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




 
H.R. 3039, THE EXPANDING OPPORTUNITIES IN HIGHER EDUCATION ACT OF 2003

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

                                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

                               __________

                           September 11, 2003

                               __________

                           Serial No. 108-31

                               __________

  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 September 11, 2003...............................     1

Statement of Members:
    Kildee, Hon. Dale E., a Representative in Congress from the 
      State of Michigan..........................................     6
    McKeon, Hon. Howard P. ``Buck'', a Representative in Congress 
      from the State of California...............................     2
        Prepared statement of....................................     5

Statement of Witnesses:
    Chin, George, University Director, Student Financial 
      Assistance, City University of New York....................    24
        Prepared statement of....................................    26
    Flores, Antonio, President and Chief Executive Officer, 
      Hispanic Association of Colleges and Universities..........    14
        Prepared statement of....................................    16
    Heller, Donald E., Associate Professor and Senior Research 
      Associate, Center for the Study of Higher Education, 
      Pennsylvania State University..............................     9
        Prepared statement of....................................    11
    Moore, David G., Chairman and Chief Executive Officer, 
      Corinthian Colleges, Inc...................................    27
        Prepared statement of....................................    29



     H.R. 3039, THE EXPANDING OPPORTUNITIES IN HIGHER EDUCATION ACT

                              ----------                              


                      Thursday, September 11, 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 9:33 a.m., in 
room 2175, Rayburn House Office Building, Hon. Howard P. (Buck) 
McKeon, presiding.
    Present: Representatives McKeon, Keller, Osborne, Cole, 
Carter, Gingrey, Burns, Kildee, Tierney, Wu, McCollum, Owens, 
and Hinojosa.
    Staff present: Kevin Frank, Professional Staff Member; 
Alexa Marrero, Press Secretary; Catharine Meyer, Legislative 
Assistant; Deborah L. Samantar, Committee Clerk/Intern 
Coordinator; Kathleen Smith, Professional Staff Member; Liz 
Wheel, Legislative Assistant; Mark Zuckerman, Minority General 
Counsel; Ellynne Bannon, Minority Legislative Associate/
Education; Maria Cuprill, Minority Legislative Associate/Labor; 
Tylease Fitzgerald, Minority Staff Assistant; Ricardo Martinez, 
Minority Legislative Associate/Education; Alex Nock, Minority 
Legislative Associate/Education; and Joe Novotny, Minority 
Legislative Assistant/Education.
    Chairman McKeon. Good morning. Happy to see you all here 
this morning. I don't know if you have had the opportunity to 
turn on the TV or the radio this morning, but there are lots of 
reminders of 2 years ago, just about a half-hour earlier. I 
think it would be fitting if we paused for a moment of silence 
in remembrance of those who lost their lives then and since, in 
defense of our freedom.
    [Pause.]
    Chairman McKeon. Thank you. I'd like to ask ranking member 
Kildee if he would lead us in the Pledge of Allegiance. All 
stand, please.
    Mr. Kildee. I pledge allegiance to the flag of the United 
States of America, and to the republic for which it stands, one 
nation, under God, indivisible, with liberty and justice for 
all.
    Chairman McKeon. Thank you very much. A quorum being 
present, the Subcommittee on 21st Century Competitiveness of 
the Committee on Education and the Workforce will come to 
order.
    We are holding this hearing today to hear testimony on H.R. 
3039, the Expanding Opportunities in Higher Education Act of 
2003.
    Under Committee Rule 12(b), opening statements are limited 
to the Chairman and the ranking minority member of the 
Committee. Therefore, if other members have statements, they 
will be included in the hearing record.
    With that, I ask unanimous consent for the hearing record 
to remain open 14 days to allow member's statements and other 
extraneous material referenced during the hearing to be 
submitted in the official hearing record.
    Without objection, so ordered.

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

    Good morning, again. Thank you for joining us this morning 
to hear testimony regarding H.R. 3039, the Expanding 
Opportunities in Higher Education Act of 2003.
    Last night we finished voting at about 10 or 10:30, and 
because of that, we have no votes scheduled for today, and 
unfortunately, because of that, we have many members I'm sure 
that have gone home. Otherwise, I know we would have a full 
dais here, because all the members of the Committee are very 
interested in what we are doing in higher education. I'm sure 
they would be here if it weren't for that.
    This legislation, introduced by my friend and colleague, 
Representative Tom Cole, breaks down existing barriers and 
opens the doors of postsecondary education a bit wider to all 
students, especially low income and minority students.
    I appreciate our witnesses taking the time to discuss this 
legislation with us today and look forward to a productive and 
open discussion.
    With the passage of the Higher Education Act in 1965, the 
Federal Government made great gains in affording our nation's 
students the opportunity to pursue postsecondary education. In 
our knowledge based economy, it is more important than ever to 
remove road blocks to innovative ideas and methods of providing 
education to students seeking to pursue their dream of access 
to and completion of a postsecondary education.
    We must all open our minds to the advancement of technology 
in pursuit of those goals, and while reviewing the past in 
making future decisions, recognize that times have indeed 
changed, and we must change with them.
    We must promote advancement in distance education, clarify 
the treatment and classification of educational institutions, 
and simplify the methods used to determine a student's 
financial need for student aid purposes.
    H.R. 3039 strives to accomplish this by improving access, 
expanding opportunities and removing unnecessary and outdated 
barriers within the Higher Education Act, all while maintaining 
the integrity and security of the student aid programs.
    This legislation strengthens and extends student support 
programs and enhances the ability of minority serving 
institutions to meet the needs of their students.
    First, this bill amends current law by combining the now 
separate definitions of ``institutions of higher education'' 
under one section within the law. The definitions do not 
change, other than in one area I will talk about in a minute. 
The bill simply combines the existing definitions, and it does 
so without changing any of the safeguards currently within the 
law. This combined definition will allow more institutions the 
opportunity to apply for competitive grants within the HEA and 
thereby better serve more students.
    Congress has made tremendous strides over the years to 
improve access to higher education, while at the same time 
ensuring that the poorly performing institutions of the past no 
longer are able to participate.
    Institutions themselves have done a good job over the years 
in monitoring the conduct and administrative capability of 
other institutions. No one wants to return to the past of high 
student loan default rates or bad institutions providing 
substandard education. This bill does not allow those events to 
reoccur.
    As mentioned earlier, the bill makes one change to the 
existing definition of an eligible institution, that is the 
repeal of a requirement known as the 90/10 rule. Current law 
requires only for-profit institutions to demonstrate that at 
least 10 percent of the revenue they receive is derived from 
sources other than Title IV funds.
    Unfortunately, this rule may actually force these schools 
to raise their tuition as many of them serve fully federally 
funded students in our nation's most impoverished areas.
    There are also questions as to the application of this rule 
and whether the sources of funds considered ``derived from 
Title IV funds'' is fair and accurate. Do we want to terminate 
high quality institutions solely because their ratio may be 89/
11?
    H.R. 3039 also enhances access to distance education 
programs. Current law prohibits colleges and universities from 
having more than 50 percent of their students enrolled in 
distance education programs and does not allow them to offer 
more than 50 percent of courses through distance education. 
This rule thwarts the efforts of many from pursuing higher 
education, including working adults, urban residents, 
minorities, and others.
    By repealing this rule, but ensuring that accreditors are 
monitoring the quality of these programs, more students will 
gain access to postsecondary education. Some have said that if 
we repeal this rule, the Title IV student aid programs will be 
at risk.
    In a report recently released by the U.S. Department of 
Education in reviewing the distance education demonstration 
program currently in law, it says, and I quote ``The Department 
has uncovered no evidence that waiving the 50 percent rules, or 
any of the other rules for which waivers were provided, has 
resulted in any problems or had negative consequences. Three 
years of experience working with the demonstration program 
participants indicates that the potential risk to Title IV 
student financial assistance programs has more to do with the 
financial viability and administrative capability of the 
institution than with the mode of delivery in which the 
education is offered.''
    Furthermore, this bill strives to provide minority students 
with additional educational opportunities. The bill provides 
additional assistance to allow minority serving institutions to 
develop and enhance their internet and technological 
capabilities.
    H.R. 3039 also simplifies the grant process for tribally 
controlled colleges and universities, as well as Alaska Native 
and Native Hawaiian serving institutions.
    These changes for minority serving institutions will 
buildupon the work we accomplished earlier this year with the 
Ready to Teach Act, a bill which made improvements to the 
nation's teacher training programs.
    In that legislation, because we recognize the importance of 
minority serving institutions among the institutions training 
the teachers of tomorrow, we provided for the establishment of 
centers of excellence for teacher training programs at high 
quality minority serving institutions. These centers of 
excellence would strengthen and improve teacher preparation 
programs at minority serving institutions including 
historically black colleges and universities, Hispanic serving 
institutions, tribally controlled colleges or universities, 
Alaska Native serving institutions, or Native Hawaiian serving 
institutions.
    In addition, the centers of excellence would provide an 
opportunity to increase teacher recruitment and development at 
minority serving institutions, and provide assistance in the 
form of scholarships to help provide for the cost of completing 
a teacher preparation program.
    Recognizing that we must continue to support programs that 
provide quality educational services to students from low 
income families where neither parent graduated from college, 
H.R. 3039 enhances support services to expand opportunities for 
low income individuals.
    It increases the minimum grant levels to the TRIO program 
and builds upon the High School Equivalency Program (HEP) and 
the College Assistance Migrant Program (CAMP) to augment 
services to migrant or seasonal farmer workers and their 
families.
    This bill also includes bipartisan legislation I recently 
introduced, H.R. 2956, the Financial Aid Simplification Act, to 
examine and simplify the current need analysis formula and 
financial aid forms that all students applying for aid must 
complete. This will go a long way in expanding access, as the 
complex formula and forms can very often intimidate students 
and their families, discouraging them from ever even beginning 
the process.
    The bill also makes many enhancements to the Higher 
Education Act too numerous to mention here, that will improve 
programs, make necessary technical changes and enhance 
services.
    As we continue our work to re-authorize the Higher 
Education Act, providing students with access to a quality 
higher education remains our central goal. We must remove 
unnecessary barriers, improve and simplify programs and 
processes and allow these critical programs to reach their full 
potential to serve students and help them reach their 
educational dreams.
    I hope we can all work together to do what we know is right 
for the students and families we want to assist and not allow 
substance and policy to fall victim to politics.
    I look forward to the comments and recommendations that our 
witnesses may have.
    It is great working again with Mr. Kildee on this process. 
We had a good process in 1998, and I am hopeful that we can 
have that same kind of rapport and process as we go forward on 
this.
    [The prepared statement of Mr. McKeon follows:]

   Statement of Hon. Howard P. ``Buck'' McKeon, a Representative in 
                 Congress from the State of California

    Good morning. Thank you for joining us this morning to hear 
testimony regarding H.R. 3039, the Expanding Opportunities in Higher 
Education Act of 2003. This legislation, introduced by my friend and 
colleague, Representative Tom Cole, breaks down existing barriers and 
opens the doors of post-secondary education a bit wider to all 
students, especially low-income and minority students. I appreciate our 
witnesses taking the time to discuss this legislation with us today and 
look forward to a productive and open discussion.
    With the passage of the Higher Education Act in 1965, the federal 
government made great gains in affording our nation's students the 
opportunity to pursue postsecondary education. In our knowledge based 
economy, it is more important than ever to remove road blocks to 
innovative ideas and methods of providing education to students seeking 
to pursue their dream of access to, and completion of, a postsecondary 
education. We must all open our minds to the advancement of technology 
in pursuit of those goals and, while reviewing the past in making 
future decisions, recognize that times have indeed changed and we must 
change with them. We must promote advancement in distance education, 
clarify the treatment and classification of educational institutions 
and simplify the methods used to determine a student's financial need 
for student aid purposes.
    H.R. 3039 strives to accomplish this by improving access, expanding 
opportunities and removing unnecessary and outdated barriers within the 
Higher Education Act, all while maintaining the integrity and security 
of the student aid programs. This legislation strengthens and extends 
student support programs and enhances the ability of minority serving 
institutions to meet the needs of their students.
    First, this bill amends current law by combining the now separate 
definitions of ``institutions of higher education'' under one section 
within the law. The definitions do not change, other than in one area I 
will talk about in a minute. The bill simply combines the existing 
definitions, and it does so WITHOUT changing any of safeguards 
currently within the law. This combined definition will allow more 
institutions the opportunity to apply for competitive grants within the 
HEA and thereby better serve more students.
    Congress has made tremendous strides over the years to improve 
access to higher education, while at the same time ensuring that the 
poorly performing institutions of the past no longer are able to 
participate. Institutions themselves have done a good job over the 
years in monitoring the conduct and administrative capability of other 
institutions. No one wants a return to the past of high student loan 
default rates or bad institutions providing substandard education. This 
bill does not allow those events to reoccur.
    As mentioned earlier, the bill makes one change to the existing 
definition of an eligible institution, that is the repeal of a 
requirement known as the 90/10 rule. Current law requires only for-
profit institutions to demonstrate that at least 10 percent of the 
revenue they receive is derived from sources other than Title IV funds. 
Unfortunately, this rule may actually force these schools to raise 
their tuition as many of them serve fully federally-funded students in 
our nation's most impoverished areas. There are also questions as to 
the application of this rule and whether the sources of funds 
considered ``derived from Title IV funds'' is fair and accurate. Do we 
want to terminate high quality institutions solely because their ratio 
may be 89/11?
    H.R. 3039 also enhances access to distance education programs. 
Current law prohibits colleges and universities from having more than 
50 percent of their students enrolled in distance education programs 
and does not allow them to offer more than 50 percent of courses 
through distance education. This rule thwarts the efforts of many from 
pursuing higher education, including working adults, urban residents, 
minorities, and others. By repealing this rule, but ensuring that 
accreditors are monitoring the quality of these programs, more students 
will gain access to postsecondary education. Some have said if we 
repeal this rule, the Title IV student aid programs will be at risk. In 
a report recently released by the U.S. Department of Education in 
reviewing the distance education demonstration program now in law, it 
says:
        ``The Department has uncovered no evidence that waiving the 50 
        percent rules, or any of the other rules for which waivers were 
        provided, has resulted in any problems or had negative 
        consequences. Three years of experience working with the 
        demonstration program participants indicates that the potential 
        risk to Title IV student financial assistance programs has more 
        to do with the financial viability and administrative 
        capability of the institution than with the mode of delivery in 
        which the education is offered.
    Furthermore, this bill strives to provide minority students with 
additional educational opportunities. The bill provides additional 
assistance to allow Minority Serving Institutions to develop and 
enhance their internet and technological capabilities. H.R. 3039 also 
simplifies the grant process for Tribally Controlled Colleges and 
Universities, as well as Alaska Native and Native Hawaiian serving 
institutions.
    These changes for Minority Serving Institutions will build upon the 
work we accomplished earlier this year with the Ready to Teach Act, a 
bill which made improvements to the nation's teacher training programs. 
In that legislation, because we recognize the importance of Minority 
Serving Institutions among the institutions training the teachers of 
tomorrow, we provided for the establishment of Centers of Excellence 
for teacher training programs at high quality Minority Serving 
Institutions. These Centers of Excellence would strengthen and improve 
teacher preparation programs at Minority Serving Institutions including 
Historically Black Colleges and Universities, Hispanic Serving 
Institutions, Tribally Controlled Colleges or Universities, Alaska 
Native Serving Institutions, or Native Hawaiian Serving Institutions. 
In addition, the Centers of Excellence would provide an opportunity to 
increase teacher recruitment and development at Minority Serving 
Institutions, and provide assistance in the form of scholarships to 
help provide for the cost of completing a teacher preparation program.
    Recognizing that we must continue to support programs that provide 
quality educational services to students from low-income families where 
neither parent graduated from college, H.R. 3039 enhances support 
services to expand opportunities for low-income individuals. It 
increases the minimum grant levels to the TRIO program and builds upon 
the High School Equivalency Program (HEP) and the College Assistance 
Migrant Program (CAMP) to augment services to migrant or seasonal 
farmer workers and their families.
    This bill also includes bipartisan legislation I recently 
introduced, H.R. 2956, the Financial Aid Simplification Act, to examine 
and simplify the current need analysis formula and financial aid forms 
that all students applying for aid must complete. This will go a long 
way in expanding access, as the complex formula and forms can very 
often intimidate students and their families, discouraging them from 
ever even beginning the process.
    The bill also makes many other enhancements to the Higher Education 
Act too numerous to mention here, that will improve programs, make 
necessary technical changes and enhance services.
    As we continue our work to reauthorize the Higher Education Act, 
providing students with access to a quality higher education remains 
our central goal. We must remove unnecessary barriers, improve and 
simplify programs and processes and allow these critical programs to 
reach their full potential to serve students and help them reach their 
educational dreams. I hope we can all work together to do what we know 
is right for the students and families we want to assist and not allow 
substance and policy to fall victim to politics. I look forward to the 
comments and recommendations that our witnesses may have.
    I will now yield to Mr. Kildee for any opening statement that he 
may have.
                                 ______
                                 
    Chairman McKeon. I now yield to Mr. Kildee for his opening 
statement.

STATEMENT OF HON. DALE E. KILDEE, RANKING MEMBER, SUBCOMMITTEE 
                ON 21st CENTURY COMPETITIVENESS

    Mr. Kildee. Thank you, Mr. Chairman. I wanted to start by 
joining Chairman McKeon in remembering those who were lost 2 
years ago on September 11. The nation has gone through and 
continues to go through the aftermath of this terrible tragedy, 
and I join Chairman McKeon and the other members of the 
Subcommittee in expressing our deep felt sympathy for the 
families and victims of September 11 and their continued 
recovery.
    Despite this somber day, I am pleased to be joining 
Chairman McKeon in today's hearing on H.R. 3039, and I would 
particularly like to welcome a longtime friend of mine, Dr. 
David Moore, who was the president of Mott Community College in 
Flint, and followed with a very distinguished career in the 
military, and now he is chairman and CEO of Corinthian 
Colleges.
    David, we were neighbors and friends, compadres there in 
Flint, Michigan, and it is good to have you here, and we look 
forward to your testimony.
    H.R. 3039 represents the second part of the Committee's 
efforts to re-authorize the Higher Education Act. I am looking 
forward to the testimony of today's witnesses and hope that we 
can use your insight to make this legislation better.
    H.R. 3039 has many positive aspects, but also several 
provisions which concern me, but I am convinced that as in 
1998, when Buck McKeon and I wrote the last reauthorization, 
that we are going to do it again this year.
    We have some problems that we are trying to work out, but 
we used to do that in 1998 by having breakfast about once a 
month, every 3 weeks, and reaching an agreement. We would not 
let the staff come to the breakfast. They worried a lot while 
we were there at that breakfast making agreements. We would 
come out and say here is what we agreed and you put it 
together.
    I am sure knowing the two of us and knowing we are anxious 
to have a good higher education bill, that we are going to 
really work hard to bring a bipartisan bill. We do our best 
work when we work in a bipartisan manner.
    On the positive side, I welcome the bill's provisions to 
simplify the process of applying for student financial aid that 
has been championed by Congressman Ronald Manuel working with 
our Chairman.
    These provisions should ensure that more of our 
disadvantaged students have access to the financing necessary 
to obtain a postsecondary education.
    In addition, H.R. 3039 strengthens the High School 
Equivalency Program, HEP, and the College Assistance Migrant 
Program, CAMP, by expanding mentoring, guidance, child care, 
and transportation services to migrant and seasonal farm 
workers.
    The bill's provisions to strengthen the TRIO program are 
also important improvements.
    While these positive aspects are worthy of note, several of 
the bill's provisions make me at this time unable to support 
this legislation in its current form, but this is a bill in 
process and a bill in progress.
    First, the legislation merges the two existing definitions 
of ``institutions of higher education.'' This change can dilute 
an already meager pot of funds for minority serving 
institutions. I want to look at that very closely. This could 
literally take funds away from Hispanic serving institutions 
and other institutions which serve some of the most 
disadvantaged students. I am sure we can study that together.
    Second, the bill repeals the 90/10 rule. The current 
provision requires that proprietary institutions derive at 
least 10 percent of their revenue from non-Federal sources.
    As many of you know, this provision was adopted as one of 
the means to control some fraudulent activity in the 1980's. 
While I recognize that the 90/10 provision is not written in 
stone, I think we should examine it very carefully to make sure 
that we keep the purpose in mind, and I think there is room for 
really active and productive discussion on this, Mr. Chairman.
    Third, the bill does not ensure adequate accreditation and 
fiscal oversight for distance education programs. And again, we 
have discussed this at length.
    If Congress does decide to lift the so-called 50 percent 
rule, we must ensure that distance education programs receive 
additional oversight for the accreditation process and meet a 
higher standard of fiscal accountability.
    I believe that H.R. 2193 introduced by Congressman Andrews 
and myself is a good step toward ensuring that these goals are 
met.
    Any changes in this area must be very carefully examined, 
and we intend to do that.
    This legislation should also be improved by the inclusion 
of a program to strengthen and establish graduate degree 
programs at Hispanic serving institutions. This initiative 
would greatly improve the access of disadvantaged students to 
graduate degree programs.
    While I know the majority was considering this initiative, 
it is not included in the introduced version of H.R. 3039, and 
I hope we can secure its inclusion during our efforts on this 
legislation.
    As the Committee proceeds with consideration of this 
legislation in the coming weeks, it is my desire and 
expectation to resolve our differences. I hope this Committee 
will come out with as fine a product as we did in 1998, and I 
look forward to working with not only my colleague but my 
friend, the Chairman of this Committee, Mr. McKeon.
    Chairman McKeon. Thank you, Mr. Kildee. We now will 
introduce our witnesses. The first witness will be Dr. Donald 
Heller. Dr. Heller is currently an associate professor and 
senior research associate at the Center for the Study of Higher 
Education of Pennsylvania State University.
    He also serves as a faculty member for the Harvard 
Institutes for Higher Education. Previously, Dr. Heller served 
as an assistant professor of education at the University of 
Michigan.
    Additionally, he has authored and co-authored numerous 
books and journal articles, including ``Condition of Access, 
Higher Education for Lower Income Students'' and ``State 
Financial Aid, Need, Merit and Access to Higher Education.''
    Next will be Dr. Antonio Flores. Dr. Flores has served as 
president and chief executive officer of the Hispanic 
Association of Colleges and Universities since 1996. 
Previously, he was director of programs and services at the 
Michigan Higher Education Assistance Authority and the Michigan 
Higher Education Student Loan Authority.
    Dr. Flores currently serves as chairman of the Board for 
the Balti Adilante Leadership and Scholarship Fund, and the 
Hispanic Association on Corporate Responsibility.
    Then we will hear from Mr. George Chin. Mr. Chin has served 
as the university director for financial aid at the City 
University of New York since 1981. Prior to his current 
position, he worked in the financial aid office at St. Francis 
College and the State University of New York at Stoneybrook.
    Mr. Chin has also served as the president of the New York 
State Financial Aid Administrators Association and the Eastern 
Association of Student Financial Aid Administrators.
    And finally, Mr. David Moore. Mr. Moore is the chairman and 
chief executive officer of Corinthian Colleges, Inc. Throughout 
his career, he has been the president of various institutions, 
including the National Education Corporation, Inc., the DeVry 
Institute of Technology in Los Angeles, and Mott Community 
College in Flint, Michigan, as Mr. Kildee mentioned. Mr. Moore 
also served a distinguished career in the United States Army 
where he received the rank of colonel.
    Welcome, each and every one of you. We appreciate you 
taking the time and being here and look forward to hearing your 
testimonies.
    Before we begin, I think you understand how those lights 
work. When they come on, it will be green. After 4 minutes, 
yellow. And after one minute, it will be red and your time is 
up.
    Your full testimony as you have sent to us will be included 
in the record, and we look forward to hearing from each of you, 
beginning with Dr. Heller.

 STATEMENT OF DONALD E. HELLER, ASSOCIATE PROFESSOR AND SENIOR 
 RESEARCH ASSOCIATE, CENTER FOR THE STUDY OF HIGHER EDUCATION, 
                 PENNSYLVANIA STATE UNIVERSITY

    Dr. Heller. Thank you, Mr. Chairman. Mr. Chairman and 
members of the Subcommittee, thank you for the invitation to 
address the Subcommittee on the Expanding Opportunities in 
Higher Education Act of 2003.
    I will take my brief time today to comment on four aspects 
of this proposed legislation which include: implementing a 
single definition for ``postsecondary institution;'' the repeal 
of the 90/10 rule; the repeal of the 50 percent rule, and 
simplifying the Federal student aid programs.
    First, I urge you not to implement a single definition for 
all postsecondary institutions. The existing law distinguishes 
between public and private non-profit colleges and universities 
which are eligible for Title III and Title V institutional 
assistance, and for profit institutions, which are not eligible 
for these programs.
    For almost 40 years, this distinction has served well for 
both the institutions and the public. Non-profit colleges and 
universities have important public service missions that are 
not shared by for profit institutions. For profit institutions 
also are not held to the same accountability standards as are 
their non-profit counterparts.
    In an era of limited Federal resources, it makes little 
sense to open up the Title III and V programs to a broader 
array of institutions, thus diluting the assistance to colleges 
and universities that have born the blunt of the recent 
recession.
    The amount of money available in Title III and V is very 
limited, and many of these programs have grown little in recent 
years. For example, the $80 million available in the 
strengthening institutions program, which benefits colleges and 
universities enrolling large numbers of Federal aid recipients, 
has changed little in the last 8 years.
    In order to ensure that these limited funds are used most 
effectively to assist this nation's neediest students, I would 
urge Congress not to eliminate the dual definition law.
    The 90/10 rule dictates that a proprietary institution must 
receive no more than 90 percent of its revenue from Federal 
sources in order for the students to qualify for Title IV 
assistance.
    I can think of no good reason for eliminating this rule at 
this time. As a for profit with a mission that is not as 
restrictive as that of public and non-profit colleges and 
universities, these institutions have the flexibility to 
develop revenue sources to supplement those available through 
Title IV. I believe that eliminating this provision of the law 
will potentially open the door to more fraud and abuse in the 
Title IV programs, without doing anything to improve 
educational opportunity for disadvantaged students in this 
nation.
    I do encourage Congress to examine ways to ease the burden 
of the 50 percent rule, while not eliminating it entirely 
without appropriate study and deliberation.
    The use of technology in both distance and classroom based 
instruction holds great promise for broadening access to 
postsecondary education. It is important to ensure that Federal 
regulations do not get in the way of innovation.
    In the last reauthorization, as the Chairman mentioned, 
Congress mandated that the Department of Education conduct a 
demonstration project to examine whether this rule can be 
eased. Over 100 higher education institutions have participated 
in this project.
    While the Department has begun and done some analyses of 
the results, I would suggest that Congress request the 
Department or another party to conduct a thorough evaluation of 
the project in order to determine if and how this rule should 
be eased, while still ensuring that Federal student aid is 
dispersed efficiently and effectively to the nation's needy 
students.
    Section 401 of this legislation calls for a study to be 
conducted by the Advisory Committee on Student Financial 
Assistance, on how the qualification for Title IV assistance 
can be simplified. I strongly encourage you to include this 
provision in the legislation.
    Research indicates that applying for Title IV aid has 
become a complex process, and is one that is a barrier to 
college access for low income students.
    A well designed study conducted by the Advisory Committee 
in conjunction with outside experts can help inform Congress 
and the Department on ways to improve how data about families' 
financial circumstances are collected, and how those data are 
used to determine eligibility for Federal assistance.
    Another provision of the bill calls for the Secretary to 
notify students who qualify under Federal means tested aid 
programs, such as the school free and restricted lunch or food 
stamps, of their eligibility for Pell grants. This is an 
excellent idea, and I would encourage Congress to go even one 
step further and examine ways not just to notify students of 
their eligibility for assistance, but to make an actual 
commitment of such aid earlier in their high school or even 
middle school careers.
    Research has consistently demonstrated that the earlier 
students can prepare both academically and financially for 
college, the more likely they will enroll.
    There are a number of programs out there that have 
demonstrated the ability of programs like this to work for poor 
students, and I would be happy to talk more about those during 
the question period.
    This reauthorization is a particularly important one. In 
contrast to 1998, when higher education benefited from flush 
coffers and a robust economy, many colleges and universities 
today find themselves facing constrained resources and 
increasing demand.
    If the No Child Left Behind Act is successful in graduating 
even more disadvantaged students from high school and preparing 
this for college, then the demand for higher education will 
increase even further.
    The role of the Federal Government in ensuring 
postsecondary education opportunity is critical in an era when 
other parties have been unwilling or unable to shoulder their 
burden.
    I want to thank the Subcommittee again for the opportunity 
to address these issues, and I would be happy to take any 
questions after my colleagues have had a chance to testify.
    Thank you.
    [The prepared statement of Dr. Heller follows:]

Statement of Donald E. Heller, Associate Professor and Senior Research 
 Associate, Center for the Study of Higher Education, The Pennsylvania 
            State University, University Park, Pennsylvania

    Thank you for the invitation to address the subcommittee on the 
Expanding Opportunities in Higher Education Act of 2003. My name is 
Donald E. Heller, and I am an education professor at The Pennsylvania 
State University. My comments today represent my views on portions of 
this legislation, based on the research I and other scholars have 
conducted on federal aid and its impact on postsecondary students and 
institutions.
    The reauthorization of the Higher Education Act of 1965 is always a 
critical juncture for higher education, and this reauthorization is 
particularly important. The fiscal conditions facing most states and 
the nation as a whole have placed great constraints on the resources 
available for funding higher education institutions and students. Most 
observers believe the situation is unlikely to improve in the near 
future; thus, the decisions made by Congress during reauthorization 
will be vital to the future of American higher education.
    The United States is universally recognized as having the best 
system of higher education in the world. Part of what has created this 
reputation is the existing level of competition among the more than 
6,000 postsecondary institutions in the nation, competition that 
benefits the more than 16 million students enrolled in these Title IV-
eligible institutions. Most students, regardless of their academic 
interests or geographic location, have some form of choice available to 
them when they are contemplating their postsecondary plans. But those 
choices are often limited by the financial and other resources 
available to those students and their families. It is because of these 
constraints that the federal role in funding higher education students 
and institutions is so critical.
    I will take my brief time today to comment on four aspects of the 
proposed legislation: 1) implementing a single definition for 
postsecondary institutions; 2) repeal of the 90/10 rule governing 
institutional receipt of federal funds; 3) repeal of the 50 percent 
rule governing institutions enrolling students in distance education 
programs; and 4) simplifying the federal student aid programs.

Single Definition for Postsecondary Institutions
    I urge you not to implement a single definition for all 
postsecondary institutions in the nation. The existing law 
distinguishes between public and private, non-profit colleges and 
universities--which are eligible for Title III and Title V 
institutional assistance--and for-profit institutions--which are not 
eligible for these programs. For almost 40 years this distinction has 
served well both the institutions and the federal government. Public 
and private non-profit colleges and universities have important public 
service missions and obligations that are not shared by for-profit 
institutions. For-profit institutions also are not held to the same 
accountability standards as are their public and non-profit 
counterparts. In an era of limited resources at both the federal and 
state levels, it makes little sense to open up the Title III and V 
programs to an even broader array of institutions. This would dilute 
the potential of the programs to assist many colleges and universities 
that have borne the brunt of the recession.
    There are a number of accountability measures that affect public 
and private non-profit colleges and universities in ways distinct from 
for-profit institutions. Public colleges in most states are subject to 
reporting and accountability regulations from state higher education 
boards that go above and beyond the minimal reporting required of all 
licensed postsecondary institutions in the state. In addition, freedom 
of information laws in many states provide a mechanism for the public 
to access information about subjects as diverse as salaries, 
presidential searches, and compliance with federal, state, and local 
laws. Financial information about private non-profit colleges is 
available via their Internal Revenue Service 990 forms. Information 
about for-profit institutions, in contrast--particularly if they are 
not publicly-held--is not as readily available to students and their 
families.
    Another important distinction that this subcommittee should keep in 
mind when debating the creation of a single definition for 
postsecondary institutions is that of access to capital markets. For-
profit institutions have unlimited access to private capital markets 
(both borrowing and equity) that is not available to public and private 
non-profit colleges and universities. While the latter institutions can 
sometimes take advantage of access to specialized debt markets through 
the issuance of tax-free bonds, the amount of borrowing available in 
these markets is limited, and these colleges and universities have no 
access to equity markets.
    The amount of money available in the Title III and Title V programs 
is very limited, and many of these programs have grown little in recent 
years. For example, the roughly $80 million available in the 
Strengthening Institutions Program--which benefits colleges and 
universities enrolling large numbers of federal aid recipients--has 
changed little in the last eight years. In order to ensure that these 
limited funds are used most effectively to assist this nation's 
neediest students, I would encourage Congress not to eliminate the dual 
definition laws.

Elimination of the 90/10 Rule
    The 90/10 rule dictates that a proprietary institution must receive 
no more than 90 percent of its revenue from federal sources in order 
for its students to qualify for Title IV assistance. I can think of no 
good reason for eliminating this rule. It is more than reasonable to 
expect a for-profit institution to demonstrate its ability to compete 
in the higher education marketplace without being more than 90 percent 
dependent upon revenue from federal sources. As a for-profit, with a 
mission that is not as restrictive as that of public and non-profit 
colleges and universities, these institutions have the flexibility to 
develop revenue sources to supplement those available through Title IV. 
I believe that eliminating this provision of the law will potentially 
open the door to more fraud and abuse in the Title IV programs, without 
doing anything to improve educational opportunity for disadvantaged 
students.

Repeal of the 50 Percent Rule
    I would encourage Congress to examine ways to ease the burden of 
the 50 percent rule, while not eliminating it entirely without 
appropriate study and deliberation. This rule restricts the number of 
distance education courses that can be offered and the number of 
students enrolled in them in order for students to be deemed eligible 
for Title IV grants, loans, and work study assistance. The use of 
technology in both distance and classroom-based instruction holds great 
promise for broadening access to postsecondary education as well as for 
changing the ways that faculty teach and students learn. While we still 
have much to understand about how to use technology most effectively in 
higher education, it is important to ensure that federal regulations do 
not get in the way of innovation and experimentation. Let me use an 
example from my own institution.
    Each semester, thousands of students take courses at Penn State's 
World Campus, one of the nation's largest and most well-respected 
distance education programs. Finding ways to simplify the awarding of 
federal Title IV funds to students enrolled there would help Penn State 
ease the delivery of funds to more low- and middle-income students 
around the country who could benefit from the World Campus courses and 
programs. In addition, as our own residential students who are Title 
IV-eligible enroll in World Campus courses, it becomes an 
administrative burden to monitor the distribution of their student aid 
between World Campus courses and traditional term-based courses for 
which the current regulations are written. Regulations that better 
address the unique benefits and methods for education delivered through 
technology, and easing the constriction of the 50 percent rule, will 
encourage further expansion of higher education programs and courses to 
more and more people.
    In the 1998 reauthorization of the Higher Education Act, Congress 
mandated that the Department of Education conduct a demonstration 
project on distance education to examine whether the 50 percent rule 
can be eased. Currently, over 100 higher education institutions are 
participating in the demonstration project. While the Department has 
issued some preliminary reports to Congress on the status of the 
demonstration project, I suggest that Congress request the Department 
or another party to conduct a thorough evaluation of the project in 
order to determine what worked well and what has not worked as 
effectively. The results of such an evaluation could help determine if 
and how the 50 percent rule should be eased, while still ensuring that 
federal student aid is disbursed efficiently and effectively, and helps 
accomplish the goals of promoting equity and opportunity in higher 
education.

Simplifying the Federal Student Aid Programs
    Section 401 of the Expanding Opportunities in Higher Education Act 
of 2003 calls for a study to be conducted by the Advisory Committee on 
Student Financial Assistance on how the qualification for federal Title 
IV assistance can be simplified. I strongly encourage you to include 
this provision in the legislation. Applying for Title IV aid has become 
a complex process, one that taxes the resources and capabilities of 
many students and their families. Research on college access indicates 
that information about the federal financial aid programs and how to 
apply for them is a barrier for low-income students.
    The Advisory Committee is the ideal organization to conduct such a 
study because of its role in advising both the Congress and the 
Secretary of Education on student financial aid matters. I believe that 
a well-designed study conducted by the Advisory Committee in 
conjunction with outside experts can help inform Congress and the 
Department on ways to improve how data about families'' financial 
circumstances are collected, and how those data are used to determine 
eligibility for federal assistance. Such a study can help establish how 
best to balance the twin goals of program effectiveness and efficiency.
    Another provision of the bill calls for the Secretary of Education 
to notify students who qualify under federal means-tested aid programs, 
such as free lunch or food stamps, of their eligibility for Pell 
Grants. This is an excellent idea, and I would encourage Congress to go 
even further and examine ways not just to notify students much earlier 
in their school careers of their eligibility for federal Title IV 
assistance, but to make an actual commitment of such aid (conditional, 
of course, upon their enrollment in a Title IV-eligible institution). 
Research has consistently demonstrated that the earlier students can 
prepare both academically and financially for college, the more likely 
they will enroll.
    There are excellent programs that make such an early commitment of 
financial aid, and they have been found to be successful in promoting 
the college attendance of low-income students. Indiana's Twenty-First 
Century Scholars program is an outstanding example of a state that 
makes an early commitment of publicly-funded financial assistance for 
college to low-income students. Seventh and eighth grade students in 
the state have to pledge the following:
     Graduate with an Indiana High School Diploma from a 
charter school, freeway or other Indiana school accredited (or seeking 
accreditation) through Performance Based Accreditation (PBA) by the 
Indiana Department of Education.
     Achieve a cumulative high school GPA of at least 2.0 on a 
4.0 scale (a ``C'' average).
     Not use illegal drugs or alcohol, or commit a crime.
     Apply for admission to an eligible Indiana college, 
university or technical school as a high school senior.
     Apply on time for state and federal financial aid 
(Indiana Twenty-First Century Scholars website, http://
scholars.indiana.edu/stepup.xml)
    In return, the state commits to pay up to four years of tuition at 
any public institution in the state the student attends, or an 
equivalent amount at an Indiana private institution. This assistance is 
in addition to any federal, institutional, or private aid for which the 
student qualifies. In addition to the tuition grant, the Twenty-First 
Century Scholars program also provides academic support to the students 
while enrolled in middle school, high school, and college, and has a 
parent involvement component.
    The unique aspect of this program is that it makes a commitment of 
tuition assistance to students as early as their middle school years. 
There are no qualifiers or caveats; as long as the student adheres to 
the pledge, the Indiana legislature has committed to appropriate 
sufficient funds to pay for the student's tuition for four years. A 
recent independent evaluation of the program concluded that, 
``Participation in the Scholars Program improved postsecondary 
opportunity for low-income students. This study confirms that the 
program played a role in the substantial gain in college access in the 
1990s in Indiana'' (Lumina Foundation for Education, Meeting the Access 
Challenge: Indiana's Twenty-first Century Scholars Program).

Conclusion
    As I stated earlier, this reauthorization of the Higher Education 
Act of 1965 is a particularly important one. In contrast to the last 
reauthorization in 1998, when higher education institutions enjoyed the 
benefit of flush state coffers and a robust economy, many colleges and 
universities today find themselves facing constrained resources in an 
era of increasing demand. More and more students are knocking on our 
colleges'' doors, driven both by the demographics of the baby boom echo 
as well as the increased need for some form of postsecondary training 
in order to be successful in today's labor markets. If the No Child 
Left Behind Act is successful in graduating more disadvantaged students 
from high school and preparing them for some form of postsecondary 
training, then the demand for higher education will increase even 
further in the near future.
    The combination of constrained resources and increasing demand 
leaves low-income students in peril. The fiscal crisis has forced many 
higher education institutions to cut back on course offerings and 
institutional financial aid at the same time they are raising tuition 
prices. The role of the federal government in ensuring postsecondary 
educational opportunity is critical in an era when other parties have 
been unwilling or unable to shoulder their burden.
    I want to thank the subcommittee again for the opportunity to 
address these important issues facing Congress. I would be happy to 
take any questions you may have.
                                 ______
                                 
    Chairman McKeon. Thank you.
    Dr. Flores?

  STATEMENT OF ANTONIO FLORES, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, HISPANIC ASSOCIATION OF COLLEGES AND UNIVERSITIES

    Dr. Flores. Buenos Dias. Good morning. Thank you, Chairman 
McKeon, Ranking Member Kildee, Representative Hinojosa, and all 
the distinguished members of the House Subcommittee on 21st 
Century Competitiveness, for allowing me to testify on behalf 
of the Hispanic Association of Colleges and Universities, also 
known as HACU.
    I am honored to appear before you in support of H.R. 3039, 
the Expanding Opportunities in Higher Education Act of 2003, as 
it relates to Hispanic serving institutions or HSIs, introduced 
under the leadership of Representative Cole.
    Although the initial version of H.R. 3039 leaves out a 
series of vital recommendations concerning HSIs and Hispanic 
American success in higher education, HACU applauds the 
Subcommittee's inclusion within the expanding opportunities 
bill of the removal of onerous and unnecessary regulatory 
burdens on HSIs.
    The bill would eliminate a 2-year wait out period between 
Title V applications. It will also remove the 50 percent low 
income assurance requirements in the current definition of 
HSIs.
    These changes will enhance HSIs and align them much better 
with other minority and developing institutions supported in 
the Higher Education Act.
    We know that the 50 percent documentation requirement for 
low income students is really a redundant requirement and it 
creates a second class citizenship status for HSIs if kept in 
the law.
    Likewise, allowing institutions to maintain continuity 
between grant cycles is critical to the development of those 
institutions that receive awards from Title V.
    We want to also applaud your continued support for HBCUs, 
historically black colleges and universities as well as tribal 
colleges and universities, sister institutions of HSIs.
    We also commend the bill's provisions that substantially 
enhance urgently needed college preparatory programs and 
college retention initiatives. These measures will provide very 
important benefits to Hispanic Americans. Hispanics make up the 
nation's youngest and largest ethnic population. Hispanics also 
suffer the lowest high school and college graduation rates of 
any major population group.
    These reasons, we believe, are sufficient for Congress to 
consider awarding the same advantage points under TRIO 
competitions to HSIs as those granted to other institutions 
already in these programs.
    It is only fair to level the playing field for these 
programs as well as HSIs are concerned.
    Please allow me to also address the following critical 
omissions within the bill that directly impact on HSIs. Title V 
remains the chief means for targeting Federal funds to HSIs, 
which remain largely under funded for the concentrated largest 
number of Hispanics in higher education today.
    You probably know that HSIs represent only 7 percent of all 
institutions in the country, yet graduate more than 60 percent 
of all the Hispanics in 2 year and 4 year degree programs.
    Hispanics are already contributing more than one of every 
two new worker joining the American labor force, and by the 
year 2025, Hispanics will represent one of every two new 
workers joining the labor force in our country.
    Clearly, Hispanics will have a dramatic impact on our 
country's future economic success, national security, and 
global leadership. Yet, HSIs who serve the largest 
concentrations of Hispanic higher education students, receive 
only half the Federal funding on average per student compared 
to all of the degree granting institutions. This is exacerbated 
when we take into account the fact that the numbers of HSIs 
will increase by at least 50 percent within the next 5 years 
because of dramatic demographic shifts in the country.
    This funding crisis for our HSIs must be addressed, and 
unfortunately, the bill in its present form does not do so.
    Therefore, first, I urge you to include in this measure an 
increase in authorized funding levels for HSIs under Title V to 
$465 million, to adequately meet the present needs of our 
historically under funded HSIs.
    Second, we must afford our largest population the 
opportunity to acquire the advanced skills and knowledge 
required to build a better future for our nation. This bill 
does not address this. Less than 5 percent of Hispanics obtain 
a graduate or professional degree. I urge you to include within 
this important legislation the authorization of $125 million 
for a new Part B under Title V to increase and improve graduate 
education for Hispanics.
    Finally, we also respectfully urge you to consider the 
other recommendations highlighted in our written testimony.
    I would be remiss if I were not to mention our objection to 
making for profit institutions under the same definition as 
non-profits, as proposed in this version of the bill. This will 
dilute the scarce resources available to non-profit HSIs by 
adding at a minimum 107 new for profits to the current 249 HSIs 
that already are really under funded, because numerous other 
legislative acts authorizing funds for higher education in 
other agencies reference definitions under this law, we believe 
that those resources will also be impacted negatively for non-
profits.
    Mr. Chairman and distinguished members of the Subcommittee, 
I'm very grateful for this opportunity to present this 
testimony and I will welcome any questions you might have. 
Thank you.
    [The prepared statement of Dr. Flores follows:]

    Statement of Antonio Flores, Ph.D., President and CEO, Hispanic 
                Association of Colleges and Universities

Executive Summary
    Thank you, Chairman McKeon, Representative Hinojosa, and other 
distinguished members of the House Subcommittee on 21st Century 
Competitiveness for allowing me to testify on behalf of the Hispanic 
Association of Colleges and Universities (HACU). We applaud your 
tireless efforts to enhance access and educational opportunity, 
particularly in higher education, for all citizens and deserving 
residents of our great nation.
    I am honored to submit written testimony in support of H.R. 3039, 
the Expanding Opportunities in Higher Education Act of 2003, with 
respect to its proposed changes for Title V, Hispanic Serving 
Institutions (HSIs). I take this opportunity to urge you to incorporate 
into this bill the series of specific recommendations transmitted by 
HACU on June 10, 2003, to members of Congress on the impending 
reauthorization of the Higher Education Act of 1965 (HEA), as amended. 
A copy of the ``HACU Public Policy Priorities for HEA Reauthorization'' 
is appended to my testimony for the official record of this hearing.
    HACU applauds H.R. 3039 for addressing some of our recommendations, 
but we are disappointed that the bill does not take into consideration 
the following amendments recommended by HACU on behalf of the HSI 
community:
    1. To authorize $50 million ``and such sums as may be necessary'' 
under Title II for eligible HSIs to expand teacher education programs 
of high quality in academic areas of urgent national need.
    2. To increase the authorized funding level for HSIs under Title V 
to $465 million ``and such sums as may be necessary'' to meet the 
pressing needs of exceedingly under funded HSIs and new HSIs emerging 
within the next five years.
    3. To authorize $125 million ``and such sums as may be necessary'' 
for a new Part B under Title V for increased and improved graduate 
education at HSIs.
    4. To authorize $50 million ``and such sums as may be necessary'' 
for a Technology Enhancement Program that would close the ``digital 
divide'' at HSIs.
    5. To authorize under Title VI $30 million annually ``and such 
sums as may be necessary'' for an Institute for Pan-Hispanic 
International Studies through HSI consortia and $20 million for a 
Hispanic International Scholars and Fellows program.
    6. To authorize $45 million ``and such sums as may be necessary'' 
to create a graduate fellowship program that would involve HSIs and 
non-HSIs in partnerships to increase Hispanic participation and success 
in areas of national priority.
    We thank you for the modest enhancements for HSIs included in H.R. 
3039, but urge you to consider the above recommendations as described 
in greater detail and supported by compelling analyses in the appended 
document to this testimony.
    At a time when more than one of every three new workers joining the 
American labor force today is Hispanic, we cannot afford to continue 
neglecting the educational needs of this growing population that is 
projected to add one of every two new workers in the nation by 2025. As 
we envision the future of America's population in the 21st Century, it 
is imperative to recognize that failing to educate the fast-growing 
Hispanic population would have disastrous economic and social 
consequences for the entire nation. We are talking about one-half of 
America's future workforce.
    As the youngest, fastest-growing, and now largest ethnic population 
in the nation, Hispanic Americans are mindful of their enormous 
historic role in advancing economic prosperity and social progress. The 
more Hispanics are called to assume leadership roles in government, the 
military, the business community, and civic life in general, the more 
their higher education is a requirement.
    Nearly 50 percent of the 1.8 million Hispanics in higher education 
are enrolled at HSIs today, and a higher percentage of them are 
projected to enroll at HSIs in the years ahead. Consequently, the 
current 219 HSIs are increasing their absolute members and proportion 
of Hispanic students from year to year. Furthermore, given the rapid 
Hispanic population growth, HACU projects that nearly 100 more HSIs 
will emerge within the next five years. In other words, within the next 
HEA reauthorization cycle, HSIs are expected to surpass the 300 mark.
    Regretfully, the authorized and appropriated funding levels for 
HSIs under Title V of the HEA have been inadequate at best to meet the 
capacity-building needs of these institutions that are the backbone of 
Hispanic higher education. Data from the Integrated Postsecondary 
Education Data System (IPEDS) of the National Center for Education 
Statistics (NCES) documents that HSIs, on average, receive 50 cents per 
student for every federal dollar that the rest of the higher education 
community gets. This blatant inequity must be addressed without delay.
    In the year 2000, the U.S. Bureau of the Census reported that the 
median age of Hispanics was 26, compared to 36 for all other groups and 
to 39 for non-Hispanic whites. Likewise, it projected the near doubling 
of the Hispanic population under the age of 18 between 2000 and 2020, 
compared to a 6 percent increase for African Americans and an actual 
decline of 5 percent for non-Hispanic whites. As of today, nearly one 
of every five students in K-12 education is Hispanic, but historically 
only one of every 10 who started kindergarten graduated from college. 
These compelling statistics demand that Congress and the Federal 
administration ensure that funding and support for HSIs and for the 
higher education success of Hispanic Americans be increased 
dramatically, now!
    Because of the history of neglect that HSIs and Hispanic Americans 
have endured for so long, HACU is especially concerned about the 
proposed definitional changes of H.R. 3039 that would make for-profit 
institutions potentially eligible for the already meager funding 
appropriated for HSIs, especially in light of the projected increase in 
the number of non-profit HSIs. We urge you to reconsider this aspect of 
H.R. 3039, for, if enacted, it would further erode the weak federal 
support available to current HSIs.
    Chairman McKeon and distinguished members of this House 
Subcommittee, I applaud your commitment to the enhancement of HSIs and 
Hispanic higher education. Your championing of this national priority 
clearly demonstrates foresight and wisdom because the very future of 
our nation hangs in the balance.
    Thank you again for inviting me to testify on HACU's behalf.
    Gracias!
Introduction
    The Hispanic Association of Colleges and Universities (HACU) is the 
national voice of Hispanic-Serving Institutions and Hispanic higher 
education. Incorporated as the champion of Hispanic success in higher 
education in December of 1986 with 18 charter members, HACU has grown 
rapidly over the years to its current total membership of 350 strong, 
including HSIs. Figure 1, below, illustrates its membership growth.

[GRAPHIC] [TIFF OMITTED] T0136.001


    Under HACU's advocacy, Congress first recognized HSIs in the 
amendments of 1992 as a national resource for federal support under 
Title III of the HEA. However, it was not until the 1995 fiscal year 
that the first appropriation of $12 million for HSIs was included in 
the federal budget. In the HEA amendments of 1998 the authorized 
funding level for HSIs was increased under a new Title V and the actual 
appropriations also begun to increase. Figure 2, below, documents 
annual appropriations for HSIs.

[GRAPHIC] [TIFF OMITTED] T0136.002

    It is worth noting that in fiscal year 1995, only 131 HSIs were 
designated as eligible for Title III funding as per a 25% Hispanic FTE 
criteria approved by Congress. Currently, 242 HSIs are designated by 
the U.S. Department of Education as eligible for funding under Title V. 
Because the amounts appropriated annually are insufficient to provide 
funding to all HSIs, they compete for limited funds under multi-year 
grant cycles of 5 years, but only about 50 percent of them receive 
competitive grants.
    Compared to other national higher education associations and to 
other higher education institutions, HACU and HSIs are very young but 
very strong. Their strength is fueled by the explosive demographic 
expansion of the youngest, fastest-growing, and largest ethnic 
population in the nation. In this sense, HACU and HSIs are driven by a 
vision of America's future that is richly diverse and yet inclusive, 
rather than by a past that was oppressive and discriminatory. This is a 
vision for a bright future rooted in a well-educated and competitive 
American workforce.
    The following sections articulate how to make this vision a 
reality. They summarize much of the content presented in the ``HACU 
Public Policy Priorities for HEA Reauthorization'' of June 10, 2003.
Title II
    The request of $50 million under Title II for eligible HSIs 
reflects the national crisis that is a grim reality at many K-12 
schools across the nation: the lack of qualified teachers to serve the 
rapidly growing cohorts of children and youth, particularly Hispanics 
and other students of color. The following table provides evidence of 
the Hispanic student population growth in the largest metropolitan 
areas of the country.

[GRAPHIC] [TIFF OMITTED] T0136.003


    Conversely, less than five percent of the K-12 teachers nationwide 
are Hispanic, compared to almost 20 percent of Hispanic students in all 
K-12 schools.

Title IV
    Student support service programs under this title, such as TRIO 
programs, are critical to the educational attainment of low-income and 
under-educated populations. We urge your support for HACU's 
recommendations in its appended publication, but especially for the 
fair inclusion of HSIs in TRIO grant competitions to close the 
educational gaps between Hispanics and other populations. HSIs and 
other minority-serving institutions should be granted the same number 
of points as those given to other institutions for ``prior experience'' 
in TRIO competitions.
    In addition to family income, parents'' educational attainment, 
especially the mother's, is a major predictor of student outcomes. From 
1974 to 1999, the educational attainment gaps between Hispanic and non-
Hispanic mothers increased significantly, as documented by Table 2 
below.

[GRAPHIC] [TIFF OMITTED] T0136.004


    Having a mother who has less than a high school education, living 
in a family on public assistance programs, living in a single-parent 
home, and having parents whose primary language is a language other 
than English are considered reliable predictors of children's future 
academic and socioeconomic outcomes by a major report on Hispanics of 
April 2003, ``States and Trends in the Education of Hispanics'' by the 
U. S. Department of Education. About 7 out of 10 (71 percent) children 
entering kindergarten from Hispanic families have one or more of these 
four risks factors.
    Yet in 1994, according to the NCES's PEQIS online data summaries, 
only 13 percent of Upward Bound participants were Hispanic, compared to 
49 percent African Americans and 29 percent non-Hispanic Whites. Given 
their high risk of educational failure, Hispanics should have a much 
greater participation rate in all TRIO programs through HSIs that serve 
their communities.

Title V
    Title V remains the chief vehicle for targeting federal funds to 
historically under-funded HSIs. During the last reauthorization cycle 
five years ago, Congressman Hinojosa introduced the landmark ``Higher 
Education for the 21st Century Act.'' Passage of that Act led to new 
recognition for the strategic importance of the nation's HSIs to our 
economic strength and national security under a new Title V of the HEA 
addressing undergraduate education needs.
    The landmark Expanding Opportunities bill should build upon those 
improvements and include a first-time graduate education component to 
Title V. Without the complement of graduate education opportunities, 
Hispanic Americans and HSI will remain relegated to second-class 
status.
    HACU supports this new bill's amendments, which will surely lay the 
foundation under ``such sums as may be necessary'' provisions to win 
progressively higher appropriations in each of the next five years of 
the reauthorized HEA to ultimately bring parity in federal funding for 
HSIs.
    HACU specifically is advocating that undergraduate funding for HSIs 
under Title V be increased to $465 million per year ``and such sums as 
Congress deems necessary'' for the authorized cycle of years following 
reauthorization of the HEA.
    HACU specifically recommends that the authorization level for 
graduate education funding for HSIs under Title V be set at $125 
million ``and such sums as Congress deems necessary'' for each year of 
the HEA cycle.
    HACU is in full support of those provisions of the Expanding 
Opportunities bill that remove the two-year wait-out and ``50 percent 
lower-income'' provisions from existing Title V language.
    The 50-percent low-income assurance requirement applies only to 
HSIs, and not to any other group of Minority-Serving Institution. This 
requirement creates an unfair burden on HSIs. It is also onerous, since 
this requirement demands information not normally collected by any 
degree-granting institution.
    The current two-year wait-out period between applications for Title 
V grants undermines the intent of Title V to enhance the quality and 
access of higher education opportunities for HSIs and the students 
served by HSIs.
    The current two-year wait-out is inherently destructive in forcibly 
dismantling effective programs in midstream for an unnecessary two-year 
period before HSIs with Title V grants can again compete for another 
Title V grant. There simply is no logic to this requirement; yet, the 
costs in hampered progress of urgently needed Title V programs are 
immediate and profound.
    This unnecessary requirement will prove especially drastic as early 
as federal Fiscal Year (FY) 2004, when the first round of five-year 
Title V grants will expire, forcing many dozens of higher education 
institutions throughout the country to dismantle their programs for the 
two-year wait. The need to eliminate this two-year wait-out requirement 
is urgent and compelling.
    HACU also calls upon the committee to add an articulation component 
to the Expanding Opportunities bill to allow two-year/four-year 
articulation initiatives to be eligible for Title V grants.
    Against a backdrop of chronically low high school and college 
graduation rates suffered by Hispanics, two-year colleges often are the 
critical point of entry for Hispanic higher education students. Indeed, 
more than 50 percent of all Hispanic higher education students attend 
community colleges.
    However, the sheer volume of well-documented reports on the need 
for diversity in higher education and for great minority attainment of 
advanced education degrees calls for a new emphasis on assisting 
Hispanic and other under-represented minority student populations to 
succeed in completing two-year degree programs, and to seek and 
ultimately obtain four-year degrees. Supporting greater articulation 
between two-year and four-year institutions under Title V is necessary 
for this bill to achieve the desired effect of increasing the number of 
Hispanics obtaining baccalaureate degrees and pursuing post 
baccalaureate education. It is also fundamental to almost every other 
component of this bill.

Title VI
    Colleges and universities in the United States welcome on their 
campuses more than five hundred thousand foreign students, but only 11 
percent are from Latin America, including a meager 2 percent from 
Mexico. Conversely, more than one hundred fifty thousand American 
college students go for study abroad, more than two-thirds of them to 
Western Europe, nearly one-half to England alone, and the remaining 
one-third to all other countries. Less than 5 percent of all the 
American students abroad are Hispanic. These data clearly document the 
pressing need to incorporate HACU's proposals for new funding for HSIs 
and Hispanic Americans to participate in international education 
programs.
    The $50 million combined request for fellowships, institutional 
collaboration, and Institute for Pan-Hispanic International Studies 
would strengthen our national security and enhance our global economic 
competitiveness. It is a modest investment that could yield invaluable 
returns to our nation. These funds would result in a much higher rate 
of Hispanic student participation in studies abroad, increased numbers 
of other non-Hispanic students at HSIs going to study in Latin America 
and the Caribbean, greater numbers of Latin American and Caribbean 
students coming to study at HSIs, and quality scholarly work and 
institutional development across national boundaries throughout the 
Americas and the Caribbean.

Title VII
    HSIs should be supported to reach out to comprehensive research 
universities for greater articulation and transfer of Hispanics from 2-
year to 4-year and from the latter to advanced research and graduate 
programs of national need. The $45 million in combined funds for 
programs and fellowships can bridge HSIs and comprehensive research 
institutions of international renown. This is of critical importance to 
the nation and to diversity at the most selective and well-endowed 
higher education institutions.

In Conclusion
    HACU's recommendations for amendments to the HEA, especially for 
changes to Titles II, IV, V, VI, and VII are all grounded in our best 
national interest for a well-educated and trained workforce, an engaged 
citizenry, and cost-effective approaches to economic and social 
progress.
    HSIs, as the backbone of a Hispanic higher education, require much 
greater federal support and funding to achieve their missions of 
educating and training the fast-growing cohorts of new students, 
particularly Hispanic Americans that represent the best hope for a free 
and prosperous America in the 21st Century and beyond.
    Congress has a unique opportunity to correct the federal neglect of 
past generations of undereducated Hispanic children and youth. The 
nation cannot afford to continue ignoring its own future. Congress 
should rise to the occasion and embrace HACU's recommendations for the 
good of the country.
                                 ______
                                 
    [An attachment to Dr. Flores' statement follows:]

          HACU and Reauthorization of the Higher Education Act

                    Policy Priorities for 2003-2004

    HACU is requesting that the 108th Congress enhance the level of 
support for HSIs and Hispanic higher education through the impending 
HEA amendments, including institutional development, graduate education 
and technology support under Title V; teacher education/teacher quality 
provisions under Title II; financial aid and related immigration 
provisions under Title IV; inclusion of HSIs and Hispanics in 
international education provisions under Title VI; and targeting 
Hispanics for greater participation in graduate and professional 
programs, as well as HSIs for competitive grants under Title VII, Part 
B.
    HACU's priorities for the reauthorization of the HEA evolved from 
three main streams: (1) a national survey of HSI presidents and key 
institutional leaders, (2) a series of six regional HSI/HEA public 
forums, and (3) staff analyses of substantive data reports. The 
feedback, comments and suggestions, as well as findings that emerged 
from these three sources were crafted into a draft report outlining 
HACU's priorities. This document was then posted on the HACU Web site 
where it generated additional input that was incorporated into the 
final HACU draft.

Title II:
     HACU recommends creation of a new section under Title II 
that will authorize $50 million ``and such sums as Congress deems 
necessary'' for eligible HSIs to create new and expand current teacher 
education programs of high quality standards in those areas where 
Hispanics students show greater underachievement (e.g., math, science, 
technology, etc.), as documented by national, state and local reports. 
This new section under Title II will support competitive grants 
addressing all PK-12 areas of education.
     HACU recommends that this new section allow funding of 
consortia and partnerships between HSIs and Associate HSIs 
(institutions with 10% Hispanic enrollment or at least 1000 Hispanic 
students, to be defined under Title V: see p. 4 below), for the 
preparation of Hispanic teachers to meet national, state and local 
needs.
     HACU recommends that this section also authorize 
collaboration between PK-12 schools and HSIs, Associate HSIs and any 
other eligible applicants for grants funded by relevant parts or 
sections of Title II. These grants are intended to better prepare 
teachers for those communities and sections of the country where 
Hispanics and other minority population are congregated in larger 
numbers.

Title IV:
     HACU recommends doubling the amount of the authorized 
maximum Pell Grant within the multiyear cycle of the HEA 
reauthorization, and assuring adequate funding levels for needy 
students by making the Pell grant an entitlement at a level comparable 
to the 80/20 ratio originally in place when first initiated.
     HACU recommends substantial increases in the percentage 
of all direct federal grant monies, versus loans, to college students 
to prevent students from graduating with a high loan debt, preventing 
students from continuing education.
     HACU recommends the creation of an adequately funded 
state challenge-grant program with new federal aid dollars, as a 
complement to the Pell Grant Program.
     HACU recommends other financial support mechanisms for 
Hispanic achievement in higher education. These mechanisms include 
discontinuing all federal student loan-origination fees, fixing the 
maximum interest rate at or below the current level or prime rate 
(whichever is lower), and forgiving accumulated federal loan debt of 
graduates who choose to work for HSIs.
     HACU recommends that the authorization level for TRIO be 
increased to $1.7 billion for fiscal year 2005 ``and such sums as 
Congress deems necessary'' for each of the four succeeding fiscal 
years.
     HACU recommends that HSIs and other minority-serving 
institutions be granted the same number of points as those received by 
other institutions for ``prior experience'' in TRIO grant competitions.
     HACU recommends that the authorization level for GEAR-UP 
programs increase to $425 million for each of the five years of the HEA 
and any additional funds ``which Congress may deem appropriate and 
necessary.
     HACU recommends migrant program funding of $75 million 
``and such sums as Congress deems necessary'' as an annual funding base 
for the entire HEA cycle.
     HACU recommends providing long term immigrant students, 
who have successfully completed a secondary school program of study or 
its equivalent and has been physically present in the United States for 
a continuous period of not less than five years, with eligibility or 
federal financial aid programs.

Title V:
     HACU recommends that the funding level for HSIs under 
Title V specifically directed at infrastructure enhancement for 
undergraduate programs at 2 and 4-year institutions be increased to 
$465 million per year ``and such sums as Congress deems necessary'' for 
the authorized cycle of years following the reenacting of the HEA.
     HACU recommends the elimination of the two-year wait out 
period for HSIs between grant completion and new application cycles. 
Currently the two-year wait out period is in direct opposition to the 
intent of Title V to enhance the quality and accessibility of HSIs.
     HACU also recommends that the ``50% percent low-income'' 
assurance requirement be eliminated from the funding criteria of Title 
V: this requirement applies only to HSIs among minority-serving 
institutions and creates an unnecessary and costly administrative 
burden.
     HACU recommends the creation of a new section under Title 
V of the HEA to be identified as Part B, Graduate Education to be 
authorized at $125 million ``and such sums as Congress deems 
necessary'' for each year of the HEA cycle.
     HACU recommends $30 million authorized for each year of 
the HEA cycle ``and such sums as Congress may deem necessary'' for the 
creation of a new section under Title V Part D of the HEA to be known 
as the Technology Enhancement Program for HSIs.
     HACU recommends the creation of a new category of HSIs to 
be known as ``Associate HSIs'' for institutions that do not meet the 
eligibility criteria for HSI designation.
Title VI:
     HACU recommends the creation of a new section under Title 
VI to be authorized for $30 million per year ``and such sums as 
Congress may deem necessary'' for the establishment of an Institute for 
Pan-Hispanic International Studies under the auspices of a consortium 
of eligible HSIs.
     HACU recommends establishing a new section under Title 
VII to be authorized for $20 million per year for the HEA cycle, ``and 
such sums as Congress deems necessary'' to support the ``Hispanic 
International Scholars and Fellows'' program.

Title VII:
     HACU recommends that $10 million be authorized ``and such 
sums as Congress deems necessary'' to create a graduate fellowship 
program under Title VII of HEA to establish partnerships between HSIs 
and non-HSIs for increased Hispanic student enrollment and success in 
graduate and professional programs.
     HACU is also recommending that Congress authorize $15 
million per year of the HEA cycle, ``and such sums as Congress deems 
necessary'' to support a ``HSI Fellowship Program'' under Title VII, 
Part A, Subpart 5 of the HEA.
     HACU recommends that Congress authorize $20 million per 
year of the HEA cycle, ``and such sums as Congress deems necessary'' to 
support an HSI/FIPSE program within Part B of the ``Fund for the 
Improvement of Postsecondary Education'' of the HEA.
                                 ______
                                 
    Chairman McKeon. Thank you.
    Mr. Chin?

    STATEMENT OF GEORGE CHIN, UNIVERSITY DIRECTOR, STUDENT 
       FINANCIAL ASSISTANCE, CITY UNIVERSITY OF NEW YORK

    Mr. Chin. Good morning. Thank you for this opportunity to 
talk to you this morning about the financial aid simplification 
aspects of H.R. 3039. As mentioned before, I've worked in this 
business a while, and in addition, I have the honor of serving 
my financial aid colleagues as the national chair elect of the 
National Association of Student Financial Aid Administrators 
this year.
    After working in this business for about 30 years, I think 
I probably have a little bit of perspective on some of these 
provisions, but let me start with just kind of going through a 
high level overview of what happens with the EFC determination.
    Fundamentally, we look at a family's total income, and then 
we subtract out what are viewed as mandatory expenses for 
living, taxes, state taxes, and we arrive at a remaining income 
number, and then we look at assets, and determine whether the 
family might be able to use some of those assets for college. 
We total these up, and then we take a chunk of that and say, 
the family maybe should spend this for college.
    That EFC is what drives a lot of the financial aid process 
because then we derive financial need from that by subtracting 
that EFC from the cost of attendance, and in our business, our 
daily job is then to try to find enough money to fill that 
need, so that the student can afford to go to college.
    The EFC formula can really be viewed as a model to try to 
determine what a family can pay, but as in any model, we have 
to find some balance between the complexity of the model and 
how accurate it is or how well it reflects what real life is, 
and life is fairly complicated.
    There are economists who would sit there and say that the 
current model is probably not complex enough because it relies 
on a snapshot of a family's ability to pay for college, when a 
family's ability to pay for college is built up over a number 
of years, and Dr. Sandy Baum from Skidmore, I think, lays out 
the case fairly well in a publication NASFAA put out a number 
of years ago, ``Primer on Economics for Financial Aid 
Professionals.'' We would be glad to make some copies available 
for people to look at and get a little more detail about her 
discussion about that.
    On the flip side of this, there are students and parents 
who fill out the form and do view it as complicated, and too 
complex, because there are a lot of questions, and the form is 
long. There is some vagueness from the definitions of the data 
elements.
    I think Congress has tried to address this somewhat in the 
past by looking at the Higher Education Act and creating a 
simplified needs test and a zero formula to try to walk some 
students through the process a little better, a little quicker, 
and maybe in a little less confusing manner, and the Department 
has undergone some efforts in the past to simplify the form by 
reformatting the questions, moving things around.
    All these things have worked to some degree, and we still 
sit here today and say, well, isn't there a better way to do 
it.
    I think this bill takes a pretty good stab at moving 
forward to try to push that along a bit.
    People have always suggested, and I think even this bill 
suggests, that there are ways for people to file only selected 
parts of the form, and with today's technology, there are many 
people who have suggested that you could put a smart form on 
line which would essentially guide a student to the right 
section of the form and streamline the process.
    My concern about that coming from where we are is that 
access to internet services is not yet universal, and like most 
things in life, those who are less well off have less access, 
so the very people we may be looking to help may be the ones 
that are not able to take advantage of kind of the 
technological advance in the process.
    I think there are some really nice things in the bill. You 
proposed linking the eligibility to filing the simple needs 
test to other means based programs, and in our business, 
sometimes we sit there and say, how many times does a student 
have to prove they are poor. I think it's a nice concept. My 
concern about that is occasionally we read these stories about 
fraud in some of the other programs, and I would not want that 
to bleed over into our programs. I think the Inspector Generals 
take a dim view of any thought of fraud.
    I think we have to kind of look at that fairly carefully. I 
think it is nice and important for the advisory committee to 
take a comprehensive look at these formulas because they are 
old. They are showing their age. The world has changed.
    The basis for which we built some of these components need 
to be looked at. We need to look at whether building a lot of 
the process on the tax code is appropriate, because that has 
gotten more complex.
    I think it is good, and I think you have directed the 
Committee to look at simplifying it, but the caution is as we 
talk about models, you have this tradeoff in complexity and 
accuracy, and when you start reducing elements, you may make 
the model less accurate and have more concerns and be less 
sensitive to families in different circumstances.
    In our business, our trademark words are ``fairness'' and 
``equity.'' We would like to maintain that.
    Although I heard last night they did something on the 
Senate floor, but as an example of some of the things that need 
to be looked at, the state tax tables. The Department has gone 
and adjusted the tables as the law directs them to do, but we 
also know that the Federal income tax data is not comprehensive 
in collecting information on all the different types of local 
taxes students and families pay. We may need to look at a 
different means of building those tables off better models or 
better data.
    My line on that is we took sales tax out as an income tax 
deduction in the 1980's, so at the very least, the Federal 
income tax data does not reflect sales taxes, which are fairly 
significant for many people.
    I think it is wise on the part of the Committee to tell the 
Advisory Committee to look at program integrity and program 
intent and the cost of it because at some point, you have to 
have something that fits into the framework of the programs. 
Just to kind of say our task is to reduce elements without 
looking at the broader picture would not result in a product 
that is terribly helpful to us.
    I thank the Committee for putting forth this effort. I hope 
we can all work collaboratively. I hope the Advisory Committee 
works collaboratively with us to come out with a good product 
at the end of the day. I will field any questions you may have 
when Mr. Moore gets done with his testimony.
    Thank you.
    [The prepared statement of Mr. Chin follows:]

   Statement of George Chin, University Director - Student Financial 
                Assistance, City University of New York

Introduction
    Mr. Chairman and members of the Subcommittee on 21st Century 
Competitiveness, I thank you for the opportunity to testify today on 
the financial aid simplification aspects of the Expanding Opportunities 
in Higher Education Act of 2003. I am George Chin and I am employed by 
the City University of New York (CUNY) which has an enrollment of over 
200,000 students at 19 colleges in the system. I also currently serve 
the National Association of Student Financial Aid Administrators as the 
National Chair-Elect of its board of directors for the 2003-2004 year. 
I offer my comments based on a view built on thirty years of work in 
student financial aid at CUNY and other institutions.
Purpose and Fundamentals of EFC determination
    I think it would be useful to briefly review a few fundamentals 
about need analysis to set a framework for considering changes in the 
methodology and process. Historically, the measurement and analysis of 
family finances has been done to arrive at an expected family 
contribution (EFC) as an indicator of what the family could reasonably 
be expected to contribute toward the total cost of attending college. 
Simplistically, this assessment involves three major steps.; The first 
step is determining the discretionary income available to the family by 
subtracting ``mandatory'' expenses such as federal and state taxes, and 
a reasonable living allowance from the total income. The second step 
measures the net family assets to see if it is reasonable to expect 
some contribution from these amounts. The final step is to add the 
amounts determined from the first two steps, and assess a portion of 
the resulting discretionary income. The outcome of this calculation is 
called the Expected Family Contribution or EFC.
What challenges do we face in a review of the need analysis process?
    In a technical sense, the EFC formulas could be viewed as a 
predictive model to determine the financial ability of a family unit to 
pay for college. In that context, we are challenged to the balance 
between complexity, accuracy, and, in this case, equity. In looking at 
the current set of formulas, essentially based on decades-old work, 
many would make the case that the current model is too simple. 
Economists, such as Dr. Sandy Baum of Skidmore College, would say that 
the current process, which relies on a financial snapshot, does not 
reliably measure a family's ability to pay for college because it is 
insufficiently precise. A more complex model is necessary to gain 
greater precision. While time does not enable me to detail economic 
underpinnings the current Federal Methodology, you can find a more 
thorough review of these issues in the NASFAA publication Primer on 
Economics for Financial Aid Professionals written by Dr. Baum.
    On the other hand, for many students, the application process is 
viewed as too complicated because of the length of the FAFSA form and 
the definitions of the data elements used for the analysis. In the 
past, efforts have been made to shorten the process for applicants 
through a simplified needs test and an auto-zero calculation based on 
income and tax filing status. Efforts have also been made to change the 
format of the application and reduce the number of questions to 
facilitate accurate completion but often by moving data elements onto 
worksheets. However, even these attempts have not been as successful as 
one would hope.
    Suggestions have been made that applications can be filed on-line 
using smarter forms with logic embedded to ask only those questions 
that are relevant for a particular applicant and his/her family. While 
this is feasible on a technological basis, it unfortunately may not 
significantly enhance the process for many high need applicants who 
have limited access to internet-based services
Moving Forward
    First, a brief comment on the proposed simplified needs test 
improvements. We appreciate the addition of recipients of means-tested 
federal benefit programs to the population eligible for the simplified 
needs test and the zero expected family contribution formulas. We hope 
that a mechanism for authenticating the receipt of these benefits is 
also part of this process to prevent fraudulent use of this provision 
and to ensure that federal student aid funds are provided to those who 
truly need them.
    Given the aged framework of the current formulas, it is appropriate 
and necessary to have the Advisory Committee on Student Financial 
Assistance comprehensively review the need analysis formula and the 
associated application design and process to facilitate easier and 
better student access to the financial aid programs. Given the 
complexity of the issue, we appreciate the stated consideration of 
program intent, integrity, and cost as well as the impact on the 
distribution of awards.
    The desirable outcome is to have a fundamentally sound set of 
formulas consistent with the underlying program rationale and sound 
economic underpinnings. In this context, the charge to the Advisory 
Committee can result in that outcome if the focus is on the entire set 
of programmatic concerns rather than predominantly on a goal of simply 
reducing the number of data elements and shrinking the form.
    For example, the case can be made that a reduced set of data 
elements can still have a fairly high correlation with the net outcome 
derived from a larger set of data elements. However, the result of 
fewer data elements may be less sensitivity to the overall financial 
state of the family. If this is true, it may be less equitable and may 
as types of income or assets are eliminated from consideration, lead to 
higher program costs. The end result is that it could be extremely 
difficult to distinguish needy families from those who have the means 
to pay. This could inappropriately increase the applicant pool thereby 
diverting scarce dollars away from the students the programs were 
designed to serve.
    It is clear the underlying allowances and offsets in the formulas 
need to be reviewed to determine the relevancy of the allowance and the 
means of updating them. Certainly, the recent discussion of the 
updating of the state and other tax allowance table would suggest a 
comprehensive review, as called for in the bill, is timely. Further, 
recent press about the effect of dependent student earnings on aid 
eligibility should be reviewed to determine the right offset and 
taxation rate of the net income after offsets.
    We understand that the task for the Advisory Committee is complex 
and appreciate the directive for the use of a forms design expert and 
consultation with interested parties . We hope that this consultation 
ensures that the needs of all of the partners in the delivery system 
can be addressed. For example, a vastly simplified federal application 
could have the unintended consequence of complicating the whole process 
if states or institutional partners find it necessary to use a separate 
application to deliver funds according to their statutory structure. A 
system that requires multiple applications could create even greater 
barriers for high need students.
    It is difficult to disagree with an effort to seek simplification, 
ease the process for students, and communicate better with students to 
assure them of their potential eligibility for Federal Pell Grants. We 
hope the result of the study maintains fairness, equity and 
effectiveness for the use of the student aid programs.
    Thank you for the opportunity to appear before you today. I would 
be pleased to answer any questions you may have.
                                 ______
                                 
    Chairman McKeon. Thank you.
    Mr. Moore?

   STATEMENT OF DAVID G. MOORE, CHAIRMAN AND CEO, CORINTHIAN 
                         COLLEGES, INC.

    Mr. Moore. Good morning, Mr. Chairman, members of the 
Subcommittee. I am David Moore, chairman and CEO of Corinthian 
Colleges, which is one of the largest private capital funded 
postsecondary education companies, with 125 colleges and 17 
corporate training centers in the U.S. and Canada. We serve 
over 50,000 students. Our colleges are members of the Career 
College Association, and I am pleased to speak on behalf of its 
members.
    Our colleges serve the large and growing segment of our 
population seeking education to become job ready and to advance 
their careers in today's demanding economy. These are mostly 
working adults trying to balance careers, family, and personal 
obligations to get the education they need to advance in the 
workforce.
    Our colleges offer diploma and certificate programs, as 
well as associate's, bachelor's and master's degrees. We have 
also begun to offer fully on line education programs.
    We are especially proud of our high rate of graduate 
placement, 82 percent.
    I am pleased to support the Expanding Opportunities in 
Higher Education Act of 2003. It takes several important steps 
toward achieving the goals of increasing access, 
accountability, affordability and quality.
    I will focus my remarks on the single definition of an 
``institution of higher education,'' elimination of the 90/10 
requirement, and distance education reforms. We believe these 
changes are about students, not institutions.
    With regard to the single definition, the proposed changes 
in the bill are another step in an evolutionary process that 
Congress began 5 years ago. The proposal is not radical. It 
simply recognizes that the landscape of higher education is 
changing.
    The key point is that today's student population is 
different from a generation ago, when the current definitions 
were created. Most students today are not traditional. That is 
they are not individuals who graduate from high school, go 
immediately to a 4-year college, and depend on their parents 
for financial support. Seventy-three percent of today's 
students are non-traditional. They are working adults that 
Corinthian and other proprietary schools serve.
    All institutions, whether they are proprietary, public or 
non-profit, are changing to meet the needs of these students. 
It is the proprietary schools, however, that are especially 
geared toward giving them the preparation they need to advance 
in the workforce. This, together with the growth that career 
schools have experienced makes it appropriate and timely to 
move toward a single definition.
    With regard to the elimination of the 90/10 rule, again, we 
strongly support the proposal in this bill. The rule had a 
dubious premise. It has not been implemented coherently, and 
most importantly, it is a prime example of the law of 
unintended consequences.
    The 90/10 rule creates the wrong incentives. It pushes 
institutions away from serving the most in need of financial 
aid, especially the poor, minorities and women. In fact, the 
relatively heavy usage of financial aid puts a school at risk 
of violating 90/10. The risk will only go up if proposals to 
increase Pell grants, increase loan limits to front load Pell, 
or equalize loan limits are adopted.
    Faced with this risk to their survival, it is hardly 
surprising that schools would change admission programs and 
location away from those types of students and toward appealing 
to more affluent students who can pay their own way, yet that 
is absolutely contrary to the goal of increased access to the 
Higher Education Act.
    Another fundamental contradiction that 90/10 creates 
involves the goal of affordability. With Title IV aid limited, 
one way that a school can raise its non-Title IV revenues is 
simply to increase tuition. This, of course, is completely 
contrary to everybody's goal of making colleges more 
affordable.
    The time has come to end this misguided requirement.
    Finally, with respect to distance education, the need for 
reforms to make financial aid more available to students who 
wish to pursue higher education on line is well established.
    The findings of the Web-Based Commission in H.R. 1992 
passed in the House in the last Congress shows the time is 
right for change. I would like to especially draw your 
attention to the Department's second report on the distance 
education demonstration program that was just released.
    The Department has found no evidence that waiving the 
current restrictions on distance education in the Act has had 
any negative consequences. It has also called for the law to be 
amended to expand distance education opportunities for 
students. It urged that the quality of distance education, the 
key point about these programs, be assessed by accrediting 
agencies.
    We agree that an accreditation based approach should be 
used to allow on line education programs to be Title IV 
eligible. The Expanding Opportunities Act takes this approach.
    Mr. Chairman, there are many other positive features of 
this bill, such as the proposals for financial aid 
simplification. The three reforms that I have addressed are 
good reasons to support it, and I am pleased to do so.
    Thank you for your time.
    [The prepared statement of Mr. Moore follows:]

  Statement of David G. Moore, Chairman and Chief Executive Officer, 
                       Corinthian Colleges, Inc.

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to testify about the Expanding Opportunities in Higher 
Education Act of 2003. I am David G. Moore, Chairman and Chief 
Executive Officer of Corinthian Colleges, Inc. Corinthian was founded 
in July 1995, and today is one of the largest for-profit postsecondary 
education companies in the United States. We are active members of the 
Career College Association (CCA) and have participated in the 
development of its legislative positions. As I will show below, the 
number, breadth and diversity of Corinthian's colleges allow us to 
speak on behalf of the interests of CCA's members.
    Corinthian's colleges serve the large and growing segment of our 
population seeking to acquire career-oriented education to become more 
qualified and marketable in today's increasingly demanding workplace. 
We offer programs at a range of levels of education to serve the needs 
of these students, including diploma and certificate programs, and 
degree programs at the Associate's, Bachelor's and Master's levels. Our 
focus is primarily in healthcare, business, technology and criminal 
justice. We operate 80 colleges and two continuing education centers in 
21 states, and 45 colleges and 15 corporate training centers in seven 
Canadian provinces. Additionally, Corinthian offers programs 
exclusively online for students seeking Bachelor's and Associate's 
degrees in business, criminal justice and accounting, and Master's 
degrees in business administration and criminal justice. In particular, 
our FMU Online programs offered through our Florida Metropolitan 
University are serving primarily adult students who must concurrently 
manage careers, family and personal lives to gain the education and 
training they need.
    We have achieved great success in helping students to become job 
ready and advance their careers in today's competitive economy. This is 
shown by the increase in our total student population to over 50,000 
and our high rate of graduate placement--82% of our graduates are 
employed within six months of graduation in the field for which they 
have been trained.
    My own background includes experience in both for-profit and public 
higher education. Prior to helping found Corinthian, I served as 
president of National Education Centers and of DeVry Institute of 
Technology in Los Angeles, CA. From 1980 to 1992, I worked at Mott 
Community College in Flint, MI, where I served as President for eight 
years. Prior to joining Mott, I had a 20-year career in the U.S. Army, 
retiring at the rank of colonel.
    At the first hearing held by the Education and the Workforce 
Committee on the reauthorization of the Higher Education Act, Chairman 
Boehner outlined four guiding principles--accessibility, 
accountability, affordability, and quality. We agree with these goals, 
and believe that the Expanding Opportunities in Higher Education Act of 
2003 takes a number of important steps toward achieving them. In my 
testimony, I will focus on three important aspects of the proposed 
legislation--the single definition of an institution of higher 
education, the elimination of the 90/10 requirement, and the reforms 
relating to distance education.
I. Single Definition of Higher Education Institution
    The Expanding Opportunities Act would strike the sections in the 
Higher Education Act (HEA) that continue to provide for disparate 
treatment of for-profit institutions as compared to public and non-
profit institutions. It would create a new consolidated section in the 
HEA on the definition of an institution of higher education.
    Corinthian and other career colleges support these changes. They 
represent further steps in a direction that Congress began five years 
ago in the last reauthorization in recognition of changes that were 
occurring in higher education. Those trends have continued and 
accelerated so that it increasingly makes little sense to perpetuate 
distinctions that are rooted in history. Changing student demographics 
and the goals of our society for postsecondary education support the 
additional steps that the Expanding Opportunities Act would now take.
    In the Higher Education Amendments of 1998, Congress transferred 
all definitions of an institution of higher education from four 
different sections of the HEA to two sections in a new Title I. This 
transfer and consolidation recognized that the purpose of all such 
institutions is to provide access to higher education. Furthermore, the 
transference and consolidation made plain that the same core 
requirements applied to all institutions--authorization by a state in 
which the institution operates, accreditation by an agency recognized 
by the Secretary of Education, and certification of eligibility to 
participate in the Title IV student financial assistance programs by 
the Department of Education. Nonetheless, distinctions between for-
profit institutions, on the one hand, and ``traditional'' institutions, 
on the other hand, continued.
    The Expanding Opportunities Act takes another step in an 
evolutionary process. It is not a radical step, but rather a 
recognition that the landscape of higher education has substantially 
changed. This change can be described in a variety of ways, but most 
tellingly it is revealed by the changes in demographics and purposes of 
students who pursue higher education. As the National Center for 
Education Statistics reported recently, today's undergraduate 
population is different from a generation ago. The ``traditional'' 
undergraduate--an individual who earns a high school diploma, enrolls 
full time in college immediately after finishing high school, depends 
on parents for financial support, and either does not work during the 
school year or works part time--is now the exception rather than the 
rule. In 1999-2000, just 27 percent of undergraduates met all of these 
criteria. Thus, 73 percent of all undergraduates were in some way 
``nontraditional.'' 1
---------------------------------------------------------------------------
    \1\ NCES, Nontraditional Undergraduates, Findings from the 
Condition of Education 2002.
---------------------------------------------------------------------------
    These students are older, have family and work responsibilities, 
and are concerned with preparation for entry into the work force or 
advancing their careers. Most institutions of higher education, 
including nonprofit and public institutions, have modified their 
program offerings in recognition of this fundamental shift. For-profit 
institutions from their inception, however, have addressed the needs of 
this nontraditional population, and prepared and certified them as 
ready for entry and advancement in the work force. As a result, career 
colleges comprise 46 percent of all postsecondary institutions and 38 
percent of all Title IV--eligible institutions. They are roughly evenly 
divided between degree and non-degree granting institutions, and enroll 
approximately 1.3 million students annually. 2 The 
maturation of for-profit career institutions, of which Corinthian's 
colleges are a prime example, and the way that they match the needs of 
a changing student population, affirm that the perpetuation of 
distinctions among institutions of higher education can no longer be 
justified.
---------------------------------------------------------------------------
    \2\ Career Training Foundation, A Profile of Career Colleges and 
Universities 4-5 (2003).
---------------------------------------------------------------------------
    The movement toward a true single definition of an institution of 
higher education is appropriate and timely. Indeed, it could be argued 
that the bill does not go as far as it should as it preserves a two-
year rule applicable only to for-profit institutions, continues to 
treat for-profit foreign institutions separately, and restricts for-
profit institutions from funding sources for institutional purposes. 
Nevertheless, the proposed amendments will encourage institutions 
funded by private capital to fill the needs of our society's modern 
work force.
II. Elimination of 90-10 Rule
    As a result of the consolidation and revision of the definition of 
an institution of higher education, the Expanding Opportunities Act 
would eliminate the requirement that for-profit institutions have no 
more than 90 percent of their tuition revenues derived from the Title 
IV programs. We strongly support the elimination of this ``90-10 
rule.'' The 90-10 rule had a dubious premise to begin with, has failed 
to be implemented coherently and, most importantly, has had pernicious 
effects that undermine the public policy goals of the student financial 
assistance programs.
    The hypothesis supporting the enactment of the 90-10 rule and its 
predecessor, the 85-15 rule, was that students'' willingness to pay 
some portion of their own money would be an indication of the quality 
of for-profit institutions. At best, this was an unproven supposition. 
The rule never purported to examine the quality of these institutions 
directly; instead, it relied upon an inference about student payments 
that could just as easily have been explained by other factors--
particularly socioeconomic status. The 90-10 rule also involved a 
second-guessing of the decisions of accrediting agencies that have the 
responsibility for assessing educational quality in the Title IV 
system. This has proven unwarranted since, as a recent report by the 
Inspector General has shown, the agencies that principally accredit 
for-profit institutions have been more focused on assessing student 
achievement than those agencies that accredit public and nonprofit 
institutions. 3
---------------------------------------------------------------------------
    \3\ Final Audit Report, ED-OIG/A09-C0014 (July 2003).
---------------------------------------------------------------------------
    On its face, the 90-10 rule appears to be simple. The statute 
states that a proprietary institution must have ``at least 10 percent 
of the school's revenues from sources that are not derived from funds 
provided under Title IV, as determined in accordance with regulations 
prescribed by the Secretary. 4 The regulations developed by 
the Department of Education, however, are complex. Many of the 
provisions in these regulations and the Department's interpretations of 
them are counter-intuitive and unsupported by the statute. For example, 
the Department has created a presumption that any Title IV funds 
disbursed or delivered to a student are used to pay the student's 
tuition, fees and other institutional charges, even if the student has 
received and used non-Title IV funds for those purposes. 5 
This presumption, in other words, turns the 90-10 rule on its head. A 
rule designed to ensure that students use at least some non-Title IV 
funds, in fact, counts Title IV funds first and diminishes the 
importance of non-Title IV funds in making the 90-10 calculation. Non-
Title IV funds are disadvantaged or not counted in other ways as well. 
For example, funds paid to the institution from tuition savings plans 
established by students and their families pursuant to Section 529 of 
the Internal Revenue Code may not be counted. This is clearly the 
students'' own money, and yet the Department's regulations do not 
recognize these funds. Nor are institutional funds used to match Title 
IV funds under the Perkins and SEOG programs recognized. 6 
In all of these instances, non-Title IV funds are utilized by 
students--again, the ostensible purpose of the 90-10 rule--but the 
Department's regulations and interpretations focus on maximizing the 
counting of Title IV funds.
---------------------------------------------------------------------------
    \4\ HEA Sec. 102(b)(1)(f).
    \5\ 34 C.F.R. Sec. 600.5(e)(2).
    \6\ See Id. Sec. 600.5(e)(3).
---------------------------------------------------------------------------
    It must also be recalled that the 90-10 rule is highly punitive. 
Institutions must notify the Department within 90 days of the end of 
their fiscal year if they fail to satisfy the rule, including the 
Department's unexpected interpretations of it, and they then lose their 
eligibility to participate in the Title IV programs completely. 
7 There are no opportunities for correction or remediation, 
and the Department has no authority to impose liabilities or fines as 
is the case in other instances where institutions may be found in 
noncompliance with the numerous and often complex provisions of the HEA 
and Department regulations.
---------------------------------------------------------------------------
    \7\ Id. Sec. 600.5(f),(g).
---------------------------------------------------------------------------
    The 90-10 rule as implemented by the Department of Education, 
therefore, is full of traps for the unwary, and the effects of failing 
to meet it are draconian. Has it nonetheless succeeded as a reform 
measure? The answer is that it has clearly not. Other reforms have had 
a far greater impact in removing substandard institutions from the 
Title IV system. In fact, the 90-10 rule has had a number of unintended 
adverse consequences.
    First and foremost, the 90-10 rule creates disincentives for 
institutions to serve those most in need of student financial 
assistance, especially the poor, minorities and women. These are the 
groups who most heavily use need-based grant assistance, particularly 
Pell Grants, to gain access to higher education. Institutions are 
precluded from denying access to this financial aid for students who 
qualify. A study commissioned by CCA demonstrates that the 90-10 ratio 
of an institution is not a measure of its quality but rather a 
reflection of the number of students in need that it serves; the more 
students who are in need, the greater is the institution's 90-10 ratio. 
8
---------------------------------------------------------------------------
    \8\ American Economics Group, The 90-10 Rule: Impact on Career 
Colleges 14, 16 (September 2003).
---------------------------------------------------------------------------
    The heavy usage of such Title IV aid puts an institution at risk of 
violating the 90-10 rule. This risk will increase dramatically if 
proposals to increase the Pell Grant authorization and loan limits, to 
front-load Pell Grants, or to equalize loan limits are adopted. An 
institution facing the risk of losing its eligibility to participate in 
the student financial assistance programs, and unable to deny financial 
aid to students who qualify, would have no choice but to consider 
changing its location or the programs offered to appeal to potential 
enrollees who are able to pay tuition and fees from their own funds. 
The study commissioned by CCA suggests that this is precisely what has 
happened. While Title IV funds pay all costs for about 31 percent of 
the students who attend career colleges, Title IV funds pay almost none 
of the costs for approximately 25 percent of these students. 
9 This suggests that many institutions have reoriented their 
missions and programs away from students who are most in need of 
assistance--the very students the Title IV aid programs are designed to 
serve in order to promote access to higher education. In this critical 
way, therefore, the 90-10 rule is inconsistent with, and defeats the 
purpose of, promoting access and the public policy goals of the Higher 
Education Act.
---------------------------------------------------------------------------
    \9\ Id. at 9, 15.
---------------------------------------------------------------------------
    The 90-10 rule also undercuts the aim of improving the 
affordability of higher education. Very simply, the rule creates 
incentives for institutions to seek funds that are not covered by 
financial assistance under Title IV. Since Title IV aid is limited 
under the HEA, principally by statutorily prescribed loan limits and 
authorizations for Pell Grants, an institution can obtain additional 
non-Title IV revenue by raising its tuition and fees. This, of course, 
cuts completely against a solution to what has rightly been described 
as a crisis in college costs. 10 The 90-10 rule, however, 
creates just such an incentive. 11 Moreover, raising tuition 
and fees in order to achieve 90-10 compliance exacerbates the problem 
that I previously noted, i.e., that the 90-10 rule pushes institutions 
away from serving economically disadvantaged student populations.
---------------------------------------------------------------------------
    \10\ The College Cost Crisis, A Congressional Analysis of College 
Costs and Implications for America's Higher Education System.
    \11\ Id. at 3.
---------------------------------------------------------------------------
    In sum, the 90-10 rule has an unproven and dubious premise. Its 
implementation has created regulatory complexity and anomalous 
interpretations. And, most importantly, the 90-10 rule has created 
incentives that undercut the goals of access and affordability that 
underpin the student financial assistance programs and the goals 
rightly articulated by Chairman Boehner for this reauthorization. The 
time has come to end this wrong-headed experiment in public policy and 
to eliminate the 90-10 rule from the HEA.
III. Distance Education
    The Expanding Opportunities Act takes another crucial step to 
expand access to higher education by reforming outdated and outmoded 
provisions of the HEA that restrict the availability of financial 
assistance to students enrolled in online courses of study. The bill 
would sever the link that has allowed restrictions on correspondence 
education--the ``50 percent rules'' --to be applied to educational 
programs delivered by telecommunications. It would create an 
accreditation-based system for assessing the quality of online 
educational programs in order to make them eligible to participate in 
the Title IV programs. And, it would remove restrictions that have 
disadvantaged non-degree certificate and diploma programs of study. We 
support all of these reform measures. They are timely, well-founded, 
and carefully constructed to balance expansion of access with 
protections of the integrity of the student financial assistance 
programs.
    The need for the reforms contained in the Expanding Opportunities 
Act is now beyond question. The case for such reforms was made by this 
Subcommittee and the Committee on Education and the Workforce two years 
ago when, based upon the findings of the Web-Based Education 
Commission, the Internet Equity and Education Act of 2001 was passed. 
12 We commend Vice Chairman Isakson for his leadership on 
this issue.
---------------------------------------------------------------------------
    \12\ H.R. 1992; Internet Equity and Education Act of 2001, H. Rep. 
No. 107-225, 107th Cong. 1st Sess. (2001) citing The Power of the 
Internet for Learning, Report of the Web-Based Education Commission 
(2000).
---------------------------------------------------------------------------
    As the Web-Based Commission found, online learning is one of the 
most promising developments to have occurred in higher education over 
the past decade. It leverages the power of technology to enrich 
learning and create new educational opportunities. A substantial and 
growing body of research demonstrates that online instruction produces 
quality learning outcomes comparable to, and perhaps even better than, 
traditional education programs. Literally millions of students, 
especially working adults, will have higher education opened to them. 
13
---------------------------------------------------------------------------
    \13\ Id. at 1-13.
---------------------------------------------------------------------------
    Since the House of Representatives passed H.R. 1992, other 
developments have confirmed that the time is ripe for changes to the 
HEA to foster online education. Senator Michael Enzi (R-WY) chaired a 
hearing a year ago in which, among other things, the General Accounting 
Office (GAO) presented testimony on the growth of distance education, 
its expansion of access to older students in the workforce, the 
important role that accrediting agencies play in reviewing distance 
education programs, and the need to modify restrictions that limit 
eligibility for student aid. 14 Senator Enzi, Senator 
Bingaman and other co-sponsors have now introduced S. 1203, which would 
use an accreditation-based approach to make online education programs 
Title IV--eligible. 15 Corinthian and other institutions 
with an interest in online education supported this bill as well as a 
similar bill, H.R. 2913, introduced by Congressmen Kildee and Andrews 
on July 25, 2003.
---------------------------------------------------------------------------
    \14\ GAO, Distance Education, GAO-02-1125T (September 26, 2002).
    \15\ 149 Cong. Rec. S. 7494 (June 5, 2003).
---------------------------------------------------------------------------
    In July of 2003, the Department of Education released its Second 
Report to Congress on the Distance Education Demonstration Program. 
16 Significantly, the Department reported that it had 
uncovered no evidence that waiving the current restrictions in the HEA 
and the Department's regulations that impede distance education had 
negative consequences. On the contrary, the Department stated that 
``[b]ased upon the experience gained to date through the demonstration 
program, and the trends that are evident in the development of distance 
education generally, the Department recognizes the need to amend the 
laws and regulations governing Title IV student financial assistance in 
order to expand distance education opportunities. 17 The 
Department's report also notes that it has become evident that there is 
``a great deal of confusion'' about how to interpret the existing 
restrictions, especially the interplay between institutional and 
student eligibility. 18
---------------------------------------------------------------------------
    \16\ Second Report to Congress on the Distance Education 
Demonstration Program (July 2003).
    \17\ Id. at iv.
    \18\ Id. at 5.
---------------------------------------------------------------------------
    As to policy direction, the Department stated that there is a 
growing consensus that the 50 percent rules need to be revised or 
eliminated, and that the quality of distance education programs should 
be assessed through the same accreditation process that governs on-
campus programs. 19 In fact, accrediting agencies, such as 
those that accredit Corinthian's schools, have developed standards and 
procedures that address the special issues raised by distance education 
and that are even more rigorous than the bill would require. 
20 The Department's conclusions are supported by the 
findings of a recent survey conducted by Babson College and the Sloan 
Consortium which found that most chief academic officers and university 
presidents believe that Internet-based courses are already at least 
equivalent to lecture hall courses in educational quality. This survey 
also found a substantial increase in the number of online students to 
more than 1.6 million--11 percent of those enrolled in postsecondary 
institutions. Public and for-profit institutions are particularly 
seizing the opportunities presented by online education. 21
---------------------------------------------------------------------------
    \19\ Id. at 20.
    \20\ Accrediting Commission of Career Schools and Colleges of 
Technology, Standards of Accreditation, Section XI; Accreditation 
Reviews, Distance Education Programs.
    \21\ Seizing the Opportunity, The Quality and Extent of Online 
Education in the United States, 2002 and 2003.
---------------------------------------------------------------------------
    These developments amply support the reforms on distance education 
in the Expanding Opportunities Act. The bill appropriately severs the 
linkage between telecommunication courses and correspondence courses, 
and focuses the 50 percent restrictions where they were originally 
intended--on correspondence education. The heart of the bill's approach 
to distance education is in section 102. This would make a distance 
education program eligible for the Title IV programs if it is offered 
by an institution that has been evaluated and determined to have the 
capability to effectively deliver distance education programs by an 
accrediting agency which is recognized by the Secretary and has 
evaluation of distance education within the scope of its recognition. 
The accrediting agency would achieve such recognition by demonstrating 
that it has standards appropriate to the evaluation of distance 
education. In particular, the accrediting agency would have to assess 
measures of student achievement specific to programs offered through 
distance education. It is now well-recognized, based upon the 
developments that I have described, that the key consideration relevant 
to distance education is quality assessment, and that accrediting 
agencies are the appropriate entities to make those assessments. Thus, 
the accreditation-based approach of the Expanding Opportunities Act 
provides the right solution with appropriate safeguards to ensure that 
accrediting agencies effectively serve as the gatekeepers to expanding 
access through this mode of educational delivery.
    Finally, the bill addresses section 484(l) of the Higher Education 
Act to remove unwarranted disadvantages applicable to certificate and 
diploma programs. Using additional 50 percent rules, section 484(l) 
currently equates these programs to correspondence education and thus 
prevents student eligibility even if an institution is eligible to 
offer online programs. 22 As the Department stated in its 
most recent report, these additional restrictions have created 
confusion. More fundamentally, there is no reason why an online 
certificate or diploma course of study is like a correspondence program 
when a degree program delivered online is not. Indeed, certificate and 
diploma programs hold special promise for working adults who wish to 
pursue new competencies and credentials so that they may advance their 
careers with current and future employers. Thus, removing the linkage 
of online certificate and diploma programs to correspondence is also a 
beneficial feature of the Expanding Opportunities Act.
---------------------------------------------------------------------------
    \22\ HEA Sec. 484(l)(1).
---------------------------------------------------------------------------
IV. Conclusion
    The Expanding Opportunities Act would take many other positive 
steps. For example, the proposals for financial aid simplification--the 
study of the feasibility of simplifying the needs analysis methodology 
and the simplified needs test improvements--are valuable and should 
lead to the more efficient delivery of aid to students. However, the 
proposals on the single definition of an institution of higher 
education, elimination of the 90-10 rule and reform of the HEA 
provisions that impede online education are particularly critical, in 
our view, and we urge their adoption.
                                 ______
                                 
    Chairman McKeon. Thank you very much.
    Mr. Moore, in your testimony, you talked about the 90/10 
rule. How do you respond to those who say the changes in this 
bill specific to distance education, 90/10, and the 
institutional definition combination will lead to an increase 
in fraud and abuse in the student aid programs?
    Mr. Moore. Fraud and abuse is a legal issue, and those who 
lie, cheat, and steal should be prosecuted and dealt with. The 
last thing that any of us want in this industry is any excuse 
to abuse the Federal financial aid or use of those funds.
    We fully support and will continue to support any measures 
that will reduce fraud and abuse. However, our point is that we 
need to be focused on measures that are actually doing that, 
not circumstantial evidence that really has nothing to do with 
fraud and abuse.
    The IG and the state laws have adequate mechanisms in place 
to discover fraud and abuse, and in the case of the 
institutions within our corporation, we have 13 full time 
internal auditors that do nothing but program reviews, similar 
to the Department of Education. We have an SFA audit that is 
completed by an independent outside auditor. We have a big four 
auditing firm that looks at our financial aid.
    The state audits us. The guarantee agencies audit us, and 
from time to time, the Department of Education audits us.
    It is hard to believe that with all that auditing, there is 
much opportunity for fraud and abuse. There is an opportunity 
for mistakes, however. If you look at the stack of bureaucracy 
that we have to work through every year to administer the 
financial aid program, you understand why 30 cents on every 
dollar of Federal financial aid goes just to the administration 
and protection of those funds.
    We whole-heartedly support trying to reduce the paperwork 
support, but I do not see any correlation at all between the 
changes that are being proposed here and an opportunity for the 
growth of fraud and abuse.
    Chairman McKeon. With regard to changing of the definitions 
to include all schools under one definition, I visited some 
propierty schools in New York, some of them have been in the 
family business for 100 years. Yet, they are denied the 
opportunity to compete for certain funds, just because of these 
definitions.
    Why would we exclude schools like that? Why do you see that 
in combining these definitions? How would you see that as a 
move forward?
    Mr. Moore. Actually, there are two pieces of that issue. 
One is an administrative issue that really has more to do with 
you folks than with us. Today, every time you make a change to 
some piece of the Higher Education Act, your staff has to go 
back through all the pieces of legislation and find the 
individual references to proprietary schools versus traditional 
schools, and make those corrections.
    History has shown that is a human endeavor, and with it 
comes a lot of error. From time to time, pieces get left out. 
In the last legislation, there were a number of times when the 
Committees had to go back at the last minute and try to find 
pieces of the legislation that inadvertently got left out. The 
single definition will relieve that issue.
    Second, we are dealing with students, not with 
institutions. The purpose of these funds is to provide an 
opportunity for students to go to school. There should be no 
difference between a student who is attending one of my schools 
in Florida, Metropolitan University in Tampa, and a student 
that is going to a Florida State school across the street. They 
are both capable of going to school and are both tax paying 
citizens. They should not be prejudiced against simply because 
one is going to one institution versus the other.
    There has been a fair amount of hyperbole about our reading 
of the special set-asides that have been put in place over the 
years to protect a certain class of students.
    The fact is that all of those programs are grants that have 
to be applied for. There are no entitlements in any of those 
funds. The likelihood that we have schools who meet the basic 
eligibility for most of those grant funds is slim. On the other 
hand, should one of our schools meet those requirements and 
successfully get through the grant application process, I do 
not find any justification to support denying that student 
access to those funds simply because of the school they are 
attending. That is a pretty fundamental issue in this country 
in terms of providing access and not discriminating against 
citizens who are seeking any number of activities, certainly to 
include higher education.
    Chairman McKeon. Thank you very much. Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman. I appreciate the 
testimony of all our witnesses here.
    We seem to have three areas where we are going to have to 
make some decisions here. One is the single definition, the 90/
10, and the 50 percent. I think probably we will have greater 
success or maybe more immediate success on the 90/10 and the 50 
percent.
    The 90/10 came in because we had some outrageous things 
happening out there, and this is one of the remedies, and maybe 
most of those institutions that were outrageous have gone by 
the wayside by now. I am willing to look at the 90/10.
    I think we have to recognize new technology, too. Distance 
learning is probably going to be a very growing thing and a 
very effective way of educating.
    David, if you and maybe if we have time, Dr. Heller, could 
respond to how you feel modification or elimination of the 90/
10 and modification of the 50 percent distance learning will 
help you better serve your students.
    Mr. Moore. Let me start with the 90/10 rule first. At the 
present time, legislation requires that any student that is 
eligible for Federal financial aid has to be granted to them.
    We concentrate on providing diploma level schools in the 
inner city. That is the bread and butter of what our 
corporation is doing. At the present time, if a typical 24 year 
old minority female, head of household, appears at our door 
step to go to school, chances are she will be eligible for 100 
percent of her tuition and fees and some living expenses 
through Federal programs. However we are being told that 
because of the 90/10 rule, we either cannot enroll her since 
she cannot pay the 10 percent, or we are in jeopardy of having 
to close the institution because we have enrolled a student who 
is the most needy of students, because they cannot come up with 
the 10 percent of their tuition.
    Today, we require every student who attends school to pay 
at least $25 a month while they are there. That may not seem 
like much to us, but for some families, that is an awful lot of 
money. That still does not meet their 10 percent rule.
    We are continuously faced with how to serve the population 
for which we have created this school to serve. We are in the 
inner cities and we believe we can make a difference there. 
However, we end up with the contradictory nature of the 
legislation on the one hand that says you must give that 
student everything they are entitled to. On the other hand, if 
we do it, the Federal Government is going to close your school.
    That is a classic case of unintended consequences. I do not 
believe that was Congress' intent when the 90/10 rule was put 
in place.
    Today, it serves no purpose. I would argue that the premise 
of it was dubious to begin with. If in fact the purpose was to 
nail the fly by night's and the bad actors, I think there were 
other ways to do that. I do not think the 90/10 rule had any 
effect on them.
    The fact is that any well run institution can avoid the 90/
10 rule, but what we end up doing is penalizing the students to 
do that. From an effective point of closing down bad schools, 
it is not going to have an effect. It certainly is not going to 
catch fraud and abuse, but what it does do is make it more 
difficult for companies who are in the inner city to try to 
provide those services to poor students.
    Mr. Kildee. The 50 percent rule, you just feel this is a 
means to really better educate students, it's a new 
technology--
    Mr. Moore. Let me talk about on-line programs just in 
general for a moment, if I could, philosophically. On line 
learning will always be second choice. A student always learns 
better sitting in a classroom with an instructor. It is no 
different than what is going on right here. This could have 
been done by teleconference. It could have been done by 
telephone, but the Members of Congress are going to learn more 
about the issues looking at us and watching us, watching how we 
avoid your pointed questions, whatever the point may be, none 
of which will happen through distance education.
    The point is, however, for a lot of students, second choice 
is their only choice, and there are hundreds of thousands of 
students out of that 75 million adults that have never been to 
college, who have never had any postsecondary training, that's 
the only way they will ever get access to it.
    To deny those students access to Title IV when their 
brethren can get to an actual campus and go to school without 
restrictions seems counter-intuitive, once again, to everything 
we are trying to do with education in this country.
    We do not have a lot of students that are doing on line. We 
use it as a hybrid program for the most part in my corporation, 
although we have totally on line, but the students that are 
enrolling in the totally on line program are people that are in 
circumstances that they cannot get to a campus to take classes.
    There is no justification to deny that person access to a 
quality education, and I believe that is the point and that is 
the concern we all have, whether we are up there with you or 
down here where we are, to ensure that on line program is the 
same quality that the on the ground program is.
    In our case, they are absolutely interchangeable. Same 
faculty. Same classes. Same curriculum. Same textbooks. We 
encourage every student to take some of their program on line. 
A student may take, when they do their own triage, they take 
what they think is simple on line. They take the hard stuff in 
the classroom. Eventually, they are going to sit back in a 
classroom, and if they did not get the basic skills on line, 
they are not going to make it through.
    We cannot afford to enroll and have a student that we do 
not believe we can graduate and most importantly, put to work 
at the end of the day, because that is the business we are in. 
We are in the business of jobs, of putting America to work, and 
particularly those Americans who for whatever reason do not 
have access to traditional schools.
    Mr. Kildee. Thank you very much. I appreciate your clarity. 
I will just make a comment because my time has run out. My main 
concern about the single definition is the effect it may have 
upon the minority serving institutions, which we have tried to 
give special care and concern to, and that is my main concern 
on the single definition.
    My time has expired. Thank you. Thank you, Mr. Chairman.
    Chairman McKeon. Thank you. Mr. Osborne?
    Mr. Osborne. Thank you, Mr. Chairman. Thank you all for 
being here today.
    I must admit to a little confusion here on two issues, the 
common definition and the 90/10 rule, that Dr. Heller and Mr. 
Moore somewhat diametrically oppose, and I understand Dr. 
Heller's concerns, I guess, on the common definition. I guess 
you are fearing dilution of funds? Is that primarily it? Mr. 
Moore, could you tell me quickly why you favor common 
definition? I know you mentioned it, but it did not process 
real well with me.
    Mr. Moore. Sure. Let me see if I can be a little more 
succinct. The principal reason for the common definition is to 
clear up and make simpler your legislative process. Right now, 
if you make a change in legislation concerning higher education 
or postsecondary education, your staff has to go through a long 
stack of existing legislation to find all the references and 
make those changes, and that often does not get done, and 
unintentionally, things get left behind. That is point No. 1.
    Point No. 2 is in those rare cases, and right now, out of 
over 4,000 proprietary schools, we can only identify 31 that 
even meet the minimum requirements to be eligible for these 
special programs. Should in fact a school be able to meet all 
of those requirements and successfully get through the grant 
process, I think we would argue those students should not be 
denied access to those funds.
    On the other hand, this is about students. This is not 
about a money grab. This is not about an attempt to open up 
Title III funds to our schools. In fact, it came as a surprise 
to me that the single definition would open up Title III, 
because we never considered using those funds, and I seriously 
doubt that we would.
    Mr. Osborne. Thank you. Dr. Heller, on the 90/10 rule, I 
think I understand Mr. Moore's arguments for supporting it 
might raise tuition. Could you again review for me why you 
oppose the 90/10 rule?
    Dr. Heller. Certainly, Congressman Osborne. I think the 
primary concern I have is over the issue of accountability. As 
I said in my testimony and went into more detail in my written 
testimony, the nation's public and private not for profit 
institutions are held to a number of accountability standards 
that for profit institutions are not held to today.
    Let me give you a few examples of these. I know 
accountability is certainly an issue that this Committee is 
concerned with, but the standards I am going to be talking 
about are standards that are already in place and have nothing 
to do with Federal regulations.
    For example, most public higher education institutions are 
held to reporting accountability standards by state higher 
education governing and coordinating boards that go well beyond 
the minimum thresholds for reporting that are required of all 
licensed postsecondary institutions in the state, including for 
profit institutions.
    Private not for profit institutions have a public service 
mission and are accountable to the public in ways that for 
profit corporations simply are not.
    I will give you an example. You can go to a web site and 
get the IRS Form 990 on private not for profit organizations, 
including colleges and universities, and you simply cannot get 
that level of information, financial and other information, 
about for profit corporations, particularly if they are 
publicly held.
    The accountability issue is my main concern about 90/10.
    Mr. Osborne. Thank you. Dr. Flores, you mentioned funding 
and weak Federal support for HSIs, I think, in your testimony, 
and yet in 1996, I think $10.8 million was available for these 
funds, and in 2004, it is $93.5 million. That is a 766 percent 
increase. I notice that you are requesting $465 million, which 
is almost five times as much as now being appropriated.
    Can you explain the reason for this disparity and why you 
are saying this is a weak Federal commitment, and why you feel 
this increase would be desirable?
    Dr. Flores. Sure. Thank you, Mr. Osborne.
    I would like to just point out a few important facts that 
create a context for my response. First of all, Hispanic 
serving institutions currently receive only about 50 cents for 
every dollar per student then the rest of the higher education 
institutions in the country get from all the Federal sources 
combined.
    In terms of Title V funding itself, at the present time, 
less than one-half of all the eligible institutions for 
participation in the Title V grant program receive any funding 
because there is not enough money to provide grants to every 
one of them.
    In addition, we already have reviewed data that indicates 
that within the next 5 years, non-profit HSIs will increase by 
no less than 100 more HSIs serving the students throughout the 
country.
    Of course, when you add up all those facts, then we have a 
picture very clearly of very severe under funding of our 
institutions. When we compute what is needed to bring about 
parity for those institutions as they continue to grow and 
serve rapidly growing numbers of students, that is what we 
calculated would be minimally required to bring about equity 
for those institutions at this time.
    Those were the kinds of numbers that we used to compute 
that was the correct amount to request from Congress.
    Mr. Osborne. Thank you. My time has expired. Mr. Chairman, 
thank you.
    Chairman McKeon. Ms. McCollum?
    Ms. McCollum. Thank you, Mr. Chair.
    I have been listening carefully to the testimony as well as 
reviewing it. I think some of the language that is being used 
here is rather interesting. In terms of industry versus 
institution.
    When I think of an industry, I think of a creation of 
something that is trying to create a profit. I think what Mr. 
Moore is describing is a profit for the business, and it is 
also something that is going to be profitable and worth 
something to the student.
    When I hear the word ``institution,'' I hear something that 
is created not only to better enrich the individual's life, but 
something that creates a legacy, something that is part of a 
community that builds up public character, not only for today, 
but for tomorrow. It becomes a tradition, it is embedded. It is 
a value. It is a goal. It is part of its mission.
    I am concerned that if we are to change this, we look at 
what we are doing very carefully. I have many institutions in 
my district. They have very specified missions as to what they 
are trying to accomplish just from their presence, as well as 
the mission and the goal that they would like to see the 
students who graduate know the direction.
    I think it is easiest to stay with what you know. I will 
use a women's college, which we are not talking about, the 
College of St. Catherine. Its goal and its mission is to create 
hope and opportunity not only for the community at large, but 
to instill that as part of a mission that a student takes 
forward.
    I trust that my friends and colleagues here will correct me 
if I am wrong, but the tribal college that I am familiar with 
in my district instills as part of its mission hope and 
opportunity for the community at large, as well as for that 
individual to be successful and achieve the American dream, 
something which many minorities in our country feel is a 
struggle to attain.
    When we talk about changing the 90/10 rule, I look at how 
will that affect that hope and opportunity, that justice, that 
quite often minorities in our country find very difficult to 
achieve.
    These colleges came to be for a reason. These institutions 
came to be for a reason, and that is because mainstream America 
was not offering that, and I do not know if we are at that 
level of color blindness yet, that our institutions know on a 
large scale quite often how to reach out to minority students.
    The other reason why I am very concerned about changing the 
rule on this is there were a couple of rules that were changed 
that had to do with the way grants are issued, many grants 
which come out of the oversight of this Committee, and I am 
going to give you two examples.
    We had grants that had been going to the Urban League to 
reach seniors, particularly minority seniors, whether they were 
African American, Hispanic, Latino, Somali, working with those 
seniors. Proven track record. Letters of accommodation.
    We had another group called Clues, and they work with 
mental health issues, especially with the Hispanic community in 
my district. Huge successes. Letters of accommodation. You're 
doing a great job.
    Well, as we went forward with faith-based education, the 
Urban League saw its senior program totally eliminated. Clues 
has seen their mental health reach totally being disrupted 
because of cuts in funding.
    With Dr. Heller's point and to Dr. Flores' point, I would 
like to ask you gentlemen, if there is no guarantee that the 
basic level of funding is in place for these institutions, what 
harm do we do by diluting a few dollars that are out there?
    I am out of time, Mr. Chair, so you can submit it to me in 
writing, gentlemen, and I will get it in the record. Thank you.
    Chairman McKeon. Thank you. Now the author of the bill, Mr. 
Cole.
    Mr. Cole. Thank you very much, Mr. Chairman.
    I am going to start with you, if I may, Dr. Heller, because 
I would really like to probe a little bit into your concerns 
about the definition.
    In your response to Congressman Osborne, and you did not 
get a chance to elaborate, so that is what I want to do here, 
it appeared to me--and in your comments, your main concern was 
simply it is going to dilute--open up, frankly, to more 
competition for a very limited pool of funds. I think that is a 
very legitimate point.
    On the other hand, is that the thrust of your opposition, 
we simply are going to spread what we would say is too small an 
amount of money over too great an area, or are there other 
specific things that concern you?
    Dr. Heller. It is a few issues, the issues of dilution of 
the funds, as you point out. It is the issue of accountability 
and differences in accountability among different types of 
institutions in the nation, and it is also the point that 
Representative McCollum just brought up about the differences 
in missions among postsecondary institutions in this country. 
It is those three areas that I have concerns about going to a 
single definition.
    Mr. Cole. Go with me a little bit further in this. I would 
turn around and say if we are trying to help students that are 
the neediest students, the ones that are most disadvantaged, we 
want to maximize the choices that they have available to them 
so they can pick an area that they think or an institution that 
they think meets their needs, and would we want to empower as 
many institutions as possible to pursue that type of student?
    Dr. Heller. I would argue, Mr. Cole, that right now we have 
a great deal of competition in postsecondary education markets 
in this country, and I think a lot of people who argue that the 
United States has the world's best system of higher education 
would say it is precisely because we have that kind of 
competition. In many other countries, students graduate from 
high school and a very small percentage are chosen for college 
and they are told where they are going to go and what they are 
going to study.
    In this nation, students have over 6,000 Title IV eligible 
institutions to choose from, and most students, other than 
those in perhaps the most rural areas, have a great number of 
institutions to choose from already, no matter what it is they 
want to study, and now with the explosion of distance 
education, even students in rural areas have an opportunity to 
choose from a broad range of institutions.
    That is why I don't think that changing the current law and 
going to a single definition will really help in terms of 
access and participation in college for the neediest students. 
I think that aspect of higher education is there. The 
competition is there. I think there are other barriers facing 
needy students right now.
    Mr. Cole. Wouldn't that be a decision for the student to 
make, not for us to make for the student?
    Dr. Heller. Well, the reality is that this Committee and 
the Congress has a lot of responsibility and a lot of authority 
to make decisions about funding, both in the Title IV programs 
in funding for students, and in the Title III and V programs in 
funding for institutions. I think Congress has to maintain that 
authority, and there are decisions that have to be made, and I 
would be very cautious about opening up the regulations, going 
to a single definition and returning us to an era where perhaps 
these funds were not spent as efficiently and effectively as 
they were and are being spent, I think.
    Mr. Cole. I am going to ask you a question on another 
aspect of your testimony, and I would like you to elaborate a 
little bit. You were sort of cautious about the 50 percent 
rule, but obviously, willing to entertain the idea of perhaps a 
modification.
    Could you elaborate, tell me what kind of modification you 
were really thinking about there that might still satisfy your 
concerns and yet move us into a more flexible and open 
situation?
    Dr. Heller. My main concern about going somewhat cautiously 
and easing the 50 percent rule is the demonstration project, as 
I said, has had about 100 institutions in it, and it has been a 
very well operated program.
    There are a couple of aspects of that that we need to keep 
in mind. Those 100 institutions are very carefully hand chosen 
by the Secretary for participation in that program. I would be 
very cautious about extrapolating from the experiences of 100 
institutions and just eliminating the rule and opening up 
distance education--funding for students in distance education 
in institutions that have more than 50 percent of students who 
are in distance education, to all 6,000 Title IV eligible--
    Mr. Cole. Do you have a specific change? You are clearly 
willing to entertain the idea of some change. What kind of 
change would you entertain?
    Dr. Heller. Well, I think perhaps the best way to go is to 
have the Secretary--give the Secretary the responsibility and 
authority to allow institutions to apply and then to choose 
institutions for participation in the program, and rather than 
going to the extreme of just opening it up and saying anybody--
any institution that right now is Title IV eligible--
    Mr. Cole. You would feel comfortable giving the Secretary 
the flexibility--giving the authority to review and make those 
decisions?
    Dr. Heller. Yes, with appropriate oversight; absolutely.
    Mr. Cole. Sure. I know I do not have too much time left. 
Mr. Moore, let me ask you, since you guys are sort of on 
opposite points of this view.
    In your institution, are there a large number of students 
currently that you think don't have access to you because of 
things like the definition difference that we have?
    Mr. Moore. Yes, sir; absolutely. Again, there are 75 
million adults that have no postsecondary training, 35 million 
that have not completed a bachelor's degree, we have over 100 
million adults in this country that require postsecondary 
training that do not have access to traditional institutions, 
and through a combination of the traditional role of 
traditional schools, traditionally doing what they have 
traditionally done, they need to be traditionally encouraged to 
traditionally continue to do that.
    That is going to take care of about 20 percent of the adult 
population. That is where the bulk of the funding goes. Almost 
95 percent of all Federal funding goes to serve that 20 percent 
of the population.
    It is the other 80 percent of the population that somebody 
must step up and serve. That is what we are particularly 
attuned to. I am not suggesting that traditional schools should 
change their mission or change what they are doing. I am not 
particularly suggesting that you change and give us any 
particular advantage. We are not asking for additional funds. 
We are not asking for different funds. We are not asking to be 
treated any differently than anybody else.
    All we are asking is that we not be treated any differently 
than anybody else is, simply because of the student body we 
serve, which is the overwhelming majority of the American 
citizens.
    Mr. Cole. I believe my time is up. I yield back, Mr. 
Chairman. Thank you.
    Chairman McKeon. Thank you. Mr. Hinojosa?
    Mr. Hinojosa. Thank you, Mr. Chairman.
    Chairman McKeon, I would like to thank you and Ranking 
Member Kildee for holding this important hearing today.
    The Higher Education Act is all about expanding 
opportunities. I would also like to thank all the witnesses for 
joining us this morning. I especially appreciate Dr. Flores' 
testimony on behalf of Hispanic serving institutions.
    I would like to echo his encouragement that we include a 
long overdue graduate program for Hispanic serving institutions 
in the bill that we eventually report out of Committee.
    I hope, Mr. Chairman, that we can continue to move forward 
in a bipartisan manner on this issue.
    I would also like to commend Congressman Cole and Chairman 
McKeon for making many of the needed improvements to several of 
the exemplary programs, such as HSI Title V, Part A, to HEP and 
GEAR-UP and also to TRIO.
    Many of these changes have been advocated by the Hispanic 
Education Coalition and others. They are certainly a step in 
the right direction.
    However, I share many of the witnesses' reservations, 
concerns about the unified definition of an ``institution of 
higher education,'' and I share their concerns of the proposed 
elimination of the 90/10 rule.
    I remember only too vividly the abuses of the proprietary 
sector nearing the late 1970's and the early 1980's, when I was 
on the Texas State Board of Education, and we wound up in Texas 
eliminating at least 60 percent of the proprietary schools 
because of the fraud and what they were doing to education and 
especially to our students.
    Many of the victims of the fraud and abuse in the student 
aid programs were Hispanics. They were not provided access to 
higher education, but rather access to debt without a means to 
pay for it.
    I would hope that we could continue to discuss whether for 
profit businesses should receive Federal institutional 
development dollars.
    The witnesses have pointed out the under funding of 
institutions of higher education such as HBCUs, HSIs, tribally 
controlled colleges and universities, and many others who are 
the ones who are recruiting and helping get minorities into 
higher education.
    How can we ensure that we never return to proprietary 
school abuses of those periods of the 1970's and 1980's?
    Finally, I would like to ask Dr. Flores to share with the 
Subcommittee why HACU and our nation's Hispanic communities 
believe it is critical that we establish a post-baccalaureate 
program for HSIs. Also, why we cannot afford to wait another 6 
years until the next reauthorization of higher education in 
2009.
    Dr. Flores. Thank you, Mr. Hinojosa.
    We reported in our written testimony that less than 5 
percent of all the graduate degrees earned in the country are 
earned by Hispanics. We have a tremendous deficit with respect 
to graduate education opportunities for our young students and 
adults.
    At the same time, our HSIs need to expand their capacity to 
create or develop new programs for graduate education, because 
this is where the overwhelming majority of our students are 
concentrated. More than 60 percent of all the students 
attending higher education today attend an HSI, and yet, many 
of those HSIs don't have graduate programs or have very limited 
graduate programs.
    There is obviously a national deficit involved in expanding 
opportunities for young people and adults to go into graduate 
programs because the institutions themselves need to be 
enhanced, and for most faculty appointments and high level 
appointments and administrative positions in higher education, 
people need to have Ph.D's or graduate degrees, as credentials 
for admission to those jobs. They also, of course, need to go 
into the corporate community and serve in leadership positions 
that require MBAs and other kinds of graduate and professional 
degrees.
    The nation as a whole is in tremendous need of improving 
opportunities for graduate education and to wait another 6 
years would seem to prolong the agony of our community.
    Mr. Hinojosa. If the Chairman will yield, yesterday, we 
heard testimony in the Select Education Committee about the 
need for teachers and professors at the university level 
because we are expecting another 2.5 million students to get 
into colleges and universities, and without professors, we 
cannot handle that demand, and naturally, it seems to me that 
we have to address the shortage of the professors and they have 
to get into the Master's and Ph.D. programs in order to teach 
in colleges.
    I thank you for your response.
    Dr. Flores. Thank you.
    Chairman McKeon. Thank you. Mr. Keller?
    Mr. Keller. Thank you, Mr. Chairman. Mr. Chairman, let me 
ask you some questions regarding the student work penalty. I 
read your written testimony, and you thought that was something 
that was worthy of being studied.
    I put language in this bill to have the Advisory Committee 
on Student Financial Assistance study it, and for those folks 
not familiar with this issue, I may briefly describe it, and 
then ask you for your opinions.
    The University of Central Florida in my area costs about 
$12,000 to go to. If we provide a student with a $4,000 Pell 
grant, a low income student, that is enough to pay for his 
tuition, books and fees, but he has to come up with the other 
$8,000. If he's an ambitious kid, and he gets a part time job, 
and he makes $8,000, guess what, he has just lost his Pell 
grant.
    His choices, go take out a loan for $8,000, and when you 
graduate from college 4 years later, you have $32,000 in 
student debt, as our Chairman likes to say, you have a mortgage 
without a house.
    My first question to you is as someone who is in the 
financial aid arena, do you believe the student work penalty is 
a problem that needs to be addressed?
    Mr. Chin. I might not characterize it--I think it is an 
issue that needs to be reviewed and looked at in terms of--I 
hesitate to use the word ``tax,'' but I mean, how much of a 
student's earnings is to be directed to their expected 
contribution toward college?
    The current process takes an offset of $2,500-$2,600 out of 
the wages, and then we subtract out income taxes and Social 
Security taxes, and then we assess half of the remaining income 
that is left over as part of the expected contribution.
    This falls back into the need analysis in the sense that we 
look at prior income as a snapshot of the student's or the 
family's ability to pay. You tend to look at that as kind of 
the snapshot is something that would be ongoing, and you say 
that is what the student can earn or the family will earn, and 
you expect a certain piece of it.
    Mr. Keller. Let me stop you before you go too far down the 
line. I just gave you a real life scenario. You would not 
characterize that as a problem?
    Mr. Chin. It's a problem with how you treat earnings. If 
you look at the current process, when you look at a student's 
wages, we exclude--back out the need based wages they make, 
because we say we gave that to the student to earn toward their 
course of attendance. On need based aid, we do back those wages 
back out.
    Mr. Keller. I think we back out about $2,400.
    Mr. Chin. We back out $2,400 as an initial offset against 
any non-need based wages before we begin to go through the rest 
of the process, but on the FAFSA form itself, there is an 
exclusion--say we happen to give the student a work study job 
for $8,000.
    Mr. Keller. Right.
    Mr. Chin. To fill that need, assuming the student had 
$8,000 worth of need. When he files the form the following 
year, your tax return says you earned $8,000, but we know 
$8,000 of it was a need based set of earnings, so on the FAFSA 
form, they take that back out so that for need analysis 
purposes, the net income from that $8,000 work study job is 
zero.
    It doesn't impact their Pell grant eligibility because the 
wages have been netted down to zero as a function of netting 
that excluded set of wages out.
    The issue is the difference in how we treat need based 
earnings that we have awarded to the student versus wages the 
student may have earned on their own, and I think that is kind 
of a conceptual thing that needs to be resolved in this 
comprehensive review of the analysis and how wages, whether 
they are need based or non-need based, get handled in the 
process.
    One of the tough things about building models is reading 
the intent. In some cases, we can read the intent pretty well 
and say, yes, the student intended to use that for education, 
and in other cases, it may not be. That is what makes the 
process--
    Mr. Keller. Let me ask you this, because I am getting real 
short on time. One of the proposals is instead of giving him 
credit for $2,400 that they can earn without having it count 
against them, give them say credit for $5,000 they can earn 
without having it count against them.
    Some think that is a good idea. The down side of that is it 
costs $460 million extra. What are your thoughts on that 
proposal?
    Mr. Chin. I think our fundamental thought about this is in 
this review of need analysis, we have to go through and find a 
sound economic rationale for some of these allowances, and 
whether it is $2,500 or $5,000, right now it is probably 
someone's estimate with updated inflation over the years, and I 
think when Congress gets through this, what they probably need 
to go through is say, all right, what is the cost of working, 
what is the cost of ancillary expenses associated with working, 
that clearly are not available to students, what part of their 
wages they earn may be attributed to a period of non-
enrollment, and you might net that out.
    I think there is a thought process to go through to 
establish what the appropriate level is, but it fits into our 
general picture that those are the things that need to be 
reviewed, and they are not easy.
    Mr. Keller. Thanks.
    Chairman McKeon. Thank you. Mr. Tierney?
    Mr. Tierney. Thank you, Mr. Chairman. I thank the witnesses 
for their testimony today.
    Dr. Heller, you mentioned during your testimony the idea of 
earlier in the process determining for students in junior high 
school or high school their eligibility and giving them some 
notice and promise on that.
    Would you expand on that for us?
    Dr. Heller. Certainly, Congressman Tierney.
    Let me give you the example that I didn't have time to talk 
about in my oral testimony.
    The State of Indiana has a program called the Indiana 21st 
Century Scholars Program, and I have summarized this in my 
written testimony. This program is targeted at low income 
youth. I believe the standard is families with children about 
150 percent of the poverty level and below. It is certainly 
below the maximum Pell grant income eligibility.
    What the State of Indiana has done has been to make a 
commitment to these students when they are in seventh or eighth 
grade, that they will fund the full cost of their college 
tuition at any public institution in Indiana, or a private 
institution, in an equivalent amount of what the public 
institution is, for 4 years, if these students agree to do the 
following: they have to graduate from an Indiana high school 
with a GPA of at least 2.0 or a C average, which is a very 
reasonable merit standard, we can all agree.
    They have to agree to not use illegal drugs or alcohol. 
They have to apply for admission to a college in Indiana, and 
they have to apply for state and Federal aid.
    If the students take all those steps, the State has 
committed and will commit to them as early as when they are 14 
or 15 years old, to pay their tuition for 4 years.
    The legislature in Indiana did this recognizing that is a 
long term commitment of an entitlement, and yet the State has 
done that, and I think the most important thing we know about 
this program is that independent research has shown it has been 
a significant contributor in improving the low income student 
college access and success rate in the State.
    I recognize that it is a little bit of a radical program 
for some here in Washington perhaps, because of that early 
commitment, but I think there are lessons that could be learned 
about not just making a commitment to students of aid, but at 
least starting with what this legislation calls for, which is 
getting the information out there about eligibility sooner.
    As I said in my testimony, I would encourage Congress to 
think perhaps a little outside the box about making the kind of 
commitments with Federal Pell grants that the State of Indiana 
has made with its state money.
    Mr. Tierney. Thank you very much. Mr. Chin, what are your 
feelings about the administration's recent change in 
disallowing state and local tax setoffs in the financial aid 
process? Do you think that is a wise thing?
    Mr. Chin. I think it was something they were clearly 
authorized by statute to update and they did update them, and 
the outcome was that for the most part, the individual rates in 
the table got reduced, but I think, as I mentioned before, this 
is one of those issues that probably falls into a comprehensive 
review that the Advisory Committee will do, and what is an 
appropriate means of determining that offset.
    I think the current statute directs the Department to use 
data from the Internal Revenue Service, and at least in my 
mind, that data understates the local tax burden for students.
    I think the Department followed the rules they were 
supposed to follow in updating it. I think they were just put 
in a position where they were directed to use data that was not 
necessarily the best set of data for making that determination.
    I think if the Advisory Committee goes through its analysis 
and finds a better means, a better basis for determining that 
state and local tax burden for the purpose of the need 
analysis, then the Committee can go forth and make that 
modification in the law, and maybe we will end up with a better 
set of tables.
    For the moment, given that we know that the data probably 
understates the state and local tax burden, I think it may be a 
good idea to kind of suspend that update until we get a better 
handle on it.
    Mr. Tierney. Thank you very much. Dr. Heller, with respect 
to the 50 percent rule, should we not think about doing 
something more in the accreditation so that is a factor? I 
liked your idea about giving the Secretary some discretion 
about which programs would qualify or not, but do we have 
enough in terms of standards of what would qualify or not? Are 
we doing enough in the area of accreditation of those distance 
learning programs?
    Dr. Heller. Because of the nature of distance education and 
some of the history we have had in this country with problems 
with institutions that were purely in distance education, we 
used to call them correspondence schools, business, I would be 
a little bit reluctant to rely only on the accreditation 
process, and that is why I recommended and suggested having 
some kind of special process for institutions to apply and for 
review by the Department and the Secretary would provide an 
extra assurance that we have the right institutions in these 
programs and serving students in an appropriate manner.
    Mr. Tierney. What criteria would the Secretary use if not 
accreditation?
    Dr. Heller. I think there would probably be additional 
information. Right now, the accreditation process, as I 
understand it, is a fairly high level process in terms of 
institutional review, and especially with the growth of 
distance education programs, accreditation is only now starting 
to deal with some of the details of distance education, 
particularly technology based distance education, and I think 
perhaps we ought to suggest that the Secretary get out ahead a 
little bit of the accreditation process and try to come up with 
criteria and sets of standards that would provide the 
assurances that the money is being used efficiently and 
effectively.
    Mr. Tierney. Thank you.
    Chairman McKeon. Thank you. Mr. Carter?
    Mr. Carter. Thank you, Mr. Chairman. Dr. Heller, on the 50 
percent rule that we are talking about in this Internet and for 
those of us like at my age, it used to be correspondence that 
we were talking about, most of the universities that I am 
acquainted with, and I graduated from two, and my children are 
either out or going to an university right now, most major 
universities have rules that the last 30 hours have to be in 
the school, in the university, where they are going to graduate 
from.
    Take the University of Texas, without firing any shots at 
them, but I think it pretty well pertains to most of the major 
universities, they do not offer very many classes at night at 
all, if any.
    Therefore, a student who for some financial reason might 
have to either transfer to a different school, have a job so 
they can pay for it to finish school, they are not able to 
finish at the school that they might have wanted to finish from 
because there is no distance education they can use to get that 
last 30 hours at the school they were enrolled in, they had to 
move to a new school.
    Most of them will have additional hours, and generally, 
these last 30 hours, there is only one or two classes per 
section that they have to have to meet their requirements to 
graduate, so you are generally adding probably two and in some 
instances three more years of going to school and working in 
order for them to receive that degree.
    This is something that I have experienced in my family, and 
I know many families who have experienced that. Wouldn't each 
of the universities almost have an obligation to expand the 
distance education to provide a means for a savings, both by 
the folks who are having to borrow the money from the United 
States government and the kids who are having to put out their 
own money to get through school? Isn't that the kind of 
accommodation we ought to be making for our students? And how 
does that fit in your view of some reluctance on expanding the 
50 percent rule?
    Dr. Heller. I agree, Representative Carter, that students 
today, and I think Mr. Moore said this earlier, are very 
different than students when we first passed the Higher 
Education Act almost 40 years ago. We have many more working 
adults. We have many more students who attend multiple 
institutions and run into the kinds of problems that you talked 
about.
    I think distance education does hold great promise for 
being able to reach students who because of time constraints, 
geographic constraints, family constraints, can't attend a 
traditional class that often meets during the day, during what 
are typically working hours. And I think there are many 
institutions out there--Penn State has, I think, one of the 
most well-respected distance education programs on its campus 
that allows students to take courses at pretty much any time 
they want; they're not bound by a traditional semester 
schedule, often they're self-paced, and exactly to meet the 
needs of those kinds of students we were talking about.
    Having said that, I would be reluctant to suggest that 
Congress should get into the business of telling colleges and 
universities and dictating to colleges and universities 
requirements about how many hours a student has to attend that 
institution to be able to qualify for a degree.
    So if you are suggesting that Congress ought to take a look 
at finding ways for institutions to ease up on this rule of 
having to attend the last 30 hours or 25 hours, whatever it may 
be, I would be reluctant to have Congress get into that 
business. I think that Congress historically has given a lot of 
autonomy to institutions to make decisions about academic 
issues, and in my mind that's clearly an academic issue, and I 
would not want to see Congress getting involved in that.
    I think the marketplace, the higher education marketplace, 
is responding very well--for profit institutions, not-for-
profit privates, and public institutions are responding to the 
needs of these students, and I don't think that Congress needs 
to look at putting in regulations that will stifle that kind of 
competition and innovation that I think is going on right now.
    Mr. Carter. I actually was not speaking to regulating--I'm 
not somebody that believes Washington ought to regulate 
anything in the level of work on what you do and running your 
schools. But I think they do have an obligation, the schools 
have an obligation, to offer an alternative to this basically 
onerous procedure if a student if a student is forced to leave 
school and they lack 28 hours to graduate, they're not able to 
graduate, they have to start over at another institution closer 
to home so they can finish, and add two or three more years to 
their cost.
    I think schools have an obligation to have long distance 
methods where they can finish school at the school of their 
choice.
    Dr. Heller. Yes, I agree. I think that is an obligation on 
the parts of colleges and universities. And I think most are 
trying to respond to that.
    Mr. Carter. Mr. Moore, if you don't mind, one of the 
questions I would like to ask you is I run into--I used to 
teach Sunday school for 20 years, and I know lots of kids that 
are college-age kids over the last 20 years, and higher 
education gives--one of the problems that I saw some for-profit 
institutions like you represent was some of the kids were put 
in the programs, they signed up, they paid a big chunk of money 
to get in--most of it borrowed, if not all of it borrowed--to 
get into a program that they were not well-advised to get into, 
didn't have a possibility of completing. They worked at it for 
usually about four to 6 months and quit and lost every dime 
that they put into the programs. And they owed the money.
    I've seen that on more than one occasion. What's going on 
in your industry to prevent that from happening and to refund 
those moneys when children are ill-placed in schools where they 
ought not be?
    Mr. Moore. Thank you, sir. Let me address that from two 
points of view. First, a national statistic. Fifty percent of 
all students who enter traditional colleges drop out in their 
first year. So if we're concerned about large payments being 
made to institutions and the money being lost, my suggestion is 
we start with the traditional schools first. Because that's 
where the greatest losses take place. Ten years later, those 
drop-outs show up on our doorstep as a 28-year-old trying to 
finish school.
    Now let me address what we're doing. We're in the business 
of putting America to work. I don't want to enroll a student 
that I'm not convinced will complete the program and we can put 
to work. We provide admissions tests up front to make certain 
they're smart enough to get through the program, we put the 
students through an intensive counseling program before we 
enroll the student to make certain they understand what they're 
getting into, and to make certain that they really understand 
the career that they're going to go to.
    The programs you're talking about were some 1200 schools 
that were put out of business 15 years ago, rightfully so. I 
would hope that you don't have any evidence of that kind of 
behavior in the last few years, at least, and certainly not in 
any of our schools.
    Mr. Carter. I have heard stories, but that--thank you.
    Mr. Moore. We'd love to have the evidence of those stories, 
because we'll deal with them.
    Mr. Carter. Thank you. My time has expired. Thank you.
    Chairman McKeon. Thank you. Mr. Owens.
    Mr. Owens. Yes. Gentlemen, as you are leaders in the area 
of higher education, I hope you will bear in mind that we have 
a war against terrorism going, which is going to absorb 
tremendous amounts of taxpayers' money. And that war against 
terrorism makes assumptions that higher education plays no 
insignificant role.
    Our Homeland Security Department has very little--pays very 
little attention to higher education. It's another example of 
gross mismanagement in our war against terrorism not to 
understand that the first and most important weapon in the 
fight against terrorism is an educated populace. An educated 
populace in the general sense that people can make decisions in 
a complex world that will contribute to our effort to fight 
terrorism.
    But in a more specific sense, we need lots and lots of 
educated people at every level. The anthrax technician has not 
been created yet. So a few envelopes of anthrax shut down this 
capital, you know, for three or 4 weeks and shut down our 
Senate building for 4 months, because there are a limited 
number of anthrax technicians who know how to clean it up. God 
forbid we should have a major anthrax attack of ten envelopes 
sent somewhere. I mean, it's bad for first responders, we 
depend on police and fire to do all the first responding, and 
in a biological attack, what do police and firemen know about 
rebuffing a biological terrorist attack? You need specially 
trained people to do that. Maybe they should be connected to 
hospitals, but the nurses can't do it and doctors can't do it; 
you need another category of people.
    We had a big blackout in the Northeast recently, and they 
said it's not just the equipment and the supplies and the 
physical infrastructure, but the people are wearing out, the 
kind of people who can deal with that.
    So at every level we need more educated people. There's 
room for proprietary schools as well as other schools, the 
traditional schools, and I'd like to see them all prosper and 
all be able to make a maximum contribution. However, we are 
forced, given the limited amount of funds and the fact that 
instead of going forward and increasing the amount of money 
we're investing in our education, we are actually decreasing 
the amount. It's a blunder that we hope we can get corrected, 
but until then, we have to make these gradations in terms of 
where are people seeking an education, higher education, where 
can they get the best quality, best value.
    And I'm not the one who is going to say the proprietary 
schools of America don't give a lot; I know a proprietary 
school which is an excellent school, opening great 
opportunities to minorities and low income students, with a 1 
percent default rate. So they're doing very well.
    On the other hand, I know of another school or set of 
schools that's built an empire on swindling minority and low 
income students. What my previous colleague mentioned, get them 
to enroll, get a big loan, pay a down--have no intention of 
giving them a decent education, and swindling them.
    We had a big investigation some time ago and we got rid of 
a lot of them, but there are some still around. And my question 
is--mainly to you, I guess, Mr. Moore--given the fact you don't 
have accreditation and a number of other things that 
traditional non-profit schools have, what are you willing to do 
to make certain that we have a better way to evaluate the good 
proprietary schools versus those that still tend to swindle 
students? How much transparency do you think your association 
and your colleagues are willing to submit to? Let us see your 
statements; you don't have to follow them in the same way as a 
non-profit institution, but we ought to be able to go somewhere 
and check to see your financial status, the quality of your 
faculty, and--how much are you willing to put on the screen so 
everybody can have a look at it when they're evaluating whether 
or not this proprietary schools is really a good one?
    Mr. Moore. Thank you, and thank you for the opportunity to 
try to correct some of the facts.
    First off, all of our schools are accredited. Most of them 
are accredited by national accrediting agencies. And even the 
Department of Education agrees that the national accrediting 
agencies are far more strict and instill far higher levels of 
discipline in terms of the school operation than the regionals 
do--the regional accrediting agencies that my colleague is 
talking about.
    So it's simply not true that the proprietary schools do not 
have the level of oversight that traditional schools do. I 
think anyone familiar with the operation of both--and I've been 
both places, I've run a public community college and I'm now 
running a--
    Mr. Owens. Well, you, yourself, said before there were some 
scandals 10 or 15 years ago.
    Mr. Moore. That's correct.
    Mr. Owens. Massive scandals. Since then you've started 
doing something different?
    Mr. Moore. Well, those schools have been put out of 
business, those people have been put in jail. Keep in mind that 
when the Congress throws gold in the streets, bad people are 
going to pick it up and run with it. And that's what happened 
in the '80's. There was so much effort to try to get student 
financial aid out that the money was put out without the 
oversight mechanisms in place. And a lot of bad people picked 
it up.
    The same thing is going on at traditional schools. Every 
quarter, there's a large list of traditional colleges and 
universities that are sanctioned by the NCAA because fraud and 
cheating is going on in their athletic programs.
    Now in our schools, if that level of fraud and cheating 
went on, we'd be putting somebody in jail and closing the 
school.
    So I think it's unfair to assume that there's a different 
level of accountability that's being held for proprietary 
schools versus traditional schools.
    Mr. Owens. Are you willing to submit to greater 
transparency in terms of your finances and--
    Mr. Moore. Well, I don't know how you could be more 
transparent than we are. Every quarter, we have to publicly 
announce where every penny that we spent went. We're subject to 
SEC accountability. We're now subject to Sarbanes-Oxley--a $3 
million-plus project--just to get the accountability. I will 
submit to any transparency that you submit to traditional 
schools, too.
    Mr. Owens. So regional accreditation, you would submit to 
that, too.
    Mr. Moore. Our standards are far beyond regional 
accreditation. In fact, we're trying to move a group of nine 
university schools in Florida to regional accreditation because 
the accreditation standards are easier than they are for the 
national accreditation.
    Mr. Owens. Now you speak for Corinthian Colleges here, or 
you speak for proprietary schools in general?
    Mr. Moore. Well, I can certainly speak for myself, and I 
think I can speak for any proprietary school that's in the same 
situation we're in.
    Mr. Owens. Well, I hope that you will find some way to 
provide some leadership within your higher education community 
to address the issue that I raised at the beginning. We need 
more money.
    Mr. Moore. That's why I'm here, sir.
    Mr. Owens. Greater realization that all higher education 
institutions are very much needed, and we need to open the eyes 
of the administration to the fact that even something as basic 
as a fight against terrorism requires that we have more people 
coming out of our higher education institutions.
    Mr. Moore. You'll be pleased to know that we were the first 
homeland defense degree program offered in the United States--
was offered through our schools.
    Mr. Owens. Thank you,
    Chairman McKeon. Thank you. I want to thank the witnesses 
for being here today, for your testimony. As we move forward in 
this process, I'm sure we'll be reaching out to you and asking 
for your input, and if you'll continue to give us that, it will 
help us as we move forward to try to reauthorize the Higher 
Education Act.
    There being no further business now, the Committee stands 
adjourned.
    [Whereupon, at 11:23 a.m., the Subcommittee was adjourned.]

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