Transportation Department 
for highways and roads, requiring states to up their drinking 
age to 21 or whatever, everybody abided by it, everybody raised 
the drinking age whether they agreed with it or not because 
they could not afford to lose the Federal funds. In some ways, 
I think the same analogy applies for colleges and universities 
in terms of the kinds of funds that we get through the Pell 
grant, the loan programs, et cetera. We are all dependent on 
them.
    What I think is the important thing about this Committee, 
frankly, is figuring out ways to take what a small college has 
done and to do with lots of other organizations. And I think 
the priority has to be how do we make our student's lives 
better and make their education a higher priority than I think 
does exist in some schools.
    Mr. Bishop. I know my time has expired. I would just say 
that I agree that we need to put the focus on students. I guess 
though what I am struggling with is that I would guess that the 
vast majority of students--pardon me, the vast majority of 
institutions, particularly private institutions, don't have the 
flexibility or the capacity or the ability to take the risk 
that your institution did and did so successfully. And I think 
we have to find ways to help those institutions and the 
students who attend them.
    Thank you, Mr. Chairman.
    Chairman McKeon. Thank you. Mr. Ryan?
    Mr. Ryan. I do not have any questions at this point, Mr. 
Chairman. Thank you.
    Chairman McKeon. And that gives every member a chance to 
ask their questions. I wanted to ask Dr. Kirby about that, so I 
am glad that you finally got to tell us how you had done in 
lowering your tuition and increasing the number of students and 
keep the quality up and give more people an opportunity. That I 
think is one of the things that we are trying to do with this.
    Do you have a closing statement? And then I will make a 
closing statement.
    Mr. Kildee. Sure, I will make a closing question statement. 
As you probably can tell, I have been working in this business 
for 27 years, trying to help more young people go to college. 
And both Buck and I have a great record on that. We have a 
little disagreement maybe on how we are going to approach this, 
but in 1998, we wrote one of the best higher education bills in 
the history of the country. We brought interest rates down to 
the lowest they have been in 17 years--
    Chairman McKeon. Thirty-eight years.
    Mr. Kildee. Thirty-eight years, OK.
    Chairman McKeon. Ever.
    Mr. Kildee. But it was a great bill. But I do have--my dad 
had to in my family pick out one of his five children to send 
to college. And for some reason, I happened to be the one. I 
tell the others that they should have been. But he could pick 
one. That was before we had Pell grants. And my dad was buying 
his house and a land contract. But we shouldn't make those--
anyone who is really qualified for college should be able to go 
to college.
    But I have serious reservations about the Federal 
Government sticking its oar in keeping down college costs. 
Because I am familiar with the Federal Government. I have been 
here for 27 years. And I have enough problems with the state 
legislature doing what they are doing back home. But I do have 
a serious problem. I am wondering if there is any carrot that 
could be used to encourage colleges to be used to keep the cost 
down rather than the stick, particularly when the stick is 
directed really at the students because students are going to 
be denied the right to go to certain colleges. That is under 
one of your proposals. Everything is in flux, I know. Don't let 
me deter you from that approach anyway. But if you have any 
ideas of maybe some carrots rather than sticks, that would be 
helpful. But I won't require an answer at this time. I let you 
conclude the meeting, Mr. Chairman.
    Chairman McKeon. I think this has been a good hearing. I 
think we all understand there is a very serious problem. And I 
think we are in total agreement with the fact that many 
students are not now able to attend college because of the 
cost. And when we did the last reauthorization, we did some 
really good things. And we did fix the interest rate so that it 
is now the lowest that it has ever been. But still when a 
college student graduates and has a mortgage on their back, 
without a house to go along with it, that is not right. And I 
see that happening.
    This is going to give my age away but our first home was 
$17,850. And students are graduating now with a loan of about 
an $18,000 average. Now what we did on reducing interest rates, 
10 years ago they were paying over $4,000 of interest because 
they were paying 9 percent loans. Now they are paying less than 
4 percent with the latest adjustment. With an $18,000 loan, 
they are still paying about $4,000 interest. But that is 
$22,000 that they have to repay. Now, granted, they do a lot 
better in the economic field because of having that education 
and there are other benefits that come from education other 
than just financial. I think it is important. And we need to 
have a full open society. Everybody needs to have the same 
opportunity to go to school.
    There have been some things that were mentioned, that we 
are cutting Pell grants. Let me just set the record straight. 
We have a bill on the floor this afternoon. The Pell grant 
maximum will be kept at $4,050, which was the same as it was 
last year. By the way, when I became Chairman of this 
Subcommittee in January 1995, the Pell grant was a little over 
$2,000. So we have doubled it in the last 8 years. I think that 
is important to know. We also are increasing Pell grant money 
this year by $885 million. While the top level will be held at 
$4,050, $850 million is being put into Pell grants so more 
people will have the opportunity to use a Pell grant to go to 
college, which is one of our goals is increasing accessability.
    There has been talk about my proposal. In a few weeks, we 
will find out what my proposal is. And in the meantime, we are 
learning more about what should be in that proposal. I hope 
that we can continue to do that. I hope that we can work on 
this in a bipartisan way, that this does not become a partisan 
issue because this is too important to become a partisan issue. 
It is something that, as I said in my opening statement, all of 
us have to come to the table, the Federal Government, state 
government, parents, students, and, yes, the lending 
institutions. All of us are going to have to come to grips with 
this.
    And what we finally do in the final passage of Higher 
Education Reauthorization will be a result of your input, the 
things that you are doing. I was really impressed with some of 
the positive things you are doing to lower costs. I hope that 
the education community around the country is listening because 
up until this point. I have heard a lot of negatives of we 
cannot make any changes. All we want to do is keep things the 
way they are and send us more money.
    To say, my good friend, that the Federal Government should 
not put an oar in, we have a big oar in. We pay 30 to 35 
percent of the cost of education. We have a big stake in it, 
and it is important that we do keep involved and make it 
possible for all young people to have a college education.
    With that, I would like to thank the witnesses, and ask you 
to stay closely working with us as we go through this process 
of higher ed reauthorization because you have a lot to offer.
    With that, we will now adjourn this Committee. Thank you.
    [Whereupon, at 12 p.m., the Subcommittee was adjourned.]

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