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



             H.R. 4283, COLLEGE ACCESS AND OPPORTUNITY ACT

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

                                HEARING

                               before the

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

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              May 12, 2004

                               __________

                           Serial No. 108-58

                               __________

  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, Staff Director
                 John Lawrence, Minority Staff Director


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

                              ----------                              
                                                                   Page

Hearing held on May 12, 2004.....................................     1

Statement of Members:
    Boehner, Hon. John A., Chairman, Committee on Education and 
      the Workforce..............................................     2
        Prepared statement of....................................     5
    Grijalva, Hon. Raul M., a Representative in Congress from the 
      State of Arizona, Prepared statement of....................    76
    Hinojosa, Hon. Ruben, a Representative in Congress from the 
      State of Texas, Prepared statement of......................    69
    Hoekstra, Hon. Pete, a Representative in Congress from the 
      State of Michigan, Prepared statement of...................    74
        Question submitted for the record........................    77
    McCollum, Hon. Betty, a Representative in Congress from the 
      State of Minnesota, ``Editorial: Gentrification/Too Much on 
      U.S. Campuses'', submitted for the record..................    72
    Miller, Hon. George, Ranking Member, Committee on Education 
      and the Workforce..........................................     5
    Norwood, Hon. Charlie, a Representative in Congress from the 
      State of Georgia, Prepared statement of....................    76
    Porter, Hon. Jon, a Representative in Congress from the State 
      of Nevada, Prepared statement of...........................    77

Statement of Witnesses:
    Boyle, Jim, President, College Parents of America, 
      Washington, DC.............................................     8
        Prepared statement of....................................    12
        Response submitted for the record........................    77
    Grayer, Michael, Recent Graduate, Virginia College, Jackson, 
      Mississippi................................................    28
        Prepared statement of....................................    31
        Letter submitted for the record..........................    83
    Martin, Dr. Dallas, President, National Association of 
      Student Financial Aid Administrators, Washington, DC.......    13
        Prepared statement of....................................    16
        Additional statement submitted for the record............    79
        Response submitted for the record........................    78
    Reed, Dr. Charles, Chancellor, California State University 
      System, Long Beach, California.............................    22
        Prepared statement of....................................    25
    Wasserman, Rebecca, President, United States Student 
      Association, Washington, DC................................    17
        Prepared statement of....................................    21
        Response submitted for the record........................    78

Additional materials supplied:
    American Medical Association, Statement submitted for the 
      record.....................................................    56
    Corrigan, Dr. Robert A., President, San Francisco State 
      University, Statement submitted for the record.............    38
    National Consumer Law Center, Center for Law and Social 
      Policy, and The Workforce Alliance, Statement submitted for 
      the record.................................................    41

 
             H.R. 4283, COLLEGE ACCESS AND OPPORTUNITY ACT

                              ----------                              


                        Wednesday, May 12, 2004

                     U.S. House of Representatives

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The Committee met, pursuant to notice, at 10:35 a.m., in 
room 2175, Rayburn House Office Building, Hon. John Boehner 
(Chairman of the Committee) presiding.
    Present: Representatives Boehner, Petri, McKeon, Castle, 
Ehlers, Isakson, Biggert, Osborne, Porter, Musgrave, Blackburn, 
Gingrey, Miller, Kildee, Owens, Andrews, Woolsey, Hinojosa, 
Tierney, Kind, Kucinich, Wu, Davis of California, McCollum, 
Grijalva, Majette, Van Hollen, and Bishop.
    Staff present: Kevin Frank, Professional Staff Member; 
Sally Lovejoy, Director of Education and Human Resources 
Policy; Alexa Marrero, Press Secretary; Catharine Meyer, 
Legislative Assistant; Krisann Pearce, Deputy Director of 
Education and Human Resources Policy; Alison Ream, Professional 
Staff Member; Deborah L. Samantar, Committee Clerk/Intern 
Coordinator; Kathleen Smith, Professional Staff Member; Kevin 
Smith, Communications Counselor; Jo-Marie St. Martin, General 
Counsel; Ellynne Bannon, Minority Legislative Associate/
Education; Tom Kiley, Minority Press Secretary; Ricardo 
Martinez, Minority Legislative Associate/Education; Alex Nock, 
Minority Legislative Associate/Education; Joe Novotny, Minority 
Legislative Assistant/Education; and Lynda Theil, Minority 
Legislative Associate/Education.
    Chairman Boehner. A quorum being present, the Committee on 
Education and the Workforce will come to order. We are holding 
this hearing today to hear testimony on H.R. 4283, the College 
Access and Opportunity Act of 2004. For those guests who we 
don't have room for in the room, we have an overflow room 
upstairs in 2257. So for those who didn't make it into the main 
hearing room, it is being broadcast upstairs in the overflow.
    Under Committee Rule 12(b), opening statements are limited 
to the Chairman and ranking minority member. If other members 
have opening statements, they will be included within the 
hearing record; and with that, I ask unanimous consent for the 
hearing record to remain open for 14 days to allow member 
statements and other extraneous material referenced during 
today's hearing to be submitted for the official hearing 
record. Without objection, so ordered.

   STATEMENT OF HON. JOHN A. BOEHNER, CHAIRMAN, COMMITTEE ON 
                  EDUCATION AND THE WORKFORCE

    Good morning, and thank you all for joining us today to 
discuss the College Access and Opportunity Act, a bill I am 
pleased to have offered last week with Chairman McKeon to 
expand college access for low- and middle-income students.
    I firmly believe current and future students should be our 
No. 1 priority in distributing Federal higher education aid. 
That was the purpose of the Higher Education Act when it was 
originally enacted more than three decades ago. And the purpose 
of our bill is to restore that focus as the law is 
reauthorized.
    Our plan will expand access to higher education for 
millions of low- and middle-income students. It will do so by 
strengthening Pell Grants, student aid, student access 
programs, and minority serving institutions. It will reduce 
loan costs, fees, and red tape for students and graduates. It 
will remove barriers for non-traditional students, including 
the so-called ``90-10 Rule'' that is hurting minority and low-
income students. It will empower parents and students through 
``sunshine'' and transparency for consumers in college 
financing and accreditation.
    Millions of low- and middle-income students today face the 
possibility of being denied access to higher education. 
Americans overwhelmingly believe that these students and their 
families should be the first in line when Federal higher 
education aid is distributed. The Federal law today reflects a 
different set of priorities. An increasing share of aid is 
flowing not to incoming low- and middle-income students 
struggling to achieve a higher education but to former students 
who have already received an education and entered the 
workforce. Federal law also allows lenders and banks to keep 
excess subsidies they earn from student loans instead of 
returning to the government so it can be used to support access 
for these same low- and middle-income students.
    If we truly believe college access for incoming low- and 
middle-income students should be the Federal Government's first 
priority in higher education aid, we will not allow these 
misplaced priorities to stand.
    The independent General Accounting Office recently warned 
Congress that the cost of fixed interest rate consolidation 
loans is ballooning, threatening to devour billions in 
resources over the next 7 years that could be used to support 
college access for students who haven't received an education. 
To avert this problem, GAO has recommended to the Congress that 
we switch consolidation loans to a variable interest rate. 
Bipartisan experts have told this Committee that following 
GAO's recommendation would free up $21 billion over the next 7 
years that could be used to expand college access for low- and 
middle-income students. If consolidation loans are left on 
autopilot, the cost to low- and middle-income students will be 
$21 billion in lost opportunities.
    The GAO's warning has not fallen on deaf ears in this 
Committee. In fact, I am pleased to say it has drawn bipartisan 
concern. A majority of the members on both sides of the aisle 
have either introduced, sponsored, or cosponsored bills to move 
the consolidation program to a variable rate. The bill that I 
have introduced with Chairman McKeon would do the same.
    Unfortunately, the GAO's warning also comes during an even-
numbered year, and that brings political temptation to the 
table. One of the first to fall victim was former Education 
Secretary Richard Riley, who was dispatched back in March by 
opponents of President Bush to attack this Committee for even 
listening to the GAO's warning. His attacks were later echoed 
by another Democrat party member, presumptive Democrat nominee 
for President John Kerry.
    Now interestingly, not long ago, these same folks were 
singing a different tune. In the early 1990's, when Secretary 
Riley and President Clinton designed the Direct Loan Program, 
they chose variable rates for direct consolidation loans, not 
fixed rates. In 1997, when President Clinton and Secretary 
Riley sent Congress their plan for reauthorizing the Higher 
Education Act, they proposed making all consolidation loans 
variable rate. And Secretary Riley's own Department of 
Education at the time said variable rate consolidation loans 
would be better for borrowers.
    A 1997 document issued by Secretary Riley's Department 
noted, ``The interest rate on FFEL consolidation loans would be 
changed to a variable rate comparable to the rate applicable to 
Direct Consolidation Loans under the Clinton plan.'' It went on 
to say, ``By extending the favorable terms currently available 
only to borrowers of Direct Consolidation Loans to borrowers of 
FFEL Consolidation Loans, these amendments would reduce the 
cost for, and provide greater flexibility to, these FFEL 
borrowers.''
    Now with all due respect to Senator Kerry and Secretary 
Riley, it would appear that some of my colleagues across the 
aisle were for the idea of variable rate consolidation loans 
before they were against it.
    Now some have also pointed to a recent study by the 
Congressional Research Service examining how borrowers would be 
impacted by variable rates on consolidation loans. Proponents 
claim that the CRS findings are evidence that variable rates 
will increase the cost for borrowers. What they don't mention 
is they are talking about a different set of borrowers. Our 
bill doesn't affect anyone who currently has a consolidation 
loan, and those are the people the CRS analysis examines in a 
hypothetical analysis.
    No one can accurately predict what the future interest 
rates are going to be. What we can do is examine past history. 
And new information from CRS does just that.
    In a report that was issued just last week, CRS found 
borrowers in 14 of the last 18 years would have fared better 
under a variable rate than under the fixed rate structure 
currently in place. Specifically, since 1986, the first year 
that we had a consolidation loan program, borrowers most often 
would have paid less in interest if their student loans had 
been under the variable rate structure that we are proposing.
    We also know that students today are paying the lowest 
rates in history, about 2.82 percent. They are able to pay this 
low rate because rates are in fact variable. In 2006, under the 
current law, interest rates will be fixed for the FFEL Program 
and at 6.8 percent, a rate more than double the amount students 
are paying today. And opponents of our legislation support 
keeping this fixed rate in tact despite the fact that costs 
will double for these borrowers if interest rates stay 
relatively low. The 6.8 percent rate is not a cap that some 
opponents claim, it is a fixed rate that would be imposed on 
all student loan borrowers for the life of the loans, locking 
borrowers out of lower rates in the future.
    Providing fairness for low- and middle-income students will 
require more than simply reforming consolidation loans and 
allowing borrowers to take advantage of variable interest 
rates. The bill we have introduced also addresses concern about 
excessive lender earnings on the Federal student loan programs. 
The bill would eliminate excess subsidies certain lenders can 
now collect and require lenders to return billions in excess 
interest earnings to the Federal Government, freeing up 
resources that could be better spent expanding access for 
current and future students.
    With tuition skyrocketing at colleges and universities 
across the nation, we owe it to students and their families to 
have an honest debate about the barriers to college access, and 
to come together with solutions. The bill Chairman McKeon and I 
have offered is an attempt to do just that. And I look forward 
to today's discussion, and I am hopeful that it will pave the 
way for bipartisan action in this Committee that will make a 
difference for those very students that we are trying to help 
get into the college and university of their choice.
    With that, I would like to yield to my colleague and 
friend, Mr. Miller.
    [The prepared statement of Chairman Boehner follows:]

Statement of Hon. John A. Boehner, Chairman, Committee on Education and 
                             the Workforce
[GRAPHIC] [TIFF OMITTED] T3631.001

                                ------                                


 STATEMENT OF HON. GEORGE MILLER, RANKING MEMBER, COMMITTEE ON 
                  EDUCATION AND THE WORKFORCE

    Mr. Miller. Thank you, Mr. Chairman, and thank you for 
holding this hearing today. Every 5 years, Congress has the 
opportunity to rewrite the higher education laws to better 
expand access to college education and to make college more 
affordable for low- and middle-income students. Unfortunately, 
the College Access and Opportunity Act doesn't even come close 
to living up to its name.
    Just at a time when millions of low- and middle-income 
students and their families are struggling to cover college 
costs, this bill actually forces students to pay thousands of 
dollars more for their college loans, caps the maximum Pell 
Grant, and fails to provide meaningful relief from rising 
tuition prices.
    While higher education has long served as the best 
opportunity for a better life for millions, students and their 
families across the country are now wondering whether they will 
be able to pay for a high-quality college education. As student 
tuition continues to soar, too many students are taking on huge 
loan debt and working long hours that hurt their academic 
studies and overall college experience or forgoing college 
altogether.
    Broad access to an affordable college education is not 
simply a matter of individual enrichment and advancement, but 
an integral component of this nation's overall economic health. 
Closing the gap in college preparation rates between low- and 
high-income young adults would create $250 billion in new 
economic growth and $85 billion in additional tax revenue to 
our nation.
    Despite the need to expand access to an affordable 
education, college is fast becoming a pipe dream for too many 
students. States are cutting support for higher education and 
pushing higher tuition and fees on to students and their 
families.
    In addition to budget cuts and rising prices, millions of 
students are taking on high debt levels that discourage college 
attendance and encourage default--which costs taxpayers 
billions of dollars.
    Over the past 10 years, student loan debt has nearly 
doubled to $17,000 and about one-fifth of full-time working 
students spend 35 or more hours per week on the job just to 
cover college costs. At the same time, student aid is falling 
further and further behind the cost of a college education. In 
fact, last year the maximum Pell Grant was worth $500 less in 
real terms than the maximum grant in 1976 and 1976.
    It is imperative that we return to the original premise of 
the Higher Education Act of 1965, that no college- qualified 
student should be denied a college education because he or she 
lacks the financial resources.
    Unfortunately, while the bill before us today includes some 
good provisions, such as reducing the student origination fees, 
reducing some of the excessive subsidies to banks, overall it 
makes college more expensive and reduces college opportunities. 
The Access and Opportunity Act pushes higher prices onto 
students just at the time when students need the help the most, 
as tuition continues to rise and debt soars.
    Despite the fact that an estimated 40 percent of all 
borrowers graduate with unmanageable debt levels, the 
Republican bill denies students the ability to choose to lock 
in low interest rates for their student loan consolidation. 
Consolidating at a low-fixed rate has made student loans that 
have helped millions of low- and middle-income students manage 
their debts and make ends meet, both while they are in school 
and out of school.
    According to an analysis by the Congressional Research 
Service (CRS), eliminating this benefit will force the typical 
borrower to pay $5,500 more for his or her student loans. And I 
do not think you can regard the life cycle of the cost of 
borrowing to these students while they are in and out of 
school.
    The Republican bill also caps the current authorized 
maximum Pell Grant at $5,800 through 2011, despite the fact 
that last year's maximum Pell Grant award was, as I said, $500 
less than 1976 and 1977.
    The bill raises the interest cap on student loans, a cap 
which my colleagues agreed to just a few years ago. And, as a 
result, millions of students will be forced to pay hundreds of 
dollars more in their college loans.
    It completely eliminates a key provision to protect 
students and taxpayers against fraud and abuse in the student 
aid program without providing additional safeguards. We all 
strongly support the career colleges in the private sector in 
the higher education system but for-profit institutions should 
have some of their own money on the table to protect the 
consumers, the students, and the taxpayers.
    In addition, the bill allows limited Federal funds, which 
have been reserved solely for nonprofit institutions to be made 
available to for-profit entities, without increasing the funds 
to this program. As a result, funding long reserved for 
community colleges, Hispanic Serving Institutions and Minority 
Serving Institutions will be cut.
    Despite double digit increases, the bill also fails to 
adequately address the tuition process.
    While I support the provisions to eliminate the lender 
floor rate of return on student loans to reduce excess bank 
subsidies, I believe that this is only one piece of a puzzle to 
return the programs to their original intent, which is to boost 
college opportunities for students.
    At a time of rising college costs, high unemployment and 
little job growth, we should not be forcing students and their 
families to pay more for college education. We should not and 
we cannot afford to take this path. And I urge my colleagues to 
reject this bill as it is presently drafted.
    I would hope that we would be able to make sure that all 
parties to the student loan community, if you will, that all of 
these issues are put on the table so that we can apportion out 
the cost and the savings of this program to all parties who 
participated. And I look forward to this hearing.
    Chairman Boehner. As you can see, we are all on the same 
page now.
    Before I introduce our distinguished panel of witnesses, 
let me welcome back to the Committee the distinguished former 
Chairman, retired Chairman of this Committee, the Honorable 
Bill Goodling. Bill, welcome back.
    [Applause.]
    Chairman Boehner. It is my pleasure to introduce our 
witnesses today. Our first witness will be Mr. Jim Boyle. Mr. 
Boyle currently serves as the president of College Parents of 
America, a nationwide organization dedicated to advocating on 
behalf of, and serving as a resource for, the country's current 
and future college parents. Mr. Boyle has nearly 25 years of 
experience in politics, trade associations, media business, and 
the financial services industry. College Parents of America is 
a not-for-profit membership organization serving current and 
future college parents through a mix of advocacy, information 
resources, and access to discounts on products and services.
    We will then hear from Dr. Dallas Martin. Dr. Martin 
currently serves as the president of the National Association 
of Student Financial Aid Administrators, an organization 
composed of 3,100 institutions and 9,300 financial aid 
professionals. And prior to his current role, Dr. Martin served 
as director of program planning and administration for the 
Division of Student Assistant Programs with the American 
College Testing program, as well as serving a number of years 
as a college and university administrator and educator.
    We will then hear from Ms. Rebecca Wasserman. Ms. Wasserman 
currently serves as president of the United States Student 
Association, an organization founded in 1947, which represents 
students on Capitol Hill with the White House and the 
Department of Education. She is a recent graduate of the 
University of Wisconsin at Madison, where she studied political 
science and social welfare.
    Then we will hear from Dr. Charles Reed. Dr. Reed currently 
serves as the chancellor of the California State University 
System, the country's largest senior system of public higher 
education. He provides leadership to 44,000 faculty and staff 
and 409,000 students on 23 campuses and seven off-campus 
centers. Prior to his current position, Dr. Reed served as the 
chancellor of the state university system of Florida.
    We will then hear from Mr. Michael Grayer. Mr. Grayer 
recently earned his accountant assistant diploma from Virginia 
College in Jackson, Mississippi, overcoming numerous obstacles 
along the way. After graduating from high school in 2000, Mr. 
Grayer attended a local community college for a semester but 
was forced to withdraw due to inadequate transportation and 
limited financial resources. With assistance from the Federal 
Student Loan Programs, Mr. Grayer enrolled in Virginia College 
and earned his diploma in December of 2002. Currently he serves 
as an auditor and regional manager for the Security Life 
Insurance Company. He also successfully owns and operates 
Maxell Communications. He is the chief executive officer of 
three Subway stores and is the president and founder of Trinity 
Financial Solutions, a tax preparation and accounting firm.
    I want to thank all of you for your willingness to come 
today, and we look forward to your testimony.
    Mr. Boyle, you may begin.

  STATEMENT OF JAMES A. BOYLE, PRESIDENT, COLLEGE PARENTS OF 
                            AMERICA

    Mr. Boyle. Good morning, Mr. Chairman, Mr. Miller, and 
other members of the Committee. My name is Jim Boyle, and since 
July 2003, I have been president of College Parents of America, 
a national association with two categories of membership: 
individuals, both current and future college parents, and 
institutions, which generally consists of schools that we 
believe we can supplement their parent relations activities.
    A little over 2 years ago, when I first heard of the 
existence of the association that I am now privileged to lead, 
it struck me that when it came to the debate over the 
reauthorization of the Higher Education Act, one group which 
deserved a seat at the policy table had been ignored, namely, 
parents. So that is one of the many reasons why I am pleased to 
be invited to testify before you today, not only on behalf of 
our members but of all current and future college parents. 
Thank you for the opportunity.
    Following is a summary of the views of College Parents of 
America on your proposed legislation:
    We strongly agree with your overall goal of making college 
accessible and affordable for all Americans, consistent with 
the principles of the Higher Education Act since its passage 
nearly 40 years ago. While the attainment of a college 
education is much more widespread today than it was in 1965, we 
have reached a precarious place when it comes to Americans and 
their perceptions of whether college really is possible for 
all.
    Across the continuum of the socioeconomic spectrum, from 
the most needy to the most wealthy of Americans, a dangerous 
notion is developing, a mis-perception that college is becoming 
out of reach for all but the most affluent. From my personal 
experience, growing up in a working class suburb of Detroit, I 
understand how such a misperception can develop. I was a first 
generation college student in the late 1970's, as was nearly 
everyone in my neighborhood who chose to continue their post-
secondary education, not a very high percentage to begin with. 
While most of my peers lived at home and attended Wayne State 
University or Lawrence Tech or Oakland Community College, I was 
fortunate to have a college guidance counselor to helped me to 
see beyond the confines of the Detroit area, and who enabled me 
and my parents to realize that financial aide made every school 
in America within reach.
    Through a combination of Pell Grants, institutional aid, a 
National Merit Scholarship, earnings from work study and other 
jobs and student loans, I was able to attend and graduate from 
Northwestern University in 4 years, an experience that was 
fulfilling and life-changing.
    Young people growing up in Detroit, or anywhere else today, 
should still know that thanks to Federal, state, and 
institution-based aid, low- and middle-income students can 
afford college.
    There are many provisions in your bill that help families 
to understand college is possible and which give them specific 
tools to pursue their higher education goals. Your proposal to 
make the Pell Grant available year-round is an important step 
in the right direction, as is your gradual elimination of the 
origination fee for student loans.
    In 1981, I was a recent college graduate working as a 
staffer for a California Member of Congress when that fee was 
put in place as a temporary deficit reduction measure. Twenty-
three years later, the ``O'' fee is still in place, and it is 
time to phase it out.
    Your modest proposal of raising loan limits for first and 
second year students is also a step in the right direction, 
especially considering just how many years it has been since 
those limits were increased. I recommend, however, that you 
look at the possibility of creating greater borrower 
flexibility within the context of the overall loan limit rather 
than set year by year maximums. This flexible borrower account 
approach would allow for better financing options if family 
circumstances change while a student is in college and he or 
she is forced to turn to additional personal borrowing to meet 
school costs.
    There are a few other provisions of the proposed bill that 
I would like to touch on before hearing the other witnesses and 
taking your questions.
    First is your proposed new variable rate structure for 
consolidation loans in order to make those loans consistent 
with the structure for Stafford loans that you propose. I 
suppose it would be easy for me to stay out of this crossfire 
on this issue, as parents generally are not involved with their 
son's or daughter's financing decisions in the post-college 
years, or at least not as much as they are involved during 
college. But you have been right, Mr. Chairman, as have your 
colleague from the other side of the aisle, Mr. Andrews, to 
make the point that the future cost of the Consolidation Loan 
Program has the potential to be an enormous financial drain, 
thereby inevitably putting downward pressure, or at least a 
lid, on funds available to students currently attending or 
planning to attend college.
    I would like to touch on the issue of transparency for 
college costs. I believe that families do want and need more 
and better information about the rate of tuition increases in 
general, the difference between sticker price and net price, as 
well as statistics on those specific schools that are 
successful, or not, at keeping prices low.
    While the college cost issue reaches across all 50 states, 
families should know that many, but not all, states have 
trimmed a portion of their own budgets allotted to higher 
education.
    On a host of budget issues, state legislators are often 
quick to point a finger at Washington and say, ``It is the 
fault of Congress,'' when less than expected funding is made 
available for this initiative or that. But when it comes to 
support for higher education, you have every right to point out 
that state support has been falling as a percentage of 
university budgets for 20 years, in good economic times and in 
bad. To be fair, in recent years the actual dollars of state 
support for higher education have increased but so have 
enrollments.
    Speaking of enrollment, it is essential to note the 
oncoming college attendance surge, a result of the baby boom 
echo. When my sixth-grader, Griffin, who is seated here behind 
me with my wife, Kelly, and younger son, Tucker, graduates, I 
hope, from high school in 2010, he will be part of the second 
largest graduating class in U.S. history, slightly smaller than 
the class of 2009, and both larger than any in the Baby Boom 
years.
    This coming rise in the college-age population raises the 
stakes for this year's reauthorization. Assuming you can move a 
bill through this year, with accompanying action by the Senate, 
it is likely under this best-case-scenario, that the 
legislation will not be in force until at the earliest 2005 to 
2006, which means that the policies you are looking to put in 
place today will hardly affect parents of today's college 
students but will instead greatly affect parents of today's 
sixth through eleventh graders.
    The actions you take--or not--this year will impact 
American families for the next five to 6 years. And in each of 
those upcoming years, more families will be affected because 
the college-age population is projected to grow through at 
least 2012.
    Part of the transparency debate will focus on how best to 
get information into the hands of parents. It seems that 
whenever there is talk about this issue, the proposed solution 
centers on four words: ``COOL Web site needed.'' The reasoning 
seems to be that a new and improved Department of Education Web 
site will be the answer when it comes to providing the college 
preparatory information they crave. To those four words, I will 
respond with four of my own: ``Remember the digital divide.'' 
It may have narrowed a bit since the last 1990's but it has not 
gone away. Survey after survey reveals that those who are most 
likely to need information about financial aid options are the 
least likely to have it. A COOL Web site will not address this 
issue.
    I strongly suggest that you mandate the U.S. Department of 
Education to implement a national advertising campaign, 
principally utilizing the wide reach mediums of television and 
radio, to accomplish two goals: provide context on the costs 
and benefits of college; and to let people know about the 
widespread availability of financial aid.
    Many of you may have your own COOL Web sites to serve your 
constituents or to promote your re-elections this fall. I am 
certain that such sites are only a small part of your 
communications strategy, not the be all and end all for 
dissemination of key messages. When it comes to key messages on 
access and affordability of college, a COOL Web site should be 
seen as a means, not as an end.
    That is the end of my prepared statement, and I thank you 
for including me on behalf of College Parents of America in 
today's hearing.
    Thank you.
    [The prepared statement of Mr. Boyle follows:]

    Statement of Jim Boyle, President, College Parents of America, 
                             Washington, DC

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[GRAPHIC] [TIFF OMITTED] T3631.003

                                ------                                

    Chairman Boehner. Thank you.
    Dr. Martin.

    STATEMENT OF A. DALLAS MARTIN, JR., PRESIDENT, NATIONAL 
      ASSOCIATION OF STUDENT FINANCIAL AID ADMINISTRATORS

    Dr. Martin. Thank you, Mr. Chairman, Mr. Miller, and 
members of the Committee on Education and the Workforce. I am 
Dallas Martin, and I am president of the National Association 
of Student Financial Aid Administrators. And I am pleased today 
to have the opportunity to comment upon the positive changes 
that H.R. 4283 makes to the Title IV student aid programs.
    We recognize the Committee's charge to develop a revenue 
neutral bill and appreciate the difficult choices that had to 
be made to focus limited resources on current and future 
college students rather than individuals who have completed 
their post-secondary education. In an ideal world we would like 
to address the needs of all individuals. But with limited 
available funding, our highest priority as an association is to 
ensure access for current and low-income and middle-income 
students.
    We are pleased to see that H.R. 4283 includes a number of 
the student aid proposals that we and others in the higher 
education community advanced. We are particularly pleased that 
the bill reduces the loan origination fees for students in both 
the FFEL and Direct Loan Programs, that it provides an interest 
only 2 year repayment plan option for borrowers who may have 
difficulty in meeting their repayment obligations. And it also 
continues the authorization for all of the time-proven Title IV 
student aid programs.
    We are also delighted that the bill eliminates both the 30 
day delay disbursement requirement and the multiple 
disbursements requirement for schools with default rates of 10 
percent or less. And we are also pleased that the bill 
clarifies the student aid rules on drug-related offenses and 
expands the use of program funds to promote financial and 
economic literacy.
    In addition, let me comment on several specific proposals. 
NASFAA supports the change proposed in the legislation to 
establish a market-based, variable interest rate for FFEL 
direct and consolidated student loans.
    In the recommendations that we sent you last year, we 
proposed that all Stafford loans, including consolidation 
loans, would continue to have a variable interest rate capped 
at 6.8 percent. While H.R. 4283 retains the current 8.25 cap as 
opposed to the 6.8 which we proposed, we still believe that the 
change to a variable rate for all future borrowers establishes 
a system that will treat all borrowers more equitably. If the 
variable interest rate was currently in effect, all borrowers 
would have the advantage of participating in the current low 
student loan interest rate environment. Similarly, in the 
future when interest rates rise, as they inevitably will, all 
borrowers again will be equally affected but will never have to 
pay a rate that is greater than 8.25. I would suggest that 
compared to other credit instruments that this change will help 
to ensure that the Federal Stafford Loan Programs provide 
students and parents with the best financing option.
    NASFAA is also pleased to see that H.R. 4283 increases the 
annual subsidized loan limits for first and second year 
undergraduate students in both the FFEL and Direct Loan 
Programs. And I assume that your budgetary limitations 
prevented the Committee from considering the proposals that we 
advanced to make adjustments to upperclassmen and graduate and 
professional students as well.
    While the proposed modest increases are certainly welcome, 
we would hope that the Committee as it continues work on this 
bill would give careful consideration to making the annual and 
aggregate loan limit changes that we support, which have been 
put forth in H.R. 4102 introduced by Congressman Rob Andrews. 
We also would strongly encourage the Committee to give serious 
attention to the new consolidation rate structure that is 
included in H.R. 4102, which would provide a variable subsidy 
to borrowers based upon the relationship between the borrower's 
total monthly loan payments and their total income. This change 
would clearly help lower income borrowers who have high student 
debt.
    We would also ask that the Committee give consideration to 
including H.R. 4283 two other of NASFAA's earlier 
recommendations. One, which would allow individual 
institutions, if it so desires, to implement lower loan limits 
on a school-wide class level or academic program basis and a 
second recommendation which would eliminate the provision 
mandated that the school also loses eligibility to participate 
in the Pell Grant program if the school loses eligibility to 
participate in FFEL or Direct Loan Programs due to high 
defaults.
    We also note that H.R. 4283 includes a proposal to modify 
the allocation of funds formula that is used to distribute 
Federal funds to institutions under the campus-based programs. 
This proposal is a modified version of a recommendation that 
NASFAA had advanced last year. The campus-based allocation 
formulas have been at the center of policy discussions over the 
past 25 years and people's views on whether the current formula 
should be modified depend in large part on when an institution 
began participating in one of the campus-based programs and in 
which state that institution is located.
    Earlier modifications to the formula established a base 
guarantee to provide protection to participating institutions 
who had been in the program for a considerable period of time 
and who had made significant institutional investments to 
properly administer the programs. But the formula also 
established a fair share concept that would ensure that funds 
remaining after meeting base guarantees would be distributed to 
institutions based upon the amount of that institution's 
students' needs in relationship to the needs of students at all 
other participating institutions.
    Unfortunately, the rather static funding of these programs 
over the past decade has prevented newer institutions which 
should have benefited from the fair share formula from keeping 
pace with institutions who student bodies have similar economic 
enrollment profiles. The provisions in H.R. 4283 would 
gradually reduce the base guarantee protection currently 
granted to certain institutions, thus freeing up additional 
dollars to distributed according to the fair share formula to 
all eligible institutions. While this change will shift dollars 
from some institutions to others over time, the provisions in 
H.R. 4283 provide institutions with adequate lead time to 
prepare for these changes.
    We recognize that institutions across the country have 
different and strongly held views on whether the current 
formula should be modified. But the approach contained in this 
bill will help to ensure that the monies allocated under the 
three campus-based programs will be equitably distributed to 
the neediest students in all participating institutions across 
the country.
    In conclusion, let me say while we have attempted to focus 
our analysis upon the Title IV student aid provisions contained 
in H.R. 4283, and we will continue to analyze the bill and 
provide you with additional comments, I should also note that 
there are many other significant changes included in the bill 
that have a dramatic impact upon institutions of higher 
education. While I don't have time or feel qualified to comment 
upon many of those proposals, I would strongly encourage the 
members of this Committee to carefully consider and analyze the 
thoughtful comments and suggests that others in the higher 
education community will undoubtedly make.
    I look forward to working with the Committee and would be 
happy to respond to your questions when appropriate.
    [The prepared statement of Dr. Martin follows:]

  Statement of Dr. Dallas Martin, President, National Association of 
                  Student Financial Aid Administrators

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                                ------                                

    Chairman Boehner. Thank you, Dr. Martin.
    Ms. Wasserman.

  STATEMENT OF REBECCA J. WASSERMAN, PRESIDENT, UNITED STATES 
                      STUDENT ASSOCIATION

    Ms. Wasserman. Thank you. Mr. Chairman, Ranking Member, and 
members of the Committee, and to all the students that were 
able to be here and apparently went through a lot to get here, 
I thank you for this opportunity to discuss H.R. 4283, the 
College Opportunity and Access Act.
    I am here today representing the United States Student 
Association and the over 1 million students that we represent. 
USSA is the nation's oldest and largest national student 
association, representing students in D.C. since 1947.
    My testimony on behalf of USSA addresses several key 
provisions in H.R. 4283 that will directly impact millions of 
low- and middle-income college students. While we believe that 
some provisions in this bill will help students, overall we 
oppose the College Opportunity and Access Act, as it will force 
millions of low- and middle-income students to pay more for 
college, deny free speech rights to students across the 
country, and re-open the doors to fraud and abuse in our 
student aid programs.
    In short, this bill does not create the access or 
opportunities the title claims and in fact may block students 
from the doors of higher education. Most importantly, it 
represents a missed opportunity for this Congress to prioritize 
higher education and address the growing crisis as colleges and 
universities become less and less affordable.
    We do applaud Chairmen Boehner and McKeon for retaining the 
current cumulative loan limits for undergraduate students. Far 
too many students are taking on huge loan debt to finance their 
college education. And while this provision allows students to 
borrow several thousand dollars more for college, it does not 
raise the limits in a careless manner. The typical 
undergraduate student graduates with nearly $19,000 in college 
loan debt, double that of the typical graduate in 1997.
    In addition to soaring individual debt, there has been a 
seismic shift in the dependence on student loans as the primary 
finance mechanism to pay for college. Thirty years ago, student 
loans accounted for about 30 percent of all Federal student 
aid, while grants accounted for 70 percent. Today these figures 
are almost reversed. Student loans account for nearly 70 
percent of all Federal student aid, while grants account for 
just 22 percent.
    When students are forced to finance their higher education 
through unmanageable student debt, there is no real access. It 
continues a cycle of poverty for low-income students and limits 
their ability to give back to the economy of our country 
through purchasing a car, a home, or even taking a lower 
paying, public interest career path.
    While we are disappointed that the student loan tax, or the 
origination fee, has not been fully eliminated, we do believe 
that reducing this tax from 3 percent to 1 percent over the 
reauthorization period is a positive step.
    While USSA believes that maintaining the cumulative loan 
limits and reducing the origination fees are important steps to 
making college more affordable for millions of low- and middle-
income students, overall the College Opportunity and 
Accessibility Act will actually force millions of low- and 
middle-income students and their families to pay thousands of 
dollars more for their college loans and education.
    First, we are very disappointed that the Act fails to raise 
the maximum Pell Grant award. Last year's maximum Pell Grant 
was worth $500 less in real terms than the maximum award nearly 
30 years ago. Despite the declining buying power of the grant, 
rising tuition prices and the growing financial need of 
students, H.R. 4283 fails to increase the maximum Pell award. 
To the more than 5 million students who depend on Pell Grants 
to make college possible this is a real step backwards toward 
making college a reality.
    We are also troubled that the Act eliminates the current 
low-fixed rate consolidation benefit for student borrowers. 
According to a recent Congressional Research analysis, 
eliminating this benefit will force the typical student to pay 
nearly $5,500 more for their college loan. Denying student 
borrowers the choice to lock in a low-fixed interest rate makes 
college more expensive, just as tuition levels rise, state aid 
is being cut and students are facing double the loan debt they 
faced just 7 years ago. As a result, H.R. 4283 will eliminate 
college opportunities and make college even more expensive.
    Consolidation is an important tool that helps low- and 
middle-income students manage their debt and makes college 
affordable. Congress should not deny student borrowers this 
benefit now when they need the help the most.
    While we share the concern that the cost of the 
Consolidation Loan Program has the potential to increase 
significantly over the next decade, we are shocked that the 
leadership of this Committee has decided to bend the will of 
the big lenders and deny low- and middle-income students the 
choice to lock in a low-fixed interest rate.
    The fact of the matter is that the big lenders that 
participate in the student loan program do not like the 
consolidation program because they are forced to pay fees to 
participate and because it increases competition in the market, 
as most students, but not all, can shop around to find the best 
deal and service for their loans. Due to low interest rates in 
the past few years, more and more students have consolidated 
their loans, increasing the likelihood that these students will 
switch lenders. The lenders that hold the lion's share of the 
total outstanding student loan debt would like to eliminate the 
current low-fixed rate benefit in order to do away with the 
competitive market so that they can protect their portfolios 
and their profit margins.
    The elimination of the current low-fixed rate benefit in 
H.R. 4283 comes as lenders in the student loan program continue 
to earn huge profits. According to a recent issue of Fortune 
Magazine, Sallie Mae is the second most profitable company in 
the United States, with a 37 percent return on their revenues 
in 2003. To give people context, the median return for the 500 
biggest companies in the U.S. was 5 percent in 2003. In 
addition, according to a U.S. News & World Report article, in 
2002, Sallie Mae's chief executive, Albert Lord, pocketed 
nearly $34 million in salary, bonus, and stock option payments.
    It is important to remember that the student loan programs 
were created to provide low-cost loans to students and to 
increase access to a college education, not to set a program 
where lenders take home big profits on federally subsidized and 
guaranteed loans. Rather than forcing low- and middle-income 
students to pay thousands of dollars more for their college 
loans, Congress ought to completely eliminate excessive profits 
to lenders in the student loan programs and use the savings 
generated to make college more affordable for students.
    We believe that the step that H.R. 4283 takes to reduce 
excessive lender profits is a critically important step and 
hope to see it followed by more good work to ensure that we are 
spending taxpayer revenues on increasing college access, not 
increasing profit margins of lenders.
    It is troubling that this bill reduces excessive lender 
profits and then simultaneously raises the cap on student loan 
interest rates. According to projections from the Congressional 
Budget Office, this change will raise student loan interest 
rates and force student borrowers to pay hundreds of dollars 
more over the life of their loans. At a time when so many 
students and their families are struggling to pay for college, 
we should not be pushing higher costs on to low- and middle-
income families.
    In addition to raising the cost of college for the typical 
student by thousands of dollars, H.R. 4283 will strip students 
of their free speech rights on college campuses with the so-
called Bill of Academic Rights. It is incredibly problematic 
for Congress to create provisions that could force our college 
and university administrators in doing excessive oversight of 
the official and unofficial activities of students. We cannot 
have officials in Washington, D.C. regulating the content of 
our classrooms. This intrusive oversight disrupts local control 
and challenges the mission of educational institutions.
    We are also concerned that H.R. 4283 will put the students 
and the student aid programs at risk by repealing a key fraud 
and abuse protection, the ``90-10'' rule that was enacted more 
than a decade ago. Congressional hearings in the 1990's 
documented extensive abuses in the student aid programs, 
primarily by for-profit schools, which cost taxpayers billions 
of dollars. Among the abuses, Congress found that schools set 
tuitions at artificially high levels; closed without warning 
leaving students with no degree and loan debts; disbursed funds 
to ineligible students, and provided inadequate instruction.
    In response to the rampant fraud and abuse, Congress 
enacted a set of safeguards, including the ``90-10,'' formerly 
``85-15'' rule, limited correspondence and telecommunications 
courses and prohibited bonuses and incentive payments to school 
employees and recruiters to stop the scams. These safeguards 
have been essential to curbing fraud and abuse in student aid 
programs. A full repeal of this safeguard could once again put 
students and the student aid programs at risk.
    Last, we support your movement toward the repeal of the 
drug provision in the financial aid form, which has already 
denied over 128,000 students access to Federal financial aid. 
However, a partial repeal is not enough. We must pass a full 
repeal to guarantee access to education for all students, and 
education is the best rehabilitation.
    To close, on behalf of USSA and the students who represent, 
we urge you to support changes to the current law that will 
make college more, not less, affordable to low- and middle-
income students. USSA supports significantly raising the 
maximum Pell Grant, retaining the student choice to lock in a 
low-fixed rate consolidation benefit, lowering interest rates 
on student loans, protecting student autonomy and retaining 
safeguards to protect against fraud and abuse in the student 
aid programs.
    Thank you.
    [The prepared statement of Ms. Wasserman follows:]

   Statement of Rebecca Wasserman, President, United States Student 
                      Association, Washington, DC

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[GRAPHIC] [TIFF OMITTED] T3631.007

                                ------                                

    Chairman Boehner. Thank you.
    Dr. Reed.

  STATEMENT OF CHARLES B. REED, CHANCELLOR, CALIFORNIA STATE 
                       UNIVERSITY SYSTEM

    Dr. Reed. Chairman Boehner, Ranking Member Miller, and 
distinguished members of this Committee, good morning, and 
thank you for your invitation to testify.
    The 23-campus California State University System is the 
largest university system in the United States. We have over 
409,000 students this year. Access is our mission. We award 
almost 5 percent of all the bachelor's degrees in this country, 
and almost half of the bachelor's degrees in California. Also, 
we have a largely non-traditional student population where 20 
percent are first generation college students, 40 percent come 
from households where English is not the main language spoken, 
and more than one-third of our students work full time. The 
average age of our students is 24, and most or almost 50 
percent of our students are classified as independent students. 
We, the California State University System, look like the 
future of higher education and what higher education is going 
to look like in 2015 and beyond.
    I would like to use my time this morning to briefly address 
five key points from my written testimony beginning with the 
Pell Grants. The Pell Grant program is essential to preserving 
college opportunity for disadvantaged students and is perhaps 
the single most important financial aid program in the 
California state university. One hundred and sixteen thousand 
of our students received over $316 million in Pell awards last 
year, averaging $2,700 per student.
    Both H.R. 4283 and H.R. 3180 contain provisions to allow 
students to receive a second Pell Grant in a given year for 
summer study. I want to thank Representative McKeon and Miller 
for their support for this concept. Year-round study helps 
students complete their academic degree sooner which reduces 
student borrowing and allows institutions to use their 
resources much more efficiently.
    However, we must ensure that schools that serve the most 
disadvantaged students are allowed to participate in year-round 
Pell. The proposed standard of at least 30 percent of students 
graduating within 4 years will not recognize institutions like 
the California State University that enroll many non-
traditional students. A standard of 30 percent of students 
graduating within 6 years would be a much better way to serve 
these students.
    Second, campus-based funding formulas. We applaud H.R. 
4283's efforts to eliminate the use of a base guarantee in the 
funding formula for the campus-based programs. The base 
guarantee concept adversely impacts new campuses because it 
uses enrollment calculations from the first one or 2 years of a 
program's participation. When you start, you start small with 
1,000 to 2,000 students but today we have three of those 
institutions that are well over 12,000 students.
    I should note that the CSU is affected by this proposal 
from both ends, having added three new campuses since 1990 but 
also have several campuses that would lose resources if the 
base guarantee were eliminated. We have talked about this as a 
group of presidents, and we support your bill. We just ask that 
you accelerate that timetable. We are for fairness and we think 
that the distribution ought to be based upon institutional 
need.
    Third, student loans. H.R. 4283 proposes to gradually 
reduce student loan origination fees to 1 percent. I should 
note that in the past Representative Miller has also advocated 
for the elimination of origination fees. Given the importance 
of these programs to CSU students, I strongly support any 
movement in this direction.
    H.R. 4283 would also increase the amount first and second 
year students could borrow while maintaining the aggregate 
borrowing caps. While we are all concerned with students' 
increase in debt burden, the proposed increases would improve 
overall flexibility for needy students and may reduce reliance 
on more costly alternative loan programs.
    Fourth, early outreach and student support. The CSU joins 
the higher education community in support of TRIO and GEAR-Up 
as separate and complementary programs. These programs are 
vital to preparing under-represented students for college and 
they reduce the need for remediation which saves students and 
institutions time and money. I have spent many hours in the 
classroom in the 7th grade to see our GEAR-Up program working 
to help these students prepare for the future that they want to 
attend college.
    Fifth, Hispanic-Serving Institutions. Last but not least, 
issues relating to Hispanic-Serving Institutions are 
particularly critical in California, which is the home to 
approximately one-third of the nation's Latino population. The 
California State University supports many of the proposals of 
the Hispanic Association of Colleges and Universities, and 
especially one that would create a new competitive graduate 
education component for HSIs under Title V.
    Again, thank you for allowing me to testify this morning. I 
trust that you will feel free to contact me or members of my 
staff as they continue this important discussion.
    Thank you.
    [The prepared statement of Dr. Reed follows:]

  Statement of Charles Reed, Chancellor, California State University 
                     System, Long Beach, California

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    Chairman Boehner. Thank you, Dr. Reed.
    Mr. Grayer?

STATEMENT OF MICHAEL GRAYER, RECENT GRADUATE, VIRGINIA COLLEGE, 
     JACKSON, MISSISSIPPI, ON BEHALF OF THE CAREER COLLEGE 
                          ASSOCIATION

    Mr. Grayer. Mr. Boehner, Mr. Miller, and members of the 
Committee, it is an honor to be with you this morning. I am 
here to share my story of how I achieved the dream of a college 
education.
    Before I begin, I would like to state for the record that I 
am only one of thousands of career college students who have 
overcome obstacles to achieve educational goals. In February, 
my achievements were recognized by the Career College 
Association as one of the seven recipients of the First Annual 
Graduate Recognition for Excellence, Achievement and Talent--or 
GREAT--Student Awards. My fellow winners and I exemplify what 
can be accomplished when determination, commitment, and 
discipline are combined with Federal student assistance 
programs.
    It is a privilege to speak to you today on behalf of the 
Career College Association and the more than 1 million students 
educated by the for-profit education sector each year.
    I was reared in a single-parent home in Jackson, 
Mississippi. In the eighth grade, I was enrolled in the Piney 
Woods School, a historically black boarding school in 
Mississippi. After failing the ninth grade, I did eventually 
graduate from high school, which, unfortunately, exhausted my 
mother's financial resources. However, making the adjustment 
back to my home was difficult because of the financial 
situation. I enrolled in a local community college, but the 
experience ended after one semester due to financial concerns 
and lack of transportation.
    Several months later, I landed a job at local cellular 
outlet and quickly climbed the ranks to management. Then came 
the horrific events of September 11th. Our company's business 
declined, leading to the loss of my job. I started selling 
cellular accessories to make money and eventually opened my own 
cellular outlet store. The expenses were high and the revenue 
was low and it also was not personally fulfilling so I decided 
to go back to school because I was wasting my time and my 
talent, and I needed to make a change.
    While watching an ad 1 day about Virginia College in 
Jackson and the programs that they offered, and due to my prior 
experience, the business program which they had that focused in 
accounting caught my attention. I took a leap and enrolled in 
Virginia College.
    Like many of my fellow Virginia College students, I 
received Federal financial aid, including Pell Grants and 
student loans. Without this support, I would have not have been 
able to graduate from Virginia College with a diploma in 
accounting. Federal student aid helps to ease the burden of 
many students in my situation when they are faced with where to 
go to college. I am blessed to have a family which is 
supportive of all my aspirations, including college, which 
helped ease some of that burden. Not every student is that 
lucky. However, at Virginia College, 80 percent of my fellow 
students are eligible for Pell Grants, 82 percent are 
independent, and 47 percent have dependents of their own. And 
more than half of the students have an expected family 
contribution of zero, meaning they are completely dependent on 
student aid to achieve their educational dreams.
    Some current provisions of the Higher Education Act stand 
in the way of assisting students like myself from achieving all 
they are meant to achieve. The 90/10 rule, which requires for-
profit institutions like Virginia College to prove 10 percent 
of their revenue comes from non-Federal aid, is one example. If 
a school enrolls too many of the poorest students, those 
students with a zero expected family contribution who could 
receive a full Pell Grant and the maximum student loans, that 
institution could be in violation of the 90/10 rule.
    The separate definition of higher education institution 
currently applied to for-profit colleges has outlived its 
purposes. Students should not have access denied based on their 
choice of an authorized, accredited, eligible institution of 
higher education. I am an example of this. I was unable to 
succeed at a community college for a variety of reasons. 
Virginia College, however, offered the program and support I 
needed to graduate from college.
    Federal Pell Grants helped me to go to college, but Pell 
Grants alone did not cover the cost of my tuition. To do this, 
I also took out Federal loans. Higher Pell Grant awards would 
help more students like me go to college, and enable many of 
them to do so with decreased loan burden. However, for those 
students who would not be eligible for an increased Pell Grant, 
higher student loan amounts will help them achieve their 
dreams.
    Most of the students at Virginia College, including myself, 
attend year-round and complete more than one academic year of 
work in an award year and therefore are able to finish our 
education more quickly. If we could get more than one Pell 
Grant award in a single year, our loan burden would decrease. 
This would be as important for those of us in a diploma program 
as for those who are seeking a bachelor's degree.
    I am an example of what a career college graduate can 
achieve with the help of student aid programs. Since 
graduating, I have been employed as a regional manager and the 
head auditor for a publicly traded insurance company, Security 
National Life. I am also the CFO of my stepfather's three 
Subways in Jackson, Mississippi, and I am the founding 
president of Trinity Financial Solutions, a tax-preparation and 
accounting service that currently employs 15 individuals, 
including another graduate of Virginia College.
    In closing, I urge you to pass H.R. 4283, the College 
Access and Opportunity Act of 2004. And I will be happy to 
answer any questions you may have.
    [The prepared statement of Mr. Grayer follows:]

    Statement of Michael Grayer, Recent Graduate, Virginia College, 
                          Jackson, Mississippi

[GRAPHIC] [TIFF OMITTED] T3631.012

                                ------                                

    Chairman Boehner. I want to thank all of our witnesses for 
their testimony and their insight into the Higher Education Act 
and how we can improve access for America's students.
    Mr. Boyle, what do you hear as the biggest concern from 
parents regarding access to higher education?
    Mr. Boyle. Anxiety and uncertainty about the process. I 
think even for families who are in need of financial aid, many 
families are not aware that financial aid options are available 
and not taking advantage of them. Guidance counselors are 
wonderful people but there are not enough of them. There is 
only one guidance counselor for every 491 high school students 
on average across the U.S. so there is no way they can reach 
everyone. And then for those who have more resources, who may 
be college graduates themselves, a lot of scratching of their 
heads and saying that, ``Gee, the process is so different now 
than it was when I went to college,'' and not understanding and 
not having a resource to turn to to guide them through the 
process is frustrating to them.
    Chairman Boehner. Dr. Martin, you represent financial aid 
administrators, your organization gets those who jump through 
the hurdles and actually apply and you get to deal with them. 
But I think the point that Mr. Boyle makes is that sticker 
shock is driving a lot of students and their families away from 
even considering the possibility of trying to go to college.
    Dr. Martin. I think, Mr. Chairman, unfortunately in the day 
that we live today with the media they love to play upon the 
most expensive, the highest cost institutions. And every time I 
see something about college costs, it always focuses upon that 
top 3 to 4 percent of institutions that are the most expensive 
in the country. And many families, unfortunately, who are not 
as sophisticated and maybe first generation believe that that 
is the cost for all colleges. And that is not the case. We have 
many fine institutions across this country, all the way from 
our community colleges, state colleges, universities, public 
and private, and along with financial resources that are 
available from local, Federal, state and institutional monies, 
that there is a way to help people to do that.
    And part of it, I agree with Mr. Boyle, is simply having a 
campaign so that families and students understand clearly what 
is available and where to go to get straightforward 
information. And I think that would be more helpful than 
anything I can think of to try to raise awareness about post-
secondary education.
    Chairman Boehner. Ms. Wasserman, you said in your testimony 
that you were for those provisions in the bill that reduced 
origination fees and for the increase in loan limits. How would 
you propose paying for that, considering you don't want 
consolidation loans to go to a variable rate?
    Ms. Wasserman. Well, I think two things. One is, to follow 
up on the questions you just asked, I think that there is some 
real sticker shock, because the cost is too high for a lot of 
institutions. While there is a varying level of cost to 
college, I do think the reality is for a lot of working 
families and a lot of first generation students the cost is too 
high. So when we are looking at this reauthorization, we are 
looking at it as an opportunity to really make steps to make 
college more affordable and more accessible.
    And so for us the reduction in origination fees is 
important but keeping the fixed rate on consolidation, making 
sure that when someone is applying to school, they know that 
they are going to be able to attend school and graduate with 
manageable debt that they can then consolidate and pay 
manageable monthly payments on.
    Chairman Boehner. Do you represent graduates as well?
    Ms. Wasserman. This sort of attempt to separate the 
students applying from the student that graduates to me just 
doesn't make sense. The reality is it is the same person--
    Chairman Boehner. Hello, hello.
    Ms. Wasserman [continuing]. That is applying for school--
    Chairman Boehner. We have Mr. Grayer right here, a 
graduate.
    Ms. Wasserman. Right, a graduate, yes.
    Chairman Boehner. A successful graduate. Mr. Grayer, were 
you able to pay your student loans?
    Mr. Grayer. Say it again, sir?
    Chairman Boehner. Are you able to pay and afford your 
student loans?
    Mr. Grayer. I pay them, but they are not manageable.
    Ms. Wasserman. They aren't manageable, and that is a great 
example of the reality; for a lot of us it is incredibly 
difficult to be paying our loan debt. And we have to make it 
more affordable for students to get through school and then 
make payments on that debt and be able to support our economy, 
to be buying a home, to be picking a career path that we want--
    Chairman Boehner. Well, do you think that it is fair--let 
me ask you this question. Do you think it is fair that 
according to the GAO, if we continue the consolidation program 
at a fixed rate, it is going to cost $21 billion in additional 
taxpayer subsidies for graduates over the next 7 years, as 
opposed to taking that $21 billion and reducing origination 
fees and increasing loan limits to try to increase access for 
low to middle-income students?
    Ms. Wasserman. Those small provisions, reducing origination 
fees from 3 percent to 1 percent, allowing flexibility in the 
loan limits, I think are important, but the reality is that we 
need to increase the Pell Grant. Real access isn't going--
    Chairman Boehner. No, no, the question was do you think it 
is fair, because this is the real issue that we are going to 
get in. And for those of you that come to this Committee often, 
you know that I try to speak English. And the fact is that we 
have a budget-neutral environment that we are in and we are 
trying to find some way to increase access for low to moderate 
income students.
    Now I know some of my colleges, and I have read your 
testimony, Ms. Wasserman, think that every day is Christmas and 
that I am Santa Claus.
    Mr. Miller. Nobody thinks you are Santa Claus.
    Ms. Wasserman. No.
    Chairman Boehner. Santa Claus is sitting next to me, I am 
sorry. The fact is that we have to make hard decisions here. 
And from a fairness standpoint it seems to me that asking 
graduates who may have received the Pell Grant, may have 
received a student loan, may have had their interest paid while 
they were in school, had a 6-month deferment of any payment 
after they graduated, and were then allowed to consolidate 
their loans in many cases, I think that we have done, we are 
doing an awful lot for those who have been through school. And 
I am trying to grapple with the issue of what is fair for 
graduates as opposed to incoming students, who may not have the 
financial ability to attend a college or university of their 
choice.
    I have gone way over my time. Mr. Miller?
    Ms. Wasserman. Well, Mr. Chairman?
    Chairman Boehner. Yes, go ahead, go ahead.
    Ms. Wasserman. Chairman Boehner, I think it is important to 
look at fairness, but I think it is also about priorities. And 
the reality is that with this reauthorization we are asking, 
the students are asking for higher education affordability to 
be prioritized. And for that we need to not only retain the 
fixed rate on consolidation, but we need to do the other things 
I mentioned in my testimony, because we find money when we make 
priorities. We found money for tax cuts. We found money for 
other things in this Congress, and we need to make sure to find 
money for higher education.
    Chairman Boehner. Mr. Miller?
    Mr. Miller. Thank you, Mr. Chairman. It is rather 
fascinating that when we get to education we are in a budget- 
neutral situation. We are not in a budget-neutral situation on 
the military budget, on the agriculture budget, on the public 
works budget, on the transportation budget. Nowhere else are we 
on a budget-neutral situation, except when it comes to 
education.
    If we were in a budget-neutral situation, we wouldn't have 
a $500 billion deficit this year, next year, and the year 
after. So they have obviously decided that it is a higher 
priority to reach in, either to the tax cuts or to the deficit, 
for all of these other purposes. But it is not a high priority 
for the Republican leadership here for the education of 
America's young people.
    So when we are told to pick and choose between students who 
have graduated and students who are in school, with all due 
respect to the same students, because when people make a 
decision about will I be able to borrow this money, pay it 
back, what is the life cycle cost of this, just like anybody in 
business would, of this loan, and will I be able to become a 
teacher or a nurse or a policeman or a lawyer or a doctor, all 
of these things go into that calculation. And you decide yes or 
no.
    But you don't just all of a sudden because you have 
graduated in a situation where those are no longer a matter of 
concern. You borrow money over a period of time and you ask 
yourself, that is why we have disclosure forms, when you borrow 
money against your house, they say the total cost of this loan 
is $1,800,000 and you go, ``Jeez, I didn't know this house was 
worth that much.''
    No, that is the cost of the loan. When you buy your car, 
they tell you what the cost of the loan is. And people say, 
``Oh, I don't want to pay that much, maybe we ought to be 
looking at something else.''
    And so the problem with this legislation is we sort of have 
a half of a higher education bill. We ought to put everything 
on the table. I don't know, maybe the students will think that 
the 6-month deferment isn't worth as much as the consolidated 
fixed rate and then make some tradeoffs. We keep picking sort 
of low-hanging food or what is politically doable here, as 
opposed to constructing a program that now is in the middle of 
a dramatically escalating cost of higher education to students.
    This bill doesn't meet that test in terms of doing that. 
You have done some good things in this legislation, but we have 
also left out the consideration of a whole range of issues and 
topics. And when a student has to think this process is going 
to cost me another $5,000, I think it is a difference in 
considerations. So that is that.
    I want to hear your points on the Pell Grants. I didn't 
understand, Mr. Boyle, you didn't address the Pell Grant in 
your oral testimony. Can you tell me where your association is? 
Are you for the cap that is in this bill between now and 2011 
on Pell Grants?
    Mr. Boyle. I addressed the year-round Pell Grant.
    Mr. Miller. I know, but are you for the cap?
    Mr. Boyle. I would like to see Pell Grants higher in the 
ideal world, but I think that the basic reality is--
    Mr. Miller. Do you support the cap, what is it?
    Mr. Boyle. I would like to see it higher.
    Mr. Miller. So you don't support the cap?
    Mr. Boyle. No.
    Mr. Miller. OK. Dr. Martin?
    Dr. Martin. I would like to see the $5,800 and say, ``Such 
sums thereafter'' if we have to do it that way.
    Mr. Miller. So you would not support the cap?
    Dr. Martin. I would like to see the flexibility go up when 
we have the funds to do it. Grants are the most important 
thing. That is our highest priority has been grants.
    Mr. Miller. Ms. Wasserman?
    Ms. Wasserman. I don't support the caps.
    Mr. Miller. Dr. Reed, Chancellor Reed?
    Dr. Reed. I testified that the Pell program was the most 
important program to the California State University students. 
I would like to see it increased.
    Mr. Miller. Again, we are in this configuration. Somehow we 
can't help those students who need it the most in this 
calculation. And I just think that those of us on this 
Committee really have got to put together a comprehensive bill. 
To put a cap on the Pell at this point when we think we are 
looking at continuing escalation of these costs is just to tell 
a lot of students at the bottom they are not going to be able 
to make it in this situation.
    We are starting to see some of this in the California 
system already, are we not?
    Dr. Reed. We are. We are trying to hold our costs down as 
much as we can. We entered into an agreement yesterday with the 
Governor that, one, that our increase in fees would be tied to 
personal income increases in California, although there was an 
emergency provision except when the state's budget goes down. 
But then that was even capped at 10 percent.
    So there is tremendous sensitivity to what you are saying, 
Congressman Miller. And, as I said, the Pell is the single most 
important--116,000 of our students are Pell students in the 
CSU.
    Chairman Boehner. Will the gentleman yield?
    Mr. Miller. Yes.
    Chairman Boehner. Not all of us are for increasing the 
Pell. Now we have a dual process in here for those who aren't 
aware that we authorize and then we appropriate. The current 
authorization, maximum authorization for Pell is $5,800. We are 
at $4,050 as the maximum award that is appropriated. Now for 
every $100 increase in the maximum award, the cost to the 
Treasury is $400 million. And as this wave of students 
continues to approach, that number is going to be a half a 
billion dollars for every $100 increase.
    Now one of the things that you have all heard me say as 
members of the Committee is that I am not for some silly 
authorization level that is not realistic. I think it is 
duplicity. I think what we ought to do is to try to have the 
authorization numbers and the appropriation numbers as close as 
possible so that people aren't misled into thinking that we are 
going to do something--
    Mr. Miller. Oh, we will never be misled again after the 
other bill.
    Chairman Boehner. Turn your microphone on.
    Mr. Miller. We will never be misled again after No Child 
Left Behind. Don't worry about that.
    Chairman Boehner. Georgie.
    Mr. Miller. Well, we won't. We now know that it doesn't 
work that way. But reclaiming my time, this Committee ought to 
be saying to the appropriators, to the Congress, and to the 
nation, this is what an education policy should be if you are 
going to take care of the wave of students, the students of 
little income who are fully qualified to go to college so that 
they can participate, this is what we should be doing. That is 
why we are called the policy Committee.
    If the appropriators don't want do this, I guess they won't 
do it. If the administration, this administration, other 
administrations, past administrations don't want to do it, 
obviously they won't do it. But we ought to be setting forth in 
law the means by which you can achieve an education policy that 
addresses the full spectrum of American students and families 
that are looking for this opportunity.
    As I said, I think you have done good things in this bill. 
I don't want this to become a partisan fight. I think this bill 
is terribly important. But I don't think that we have in a 
comprehensive fashion addressed all of the possibilities where 
we can reapportion some of these costs in a more fair fashion. 
That is all I am trying to say.
    And I don't say that as throwing down the gauntlet or any 
of the rest of this. I think that we have got to work our way 
through it, but we have got to recognize that this landscape 
has changed dramatically. A lot of it, we are struggling to 
figure out how we can get the states to belly up to the bar 
here with a little bit more responsibility and participation.
    So this isn't meant as a broadside. It is just I think you 
see some glaring problems here that are going to be huge, and 
certainly in the Pell Grant area. We have got do deal with this 
now. We have got to deal with it this fiscal year. I just don't 
think this bill meets that test, Mr. Chairman, and it is not 
because it hasn't been a good faith effort and it is not 
because people haven't worked hard. I just don't think we are 
there yet.
    Chairman Boehner. Well, I would just suggest to my 
colleague and my friend that this is the first hearing on the 
first proposal. This is the beginning of what will be a very 
long process.
    Mr. Miller. Mr. Chairman, let me say this for the record. 
This is a rather unusual experience in the Congress of late 
where we actually have a bill that is in writing and then we 
have people come in and publicly comment on it, and I want to 
thank you for that, because I think that is the way we will end 
up. All of these witnesses have varying views on different 
subject matters. That is the manner at which we will arrive at 
a bill where people have a chance to pull it apart, look at it, 
and then hopefully, we can come back together and take this 
advice.
    And I would also like to ask unanimous consent to insert in 
the record some statements by the president of my alma mater, 
Dr. Corrigan, and the National Consumer Law Center, if I might, 
who also are testifying to this particular bill.
    Chairman Boehner. Without objection, so ordered.
    [The information referred to follows:]

  Statement of Dr. Robert A. Corrigan, President, San Francisco State 
                  University, Submitted for the Record

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 Statement of the National Consumer Law Center, the Center for Law and 
  Social Policy, and The Workforce Alliance, Submitted for the Record

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                                ------                                

    Mr. Miller. Thank you.
    Chairman Boehner. The Chair recognizes Mr. Petri.
    Mr. Petri. Thank you very much, Mr. Chairman. As we 
struggle to find the resources to meet our obligations to help 
provide access to education for students, I wonder if I could 
ask the panel members to turn their attention for a minute to 
the Direct and Guaranteed Student Loan Programs. About a third 
of the loans are direct and two-thirds are guaranteed student 
loan programs. The General Accounting Office has reported that 
in a number of years, the Direct Loan Program has netted money, 
not cost money to the Treasury. The Office of Management and 
Budget said of the Direct Loan Program recently, 
``Significantly lower direct loan subsidy rates call into 
question the cost-effectiveness of the guaranteed program 
structure, including appropriate level of lender subsidies.''
    And on May 3rd, the Wall Street Journal reported that next 
year the Direct Loan Program will, according to its analysts' 
estimates, make $500 million for the Treasury and the 
Guaranteed Program will cost $7 billion to the Treasury. Now if 
that is anywhere near true, we have an opportunity to come up 
with some money to meet some obligations in both the loan and 
other areas. Would any of you care to comment on the 
implications of those figures?
    Dr. Martin. Mr. Petri, I am not an economist, but I have 
read different reports that have been done throughout the years 
about the differences between the Direct Loan Program and the 
FFEL Program and which is more costly and which saves the 
government money and so on. I don't have a firm answer to that 
because I have read too many different things depending on the 
spin that has been put on those particular reports, and I am 
not smart enough to be able to break that down. I think it is a 
good question that you ask.
    I do think as an association we strongly support 
maintaining both programs for choice. I also think that the 
bill that is before us now that looks us and recaptures some of 
what many of us believe are some excessive earnings out there 
in the programs is a step in the right direction. I know that 
my colleagues in the lending community probably aren't happy 
with that provision, but I think it is reasonable and fair to 
ensure that those dollars are coming back in so that we can 
continue to support need-based student financial assistance.
    Dr. Reed. I cannot speak for those government figures. I 
can share with you, though, that in a 23-university campus, 23 
campuses, we support keeping both programs. Eleven of our 23 
universities are in the Direct Lending and 12 are in the 
guarantee. What we have seen is better services to students 
because we do have both, and we think that competition has made 
both programs better. Therefore we would support both.
    Mr. Petri. In that connection, the President's budget 
indicated that it costs taxpayers approximately 69 cents to 
lend $100 through the direct program and $10.51 to lend $100 to 
a student under the guaranteed loan program. Do you think that 
competition makes sense if you could get the $10?
    Dr. Reed. I don't know that those are the correct figures. 
I know you are quoting something.
    Mr. Petri. It is just our President.
    Dr. Reed. But I can tell you that both programs work. Both 
programs work very well. If there are greater efficiencies, we 
should really strive to get those so that we can put those 
funds back into students' hands so that they can be the 
beneficiaries of that.
    Ms. Wasserman. Congressman, I think that that is an 
important question and I don't have necessarily a better answer 
to that specific question, but I do think that as we ask those 
questions we need to ask why--we support Direct Lending, we 
think it is a really important program--why is it being 
attacked in states like New York and Oregon and California 
where you see Direct Lending Programs under attack?
    So I think we should be looking at how we can at least 
support the Direct Lending Program as we figure out where those 
monies are going and how to support both, possibly.
    Mr. McKeon [presiding]. Thank you. Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman. First of all, I would 
like to acknowledge the students who are in the back of the 
room for being here today. I know some of you have come at some 
expense to your academic needs and your other needs. I really 
appreciate it. Your presence itself today provides great 
testimony to this Committee. So we deeply appreciate you being 
here. Your presence is effective, let me tell you. You are 
really the customers of education and we should be focusing on 
you. That is our primary responsibility so thank you again.
    Mr. Boehner has said that the cost of keeping the fixed 
rate rather than changing it to a variable rate would cost $21 
billion over 5 years, emphasizing that we should be budget-
neutral. One of the reasons that I guess we have to be budget-
neutral is that this administration and Congress, not with my 
vote, gave up $2 trillion of revenue over the next 10 years, $2 
trillion. That is $2,000 billion.
    We are talking about $21 billion. Now you can't separate 
your votes on taxes and your votes on authorizations and 
appropriations. I voted against those $2 trillion in tax cuts 
because I knew it would get ourselves in these types of 
situations where we now have to short change students.
    Now I didn't go get a lot of applause back home when I 
voted against $2 trillion in tax cuts, but I think it was the 
right thing to do. I think our future is students. So the $21 
billion, if that is the right figure which Mr. Boehner is 
using, is a small part of $2,000 billion, which we gave up in 
revenue. We could certainly use some of that revenue to fund 
these programs.
    So always bear in mind that how a person votes on taxation 
is just as important as how the person votes on authorizations 
and appropriations. You can't separate the two.
    Ms. Wasserman, thank you very much for being here. This 
bill sets the maximum Pell Grant at $5,800 and freezes it there 
for the next 6 years. That figure, $5,800, Mr. McKeon and I put 
in place for this year and the reauthorization in 1998.
    That was a very pleasant reauthorization in 1998. President 
Clinton used that authorization room, to raise the maximum Pell 
Grant from about $2,300 to $3,750. That is what it was when he 
left office. President Bush has raised it during his last 3 
years 50 bucks, 50 bucks. That is almost an insult, 50 bucks, 
where President Clinton raised it from $2,300 to $3,750. We 
gave him room, and I think we need more room. We set policy, as 
the ranking Democrat of this Committee said, we set policy 
here. We look at the needs and then the appropriation Committee 
can say how much money we have left and how should we set our 
priorities.
    But can you expand upon the need to raise the maximum Pell 
Grant and the effects it could have over the next 6 years for 
students?
    Ms. Wasserman. I think it is critical when we look at this 
reauthorization, students really do look at it as an 
opportunity, an opportunity to create real access. We all, I 
think when we went down the line, said the Pell Grant is one of 
the most important ways that we are going to create access. For 
this reauthorization to keep the maximum at the same level that 
it was set back in 1998 is ignoring all the realities we know 
to be true. We have more students going to school, more of them 
are low-income, tuition is rising, and we are going to be 
shutting doors to people from going to school if we don't at 
least increase the maximum and create room for the Pell Grant 
in the appropriations process to get the full funding that it 
needs.
    Mr. Kildee. I think we asked all four witnesses, but didn't 
get down to Mr. Grayer yet on raising the Pell Grant. Would you 
also agree that the Pell Grant cap should be raised?
    Mr. Grayer. Say that again?
    Mr. Kildee. Would you also agree with the other four 
witnesses that the Pell Grant cap should be raised?
    Mr. Grayer. Yes, I think it should be raised.
    Mr. Kildee. Thank you.
    Mr. Grayer. But I would also like to state that earlier I 
misunderstood the question, I do not have a problem paying my 
debts.
    Mr. Boyle. May I add something on the Pell Grant?
    Mr. Kildee. Yes, sure.
    Mr. Boyle. I think it is important for families to 
recognize of course that the Pell Grant is a foundation grant 
for financial aid awards. And so the people that are receiving 
Pell Grants, when they receive their financial aid award, they 
are receiving institution-based aid and institutions have 
stepped up to the plate over the last 10 years and provided 
additional funds in order to make college costs more reasonable 
for families.
    And so if the focus is only on Pell Grants and the fact 
that they are stuck at a certain level, I think that that can 
help to create a misperception by the public that that is the 
only source of availability of financial aid. There are many 
sources of availability of financial aid.
    Mr. Kildee. But the Pell Grant is a basic fundamental help 
for those students so they will not be burdened with loan debt.
    Ms. Wasserman. Sadly, I think to respond to Mr. Boyle, 
instead of a focus only on the Pell Grant, what we are seeing 
is no focus on the Pell Grant, right? Because we are not 
increasing the maximum authorization at all.
    Dr. Martin. Mr. Kildee, could I also speak to this issue? 
Because I understand, as someone that has watched this program 
since its inception, I realize that we have always had a higher 
maximum than what we have ever funded. And I understand Mr. 
Boehner's concern about having a mark out there that is 
unrealistic and gives false expectations. But I also think it 
is important that we have to recognize that this is a 
foundation program. And I do agree that we have shifted 
dramatically in this country over the last 20 years from 
reliance upon grants to student loans. And maybe that is the 
reality of what we have to deal with.
    But I would say to the Committee, and regardless of where 
we set the maximum and so on, and I have my own views on that, 
but let me suggest another policy decision that was a part of 
our recommendation that I think also addresses and goes to what 
the issue is with Pell Grants. Pell Grants is the foundation 
program for the neediest students in this country. And one of 
the recommendations that we had was is that at least fund the 
negative EFC.
    So if you have a student that their expected family 
contribution is in the negative, and we currently calculated 
down to $750, that student should be entitled to that 
difference on that negative amount. So if they had a negative 
EFC of $500, that means that that student in two semesters 
would get an additional $250 the first semester and $250 the 
other. That ensures that those limited increases are going to 
the neediest students that are enrolled in our post-secondary 
educational institutions.
    Mr. Kildee. Thank you.
    Mr. McKeon. Let me just real quickly ask you each a real 
quick question. Would you all like a Cadillac? Mr. Boyle?
    Mr. Boyle. No.
    Mr. McKeon. What would you like?
    Mr. Boyle. I would like a very nice Chrysler car.
    Mr. McKeon. OK, we will give that to you.
    Dr. Martin. Whatever gets me to where I am going.
    Mr. McKeon. Would you like one?
    Ms. Wasserman. Accessible education.
    Dr. Reed. A Ford.
    Mr. Grayer. A Cadillac.
    Mr. McKeon. One very honest guy, thank you very much. I 
think we are all talking the same way. We all would like to 
have a whole lot of things. In fact, I guess if the human 
persona, if we ever get to the point where we have everything 
we want, then what are we here for then? What is our goal? What 
pushes us for more?
    We had a study done by the Student Financial Aid Commission 
and they showed that over the last 20 years the cost of 
education has been going up at four times the rate of people's 
ability to pay for it. And that means that by the end of this 
decade, 2 million students that we would like to provide 
education for are not going to be able to get that. So what we 
are trying to do, it would be nice to have unlimited funds, we 
do not have unlimited funds. And the Chairman that sits in this 
chair I think tried to address that situation very well. We are 
given a budget, we have a number that we can work with. And 
then we try to say if given that budget, where do we want to 
put our emphasis? And when the Higher Education Act was passed 
in 1965 the purpose was to provide access to as many people as 
possible. And that is what we are trying to do.
    So we are trying to put our resources on the front end 
rather than the back.
    Now there has been some things said about Pell Grants. You 
can do a lot of things with numbers. And that philosophy of 
trying to help more people have access, yes, the maximum has 
been $5,800. It has not changed for the last few years. But we 
have been able to give over a million kids more a Pell Grant.
    So you have got two things. You can increase the maximum 
and pay more to some students or you can keep the maximum the 
same and give more aid to more students. But it has gone up 
almost in the time I have been Chairman from $6 billion to $13 
billion. That is the number. The money is there and it is 
helping more students.
    Chancellor?
    Dr. Reed. Mr. Chairman, may I just say this. You have a 
most difficult job, and I want to recognize that, because you 
are trying to balance politics, reality, budgets, deficits, 
taxes.
    Mr. McKeon. And a war.
    Dr. Reed. And a war. OK, I don't want to go there.
    Mr. McKeon. Except that it was talked about--
    Dr. Reed. But that is a part of your reality, OK.
    Mr. McKeon. Right.
    Dr. Reed. Now what I want to say for America and America's 
public policy, I am very concerned, as a person that has spent 
about 30 years in higher education and in politics, about what 
is happening in America. What I see is if you are middle class 
or better, economically a little better off, and frankly not 
very smart, your chances of getting a college education are 
very good. If you are real bright and economically not very 
well off, you have an 80 percent chance of not getting a 
college education, because you can't afford it. And there are 
more and more haves and have nots in this country. And so what 
your public policy debate really is is how do you balance this?
    Now, I don't know. Maybe what the authorization ought to do 
is to continue knowing that you are not going to fully fund 
Pell at any time, but you ought to set the bar so that it 
continues to move, so that there is this obligation, hope, that 
you can do that. And then, as this country can afford it, you 
fund what you can for the largest number of the most needy 
students, because they are the ones that need access in this 
country.
    Mr. McKeon. We have a markup going down at the other end of 
the building in the Armed Services Committee, which I also 
serve on, and in that Committee we are very careful to 
authorize what we think will be appropriated. We work very 
carefully. Here it has had a history of not doing that at all. 
I am sure at the end of the day we will probably be doing what 
you suggest. My time is out and the Chairman has returned, and 
I will give him back the chair.
    Before I do that, could I just make one quick little--for 
Ms. Wasserman, you made a comment about we are giving up our 
freedom of speech. I would like you to look at the bill and 
read pages 19 and 20 and if you can, for the record, find 
anything in there that takes anything of freedom of speech, 
would you please insert that in the record, give me an answer 
in writing?
    Ms. Wasserman. You want an answer in writing?
    [Answer not received.]
    Ms. Wasserman.  I can talk a little bit about it now. I 
think that the concern is that it creates this Federal 
oversight of our classrooms and our activities, both official 
and unofficial, and will restrict our ability--I have read the 
bill, and I think that it will restrict the options and things 
such as funding, who we are bringing to speak on our campuses. 
I think the oversight on this is very problematic. We are 
looking at the Federalization of higher education on our 
campuses.
    Chairman Boehner. We have a series of votes on the floor. 
We are going to take questions from Ms. McCarthy, who is next 
on our list on the other side. And at the conclusion of her 
questioning, we will recess the Committee until approximately 
1:15 for the series of votes that we have on the floor.
    The Chair recognizes the gentlelady from New York for 5 
minutes.
    Mrs. McCarthy. Thank you, Mr. Chairman. I am hoping that as 
we go through this hearing and work together, that we will be 
able to accommodate an awful lot of the issues that have been 
brought up today. I also want to say hello to Mr. Goodling. It 
is good seeing you in the audience.
    Chancellor Reed, I read your whole testimony, and with all 
the things that you were saying today, your recommending 
addressing the severe nursing strategy, my background is a 
nurse, so we have always had this shortage, but now it is at a 
crisis level we now face. By allowing mandatory loan 
forgiveness for nurses serving in the shortage areas, Mr. 
chancellor, I am going to be introducing a bill next week, H.R. 
934, Teacher and Nurse Support Act, that encourages individuals 
to enter and continue in the teaching and nursing professions 
by amending the Higher Education Act to provide loan 
forgiveness and loan cancellations to teachers and nurses. To 
be eligible, the teachers must be employed full-time for 
teachers and teaching for five consecutive complete school 
years at a school that is at an under-served school district. 
Nurses must be full-time nurses for five consecutive complete 
years in a clinical setting or as a member of the nursing 
facility at an accredited school of nursing. I will be sending 
you that information. I would like your input on it.
    But in your testimony also you talked about Trio and GEAR-
Up. I am very involved in those programs back at home, but I 
have also been working very hard on Project Grad, which 
basically is going into a school in my district that was taken 
over by the state and what we are doing is partnering with 
businesses. They are putting up the money for scholarships for 
these kids if they keep a 2.5 average in leadership skills and 
everything else like that.
    When we started the program in my district 3 years ago, we 
thought we would have a hard time getting these kids together 
to get into this program because they have been, the only thing 
I can say is they have given up hope most of the time. Now we 
are seeing overwhelmingly these kids studying, raising their 
marks, because they actually have a chance of thinking about 
going to college and that is our step on doing that.
    So I hope this Committee will also look at Project Grad. It 
is working. We have programs out there that are working and we 
are hoping to finally, we are starting at the high school but 
we are working our way down now. But with the Trio and the 
GEAR-Up programs that are already in the grade schools, we 
think that in the end we are going to save an awful lot of 
money, especially for the kids that need special services.
    So with that, you also talked about students to pursue 
course work in careers in the fields such as science, 
technology, engineering, and mathematics. And I am hoping that 
you might consider also having nurses in those programs. People 
don't understand nursing is a lot of math and it is a lot of 
science. So I think they should be qualified.
    And with that, going with the Pell Grants, that is going to 
be a big debate and I know that. All of us here wish that we 
could have the money to make sure that every child that wants 
to go to college--but I agree with you on the digital divide. A 
lot of my schools in the minority area don't even have 
computers in the school. Don't even have computers. So with 
that--
    Dr. Reed. Congresswoman McCarthy, I look forward to 
reviewing and reading and commenting on your legislation. One 
of the things that we have tried to do in the California State 
University in the nursing area is to build partnerships with 
our large hospitals who are now providing in a partnership with 
us scholarships for nurses who will agree to work for that 
hospital for a period of 5 years and they will forgive their 4 
year nursing scholarship to our institutions. We have a $15 
million agreement between Long Beach Memorial, which owns 
several hospitals in southern California, and the California 
State University/Long Beach. I would strongly recommend that if 
the Federal Government could also be a part of this, you could 
do it in a matching, partnership way.
    Mrs. McCarthy. Thank you. We will look into that. Does 
anyone have any comments? Great.
    Chairman Boehner. The Committee will stand in recess until 
approximately 1:15.
    [Recess.]
    Chairman Boehner. The Committee will resume its hearing on 
H.R. 4283. And the Chair recognizes the gentleman from 
Nebraska, Mr. Osborne.
    Mr. Osborne. Thank you, Mr. Chairman. And I would like to 
thank those of you for coming and thank you for sticking around 
while we had this lengthy series of votes. One thing that I 
would like to mention to you that has occurred to me is that 
there is a real world cost of money. So if somebody is out of 
school, maybe they are a doctor, maybe they are somebody who 
has gone into business, and they have got credit card debt 
where they are paying 15 percent. They have got a car payment 
of 6 or 7 percent, house payment of 6 or 7 percent. And they 
also have a student loan payment of 3.4 percent or whatever. It 
doesn't take a genius to figure out which one they are going to 
pay off and which one is going to ride.
    And so it just seems to me that there is a basic fairness 
issue here. And naturally we would like to give students a 
break forever and ever. And I guess one of the solutions that I 
keep hearing here is, ``Well, we just need more money,'' and 
certainly that would be great.
    But even if we doubled the amount of money, at some point 
it seems to me we would still be making a basic choice. We 
would be saying are we going to help those who have already 
graduated from school or are we going to begin to help more 
incoming students? At some point that is the fundamental choice 
that you have to make.
    And so I guess everybody on this Committee would like to 
have more money available, and yet I hear complaints all the 
time about the Federal deficit. And so it kind of depends on 
what you are interested in. And so you want to maybe double the 
amount of money spent on education but you don't want to see 
the Federal deficit go above $500 billion. As a matter of fact, 
you would like to see it down to zero.
    Same thing is true in the military spending. Same thing is 
true in Medicare. Whatever you talk about, it is the same deal. 
So there is a balancing act here that is going on.
    And I used to work with young people, most of whom were 
from lower socioeconomic situations. And many of them were 
walk-on football players. And they had to rely on Pell Grants 
and they had to rely on student loans.
    One of the concerns that I had that I would like to ask you 
about. Let's say that you doubled the cost or the Pell Grant 
from $4,000 to $8,000, do you feel that all of that would go to 
the student or do you feel that it might result in higher cost 
of education to some degree? I realize it is not a one-to-one 
relationship, but it seems like the more the Federal Government 
spends, the more rapidly the costs accelerate. And that has 
been a concern. And I would like to have you comment on it. 
Maybe I am totally out of touch with reality, but maybe there 
is something to that.
    So any or all of you that would like to comment on that, I 
would appreciate hearing from you.
    Dr. Martin. Mr. Osborne, I have seen a couple of analyses 
previously that have asked the very question that you have just 
raised, and that is, if we increase grant aid, does it 
correspondingly result in an increase in the cost of education. 
And the studies I have looked at would suggest that it does 
not. And I think probably in large part because of what you 
said, that there is not a direct correlation because it doesn't 
go to all students.
    I think what Mr. Boyle said earlier this morning in the 
testimony is also important to note. And I think one of the 
things that we have observed, and I think he correctly pointed 
out, is that unfortunately in many of the states their policies 
toward low tuition, particularly in public institutions have 
shifted. And many of them have moved now to a policy of either 
modest or high tuition along with additional student aid to try 
to make up to keep access available for those students. And 
while there is certainly growth in many of the state programs, 
unfortunately states with the other pressures and so on, most 
of them have not been able to keep up. And so that probably has 
contributed as much as anything to part of the cost.
    In terms of the first part of what you were talking about, 
you are correct. All of us from time to time have to make very 
difficult choices because we have limited dollars. We will 
never have all of the money that all of us would like to have.
    And therefore if we are going to have to have limited 
dollars, the question is is what are the priorities? And I 
think the thing we have wrestled with this within my membership 
extensively. We are very, very concerned about the level of 
indebtedness that many of our graduates have when they leave 
our institutions. On the other hand, we also would like to 
believe, and strongly believe, and there is evidence to support 
this, that those students when they graduate are in a much 
stronger position and are able to earn more money over a 
lifetime without that education.
    And so it is a very positive investment. Our main concern 
is trying to make certain that with the limited funds that we 
have the first priority ought to go to keep the doors open for 
future students who without those funds would not be able to 
enter those institutions at all and even avail themselves of 
that opportunity.
    I recognize, I fully recognize that when you talk about 
changes or something and somebody says, ``Hey, maybe I am going 
to have to pay an additional $5,000 on my loan,'' we are 
talking about an amount there that is going to be amortized 
over about a 20-year period. And when I figured that out, it 
comes out to about $23 a month difference in terms of the 
payment for that person.
    Now I am sorry that that person has to do that, and all 
things being equal, I would rather they don't have to. But that 
is about what our average graduates were talking about in order 
to ensure that we have the money at the front end to do some of 
the improvements, some of the enhancements to this bill of 
trying to make the loan programs fair and better, reducing the 
origination fees, giving students the amount of money so they 
don't have to go out and borrow through private loan programs, 
through separate initiatives, giving students and addressing 
issues on repayment, when they are having problems with that so 
that they have got additional time. It takes money to do those 
things, too. And I think that has been the focus of the bill. I 
would like to see it expanded even further.
    One of the things that I like very much about Mr. Andrews' 
bill is also on the back end with the consolidation, he 
provides some sensitivity depending on the relationship of your 
student loan to your income as a debt, to kind of look at that, 
to try to be sensitive. But it also doesn't allow for somebody 
that is making $100,000 to suddenly lock in at a very low rate. 
And so we have got to find a balance here, and I think you are 
exactly correct.
    Dr. Reed. Congressman Osborne, I support what Dr. Martin 
says. In this country today if you are a high school graduate, 
your lifetime earnings are projected by the Department of 
Commerce and Labor to be about $1.2 million over your lifetime. 
If you are a college graduate with a baccalaureate degree, your 
earnings are going to be $2.1 million. So therefore those 
earnings are about a million dollars more. If you have to set 
priorities, which you do, our priority is to help those 
students that are in school or are going to come to school. If 
in the loan consolidation business, you are going to have some 
savings, then let's put that into the students that are in 
school and help them.
    No. 2, back to what I said earlier, I would like to see 
this Committee talk a little bit more about how can we assure 
that Pell loans consolidation, whatever you are going to do, 
helps the lowest income students, the students whose families 
struggle the most. Now that is very difficult and ``fair'' has 
lots of different definitions as to where you draw that line. 
But I think that focus needs to be debated and talked about.
    No, I don't think increasing Pell will drive the cost of 
higher education up. There is a big spotlight on higher 
education. In California I can tell you that we went almost 10 
years and never increased fees a penny, actually we reduced 
them 10 percent in 1997 and 1998 when I first came to 
California.
    Now here is America's problem: health care, corrections, 
all of these competing matters, transportation in the states 
are more competitive for the state revenue than they have ever 
been before. Therefore, higher education has a much harder time 
than they have ever had. So it has been maybe a little too easy 
to shift some of the state's responsibility. It is really the 
state's responsibility to pay for access to higher education 
and not shift as much in fees to students as the states have 
done in the last four or 5 years.
    Ms. Wasserman. Congressman, I have to say that I think that 
this talk about separate priorities, the students coming in the 
door or the students that have graduated, again, I will say 
that I don't think that it makes sense, because I think then we 
are getting them in the door under false pretenses. If then 
they are saddled with unmanageable debt when they leave, then 
that isn't access. And pretending we are prioritizing the 
ability to get people in the door, it is just a false pretense.
    The reality is they won't be able to come in the door 
because they are going to know that they cannot sustain those 
payments when they graduate. It will discourage the same 
students that are worried about applying now because of sticker 
shock from worrying about how they are going to make those 
payments, how they are going to get through school. And I think 
that any proposals we look at, we need to look at any of the 
needs analysis proposals to make sure that they are really 
going to work for low-income students. So that means that if 
you are making a salary of $23,000, that you are not going to 
be stuck with, again, huge unmanageable payments.
    Mr. Osborne. Well, my time is up and I will yield back, but 
I would like to say also that the argument is true, we are in a 
static economy but we are in a dynamic economy, so incomes rise 
and fall, taxes, interest rates rise and fall, and it doesn't 
seem to be wise to me to lock in something in a dynamic 
economy.
    I yield back, Mr. Chairman.
    Chairman Boehner. The Chair recognizes the gentleman from 
New Jersey, Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman. I would also like to 
thank the panel of witnesses for an outstanding job and for 
your patience in waiting while we had a series of votes.
    I have never been involved in a legislative process that 
was worth doing that did not involve compromise. And I have 
never been involved in a compromise that didn't make someone 
unhappy about something. And I think the choice that is in 
front of this Committee is whether we are going to leave the 
status quo in place, which I think is unacceptable because it 
is not dealing with the stress and anxiety of rising college 
costs and shrinking affordability, or whether we are going to 
find the most equitable and intelligent way to reach a 
compromise.
    I think, and I think Chairman Greenspan agreed when he was 
here a couple of weeks ago, that a better choice would be for 
us to extend Pell Grants and pay for it by scaling back a part 
of the tax cut. Unfortunately--or fortunately, depending on how 
you look at it, that is not a decision within the purview of 
this Committee. What is within the purview of this Committee is 
what to do about the student loan law. And I do hear consensus 
on the panel today that reducing or abolishing origination fees 
is a worthy goal. I think I hear consensus that expanding 
options for student repayment by income contingent repayment 
and other flexible repayment mechanisms is a worthy goal. I 
think I hear a consensus that offering loan forgiveness to 
people who go into critical professions such as nursing and 
teaching is a worthy goal. All of those worthy goals, each of 
those worthy goals costs money, and it is our job to balance 
off how to do that.
    I agree with the very difficult and controversial 
proposition that switching from fixed rate consolidation to 
variable rate consolidation is the right choice. I think it is 
the right choice. I only think it is the right choice if the 
$20 billion or so that is saved by making that switch is 
dedicated to helping students. And I would choose to dedicate 
it by abolishing origination fees on subsidized loans and I 
would choose to dramatically expand repayment flexibility. And 
I would also choose to means test the question of who gets a 
fixed rate and who doesn't. I think a compromise that we need 
to look at is whether certain students who have high debt and 
low-income should still get a cap on the interest rate they 
pay, and I think we should also look at other methods of 
achieving that same goal.
    One of the areas that I did hear some division of opinion 
from our students or student and recent graduate I wanted to 
ask them about, because I think your groups are ultimately the 
ones who matter most. I think I heard Ms. Wasserman say that 
she and her group are very concerned about raising borrowing 
limits because it could put people further into debt. And I 
heard Mr. Grayer say that he supports higher loan limits so a 
student can choose to borrow more, and I assume he has to. I 
think I also heard Mr. Grayer say he would rather there be more 
grants but if a student has to borrow, the student has the 
right to borrow.
    Ms. Wasserman, why is Mr. Grayer wrong?
    Ms. Wasserman. I think that we are working within a 
political climate right now where we are seeing a bill right 
now that has no increases in the Pell maximum, right? And under 
this bill, I am looking at the prospect of raising loan limits 
is really frightening at the idea of adding to the -- we are 
talking an average student debt of $18,900.
    Mr. Andrews. Can I give Mr. Grayer a chance to -- Mr. 
Grayer, do you think that you should make the choice as to 
whether to borrow more money or someone else should? Do you 
think that you should make that decision for yourself or do you 
think that we should do so by putting limits in the law?
    Mr. Grayer. I think it depends personally on the 
individual's personal financial situation, because the decision 
that I will make based on my finances is not necessarily the 
decision that another student may make based on their finances. 
So I think then, too, when you have a difference in markets, 
depending on where you are located, I think that personally I 
would not give a definite answer to that question but say the 
issue should be a case by case.
    Mr. Andrews. Mr. Grayer also testified that he believes 
that the repeal of the 90/10 rule would permit more schools to 
open their doors to low-income students. And, Ms. Wasserman, 
you oppose repeal of the 90/10 rule. Who is right, you or Mr. 
Grayer?
    Ms. Wasserman. I think it is important not to pit myself 
against Mr. Grayer. Mr. Grayer has--
    Mr. Andrews. But, ma'am, you took two different positions. 
You pit yourself against him. Is he right or are you right?
    Ms. Wasserman. I think that his story is very important 
when we look at the reality; this is an important story, to 
look at how someone was able to get through this college 
process, which is difficult and hard to finance. And I think we 
heard that. I think the repealing of the 90/10 rule, when you 
look at the abuses of the past and the scams of the past, is a 
dangerous step. And that we do not want our for-profit schools 
entirely financed by Federal funding. I think that is what we 
are saying.
    Mr. Andrews. Are the students at Mr. Grayer's school 
members of your association?
    Ms. Wasserman. They are not.
    Mr. Andrews. Did you poll the members of your association 
for their position on this issue?
    Ms. Wasserman. Excuse me?
    Mr. Andrews. Did you poll the members, the million members 
of your association, for their position on this issue?
    Ms. Wasserman. We don't poll them. They vote and give their 
opinion on how they feel about for-profits being federally 
funded completely. And we are very worried about the abuses and 
scams in the past and figuring out how to create opportunities 
now.
    Mr. Andrews. Right.
    Ms. Wasserman. And create real access.
    Mr. Andrews. Are there members of your association who are 
students at proprietary schools?
    Ms. Wasserman. No.
    Mr. Andrews. OK, thank you very much.
    Mr. McKeon [presiding]. Thank you. Mr. Ehlers?
    Mr. Ehlers. Thank you, Mr. Chairman. And let me just 
briefly before I get into my questions yield for a moment to 
the gentleman from Georgia for a unanimous consent request.
    Mr. Gingrey. I thank the gentleman and apologize for not 
being here for most of this very, very important hearing, which 
I am intensely interested in. Of course we are in the process 
of marking up the 2005 Defense Authorization Bill, and so you 
guys know how busy we are there.
    Mr. Chairman, I would like to ask unanimous consent to have 
a statement from the American Medical Association in support of 
H.R. 4283 submitted for the record, if there is no objection.
    Mr. McKeon. No objection, so ordered.
    [The provided material follows:]

Statement of the American Medical Association, Submitted for the Record

[GRAPHIC] [TIFF OMITTED] T3631.014

[GRAPHIC] [TIFF OMITTED] T3631.015

                                ------                                

    Mr. Gingrey. Thank you, Mr. Chairman.
    Mr. Ehlers. Reclaiming my time, I would like to just ask 
about a feature that there has been some discussion on, and 
that is the benefit for the 2 year interest only repayment 
option for borrowers if they request it. And I want to evaluate 
whether this is a positive or a negative thing. I will start 
out with Dr. Dallas Martin, and anyone else that wishes to 
answer may do so.
    Dr. Martin. Mr. Ehlers, let me say that I think we find 
that many times students when they first leave school are 
moving to a new location, establishing a new career, there is 
obviously cost associated with that of getting an apartment, 
maybe buying a new wardrobe that is a little more appropriate 
for your new career than what we were able to wear in college. 
In many cases, students may be buying a new automobile or 
something for transportation, et cetera. And then on top of 
that they also have their loan payments, not to mention the 
deposits that they put down for utilities and so on and moving 
into a new place.
    And so it is very difficult sometimes getting off to that 
start. But we have found that if you give students, and 
technically in the law currently there is a provision that if 
you are behind you can go to the whole of your loan and talk 
about forbearance. The problem is many students don't realize 
that that option is available to them and so subsequently they 
get into trouble, begin to default before they learn that there 
was an option to help them out of this. Now they are not trying 
to be irresponsible of not repaying their debt. They just don't 
have the means.
    And so we think that by making this up-front, making 
certain that every student knows that he or she is available 
for this option, doing it in a way so that they are least 
paying the interest on the loan so we are not going to end up 
with negative amortization, we think that that will be a 
positive benefit to assist students as they are coming out, 
getting established and then having the means to take over 
their credit responsibilities in a reasonable way.
    Mr. Ehlers. Thank you. Does anyone else wish to comment on 
that?
    Dr. Reed. I would say to use that very sparingly, to be 
very careful, because that is just going to add additional debt 
later on for the students, and so being very careful I think is 
best.
    Mr. Boyle. I would agree, and I think it speaks to the 
issue of financial literacy, which all the studies show that 
there is a tremendous degree of financial illiteracy among 
college students and graduates. And so without proper 
information about what interest only repayment means and advice 
on that, people get themselves into trouble. And with credit 
card marketing on campus, students may be doing interest only 
repayment and not know it by paying just the minimum payment on 
sometimes multiple credit cards that they take out and be 
digging themselves into a financial hole.
    Mr. Ehlers. I would just have two responses to that. First 
of all, once again, to illustrate the need for some improvement 
in our elementary and secondary education programs to increase 
financial literacy. Second, I would be very interested to find 
out whether the students' financial illiteracy is any greater 
than that of the population at large. And I suspect that it is 
not. That they are probably better off than many of their 
parents on that score.
    Dr. Martin. I would suggest, Mr. Ehlers, that if you looked 
at all of the students that have taken advantage of the current 
climate to consolidate their loans with such low interest 
rates, it suggests to me that they are pretty savvy when it 
comes to financial literacy, maybe more so than most of our 
parents--not our parents, but we as parents.
    Mr. Ehlers. I suspect you are right. One other comment that 
I would like to enter into the record at this point on the 
previous discussion. And I have served as a professor for some 
22 years and frequently would have students come to me and say, 
``Well, I am not sure I can continue in school.'' And I would 
say, ``Why not?'' ``Well, my debt is getting too large.''
    And I proceeded to give them a short sermonette to the 
effect that I always encouraged them to continue in school, I 
encouraged them to borrow whatever they were able to borrow 
under the student loan program. I said it is the lowest 
interest rate you are ever going to have and it is the best 
investment you can make of any money you are ever going to 
have. And once you get out of school and graduate you may have 
$10,000, $20,000 in loans. That is probably the lowest debt 
level that you will have for 20 or 30 years because you are 
going to buy a car and you will probably owe $10,000 at least 
on that, mortgage for a house, $100,000 to $300,000. It is 
going to make your student loan look so minuscule by comparison 
and particularly the interest rate. And it is the only 
investment you can make that is going to help you pay off all 
your other loans.
    And I think we just have to keep that perspective here. The 
student loan is the best deal that anyone can ever have because 
it increases their learning power and it is a lower rate than 
almost anything else. And let's not lose sight of that as we 
discuss the loan picture.
    Thank you, Mr. Chairman. I yield back.
    Mr. McKeon. Thank you. Mr. Bishop?
    Mr. Bishop. Thank you, Mr. Chairman. And let me thank the 
panel for your comments here today.
    I have a rather broad question, and I should say that I 
come at this issue from the perspective of someone who spent 29 
years as a college administrator before I came to the Congress 
and I spent seven or eight of those years as the director of 
financial aid. And my question is this, the fundamental premise 
of this bill is that it is a revenue-neutral bill. So my 
question is primarily to Mr. Boyle and to Dr. Martin and to Dr. 
Reed is in terms of how we order our national priorities, do 
you accept that fundamental premise? And if you don't, why have 
you not come to us telling us that this is simply unacceptable? 
Why have you not come to us and tell us that higher education 
deserves to be a much higher priority than a revenue neutral 
proposition?
    And then I guess my more specific question is we have heard 
two statistics. Dr. Reed talked about a well-qualified student 
of limited means has an 80 percent chance of not going to 
college. And a Federal commission estimated that because of 
financial considerations, over four million people will not 
have access to higher education over the next decade. And so my 
specific question is do you believe that this bill as currently 
written is going to appreciably cut into either of those 
numbers? Start with Dr. Martin?
    Dr. Martin. Mr. Bishop, if you take the assumption that 
this bill as written being revenue neutral, does it move the 
bar up to help students? The answer is, at least in looking at 
the Title IV programs, the answer is yes, I think there are 
some improvements. Does it go to where we would like to see it 
go? Absolutely not. Do we believe that education ought to be a 
higher priority in this country? Absolutely. No doubt about it. 
We have talked about this for years in terms of trying to deal 
with this and so on. But you and I live also in a realistic 
world where there are changes in budgets and deficits and 
politics and all the other kind of things that deal with it.
    Let me say, though, that this Committee, which is an 
authorizing Committee, and this is an authorization bill, in my 
opinion there are two areas in this bill that this Committee, 
if it wishes to direct more money to education, you can either 
make changes along the lines of some of the other things that 
we have talked about and expansion, including Mr. Andrews' 
bill, on the loan programs because they are entitlements and 
will be funded. You can add real benefits to students, both in 
terms, conditions, limits, all the other things that you want 
to debate.
    You also in my opinion, while you can set a Pell Grant 
authorization level at a certain level, we still have to go to 
appropriations and get it. The proposal that we put forward on 
the negative expected family contribution however if it was 
enacted would take that money from the current appropriations 
that are out there and it would least direct that to the 
poorest of the poor. Those are two areas where I think this 
Committee can make a difference.
    Mr. Bishop. May I interrupt for a second?
    Dr. Martin. Yes, you may.
    Mr. Bishop. With reference to assisting the poorest of the 
poor, which I would wholeheartedly endorse, how would you 
characterize or what is your position on the proposal in the 
bill to make at least a portion of Pell merit-based?
    Dr. Martin. My association has not taken a formal position 
on this, but let me give you a personal opinion, if I may.
    I think all of us want to try to ensure that students in 
high schools today are taking a rigorous curriculum to make 
certain that they are properly prepared to pursue post-
secondary education. I think the idea of trying to recognize or 
provide some benefit to those students that do that is fine.
    My objection is, and while I understand that probably if 
this is enacted the state Scholars Programs will grow in the 
other states, but currently it is only in effect in 13 states.
    If I had my choice, what I would do is I would say this is 
that rigorous curriculum, which the state scholars support, and 
I would say to children in high schools across this country 
that if you achieve that curriculum and come out of it 
regardless of what public school districts you are in or what 
state or whatever, you are entitled to that additional bonus 
just like everybody else. And right now it will be limited and 
also you can have somebody with a minimum Pell Grant that would 
be eligible for a maximum $1,000. Even under the proposal that 
I have proposed of the negative EFC, the maximum that any 
student could get, which are the poorest of the poor, would 
only be $750, because that is where we have the negative EFC.
    Dr. Reed. Congressman Bishop, one, there are many, many 
good things in this bill, and so we do support this bill. And I 
hope that you do that in your way of compromise. So it is a 
good bill for the many good things that are in there.
    No. 2, in part of my work life I was the chief of staff to 
the Governor of Florida for 8 years, and that was probably the 
single best education I ever received. What you are asking us 
who are biased, yes, I want you to put everything that you can 
in higher education. But as elected officials representative of 
this nation, I also know that you have to balance that because 
there are a lot of people who need health care. There are a lot 
of children who need services, a lot of elderly. I want to ride 
on good highways. I live in Los Angeles and you know what that 
is like.
    So it is a balance. What I worry about a lot is that higher 
education is about second or third on everybody's list and it 
is not first. Yes, I would like to see it be first because of 
what I think it can do for the citizenship of this country. But 
I realize that you have got to balance that and I trust you all 
in that balance.
    No. 2, the merit part I would oppose. The merit-based 
financial aid programs in this country have grown in the last 
10 years at an enormous rate. I have a record, if you want to 
go back and look at it, I opposed the merit-based financial aid 
program in Florida when I was chancellor. The only thing that I 
can say today is all of my friends now are calling me up 
saying, ``You said so, you were right. What a mistake.'' And 
what it has done it has tied the hands of the legislature. And 
I don't want to see you tying your hands the way those programs 
were tied.
    Now, coming back, figuring out what the gentleman said 
earlier about how we can help the most needy students is the 
most important thing that you can do because if we can help 
them and help them get an opportunity to get a baccalaureate 
degree, then they will help this country by paying more taxes 
and contributing more to their communities.
    Mr. Boyle. On the issue of merit-based versus aid based on 
need, this week's Chronicle of Higher Education has a survey of 
a 1,000 parents and 34 percent right now are claiming that 
their families are receiving merit-based scholarships. But of 
those parents who are on their way to college, doing my math 
here, 72 percent expect that their son or daughter will be 
getting an academic-based scholarship. And so part of I think 
our collective role is to educate families that we all have 
very special children but they may not be eligible for 
academic-based scholarships.
    And I think that returning to the system of 20 years ago 
where aid is based on need and it is much cleaner and it is a 
much more understandable system and if someone is able to meet 
the entrance requirements of a university, then they should be 
able to get the aid that they need.
    Mr. Bishop. Thank you, Mr. Chairman.
    Chairman Boehner. The Chair recognizes the gentlelady from 
Minnesota, Ms. McCollum.
    Ms. McCollum. Thank you, Mr. Chair. I have been reading the 
bill so I have a couple of questions, but I think I am going to 
basically direct them to the Chair to get me some information. 
But I think you also might have some light to shed on these 
issues.
    So, Mr. Chair, I have been going through here and I have 
noticed numerous, numerous reports that the colleges have to be 
filling out to comply with, academic achievement, information 
to the public, and there are consequences to them for not 
fulfilling these reports. Many of these reports are in statute. 
Some of these are an expansion to statute. And I am wondering 
if we ran any kind of cost analysis on average what it is going 
to cost the higher education institutions to comply with this 
law?
    Chairman Boehner. There are no new reporting requirements 
for institutions of higher education until 2008 and only for 
those institutions who have increased their tuition at more 
than twice the rate of inflation for the 3 years leading up to 
that.
    Ms. McCollum. Thank you, Mr. Chair. Reclaiming my time, 
2008, so because it is a projected increase to the colleges for 
doing these reports in 2008, I am just to ignore and not have 
any information on what it is going to cost the colleges?
    Chairman Boehner. These are for only institutions who raise 
their tuition and fees at more than twice the rate of 
inflation.
    Ms. McCollum. Thank you, Mr. Chair. On the GAO study, 
because I wasn't part of the working group that put this bill 
together--it is on page 29 of the bill--it says that ``They 
shall conduct a study of policies and procedures of 
institutions increasing their costs.'' That is one of the 
studies I referred to. There is nothing in here I see that asks 
GAO to state what the individual states have done where the 
colleges are located, if they have cut their support for 
financial aid or their support to the institution. And I have a 
question as to whether or not under--well, are books included 
in here with what is going on with textbooks? Because I hear 
that from students all the time with what is going on with 
their textbooks. Is that considered part of the total cost of 
the education under the report?
    Chairman Boehner. I think we are only looking at tuition 
and fees.
    Ms. McCollum. Well, you need the books to take the class. I 
think maybe we need to take a look at that. And if we are 
really going to be holding the colleges accountable for what is 
happening or the technical schools accountable for what is 
happening to their tuition, I think we have to look at what the 
states are doing.
    The states have been negligent for the large part, and 
maybe Dr. Martin would like to expand on this some more, for 
being involved. I know in my state 20 years ago, when the 
Federal Government was on hard times and the state was on hard 
times, we cut higher education. And they talk about all the 
increases on higher education. Well, folks, all the increased 
on higher education don't match what has happened in the last 
20 years with inflation to higher education.
    So we are not talking about where the base should be had it 
never been cut. And I think that holding schools accountable 
for fees that they can control is legitimate. When the state of 
Minnesota cuts higher education 14 percent, the U of M is 
opening its doors to the freshmen class and for those returning 
6 months later, it is kind of stuck. And I don't think that 
that is fair not to include that, and maybe someone from the 
panel would like to elaborate on that.
    Chairman Boehner. Well, if the gentlelady would yield, and 
I won't take this off your time, but I agree with you entirely. 
The states for the last 25 years have systematically shifted 
their responsibility in higher education from themselves onto 
the backs of the Federal taxpayers. And if you look at the 
explosive growth both of Pell Grants and of student loans, you 
will see that we are picking up a far greater share and it 
hasn't slowed down at all, especially over the last 10 years. 
And if you look out over the next 10 years, you will see that 
the Federal Government's share of the cost of higher education 
will continue to explode exponentially.
    Anyone on the--
    Ms. McCollum. Mr. Chair, you made my point why we need to 
include it. Dr. Martin?
    Dr. Martin. I think Dr. Reed made this point earlier in 
terms of doing it, and he probably has more experience about 
this than I do because of his position, but we have seen a 
shift in terms of many states adopting policy positions that 
have moved from a philosophy of several years ago of low 
tuition, particularly in state-supported colleges and 
universities, to modest to middle to even high tuition with the 
idea that we will make the difference so that we still have 
access by increasing out state aid programs. The unfortunate 
part of that is is as we have gone into that policy, in many 
cases the state aid has not kept up proportionately to the 
other costs.
    And you are right, when we cut back on that and change 
that, I agree with Dr. Reed that there are a lot of competing 
priorities out there in statehouses across the board. And quite 
honestly higher education frequently is on the tail end of 
those priorities, unfortunately. And the reason is because they 
still recognize that many people will still pay the price 
because of the benefits and so they can get away with raising 
tuition and fees in public institutions easier than they can in 
not addressing other kinds of priorities that the state has, 
including many of the unfunded Federal mandates that have been 
imposed on them even by the Federal Government.
    So it is a balancing act. It is very, very difficult. And 
we recognize it. But I would agree with you on this that if we 
don't begin to pay some attention to doing this, as we keep 
going in this kind of imbalanced direction, and we keep 
depending only upon credit financing to do this, to finance 
higher education, we are going to do a terrible disservice to 
this country, and particularly when you look at the changing 
demographics and the wave of people coming forward. And if we 
do not spend the resources to provide education and skills to 
those people, this country will lose the prominence and the 
richness and many of the virtues that we have today.
    Chairman Boehner. The Chair recognizes the gentleman from 
Georgia, Mr. Isakson.
    Mr. Isakson. Thank you, Mr. Chairman. Dr. Reed, I apologize 
that I was not here to hear personally your testimony or that 
of the other panelists; however, I read your testimony and I 
wanted to particularly thank you for your comments with regard 
to distance education. I thought you put it very succinctly 
about the environment we were in in 1998 and the one we find 
ourselves in today, which is a sea change.
    I would like to ask you, however, are you comfortable with 
the accountability and administrative procedures governing 
distance education today as it now exists?
    Dr. Reed. Well, if I said no I would be indicting myself. 
And I don't want to do that. Yes, I am. It can get better. It 
will get better, because we are kind of learning as we are 
doing, and I think that that is what we will need to continue 
to do. And I think, back to Congressman McCollum's first 
statement, this Committee could look at all of the reporting 
that is required by those of us in higher education and help 
lower some of the administrative cost burdens but also keep in 
place the kinds of accountability that we really need to have 
and report to you so that we are responsible and accountable 
for your resources.
    Mr. Isakson. Thank you. I noted your comment about the 
accrediting agencies, too, and although you included them in 
the same statement with yourself, my observation is they have 
come light years in the past two or 3 years in terms of 
accreditation of distance learning and are really up to speed 
now I think compared to where there was some reluctance to even 
address it five or 6 years ago. Is that correct?
    Dr. Reed. That is correct, and we will see that get better. 
I am proud that the Western Association of Schools and Colleges 
has led that effort but so have all the other regional 
accrediting organizations really improved in the last couple of 
years.
    Mr. Isakson. And my last question, and pardon me for 
concentrating just on that subject but it is one I have had a 
great interest in for some time, I have felt three or 4 years 
ago when we really started investigating this that this would 
allow us to reach so many of what I call non-traditional 
students and also had the distance learning and also had the 
promise of alleviating some of the enrollment and some of the 
overcrowding problems experienced in some of our colleges and 
universities. Is that in fact now a reality?
    Dr. Reed. That is in fact a reality. I have pushed as hard 
as I can as the chancellor of the university system to see our 
faculty maybe only have to have their students come to class 
instead of 3 days a week, 2 days. And that other day through 
the use of technology, through the lab, through video, that 
they could then use that to be a part of their learning 
experience and enrich what they have done. This morning I was 
sharing another story about distance education. The movie 
industry in California is desperate for animators. And not to 
make cartoons but that is the way movies are being made. Well, 
all of the industry came together and asked the California 
State University to help them out and if they would contribute 
money, but what they have ended up doing is contributing staff.
    And so the folks at Disney, the Spielbergs, have donated 
their staff, who by television, by computer, by the Web are 
teaching students in San Jose today how to be animators. And 
they are very successful. They are producing more animators 
than some of the institutions in the LA Basin and are very 
proud just because of the kinds of students that San Jose has.
    So it is working and it can get better.
    Mr. Isakson. Well, my last, and this is really a comment, 
we were doing a lot of the stuff on the 15 percent rule and the 
12-Hour rule and some of the other things that were impediments 
really for distance learning. We had a lot of faculty members 
at universities who were very reluctant to embrace it because 
of the relationship with a student and not having the face to 
face time. I recently had a professor at a university in 
Georgia comment that he had fought it for so long because he 
felt like it deprived students of access until he remembered 
that when he got home at night he would just take his phone off 
the hook and his students couldn't get him but he cannot deny 
his e-mail, they can get him any time they want to.
    So I thought that was an interesting comment in terms of 
the faculty and student relationship.
    Thank you, Mr. Chairman.
    Chairman Boehner. The Chair recognizes the gentleman from 
Massachusetts, Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman. I thank all of you 
witnesses for your testimony today. I apologize for missing 
some of it, but I found it to be very forthcoming and direct 
and helpful.
    Dr. Reed, because you are involved in managing a campus I 
wanted to ask you a question. We talk in this bill about 
tuition hikes compared to the Consumer Price Index. I have a 
little experience with higher education situations and it 
strikes me that the Consumer Price Index and what it measures 
in terms of products in the basket might not even be close to 
what institutions experience, energy costs, security, 
technology, and facilities.
    I had an alternative with other members here, Ms. McCollum 
and others, that would have asked the Department of Education 
to establish a higher education price index that we hoped would 
be more reflective of the kinds of costs that colleges and 
universities experience. Do you think that is worth pursuing? 
Do you think there is in fact a disparity between the CPI and 
the real index that would affect colleges and universities?
    Dr. Reed. I do think it is worth pursuing. I don't know 
what all is included in the price index of higher education.
    Mr. Tierney. But do you think it is different than the 
regular--
    Dr. Reed. But I do want you to know that I entered into an 
agreement yesterday with the Governor of California, as my 
colleague at the University of California did, where we have 
agreed to tie our future fee increases to a personal income 
increase of the citizens of California.
    Mr. Tierney. So if I am correct, your tuition can't 
increase any more than the rate of income?
    Dr. Reed. Personal income.
    Mr. Tierney. That was at a mean rate of income or an 
average?
    Dr. Reed. It is an average.
    Mr. Tierney. So when Mr. Schwarzenegger makes another 
movie, that thing can go up like crazy?
    Dr. Reed. Yes, that is right.
    Mr. Tierney. I think you got taken there. I don't want to 
say anything, Dr. Reed, but you were taken to school on that 
one.
    Dr. Reed. And there was a provision in there if there is 
some huge emergency we can increase fees up to 10 percent but 
it is capped at that. But the real focus was back on the tie to 
the personal income.
    Mr. Tierney. Thank you. The campus-based aid issue, and I 
open this up for anybody who wants to address it or whatever, 
does anybody have any evidence that institutions are currently 
getting any part of the campus-based aid to students who do not 
have an unmet need?
    Dr. Martin. No, the students that receive the campus-based 
aid have to be eligible to meet the criteria, Mr. Tierney. So, 
no, there is no student getting money now that is not eligible.
    Mr. Tierney. That is my point. So when I read this bill I 
have the real concern that it is going to result in some 
students not getting the aid they need and others getting aid 
that they need. And it seems like we are getting into a beg 
your neighbor type of situation on that. So I just wanted to 
clarify that point and make sure that we are all on the same 
page.
    The proprietary schools issue. There is a lot of concern 
that we put in protections against fraud and abuse some time in 
the 1980's because of the scandals that were out there and now 
there is some indication in the National Student Loan Data 
System that in 2001 reports that proprietary schools for that 
year, 2001, had an overall default rate on student loans of 9 
percent contrasted with a 5.3 percent for public colleges and 
3.5 percent for private colleges. Should we still have a 
concern about the possibility of a fraud and abuse in 
proprietary schools if we abolish the 90/10 rule? And if we do 
still have that concern and if we still do abolish the 90/10 
rule, what other protections might you recommend we put in 
place to alleviate any concern about fraud and abuse?
    Dr. Martin. Mr. Tierney, I don't know about the 90/10 
thing, let me make a comment about the differences I think on 
the default rates. If you look at everything I have ever read 
about default rates is there is a tendency of people who have 
higher incomes are more likely to be able to pay their loans 
off more rapidly and are less likely to default than people 
that have modest means. If you look at the economic make-up of 
students who are enrolled in different sectors of higher 
education, there is a relationship if you looked at community 
colleges or say proprietary institutions and that they probably 
have a higher proportion of lower income students in their 
institutions than would certain other sectors.
    This doesn't mean, this doesn't mean that people that have 
modest economic means are not serious or responsible about 
paying back their debts. It is not an unwillingness to repay. 
In many cases they find themselves after they are out with 
lower paying jobs or whatever, that they don't have the 
ability. And so there is a higher propensity of some of those 
people not to be able to manage their debt.
    Mr. Tierney. May I interject something, Mr. Chairman. Do I 
have your allowance to do that? I know I am a little over my 
time. But aren't we talking about the whole universe of these 
students all being financially eligible to get these loans so 
they are all pretty much in that financial category? So a lot 
of the institutions may have more of a student, these students 
we are talking about whose payment rates are being judged are 
pretty much the same kettle of fish here. They are all eligible 
financially for these loans so they are all pretty much in the 
same circumstance. So I am not sure I follow your logic when 
you compare the institutions.
    Dr. Martin. I was just trying to compare, maybe I 
misunderstood you, Mr. Tierney, but I understood that you were 
talking about differences of what are the default rates by 
sectors in post-secondary education?
    Mr. Tierney. I did, but basically I think I don't draw that 
to be that because a school might have a lot of wealthier kids 
and than some poorer kids that that somehow leads to them not 
having a payment schedule because all the kids getting the 
loans are in the same economic area. It seems to me that those 
protections work and even with those protections in place, we 
are finding a higher default rate on these proprietary schools 
because of the way they are structured than we do in the public 
and the private institutions on that. And I see Dr. Reed 
nodding a little bit there. You might want to help me out here 
if I am not explaining it clearly enough.
    Dr. Reed. Yes, I think you are correct. I think it is a 
part of the due diligence and the responsibility of these 
institutions and I think the more you make the information you 
have public, the better. California State University, we are 
mostly poor students. Our default rate is 3.7 percent. I want 
it to get better. But it is something that my board pays 
attention to and makes us report publicly. And I think the more 
we can do that, the better.
    Mr. Tierney. And do you have a comment on how we would, if 
we were going to remove the 90/10 rule of proprietary schools, 
how would we then ensure against fraud and abuse if they are 
already higher than your institution and others like it?
    Dr. Reed. I don't know.
    Mr. Tierney. OK.
    Chairman Boehner. If the gentleman would yield?
    Mr. Tierney. Mr. Chairman wants to be a witness?
    Chairman Boehner. Well, I want to be helpful. When there 
were serious problems in the 1980's with certain types of 
institutions, Congress slapped multiple layers of 
accountability on these institutions where the abuse was coming 
from. And many of us believe that 90/10 is inhibiting schools 
from going into very poor neighborhoods and offering students a 
chance in those neighborhoods.
    And if you look around the country, you will see a lot of 
institutions that were once there, in large urban centers 
especially, are no longer there. And I believe and others 
believe that the accountability provisions still in the law are 
more than sufficient to prevent the abuse that we saw back in 
the 1980's and early 1990's in that 90/10 is in fact 
overlapping and redundant and frankly unnecessary.
    Mr. Tierney. Reclaiming my time, and I appreciate that. I 
pretty much knew what your theory was and I was sort of giving 
you that in my question just for argument sake. Assuming that 
you get rid of the 90/10 rule and looking at the facts of 
saying either with the 90/10 rule proprietary schools aren't 
doing anywhere near as well as public colleges and private 
colleges, my real question what other protections do we put in 
place because in my estimation the existing ones aren't enough 
if the ones we put in the 1980's still aren't doing the job, 
the existing ones aren't enough, what would you substitute for 
the 90/10 if you wanted to get rid of the 90/10 and that was 
really where I was going.
    So I was almost willing to give you your argument that you 
think that those might be the wrong set of situations there but 
clearly something is needed to do a better job than we are 
doing now. And if you take away the 90/10, I didn't know if 
anybody had any suggestions of what they thought we might 
replace it with in order to try to bring those numbers down. 
Ms. Wasserman, you do.
    Ms. Wasserman. Yes, I think I know that there has been work 
by the National Consumer Law Center and the Workforce Alliance 
to look at things like doing a non-partisan study to figure out 
where the fraud and abuse lies because some statistics are that 
just in 2003 the Department of Education's Inspector General 
made public seven audits documenting serious fraud and abuse in 
school administration of Federal aid. Those schools had to 
return over $50 million to the Department, lenders and 
students.
    So there is fraud and there is abuse. And we do need to 
find out more about that. I think keeping the rules that we 
have, keeping the protections that we have and then doing the 
research to figure out what are those other things that we can 
do, are positive steps that we should look at in this 
reauthorization. There are still schools that are closing. In 
2002, over 100 computer training schools closed in 23 states. 
Of those schools, only 25 provided advance notice. So there are 
real issues, and I think we do have to make sure that students 
are protected.
    Mr. Tierney. I thank the witness. Mr. Chairman, I thank you 
for your indulgence.
    Chairman Boehner. The Chair recognizes the gentleman from 
Texas. I am sorry, Dr. Reed has got to catch a plane and so, 
Dr. Reed, you are excused. We don't have to go through all the 
reasons, but the Chair recognizes the gentleman from Texas, Mr. 
Hinojosa.
    Mr. Hinojosa. Thank you, Mr. Chairman. I ask for unanimous 
consent that my opening statement be allowed to be entered into 
the record.
    Chairman Boehner. Without objection.
    [The prepared statement of Mr. Hinojosa follows:]

Statement of Hon. Ruben Hinojosa, a Representative in Congress from the 
                             State of Texas

[GRAPHIC] [TIFF OMITTED] T3631.030

                                ------                                

    Mr. Hinojosa. Thank you. I am sorry to see Chancellor Reed 
have to leave but I will ask my questions then to possibly Dr. 
Martin and the other gentleman.
    I thank you all for coming to testify today. Your testimony 
in support of strengthening, actually it was Chancellor Reed 
who gave testimony in support of strengthening Hispanic-serving 
institutions, HSI's, establishing a graduate program for HSI's 
is one of the top priorities for the Congressional Hispanic 
Caucus and to the Hispanic community from West Coast to East 
Coast and some of the territories.
    Could you please discuss the implications for higher 
education research and industry if we do not raise the level of 
advanced degree attainment in the Hispanic community, Dr. 
Martin?
    Dr. Martin. Mr. Hinojosa, I fully support obviously trying 
to make certain that we do what we can to ensure that we have 
equal participation in our society from all people. And I think 
to the degree, if you look at who goes on to obtain higher 
education graduate professional degrees, obviously we have a 
lot of under representation not only in the Hispanic community 
but within some of our other minority communities in this 
country.
    I have long believed that anything that we can do to 
strengthen that and recognize maybe some additional need-based 
aid in the graduate and professional areas is important. While 
this particular provision is not the topic that necessarily 
falls under our association directly, I think that it is a good 
idea to address this issue, to see what we can do to strengthen 
those institutions and to provide that kind of support for 
those individuals.
    Mr. Boyle. I agree. At the suggestion of the GEAR-Up group, 
we participated in Feria Educativa Fair in South Florida in 
December and were literally besieged by hundreds of Latino 
parents who were wanting more information about how they could 
better understand the process of preparing, applying to, and 
financing of college. And we at our group of College Parents of 
America are actively hoping that we can secure necessary 
funding to put our Web site into Spanish and to work with 
partners to create a greater distribution of Spanish language 
material.
    Mr. Hinojosa. Well, I want to say that in the 8 years that 
I have been in Congress I have seen the increases that have 
occurred in trying to get more HSI's to be able to get 
designated and monies so that they can do the recruitment and 
tutoring and mentoring and retention and seeing how this bill 
only increases the minimum grants for the HBCUs from $500,000 
to $750,000, it seems like the experience I have had two or 3 
years where we have been getting crumbs increases for the HSIs 
that we are getting right back to where we were 10 years ago 
where there was a great deal of neglect for the Latino 
community, and I think that that is a serious mistake in this 
legislation.
    Also, I see that the question that I asked is not being 
addressed in ways that will give us more professors at the 
universities where we have an acute shortage of professors, and 
especially Latino professors. And if we are to be able to take 
care of the needs of this very fast-growing ethnic group, I 
think that this legislation is lacking in order to meet the 
needs of what we need for higher education and would like to 
have this young lady's--sorry, I can't see your name from here, 
but I would like to have your comments.
    Ms. Wasserman. I think that that is a critical point and in 
a bill that has this Bill of Academic Rights talking about 
diverse viewpoints and intellectual pluralism being important, 
for us, when we look at the bill, we are looking are what are 
the ways we are going to have real increased diversity points 
in our campus and that is going to be to support the increase 
of Latino students on campus and that is what is attracts those 
students is becoming the professors of the future. And it is 
supporting HSIs, it is supporting HBCU's, it is finding ways to 
support other programs that our outside of this reauthorization 
process like affirmative action, that we support those programs 
that we think will make the difference in who is in our 
classrooms and who goes on to reach higher level degrees.
    Mr. Hinojosa. Well, it seems like all of you agree but I 
don't hear that you all are making a strong statement that this 
bill is short of what we need for the next 6 years. And unless 
you speak up, I don't see that Congress is going to wake up to 
the fact that there are over 2.5 million Latino students and 
another 2.5 who would like to get into college simply because 
we don't have enough professors. Classes close like this once 
they open them for registration because we don't have enough 
professors and we have got to have Master's and Ph.D.'s to be 
able to teach at the university level. So I need to hear your 
community to really rise and speak up so that the shortfall 
that occurs in the new reauthorization act that that gap is 
closed so that we can indeed serve all those who are qualified 
and wanting to go to college.
    So with that, I yield back the balance of my time.
    Chairman Boehner. I want to thank all of our witnesses for 
your patience and our audience for your patience during our 
interruption today. We appreciate your valued testimony, and I 
expect that the Committee will have another hearing probably 
after members return from the Memorial Day district work period 
and begin to delve a little more deeply into some of these 
subjects that were talked about today.
    Ms. McCollum. Mr. Chair?
    Chairman Boehner. Ms. McCollum.
    Ms. McCollum. I would like to add in an editorial from the 
Minneapolis Tribune which talks about access to higher 
education.
    Chairman Boehner. Without objection, so ordered.
    [The provided material follows:]

 Editorial from the Minneapolis Star Tribune, Submitted for the Record 
                         by Hon. Betty McCollum

[GRAPHIC] [TIFF OMITTED] T3631.023

                                ------                                

    Chairman Boehner. Mr. Kildee?
    Mr. Kildee. I just want to thank all the witnesses. We have 
had a very good panel today. You have responded to our 
questions very well. All of you have done well. I do think, Ms. 
Wasserman, you responded and reacted well to tough and hard 
questions on both sides of the aisle, and I commend you for 
that.
    Ms. Wasserman. Thank you.
    Chairman Boehner. This hearing is now adjourned.
    [Whereupon, at 2:30 p.m., the Committee was adjourned.]
    [Additional material submitted for the record follows:]

Statement of Hon. Pete Hoekstra, a Representative in Congress from the 
                           State of Michigan

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 Statement of Hon. Charlie Norwood, a Representative in Congress from 
                          the State of Georgia

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 Statement of Hon. Raul M. Grijalva, a Representative in Congress from 
                          the State of Arizona

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  Statement of Hon. Jon Porter, a Representative in Congress from the 
                            State of Nevada

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       Question from Hon. Pete Hoekstra, Submitted for the Record

    Please explain the primary sources of revenue and funding for your 
organization.
    What percentage of your budget is composed member dues? Please also 
include other sources that comprise more than 10 percent of your annual 
operating budget, including the approximate percentage contribution 
made by each alternative source.
                                 ______
                                 

Response of Jim Boyle, President, College Parents of America, Submitted 
                             for the Record

    College Parents of America's primary sources of revenue and funding 
are member dues and partner fees.
    Member dues are comprised of both individual and institutional 
monies. Individual members, generally parents of current or future 
college parents, pay an annual fee of $36.50, or may join for up to 
five years at a discounted price of $109. There are currently more than 
1300 active individual members. Institutional members, generally 
comprised of colleges and universities (with a handful of school 
districts and/or independent secondary schools), pay an annual fee of 
$495. There are currently 68 active institutional members.
    Partner fees are negotiated with companies who wish to serve the 
current and future college parent market, and who see College Parents 
of America as a viable partner for accomplishing their objectives. 
Current partner fees range as high as $90,000 per year to as low as 
$495, with a share of revenue gained through the partnership always 
part of the equation. There are currently 10 signed corporate partners, 
with several others in negotiation.
    As of June 2004, approximately 40 % of total revenues this year 
have been derived from member dues, with slightly more than 60 % of 
that figure coming from individuals and the remainder from 
institutions. During this year to date, therefore, approximately 60 of 
total revenues have been derived from fees paid by corporate partners.
                                 ______
                                 

 Response of Dr. A. Dallas Martin, President, National Association of 
     Student Financial Aid Administrators, Submitted for the Record

    In response to Congressman Hoekstra's question, NASFAA Operating 
Budget for the 2003-04 fiscal year is $6,103,000.
    The Association has seven primary sources of revenue and funding 
which are listed below with the percentage derived from each.

    Association Membership Dues-50%
    Association Conference Registrations-12%
    External Advertising, Exhibitors, Sponsors-18%
    Association Publications and Subscription-6%
    Association Training Sessions and Materials-5%
    Association Investment Income-5%
    Association Development Activities-4%

    If you need further information, please let me know.

Sincerely,

Dr. A. Dallas Martin
                                 ______
                                 

  Response of Rebecca J. Wasserman, President, United States Student 
                 Association, Submitted for the Record

The Honorable Pete Hoekstra
United States House of Representatives
2234 Rayburn House Office Building
Washington, DC 20515

06/04/2004

Dear Representative Hoekstra,

    The United States Student Association (USSA) is almost entirely 
funded by dues from membership campuses through their student 
governments. 59% of this year's operating budget comes directly from 
campus and state student association dues. The only other income item 
that is over 10% of our budget is the income received from our two 
annual conferences, our National Legislative Conference in Washington, 
DC and our National Student Congress held on a different college campus 
each year. These two conferences'' combined revenue accounts for 24% of 
our income. Overall, membership dues and conferences account for 83% of 
our income.
    I hope this gives some insight to the budget of our organization.

Thank you,

Rebecca J. Wasserman
President, USSA
                                 ______
                                 

    Additional Statement of Dr. Dallas Martin, President, National 
 Association of Student Financial Aid Administrators, Washington, DC, 
                       Submitted for the Record 

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Letter from Michael Grayer, Recent Graduate, Virginia College, Jackson, 
                 Mississippi, Submitted for the Record

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