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



 
  H.R. 4283, THE COLLEGE ACCESS AND OPPORTUNITY ACT: ARE STUDENTS AT 
     PROPRIETARY INSTITUTIONS TREATED EQUITABLY UNDER CURRENT LAW?

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



                                HEARING

                               before the

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

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             June 16, 2004

                               __________

                           Serial No. 108-63

                               __________

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






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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN A. BOEHNER, Ohio, Chairman

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

                    Paula Nowakowski, Staff Director
                 John Lawrence, Minority Staff Director
















                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on June 16, 2004....................................     1

Statement of Members:
    Boehner, Hon. John A., Chairman, Committee on Education and 
      the Workforce..............................................     2
        Prepared statement of....................................     5
    Kildee, Hon. Dale E., a Representative in Congress from the 
      State of Michigan..........................................     6
    Miller, Hon. George, Ranking Member, Committee on Education 
      and the Workforce, Press release submitted for the record..    72
    Norwood, Hon. Charlie, a Representative in Congress from the 
      State of Georgia, prepared statement of....................    73
    Porter, Hon. Jon C., a Representative in Congress from the 
      State of Nevada, prepared statement of.....................    74

Statement of Witnesses:
    Letteny, Dr. Alice, Executive Director, University of New 
      Mexico-Valencia, Los Lunas, New Mexico, on behalf of the 
      American Association of Community Colleges.................    17
        Prepared statement of....................................    19
    Moore, David G., Chairman and Chief Executive Officer, 
      Corinthian Colleges, Inc., Santa Ana, California...........    33
        Prepared statement of....................................    35
    Nassirian, Barmak, Associate Executive Director, American 
      Association of Collegiate Registrars and Admissions 
      Officers, Washington, DC...................................    22
        Prepared statement of....................................    24
    Rosen, Andrew S., President & COO, Kaplan, Inc., and 
      President, Kaplan College, Boca Raton, Florida.............    13
        Prepared statement of....................................    15
    Smith, Dwight, President & CEO, Sophisticated Systems, Inc., 
      Columbus, Ohio.............................................     9
        Prepared statement of....................................    11

Additional materials supplied:
    American Association of Collegiate Registrars and Admissions 
      Officers, the American Council on Education, and the 
      Council for Higher Education Accreditation, Statement 
      submitted for the record...................................    74
    American Federation of Teachers, Statement submitted for the 
      record.....................................................    71
    Hackney, Captain Norma Lee, Statement submitted for the 
      record.....................................................     3
    Lundberg, Rolf Th., Jr., Senior Vice President, Congressional 
      and Public Affairs, United States Chamber of Commerce on 
      behalf of The Coalition for a Competitive American 
      Workforce, Statement submitted for the record..............    77
    Rhodes, David, President, School of Visual Arts, 
      Commissioner, Middle States Commission on Higher Education, 
      and Vice Chair, Regents Advisory Council on Institutional 
      Accreditation, on behalf of the Association of Proprietary 
      Colleges, Statement submitted for the record...............    81














H.R. 4283, THE COLLEGE COLLEGE ACCESS AND OPPORTUNITY ACT: ARE STUDENTS 
    AT PROPRIETARY INSTITUTIONS TREATED EQUITABLY UNDER CURRENT LAW?

                              ----------                              


                        Wednesday, June 16, 2004

                     U.S. House of Representatives

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The Committee met, pursuant to call, at 10:30 a.m., in room 
2175, Rayburn House Office Building, Hon. John A. Boehner 
(Chairman of the Committee) presiding.
    Present: Representatives Boehner, Petri, Hoekstra, McKeon, 
Castle, Norwood, Isakson, Platts, Tiberi, Osborne, Kline, 
Burns, Kildee, Andrews, Hinojosa, McCarthy, Tierney, Wu, Holt, 
Davis, Grijalva, Van Hollen, and Bishop.
    Staff Present: Kevin Frank, Professional Staff Member; 
Sally Lovejoy, Director of Education and Human Resources 
Policy; Catharine Meyer, Legislative Assistant; Alison Ream, 
Professional Staff Member; Deborah L. Samantar, Committee 
Clerk/Intern Coordinator; Kathleen Smith, Professional Staff 
Member; Jo-Marie St. Martin, General Counsel; Ellynne Bannon, 
Minority Legislative Associate, Education; Ricardo Martinez, 
Minority Legislative Associate, Education; and Alex Nock, 
Minority Legislative Associate, Education.
    Chairman Boehner. A quorum being present, the Committee on 
Education and the Workforce will come to order.
    We are holding this hearing today to hear testimony on H.R. 
4283, the College Access and Opportunity Act, and the question 
being, ``Are students at proprietary institutions treated 
equitably under the current law?''
    Under the Committee rules, opening statements are limited 
to the Chairman and ranking Member. If other Members have 
statements, we will leave the record open until the end of the 
day. And with that, I would ask unanimous consent for the 
record to remain open to allow for Member statements and other 
extraneous material referenced during the hearing this morning 
to be submitted for the official record.
    Without objection, so ordered.

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

    Good morning to all of you, especially to our witnesses and 
all of our guests today. We are here to learn more about the 
issues facing proprietary colleges and universities and examine 
how current law creates a two-tier system for students seeking 
a postsecondary education. And I recognize some of the issues 
we will address today remain open to debate, and I welcome the 
chance for Members on both sides of the aisle to learn more 
about how these issues are affecting millions of American 
students.
    I can respect differences of opinion when it comes to 
finding solutions, but there should be no question today that 
we have got a problem. There is a problem when schools serving 
some of the neediest students are treated like second-class 
citizens. There is a problem when the Federal Government 
creates incentives for schools to raise tuition or to leave 
inner cities. And there is a problem when innovation is stifled 
through outdated regulations.
    Today, we ask the question, are students at proprietary 
colleges or proprietary institutions treated equitably under 
the current law? And I think the answer is no. And that is why 
in our bill we are calling for changes. On May 5, Mr. McKeon 
and I introduced the College Access and Opportunity Act, a bill 
aimed at expanding college access for low- and middle-income 
students. Chief among our reform principles is the need to 
remove barriers in current law preventing some colleges and 
universities from helping students achieve their higher 
education goals.
    There are three issues in particular I think we would like 
to learn more about from our witnesses today that affect 
proprietary schools and their students under current law and 
areas we reform in the College Access and Opportunity Act. The 
first is the current dual definition of institution of higher 
education. Under current law, there are two separate 
definitions: One a general definition, and one specifically for 
Title IV eligibility. The State of New York offers an example 
of how, when all degree-granting institutions are treated 
equally, a level playing field results in a stronger higher-
education system. In New York, there is no distinction between 
a proprietary school and so-called traditional degree-granting 
institution. And as a result, all institutions have the same 
opportunities to serve their students.
    More than a year ago, I received a letter from 18 Members 
of the New York congressional delegation asking that the 
Federal Government follow suit, treat all degree-granting 
institutions equitably. A single definition will move us closer 
to that goal of fair treatment and a level playing field.
    Now those who oppose the single definition often claim for-
profit organizations should not have access to competitive 
grant funding. Yet, throughout Federal law, there are numerous 
examples of grants that are open to both nonprofit and for-
profit entities. And I think the chart up on the wall will 
indicate that. A brief review of these programs shows scores of 
grants available for for-profit organizations. We found more 
than 160 examples, including laws under the jurisdiction of 
this Committee, including the Work Force Investment Act, the 
Individuals With Disability and Education Act, and No Child 
Left Behind. It is clear that our exclusion of proprietary 
schools in the Higher Education Act is the exception and not 
the rule.
    The second issue I hope to learn more about today is the 
90/10 Rule, which is imposed only on proprietary institutions. 
This rule, originally with a ratio of 85/15, was put into place 
as part of the larger effort to reduce the fraud and abuse that 
plagued the proprietary sector in the 1970's and 1980's. While 
I do not disagree that this rule was well intentioned years 
ago, but today, it seems not only unnecessary and ineffective 
but also potentially harmful to students. The rule requires 
proprietary institutions to show at least 10 percent of funds 
are derived from sources outside of Title IV student-aid 
funding. And while that may not seem like too much to ask, 
looking closely at this rule shows how burdensome it may be.
    Statistics show proprietary schools tend to serve larger 
populations of needy, high-risk minority and nontraditional 
students, in other words, the students most in need of 
financial assistance. Yet when proprietary schools serve a 
large share of needy students, many of whom rely on Federal 
aid, the schools compliance with the 90/10 view is put in 
jeopardy. And if the school breaks this rule, even by a 
fraction of a percentage point, it loses eligibility to 
participate in Title IV. This means that the school's students 
cannot receive Pell Grants, Federal student loans or any other 
type of Federal aid. Worse still, this rule creates an 
incentive for proprietary schools to raise tuition or move away 
from urban areas where students are more likely to depend on 
Federal aid.
    Safeguards against waste, fraud and abuse in our Federal 
student aid programs are essential. And that is why the College 
Access and Opportunity Act maintains dozens of effective 
protections that are in current law today. The list on the 
screen demonstrates some of the many changes that have taken 
place over time to increase accountability and maintain the 
integrity of the student aid programs.
    The third and final issue I hope to examine is the rapid 
growth of distance education and how rules, such as the 50-
percent rule, limit access to innovative learning 
opportunities. Technology has changed dramatically since the 
last time that we reauthorized the Higher Education Act. 
Teachers and students today have access to learning tools we 
could not have imagined just a few short years ago. Yet 
outdated rules limiting distance education prevents students 
and schools from making the most of advanced technology.
    I would like to share with you a story about Captain Norma 
Lee Hackney of the U.S. Navy.
    [The information referred to follows:]

                 Statement of Captain Norma Lee Hackney

    Chairman Boehner, and Members of the Committee, I am pleased to 
provide this written statement in support of the provisions of H.R. 
4283 that would level the playing field for students attending non-
traditional institutions, and in particular those attending distance 
education institutions.
    I am a Captain in the United States Navy. I have had the 
distinction and honor of being the first woman to command the U.S.S. 
Saipan, a United States Navy large deck amphibious assault ship, during 
Operation Iraqi Freedom. The U.S.S. Saipan has capacity for more than 
3,000 sailors and marines. It operates a 400-bed hospital, supports a 
tactical air control squadron and launches marine helicopters from its 
flight deck.
    While at sea, I was able to continue my studies toward a Ph.D. in 
Capella University's School of Business. I completed course work and 
participated in course discussions via Internet connection aboard the 
ship in the evening, at times that did not interfere with my official 
duties. With remote access to education, I am able to continue my 
studies without delay or interruption while serving in the military 
during this important time. I learned of Capella through word of mouth 
because of its positive reputation in the military community. Fifteen 
percent of Capella's learners are affiliated with the U.S. Armed 
Forces.
    I am using Title IV funds to help pay for my education. I am 
fortunate that Capella University is a participant in the U.S. 
Department of Education's Distance Education Demonstration Program, 
which provides Capella students access to Title IV funds. Advancing in 
my education would be significantly more difficult without such access. 
I understand that, without participation in the Demonstration Program, 
institutions offering primarily distance education courses are 
prohibited under the Higher Education Act from participating in Title 
IV programs, thereby denying their students access to these funds.
    I applaud your bill's provisions which set forth the abolishment of 
distinctions made in Title IV between traditional institutions and non-
traditional institutions. I am particularly pleased to learn that H.R. 
4283 would eliminate the 50% percent rule that restricts access to 
funding for students attending distance education institutions. In 
these complex times and with an inordinate amount of responsibility 
placed on adults' shoulders, it is so important that the federal 
government takes steps that will encourage, not dissuade, students to 
continue their education in whatever environment provides them the most 
flexibility in their lives. I, for one, would have had considerable 
difficulty continuing my studies in a classroom setting or without 
access to Title IV. I know that others in the military, students living 
in rural communities, and single parents in urban cities around the 
country share this view.
    I appreciate your interest in providing greater access to Title IV 
for all students and encourage the Committee to approve these 
provisions as part of H.R. 4283.
                                 ______
                                 
    Chairman Boehner. Her experiences show just how valuable 
distance education is to Americans facing challenges and unique 
circumstances as they pursue their higher education.
    Captain Hackney is the first woman to command a United 
States Navy large-deck amphibious-assault ship, specifically 
the U.S.S. Saipan, during Operation Iraqi Freedom. The U.S.S. 
Saipan has capacity for more than 3,000 sailors and Marines, 
operates a 400-bed hospital, supports a tactical air control 
squadron and launches U.S. Marine Harriers and helicopters from 
its flight deck.
    And while commanding her ship and serving her Nation, 
Captain Hackney was able to continue her studies toward a Ph.D. 
through an online education. Through advanced technology, 
innovative teaching strategies and online tools, students who 
may never have had the opportunity for a college education are 
pursuing higher learning through distance education.
    Again, we are dealing with antiquated regulations that may 
have been well-intentioned when put in place but, today, are 
simply a burden on students pursuing a higher education. So I 
look forward to a frank and productive conversation about the 
issues facing this growing sector of American education. At a 
time when more students than ever are choosing to go to 
college, millions of adults are interested in going back to 
school, and changing technology requires workers to train and 
retrain to compete in a changing marketplace. We should be 
taking steps to expand access to all sectors of higher 
education.
    And with that, I would like to yield to my friend and 
colleague, the gentleman from Michigan, Mr. Kildee.
    [The prepared statement of Chairman Boehner follows:]

 Statement of Hon. John Boehner, Chairman, Committee on Education and 
                             the Workforce

    Good morning, thank you for joining us today. We're here to learn 
more about the issues facing proprietary colleges and universities and 
examine how current law creates a two-tiered system for students 
seeking a postsecondary education. I recognize some of the issues we'll 
address today remain open to debate, and I welcome the chance for 
Members on both sides of the aisle to learn more about how these issues 
are affecting millions of American students.
    I can respect differences of opinion when it comes to finding 
solutions, but there should be no question today that we have a 
problem. There is a problem when schools serving some of the neediest 
students are treated like a second class. There is a problem when the 
federal government creates incentives for schools to raise tuition or 
leave inner cities. And there is a problem when innovation is stifled 
through outdated regulations. Today we ask the question, ``Are students 
at proprietary institutions treated equitably under current law?'' I 
think the answer is no, and it is time for a change.
    On May 5, Buck McKeon and I introduced the College Access & 
Opportunity Act, a bill aimed at expanding college access for low and 
middle-income students. Chief among our reform principles is the need 
to remove barriers in current law preventing some colleges and 
universities from helping students achieve their higher education 
goals.
    There are three issues in particular I'd like to learn more about 
from our witnesses that affect proprietary schools and their students 
under current law, and areas we reform in the College Access & 
Opportunity Act. The first is the current dual definition of 
institution of higher education. Under current law, there are two 
separate definitions; one general definition and one specifically for 
Title IV eligibility.
    The state of New York offers an example of how, when all degree 
granting institutions are treated equally, a level playing field 
results in a stronger higher education system. In New York, there is no 
distinction between proprietary and so-called ``traditional'' degree 
granting institutions, and as a result, all institutions have the same 
opportunities to serve their students. More than a year ago I received 
a letter from 18 members of the New York congressional delegation--
including Mrs. McCarthy on this committee--asking that the federal 
government follow suit and treat all degree granting institutions 
equitably. A single definition will move us closer to that goal of fair 
treatment and a level playing field.
    Those who oppose a single definition often claim for-profit 
organizations should not have access to competitive grant funding. Yet 
throughout federal law there are numerous examples of grants that are 
open to both non-profit and for-profit entities.
    A brief review of these programs shows scores of grants available 
to for-profit organizations. We found more than 160 examples, including 
laws under the jurisdiction of this committee, including the Workforce 
Investment Act, the Individuals with Disabilities Education Act, and 
the No Child Left Behind Act. It's clear our exclusion of proprietary 
schools in the Higher Education Act is the exception, and not the rule.
    The second issue I hope to learn more about is the 90/10 Rule, 
which is imposed only on proprietary institutions. This rule, 
originally with a ratio of 85/15, was put into place as part of a 
larger effort to reduce the fraud and abuse that plagued the 
proprietary sector in the 1970s and 1980s. While I don't disagree that 
this rule was well intentioned years ago, today it seems not only 
unnecessary and ineffective, but also potentially harmful to students.
    The rule requires proprietary institutions to show at least 10 
percent of funds are derived from sources outside of Title IV student 
aid funding. While this may not seem like too much to ask, looking 
closely at this rule shows just how burdensome it may be. Statistics 
show proprietary schools tend to serve larger populations of needy, 
high-risk, minority, and non-traditional students. In other words, the 
students most in need of federal assistance.
    Yet when a proprietary school serves a large share of needy 
students, many of whom rely on federal aid, the school's compliance 
with the 90/10 Rule is put in jeopardy. And if a school breaks this 
rule, even by a fraction of a percentage point, it loses eligibility to 
participate in Title IV. This means the school's students cannot 
receive Pell Grants, federal student loans, or any other federal 
student aid. Worse still, this rule creates an incentive for 
proprietary schools to raise tuition or move away from urban areas 
where students are more likely to depend on federal aid.
    Safeguards against waste, fraud, and abuse in our federal student 
aid programs are essential, and that is why the College Access & 
Opportunity Act maintains dozens of effective protections in current 
law. The list on the screen demonstrates some of the many changes that 
have taken place over time to increase accountability and maintain the 
integrity of the student aid programs.
    The third and final issue we'll examine is the rapid growth of 
distance education, and how rules such as the 50 percent rule limit 
access to innovative learning opportunities. Technology has changed 
dramatically since the last time we reauthorized the Higher Education 
Act. Teachers and students today have access to learning tools we could 
not have imagined just a few short years ago. Yet outdated rules 
limiting distance education prevent students and schools from making 
the most of advanced technology.
    I would like to share with you the story of Captain Norma Lee 
Hackney of the U.S. Navy. Her experiences show just how valuable 
distance education is to Americans facing challenges and unique 
circumstances as they pursue higher education.
    Captain Hackney is the first woman to command a United States Navy 
large deck amphibious assault ship, specifically the U.S.S. Saipan 
during Operation Iraqi Freedom. The U.S.S. Saipan has capacity for more 
than 3,000 sailors and marines, operates a 400-bed hospital, supports a 
tactical air control squadron, and launches U.S. Marine harriers and 
helicopters from its flight deck. While commanding her ship, and 
serving her nation, Captain Hackney was able to continue her studies 
toward a Ph.D. through online education.
    Through advanced technology, innovative teaching strategies, and 
online tools, students who may never have had the opportunity for a 
college education today are pursuing higher learning through distance 
education. Again, we're dealing with antiquated regulations that may 
have been well intentioned when put into place, but today are simply a 
burden on students pursuing higher education.
    I look forward to a frank and productive conversation about the 
issues facing this growing sector of higher education. At a time when 
more students than ever are choosing to go to college, millions of 
adults are interested in going back to school, and changing technology 
requires workers to train and retrain to compete in a changing 
marketplace, we should be taking steps to expand access to all sectors 
of higher education. With that, I will now yield to Mr. Miller for his 
opening statement.
                                 ______
                                 

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

    Mr. Kildee. Thank you, Mr. Chairman.
    I join you in welcoming the witnesses before the Committee 
today.
    I want to especially welcome David Moore, CEO of Corinthian 
Colleges. David and I have known each other for many years, 
dating back to when he was the head of the community college in 
Flint, Michigan. Before that, he spent time in the military.
    And David, it is good to have you, always.
    Mr. Chairman, I do not fully agree with the changes made by 
H.R. 4283 with respect to proprietary schools. The bill, in its 
current form, would fundamentally change some of the most 
significant statutory provisions which ensure accountability 
for Federal higher-education funding. These changes could 
hinder rather than improve access to postsecondary education.
    But before I get into some of the issues with this 
legislation, I do want to acknowledge the important role that 
proprietary institutions do play. Many students--we know in 
this Committee, I certainly know--would not be able to access 
the educational courses they need without proprietary 
institutions. They play a very important and essential role in 
the total spectrum of higher education. Flexible scheduling and 
innovative course offerings are key elements that the 
proprietary sector has brought to postsecondary education. 
Opposition to some of the changes made by H.R. 4283 should not 
be viewed as an opposition to proprietary schools in general. 
Rather, the role the schools play is essential to ensuring that 
all students have access to that postsecondary education. And 
in my 28 years here in Congress, I have worked closely with 
proprietary schools during my tenure.
    Unfortunately, H.R. 4283 does raise some issues of concern. 
H.R. 4283 repeals the 90/10 Rule. As I have said before, rather 
than repeal, we should examine what problems the 90/10 Rule is 
causing. How many schools are presently close to the 90 percent 
limit? What limitations does this rule actually place on 
schools? H.R. 4283 repealing the 90/10 Rule, these questions 
have not been satisfactorily answered. Rather than repeal, we 
should be examining perhaps a meaningful compromise on these 
issues that addresses these problems.
    And Mr. Moore and I have discussed--I think you have two 
colleges in Georgia, one of which would have a very high Pell 
Grant status or numbers through the Pell Grants. And I am 
certainly willing to discuss that with you to see whether we 
can arrive at some type of formula for a school with a large 
number of Pell Grant students where we could waive that 90/10 
Rule in the compromise that Mr. Miller and I have suggested.
    H.R. 4283 also establishes a single definition of an 
institution of higher education. This, I fear, would actually 
reduce the amount of aid presently going to minority-serving 
institutions. All of us, both Republicans and Democratic 
Members, have worked to raise funding for minority-serving 
institutions. This provision would only set us back on these 
efforts.
    H.R. 4238 would also repeal the 50-percent rule. 
Congressman Andrews and I introduced a legislation earlier this 
year to eliminate the 50-percent rule in exchange for 
additional fiscal and academic responsibility through the 
accreditation process. This bill does not include the 
provisions from the Andrews legislation and therefore, I think, 
lacks sufficient safeguards for the expansion of distance 
education.
    But I certainly feel that expansion is in order, with the 
proper safeguards. I think it is--we have to recognize that new 
technology that exists out there, and it is a very positive 
thing for education.
    In addition to these issues, this bill has other 
significant issues of concern. The bill's repeal of the low 
fixed rate for consolidation loans would translate into 
thousands in additional interest costs for students.
    The bill also caps the maximum Pell Grant, sending the 
message that we should limit future resources for this critical 
program. I can recall in the last reauthorization, with Mr. 
McKeon in 1998, President Clinton used greatly the increase in 
the Pell Grants and increased the Pell Grants significantly. 
And they have not been increased significantly much since then. 
I think Mr. Bush raised them $250 the first year and then 
another $50. And it has been $50, straight level, funding that 
increase ever since. So I think leaving room for the President 
can be significant, as it was in the 1998 reauthorization.
    In closing, I would like to point out that our colleague, 
Ms. Waters from California, requested to testify at this 
hearing. To my knowledge, her office did not receive a response 
to her request. I would hope that the Committee would provide 
an opportunity for Ms. Waters to be able to present her views 
on this matter. I believe her testimony would be especially 
useful to our conversation, given that she was the author of 
the original 85/15 provision.
    And I thank you, Mr. Chairman, and look forward to working 
with you.
    And I assure all of you that this is a work in process, and 
hopefully, when we are finished with this, we will all be happy 
and be able to deliver the services to the students of this 
country.
    Thank you, Mr. Chairman.
    Chairman Boehner. To clarify the record, we had extensive 
conversations with Ms. Waters' staff, but there was--we already 
had our panel set, and it was our decision not to have two 
panels. And she and her staff were in fact informed of that.
    Secondly, I would point out that the change in interest 
rates the gentleman from Michigan stated that students would be 
paying, could be paying higher rates when they start to repay 
those. And I would remind the gentleman that the students are 
people who are in school. Those who are repaying those would be 
out of school, and I would suggest that we should refer to them 
as graduates.
    With that, we are pleased to introduce our distinguished 
panel of witnesses, and to introduce our first witness, let me 
call on my colleague from Columbus, Ohio, Mr. Tiberi.
    Mr. Tiberi. Thank you Mr. Chairman. It is a pleasure for me 
to introduce a constituent of mine, Mr. Dwight Smith, who is 
currently the president and CEO of Sophisticated Systems, Inc. 
in Columbus and a company that provides system integration and 
consulting that specializes in providing integrated solutions 
for its clients' system requirements.
    On a personal note, Mr. Smith is chairman of the Board of 
Columbus State Community College in Columbus and is here today 
representing DeVry because, as an employer, he has employed 
many of the students of a proprietary school in my 
congressional district.
    I know you have a plane to catch, and so without further 
ado, thank you for being here today. We really appreciate your 
time.
    Chairman Boehner. Our second witness today will be Mr. 
Andrew Rosen. Mr. Rosen currently serves as president and chief 
operating officer of Kaplan Incorporated, a broadbased provider 
of educational services, including test preparation, K-through-
12 services for students in schools and post-secondary 
education and professional training. Mr. Rosen also serves as 
president and CEO of Kaplan College, a regionally accredited 
degree-granting institution.
    And then we will hear from Dr. Alice Letteney. Dr. Letteney 
currently serves as director of the University of New Mexico, 
Valencia. Dr. Letteney was one of the founding faculty members 
at Quinebaug Valley Community College in Connecticut. She has 
also served as dean of academic affairs and executive dean of 
academic and student affairs at community colleges in 
Pennsylvania and Massachusetts.
    We will then hear from Mr. Barmak Nassirian. Mr. Nassirian 
has been active in higher education policy for over a decade 
and currently serves as associate executive director of the 
American Association of Collegiate Registrars and Admissions 
Officers, a nonprofit voluntary professional association of 
more than 9,000 higher education admissions and registration 
professionals who represent 2,300 institutions in more than 35 
countries.
    And then we will hear from Mr. David Moore. Mr. Moore is 
one of the founders of Corinthian Colleges and serves as 
chairman and CEO of Corinthian Colleges. Previously, Mr. Moore 
served as president of the DeVry Institute of Technology in Los 
Angeles. Prior to that position, Mr. Moore was employed by Mott 
Community College in Flint, Michigan, where he was president 
from 1984 through 1992.
    We want to thank all of our witnesses for your willingness 
to come and testify today. I am sure that the staff has 
explained the lights to you; 4 minutes on green, 1 on yellow. 
Red means you should be wrapping up. We are pretty lenient 
around here, as long as you do not get too carried away.
    So with that, Mr. Smith, we would love to hear your 
testimony.

   STATEMENT OF DWIGHT SMITH, PRESIDENT & CEO, SOPHISTICATED 
             SYSTEMS, INCORPORATED, COLUMBUS, OHIO

    Mr. Smith. Thank you. Thank you, Chairman and Members of 
the Committee.
    My name is Dwight Smith, and I am the president and CEO of 
Sophisticated Systems, an IT consulting firm founded in 
Columbus, Ohio, some 14 years ago. It is my pleasure to have 
the opportunity to speak with you today as an employer of 
proprietary school graduates and to share my perspective on how 
these schools are serving a critical role in educating 
technology workers that employers need in today's knowledge-
economy.
    The United States has no greater opportunity with America's 
current and future generations than to educate our citizens and 
create a competitive work force. My comments today are limited 
to a statement of which I firmly believe that every citizen 
should have equal access to the postsecondary education that 
best meets his or her educational needs.
    I founded Sophisticated systems in 1990, and we quickly 
became recognized as a leader in the business community in 
Columbus. We have offices in Columbus and Dayton. We currently 
serve clients in Cincinnati, Chicago, Wilmington Delaware and 
Detroit. We are an $18 million firm that provides IT consulting 
services to a number of organizations, including The Limited, 
Bank One, the State of Ohio and the U.S. Federal Government. We 
currently employ 90 employees and have nearly 40 contractors on 
our staff.
    In order to achieve our success, we need to employ 
individuals with the appropriate technology and business skills 
that will help our clients address their needs. These graduates 
are very hard to find. We look for graduates with bachelors 
degrees and skills that not only include a technical aptitude 
but also the ability to work in teams to provide solutions to 
complex problems.
    One of the institutions that consistently provides us with 
high-quality candidates and graduates would be DeVry 
University. We currently employ five graduates of this great 
institution and, in the past, have employed many more. Many of 
our graduates have been hired on as--hired on by our clients in 
key positions and at least one has left our organization, 
utilizing his education at DeVry and the experience gained at 
Sophisticated to go out and start his own business. We have 
considered DeVry graduates for all entry-level positions and 
hire these graduates because of their ability to be productive 
day one, not only because of their technical skills but the 
problem-solving skills that they acquire at this organization.
    I would like to share with you some examples of some of the 
graduates that we have hired from this organization and how 
they have contributed to our success at Sophisticated Systems. 
First I would like to mention a gentleman by the name of Troy 
Stevens. Troy joined us, after graduating from DeVry in 1999, 
as a business analyst, assisting our clients with requirements 
definition and design. He later supported our e-business 
practice and, last year, was promoted to a very key position of 
business development manager. In this role, Troy reports 
directly to our chief operating officer and is responsible for 
leading all major proposal efforts and establishing key 
strategic alliances with firms such as Deloitte, Unisys and 
CDW. Our firm is continuing to win significant opportunities 
based on Troy's outstanding leadership in this area. Again, 
Troy is a DeVry graduate.
    Next is Harold Ransom, an African-American gentleman who 
joined our firm in 1998 as a PC technician and was later 
promoted to network engineer. Two years ago, Harold assumed a 
lead role in our firms outsourcing contract with the Columbus 
Area Chamber of Commerce. Following two 1-year contracts with 
this important client, in December of 2003, the Chamber signed 
a 3-year agreement with our firm to continue this outsourcing 
agreement. In signing this agreement, they expressed great 
excitement and enthusiasm that Harold would continue to lead 
this effort. The Chamber, as a result of his commitment to 
quality and expertise, continues to be one of our finest 
references.
    My final example is Siu Li. Siu is also a graduate of DeVry 
and joined our company as a result of an acquisition in 2000. 
Siu is a web developer and has developed and supported more 
client engagements and this type of work than any other 
consultant in our firm. That aside, Siu's creativity and values 
bring a great deal to our company in another area. Our company 
is very committed to our community and to giving back.
    Several years ago, Siu had a vision that a team from our 
company should travel to a local shelter and serve meals to the 
less fortunate people in our community. Since that time, Siu 
has organized a trip on a monthly basis, without fail, and led 
a team. And we have served many, many thousands of meals over 
that time. Again, a great DeVry graduate with great business 
contributions to the company as well as a contribution to our 
mission as it pertains to serving our community.
    Clearly, with people like Troy, Siu and Harold on our team, 
I think you can understand why our company has achieved such 
great success. One of the reasons is that these employees have 
received an outstanding education at DeVry. What greater public 
good can there be than educating and preparing Americans for 
future--for what the future promises.
    We are facing increasing competition in the global 
marketplace, and like so many other businesses today, the 
education and training of our current and future work force is 
key to our ability to be successful in the future. I am not an 
education policy expert but rather a CEO and very dependent 
upon the end product of education. I need and want quality 
education. I need and want the quality education that is 
provided by schools such as DeVry and proprietary institutions. 
When hiring an employee, I look to see that the applicant has 
the skills that can meet and improve the needs of our company. 
It seems to me that the objective should be of education policy 
also that any education institution that is accredited and 
meets all the necessary standards and is improving the quality 
of graduates is making our Nation stronger and providing a 
great benefit to the public.
    Thank you Chair and to the Committee.
    [The prepared statement of Mr. Smith follows:]

  Statement of Dwight Smith, President & CEO, Sophisticated Systems, 
                          Inc., Columbus, Ohio

    Mr. Chairman, Mr. Miller and members of the committee, my name is 
Dwight Smith and I am the President and CEO for Sophisticated Systems, 
Inc. (SSI), an I/T consulting firm founded in Columbus, Ohio some 
fourteen years ago. It is my pleasure to have the opportunity to speak 
to you today as an employer of proprietary school graduates and to 
share with you my perspective on how proprietary schools are serving a 
critical role in educating and providing the technology workers 
employers need in today's knowledge economy. The United States has no 
greater opportunity with America's current and future generations than 
to educate our citizens and create a competitive workforce. My comments 
today are limited to a statement of my firmly held belief that every 
citizen should have equal access to the postsecondary education that 
best meets his or her educational goals.
    I founded SSI in 1990 and it has quickly become a recognized member 
of the central Ohio business community. We have opened branches in 
Columbus and Dayton supporting clients in these areas as well as 
Cincinnati, Detroit, Chicago, and Wilmington, Delaware. SSI was listed 
among the Columbus Fast Fifty for five consecutive years (1996-2001) 
denoting it as one of the fastest growing businesses in central Ohio. 
In addition the company has been included in Inc. Magazine's list of 
the nation's 500 fastest growing businesses on two separate occasions. 
We are an 18 million dollar company that delivers professional services 
that include staff augmentation as well as the design, development, 
implementation and support of computer applications and systems. We 
have experience and expertise in all phases of the application 
development process, Wide-area and local-area network design, 
installation and support, PC and server deployment, and general 
computer and technology consulting services. To ensure complete end-to-
end solutions, we provide the related hardware and software products 
necessary to implement computer solutions. SSI employs approximately 90 
employees as well as nearly 40 subcontractors. Our customers include 
Nationwide Insurance, State of Ohio, The Limited, Bank One, Columbus 
Public Schools, The Columbus Area Chamber of Commerce and Wright 
Patterson Air Force Base.
    In order to achieve our success, we need to employ individuals with 
the appropriate technology and business skills that will help our 
customers achieve their goals. These types of graduates are hard to 
find. There continues to be a shortage of workers with the requisite 
skills to complete in the knowledge economy. We look for graduates with 
bachelor's degrees and skills that not only include technical aptitude, 
but also the ability to work in teams to provide solutions to complex 
problems. Technology continues to be infused in today's workforce and 
the technology itself is continually improving. So, our employees also 
must have the desire to participate in life long learning, so we, as a 
company, can continue to meet the changing needs of our customers.
    One of the institutions of higher education that consistently 
produces these quality graduates is DeVry University. SSI currently 
employs five DeVry graduates and in the past we have employed many, 
many more. Some of these individuals have been hired into key positions 
at our client sites while at least one has started his own business 
utilizing both the technical and business skills that he acquired at 
DeVry as well as experience gained at Sophisticated Systems. One of the 
things that impress me about DeVry is that they are one of the top 
producers of minority graduates. We have considered DeVry graduates for 
all entry-level openings and hire DeVry graduates because they have the 
ability to be productive their first day on the job, and because they 
not only have the technical skills but also the teamwork and problem 
solving capabilities to continue to build relationships with our 
customers. I have interviewed graduates from public, private, non-
profit and for-profit institutions, and I believe that our goal is to 
hire an individual with the appropriate qualifications and education--
it does not matter to me whether the student attended The Ohio State 
University, Case Western Reserve University, or DeVry University--just 
as long as they have the skills we need to meet our business goals.
    I would like to give you few examples of some of our DeVry 
graduates and how they have contributed to the success of SSI.
    Troy Stevens joined Sophisticated Systems in 1999 as a Business 
Analyst assisting our clients with requirements definition and solution 
design. He later supported our E-business practice and last year was 
promoted to Business Development Manager. In this role, Troy reports 
directly to our Chief Operations Officer and is responsible for leading 
all major proposal efforts and establishing key strategic relationships 
for the firm including with large international companies such as 
Deloitte, Unisys, and CDW. Our firm is continuing to win significant 
opportunities due, in large part, to Troy's outstanding leadership 
abilities.
    Harold Ransom joined our team in 1998 as a PC Technician and later 
was promoted to Network Engineer. Two years ago Harold assumed the lead 
role in our firm's outsourcing contract with The Columbus Area Chamber 
of Commerce. Following two successful one-year contracts with this 
important client, the Chamber, in December 2003 signed a new three- 
year agreement with Sophisticated Systems. In signing this agreement, 
they expressed great excitement and enthusiasm that Harold would 
continue to lead this effort. The Columbus Chamber, as the result of 
Harold's commitment to quality and expertise, continues to be one of 
our company's finest references.
    Judy Hardina joined our team in 2000. Judy is responsible for all 
hardware/software sales for the organization. She has established 
strong relationships not only with our clients but also manufacturers 
and distributors such as IBM, H-P, Dell and Cisco. Her results to date 
have been absolutely amazing, so much so that it is likely that by the 
end of this month Judy will exceed our projections for sales in this 
key area for the business for the entire year. I receive unsolicited 
feedback from our clients on a regular basis that can be summarized as 
``people do business with our company because of the professionalism 
exhibited by Ms. Hardina.''
    My final example is Siu Li. Siu joined our company as the result of 
an acquisition in 2000. Sui is a web developer and has developed and 
supported more client engagements for this type of work than any other 
consultant in the firm. That aside, Siu's creativity and values bring a 
great deal to the company in another area. Sophisticated Systems is 
very committed to supporting our community--``giving back''. Several 
years ago Siu had an idea, a vision, that a team from the company 
should travel to a local shelter and serve meals to the less fortunate 
in our community. Since that time Sui has organized this trip, without 
fail each month. During this time our team, led by Sui has served 
thousands and thousands of meals to homeless members of our community.
    Clearly with people like Troy, Harold, Judy, and Siu on our team I 
believe you can understand why our company has been blessed with such 
success.
    One of the reasons these employees are successful is the education 
they received at DeVry. What greater public good can there be than 
educating and preparing Americans for promising futures? We are facing 
increasingly tougher competition in the global marketplace and, like so 
many other businesses today, the education and training of my current 
and future workforce is the key to my company's competitiveness and 
future growth. More than ever, we need to promote and reward success in 
the areas of workforce education and training. If an institution is 
doing a good job of preparing students and providing businesses with 
quality employees, this is clearly in the nation's interest.
    I am not an education policy expert, but as a CEO, much of my 
success depends upon the end product of the education process. I want 
and need quality employees whose education and training allow them to 
adapt and keep pace with technological and marketplace developments. 
When hiring an employee, I look for a skilled applicant that can meet 
my needs and improve my company. It seems to me this ought to be the 
objective of our education policy as well. Any qualified and accredited 
institution that meets all the necessary standards and is producing 
quality graduates is making our nation stronger and providing public 
benefit.
    If I have a superb employee, I look for ways to give that employee 
more responsibility. If I have a product or service that is in demand, 
I find a way to increase production. If there is a school that is 
producing graduates that are performing well and strengthening our 
workforce, then we should make it possible for that institution to do 
more of whatever it is that they are doing with such success.
    Thank you, Mr. Chairman, for this opportunity to share my 
experiences, as an employer, and to offer my thoughts on the 
contributions proprietary postsecondary schools, such as DeVry, make 
towards helping employers find quality employees.
                                 ______
                                 
    Chairman Boehner. Thank you.
    Mr. Rosen.

  STATEMENT OF ANDREW S. ROSEN, PRESIDENT AND CHIEF OPERATING 
      OFFICER, KAPLAN, INC., AND PRESIDENT, KAPLAN COLLEGE

    Mr. Rosen. Mr. Chairman, Members of the Committee, it is an 
honor for me to appear before you today to discuss equity 
issues pertaining to students at proprietary postsecondary 
institutions. I am Andrew Rosen, president and chief operating 
officer of Kaplan, Inc. I also serve as president of Kaplan 
College.
    Kaplan, Inc. is a wholly owned subsidiary of the Washington 
Post Company. Many of you know Kaplan's roots in test 
preparation. But we have expanded well beyond test prep to help 
individuals achieve their educational and career goals 
throughout their lives. Kaplan's postsecondary education 
involvement includes 67 accredited brick-and-mortar schools in 
16 States that offer bachelors, associate and certificate 
programs. Those schools include Kaplan College in Davenport, 
Iowa, which is regionally accredited and anchors Kaplan College 
Online.
    Kaplan College is one of the original participants in the 
U.S. Department of Education Distance Education Demonstration 
Program. Because of that, we are exempt from the 50-percent 
rules. Kaplan's on-ground and online students are 
nontraditional with an average age of 38. The majority of our 
students are women, more than half identify themselves as 
racial or ethnic minorities and, at our on-ground schools, 
approximately 60 percent qualify for Pell Grants. About one-
third of our online population is eligible for Pell Grants. 
Most of our online students are adults with families, and many 
are working single parents. For them, online education is the 
only way to advance their careers and better provide for their 
families.
    Kaplan College Online has 11,000 students working toward 
associate and bachelors degrees in business, information 
technology, criminal justice and paralegal studies. Every 
student at Kaplan College Online has ongoing relationships with 
faculty and a personal academic advisor.
    The requirement that, to be eligible for Federal financial 
aid, institutions must keep online courses to less than 50 
percent of the total courses offered and students enrolled is 
anachronistic. The 50-percent rules hinder the power of 
distance learning.
    We are pleased that H.R. 4283, the College Access and 
Opportunity Act of 2004, recognizes this reality and takes 
significant steps toward more equitable treatment for online 
education. I would also like to acknowledge the efforts made 
toward this goal by Members on both sides of the aisle. Because 
of that broad support, I am confident that, as part of 
reauthorization, Congress will update the laws that govern 
access to Federal student aid for online learners to better 
reflect the needs of 21st century learners.
    Mr. Chairman, I will touch briefly on three other areas 
that treat students at for-profit schools inequitably that are 
resolved in your bill. The requirement that proprietary schools 
obtain at least 10 percent of their revenues from sources other 
than Federal student aid has become a disincentive for 
companies to serve the neediest students who receive the most 
Federal aid. We applaud your decision to eliminate the 90/10 
Rule as part of H.R. 4283.
    The College Access and Opportunity Act of 2004 also 
addresses transfer of credit, which is another equity issue for 
students at proprietary schools. Too often our students at 
nationally accredited schools are unable to transfer credits 
for their courses simply because the sending school is not 
regionally accredited. H.R. 4283 maintains institutions' 
academic freedom while insuring that decisions on credit 
transfers are based on course content rather than on the nature 
of the accreditor.
    H.R. 4283 also provides for a single definition of an 
educational institution. In an era when more than 1 million 
students per year enroll in private career colleges, it is time 
that the Federal Government stopped relegating them to second-
class status. As a matter of equity and sound public policy, 
the single definition is appropriate.
    Nontraditional students have different needs and 
circumstances than the high school graduate who continues 
immediately with postsecondary education. Our students go to 
school year-round. Their need for financial aid does not take a 
summer vacation. I am pleased that your bill acknowledges this 
need by establishing a pilot program for year-round Pell 
Grants.
    Mr. Chairman, you have also asked me to assess the 
potential for increased fraud and abuse resulting from 
provisions in H.R. 4283. The only way to maintain the long-term 
health and representations of our companies is by providing 
quality instruction and training and building enduring 
institutions. In addition, for-profit postsecondary education 
has multiple reporting requirements at both the Federal and 
State levels. The legislative changes you propose leaves most 
of these requirements in place.
    I would like to close my testimony by telling you about 
Christine Forestire, a recent graduate of Kaplan College Online 
who is here today. Christine lives in upstate New York and 
commutes 2 hours each way into Manhattan to work. She had an 
associates degree and no means of continuing her education 
anywhere near her home. She became a student at Kaplan College 
Online.
    On September 11, 2001, Christine was about to go to her 
office on the 45th floor of Tower Two of the World Trade 
Center. She was shopping and never got in the elevator and ran 
when the building shook violently. She watched from a nearby 
restaurant as the second plane hit the other tower. Eight of 
Christine's coworkers were killed.
    Without any prodding, without any of my knowledge, our 
staff at Kaplan College Online immediately followed up with 
Christine to be sure she was all right, including her 
admissions counselor. Her teachers were very supportive, and 
rather than abandoning her studies because of the tragedy, 
Christine focused even more on her studies.
    Christine now works at a law firm in Manhattan and 
graduated in December with a bachelor's degree in management. 
She has a bright future ahead of her because online education 
made it possible for Christine to reach her goals.
    Christine, I would like to ask you to rise for a moment. 
Thank you, Christine, and congratulations.
    Mr. Chairman, I would be pleased to answer any questions 
you or any other Member may have. Thank you.
    [The prepared statement of Mr. Rosen follows:]

   Statement of Andrew S. Rosen, President & COO, Kaplan, Inc., and 
             President, Kaplan College, Boca Raton, Florida

    Mr. Chairman, Other Members of the Committee:
    It is an honor for me to appear before you today to discuss equity 
issues pertaining to students at for-profit postsecondary institutions. 
I am Andrew Rosen, President and Chief Operating Officer of Kaplan, 
Inc. I also serve as President of Kaplan College. Kaplan Inc. is a 
wholly owned subsidiary of The Washington Post Company, a media and 
education company. As many of you know, Kaplan's roots are in test 
preparation, and we have expanded beyond those origins to help 
individuals achieve their educational and career goals throughout their 
lives. We still offer test preparation for college admission, graduate 
school, and beyond. In addition, Kaplan K12 Learning Services provides 
supplemental education services as part of the No Child Left Behind 
law. SCORE! Education Centers offer both enrichment and supplemental 
education programs. Our Kaplan Professional division offers continuing 
education and certification studies in financial services, insurance, 
home inspection, architecture, and real estate.
    Kaplan's postsecondary education involvement includes 67 accredited 
brick-and-mortar schools in 16 states that offer bachelor's, associate, 
and certificate programs. We also have Concord Law School, which is 
online and is the second-largest part-time law school in the country.
    My focus with you today are the postsecondary students at our 67 
on-ground schools, as well as those who study online through Kaplan 
College Online. All are non-traditional students, with an average age 
of 38. The majority of our students are women, more than half identify 
themselves as racial or ethnic minorities, and at our on-ground-
schools, approximately 60 percent qualify for Pell Grants. About one-
third of our online population is eligible for Pell Grants.
    One of our on-ground schools is Kaplan College in Davenport, Iowa, 
which is accredited by the Higher Learning Commission of the North 
Central Association of Colleges and Schools, and anchors Kaplan College 
Online. Kaplan College is one of the original participants in the U.S. 
Department of Education's Distance Education Demonstration Program. 
Because of that, we are exempt from the 50 percent rules, which would 
otherwise subject education and training delivered online to rules 
drafted for correspondence programs.
    Mr. Chairman, we believe that the reauthorization of the Higher 
Education Act presents an unprecedented opportunity to ensure that 
quality education and training options are available to all motivated 
students. Most of our online students are adults with families, and 
many are working single parents. They are eager to improve their 
education at times that traditional classroom learning would not be an 
option because of their job and family responsibilities. For them, 
online education is the only way to advance in their careers and better 
provide for their families.
    The world has changed, and in order to advance economically, 
postsecondary education is now a requirement. Ensuring that students 
have access to the education that meets their needs will ensure the 
continued economic security of our Nation. Recognizing that, the U.S. 
Chamber of Commerce has formed the Coalition for a Competitive 
Workforce, of which Capella University, Corinthian Colleges, DeVry, 
Inc., and Kaplan are founding members.
    Kaplan also belongs to the Career College Association, whose 
members educate and train one million students each year for employment 
in some 200 occupational fields.
    Kaplan College Online has over 11,000 students working toward 
associate and bachelor degrees, and another 4,500 who are in the school 
of continuing education, which offers non-credit certificate programs. 
We offer degree programs in business, information technology, criminal 
justice, and paralegal studies. Areas of study for continuing education 
include forensic nursing and legal nurse consulting, financial 
planning, and life care management.
    In Kaplan's experience, effective online learning requires more 
faculty-student interaction, not less, particularly for longer or more 
complex programs. Our online faculty and administrators make an effort 
to get to know their students and make themselves available to students 
at all hours. Every student enrolled in Kaplan College Online has an 
academic advisor.
    The requirement that to be eligible for federal financial aid, 
institutions must keep online courses to less than 50 percent of the 
total courses offered and students enrolled is anachronistic to the 
realities of 21st century learning. The 50-percent rules hinder the 
power of distance learning. We are pleased that HR 4283, the College 
Access and Opportunity Act of 2004, recognizes this reality and takes 
significant steps toward more equitable treatment for online education.
    I would also like to acknowledge other efforts made toward this 
goal by Members of this Committee on both sides of the aisle. Because 
of that broad support, I am confident that as part of reauthorization, 
Congress will update the laws that govern access to federal student aid 
for online learners to better reflect the needs of 21st century 
learners.
    Mr. Chairman, I will touch briefly on three other areas that treat 
students at for-profit schools inequitably and that are resolved in 
your bill. The requirement that proprietary schools obtain at least 10 
percent of their revenues from sources other than federal student aid 
funds had understandable origins. However, today's responsible for-
profit schools are integral components of the higher education system 
in our country. Yet the 90/10 provision remains in effect and has 
become a disincentive for companies to serve the neediest students who 
would receive the most federal aid. The rule is also administratively 
burdensome. We would prefer to redirect resources to counseling and 
serving students, instead of minutely tracking each school's percentage 
of federal funding. We applaud your decision to eliminate the 90/10 
Rule as part of HR 4283.
    The College Access and Opportunity Act of 2004 also addresses 
transfer of credit, which is another equity issue for students at 
proprietary schools. Too often, our students at nationally accredited 
schools are unable to transfer credits for their courses simply because 
the sending school is either not regionally accredited or is not 
accredited by the same regional agency. HR 4283 strikes the right 
balance, maintaining institutions' academic freedom, while ensuring 
that decisions on credit transfers be based on course content rather 
than on the nature of an accreditor.
    HR 4283 also provides for a single definition of an educational 
institution. In an era when more than one million students per year 
enroll in private career colleges, it is long past time that the 
federal government should have ceased relegating them to second-class 
status. As a matter of equity and sound public policy, the single 
definition makes sense.
    As I indicated earlier in my testimony, non-traditional students 
have different needs and circumstances than the high school graduate 
who continues immediately with postsecondary education. Our students go 
to school year-round; their need for financial aid to pursue their 
studies does not take a summer vacation. I am pleased that your bill 
acknowledges this need by establishing a pilot program for year-round 
Pell Grants. We look forward to working with you to fine-tune the 
proposal in the best interests of our students.
    Mr. Chairman, you have asked me to assess the potential for 
increased fraud and abuse resulting from provisions in HR 4283. I 
recognize that some Members of this Committee remember the days when 
unscrupulous operators left a trail of disappointed students and debts 
to the federal Treasury. The changes in the law passed by Congress 
weeded out those bad actors. The for-profit industry, including online 
institutions, has matured, and those of us in this business recognize 
that the only way to maintain the long-term health and reputations of 
our companies is by providing quality instruction and training. 
Competition has made our traditional colleges and universities the envy 
of the world, and it is having the same impact with private sector 
education. In addition, our students are more sophisticated and have 
learned to shop for value, and that carries over to their education and 
training needs.
    For-profit postsecondary education has multiple reporting 
requirements at both the federal and state levels. The legislative 
changes that I have outlined in the interests of better public policy 
and improved service to students will still leave most of those 
requirements in place. I have no doubt that scrutiny of our sector will 
continue, and that we will pass and thrive as students continue to turn 
toward quality, cost-effective programs to help them achieve their 
career goals.
    I would like to close my testimony by telling you briefly about 
Christine Forestire, a recent graduate of Kaplan College Online. Some 
of you met her in February when she was honored by the Career College 
Association as an outstanding graduate.
    Christine lives in upstate New York and commutes two hours each way 
into Manhattan to work. She had an associate's degree and no means of 
continuing her education anywhere near her home. She became a student 
at Kaplan College Online. She usually took one course at night and 
another on weekends, using her commuting time and part of each weekend 
to study.
    On September 11th, 2001, Christine had stopped to do some shopping 
on the concourse level of the World Trade Center, prior to taking the 
elevator to her office on the 45th Floor of Tower Two, where she would 
otherwise normally have been before 8:30 a.m. She never got in the 
elevator, but ran from the building when what sounded like a giant bomb 
shook the tower. She ran to a nearby restaurant and while waiting to 
use a pay phone, watched television coverage, seeing the second plane 
hit the other tower. Eight of Christine's co-workers were killed, and 
she never again saw a commuter friend who traveled with her daily.
    Without my knowledge or any prodding, our staff at Kaplan College 
Online followed up with Christine to make sure she was all right, 
including her admissions counselor. Her teachers were very supportive, 
and rather than abandoning her studies because of the tragedy, 
Christine focused even more on her studies, to take her mind off what 
had happened.
    Christine works at a law firm in Manhattan and graduated in 
December with a Bachelor's degree in management, with a concentration 
in information technology. She has a bright future ahead of her, 
because online education made it possible for Christine to reach her 
goals.
    Mr. Chairman, I would be pleased to answer any questions you and 
other Members may have.
                                 ______
                                 
    Chairman Boehner. Thank you Mr. Rosen.
    Dr. Letteney.

    STATEMENT OF ALICE LETTENEY, PH.D., EXECUTIVE DIRECTOR, 
 UNIVERSITY OF NEW MEXICO-VALENCIA, LOS LUNAS, NEW MEXICO, ON 
    BEHALF OF THE AMERICAN ASSOCIATION OF COMMUNITY COLLEGES

    Dr. Letteney. Good morning Chairman Boehner and Members of 
the Committee.
    My name is Dr. Alice Letteney, and I am the executive 
director of the University of New Mexico, Valencia campus, an 
HSI that serves 1,700 credit and 7,000 noncredit students in 
rural New Mexico. I am pleased to be here today representing 
the American Association of Community Colleges comprised of 
1,173 public, private and proprietary colleges who enroll over 
11 million credit and noncredit students all across this 
country.
    AACC's leadership and representation on these issues 
accurately reflect the policy positions of our members. I have 
been asked to address proprietary school and program integrity 
issues in H.R. 4283 today. AACC cannot support this key bill at 
this time largely because of these issues.
    AACC appreciates the role of for-profit colleges in 
providing career education and training and has always 
supported giving proprietary school students Federal financial 
aid. However, the community college role is different from that 
of for-profit. We are open admissions colleges, providing a 
wide range of programs from adult basic education, remediation, 
college transfer to technical and career education. For-profits 
generally focus more narrowly on career education.
    AACC strongly opposes the single definition which would 
make roughly 4,000 for-profit colleges eligible for all HEA 
programs and would result in a sure and swift funding cut for 
our colleges. We can perhaps live with an HEA bill that has no 
new money. But we cannot accept less old money. The single 
definition would adversely impact Title III-A Strengthening 
Institutions funds which go largely to community colleges and 
other resource-poor institutions with high percentages of needy 
students.
    Of equal concern is the HSI program, which currently funds 
165 HSIs, half of whom are community colleges, including my 
college. The single definition would immediately make 110 for-
profit colleges eligible, causing many of us to lose grants. 
The single definition makes for-profit schools eligible for 
scores of non-HEA programs that use its definitions for program 
eligibility, including programs at NSF, HHS, Agriculture and 
Homeland Security. We understand that no list of these non-HEA 
programs has been provided, and we believe that Committees with 
jurisdiction may not even be aware of this pending change.
    It has been claimed that the single definition is about 
serving students. This is a distortion or half truth. Taxpayer 
funds awarded to proprietary colleges subsidize corporate 
profits, for they are inseparable from funds used for students. 
On the other hand, all of the taxpayer funds provided to public 
community colleges, accountable to locally elected and 
appointed boards, go into education, not profits. The HEA has 
always reflected this fundamental difference.
    Beyond student financial aid, American taxpayers should not 
be asked to subsidize significant shareholder profits at for-
profit colleges. The single definition must be rejected.
    AACC recommends the continuation of the 90/10 Rule as a way 
to prevent the pattern of fraud and abuse of financial aid that 
we saw in past years involving proprietary schools. Hearings by 
the Senate Government Affairs Committee in the early 1990's 
showed that institutions heavily dependent on student aid 
revenues had higher levels of fraud and the NIG has repeatedly 
cited continuing problems.
    We dispute claims that for-profit colleges provide services 
to low-income and minority students that our community colleges 
do not and are skeptical when for-profit institutions claim 
that they will be forced to increase tuition if the rule is 
kept. Please retain the 90/10 Rule.
    Lastly, AACC recommends that the 50-percent rule regarding 
distance education be modified to allow institutions to exceed 
the 50 percent limit, a waiver from the Department of Education 
based on specific criteria, including some of the standards 
included in the Distance Education Demonstration Project that 
is extended under H.R. 4283. We generally support full parity 
between on-campus and distance education, but believe that 
colleges heavily involved in distance education should have 
some additional oversight beyond current accreditation 
procedures. Asking the Department of Education to be a back 
stop in ensuring that the wrong institutions are not given 
access to Federal student aid is simply good prudent government 
with no harm to institutions.
    Thank you for this opportunity to testify. I will be happy 
to answer questions.
    [The prepared statement of Dr. Letteney follows:]

Statement of Dr. Alice Letteney, Executive Director, University of New 
   Mexico-Valencia, Los Lunas, New Mexico, on behalf of the American 
                   Association of Community Colleges

    Good morning, Mr. Chairman and Members of the Committee. My name is 
Dr. Alice Letteney and I am Executive Director of the University of New 
Mexico-Valencia. My college is an Hispanic Serving Institution (HSI) 
and a rural community college, serving about 2,000 students. I am 
pleased to be here on behalf of the American Association of Community 
Colleges (AACC). AACC is the national voice for community colleges and 
represents 1,173 community, junior and technical colleges. Included in 
that figure are a number of high-quality, for-profit colleges that 
carry regional accreditation status, a prerequisite for AACC 
membership. We are pleased to present our views on some of the 
integrity and proprietary school provisions in H.R. 4283, the ``College 
Access and Opportunity Act of 2004.''
    Before I begin my testimony, let me provide a few statistics. 
Community colleges enroll more than 11 million credit and non-credit 
students each year. This includes 45.9% of all undergraduate African 
American students in American higher education, and 56% of all 
Hispanic-American students. They also enroll 48.6% of all first 
generation college students. Hence, we proudly think of ourselves as 
being the ``Ellis Island'' of higher education. At the same time, our 
colleges are undergoing a difficult period of sharp budget cuts coupled 
with dramatic enrollment increases. In the last budget cycle, state 
funding, which represents 41% of total revenues, decreased overall by 
2.1%. And, over the last 3 years, our credit enrollments have exploded, 
by about 20%.
Background on Community Colleges, Proprietary Schools, and the HEA
    AACC's overwhelming focus on the Higher Education Act (HEA) always 
has been and always will be on student aid. The HEA is essential for 
needy students to finance their education. More than two million 
community college students receive Pell Grants each year, which is 
almost one- third of fall credit enrollments. The ``integrity'' issues 
discussed below were not part of AACC's initial reauthorization 
position submitted to this committee. Essentially, they were thrust at 
community colleges by provisions in H.R. 3039 and, now, H.R. 4283. Our 
basic positions on these issues are shared by the American Council on 
Education, the umbrella higher education association, and the 44 other 
signatories to its May 26 letter on H.R. 4283.
    HEA ``integrity'' issues inevitably raise the topic of proprietary 
schools. AACC commends proprietary schools, who in many ways are 
partners in providing technical training and other essential programs 
to millions of Americans. The continued expansion of proprietary 
schools testifies to the fact that they are meeting many needs.
    However, proprietary schools are businesses. They have a central 
and necessary goal of earning profits. Alternatively, community 
colleges are, by law and custom, dedicated to the public good. While 
community colleges are complex institutions, with multi-million dollar 
budgets, any excess of revenues over expenses is redirected to 
educational programs and other student services. They do not enrich 
owners and stockholders. This is reflected in the different tuition 
levels. The average community college tuition this fall was $1,905. As 
of this fall, the average two-year, degree granting proprietary school 
charged $10,619--more than five times as much.
Congress Should Reject the ``Single Definition'' of Institution of 
        Higher Education
    AACC strongly opposes the inclusion in H.R. 4283 of the ``single 
definition'' of institution of higher education. The AACC Board has 
indicated that AACC must oppose reauthorization legislation that 
includes the single definition. This is largely because the inevitable 
and immediate result of the single definition is to reduce funding for 
community colleges, and make it even more challenging to provide 
necessary services to students. Our colleges can perhaps accept HEA 
reauthorization legislation in which o new money is the guiding 
principle, but they cannot accept ``less old money.''
    The single definition does much more than make proprietary schools 
eligible for non-Title IV HEA programs. Even more significantly, it 
makes all those institutions eligible for scores of programs outside 
the HEA that use its definitions for program eligibility. This dramatic 
change to these non-HEA programs will occur without other committees of 
jurisdiction taking any affirmative steps to extend them to proprietary 
schools.
    These additional for-profit institutions amount to about 4,000 
institutions, more than all of the non-profit colleges combined. 
Degree-granting proprietary schools currently number about 800. This is 
more than two-thirds the number of community colleges. For the record, 
AACC has never questioned proprietary school participation in the 
student aid programs. These programs represent more than 95% of total 
HEA expenditures.
    The single definition would affect two HEA grant programs that are 
of particular concern to our association. One is the Title III-A of the 
HEA, the Strengthening Institutions program. On average, community 
colleges receive about 70% of these funds, with the remainder awarded 
to four-year colleges, public and private. The funds are awarded to 
institutions that serve high percentages of needy students and that 
have relatively few resources. Competition for these grants is fierce, 
and only about 15% of applications are funded in a given year, for 
average annual grants of about $350,000. Roughly 120 grants are funded 
at any one time. Unfortunately, appropriations for this extremely 
valuable program have stagnated. The program was funded at $80 million 
in fiscal year 1995; nine years later the fiscal year 2004 
appropriation is $81.0 million. Our colleges are understandably 
dismayed about the prospect of an immediate and radical expansion of 
the pool competing for these limited funds.
    Of equal concern is the impact of the single definition on the HSI 
program. There are currently 165 institutions participating in this 
program and half of them are community colleges. The single definition 
would immediately make 110 for-profit colleges eligible for these 
grants. Adoption of the single definition could therefore strike a 
serious blow to our colleges.
    In earlier correspondence to the Committee, AACC asked for a list 
of the non-HEA programs that would be affected by the single 
definition, but none has been made available. We understand that 
compiling this list presents a research challenge, but this very fact 
suggests why it must be done before legislative action on the single 
definition takes place. We do know that a very broad array of non-HEA 
programs will be affected by the single definition (National Science 
Foundation, Department of Agriculture, Department of Homeland Security, 
Department of Health and Human Services), and most likely without the 
relevant committees of jurisdiction even being aware of its potential 
impact.
    There are further implications for state scholarship and grant 
programs embedded in the single definition. Many of these programs also 
use the HEA eligibility definitions. Heretofore, there has been no 
discussion of this concept. The committee should fully examine this 
aspect of the single definition before moving ahead with it.
    Lastly, proponents of the single definition and the title of this 
hearing suggest that this issue is about serving students. This is only 
half true--the services received by students are provided by 
institutions, and the single definition is about which institutions are 
allocated funds. Taxpayer funds awarded to colleges for students are 
not separable from the monies that ultimately flow to school owners and 
shareholders. Recent financial statements from some of these concerns 
place this into context:

Apollo Group (U. Phoenix): Gross Profits, $860.9 million over 4 
quarters ending 2/29/04
Career Education Corp.: Gross Profits, $1.593 billion for 3 years 
ending 12/31/03
DeVry, Inc.: Gross Profits, $1.098 billion for 4 years ending 6/30/03
Corinthian Colleges, Inc.: Gross Profits, $541.3 million for 3 years 
ending 6/30/03

    Community colleges are ``open door'' institutions that are 
accountable to their locally elected and appointed boards, representing 
the public. Proprietary schools are accountable to their owners and 
shareholders. These represent fundamental differences and, until now, 
the HEA has always reflected them by creating a strict statutory 
demarcation between them. This demarcation should stand.
    The ``90/10 Rule'' is Good for Students, the Student Aid Programs, 
and Taxpayers
    The so-called ``90/10 Rule'' was enacted in 1992 to prevent 
institutions from focusing exclusively on recruiting low-income 
students in order to profit from federal student aid eligibility. The 
primary rationale for this provision, originally the ``85/15 rule'' 
until it was watered down in the 1998 HEA amendments, was to ensure 
that proprietary schools were subject to a limited amount of free-
market testing; that is, that the education was sufficiently high-
quality that students were willing to use their own money to cover a 
limited share of tuition. In addition to preventing the misuse of 
federal funds, the ``90/10 Rule'' serves as a protection for low-income 
students, who are the least informed about the range of postsecondary 
choices open to them. Also, the Committee should be aware that the 
Departments of Defense and Veterans Affairs use an ``85/15 rule'' for 
their education programs because of the vulnerability to abuse of 
highly subsidized federal programs.
    For purposes of comparison, the committee should know that, on 
average, community colleges receive no more than 7% of their revenues 
via the federal student aid programs. The notion that a 90% limit on 
Title IV revenues presents a barrier for for-profit institutions is 
difficult for our presidents to imagine.
    How well has the ``90/10 Rule'' worked in practice? In some ways it 
is hard to tell, in that the abuses that have been prevented by it 
cannot, by definition, be documented. Hearings by the Senate Government 
Affairs Committee in the early 1990s did show that institutions so 
heavily dependent on student aid revenues were subject to much higher 
levels of fraud. In addition, recent reports by ED Office of Inspector 
General (OIG) documented serious abuses, primarily in federal student 
aid programs. Some of these problems included: schools closing without 
warning; routine fabrication of financial aid documents; falsification 
of ability-to-benefit test results; widespread failure to comply with 
the ``90/10'' rule; overstating program length; and disbursing funds to 
ineligible students.
    We reject some arguments that have been made to this committee on 
behalf of repealing the ``90/10 Rule''. This includes the argument that 
the ``90/10 Rule'' should be repealed because for-profit colleges 
provide services to low-income and minority students that non-profit 
colleges do not. Community colleges are easily accessible in almost all 
parts of the country, including inner cities as well as very sparsely 
populated rural areas. The claim that proprietary schools have left 
inner cities because of the ``90/10 Rule'' is impossible to verify; it 
does, however, reflect their owners priorities. In addition, we find 
the assertion by for-profit institutions that they will be forced to 
increase tuitions if the ``90/10 Rule'' is not repealed difficult to 
accept.
    While proprietary schools serve large numbers of low-income 
students, non-profit institutions do as well. Sixteen percent of 
dependent students at both public and private four-year institutions 
are from families earning $25,000 or less, and one-quarter of students 
at those institutions are minorities. About a third of the students 
attend part time, and nearly 20 percent have dependents. Twenty-two 
percent of dependent students at community colleges are from families 
with incomes less than $25,000.
    Community colleges may have lower completion rates than other types 
of institutions. In these cases, it is often due to the fact that they 
are mandated to maintain an ``open door,'' serving all students who can 
potentially benefit from further education, not just those the 
institution would like to admit. This includes remedial education and 
ESL students. Lower completion rates are also due to the fact that more 
than 80% of our students work, more than 30% of them full-time. These 
heavy work responsibilities tend to stand in the way of program 
completion.
    The package of integrity provisions put in place by the 1992 HEA 
reauthorization, including the ``90/10 Rule,'' resulted in an 
immediate, precipitous, and sustained drop in the student loan default 
rate. Students who received an inadequate education, and are unable to 
find employment, are at high risk of defaulting on their loans. In 
1992, the proprietary school sector default rate was 30.2%. Today, 
after more than a thousand proprietary institutions have been removed 
from the federal student aid programs, the proprietary default rate is 
9%, significantly higher than the 3.5% rate for private institutions, 
and the 5.3% rate for public four-year institutions. It is and has been 
higher than that for community colleges, which are mandated by law and 
policy to maintain an pen door to all students.
    Congress will be making a serious mistake if it allows the fraud 
and abuse of a decade ago to return to harm students, institutions, and 
taxpayers. The ``90/10 Rule'' needs to be kept in place to assure that 
students receive the quality education they have been promised.
Eliminate the 50% Rule--But Require a Second Opinion for Institutions 
        That Go Above That Threshold
    AACC supports elimination of the 50% rule, under the conditions as 
outlined below.
    Community colleges are more heavily involved in distance education 
than any other sector of higher education. According to the National 
Center for Education Statistics, 90 percent of all community colleges 
offered at least one distance education course during the 2001-2002 
academic year. 56% of all two- and four-year non-profit institutions of 
higher education offered courses.
    In general, AACC supports the elimination of the current statutory 
provisions that create a lack of parity between courses delivered on 
campus and those provided through Web-based or other types of distance 
education vehicles. However, it should be understood up front that this 
will add significant cost to the student aid programs. Given the fiscal 
state of the Pell Grant program, significant program expansion must 
always be carefully considered.
    H.R. 4283 effectively eliminates any telecommunications course from 
being considered a correspondence course. This makes students at 
schools that offer programs solely through telecommunications eligible 
for student aid. This educational delivery format makes it harder to 
assess institutional structures, educational resources and student 
learning, and to ensure the integrity of student aid funds. We believe 
that this same pattern of fraud and abuse could emerge if this change 
is enacted without additional safeguards.
    In virtually every case, the 50 percent rule has not prevented the 
expansion of distance education at schools that also offer classroom 
programs. This is because telecommunications courses (primarily those 
offered by television, audio, or computer) are not considered 
correspondence courses for degree programs if the number of 
telecommunications and correspondence courses do not equal at least 50 
percent of the courses offered by the institution.
    The 50 percent rule is not currently a barrier to institutional 
provision of distance education. Only a few schools are approaching the 
current limit. Some that are, and some that are interested in pursuing 
a 100 percent distance education program, are included in the 
Department of Education Distance Education Demonstration Program. We 
think this a good approach that should serve as the model for a 
permanent program to allow interested schools to receive waivers of the 
``50 percent rule'' on a case-by-case basis. This approach recognizes 
the importance of and increasing interest in distance education, but 
protects students and student aid programs from being taken advantage 
of by easily accessed and highly advertised programs that do not 
provide quality education.
    We recognize that the Committee may be reluctant to cede to the 
Secretary of Education blanket authority to grant waivers for 
institutions wanting to exceed the 50% threshold. Therefore, we are 
ready to work with the Committee to design specific criteria that the 
Secretary should employ when granting waivers. These would involve at 
least some of the standards used under the Distance Education 
Demonstration Program that H.R. 4283 extends.
    We firmly support the role of accreditation in assuring quality 
education. But for institutions that offer most or all of their 
programs by distance, the need for additional oversight extends beyond 
accreditation. Ensuring program integrity is clearly a responsibility 
of the federal government, on behalf of American taxpayers, not 
accreditors. Opening distance education with no limitations, or without 
additional oversight by the ED, is an invitation for increased fraud 
and program abuse. The General Accounting Office stated in a February 
2004 report that ``the lack of consistently applied procedures for 
matters such as comparing distance education and campus-based programs 
or deciding when to incorporate reviews of new distance education 
programs could potentially increase the chances that some schools are 
being held to higher standards than others.''
    Asking the Department to play a role as a backstop in ensuring that 
the wrong institutions are not given access to federal student aid 
funds is good, prudent government, with no harm to institutions and 
potential great benefit to the public interest.
    We thank you for this opportunity to present our views. I would be 
happy to answer any questions that you may have.
                                 ______
                                 
    Chairman Boehner. Thank you.
    Mr. Nassirian.

 STATEMENT OF BARMAK NASSIRIAN, ASSOCIATE EXECUTIVE DIRECTOR, 
 AMERICAN ASSOCIATION OF COLLEGIATE REGISTRARS AND ADMISSIONS 
                            OFFICERS

    Mr. Nassirian. Mr. Chairman, I appreciate the opportunity 
to participate in the hearings and to hopefully be responsive 
to some of the Committees' concerns.
    My name is Barmak Nassirian. I am associate executive 
director with the American Association of Collegiate Registrars 
and Admissions Officers, a mouthful. AACRAO is how we refer to 
ourselves in shorthand. We are not part of the traditional 
lobbying community in Washington. We did not sign any letters 
other than our own to the Committee and are only essentially 
dragged into matters pending before the Committee when changes 
in the law begin to really intrude on the autonomy of 
institutions with consequences that I am convinced the 
Committee does not intend. So I hope with all humility and with 
the spirit of attempting to be helpful to your deliberations, 
you consider some of our concerns.
    I want to substantially associate myself with Dr. 
Letteney's observations on the three particular issues that you 
raise. We--it is very easy to go back to the 1970's and 1980's 
and look at the history of unfortunate waste, fraud and abuse 
in these programs and then declare victory and go home.
    The problem is that patterns of disparate outcomes persist. 
And we need to be mindful that so much of the good that has 
happened since the enactment of the integrity provisions of the 
1992 amendments are highly contingent on the particular 
provisions that the bill pending before the Committee would 
undo.
    Now, having said that, I do not disagree that reputable 
companies are in student training and in the education market 
for the long haul. The question is, what do we do with the ones 
who are not at the table? The issue is not whether distance 
education is appropriate and whether reputable institutions 
like those at the table should be allowed to cross the 50-
percent threshold. They should.
    In fact, I will, in the interest of full disclosure, we do 
not ourselves have Federal contracts. We have a consulting unit 
that assisted a proprietary institution to expand its 
participation in the demo program. We have no ideological 
objection to proprietary schools, nor do we have any 
ideological objections to the profit incentive operating as a 
very efficient mechanism in these programs.
    The issue becomes, how do we stop every website from 
becoming a school? How do we ensure that limited Federal 
dollars really finance quality education? And despite 
everything this Committee has done, the system is substantially 
operating on the basis of an honor system. We cannot be 
everywhere at all times. The IG, routinely, every time they 
turn a stone over, they find some untoward activity somewhere, 
and we need to be mindful, as a certain sailors' proverb: If 
you cannot tie one good knot, tie lots of bad ones.
    And admittedly, every one of these provisions is not, in an 
axiomatic theoretical way, defensible per se because there will 
be exceptions that we can all agree should not be caught in the 
rule. But the issue becomes, what happens if all of these are 
undone? The one area of substantive disagreement that of course 
the Committee will have to resolve is the 90/10 Rule.
    The real question, I suspect, becomes, what is it that 
these institutions are selling? If a dime on the dollar cannot 
come--we do not go to the extreme that the VA goes--by the way, 
this is a regulation that is in effect today, that says 15 
percent of your students should be unaided by the Federal 
Government or by the school because that can become a loophole 
where artificial tuition hikes are then discounted back. We 
simply say, a dime on the dollar should come from sources 
outside of Title IV. That is a candid recognition we do not 
have good mechanisms of gatekeeping in Title IV. That is to 
say, we rely to the tune of 10 percent on somebody else's 
judgment, heaven forbid it be private funds but at least some 
other program, the labor department, VA, some other source of 
funding.
    It really becomes an issue of, can that much separation 
between the haves and the have-nots be good for this country? 
Do we want entire schools populated with zero-EFC students? And 
I submit to you, we do not want that anymore than we want 
institutions that enroll no federally aided students. We also 
have significant reservations about the transfer provisions in 
the bill which I urge the Committee to carefully review.
    They really do severe damage to the tradition of autonomy 
in American higher education. I appreciate the opportunity and 
would be delighted to respond to any questions.
    [The prepared statement of Mr. Nassirian follows:]

 Statement of Barmak Nassirian, Associate Executive Director, American 
     Association of Collegiate Registrars and Admissions Officers, 
                             Washington, DC

Introduction
    Chairman Boehner, Ranking Member Mr. Miller, members of the 
committee, my name is Barmak Nassirian and I am Associate Executive 
Director with the American Association of Collegiate Registrars and 
Admissions Officers. I am honored to have this opportunity to share the 
views of our members with the Committee regarding certain provisions of 
H.R. 4283, the ``College Access and Opportunity Act of 2004.''
    AACRAO is a nonprofit association of more than 2,300 institutions 
of higher education and more that 9,000 campus enrollment services 
officials. The campus administrative officials that comprise our 
membership range from front-line administrative staff to senior 
administrators with primary responsibility for enrollment planning, 
records management, administrative computing and other important 
operations central to the smooth and efficient administration of 
colleges and universities. Our membership includes public and private 
non-profit institutions as well as for-profit collegiate institutions.
    Today's hearing focuses on the characteristics of for-profit 
schools participating in Title IV programs and considers whether 
students attending such institutions receive equitable treatment under 
current law. The question as framed is somewhat strained. Current law 
treats all eligible students identically and does not make distinctions 
among students on the basis of the type of eligible institution they 
attend. In contrast, participating institutions are treated differently 
under the Higher Education Act, as they are under a variety of other 
federal statutes, most notably the tax code. As it deliberates on H.R. 
4283 pending legislation to reauthorize the HEA--the Committee is 
understandably interested in eliminating disparate treatment of 
eligible institutions that it deems inappropriate, while retaining 
differences in the law that can be justified on the basis of real 
differences among schools. Clearly identical treatment of different 
entities can be as inappropriate as different treatment of identical 
ones. The Committee is quite rightly interested in striking a proper 
balance and I hope the following comments prove helpful to the members 
as they consider possible changes. We believe the bill as currently 
drafted removes some of the most important safeguards for students and 
taxpayers. In addition to provisions that would weaken federal 
financial aid program integrity measures, the bill would shift 
significant additional costs to students by failing to authorize 
adequately increased Pell Grant maximum awards, eliminating low-cost 
consolidation interest rates, and increasing the rate cap on student 
loans. Regretfully, we oppose this bill as it currently is written.
Background
    The for-profit sector's participation in Title IV was first 
authorized in 1972. At that time, the majority of proprietary schools 
were small privately-held trade-schools that provided vocational 
training. Today, the for-profit sector's participation in Title IV 
programs has grown to 2,215 schools, some 789 of which are degree-
granting institutions. Among these are a number of publicly-traded 
institutions with large enrollments and multiple campuses. While the 
for-profit sector accounts for a significant percentage of the total 
number of institutions participating in Title IV, the percentage of 
students enrolled in the sector is quite small: students in this sector 
represent about 4 percent of the total student population, and only 2.1 
percent of those enrolled in degree-granting schools (Attachment 1). 
The small size of the population served by this sector should not 
detract from a number of trends within higher education that can be 
substantially credited to the proprietary sector. For example, for-
profit schools were at the forefront of innovations such as flexible 
course scheduling, convenient locations for working adults and 
accelerated programs. In addition, their model of student services--a 
model that treats students as consumers--has been significantly adopted 
by the collegiate sector.
    Proprietary schools' track-record of flexibility and innovation is 
directly tied to their market orientation and the relative autonomy 
typically afforded owners and managers to administer the schools. In 
contrast, traditional collegiate institutions in the United States have 
a long tradition of shared governance, requiring active faculty 
involvement and broad consensus with regard to program offerings and 
academic policies. The profit motive that drives proprietary schools' 
responsiveness to market conditions has certainly been the primary 
force behind many of the positive innovations associated with this 
sector. Realistically, the same profit motive can, unless constrained 
by reasonable protections for consumers and taxpayers, induce schools 
to engage in practices that harm their students and the federal fisc. 
Sadly, federal student financial assistance programs have had too many 
instances of waste, fraud, and abuse associated with the for-profit 
sector. The worst of these was amply documented more than a decade ago 
by the Permanent Subcommittee on Investigations of the Senate 
Government Affairs Committee under the chairmanship of Senator Sam 
Nunn. The range of problems discovered by the Subcommittee included 
\1\:
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    \1\ Senate Hearings 101-659; Parts 1-4, February 20 and 26, 
September 12 and 13, September 25 and 26, and October 10, 1990. See 
also Senate Hearings 102-58 (1991) and 103-491 (1993).
---------------------------------------------------------------------------
      Deceptive recruitment practices;
      False claims and representations to prospective students;
      Falsification of admissions and financial aid records;
      Disbursement of aid to ineligible students;
      Schools that consisted of significant recruitment and 
financial aid operations, but non-existent or inadequate teaching 
infrastructure.
    In response, the 1992 reauthorization of the Higher Education Act 
included a series of program integrity measures that, together with 
more robust enforcement by the Department of Education, significantly 
curbed the most egregious instances of fraud and abuse. Since 1992, 
components of the program integrity measures have been modified, 
relaxed or undone and some of these measures are under review by the 
Committee today. It is these provisions that I will discuss.
Single Definition of Institution
    Currently, the Higher Education Act includes two distinct 
definitions of institution of higher education. The definition 
contained in Section 101 is limited to public or private non-profit 
institutions and is used to establish eligibility for non-Title IV 
programs. An expanded definition is used in Section 102 for purposes of 
establishing institutional eligibility for Title IV only. This 
definition of institution of higher education was modified in 1998 to 
include proprietary institutions, postsecondary vocational schools and 
certain institutions outside the United States. The bill pending before 
the Committee would adopt a broader definition that is substantially 
similar to that contained in Section 102 to establish a single 
definition of institution of higher education under the Higher 
Education Act.
    AACRAO joins the rest of the higher education community in 
objecting to the proposed change and respectfully urges the Committee 
to consider the following concerns.
    First, the public policy goals motivating a change are not 
compelling or clear. It is difficult to justify providing federal gift 
aid to profit-maximizing institutions unless the Committee believes 
that the provision of such federal funding will bring about a public 
good. We are unaware of the outcomes that federal subsidies to for-
profit entities would allegedly effectuate. Where the for-profit sector 
might have advantages in efficiency or productivity, we believe federal 
contracts--not outright grants--would be the proper mechanism of 
availing the public of these advantages.
    Second, the proposed change is likely to have severe redistributive 
consequences that could dilute the effectiveness of meager federal 
funds. Such important programs as those funded under Titles III and V 
of the Act are already under strain and would be further weakened by 
the sudden influx of newly eligible schools with unproven track 
records. For example, there currently are 165 grantees in the Hispanic 
Serving Institutions program. If the proposed single definition is 
approved, an additional 110 schools would become immediately eligible 
for the program.
    Third, the Higher Education Act's definition of institution of 
higher education is relied upon in numerous other federal and state 
laws, as well as private contracts and agreements and any radical 
changes in definition would likely have significant unintended 
consequences. Even if the substantive arguments against the creation of 
a single definition were to be dismissed, the sudden change could cause 
chaos for the many other parties relying on the current Section 101 
definition. We respectfully urge the Committee to carefully analyze the 
effects of a change in definition before making any significant 
changes.
The 90/10 Rule
    The 90/10 Rule is a modified version of a program integrity 
provision originally inserted into the 1992 Amendments. At that time, 
the rule required that at least 15 percent of a proprietary school's 
revenues come from non-Title IV sources. The 1998 amendments reduced 
that share to 10 percent. The bill pending before the Committee would 
eliminate the rule altogether.
    We believe that the proposed elimination of the 90/10 Rule is ill-
advised, and that the elimination of this important market-based 
provision would significantly harm the interests of students and 
taxpayers.
    To better explain our concern, we respectfully ask the Committee to 
consider exactly what type of for-profit school would gain eligibility 
if the rule were eliminated. Only schools that would be funded entirely 
(or nearly entirely) with Title IV dollars would stand to gain under 
the proposed changes. The most telling characteristic of such schools 
would be not only student bodies entirely consisting of students with 
Expected Family Contributions of zero, but also tuition and fees that 
mathematically equal the maximum Pell Grant plus the maximum loan 
limit. As mentioned above, schools fitting this description did enjoy 
Title IV eligibility before 1992, with disastrous consequences for 
their students and the taxpayers.
    By way of background, we point out that the original rule--the 85/
15 rule--arose from the desire of Congress to protect veterans. In 
1952, as it extended the GI Bill after the Korean conflict, Congress 
was concerned that the educational benefits not end up funding courses 
of little value that flourished only to capture veterans' educational 
benefits.
    More than 25 years ago, when the 85/15 rule was challenged, the 
Supreme Court upheld it per curiam.\2\ The Court's decision described 
the 85/15 rule as based on a ``rational assumption'' that allowing the 
free market mechanism to operate would weed out those institutions 
which could survive only by the heavy influx of Federal payments.\3\ 
The Veterans Administration still operates under the 85/15 rule 
today.\4\
---------------------------------------------------------------------------
    \2\ Cleland v. National College of Business, 435 U.S. 213 (1978).
    \3\ Id. at 218. The Supreme Court points our that Congress 
continually extended the reach of the 85-15 Rule:   First version--
Applied only to non-accredited courses not leading to a college degree, 
that were offered by proprietary institutions. 435 U.S. at 216.   
1974--The 85/15 requirement was extended to courses not leading to a 
standard college degree but offered by accredited institutions. 435 
U.S. at 216, citing to sec. 203(3) of Pub. L. 93-508, 88 Stat. 1 582.   
1976--The 85/15 requirement was further extended to courses leading to 
a standard college degree. 435 U.S. at 216.
    \4\ 38 CFR 21.4201. ``Except as otherwise provided in this section 
the Department of Veterans Affairs shall not approve an enrollment in 
any course for an eligible veteran, not already enrolled, for any 
period during which more than 85 percent of the students enrolled in 
the course are having all or part of their tuition, fees or other 
charges paid for them by the educational institution or by the 
Department of Veterans Affairs pursuant to Title 38 U.S.C. This 
restriction may be waived in whole or in part.''
---------------------------------------------------------------------------
    To maintain the 90/10 Rule the Committee need not rely solely on 
the rationality of the assumption that a modicum of market value serves 
to ensure program integrity. In 1997, at the request of the 
Subcommittee on Human Resources of the House Committee on Government 
Reform and Oversight, the General Accounting Office initiated ``a study 
to address the core of the issue: Is there a clear relationship between 
reliance on Title IV revenues and school performance?'' \5\ The GAO did 
find such a relationship. The title summarizes its conclusions: 
Proprietary Schools: Poorer Student Outcomes at Schools that Rely More 
on Federal Financial Aid.''.\6\
---------------------------------------------------------------------------
    \5\ Ensuring Quality Education from Proprietary Institutions, GAO/
HEGS-96-158 (June 6, 1996).
    \6\ GAO/HEHS-97-103. Henceforth Poorer Student Outcomes.
---------------------------------------------------------------------------
The 50 Percent Rule
    The advent of the Internet has revitalized interest in distance 
education within the traditional collegiate sector and promises to 
bring tremendous benefits as web-based delivery technology improves 
over time. By far the vast majority of colleges and universities have 
embraced distance education and are actively contributing to the 
creation of next-generation distance education models and technologies. 
The great interest in distance education is combined with concerns 
about security and integrity that parallel other deployments of the 
Internet. As with all things virtual, our enthusiasm for the great 
potential of the Web should be tempered with realistic safeguards 
against the greater risks associated with cyber-transactions.
    The Committee's interest in promoting utilization of new 
technologies in distance education is shared by our members. We are, 
however, quite concerned about the potential for abuse if an important 
provision of current law that limits the percentage of courses offered 
entirely through distance education is eliminated. The fifty-percent 
rule limits the number of courses offered via distance education, as 
well as the number of students enrolled in distance-delivered courses 
only, to fifty percent of the total for each category. The provision 
dates back to the 1992 reauthorization's efforts at curbing documented 
abuses associated with distance education. We believe this safeguard 
continues to be necessary and should be maintained, a conclusion with 
which the GAO agrees. In February of this year the GAO concluded 
``[o]ur analysis of several factors including the extent to which any 
changes would improve access to postsecondary schools, the impact that 
changes would have on Education's ability to prevent institutions from 
conducting fraudulent or abusive practices, and the cost of 
implementation indicates that eliminating the restrictions without 
ensuring some form of management accountability would likely incur a 
higher risk for fraud and abuse than currently exists.'' The GAO 
continues by pointing out that the Department of Education recognizes 
that elimination or modification of the 50 percent rule would cost 
federal student aid programs.
    While we agree that the rule may inadvertently limit the 
participation of some providers, we believe, as does the GAO, that 
continuation of the Demonstration Program, which allows for waivers to 
the 50 percent rule and provides monitoring and technical assistance on 
a routine basis is the most prudent approach to the federal financing 
of entirely distance-delivered programs.
Transfer of Credit
    Since today's hearing focuses on H.R. 4283 and proprietary 
institutions, I would be remiss if I did not comment on transfer of 
credit proposals in the legislation. The bill contains numerous 
transfer-related provisions, virtually all of which address portability 
of credits earned at nationally accredited institutions--typically, 
proprietary schools--to regionally accredited colleges and 
universities. As the national association of transfer practitioners on 
campus, AACRAO believes that the proposed legislative language would 
have significant adverse consequences for students, taxpayers and the 
American tradition of federal non-interference with academic judgments 
of colleges and universities. Historically, the federal government has 
wisely allowed colleges and universities to autonomously determine the 
terms and conditions their students must meet to earn various academic 
degrees. H.R. 4283 would, for the first time, create a new federal 
mandate on a fundamentally academic issue, i.e., transfer of credit, 
and as such, would undermine the ability of institutions to safeguard 
the integrity of their own credentials.
    The United States has the world's most mobile system of higher 
education. The Department of Education's Office of Educational Research 
and Improvement has found that the proportion of undergraduates 
attending multiple institutions of higher education grew from 40 to 54 
percent (and among bachelor's degree recipients, from 49 to 58 percent) 
during the 1970s and 1980s. These data suggest that the proportion of 
transfer students surpassed the 60 percent mark in the 1990s. In 
addition, OERI found that the number of institutions attended by 
students had no effect on degree completion.
    Not only is there every evidence that student mobility is at an 
all-time high without any documented adverse impact on degree 
completion, state policymakers and the higher education community are 
actively working on improving credit portability and making transfer 
even more seamless. AACRAO, for example, maintains a centralized 
database of transfer credit practices. The National Transfer and 
Articulation Network is working to improve inter-institutional 
articulation agreements. A number of states have put various mechanisms 
in place to help facilitate inter-institutional portability of academic 
credit. In view of all these positive developments, a one-size-fits-all 
federal mandate could not have been proposed at a less propitious time. 
Congress mandated that the U.S. Department of Education study the 
transfer issue during the last reauthorization of the Higher Education 
Act in 1998, yet the Department has not fulfilled its mandate. We fear 
that federal intrusion into academic prerogatives of the world's best 
higher education system will cause irreparable harm to the nation if 
Congress acts before it has adequate facts at its disposal. We are 
alarmed because the transfer-related provisions of H.R. 4283 are too 
blunt an instrument to address any shortcomings in the credit 
evaluation procedures, and would certainly harm transfer students, 
institutions of higher education and the public.
    First, the proposed legislation represents a congressional second-
guessing of campus academic judgments about course-equivalencies. This 
imposition of the new transfer mandate represents an unprecedented 
federal intrusion on the academic autonomy of colleges and 
universities. Academic degrees are made up of credits and federal 
regulation of credit-equivalencies is tantamount to a federal degree 
recognition policy.
    Second, credit evaluation is a complex and deliberate process of 
placing students in courses for which they have the necessary 
prerequisites. Today's voluntary system of inter-institutional transfer 
is based on principles articulated in the industry-recognized Joint 
Statement on Transfer of Credit (Attachment 2). AACRAO drafted this 
document along with the American Council on Education and the Council 
for Higher Education Accreditation. The Joint Statement recommends that 
institutions evaluate transfer credit on the basis of three criteria: 
quality, comparability and applicability. Specifically, the Joint 
Statement discusses the three criteria as:
    (1)  The educational quality of the learning experience which the 
student transfers;
    (2)  The comparability of the nature, content, and level of the 
learning experience to that offered by the receiving institution; and
    (3)  The appropriateness and applicability of the learning 
experience to the programs offered by the receiving institution, in 
light of the student's educational goals.
    Credit evaluation professionals on campus go to great lengths to 
correctly analyze transfer applicants' transcripts and provide fair and 
accurate equivalencies that avoid duplication of effort and that 
correctly place these students in the sequences of courses for which 
they are academically qualified. The proposed transfer provisions would 
do away with the subtleties of credit evaluation by federally reducing 
the task to course comparability and student performance. As such, 
legislation would undermine academic quality at the same time as it 
would cause many students to be misplaced in courses for which they are 
not academically prepared.
    H.R. 4283 would require institutions to disclose a statement on 
their transfer policy and, more importantly, would dictate the 
substance of an institution's transfer of credit policy to at least 
include non-denial of credits solely on the basis of the agency or 
association that accredited the sending institution, so long as the 
agency or association in question is recognized by the U.S. Secretary 
of Education. This provision would essentially do away with specialized 
accreditation by explicitly requiring institutions to treat all 
agencies and association recognized by the Secretary as 
interchangeable--technical school credits with medical school credits, 
law school credits with cosmetology school credits. Indeed the 
legislation would require institutions relying on non-federal voluntary 
accreditation standards--like medical education--to substitute the 
Secretary's unrelated judgments for their own autonomous systems of 
peer recognition. Further, the proposed legislation would set 
Secretarial recognition of accrediting bodies--hitherto deemed to be 
the minimal threshold for participation in Title IV programs--as the de 
facto ceiling by denying institutions the right to be more academically 
demanding than the least rigorous of accrediting agencies recognized by 
the Secretary.
    Third, the legislation would not only hurt students by distorting 
their qualifications and causing incorrect placements, it would 
outright deny Title IV eligibility for some transfer students. By 
mandating that schools award academic credits even for coursework that 
is not applicable to the students' academic program, the proposed 
language would push many students out of eligibility for federal 
financial assistance by penalizing them under federal Satisfactory 
Academic Progress regulations that cap the number of credit hours a 
student can take and maintain Title IV eligibility.
    Fourth, the proposed legislation would set up new and cumbersome 
reporting requirements to generate information of dubious value. The 
bill would require production and publication of credit acceptance 
statistics based on the accreditation status of sending institutions. 
Yet the bill is unclear as to how reporting institutions would 
authoritatively determine the accreditation status of each sending 
institution to the satisfaction of the provision's enforcement 
authorities. In mandating this new data reporting burden, the provision 
only adds to the problem of escalating college costs that the Committee 
seeks to redress elsewhere in the legislation.
    Fifth, the proposed legislation would require accrediting bodies to 
serve as federal agents in enforcing the transfer mandates by adding 
three new provisions to Section 496(c). Not only would this be a 
redundant distraction for accreditors, it would add significantly to 
the costs of accreditation and represents another costly federal 
mandate working at cross-purposes with the college affordability 
provisions. Additionally, the bill contains several additional 
references to transfer in various disclosure provisions amending 
Section 485(a)(1) of the Higher Education Act.
    AACRAO believes that one-size-fits-all legislative mandates on a 
complex topic such as credit evaluation would result in poor student 
placements, diminished quality and wasted resources. Institutions of 
higher education have an obligation to their students, their graduates, 
employers, other institutions of higher education and the public to 
protect the integrity of the degrees they confer. In an age when 
fraudulent credentials are becoming a national and international 
security problem as discussed yesterday in the Senate, Congress should 
be strengthening, not undermining, the ability of colleges and 
universities to control the award of their own credentials.
    AACRAO respectfully urges the committee to strike the transfer of 
credit provisions in H.R. 4283 and to instead engage in an objective 
study of transfer issues. We believe legislative action of this 
significance is not prudent before the findings of a properly conducted 
study are available to the Committee. AACRAO stands ready and willing 
to assist with such a study.
    On behalf of the members of AACRAO, I thank you for your 
consideration of our views. We are mindful of your extraordinary 
contributions to the nation's students and look forward to working with 
you as you advance the cause of education.
                                 ______
                                 
    Attachments to Mr. Nassirian's statement follow:]



    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
    Chairman Boehner. Thank you very much.
    Mr. Moore.

   STATEMENT OF DAVID G. MOORE, CHAIRMAN AND CHIEF EXECUTIVE 
               OFFICER, CORINTHIAN COLLEGES, INC.

    Mr. Moore. Good morning, Mr. Chairman, Members of the 
Committee.
    I am David Moore, chairman and CEO of Corinthian Colleges. 
We own and operate 133 colleges and 15 corporate training 
centers in the United States and Canada and serve over 66,000 
students. Our institutions provide education and training that 
enables these students to become job-ready and advance their 
careers in today's demanding economy. We offer both degree and 
nondegree programs principally in health care, business 
technology and criminal justice. We have a high rate of 
graduate placement, about 82 percent.
    To answer the question posed by today's hearing, students 
at for-profit institutions are clearly not treated equitably 
under current law. Reforms are badly needed to eliminate the 
90/10 Rule, remove the 50-percent restrictions on institutions 
offering online education, deal with costly and unfair 
transfer-of-credit practices and restructure the definition of 
institutions of higher education.
    To understand why, two points are critical. First, the 
traditional student is no longer the norm. Only a small 
percentage, about one-quarter of the postsecondary student 
population, fits the model of what I think many may have of 
higher education. That is the individual who earns a high 
school diploma, then enrolls full time in a traditional school, 
depends on parents for some financial support and does not work 
while attending school.
    About three-quarters of postsecondary students today do not 
meet this traditional model. These nontraditional students are 
older, have family and work responsibilities and are concerned 
with preparatory work for entry into the work force or 
advancing their careers. For-profit institutions, like 
Corinthian Colleges, especially address the needs of these 
nontraditional students. One such student is here with us 
today.
    Ms. Williams, could you stand please?
    Mr. Chairman, this is Shirley Williams, a recent graduate 
of the medical assisting program at our Olympia Career Training 
Institute in Kalamazoo, Michigan. To meet her goal of entering 
the health care field she needed concentrated training. She 
could not go to a traditional 2- or 4-year program. Ms. 
Williams is the mother of three school-aged children and, while 
in school, worked part-time at an assisted-living facility. She 
just graduated this May and was an honor role student.
    Federal student aid was critical to her. All of her tuition 
and fees, 100 percent, was covered by aid with about one-third 
coming from Pell Grants. She is now employed as a medical 
assistant at Marshall Internal and Family Medicine in Marshall, 
Michigan, a six-doctor practice group which serves that 
community.
    Thank you, Shirley.
    Ms. Williams is a good example of how for-profit 
institutions meet the needs of nontraditional students. She is 
also an example of the second key point that I wanted to make, 
how for-profit institutions are meeting the purpose of Federal 
aid programs. That purpose is not to subsidize institutions or 
to give some of them special treatment. Rather, from their 
enactment in 1965, the aid programs have been aimed at 
educating and training students for productive involvement in 
the economy.
    These needs are more important today than ever, as Federal 
Reserve Chairman Alan Greenspan testified to this Committee 
earlier this year. That is also why the business community as 
represented by the U.S. Chamber of Commerce has become directly 
involved in this reauthorization and is calling for the removal 
of impediments in the law to for-profit institutions' ability 
to supply the trained work force that employers need.
    In re-examining the Higher Ed Act, this Committee should, I 
respectfully submit, judge whether provisions in the law meet 
or impede its work-force preparation goals. Tested against this 
principle, it is clear that the 90/10 Rule should be 
eliminated. The 90/10 Rule creates perverse incentives that 
push schools away from serving the neediest of students, 
especially minorities and women because they need more Title IV 
aid and thus put a school at risk of exceeding the 90-percent 
limit.
    I have included in my written testimony three examples of 
our own institutions that demonstrate this point. They are our 
schools in Marietta and Atlanta, Georgia, schools in the sister 
cities of Portland, Oregon, and Vancouver, Washington, in San 
Bernadino and Anaheim, California. In each case, the schools 
offer the same or similar programs, are accredited by 
recognized agencies and have the same ownership and management. 
In short, there is no difference among them in quality or 
integrity.
    Yet there is a significant difference in their 90/10 
ratios, about 10 percentage points. Why? Clearly, it is because 
of the student population served in the amount of Federal aid, 
especially Pell Grants, to which the students are entitled. I 
would add that the 90/10 Rule also creates an incentive to 
raise tuition in order to obtain non-Title IV revenue. The 90/
10 Rule therefore inhibits access and exacerbates the problem 
of affordability. The time has come to eliminate the 90/10 
Rule.
    As to online education, this holds tremendous promise to 
provide access to higher education for the nontraditional 
students about whom I have testified. This is another area in 
which we are increasingly involved with over 1,600 fully online 
students. The key issue is quality. By using an accreditation 
based approach, H.R. 4283 provides the right solution.
    I also support the provisions in H.R. 4283 that remove the 
wrongful barriers to students' ability to transfer credits 
between institutions. There is simply no justification for the 
denial of credit transfers based on the accreditation of the 
sending institution when it is accredited by an agency 
recognized by the Secretary of Education. Such denials 
inappropriately deter students access to opportunities and to 
advance their education and careers. They raise costs by 
requiring payment for the same coursework twice, in some cases 
more. H.R. 4283 provides a carefully tailored approach that 
would not impair institutional autonomy. Transfer of credit is 
a real and ongoing problem for our students.
    Finally, we support a single definition of an institution 
of higher education. H.R. 4283 takes another evolutionary step 
that is well supported by the two key points I made earlier. 
Objections to a single definition reflect the outdated 
imperatives of institutions, not students, and miss the purpose 
of student aid programs, the education and training of students 
for productive involvement in this economy.
    Thank you, Mr. Chairman. And I am ready to answer any 
questions.
    [The prepared statement of Mr. Moore follows:]

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

    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to testify about ``Higher Education Act Reauthorization: 
Are Students at Proprietary Students Treated Equitably Under Current 
Law?'' I am David G. Moore, Chairman and Chief Executive Officer of 
Corinthian Colleges, Inc. I have over 20 years of experience in both 
public and for-profit higher education. From 1980 to 1992, I worked at 
Mott Community College in Flint, Michigan, where I served as President 
for eight years. I then pursued a career in for-profit higher education 
at National Education Centers and DeVry Institute of Technology, before 
helping to found Corinthian and leading it to become one of the largest 
postsecondary education companies in the United States. Corinthian 
operates 88 colleges in 21 states in the United Sates, and 45 colleges 
and 15 corporate training centers in seven provinces in Canada. Our 
institutions of higher education serve the large and growing segment of 
the population seeking to acquire career-oriented education and 
training to become more qualified and marketable in today's 
increasingly demanding workplace. Corinthian's colleges offer Master's, 
Bachelor's and Associate's degrees, and diploma programs in a variety 
of fields, with a concentration in health care, business, criminal 
justice and technology. We currently educate and train over 66,000 
students.
    To answer the question posed by today's hearing--students who are 
pursuing their education and training at Corinthian's colleges and 
other for-profit institutions are clearly not treated equitably under 
current law. Reforms are badly needed in a number of areas, especially 
(1) elimination of the 90/10 Rule, (2) removal of the 50 percent 
restrictions on institutions offering online education programs, (3) 
elimination of unfair, costly and anti-competitive transfer of credit 
practices in higher education, and (4) restructuring the multiple 
definitions of an institution of higher education to end the two-tier 
classifications of these institutions and their students.
I. Two Key Factors--The Predominance of Nontraditional Students and 
        Renewed Focus on the Workforce Preparation Purpose of HEA
    To understand why these reforms are critically needed, I believe 
that it would be helpful to establish at the outset of my testimony two 
propositions that are highly relevant to the subject matter of this 
hearing and that have profound implications for making good public 
policy in this Reauthorization of the Higher Education Act programs.
    First, the traditional student is no longer the norm. Only a small 
percentage of the postsecondary student population now answers to the 
model of what I suspect many still have of higher education. 
Individuals who earn a high school diploma, enroll full-time in college 
immediately after finishing high school, depend upon parents at least 
in part for financial support, and either do not work during the school 
year or work part-time are now the exception rather than the rule. As 
reported by the National Center for Education Statistics, just 27 
percent of undergraduates met all of these criteria in 1999-2000. Thus, 
73 percent of all undergraduates were in some way nontraditional.\1\ 
These students are older, have family and work responsibilities, and 
are concerned with preparation for entry into the workforce or 
advancing their careers.
---------------------------------------------------------------------------
    \1\ NCES, Nontraditional Undergraduates, Findings from the 
Condition of Education 2002.
---------------------------------------------------------------------------
    With a high school diploma increasingly inadequate to ensure that 
an individual can become a productive participant in the economy on a 
long-term basis and substantial demographic shifts occurring, we must 
abandon the notion that higher education today means spending an 
extended period on a traditional college or university campus and 
pursuing traditional academic subjects. While this approach may work 
well for approximately one-quarter of the postsecondary population, it 
cannot drive good public policy. To be sure, institutions that have 
such a mission will continue to play an important role in higher 
education. That role will be, as it has consistently been for over 50 
years, to educate and prepare about 20 percent of the workforce for 
entry into professional ranks. But, with the growing demand for a 
skilled workforce, institutions that have a mission of workforce 
education and training have a more valuable role than ever to play in 
higher education.\2\ That role is to educate and train nontraditional 
students to fill skilled workforce needs. Institutions that serve these 
nontraditional students should be encouraged and facilitated, not 
hamstrung with outdated and outmoded restrictions.
---------------------------------------------------------------------------
    \2\ According to the Bureau of Labor Statistics, the percentage of 
the workforce that requires skills training has grown from 20 percent 
in 1950 to 65 percent in 2000. Yet, only 25 percent of all persons over 
25 years of age have a bachelor's degree or higher. This means that 
workforce education and training must be broadly understood to be more 
than traditional vocational education in trades.
---------------------------------------------------------------------------
    Second, the federal student financial assistance programs exist to 
serve a purpose. That purpose is not to subsidize institutions or to 
accord some of them special treatment because of the nobility of the 
missions that they have established for themselves. Rather, from their 
inception, the federal student aid programs in the Higher Education Act 
have been geared toward a more concrete objective: the education and 
training of students for productive involvement in our economy. The 
legislative history of the 1965 Higher Education Act, which established 
the student aid programs as we know them, focused on ``how best to 
increase the supply of trained manpower'' and the need for ``competent, 
well-trained professional and technical personnel.'' \3\ The bill that 
became law ensured that training for gainful employment in a recognized 
occupation was among the objectives that eligible institutions 
pursue.\4\ In reexamining provisions of the law and proposals for 
reform, Congress should, I respectfully submit, test them against 
whether they meet these original purposes of the student aid programs.
---------------------------------------------------------------------------
    \3\ 1 U.S. Code Congressional and Administrative News 4053 (1965) 
(S. Rep. No. 673).
    \4\ Id. at 1264.
---------------------------------------------------------------------------
    Indeed, these purposes are more vital today than ever before. As 
Alan Greenspan, the Chairman of the Federal Reserve Board, testified 
before this Committee on March 11, 2004, postsecondary education and 
training is critically needed to increase the supply of highly skilled 
workers. In response to a question from Congressman McKeon, Chairman of 
the 21st Century Competitiveness Subcommittee, on whether Congress 
should remove restrictions on distance education and for-profit 
institutions to better accomplish this end, Chairman Greenspan replied 
that Congress should use ``any means available'' and find new ways to 
education and train such workers. Chairman Greenspan's statement has 
even greater force because of the severe constraints on public and 
nonprofit institutions' ability to expand to meet this need.
    The ownership structure of institutions of higher education--
whether they be non-profit, public or for-profit--is irrelevant. The 
question is whether provisions in the law, which perhaps had some 
rationale or basis in an earlier time under different conditions, now 
meet the pressing need to fulfill the purpose of supplying our economy 
with highly skilled workers or whether they stand in the way of that 
objective. If they present impediments, these provisions should be 
removed or modified.
    With these two propositions in mind, it becomes readily apparent 
why for-profit institutions should play a key role--and be at least an 
equal participant--in the student financial assistance programs. For-
profit institutions address the needs of the nontraditional student 
population, and prepare and certify them as ready for entry and 
advancement in the work force. For-profit colleges enroll a 
disproportionate number of minority, lower-income and other 
nontraditional students compared to nonprofit and public 
institutions.\5\ For-profit institutions also account for a 
disproportionate share of degrees earned by minority students.\6\ 
Moreover, nontraditional students have greater success at for-profit 
institutions as measured by such outcomes as student completion 
rates.\7\
---------------------------------------------------------------------------
    \5\ Career Training Foundation, A Profile of Career Colleges and 
Universities 7-10 (2003) (``Profile''). U.S. Department of Education, 
National Center for Education Statistics, National Postsecondary 
Student Aid Study (NPSAS), Data Analysis System (DAS), 1990, 1993, 1996 
and 2000, and IPEDS, Spring 2002.
    \6\ Id.
    \7\ Id.; Profile at 13-14.
---------------------------------------------------------------------------
    Data on students who attend Corinthian's colleges also demonstrate 
how our types of institutions serve the nontraditional student. Of our 
66,000 students, approximately 73 percent are female, 70 percent are 
over 21 years of age, and about one-half are minorities. Our 
institutions must meet minimum quantitative standards for completion 
and placement established by our national accrediting agencies, all of 
which are recognized by the Secretary of Education. Company-wide, 82 
percent of our students obtain employment in the field for which they 
were trained within six months of graduation.
    These data are important to the development of sound public policy. 
However, it is necessary to remember that behind these data are real 
people, with aspirations, obstacles to overcome, and achievements. An 
example is Shirley Williams, a recent graduate of the medical assisting 
program at our Olympia Career Training Institute in Kalamazoo, 
Michigan. Prior to enrolling, she was not employed. To meet her goal of 
entering the healthcare field, she needed concentrated training. A 
traditional two or four-year program would not have met her needs. Ms. 
Williams is a mother of three school-age children, and worked part-time 
at an assisted living facility while in school. She just graduated this 
May and was an honor roll student. Federal student aid was critical to 
her. All of her tuition and fees--100 percent--was covered by aid, with 
about one-third coming from Pell Grants. She is now employed as a 
medical assistant at Marshall Internal and Family Medicine in Marshall, 
Michigan, a six-doctor practice group which serves that community. Ms. 
Williams is a good example of how Corinthian's colleges and other for-
profit institutions serve the nontraditional student.
    She is also a good example of how Corinthian's colleges and for-
profit institutions are meeting the purposes of the student financial 
assistance programs. These purposes, as I have noted above, are to 
supply our economy's demand for well-educated and highly skilled 
employees. With the advent of a truly global economy and the rapid 
advance of technology, this need has become even more acute. 
Organizations like the U.S. Chamber of Commerce, the world's largest 
business federation representing over three million businesses of every 
size, sector and region, now recognize the importance of workforce 
preparation to maintain our competitiveness and preserve our economic 
security. They have also recognized that, as businesses seek to hire, 
train, and retain qualified employees and to keep pace with an evolving 
market place, deficiencies in our higher education system have been 
exposed. There is a shortage of well-educated and highly skilled 
workers to meet the needs of employers. Accordingly, the Chamber of 
Commerce has made Reauthorization one of its top legislative 
priorities.
    In looking for effective solutions, the Chamber has turned to the 
for-profit sector of higher education because enterprising, market-
oriented for-profit postsecondary education and training companies like 
Corinthian have identified needs underserved by traditional higher 
education institutions and evolved to supply the demand for educated 
and skilled employees. We are pleased that the Chamber has chosen to 
partner with us and with other leaders in the for-profit sector--
Kaplan, Inc., DeVry, Inc., and Capella University. With the Chamber, we 
have created the Coalition for a Competitive American Workforce to 
address provisions in the Higher Education Act that are outdated and 
obstruct the ability of for-profit postsecondary education companies to 
provide innovative solutions to America's workforce needs. The 
impediments in the current law that prevent us from being even more 
effective in serving students and thereby promoting workforce 
development are the very measures identified by H.R. 4283, the College 
Access and Opportunity Act, as in need of reform--the 90/10 Rule, the 
50 percent restrictions on online education, transfer of credit 
practices, and the multiple definitions of an institution of higher 
education. I will address these issues specifically in the remainder of 
my testimony.
II. Repeal of 90/10 Rule
    The Higher Education Act currently requires for-profit 
institutions, and them alone, to obtain at least 10 percent of their 
revenues from sources other than the federal student financial 
assistance programs. Nonprofit and public institutions, even though 
they are advantaged through favorable tax treatment and public 
subsidies, are free to secure all their revenues from the student 
financial assistance programs. For-profit institutions, in contrast, 
return funds to the federal government in the form of taxes.
    The 90/10 Rule and its predecessor, the 85/15 rule, were enacted at 
a time of substantial and justified concern about fraud and abuse 
perpetrated by certain for-profit institutions. A host of other 
measures to protect the financial aid programs and federal funds were 
enacted during this period. These included:
      Caps on excessive cohort default rates,
      Requirements for strengthened accreditation standards and 
procedures,
      Federal financial responsibility standards and letters of 
credit,
      Annual reporting of audited financial statements and 
financial aid audits,
      Student satisfactory academic progress requirements,
      Provisional certification by the Department of Education 
to limit an institution's participation in the Title IV programs,
      Reimbursement and heightened cash monitoring requirements 
that the Department may impose to limit an institution's access to 
federal funds to ensure that they are being properly administered,
      Incentive compensation limitations on student 
recruitment,
      Federal requirements for ability-to-benefit tests,
      Return to Title IV requirements,
      Completion and placement rate requirements for short-term 
programs,
      Definition of an ``academic year,
      Limitations on branch campuses,
      Periodic recertification requirements, and
      Pre-certification training regulations.
    Congress thus attempted to put in place a wide array of measures to 
curb fraud and abuse. Overall, the good news is that the problem has 
been effectively addressed. For example, default rates, which averaged 
22.4 percent in 1990, have fallen substantially. Since the height of 
the concerns about fraud and abuse in the late 1980's and early 1990's, 
over 1,000 institutions have lost their eligibility to participate in 
the Title IV programs.
    As the American Council on Education (ACE) recently commented, the 
system will never be perfect.\8\ In a complex regulatory environment, 
instances of noncompliance will always come to light. The real issue, I 
submit, is whether the institutions participating in the Title IV 
system take their obligations seriously and have mechanisms established 
to try to achieve full compliance--to detect noncompliance and to 
rectify it when noncompliance is found. At Corinthian, we do, and so do 
the great majority of other organizational institutions.
---------------------------------------------------------------------------
    \8\ Letter from David Ward, President of ACE, to Hon. John A. 
Boehner and Hon. Howard ``Buck'' McKeon, May 26, 2004 (Attachment, p. 
3) (Accreditation ``not perfect,'' but ``it works--better than any 
other approach'').
---------------------------------------------------------------------------
    It would be surprising if all of the measures enacted over 10 year 
ago had been equally effective. Imposed during a time of crisis, these 
were the best judgments of Congress at the time as to how to address a 
major problem in the student aid programs. With the benefit of over ten 
years of experience, it should now be possible to examine how these 
measures have worked and fine-tune the law to retain those that have 
proven most effective and to reexamine and, if justified, remove those 
that have been ineffective or, still worse, have had deleterious 
effects. I submit that the 90/10 Rule falls into the latter category.
    The hypothesis supporting the enactment of the 90/10 Rule and its 
predecessor, the 85/15 rule, was that students' willingness to pay some 
portion of their own money would be an indication of the quality of 
for-profit institutions. At best, this was an unproven supposition. The 
rule never purported to examine the quality of these institutions 
directly. Instead, it relied upon an inference about student payments 
that could just have easily been explained by other factors--
particularly socioeconomic status. The 90/10 Rule also involved a 
second-guessing of the decisions of accrediting agencies that have the 
responsibility for assessing educational quality in the Title IV 
system. As noted above, however, accrediting agencies themselves have 
been obliged to strengthen their standards and procedures since 1992 
and to become more effective gatekeepers to the student financial 
assistance programs. Their improved performance alone ought to justify 
the elimination of the 90/10 Rule. In this regard, we agree with the 
recent statements of the ACE that accreditation ``assures students and 
the public that institutions participating in the federal student aid 
programs have been thoroughly evaluated and offer a high quality 
education.'' \9\ If this is so, and we believe it is, there is no 
longer any need for the 90/10 Rule, given its premise.
---------------------------------------------------------------------------
    \9\ Letter from David Ward, President of ACE, to Hon. John A. 
Boehner and Hon. Howard ``Buck'' McKeon, May 26, 2004 (attachment, 
p.3).
---------------------------------------------------------------------------
    Furthermore, experience gained in the implementation of the 90/10 
and 85/15 rule has shown that, rather than measuring educational 
quality, it does indeed measure only the financial need of the student 
population that an institution serves. The more students that are in 
need, the more federal student financial aid the students will qualify 
for and receive. The more aid that students receive, the greater is an 
institution's 90/10 ratio.\10\ And, as an institution's 90/10 ratio 
increases, the greater is the peril that it will exceed the 90 percent 
limitation and lose its ability, without any opportunity for 
remediation, to participate in the federal student aid programs.
---------------------------------------------------------------------------
    \10\ American Economics Group, the 90/10 Rule: Impact on Career 
Colleges 14, 16 (September 2003).
---------------------------------------------------------------------------
    The 90/10 Rule thus creates disincentives for institutions to serve 
those most in need of student financial assistance, especially the 
poor, minorities and women. These are the groups who most heavily use 
need-based grant assistance, particularly Pell Grants, to gain access 
to higher education. Institutions are precluded from denying access to 
this financial aid for students who qualify. Yet, the heavy usage of 
such Title IV aid puts an institution at risk of violating the 90/10 
Rule. Institutions are therefore incentivized to reorient their 
missions and programs away from students who are most in need of 
assistance--the very students the student aid programs are designed to 
serve. These incentives will only be heightened if authorizations for 
Pell Grants and loan limits are increased.
    The 90/10 Rule also undercuts the aim of improving the 
affordability of higher education. The rule creates incentives for 
institutions to seek funds that are not covered by financial assistance 
under Title IV. Since such aid is limited under the Higher Education 
Act, institutions can most easily obtain additional non-Title IV 
revenue by raising their tuition and fees. This cuts completely against 
the widely-recognized problem of affordability in higher education.
    The perverse incentives created by the 90/10 Rule and its failure 
as a measure of quality and integrity can readily be seen at 
Corinthian's colleges. Corinthian owns and operates the Georgia Medical 
Institute, which has campuses in downtown Atlanta and Marietta, 
Georgia. Both are accredited and offer virtually the same programs in 
allied health. The downtown Atlanta campus has a student population 
that is almost 100 percent minority and 94 percent female. The school 
president maintains an emergency pantry so that students--primarily 
single parent African American women--will be able to feed themselves 
and their children and stay in school. In contrast, the Marietta campus 
serves a more suburban student population and a significantly lower 
percentage of minority students. At the end of our third fiscal quarter 
in March of this year, the downtown Atlanta campus had a 90/10 
percentage of 90.25 percent. The Marietta campus had a 90/10 percentage 
of 81.9 percent.
    The difference clearly has nothing to do with the two institutions' 
quality or integrity. They are accredited by recognized accrediting 
agencies, offer virtually the same programs, and are owned and managed 
by the same company. The only significant difference between the two 
campuses is the percentage of the revenues derived from Pell Grants--
44.5 percent for the Atlanta school and 33.4 percent for the Marietta 
school. This reflects the location and student population served by the 
two schools, not their quality or integrity of operations.
    Our Western Business College campuses in Portland, Oregon and 
Vancouver, Washington, tell a similar story. They are only twenty 
minutes apart, but serve very different student populations. The 
schools offer similar programs in business, information technology and 
allied health. They are each accredited by the Accrediting Council for 
Independent Colleges and Schools (ACICS), a recognized accrediting 
agency. The Portland campus is located downtown and has a minority 
population that is 26 percent of the total students. The Vancouver 
campus has a minority population that is only 11 percent of the total. 
The Portland school has a 90/10 percentage of 86.75. The Vancouver 
campus has a 90/10 percentage of 74.51. Once again, financial need is 
the explanation for this 12-point difference. At the Portland campus, 
75 percent of the students qualify for Pell and SEOG funds. At the 
Vancouver campus, 59 percent qualify.
    One more example makes the point. Our Bryman College in San 
Bernardino, California, serves an area that has had a depressed 
economy. Its student population is 60 percent Hispanic and African 
American, and 33.3 percent of its revenues come from Pell Grants and 
SEOG funds. Its 90/10 percentage at the end of our third quarter was 
87.3 percent. In contrast, our Bryman College in Anaheim, California, 
is more of a commuter school, and about half of its students are 
Hispanic or other minorities. At the end of the third quarter, 26.4 
percent of this school's revenues came from Pell Grants and SEOG funds, 
and it had a 90/10 percentage of 79.9 percent. With accreditation at 
both campuses from a recognized accrediting agency, similar program 
offerings, and identical ownership and management, the two schools 
nonetheless have approximately a 7 percent difference in their 90/10 
ratio. As is the case at the Georgia Medical Institutes and Western 
Business Colleges, the percentage difference in the revenues derived by 
the two schools from Pell Grants and SEOG funds, which are a good proxy 
for the need of the student population served, parallel their 
differences in 90/10 percentages.
    These examples make clear that the 90/10 Rule has missed the mark. 
Rather than ensuring institutional quality and integrity, it threatens 
access for poor and minority students. The time has come to end this 
experiment in public policy, and not to mend it. H.R. 4283 takes a 
well-justified and much-needed step in eliminating the 90/10 Rule.
III. 50 Percent Rule and Online Education
    Other outdated and outmoded provisions in the Higher Education Act 
restrict the availability of financial assistance to students in online 
courses of study. The 50 percent limitations on courses and students 
were among the protective measures enacted over ten years ago. However, 
they were aimed at restricting the availability of Title IV aid to 
correspondence institutions; online education was not even in existence 
at that time. These limitations, and other restrictions in the Act 
applicable to students attending institutions that are predominantly 
diploma and certificate-granting, have been extended to online 
education by equating telecommunications and correspondence courses and 
programs.
    The need for reform in this area is now beyond question. The 
findings of the Web-Based Education Commission, and H.R. 1992, passed 
by the House of Representatives in the last Congress, clearly made the 
case for change. More recently, the Department of Education released 
its Second Report to Congress on the Distance Education Demonstration 
Program. The Demonstration Program was a stop-gap measure passed in the 
last Reauthorization in 1998 as a temporary solution to allow the 
Department to gather more facts and experience with online education 
for the Congress to consider in making changes to the law in this 
Reauthorization. The Department has now found that it has uncovered no 
evidence that waiving the current restrictions in the Higher Education 
Act and the Department's regulations that impede online education has 
had negative consequences. On the contrary, the Department has stated 
that ``[b]ased upon the experience gained to date through the 
demonstration program, and the trends that are evident in the 
development of distance education generally, the Department recognizes 
the need to amend the laws and regulations governing Title IV student 
financial assistance in order to expand distance education 
opportunities.'' \11\ The Department also stated that there was a 
growing consensus that the quality of distance education programs 
should be assessed through the same accreditation process that governs 
on-campus programs.\12\
---------------------------------------------------------------------------
    \11\ Second Report to Congress on the Distance Education 
Demonstration Program at iv (July 2003).
    \12\ Id. at 20.
---------------------------------------------------------------------------
    This conclusion has been reinforced by every bill that has been 
introduced to address online education in this Congress--S. 1203, 
introduced by Senators Enzi and Bingaman, H.R. 2913, introduced by 
Congressmen Andrews and Kildee, H.R. 3039 introduced by Congressman 
Cole, and now H.R. 4283, introduced by Chairmen Boehner and McKeon. 
Authors of all of these bills have concluded that an accreditation-
based approach should be used to allow online education to become Title 
IV eligible. The accreditation community has stepped forward and 
demonstrated its willingness and ability to take on the responsibility 
for appropriate gatekeeping for online education. The accrediting 
agencies that accredit Corinthian's colleges have developed standards 
and procedures that address the special issues raised by online 
education, and the Council of Regional Accrediting Commissions (CRAC) 
has stated its support for the accreditation provisions of the College 
Access and Opportunity Act.\13\
---------------------------------------------------------------------------
    \13\ Accrediting Commission of Career Schools and Colleges of 
Technology, Standards of Accreditation, Section XI; Accreditation 
Reviews, Distance Education Programs; letter from Sandra E. Elman, 
Barbara Beno, Steve Crow, Jean Morse, James R. Rogers, and Ralph Wolff 
to Chairman John Boehner, May 11, 2004.
---------------------------------------------------------------------------
    Online education is one of the most promising developments to have 
occurred in higher education in recent times. It leverages the power of 
technology to enrich learning and create new educational opportunities. 
A substantial and growing body of research demonstrates that online 
instruction produces quality learning outcomes comparable to, and 
perhaps even better than, traditional education programs. Literally 
millions of students, especially working adults, will have higher 
education opened to them.\14\ The accreditation-based approach of H.R. 
4283 provides the right solution to ensure that accrediting agencies 
effectively serve as the gatekeepers to expanding access through this 
exciting mode of educational delivery.
---------------------------------------------------------------------------
    \14\ Babson College and Sloan Consortium, Seizing the Opportunity: 
The Quality and Extent of Online Education in the United States, 2002 
and 2003.
---------------------------------------------------------------------------
IV. Transfer of Credit
    Transfer of credit practices in higher education are another 
significant way that students attending for-profit institutions are 
treated inequitably. Here, the problem is not with what the law says, 
but with what it fails to address. While we are in agreement with those 
who contend that the federal government should not intrude upon 
institutions' academic decision making, the rhetoric to this effect 
masks the real issue. The problem is not whether transfer of credit 
practices would be federalized under H.R. 4283, but whether the academy 
should be indulged in practices that are unfair, costly and 
anticompetitive. The answer is that it clearly should not. The 
academy's failure meaningfully to address the problem, despite years of 
talk, mandates a solution in federal law, especially when federal funds 
are being wasted.
    Contrary to the contention there is not a ``sufficient problem with 
transfer of credit'' to merit the provisions in the College Access and 
Opportunity Act, transfer of credit has been a real and urgent problem 
for some time.\15\ Even though proprietary school students attend 
institutions accredited by agencies recognized by the Secretary of 
Education (most of which are national accrediting agencies), they have 
long encountered blanket refusals even to evaluate the credits they 
have earned when they seek to transfer to public and nonprofit 
institutions accredited by regional accrediting agencies.\16\ These 
institutions have been encouraged to adopt and engage in these 
categorical restrictions by their own desires to enhance the revenues 
they receive by forcing students to retake courses already successfully 
completed and by discriminatory policies and practices of their own 
accrediting agencies.
---------------------------------------------------------------------------
    \15\ Letter from David Ward, President of American Council on 
Education, to Hon. John A. Boehner and Hon. Howard ``Buck'' McKeon (May 
26, 2004) (attachment, p.5).
    \16\ National and regional accrediting agencies meet the same 
recognition standards. See 34 C.F.R. Sec. 602 (2003)
---------------------------------------------------------------------------
    In 1997, the U.S. Department of Justice was obliged to intervene in 
the re-recognition proceedings for the Southern Association of Colleges 
and Schools (SACS) before the Department of Education because SACS'' 
policies and practices made it difficult for students to transfer 
credits from an institution accredited by a non-SACS agency to an SACS-
accredited institution. As the Justice Department stated in comments 
filed with the Department of Education:
        The Department of Justice submits this comment because of its 
        concern that SACS'' revised transfer of credit criteria may 
        injure competition, competitors, consumers, and government 
        agencies funding postsecondary education. SACS'' revised 
        transfer of credit criteria--most adversely affect technical, 
        occupational, and vocational students, who wish to continue 
        their education, but who may be the least able to bear the 
        burden of unnecessary and redundant courses. They may also 
        cause the waste of educational resources by placing unnecessary 
        restrictions on transfer credits that are bad competition, 
        educational, and public policy.\17\
---------------------------------------------------------------------------
    \17\ Letter from Joel I. Klein, Assistant Attorney General, to Dr. 
Karen W. Kerschenstein, Director, Accreditation and Eligibility 
Determination Division, at 14, September 9, 1997.
---------------------------------------------------------------------------
    SACS agreed to change its transfer of credit criteria 
``voluntarily'' in order to secure renewal of its recognition as an 
accrediting agency from the Secretary of Education.
    Restrictive and discriminatory transfer of credit practices have 
not been limited to SACS. In 2000 and 2001, the National Advisory 
Committee on Institutional Quality and Integrity (NACIQI), a committee 
that advises the Secretary of Education on accreditation and other 
institutional eligibility issues, held a series of hearings on the 
problems associated with transfer of credit. While some may seek to 
dismiss the evidence of transfer of credit problems as anecdotal, 
instance after instance was presented to NACIQI of arbitrary and 
inexplicable refusals by institutions to accept validly earned credits. 
These include not only refusals to accept credits earned by proprietary 
school students by traditional, regionally-accredited institutions, but 
also refusals by such institutions to accept each other's credits. 
Witnesses noted examples of public institutions in the same state 
university and college system that would not except credits from each 
other.
    The transfer of credit problem is, in fact, systemic and 
widespread. In December 2001, the Career Training Foundation 
commissioned the Institute for Higher Education Policy, a nonprofit, 
nonpartisan research organization, to conduct a study of transfer of 
credit. The study combined the results of an original survey of almost 
300 nationally accredited, degree-granting institutions with an 
analysis of policies on transfer of credit, with a particular focus on 
national guidelines embodied in a publication by the American 
Association of Collegiate Registrars and Admissions Officers (AACRAO)--
Transfer Credit Practices of Designated Educational Institutions: An 
Information Exchange (TCP). The study concluded that substantial 
numbers of students from nationally accredited institutions reported 
that they were unable to transfer credit solely due to the sending 
institution's accreditation. In addition, nationally accredited 
institutions reported that they had been unable to develop articulation 
agreements, which can facilitate transfer of credit, solely because of 
their accreditation. Moreover, the study found that the TCP revealed a 
marked contrast between national and regional accreditation with regard 
to acceptance of transfer credit, with a pattern of negative treatment 
of nationally accredited institutions. Only 18 percent of nationally 
accredited, degree-granting institutions were found to have their 
credits generally accepted.\18\
---------------------------------------------------------------------------
    \18\ Transfer of Credit from Nationally Accredited to Regionally 
Accredited institutions 13 (December 2001).
---------------------------------------------------------------------------
    At Corinthian, we have recently experienced first-hand why we need 
changes to federal law to address transfer of credit. In April, we were 
sued in Florida state court by a former student of our Florida 
Metropolitan University (FMU), an institution offering programs up to 
the Master's degree that is accredited by the Accrediting Council for 
Independent Colleges and Schools (ACICS). ACICS has long been 
recognized by the Secretary of Education and, more recently, by the 
Council for Higher Education Accreditation (CHEA). The student had 
earned an Associate's degree at FMU and contacted three SACS-accredited 
institutions to determine whether the credits that she had earned at 
FMU could be applied toward a Bachelor's degree program that she wished 
to pursue. All three of these SACS-accredited institutions informed 
this single African American parent that they would not accept credits 
from a non-SACS-accredited institution like FMU. Rather than direct her 
justifiable ire at those who had unjustly refused even to examine her 
credits, the student has sued FMU and Corinthian. We are, of course, 
defending the case (we had disclosed to the student the possibility 
that her credits might not be able to be transferred), but the case 
vividly illustrates why the higher education community has been unable 
or unwilling to solve the transfer of credit problem effectively and 
why a federal solution is needed.
    H.R. 4283 provides that solution. Contrary to the alarmist rhetoric 
directed at these provisions of the bill, the core point that the bill 
would establish is that institutions receiving the public's funds in 
the form of Title IV aid may not deny credit transfers solely on the 
basis of the accreditation of the sending institution, provided that 
the institution is accredited by an agency recognized by the Secretary 
of Education. The bill would not mandate the acceptance of credit 
transfers. Rather, it would de-legitimize what is plainly an 
illegitimate practice--the blanket rules institutions still utilize to 
refuse even to consider credit transfers, notwithstanding that the 
transferor institutions are accredited by established, recognized 
accrediting agencies.
    It is difficult to understand why the higher education community 
could object to this principle. CHEA, which organizations representing 
traditional institutions look to for good practices in accreditation, 
adopted a statement on transfer of credit in 2000 which said that 
``institutions and accreditors need to assure that transfer decisions 
are not made solely on the source of accreditation of a sending program 
or institution.'' \19\ This statement is consistent with the position 
recently expressed by ACE and other higher education organizations that 
accreditation ``assures students and the public that institutions 
participating in the federal student aid programs have been thoroughly 
evaluated and offer a high quality education.'' As this position makes 
no distinction--and could make no distinction--between recognized 
national and regional institutional accreditation, there can be no 
legitimate objection to a rule that would preclude denials based on 
accreditation.
---------------------------------------------------------------------------
    \19\ A Statement to the Community: Transfer and the Public Interest 
5 (November 2000).
---------------------------------------------------------------------------
    Accordingly, the College Access and Opportunity Act addresses a 
real problem and provides an appropriate, carefully crafted solution. 
It also provides the right mechanism to effectuate this solution. By 
requiring institutions to have a clear and forthright policy so that 
prospective students may understand the criteria by which their 
requests for credit transfers will be judged and by giving accrediting 
agencies--not the federal government--the responsibility to evaluate 
whether these policies are being followed, the bill would avoid the 
very federal intrusion that its critics in the traditional higher 
education community have already begun to bemoan. Furthermore, the 
reporting provisions on transfer of credit will give us the data, which 
opponents of these provisions contend is lacking, to determine the 
ongoing scope of the problem and whether it is being adequately 
addressed. I urge the adoption of the transfer of credit provisions in 
H.R. 4283.
V. Single Definition of Institution of Higher Education
    Finally, I support the adoption of a unified definition of an 
institution of higher education in H.R. 4283. The criticisms that have 
been directed at this proposal are, once again, grossly overdrawn, and 
ignore the incremental nature of this step and the important conditions 
and limitations that are attached to it.
    The single definition proposal represents an additional step in a 
direction that Congress began five years ago in the last 
Reauthorization in recognition of the changes that were occurring in 
higher education. Those trends, such as the predominance of the 
nontraditional student and the maturation of for-profit institutions, 
have continued and accelerated. It thus makes little sense to 
perpetuate distinctions that are rooted in history and that represent 
the imperatives of institutions rather than the goals and needs of 
students. In the Higher Education Amendments of 1998, Congress 
transferred all definitions of an institution of higher education from 
four different sections of the Higher Education Act to two sections in 
a new Title I. This transfer and consolidation recognized that the 
purpose of all such institutions is to provide access to higher 
education. Furthermore, it made plain that the same core requirements 
apply to all institutions--authorization by a state in which the 
institution operates, accreditation by an agency recognized by the 
Secretary of Education, and certification of eligibility to participate 
in the Title IV student financial assistance programs by the Department 
of Education. Nonetheless, distinctions between for-profit institutions 
and traditional institutions continued.
    The College Access and Opportunity Act takes another step in this 
evolutionary process. Very simply, an institution of higher education 
would be defined in a single section of the Higher Education Act. 
However, important restrictions would be continued or enacted that 
would limit the ability of for-profit institutions to participate in 
federal funding programs. The ``two-year'' rule would continue to apply 
only to for-profit institutions, i.e., they must be in existence for 
two years before they may be certified as eligible to participate in 
the Title IV programs. In addition, for-profit institutions would not 
be eligible for funds under Title III of the Higher Education Act for 
the building of institutional infrastructure or the support of 
endowments. Moreover, for-profit institutions could never be considered 
Historically Black Colleges and Universities or tribally controlled 
colleges, as those institutions are defined in the Act.
    All that H.R. 4283 would do is make for-profit institutions 
eligible to compete for certain grants that may be awarded to 
institutions from other funding sources. Even then, only two-year, 
degree-granting for-profit institutions could apply. Given all these 
restrictions, I believe that fewer than 10 percent of all Title IV 
eligible for-profit institutions would be able to file competitive 
grant applications. Based upon my experience, it is unlikely that more 
than a fraction of these relatively few institutions would apply. The 
amount of funding that would be available and the involved process of 
putting competitive applications together would simply not make it 
worthwhile for many for-profit institutions to pursue such grants. 
Nevertheless, it is important to recall that all of our higher 
education programs, directly or indirectly, are for the benefit of 
students. If a for-profit institution, for example, were to have a 
substantial number of low income Hispanic students, and it were to 
submit an application for funds that would meet their needs, it ought 
at least to receive consideration.
    This suggests what is truly at issue with the proposal for a single 
definition of an institution of higher education and pertinent to the 
topic of this hearing--the equitable treatment of students at 
proprietary institutions under current law. A single definition would 
send an important signal to these students that for-profit institutions 
represent an equally valid option for the pursuit of their higher 
education and training. It would say to these students that, if they 
choose to seek the education, training, and skills that they need to 
become productive members of the economy at these institutions, they 
will not be regarded under federal law as second class citizens.
                                 ______
                                 
    Chairman Boehner. Well, thank all the witnesses for their 
excellent testimony, some of which I agree with, some of which 
I did not. But that is why we are having this hearing this 
morning.
    My good friend from Michigan brought up Pell Grants, and I 
just cannot quite let it go beyond. If you look at the maximum 
Pell Grant award since 1995, when the Republicans took control 
of Congress, we have had a 73 percent increase in the maximum 
Pell Grant award, 73 percent. If you look at Pell Grant funding 
since 1996, we have had a 95 percent increase in Pell Grant 
funding. Why? Because we have more students than ever, low-
income students, attending postsecondary institutions. As a 
matter of fact, if you look, since 1996, we have had an 
increase of 1.7 million students who are accessing Pell Grants, 
an increase of 46 percent.
    So for Members to suggest that we are not doing enough on 
Pell Grants, I want to set the facts straight. We would all 
like to do more. And we all know that every $100 increase in 
the maximum Pell Grant costs the Federal Treasury about $400 
million, and the challenges that we face in that account, in 
the coming years, are going to be even more difficult.
    Mr. Kildee. Would the gentleman yield?
    Chairman Boehner. Be happy to.
    Mr. Kildee. Thank you, Mr. Chairman, for yielding.
    We can talk dollars and dollars, but, actually, actual real 
dollars, the maximum grant is about $500 less than when the 
Pell program was enacted, in real dollars. So we can talk about 
nominal dollars, but, in fact, what they are able to purchase 
in education is $500 less than when--
    Chairman Boehner. Well, reclaiming my time, I do agree that 
there is a problem with the purchasing power. But given the 
ever increasing cost of tuition and fees, we are doing all we 
can to try to keep up with it.
    In 1999, we had a great economy. The stock market was 
booming. And Americans were very optimistic about the future. 
And in that year, the American economy lost 35 million jobs. 
Now, the American economy also created 37 million new jobs, a 
net increase of 2 million jobs.
    So if we go 3 years ahead of time to 2002, the American 
economy was in a recession. We were going through the effects 
of post-9/11. And the stock market had crashed. And guess what? 
The American economy lost 35 million jobs. And the American 
economy only created 33.5 million new jobs. The churning that 
we see in our economy has always been there, but it has never 
been there to the extent that it is today.
    And the need for life-long learning, the need for American 
workers to get tools that they need to participate in today's 
economy, is greater than ever in our history. And if you look 
at the traditional schools, what we would call traditional, 
postsecondary schools, where are the new seats? Where are the 
new schools? And if you begin to look at where these skills are 
coming from, by and large, many of them are coming from 
community colleges and from the proprietary sector in 
postsecondary education.
    Mr. Nassirian, I have to ask you a question. In our bill, 
we outline three issues on accreditation. We say that you 
cannot deny the transfer of credit solely on who the accreditor 
is. We say, in the bill, that all postsecondary institutions 
should have a transfer-of-credit policy that you decide and, 
three, that you ought to live by it. Now, you took--you made 
criticism of our proposal. Now which of the three issues do you 
have a problem with?
    Mr. Nassirian. With all due respect, sir, the bill also 
dictates the substance of the policy. If the bill simply stated 
that you must have a publicly disclosed policy that you live 
by, that is certainly not objectionable. The problem is the 
bill then goes into the substance of what thou shalt do and 
says you may not deny credit on the basis of the sending 
institutions' accreditation status so long as that 
accreditation status has been recognized by the Secretary. I 
think that is a factual description.
    Chairman Boehner. No. No. The bill says you cannot deny 
solely based on who the accreditor is.
    Mr. Nassirian. That is correct.
    Chairman Boehner. And if--that is all it says. It does not 
qualify it in any way shape or form.
    Mr. Nassirian. May I--
    Chairman Boehner. Go ahead.
    Mr. Nassirian. In the interest of really sort of 
articulating, there is an enormous amount of frustration on our 
campuses with this issue that I really do think this is an 
opportunity for us to explain. One, the Secretary has never 
been thought to be setting ceilings on the quality of 
education. I think the Committee would concur, the Secretaries' 
activity has to do with establishing thresholds and floors. And 
fourth, what the notion that institutions may not make 
distinctions amongst accreditors so long as they are 
secretarially recognized implies is that no accreditor may 
establish higher standards than those acceptable to the 
Secretary. That is one issue.
    Chairman Boehner. But the--all the bill says is that you 
cannot deny the credits, transfer of credits, solely on who the 
accreditor is. I realize there are different accreditors, but 
all we say there is you cannot deny it solely on that purpose.
    Mr. Nassirian. Mr. Boehner, is it possible that some 
accreditors may be better than others?
    Chairman Boehner. I agree with that.
    Mr. Nassirian. And if that is the case, why should a 
rabbinical college have to go through the transcripts of a 
Baptist institutions' coursework to decide wholesale that the 
credits it is interested in happen to be rabbinical credits? 
Why should a medical institution--
    Chairman Boehner. We do not require that.
    Mr. Nassirian. Yes you do. Yes you do, sir.
    Chairman Boehner. All we say is you cannot deny solely on 
that purpose.
    Mr. Nassirian. Well, I submit to you respectfully, sir, 
that that is grounds to reject the credits entirely if it so 
happens that the accreditor--it is not so much who the 
accreditor is; it is more who the accreditor is not.
    I will give you a completely non-Federal example, sir. 
Medical education in the United States, the LCM, the Liaison 
Committee on Medical Education has nothing to do with the U.S. 
Department of Education, is not an accreditor that is 
recognized for Title IV purposes, really has nothing to do with 
this Committee's activities.
    Mr. Nassirian. It so happens that medical institutions in 
this country require for their reasons on the basis of, I am 
hopeful, medical training that institutions that have been 
accredited by that organization can send students their way and 
students that don't cannot. It may be that a dog grooming 
school teaches anatomy. Why should a medical institution have 
to go through the trouble of obtaining syllabi, textbooks, 
qualifications of staff before it can articulate a simple truth 
unless--
    Chairman Boehner. They don't have to do that.
    Mr. Nassirian. Yes, they do, sir.
    Chairman Boehner. No, they do not. The bill says that you 
can't deny the credit solely on who the accreditor is. Solely.
    Mr. Nassirian. That is what they want to do. They want to 
say, unless have you been accredited by LCME, we are not 
interested in reviewing your transcripts; and I don't think you 
would want them to do.
    I appreciate more than I could publicly acknowledge the 
efforts of this Committee on the issue of cost. I think these 
efforts are appropriate and have resulted in a lot of good 
things happening. This is going to be the single biggest cost 
driver in American higher education because, in essence, you 
are demanding that because the Federal Government buys GM 
automobiles and it buys Ford automobiles that the alternator 
out of a GM car should fit a Ford; and you know it can happen, 
but then all cars will look the same because of 
interchangeability of parts.
    Chairman Boehner. I think what we are suggesting is that 
some schools routinely and arbitrarily deny the credit--the 
transfer of credit from a proprietary school to a traditional 
school just--without looking at the quality of the content or 
the makeup of the class; and all we are suggesting, without 
dictating the policy, is that to say that you won't take it 
because of who the accreditor is, is over the line. You want to 
reject it based on the qualities of the course, fine, you can 
go do that.
    Mr. Nassirian. Mr. Chairman, we share that frustration, 
lest I think we don't share the frustration with regard to 
transfer. My organization published a book called Transfer 
Students: the Forgotten Student. We are transfer practitioners. 
We are extremely concerned.
    With all due respect, I would point out, first and 
foremost, that insofar as transfer is concerned the challenge 
is that of volume. There are hundreds of thousands of courses 
that are summarized on pieces of paper called transcript that 
come into the admissions office. And the experience of going 
through a course-by-course analysis--there is no such thing as 
a free lunch, and legislation can't create one. The course-by-
course analysis that the bill would mandate would be 
backbreaking to every institution in this country.
    We appreciate the motivation, but we ask you to give us a 
chance to solve this problem. Because we are all interested in 
eliminating duplication of effort. It is in nobody's interest 
to force a student to go through the same course twice. The 
challenge is when the course entry comes up in the admissions 
office we have no clue what is behind--
    Chairman Boehner. My time has expired. But I have not 
gotten any suggestions from the community about how to address 
this other than you don't like what we have done. And if people 
are serious about helping students who we all know will go to 
multiple institutions solve this problem, I am certainly open 
to your suggestions.
    Mr. Kildee.
    Mr. Kildee. Thank you, Mr. Chairman.
    On the Andrews-Kildee bill, or the Kildee-Andrews bill, on 
the distance learning, we would drop the 50 percent requirement 
and have a certain surveillance on the academic side by the 
accreditation agency, on the fiscal side by the Federal 
Government. Do you think that that would take care of the needs 
if we were to enact that bill?
    Mr. Moore. Thank you.
    Well, obviously, at the time that the Andrews-Kildee or 
Kildee-Andrews bill was introduced, we were very supportive of 
it. I am reminded of a late, great statesman who is quoted as 
saying, ``If I am offered half a loaf, I will take it, but 
depend on me being back the next day to get the rest of it.'' 
so this is the next day, and we are back to get the rest of the 
loaf.
    I think that the debate and discussion that was started 
with your bill was probably one of the most important 
activities that has happened for a while in this whole issue. I 
think as we go through this political process, and it is a 
political process, we are going to find opportunities to modify 
and improve the bill as we go through, while trying to 
maintain, I think, the heart of what the two of you were 
looking for and what we were supporting at the time. I think 
there is a lot of opportunity over here the next few weeks to 
sit down and merge what your goals were versus what the current 
goals are. Just remember, I am after the whole loaf.
    Mr. Kildee. I appreciate your candor and honesty.
    Everything is step by step, I guess, on these things. I 
think that Rob and I worked together and felt that this would 
be a--each reauthorization very often moves us down--it is not 
everything in one bill but get some experience in that 
reauthorization and maybe the next reauthorization we take 
another step. That has been pretty well the history of the 
Higher Education Act.
    In your memo to me--and I appreciate the memo; it is very 
thorough--you mentioned one of your institutions in Marietta, 
Georgia, and one in Atlanta; and the one in Atlanta was quite 
different. How would the change in the 90/10 help you better 
serve your students in Atlanta?
    Mr. Moore. The example we gave, Mr. Kildee, for Atlanta, 
Georgia, is also the same one in Portland and Vancouver and in 
the two schools in California. They are similar urban versus 
suburban schools that are essentially running exactly the same 
curricula under the same supervision but yet the 90/10 
proportions are dramatically different in both of those 
schools.
    What is going to happen in those urban settings, 
particularly if the Pell Grant increases and 90/10 doesn't go 
away, is we are going to have to start limiting access to those 
students who most need access because we can't jeopardize the 
school to continue to award 100 percent of Title IV as our 
students who are with us experienced. Right now, that is a 
relatively low occurrence, but if Pell goes up or the limits go 
up or you change the ratio of the amount of money that is 
available in the first couple years--and I can't believe I am 
standing here sounding like I could be opposed to that effort 
to help students, but that is the corner that we get backed 
into.
    On one hand, we are arguing to try to support students, 
which is why we are here. On the other hand, I am being asked 
to jeopardize the institution that is trying to help that 
student. So in each one of those cases there is more students 
that could be helped and particularly in the area of those who 
are the most needy and most need the help.
    As you know, I ran a community college in an inner city, 
and there were a lot of students that didn't get served very 
well that probably should have because the community college 
simply couldn't serve them. That is not a reflection on the 
community college. That is the nature of the animal. And 
without the for-profit schools risking private capital to set 
up those institutions and run them, we wouldn't be able to 
provide the resources we do.
    I hope that doesn't mean my time is up.
    Mr. Kildee. No. You are all set.
    What you are saying, then, is that, if not now, soon you 
feel there may be a necessity to say to certain students we 
can't afford to take you because we jeopardize our 90/10 ratio.
    Mr. Moore. Yes, sir, that is correct.
    Once again, that creates a dilemma. Because the law is very 
clear that if a student presents himself to us and is otherwise 
qualified--it is like the transfer of credit issue--they are 
fully qualified, we are required by law to accept that student. 
And if, in fact, they are 100 percent eligible, we can't turn 
around and say to that student we are going to discriminate 
against you because you are 100 percent eligible. But, on the 
other hand, if we enroll too many of those students, we are 
going to close the institution; and that is, obviously, an 
unintended consequence of 90/10.
    The other piece I have to throw in, Mr. Kildee--I don't 
want to burn your time--but the supposed intent of 90/10 was to 
reduce fraud and abuse. I don't think there is any evidence 
either under 85/15 or 90/10 of any incidence of fraud and abuse 
that the law has caught. All it has done is discriminate 
against students. It really hasn't, that I know of, caught any 
institutions or put them out of business--that were put out of 
business because of fraud and abuse as it applies to 90/10.
    Mr. Kildee. I think my time has expired. Thank you, Mr. 
Chairman.
    Mr. McKeon. [presiding.] That was a great explanation of 
why we should eliminate 90/10.
    You know, when the Higher Ed Act was passed in '65, the 
purpose, as I understand it--not having been here at that time; 
I was just a very young man then--but I understand that it was 
to provide increased access and to help those who needed the 
help most to participate in the American dream; and that is 
what we have tried to do in this bill that we have put forward 
in--we are not able to do all the things that we want to do to 
cut the tuition and fees and to keep school more affordable, 
but what we have really tried to do is expand access. And that 
hearing today where we are really highlighting proprietary 
schools I just want to thank you for what you have done to 
provide increased access.
    I have a little chart here before me that shows in 1995 the 
top ten universities in the country by population. Starts out, 
University of Minnesota, Twin Cities, University of Texas. The 
population of the University of Minnesota at that time, 51,445 
students.
    On the other side, I have what the population of the top 
ten schools are now. And in 1995 there were no proprietary 
schools in the top ten. Fall of 2003, four of the top ten, 
Apollo Group with a population of 200,000 students; Education 
Management, 58,858; Corinthian Colleges, 57,580; University of 
Minnesota, which was 51,000 in '95, has dropped to 48,000. 
Where are we expanding the capacity? Where are we reaching out 
to give people an opportunity to participate in the American 
dream?
    It seems to me the proprietary schools are taking great 
steps. Now some of the schools have increased in size. Ohio 
State added 1,000 students. But, I mean, in comparison, we 
would be in even further problems with trying to provide access 
to people if it hadn't been for what the proprietary schools 
had done. It seems to me that, because they happen to make a 
profit, that there are people that take exception with them; 
and I think that is the American dream, is we want people to be 
able to make a profit. I think that is what makes the machinery 
of this country move.
    A couple of questions. Mr. Moore, as you are no doubt 
aware, one of the issues under consideration today is the role 
of the Federal Government with respect to proprietary 
postsecondary institutions. Some people see the enrollment of 
students with Federal financial aid at your schools as 
equivalent of a Federal contribution to your profits. How do 
you respond to that?
    Mr. Moore. Thank you.
    Let me talk about profit to begin with. We tend to make a 
distinction between for-profit and not-for-profit schools when, 
in fact, there is no such thing as a successful college that 
isn't profitable.
    I was a community college president in Flint, Michigan, for 
8 years. I was there a total of 12. I can tell you that if we 
were not profitable every year we would have been out of 
business, because the State of Michigan was in no position to 
bail us out. We were told by our accountants, as a matter of 
fact, that we should have a goal of building a 10 percent fund 
balance at the end of every year. Now, a fund balance is a 
difference between income and expenses. The accountants call it 
a fund balance because the schools are not-for-profit. In fact, 
that is their profit.
    It is interesting to point out that that 10 percent bogie 
for community colleges is exactly what the profit margin is in 
my corporation. Year in and year out, our after-tax profit is 
about 10 percent. That is after paying 40 percent of our income 
in taxes and all of our employees, some 10,000 of them, having 
paid 32 percent of their income in taxes, also.
    So this fund balance issue in for-profit, we are clearly in 
line. In fact, current Department of Education requirements say 
you have to be a profitable by at least 8 percent to continue 
in the program.
    The other misconception is that, somehow or another, those 
funds are going to investors. We have never paid a dime of our 
money to any investor anyplace in this country; and unless I go 
senile and start paying dividends, which isn't likely, we never 
will pay a dime to an investor.
    The money that is being made off of the company is being 
made in the stock market as people are taking stock risks to 
buy shares in our company, but there is no return from that. 
There are no dividends paid. There are no options paid to 
investors. We pay our employees' options, but there is not a 
single dime of our money that is going to investors or people 
who are investing in our company.
    What the investors are doing, however, which is what we 
really need to be concerned about, is they are building the 
infrastructure for us. They are the ones that are paying for 
the buildings, the computers, the textbooks, the facilities 
that are going into those schools, as opposed to using either 
tax money or endowment money, which are the other two groups of 
schools some--we are for-profit, but so is everybody else.
    Our profits are clearly in line, if you consider fund 
balances as profits, with everybody else, but, most 
importantly, there is no Federal money that is being paid to 
investors in my company and, to the best of my knowledge, none 
of the other companies that are in this sector.
    Mr. McKeon. Thank you.
    Dr. Letteney, you talked about the concern of losing money 
if we have the single definition. If money were not an issue, 
would you have a problem with eliminating the--with going to 
the single definition?
    Dr. Letteney. I think as a matter of public policy, yes, in 
that whether the profits that are available in Mr. Moore's 
company or the Apollo Corp. group--
    Mr. McKeon. I am saying if money was not an issue, if there 
is no money as an issue. Like right now, by going to single 
definition, it does put some money at competition. So there is 
money available. But if it were written such that money were 
not an issue, would you have a problem with going to a single 
definition?
    Dr. Letteney. Our association has taken the stand that if a 
separate program were created then that would certainly reduce 
our opposition to this issue.
    Mr. McKeon. The issue is the money, not the single 
definition.
    Dr. Letteney. From the perspective of this Committee's 
history, the philosophy and the principles that this Committee 
has stood for, we do feel that there is an issue with this 
Committee suggesting that not only should taxpayers pay for 
financial aid for students which goes to the students and the 
students have a choice they go anywhere else, but I would say 
that that is something--if there were a separate program 
created, it would be more palatable to our institution.
    Mr. McKeon. If a school has been in business and operation 
and graduating students, granting degrees for almost a hundred 
years and been a family business where they are really trying 
to reach out and educate and help people, why should they not 
have the same status as a school that is a public school that 
maybe has been in existence for 5 years or 10 years?
    Dr. Letteney. I think the issue is not the status of the 
school. The issue is the question--
    Mr. McKeon. For these schools, status is a big issue. For 
the student that is graduating, it is a big issue.
    Dr. Letteney. From my perspective--and, by the way, I have 
talked to some of our local businesspeople on this matter; and, 
from my perspective, the issue is whether this Committee 
chooses to go beyond Federal financial aid as a subsidy of 
institutions who have--
    Mr. McKeon. We keep coming back to money.
    Dr. Letteney. Whether they distribute those profits is 
another matter, but our money goes directly back into the 
institution.
    Mr. McKeon. I guess I can't get an answer to my--what I am 
trying to say is, if we exclude money from the issue, do you 
see any problem with granting these institutions the same 
status as other institutions?
    Dr. Letteney. I personally would still see an issue as a 
taxpayer, knowing that the dollars that go to, say, community 
colleges are going to the public good, as opposed to dollars 
that are going to education companies that have significant 
dollars available to give to their shareholders, yes.
    Mr. McKeon. Mr. Nassirian.
    Mr. Nassirian. Mr. Chairman, putting money aside, the 
change is ill-advised because of its breadth. We keep talking 
about degree-granting institutions being the same; and that is 
a middle ground, actually.
    Mr. McKeon. In the bill, we are talking about for degree-
granting institutions.
    Mr. Nassirian. For degree-granting institutions, if you 
insulate redistributive effects and do a careful study to make 
sure that nothing unintended--and we defer to your judgment, of 
course. You are responsible for enacting the legislation.
    Mr. McKeon. We have never caused any unintended 
consequences.
    Mr. Nassirian. Mr. Chairman, I certainly accept that, but 
it is--if one carefully goes through what else may be off 
kilter as an unintended consequence of a change that would be 
agreeable. But to go to the extreme of treating all Title IV 
eligible participants as institutions of higher education, I 
think that is--
    Mr. McKeon. In our bill, this has nothing to do with Title 
IV. It is Title III and Title V.
    Again, my question was, if we write it to eliminate the 
money, just talk about the definition, any way--
    Dr. Letteney. Mr. Chairman, may I suggest that, as I stated 
in my testimony, we understand that the impact could be greater 
because other Federal agencies use the definition to determine 
who is eligible for their grants as well.
    Mr. McKeon. I understand that. That is why I was trying to 
get the money out of it, find out where we were on just 
feelings of the definition.
    My time is up. If could you just be very brief. Mr. Smith.
    Mr. Smith. As an employer, we want great employees, 
irregardless of which institution they come from. I am a very 
strong proponent of treating all of our institutions of higher 
learning the same. I am a graduate of Ohio State University, a 
public institution. I chaired the board at Columbus Day 
Community College. I am considering now becoming an adjunct 
professor at a private college, and we hire lots of great 
people from DeVry, a proprietary college.
    As I run this business and grow it, I need a great 
workforce. I need to be able to go to the multiple avenues to 
source that workforce. I need all of those avenues to be 
strong. So let's treat them all fairly, let's give all 
Americans the opportunity for a postsecondary education and 
then allow them the choice and allow the country to be stronger 
as a result.
    Thank you, Mr. Chairman.
    Mr. McKeon. Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman.
    I would like to thank each of the witnesses for their 
outstanding contribution this morning.
    I think higher education is one of the great success 
stories in the United States, and I think that success story in 
large part owes itself to the diversity of choice that we have 
in higher education. I think the failure that lies among these 
elements of success and the success story is that we have not 
done a good enough job reaching people at the bottom of the 
economic ladder; and I think one of the real strengths of the 
for-profit sector, as well as the community college sector, is 
that these two elements of higher identification make a special 
effort to reach students at that bottom part of the economic 
ladder.
    So I am interested in doing whatever we can in this law to 
reach even more students so, as Mr. Smith just said, more of 
those students can become productive and dynamic workers and 
investors and entrepreneurs in the workforce. I think that is 
the way we have to come at this question of the 90/10 Rule.
    And, Mr. Nassirian, I wanted to ask you about your comments 
about the 90/10 Rule. You indicate that--let me ask you this 
first: Do you agree or disagree with the proposition that 
students from a modest or low-income background are more likely 
to be loan defaulters than students from a high-income 
background?
    Mr. Nassirian. I do.
    Mr. Andrews. Do you agree or disagree with the proposition 
that students from a moderate-income background are more likely 
to drop out before finishing their program than students from a 
high income?
    Mr. Nassirian. Regrettably so.
    Mr. Andrews. I would agree with that, too. That is why I 
would call into question the 1997 study from the GAO that you 
refer to in your testimony. You say that there is a 
relationship, and you say the GAO says there is a relationship 
between reliance on Title IV revenues and the qualities of a 
school. I don't think that is true. And one of the reasons I 
think that is not true is, as I read the 7-year-old GAO study, 
it did not take into account the student body demographics of 
the schools that met this requirement. Would you agree with 
that?
    Mr. Nassirian. I do. The concern, Mr. Andrews, is not so 
much with any kind of a theoretical link between the incidents 
of default and income status. The real question--and it really 
has to do with competing visions of capitalism, I suspect. The 
real question is, do we want institutions that are composed 
entirely of zero EFC students?
    Mr. Andrews. That is the question.
    Mr. Nassirian. I don't think that kind of segregation--
    Mr. Andrews. It is your testimony that said there is this 
relationship. I didn't say this, you did, that there is this 
relationship between the quality of a school and how much or 
how little Federal financial is. I don't think that is true.
    Mr. Nassirian. There is a correlation--I am simply 
repeating what the GAO describes as a correlation.
    Mr. Andrews. You think the basis of the GAO's conclusion is 
suspect because they didn't take into account the demographic 
students status of students?
    Mr. Nassirian. There is a correlation. I should point out, 
to this day, 4 percent--lest we get confused about where the 
students are--4 percent of the students are in about a third of 
the participating institutions in Title IV, and yet lifetime 
default numbers that exceed 40 percent, dollar amount at risk 
in excess of 27 percent.
    Mr. Andrews. Let's look at those default numbers a little 
more closely. You conclude that there is a link between the 
presence of the 90/10 Rule and the precipitous drop in defaults 
in the proprietary sector over the last 9 or 10 years. You 
claim there is a cause-and-effect relationship between those 
two. Could you tell us, of the thousands of proprietary schools 
that have been excluded from Title IV in the last 10 years, how 
many of them had revenues--nonFederal aid revenues of more than 
10 percent, how many had less than 10 percent?
    Mr. Nassirian. It would be the number of institutions that 
have been pushed out of eligibility since the enactment of the 
90/10 Rule.
    Mr. Andrews. What is the data?
    Mr. Nassirian. I believe it was a handful. I want to say 
four, for example.
    Mr. Andrews. Four had revenues of less than 10 percent.
    Mr. Nassirian. Four triggered the modified--
    Mr. Andrews. My understanding is the huge majority of for-
profit schools that have been excluded from the program were 
because of high default rates, not because they were less than 
10 percent.
    Mr. Nassirian. That is the issue. We don't have the luxury 
of doing double-blind experiments here. In '92, in despair over 
the condition of the programs, Congress enacted a variety of 
measures, essentially out of a reasonable expectation that some 
of them may work. So, in candor, I don't have proof or any kind 
of a theoretically robust presentation to prove to anybody that 
the 90/10 Rule should or shouldn't be there. It is a matter of 
call as the Committee will deliberate.
    Mr. Andrews. I think it is important that we establish for 
the record the question of how best to avoid fraud. Something, 
I think there is unanimous agreement here, that that is the 
goal. The question of how best to avoid fraud is not a matter 
of factual assertion. To come in here and say that 90/10 is the 
reason that the defaults have dropped is a view, but it is by 
no means a fact. A lot of us believe that the default rates 
have dropped in large part because of the default rate ceiling, 
because of more resources put into policing by the Department 
of Education, more resources put into the industry itself by 
members of the industry and a general increase in quality.
    Now I don't dispute that 90/10 may have had something to do 
with that, but your conclusion, which seems to be--is that the 
absence of 90/10 would put at risk all of those improvements. I 
just don't see the data. If I am missing something, you would 
be free to supplement the record.
    Mr. Nassirian. As you contemplate any change, the question 
you should ask yourself is, who does it benefit?
    Mr. Andrews. Can I ask one other thing about 50 percent?
    You make a similar claim about the 50 percent rule opening 
us up to all kinds of fraud and abuse. But isn't it the case 
that if a school today offers 40 percent of its courses online 
and 40 percent of its students are attending online, it might 
be the worst fraudulent school in the country, but a school 
that offers 60 percent of its courses online to 60 percent of 
its students might be the best school in the country? So isn't 
a better measurement of quality of education some robust 
accreditation standards like Mr. Kildee and I want, rather than 
an arbitrary 50 percent figure?
    Mr. Nassirian. The Andrews-Kildee legislation does have 
provisions that offer safeguard. The real issue is to make 
sure, again, no mathematical proof at hand, but to allow the 
Department discretion. We do advocate for expansion of distance 
education, and there is nothing magical about it.
    Mr. Andrews. The Department has no discretion with a school 
that offers more than 50 percent. The purpose of our bill is to 
offer that discretion. That is to say, if you meet the robust 
accreditation review standards, you can go as high that you 
think you need to go. Isn't that better than the ridge of 50 
percent?
    Mr. Nassirian. It is conceptually a sounder approach.
    Mr. Andrews. So can we get your endorsement of the bill? Is 
that what you are saying?
    Thank you very much.
    Mr. McKeon. Mr. Castle.
    Mr. Castle. Thank you, Mr. Chairman.
    This has actually been a fascinating hearing. We have some 
true disagreement on the panel, which is always fun. I walked 
in here not certain of exactly where I was on this, and I think 
my feelings have become more galvanized as I have heard it. I 
think it has been good. So I appreciate it.
    Mr. Moore, let me say I am a fan of the distance learning, 
I am a fan of the for-profit institutions, and I think we do 
need to treat our unconventional students. But, having said 
that, I hope you are not teaching economics at Corinthian 
College, because I entirely disagree with your premise about 
the value of Federal dollars fleeing into the funding of your 
institution. It may be correct you are not paying dividends 
and, therefore, it doesn't flow directly to the stockholders, 
but to suggest that doesn't add value used for the expansion of 
the school or just added retained dollars in the accounts of 
the corporation is just absolutely borderline logic at best 
from an economic point of view. Clearly, that is profitable.
    I think we have a very significant issue as to whether 
institutions--and my recollection I think in the top 10 stocks 
in this country in the last--you may be one of them--in the 
last 3 years, three or four of them are these for-profit 
institutions; and the idea of opening this up to Federal 
dollars is something I think we really need to pay attention 
to. We can't go over that too lightly.
    I was struck--I walked in the middle of Dr. Letteney's 
testimony--by some of the things that she stated. One of the 
things I then confirmed in the written statement struck me, and 
that is that the average community college tuition this fall 
was $1,905 and the average 2-year, degree-granting proprietary 
school charged $10,916, more than five times as much. Is that a 
substantiated fact, Dr. Letteney?
    Dr. Letteney. Yes. Yes. In fact, at my institution--and, I 
mean, New Mexico is a poor state by any standards--our 
institution charges only $1,056 per year for tuition and fees. 
So the $1,905 is fair.
    Mr. Castle. Later in that testimony you indicated that--you 
named the Apollo Group, Career Education, DeVry, Corinthian 
Colleges. You show the gross profits of Apollo being $860.9 
million over four quarters ending 2/29/04; Career Education 
Corp., gross profits $1.593 billion for 3 years ending 12/31/
03; DeVry, gross profits $1.098 billion for 4 years ending 6/
30/03; and Corinthian Colleges to $541.3 million for 3 years 
ending 6/30/03. Are those figures which are--those are 
incredible numbers.
    Dr. Letteney. Bear in mind those figures that I stated are 
gross profits. They are not the net profits. But they come 
right from the financial statements of the corporations.
    If you look, for example, at the net profits of some of the 
largest education companies in this country for the last four 
quarters, they would cover the amount for the entire Title III 
strengthening institutions grant program, or they would cover 
the entire amount for the Title V grant program.
    Mr. Castle. I remember reading someplace that the success 
of the Washington Post Company lately has been through Kaplan, 
not through the Washington Post itself, the illustrious 
newspaper there, which would sort of underline some of the 
things you are saying as well.
    But my concern is that we are dealing with institutions--
and I think actually Mr. Moore is correct about this. That is, 
there is no such thing as running a higher education 
institution which is not profitable in the sense that at least 
it is in the black, if not for profit, in terms of distribution 
or stockholders or whatever it may be, and that is significant. 
But I assume that in the present definition in which a 
community college can take advantage of Federal dollars that 
others cannot because of the definitional aspects of it that 
that money is of importance to the community colleges and being 
able to stay above that line and stay in the black with less 
revenues than the for-profits had. Can you expand on that or 
correct me if I didn't state it correctly?
    Dr. Letteney. Let me give you an example.
    Many of our institutions just run on very thin margins. We 
have an institution that serves 1,700 credit students, over 
7,000 noncredit students, and we do that on $10 million. So if 
you look at the numbers of people that community colleges 
serve, we are running on very thin margins.
    Let me tell you also--and let me thank you, Mr. Chairman 
and the Committee, for the Federal programs that are available. 
At our little institution we have--we are just finishing up a 
Title V program that involves student retention. We are working 
on--we have gotten a TRIO grant which has been enormously 
helpful to us, has 170 students in it. Twenty-five of those 
students--
    Mr. Castle. Can you get to the answer of the question? I 
don't mean to cut you off.
    Dr. Letteney. Would you restate briefly?
    Mr. Castle. Basically, I indicated that--I asked, 
basically, do you need these dollars in order to keep above the 
line in terms of staying in the--
    Dr. Letteney. Yes, sir. What I am saying is that, 
especially in a State like New Mexico, where in my county our 
average income is a little over $21,000, we are dealing with 
very, very poor first-generation students, parents don't 
understand, have not--
    Mr. Castle. Again, I don't mean to cut you off, but I do 
need to cut you off.
    Dr. Letteney. Yes. These Federal dollars have been critical 
to our moving forward.
    Mr. Castle. This is apart from the Pell Grants and student 
loans. My understanding is that if you have those funds then, 
indeed, you can spend other funds--if you get those funds, you 
can spend other funds you already have on hand for other 
services.
    Dr. Letteney. Yes.
    Mr. Castle. Therefore, if you don't have to spend those 
funds if you are a for-profit, then you could--those would 
either go to the bottom line and some sort of retained earnings 
or they could spend it on expansion. I imagine most of the for-
profits are expanding, which is fine. I am all for the for 
profits, but I am worried about the use of public dollars in 
the for-profits.
    Let me change subjects for a moment. I want to talk about 
the 90/10 business. Because, again, I think it was in your 
testimony, I think it was on page 3, the community colleges 
receive 7 percent or so of their money from Federal student 
aid, is that correct? That seemed low to me.
    Dr. Letteney. Well, you have to remember that, because 
across the board our tuition and fees are low, the amount of 
Federal financial aid that a student may get, a lot of that may 
go to their living expenses and other expenses. So the actual 
amount that goes to tuition and fees in the community colleges 
is relatively low because our tuition and fees are low.
    Mr. Castle. You are basically then getting--the 7 percent 
of your revenues that you get on the $1,905 which is cited here 
are from Federal loans to students. Is that another way of 
putting it?
    Dr. Letteney. It would be from Federal aid to students. 
Then, of course, the students pay for their tuition and fees, 
yes.
    Mr. Castle. And yet we are trying to eliminate the 90/10 
provision, meaning that only the 10 percent of any college paid 
for profit or anything else would have to have their fees come 
from something other than Federal dollars, is that correct?
    Dr. Letteney. Yes.
    Mr. Castle. You are saying community colleges aren't even 
close to having a problem.
    Dr. Letteney. No, it is not a problem for us in terms of 
the percentage of Federal financial aid that comes to us 
through our students who are getting Federal financial aid.
    Mr. Castle. Thank you.
    Mr. McKeon. Mr. Bishop.
    Mr. Bishop. Thank you, Mr. Chairman.
    I want to stay on this 90/10 issue because I think it is 
very important as a matter of public policy. Mr. Moore, as I 
understand it, there are about 2,500 proprietary institutions 
that are Title IV receiving institutions. Do you have any sense 
as to how many of them are bumping up against this 90/10 
difficulty?
    Mr. Moore. I am sure every one of them are bumping up 
against the 90/10 Rule.
    Mr. Bishop. The 90/10 Rule, as I understand it, is in the 
aggregate not per individual student. No more than 90 percent 
of the total tuition and fee revenue can be comprised of Title 
IV funds, correct?
    Mr. Moore. The exact formula is not more than 90 percent of 
the revenue on a cash basis can come--
    Mr. Bishop. You are saying that the vast majority of 
institutions are bumping up against that.
    Mr. Moore. Yes, sir. And they are managing it--and that is 
probably the other downside of the 90/10. They are managing 
because they are denying access.
    Mr. Bishop. Where is your institution? What percentage of 
your revenue is Title IV?
    Mr. Moore. Across the corporation is about 86 percent.
    Mr. Bishop. What is the total size of your institutional 
financial aid budget?
    Mr. Moore. Well, it is--you will have to do the math.
    Mr. Bishop. That is not the question I am asking. What 
portion of your total revenue do you plow back into 
institutionally funded student aid? Not Federal aid, 
institutionally funded student aid.
    Mr. Moore. Through the scholarships and student loans, we 
put about 5 to 7 percent of our revenue back into the students.
    Mr. Bishop. On the question of access then, is it not 
possible for you to increase that? I mean, what you said is 
that this 90/10 Rule creates perverse incentives. You said it 
was pushing schools away from needy students. And you are 
suggesting that the 90/10 Rule inhibits access.
    Mr. Moore. Correct.
    Mr. Bishop. Now I come out of an institution that was not-
for-profit. It was, by the way, particularly good at being not-
for-profit.We really were very good at that. But we discounted 
tuition at the rate of 35 percent; and that is not unusual for 
private colleges in the Northeast, I mean, to have a student 
aid budget--unfunded student aid budget somewhere between 25 
and 35 percent. You are at about 5 percent.
    Mr. Moore. We are not allowed by law to discount tuition. 
We have to charge everybody the same route.
    Mr. Bishop. We are charging the same thing, but we are 
putting it back in. It is called discounted aid.
    Mr. Moore. Right. In using your analogy, that roughly 5 to 
7 percent allows us to fund students through loans, but we 
can't discount tuition, we are prohibited from doing that, and 
the scholarships that we grant are, in fact, student loans and 
have to be repaid.
    Mr. Bishop. So there is not nonrepayable institutional 
grant money that you provide to help students pay their bills.
    Mr. Moore. We are prohibited from that by Federal law.
    Mr. Bishop. Wouldn't it be a better use of public--wouldn't 
it be a better public policy issue to allow you to do that? I 
mean, if--here is my problem: We are reauthorizing higher ed. 
We all agree that we have an access problem. We all agree we 
have an affordability problem. But we are addressing it, at 
least in this bill, exclusively in terms of increasing loan 
limits. We are not doing anything else. We are not raising Pell 
Grant maximums.
    So if we, in fact, have an access and affordability 
problem, which I agree that we do, it seems to me that the only 
place where we are allowing Federal dollars to flow in a 
greater--to a greater extent than is now the case is to the 
proprietary institutions if we were to do away with 90/10. Is 
that not correct?
    Mr. Moore. We are the only ones that are governed by 90/10; 
90/10 does not apply to community colleges.
    Mr. Bishop. Wouldn't it be nice if we had to worry about 
90/10 at the institution I had been at?
    So the fundamental premise of this bill is that it is a 
revenue-neutral bill. There will be no new dollars flowing to 
higher education. So to the extent that there are no new 
dollars flowing to higher education, if we were to take that 
pie and divide it somewhat differently so that additional 
dollars could flow to the proprietary institutions, would we 
not be disadvantaging public sector institutions and private 
sector institutions?
    Mr. Moore. Well, I think that, Mr. Bishop, it is a function 
of what the purpose of the law is. If the purpose of the law is 
to provide access to students--let's take the institutions out 
of this. This is not an institution funding issue. This is a 
student access issue.
    So the question is, is the money going to follow the 
student or not follow the student? If it is going to follow the 
student, then it shouldn't matter what institution they go to. 
If Joe Brown wants to go to school, he ought not be limited 
between going to a tech school and becoming an auto mechanic or 
diesel engineer, as opposed to going to community college 
because the money doesn't follow him.
    Mr. Bishop. If we are dealing with student access and we 
have to agree that we have access all across the system, as a 
matter of public policy it seems to me that our priority here 
for addressing student access to the proprietary institutions--
we have shortages of physicians. We have shortages of 
scientists. We have shortages of mathematicians and nurses. 
This is the best public policy decision that--
    Mr. Moore. Let me address it slightly different. We are 
also talking about capacity. There is probably not a State 
university or college in America that isn't crying the blues 
that they don't have enough capacity for the students that are 
showing up. U.S. News and World Report has an article to that 
because schools now have to show they are getting massive 
applications for the few students that enroll. It is well known 
that capacity doesn't exist.
    So the question is, if you are going to rely on traditional 
schools to provide that capacity, you--Congress--and the States 
are going to have to come up with the infrastructure to do 
that. What we are suggesting is private capital is willing to 
build that infrastructure, but the money has to follow the 
students--not the schools but the student.
    Mr. Bishop. My time is up. If the Chairman will allow--
    Mr. Rosen. Mr. Bishop, if I could respond on the issue of 
access, I can give you some very clear sets of examples.
    We have three schools within the Catholic system that are 
right up against the 90/10 cliff, and one of the reactions to 
that is we have imposed a requirement that every student must 
pay $100 a month in order to come to our school. Now the result 
of that, these are--two of these three schools are in the 
border towns of Texas among the poorest communities in the 
United States; and the result is that there are hundreds of 
students who want to come to our institution, who want to take 
the next step in advancing their career and becoming role 
models for their children, but they can't do it because $1,200 
a year is absolutely an insurmountable burden for them.
    Mr. Bishop. But Mr. Moore said that 5 percent of his 
institution's budget is dedicated to repayable assistance that 
goes to these students. Is that correct? Now--
    Mr. Moore. That doesn't count against 90/10, by the way. We 
don't get any credit for that.
    Mr. Bishop. That would be a source of tuition. That is a 
non-Title IV source of tuition, is it not?
    Mr. Moore. But it doesn't count in the 90/10 formula.
    Mr. Rosen. Cannot be counted on the 10 side of the 90/10.
    Mr. Bishop. So the 10 side relates only to what students 
pay out of pocket.
    Mr. Rosen. It is money that comes from a student's pocket.
    Mr. Bishop. That is the way I read it.
    Mr. Nassirian. The mode of analysis, the one way of 
thinking about it, you have heard all about the concerns 
expressed by the President of Harvard University of lack of 
economic diversity at the very top of our system of higher 
education. One may ponder why should we be concerned. Access to 
what? At the most prestigious institutions, you are looking at 
a per capita subsidy above and beyond out-of-pocket expenses 
that today, give or take, borders on around $24,000 per head. 
In other words, a student who goes to the most selective 
segment of our system of higher education is receiving an 
additional $24,000 of subsidy from sources other than what he 
or she pays.
    At the other extreme, you have for-profit institutions 
where, by definition--and this is for Mr. Andrews, who isn't 
here--this is a mathematical issue. The amount of subsides is a 
negative amount. The amount they pay--typically, on this the 
school is losing money and may be headed a bad way, is actually 
beyond what the expenditure per student adds up to.
    So when we talk about capacity issues, we are certainly--as 
enrollment planning officials, we are very aware of the 
critical role that for-profit sector institutions can play. But 
that is good news for them, because that is a way of actually 
going beyond 90/10. If the State of New York has a capacity 
issue, it can contract with New York institutions and, guess 
what, the funds that derived from the State of New York will 
actually remedy the 10 percent issue.
    The real critical problem is why is it that nobody--why is 
it all Title IV money? Why isn't somebody else putting a dime 
on the dollar into this pot? And, candidly, that is how $600 
toilet seats were sold to the Pentagon. If we required people 
to have a market test on the front end, we would have avoided 
the--
    Mr. Rosen. There is an assumption that students have 
thousands of dollars at their disposal to spend on their 
education. The purpose of Title IV is to enable the lowest-
income students to acquire the ability to go to school and 
improve their lives. The reality is, sure as we sit in 
Washington, it seems like, of course, they should be able to 
contribute $1,000, but that is not the case with a lot of 
students.
    Mr. Bishop. That is not the point I am arguing.
    Mr. McKeon. Mr. Petri.
    Mr. Petri. Thank you, Mr. Chairman. Apologize, I had a 
hearing next door on a different Committee.
    I guess I just have a general area I would like to explore 
with you briefly. That is the area of the competition between 
the traditional vocational schools and State schools and the 
proprietary education.
    It is my impression that proprietary our for-profit 
schools, the Kaplans and the Parsons, the Phoenixes of this 
world, have grown enormously because they have been meeting a 
huge need. They have adjusted the way they provide education to 
much more focus on the consumer rather than having the society 
adjust to the way they traditionally were doing things. So you 
would think that should be rewarded rather than--it probably is 
causing enormous change in the government side of education as 
a result, rather than us throwing up barriers to that.
    One thing that I am curious about is whether in proprietary 
education you have the phenomenon of students that we see in 
the public sector--I don't know if it is true in vocational as 
it is in general--of kids not graduating in 4 years but 
stretching it out and using the money to have a good life 
experience rather than getting on in the field of work. Nothing 
against all that, but that is not what the taxpayers' money is 
for.
    Could you comment on that and how we can minimize farming 
the system for life-style value as opposed to supporting people 
acquiring needed skills which benefits us all?
    Mr. Rosen. I think, to respond to the first set of 
comments, I really believe that what has made the higher 
education the best in the world is exactly the competition 
between various modes of education from the Harvards to the 
State colleges to the community colleges. We put--the Congress 
in its wisdom has put the money in the hands of students to 
make choices as to what institution meets their needs. It is 
not--Congress isn't making those decisions, but students make 
the decisions as to what is right for them. The result of that 
is schools compete for those dollars, and they try to become 
better and more effective at reaching niche audiences that want 
their kinds of programs.
    Now, one of the ways that traditional schools compete is by 
being relatively relaxed on the subject of graduation or moving 
along toward graduation. I think you would find at most of the 
proprietary schools we tend to be much more disciplined about 
moving students from quarter to quarter and on to graduation, 
in part because we know that our students are not there for 
general life-style issues or for social issues. They are there 
because they want to advance in their careers. They want to 
make more money and provide for their families. We are doing 
them a favor by providing more discipline and insisting that 
they come quarter by quarter.
    To take a leave of absence at Kaplan College is a very 
difficult process. In a family emergency it is possible, but it 
is highly discouraged because we know once a student, 
especially a student who is has not shown a record of academic 
success before, once they step off of the path, it is much 
harder to get them back on.
    Dr. Letteney. May I respond to that as well? Just in terms 
of capacity I think you should know that over the last 3 years 
the community college credit enrollment has increased about 20 
percent. So we are handling some of that capacity, too.
    And I agree with Mr. Rosen that, for example, in the 
community colleges we anticipate students are going to step 
out. At my institution, I have more part-time than I have full-
time students. We anticipate they may come in needing 
remediation. Over 60 percent of our students do. We anticipate 
they may have family issues and other issues. Their average age 
is 29. Most of them are working adults. So we do things 
differently, not to criticize either way that we do it, but we 
are providing different opportunities.
    Mr. Smith. When we think of education, we think of these 
students--these students are individual people. I think 
sometimes we think of education as one-size-fits-all. Truly 
different personalities, life-style may make it more 
advantageous for one student to go to a proprietary school, 
another to a public school.
    I have a relative who attended Ohio State University for 
about 2 weeks and realized it clearly was not the right fit for 
her. She left but re-engaged to increase her odds in the 
workforce. She is now in nursing school at a community college.
    I like the fact that there is competition, and we must 
acknowledge that this particular institution or this particular 
type of institution may not be the best fit for all students. 
So let's give the students a choice.
    I really like what I have heard today in regards to 
allowing the dollars to follow the students, allowing the 
students to get the education and create a stronger workforce.
    Thank you.
    Mr. McKeon. I don't even look at it so much as competition 
as expanded opportunity. I think that is what we need to focus 
on.
    Mrs. McCarthy.
    Mrs. McCarthy. Thank you.
    I have to say I am really enjoying the debate that we see 
going on here.
    Let me first say, when Mr. Boehner was talking about single 
definition, New York State has had that for so many years and I 
don't understand what the problem is, because our board of 
regents has come up with the single definition and it has 
worked very well for everybody.
    Second part that I would like to talk about, which will go 
to the whole panel, hearing the concerns, No. 1, of a lot of my 
colleagues here and the debate that is going on in the panel, 
even though technically in 6 years we would be looking at this 
bill again, would you all be a lot more comfortable if the 
concerns that people had with repealing the 50 percent, the 90/
10 and moving to a single definition stem from the well-known 
problems that went on with the career colleges going back 
almost 10 years ago or even more than that? So, for the panel, 
what if Congress repealed these items now but reconsidered some 
or all of them the next time the HEA reauthorization comes up? 
We can get the GAO to do a report during these next 6 years.
    It seems to me that it is--not making the changes permanent 
does two things. It would enable schools to prove themselves, 
and we can address concerns that some have had with 
accountability and stability of the schools.
    The other thing is, talking with a number of the career 
colleges, some concern which really didn't come up that much 
during this discussion was taking money from Title III and 
Title V, and a lot of the career colleges have said that is not 
a big issue for them. So I guess I would like the response--I 
think, on both sides of the aisle, no matter what we are 
looking at, we are trying to make sure that access, which I 
think is the important word here, that all students, depending 
on what college they want to go to, have the ability and the 
right to go to that particular school.
    And the career colleges, in my opinion, I guess because I 
have good experience in New York with a number of the colleges 
and have traveled to look at some of the other colleges, that 
the access is there, and it fits a lot of students. I think 
that is important. I thing that is what our Committee is 
supposed to be doing, making sure access and financial help is 
there.
    There is one other thing in the bill, and I don't know if 
you can answer that right now or not. I will find that out 
later when we look into the bill a little bit deeper. My 
understanding is with the career colleges they cannot make a 
profit and the profits that they do make have to go back to the 
student and not for brick and mortar, expanding their schools 
and things like that. Am I understanding that part of the bill?
    Mr. McKeon. Mrs. McCarthy, I just--I will answer that, but 
if I could just intervene here a little. Mr. Smith needs to 
leave to catch his plane, and we all know what that is like 
nowadays. So if we could thank you, Mr. Smith, and excuse you 
and appreciate your--
    Mr. Smith. I was scheduled at noon, but I enjoyed and was 
so honored to be a part of the conversation. I would say, in 
closing, thank you and acknowledge that our organization today 
is stronger because of the graduates that we are finding at 
these proprietary schools. We want to see them grow and see 
them be successful in the future. Thank you. Many blessings.
    Mr. McKeon. To respond to your question, if a proprietary 
school, the way the bill is currently written, would receive 
money in a competitive grant, they would have to use it for 
student services. They couldn't use it to build brick or mortar 
or to increase the endowment or physical facilities.
    Mrs. McCarthy. Thank you.
    What would you all think about with the question I had 
asked before?
    Mr. Moore. Well, first off, Congress has the right to 
reconsider the law at any time; and certainly 5 years hence you 
must reconsider it. I might be a little nervous with leaving an 
automatic death sentence on a bill, given, with all due 
respect, Congress's sometimes not up to time reconsideration. 
It would be too bad to find that these changes were working and 
then they arbitrarily died because of the calendar.
    But I think, once again, this is part of a political 
process, and I think we need to take a look at what it would 
imply, because I know that is not the consequence you are 
after. But I think we can take a look. As we go through this 
deliberation, we would love to sit down with you and get a 
little more information.
    I think in terms of the Title III, Title V, having again 
run a public community college and knowing how dependent public 
institutions are on that additional Federal funding above their 
local taxes and State taxes and Title IV for student tuition, 
it is unlikely that proprietary schools would even be eligible 
for those funds. And I can tell you, having been there, that 
the likelihood of me investing the resources to apply for one 
of those grants is somewhere between zero and nothing. That is 
not a good use of my time. If I need to raise money, I will go 
back out in the capital markets to do that. I am not going to 
try to do that through Title III and Title V.
    Now, having said that, if there is an entitlement that 
follows students--not the institution but follows students--and 
there is a body of students that are eligible, they ought not 
be discriminated against simply because of the institution they 
are in.
    Let me take one more license. The question today was 
whether or not for-profit students are being treated equitably. 
I think the very definition of the dual definition answers the 
question. No, they are not. If there was not a concerted effort 
to treat for-profit students differently, there would not be 
two sets of definition of higher education. There would only be 
a single definition.
    Mr. Nassirian. Mrs. McCarthy, if I may, I knew we would 
come to agreement at some point; and that agreement is at hand. 
They are not being treated equitably by the judgment of recent 
history. As I said, the incident of default and disaster is 
significantly higher for those students who have attended that 
sector. This isn't Corinthian. Corinthian is actually a fine 
institution. It is the universalizing of an anecdote, a couple 
of good apples making us oblivious to the bad apples that may 
be in the mix.
    The organization you may have firsthand experience with, 
the association of proprietary colleges in the State of New 
York, that is a fine collection of institutions; and that model 
of legislation would be perfectly acceptable. The problem is 
the legislation before the Committee goes vastly beyond that. 
That is the real issue. I think there is room to compromise and 
model something along the lines of what you just described.
    I don't think the bill as currently proposed does that. Nor 
do I think experimenting with what is, in fact, a significant 
life-altering situation for hundreds of thousands of students 
who may be victimized is a chance we should all take. The 
burden is on the side that argues for change. Why change the 
definition?
    Mr. Nassirian. Arguments have been made. I don't find them 
very compelling, for my part. Obviously, the Committee will 
have to exercise its judgment.
    Mrs. McCarthy. But that is the reason we have hearings, 
because this is an ongoing piece of legislation; and that is 
why we like to reach out to everybody, so that, hopefully, we 
can hear from your concerns and then the Committees go back and 
possibly look at it. I happen to think that we can put 
safeguards in there to make sure, because this Committee 
certainly doesn't want to waste its money. So I think that can 
be worked out in time.
    I yield back. Thank you.
    Mr. McKeon. Thank you.
    Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman; and thank the members 
of the panel for what I think has been a good discussion on 
this subject that has sort of focused my interest.
    I note that the issue raised by Dr. Letteney and 
Congressman Castle a little bit earlier still troubles me, is 
why it would be appropriate for funds from the Federal 
Government, essentially taxpayers' money to fund 100 percent of 
the profits of private companies, which is essentially what 
will happen if we pass the 90/10 Rule--and I have not really 
heard an answer for that, and I have had long discussions with 
friends that were in favor of this. But it is a philosophical 
and policy issue that I have not yet heard a distinct answer on 
as why we would want that to happen.
    Mr. Moore do you want to take a shot at that again?
    Mr. Moore. Sure. Well, let me kind of turn the question 
around. Is it any more morally correct to fund 90 percent--
using your analogy, 90 percent of our profits as opposed to 100 
percent?
    Mr. Tierney. Well, I suppose we could eliminate it all.
    Mr. Moore. And I think that is the whole point that we are 
talking about--
    Mr. Tierney. Would that be your motion, you know, you want 
us to take it out? Because I am not sure I am there either. So, 
I mean, we can keep moving back, but what I want to know is why 
the last 10 percent when I think our Federal monies are not 
reaching the places they have to reach in some of our other 
institutions.
    Mr. Moore. Correct. The point of the issue has nothing to 
do with funding institutions. It has to do with funding 
students.
    Mr. Tierney. I don't buy that. I am sorry. That is a nice 
comment. Tell me how it is that funding 100 percent isn't going 
to increase your profits by another 10 percent.
    Mr. Moore. It is not necessarily going to increase the 
profit by another 10 percent. We will probably reinvest much of 
that money back into those students.
    Right now, if a student can't come up with 10 percent of 
the cash to go to school, as Mr. Rosen previously mentioned, if 
they can't pay $100 a month our whatever it is, they can't go 
to school. Now when we remove that barrier and students step 
down one more level, then we have to provide additional 
counseling support for those students. Today, every one of my 
teachers has to call a student who misses class that day to 
find out why they are not in class and get them back the next 
day. Now that is counseling up front and in the face. So if we 
have students that are even less well-prepared than we have 
today, the cost of that counseling is going to be even greater 
than it is today.
    Finally--
    Mr. Tierney. I thank you for your effort on that, but I am 
not sure that--I am not sure that I buy that aspect of it on 
that. But--
    Mr. Moore. Well, let me make one more--
    Mr. Tierney. I am on limited time, so if you can't do it 
quickly--
    Mr. Moore. I am sorry.
    Mr. Tierney. If you have to do it quickly. I have got 
limited time.
    Mr. Moore. OK. Of the roughly $100 million of profit that 
we will make this year after tax depending on 40 percent, $65 
million of that is being plowed back into facilities and 
support for the students. Nearly everything we make is going 
back into those students, and none of it is going to 
shareholders.
    Mr. Tierney. There is at least--a correlation I think has 
been noted here earlier between the fact that the heaviest 
users of Title IV funds and the higher default rates--it may 
not be a direct causality--I think that--as one gentleman 
indicated, but there is at least a correlation on that. I am a 
little surprised that we are moving forward on this and we have 
yet to see an real data from the Department of Education 
indicating that eliminating the 90/10--what the effect would be 
and whether or not any remaining protections against fraud and 
waste would suffice or would it serve the purpose. I would like 
to think that we might not move until we had that kind of 
information on that.
    Mr. Moore. May we work with your staff on helping to 
provide that?
    Mr. Tierney. Well, I think you ought to work with the 
Department of Education to provide it. That is who has to do 
the work on that.
    But let me Dr. Letteney a question here. We have focused 
here today on proprietary schools, and that is about 7 percent 
of the highly nontraditional students that attend private for-
profit institutions compared to about 64 percent who attend 2-
year institutions. Now the community colleges in my district, 
they have low-income students there to a higher proportion. 
Those students work, many of them full time, most of them part 
time at least. We can debate the 90/10 Rule, the 50/50 rule for 
a long time. But Dr. Letteney, can you tell me in the short 
time I have left what things can we do that would have a 
greater impact on opening the doors for those nontraditional 
students to remain in school, as well as to get into school?
    Dr. Letteney. I think that because capacity has increased 
so significantly one of the things that you could do--and I 
know that you want this to be revenue neutral here, but, 
obviously, increasing Pell is going to be important in coming 
years because our students are understanding that without some 
kind of postsecondary college or training they are not going to 
do well in the 21st century as competitive workers. And so that 
is absolutely critical.
    I think other things--I would just say to you that the TRIO 
program has probably been the single most transforming program 
on my campus that we have ever had to deal with poor students 
who are unfamiliar with college, because they are getting 
significant support. So those are items that I would suggest to 
you.
    Certainly, I would also suggest please don't cut the amount 
of Title III and Title V money that is available to our 
students. Our community colleges now serve--of all higher 
education students, we serve 45.9 percent of undergraduate 
American--African American students and 56 percent of Hispanic 
American students and almost 50 percent, 48.6 percent, of all 
first-generation students. So capacity is going to be an issue 
for us in the coming years.
    Mr. Tierney. Thank you.
    Dr. Letteney. Thank you.
    Mr. Tierney. Yield back, Mr. Chairman. Thank you.
    Mr. McKeon. Thank you.
    Mr. Hinojosa.
    Mr. Hinojosa. Thank you, Mr. Chairman; and I also wish to 
thank the witnesses for coming before our Committee today.
    I would like to say that I am disappointed that this 
discussion on the treatment of proprietary institutions in the 
higher education act has been framed as an issue of 
discrimination. The issue at hand is not whether we are fairly 
providing assistance to the low-income, to the minority and to 
the disadvantaged students. It is about whether we are 
investing institutional capacity building funds and grant 
assistance in institutions that belong to the low-income, the 
disadvantaged and the minority communities, institutions that--
my State of Texas, for example, has been systematically 
underfunded to such an extent that the courts had to step in--
or in private businesses that exist for the benefit of 
individuals and shareholders as do the proprietary schools. To 
frame the issue in the language of civil rights is an affront 
to those of us who were forced to attend segregated public 
schools.
    I would like to ask two panelists, Dr. Letteney and Mr. 
Nassirian, to further elaborate on how the proposed single 
definition of institution of higher education will radically 
alter our institutional aid programs and discuss the effects 
that the shifting of the focus and resources will have on the 
communities that are supposed to be served by these programs.
    Start with you, Dr. Letteney.
    Dr. Letteney. Thank you, Mr. Chairman, Representative 
Hinojosa.
    What we see is simply a dilution of current funding. And I 
know that you have been a strong champion, Representative 
Hinojosa of HACU. HACU has been trying to move the amount of 
Title V money up to at least $100 million. If we have 
significant numbers of for-profit institutions coming into our 
current 165 HSI, the pool of that Title V money clearly--that 
is going to severely affect those Hispanic-serving institutions 
that serve the majority of Hispanic students who, 
unfortunately, are also--most students are also low-income 
students in this country.
    And the same goes for Title III. Title III has an even 
greater impact on 2-year institutions as about 70 percent of 
the Title III grants go to resource poor 2-year community 
colleges.
    Mr. Hinojosa. Mr. Nassirian.
    Mr. Nassirian. Mr. Hinojosa, I also associate myself with 
the response you just got; and I want to state for the record 
our agreement with your observation that the debate is not a 
substantive one if we begin to worry about the schools to the 
detriment of the students. Contrary to the assertions made 
today, aid does not currently and should not follow the 
student. It doesn't follow the student from an eligible 
institution to an ineligible institution, for example, and it 
shouldn't.
    The issue of access is critical. We concede, as an 
organization that has for-profit collegiate institutions in its 
membership, that access has been enhanced around the margins 
because of innovations that these institutions have brought to 
bear on the education market. But the representation that what 
we want to do, that the solution to this country's coming 
crisis is to take disproportionately minority students, as luck 
would have it, and shift them from high-subsidy institutions 
like the one represented right next to me to low-subsidy ones, 
I think, is a mistake.
    I think we want the minority student population to receive 
the highest per capita subsidy because that is generally 
associated with the American dream and the opening of doors, 
and the notion that we are going to turn them into the likely 
marketplace where a profit is squeezed out of the system is, 
candidly, not a particularly credible one.
    Mr. Hinojosa. Well, thank you for answering my question.
    I want to tell you that I have come to Congress and I make 
many of my decisions based on experience and from what I learn 
from my colleagues.
    But I can tell you that, in the region that I come from, 
from 1974 to 1994 we depended on proprietary schools. We had a 
double-digit unemployment rate that ranged from 20 to 25 
percent in an area that today has one and a quarter million 
people. We decided that we were going to invest in a community 
college, South Texas Community College. In just 10 years, it 
has gone from less than 1,000 students to 16,000 students. The 
result has been that we have attracted manufacturing companies 
into our area and that unemployment of 21, 22 percent when I 
was sworn in is now 10.5 percent. They are telling us that we 
are producing a trained workforce where, with the proprietary 
schools that we had, for that 20-year period where we put so 
much emphasis on them we just could not beat that double-digit, 
huge, very high unemployment rate.
    So I have concerns about how this would impact community 
colleges and most of our universities and particularly, yes, 
HSIs and HBCUs. In 1996, we were getting $10 million to recruit 
Hispanics into colleges. Today, we get $95 million. Where we 
used to serve 34 universities with HSI money in 1996, today we 
serve a little over a hundred, but we have 250 of those 
identified HSIs. So, as you can see, there isn't enough money 
in the system today, at least not for education. There is for 
many other things but not for this, and so we have to fight 
that this money is not diluted and taken away from those that 
are now beginning to show us some good results after 10 years.
    With that, I yield back, Mr. Chairman.
    Mr. McKeon. Thank you. And the gentleman will remember that 
last reauthorization we helped you to get the special title for 
HSI, and I have been very supportive of reaching out to the 
Hispanics and helping them in their education.
    One thing that disturbs me--and it sounds like we are kind 
of getting to where we are fighting between proprietary and 
community college. I have been a strong supporter of community 
college. That is not the issue, and that is why I asked the 
question: If we took the money out of that equation, do we have 
the problem with the single definition? And I think we need to 
remember that.
    This bill--we will, I am sure, have some changes as we go 
through the process. But I think that Mr. Moore pointed out 
that he probably wouldn't even compete for those funds.
    What we are talking about, last year, we provided--the 
Federal Government and the lending institutions provided $70 
billion for higher education across the country. Title III was 
how much? $95 million? $100 million? Between Title III and 
Title V we are talking about $200 million out of $70 billion. 
So I think we--and if we took that money out of it, you know, I 
think we could work this out.
    Mr. Wu.
    Mr. Wu. Thank you, Mr. Chairman.
    I understand that with Mr. Hinojosa's inquiry we might be 
coming around to the single-definition issue for a third time 
in this hearing. But I am just trying to drill down and try to 
understand this a little bit better, because I did have someone 
come to my office after the person had visited Mr. Hinojosa.
    Some of the arguments on either side of this issue I find 
less illuminating than I would like. Because on the community 
college side the argument seems to be that there is a thinning 
of the soup, and we don't want to thin the soup any further; 
and on the other side of this issue, there is the argument that 
Mr. Hinojosa similarly found not completely convincing which 
was to cast this as a civil rights issue.
    I would like to just give you all an opportunity again to 
further address this single-definition issue, and I would like 
to throw it back to the panel with this additional inquiry, and 
that is, if we were to hold current institutions harmless in 
terms of thinning the soup, how much additional resources would 
we have to throw in in order to keep the soup, if you will, of 
the same consistency?
    I would like to ask that question but also just give you 
all a further chance to address the single-definition issue and 
include Dr. Letteney and Mr. Nassirian and Mr. Moore to give 
you all--but all four of you a chance to address this, if you 
would like.
    Mr. Rosen. Well, I can start off by saying I would join 
with Mr. Moore and say I can't imagine that we would be seeking 
the Title III or Title V funds. It is just so unlikely as to be 
hard to imagine. So, for us, it is much more an issue of 
simplifying--to call it a civil rights issue is way overstating 
it. But to say that--
    Mr. Wu. Well, that wasn't my characterization. That was the 
characterization of someone who came to my office, allegedly to 
speak on behalf of proprietary schools.
    Mr. Rosen. Well, OK. Then I disagree with that 
characterization.
    It is one of differential treatment, and that is a real 
issue. But it is mainly a symbolic issue, and it also is an 
issue of confusion. That is, there are a number of States that 
follow the Federal definition, and I have talked to legislators 
who don't even realize that they are excluding important 
elements of their local economies because they don't realize 
that for-profit institutions are not included in State 
definitions. So I think there is just confusion surrounding it.
    When it gets to the actual funding, each funding program 
has its own definitions, its own mission; and some of them are 
institutionally based. Unlike the Title IV funds which follow 
the students, some of these are about institutions; and I think 
that within the definition of the programs we can talk about 
which institutions are appropriate to get the money.
    Dr. Letteney. Mr. Chairman, Representative Wu, I think one 
of the issues that we are concerned about is not only the 
extension of for-profits to apply for Title III and Title V 
funds--and according to my information, the expenditures in 
Title III were $81 million this year--
    Mr. Wu. I am sorry. Could you repeat that?
    Dr. Letteney.--and in Title V, $94 million.
    Mr. Wu. What was the first one?
    Dr. Letteney. $81 in Title III and $94 in Title V.
    So, I mean, by your definitions that may not be a lot of 
money. I mean, to some of us that is a lot of money.
    Mr. McKeon. If the gentlelady will yield--if the gentleman 
will yield, I didn't want to refer it. I have not been here 
long enough yet to say $190 million is not a lot of money. I 
said, in proportion to the $70 billion that we put into the 
program. There has been no argument between moving Pell Grants 
from student--you know, following the student. But, again--
    Dr. Letteney. I think one of our major concerns about this 
issue is what we have talked about before, its unintended 
consequences. We do not know how many programs--how many 
legislative programs would then be open to for-profit 
institutions because a list has not been made available. So 
that analysis, as far as our association knows, has not been 
done yet. We assume that NSF grant funds would be available, 
would be open, health and human services grants would be open, 
we assume that grants in other Federal programs would be open, 
but we don't know that this research has been done yet, and we 
don't know that other Committees who have jurisdiction under 
these other grant programs are even aware of the impact of the 
change of this definition.
    Mr. Wu. Mr. Chairman, with your indulgence, I would like to 
give Mr. Nassirian and Mr. Moore a chance to answer the 
question, even though my time has expired.
    Mr. Nassirian. Mr. Wu, beyond the redistributive effect, 
there is sort of an extremism to what the pending legislation 
does which is susceptible to compromise. I think the Chairman 
might have misspoken when he suggested that the bill limits the 
definition to degree granting. I think that would be something 
we could all kind of coalesce around after some discussion. But 
the bill, as drafted, and I am reading it right now, does in 
fact allow programs that are not shorter than 1 year--
    Mr. McKeon. Degree granting for Title III and V.
    Mr. Nassirian. I am speaking about the single definition, 
not so much participation in III and V but in general. The 
concept of calling--
    Mr. McKeon. As currently written, single definition only 
applies--I mean, for III and V, it would have to be degree-
granting institutions.
    Mr. Nassirian. Correct. But I think the issue was whether 
we can support--whether--leaving monetary redistributive 
effects aside, whether the definition as such is agreeable. And 
I respectfully submit to you that a 1-year nondegree granting 
certificate program shouldn't be called an institution of 
higher education. It should be called what it is. I mean, why 
do we want to do violence to the language? I don't think that 
is the intent.
    If there is nothing but a matter of substantive change that 
is justified on the basis of real analogous sort of programs 
being offered in two different settings, certainly that can be 
called an institution of higher education. But the bill as 
currently written defines institution of higher education a 
little too broadly, and it should be perhaps whittled down to 
something that we can all support.
    Mr. Moore. A major source of funding for universities and 
colleges from Harvard to Cal State Fullerton--not to pick on 
Fullerton--are less than 1- year certificates that are granted 
out of their graduate schools. Are we suggesting that because 
they are less than 1 year that we are going to eliminate those 
programs from the provisions of Title III and V? And obviously 
we are not.
    The issue here has little to do with the nature of the 
institution. Somehow we have gotten ourselves adrift here. We 
are trying to do a comparison between the value of community 
colleges versus for-profit schools, versus others; and that is 
not the purpose of what this bill is. This bill is to look at 
providing access to low-income and middle-income students that 
otherwise are being denied access to an education because of 
financial reasons. There could be 10,000 other reasons why they 
can't get there, but the purpose of this bill is to deal with 
the financial support for those students. So the purpose of 
what we are dealing with is to provide that access.
    Now, if, in fact, providing that access to a student means 
that there is enough students attending a for-profit school to 
make those students eligible for a program not currently there 
and that school wants to apply for that grant fund, I don't 
know why they should be denied it. But, as I said earlier, 
frankly I can't imagine any for-profit school turning to that 
as a source for infrastructure money. That is all it can be 
used for when there is other sources.
    Not to brag, but I have a $230 million line of credit that 
I can write checks on any time I want. That is more than the 
entire entitlement that the Chairman is talking about. So why 
would I be concerned about trying to draw down Federal monies 
to support my development? And I am one of the smaller 
companies in the sector.
    So I think we are allowing a certain amount of emotion 
about damaging somebody who isn't going to be damaged, at the 
same time denying the opportunity to protect students who, 
simply because they are low-income, taking aside any kind of 
discriminatory issue, just the fact that they are low-income, 
they are not eligible for a program that they ought to be 
eligible for. So, you know, it is purpose, purpose, purpose. 
What we are talking about here is student access and providing 
equal access to students across a variety of menus, which 
includes for-profit, community colleges, endowment-supported 
schools and tax-supported schools.
    Mr. Wu. I thank you for your forbearance, Mr. Chairman, and 
thank the panel for its answers. I am afraid I am in a markup 
right now and have just been notified I have missed at least 
one vote up over there, so if you will excuse me. Thank you, 
Mr. Chairman.
    Mr. McKeon. Well, thank you very much; and I want to thank 
the witnesses. I think it has been very enlightening, I think 
it has been very productive, and I hope we will be able to, as 
we move forward, continue to have more of these--you want a UC 
request?
    Mr. Kildee. Yes, Mr. Chairman. I ask unanimous consent that 
a letter from the American Federation of Teachers be included 
in the record of this hearing.
    Mr. McKeon. No objection. So ordered.
    [The information referred to follows:]

            Letter from the American Federation of Teachers

June 16, 2004

The Honorable George Miller
Ranking Member
Committee on Education and the Workforce
United States House of Representatives
2101 Rayburn House Office Building
Washington, DC 20515-6100

Dear Representative Miller:

    On behalf of the 1.3 million members of the American Federation of 
Teachers (AFT), including the 130,000 higher education professionals, I 
write to express our strong opposition to specific provisions in H. R. 
4283, the College Access and Opportunity Act of 2004, which are the 
focus of today's hearing on for-profit institutions. We appreciate the 
opportunity to share our views with you.
    In general, the AFT believes this legislation falls short of the 
historical mission of the Higher Education Act (HEA), which since 1965 
has opened the doors to higher education for students regardless of 
their financial circumstances. Unfortunately, H. R. 4283 exacerbates 
existing deficiencies in the HEA rather than improving current law.
    In addition to the lack of increase in the Pell Grant or any 
support for the growing nontraditional student population, the AFT is 
concerned with the attention given to for-profit institutions. 
Unfortunately, H. R. 4283 promotes the financial interests of the for-
profit higher education industry at the expense of the needs of 
students. This is evident in the proposal to change rules and 
definitions that would open more federal dollars to for-profit 
institutions. For more than a decade, these guidelines have ensured 
that student and institutional aid goes to low- and middle-income 
students, while also protecting our federal financial-aid system from 
fraud and abuse.
    H. R. 4283 calls for a ``single definition'' of an institution of 
higher education (IHE). This would make all IHEs, including for-profit 
institutions, eligible for Title IV programs that currently provide 
institutional aid to public and private nonprofit colleges and 
universities serving large numbers of minority and other nontraditional 
students. Under current law, many for-profits are not eligible to 
participate in these programs.
    In addition, the bill would repeal a legal provision that prohibits 
students who attend institutions offering more than half their 
coursework by distance education from receiving federal student aid. 
The AFT joins other higher education associations representing faculty 
and administrators in opposing changing this 50 percent rule, which has 
served to ensure integrity in federal student financial-aid programs 
and promote ``face-to-face'' interaction as part of a student's college 
education. It is well established that current funding for public 
colleges and universities, as well as for federal student aid, is 
inadequate. Making a new universe of institutions eligible for student 
aid, as suggested in H. R. 4283, without imposing safeguards aimed at 
preventing fraud and abuse would be highly irresponsible.
    The AFT believes that the federal government should collect more 
information and study the impact of lifting the 50 percent rule before 
considering such a dramatic change. We support comprehensive research 
that evaluates the quality of distance learning, the students it is 
serving, and how federal aid programs will be affected by the expansion 
of student-aid eligibility to distance learning. We believe Congress 
needs to address these and other relevant questions before moving in 
this direction.
    Finally, we oppose the lifting of the so-called 90/ 10 Rule which 
mandates that for-profit schools demonstrate that 10 percent of their 
revenue is derived from sources other than federal student-aid funds. 
The 90/10 Rule was put into effect to ensure that federal student aid 
was not the sole funding stream for these schools. As a result of the 
implementation of that rule, fraud and abuse in federal student aid 
programs were drastically reduced. There is no evidence to believe this 
protection is no longer necessary.
    The AFT believes that the current HEA reauthorization represents a 
tremendous opportunity to improve access to higher education for 
America's low- and middle-income students. It should not be reduced to 
an exercise in improving access to federal aid for private 
entrepreneurs. To this end, we look forward to working with you on 
these issues of great importance to AFT higher education professionals 
and the students they serve. If you have further questions, please 
contact me or Gabriella Games of the AFT legislative staff at (202) 
879-4452.
    Thank you for considering our views on H. R. 4283.

Sincerely,

Charlotte J. Fraas
Director, Legislation Department
American Federation of Teachers
                                 ______
                                 
    Mr. McKeon. Thank you very much for being here, and this 
hearing is now adjourned.
    [Whereupon, at 1 p.m., the Committee was adjourned.]
    [Additional material submitted for the record follows:]

  Press Release from Hon. George Miller, Ranking Member, Committee on 
                      Education and the Workforce

FOR IMMEDIATE RELEASE: Wednesday, June 16, 2004
CONTACT: 202-225-2095, Tom Kiley or Daniel Weiss
  REPUBLICAN HIGHER EDUCATION BILL REMOVES BARRIERS TO FRAUD & WASTE, 
                            SAYS REP. MILLER
    WASHINGTON, D.C.--Rep. George Miller (D-CA), the senior Democrat on 
the House education committee, today issued the following statement on 
Republican higher education proposals that would eliminate safeguards 
against fraud and waste at for-profit institutions of higher education. 
These proposals were the focus of a full committee hearing this 
morning.
    ``Today's hearing focuses on the significant changes that the 
College Access and Opportunity Act, H.R. 4283, makes to institutional 
integrity provisions under current law.
    ``In particular, this hearing focuses on for-profit schools and 
asks whether or not students at these institutions receive equitable 
treatment. Under current law, all eligible students are treated 
equitably, regardless of whether they attend a for-profit or non-profit 
institution.
    ``Therefore, the real question we should be asking is: `What is the 
right balance between granting schools flexibility and ensuring that 
the appropriate safeguards are in place to protect student and 
taxpayers from fraud and abuse?'
    ``For-profit institutions have participated in the federal student 
aid programs for more than 30 years. They have been the forerunners of 
many innovations-such as on-line courses, accelerated course time and 
flexible scheduling for non-traditional students-that have been 
instrumental to increasing access to higher education for students.
    ``The same business model that allows for-profit schools to 
innovate can also breed the types of rampant fraud and abuse that 
occurred in the 1980s and early 1990s, absent sensible safeguards. As a 
result of these widely documented abuses and ballooning student loan 
default rates, in 1992 Congress enacted a series of protections and 
integrity measures to safeguard students and taxpayers.
    ``The good news is that when appropriately enforced by the 
Department of Education, these protections have successfully stopped 
most fraudulent and abusive practices in the student aid programs. The 
bad news is that, although significant problems still exist, many of 
these protections have been substantially weakened. The College Access 
and Opportunity Act indiscriminately eliminates key safeguards such as 
the 90-10 Rule.
    ``In addition, for the first time the Act makes limited federal 
funds for minority serving institutions-with dedicated public interest 
missions-available to for-profit entities. As a result, funding long 
reserved for community colleges and Minority Serving Institutions will 
be cut, just at a time when these schools are struggling to meet the 
needs of their growing populations.
    ``I support easing the transfer of credit process for all students 
at both for-profit and non-profit schools. However, the Republican bill 
makes changes to the transfer of academic credit that could result in 
students losing financial aid eligibility and hurt the integrity of the 
transfer process.
    ``Flexibility and innovation in higher education must be balanced 
against the danger of repeating past abuses, otherwise we will end up 
placing students in harm's way and wasting taxpayer dollars.
    ``Unfortunately, the College Access and Opportunity Act not only 
eliminates important fraud and abuse safeguards in the student aid 
programs, but it doesn't even come close to living up to its name. 
Instead it makes college more expensive for millions of low- and 
middle-income students and their families as they continue to struggle 
to cover rising college costs.
    ``This bill actually forces students to pay thousands of dollars 
more for their college loans, caps the maximum Pell Grant and fails to 
provide meaningful relief from rising tuition prices. At a time of 
rising college costs, high unemployment and the worst job creation 
record in 30 years, we should not be forcing students and their 
families to pay more for a college education.
    ``We should not and we cannot afford to take this path. I urge my 
colleagues to reject this bill as it is now drafted.''
                                 ______
                                 

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

    Mr. Chairman, I thank you for holding today's hearing to further 
examine the many important issues facing higher education today, and 
more specifically, to explore the evolving issues that impact students 
who attend proprietary institutions of higher learning. The Committee 
on Education and the Workforce has an excellent opportunity to increase 
equity for every American student seeking higher education as we 
continue the reauthorization process for the Higher Education Act 
(HEA), and I appreciate the opportunity to learn from today's 
extraordinary panel of witnesses in shedding additional light on how 
the College Access and Opportunity Act (H.R. 4283) can achieve that 
goal.
    Mr. Chairman in today's rapidly changing economy that relies on a 
highly trained and technologically advanced workforce, many students 
are charting a different course to obtain an education that will 
prepare them for the jobs of the future. And while traditional four and 
two-year public schools continue to play a critical role in 
contributing to the 21st Century workforce, proprietary institutions 
throughout America are playing an increasing role every year in 
educating our emerging young leaders. Many such students choose to 
study at proprietary institutions that focus chiefly on technology and 
vocational skills. Still others focus on arts and the humanities. Yet 
regardless of their focus, these fully accredited for-profit 
institutions offer an attractive alternative to traditional public 
universities for American students today.
    Yet many questions remain unanswered regarding federal higher 
education policy and how it currently serves students who choose to 
attend a proprietary school. Does the federal government treat these 
students fairly and equitably? Are they receiving their fair-share of 
federal higher education funding that will contribute to their academic 
achievement? Should Congress change long-standing federal policy in 
order to allow for-profit institutions to apply for competitive grants 
within HEA?
    In reauthorizing the HEA for the next six years, the College Access 
and Opportunity Act (H.R. 4283) tackles these questions head on by 
dramatically altering federal policy in regards to proprietary 
institutions. Most notably, the legislation includes three provisions 
that address institutional eligibility, distance education and 
accreditation: implementation of a ``Single Definition'' of an 
institution of higher learning, the repeal of the ``90-10 Rule'' for 
proprietary schools and the repeal of the ``50% Rule'' for distance 
education.
    I look forward to hearing our witness' thoughts on these critical 
issues that H.R. 4283 addresses. As this Committee continues to study 
the HEA reauthorization, Congress must find an appropriate solution to 
ensure equity and fairness for students attending proprietary schools; 
yet it must do so without jeopardizing needed funding for students 
attending traditional public schools.
    Thank you Mr. Chairman and I yield back.
                                 ______
                                 

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

    Good Morning, Mr. Chairman. Thank you for convening this second 
hearing on the committee's legislation to reduce the burdens and 
eliminate the roadblocks facing our students as they attempt to achieve 
post-secondary education. I also welcome our panel of witnesses today 
and thank them for their testimony on the equality of access between 
for-profit and non-profit schools and how this will change under the 
proposed legislation.
    Ensuring an environment where students, whether high school 
graduates or adults attempting to enter different sectors of the 
workforce, encounter equitable access to higher education is one of 
this committee's highest priorities. As we continue to embrace today's 
ever-globalizing and increasingly skill-based economy, we must provide 
Americans with the access to high-quality and affordable post-secondary 
education.
    I look forward to hearing from our panel of witnesses today, as 
they help clarify how current restrictions on proprietary institutions 
impact student access to these schools that provide many with the 
skills they need to progress in their current careers and pursue more 
sophisticated and satisfying new occupations.
    My state of Nevada provides a perfect example of the need to 
utilize all avenues of education in bringing our workforce into the 
twenty-first century. Our explosive population growth requires that all 
Nevadans are able to find the training and resources necessary to excel 
in the knowledge-based economy in which they find themselves. We must 
look to both proprietary and traditional colleges and institutions of 
higher learning to provide our workforce with the highly-skilled, 
professional individuals that will allow for Nevada's, and America's, 
continued economic and industrial growth.
    Mr. Chairman, I look forward to the testimony of our distinguished 
panel and look forward to continuing the work that our committee does 
in preparing Americans for the workforce that they will confront today 
and the years to come.
                                 ______
                                 

    Statement of American Association of Collegiate Registrars and 
Admissions Officers, the American Council on Education, and the Council 
                   for Higher Education Accreditation

    The following set of guidelines has been developed by the three 
national associations whose member institutions are directly involved 
in the transfer and award of academic credit: the American Association 
of Collegiate Registrars and Admissions Officers, the American Council 
on Education, and the Council for Higher Education Accreditation. The 
need for such a statement came from an awareness of the growing 
complexity of transfer policies and practices, which have been brought 
about, in part, by the changing nature of postsecondary education. With 
increasing frequency, students are pursuing their education in a 
variety of institutional and extrainstitutional settings. Social equity 
and the intelligent use of resources require that validated learning be 
recognized wherever it takes place.
    The statement is thus intended to serve as a guide for institutions 
developing or reviewing policies dealing with transfer, acceptance and 
award of credit. ``Transfer'' as used here refers to the movement of 
students from one college, university or other education provider to 
another and to the process by which credits representing educational 
experiences, courses, degrees or credentials that are awarded by an 
education provider are accepted or not accepted by a receiving 
institution.
            Basic Assumptions
    This statement is directed to institutions of postsecondary 
education and others concerned with the transfer of academic credit 
among institutions and the award of academic credit for learning that 
takes place at another institution or education provider. Basic to this 
statement is the principle that each institution is responsible for 
determining its own policies and practices with regard to the transfer, 
acceptance, and award of credit. Institutions are encouraged to review 
their policies and practices periodically to assure that they 
accomplish the institutions' objectives and that they function in a 
manner that is fair and equitable to students. General statements of 
policy such as this one or others referred to, should be used as 
guides, not as substitutes, for institutional policies and practices.
    Transfer and award of credit is a concept that increasingly 
involves transfer between dissimilar institutions and curricula and 
recognition of extra-institutional learning, as well as transfer 
between institutions and curricula with similar characteristics. As 
their personal circumstances and educational objectives change, 
students seek to have their learning, wherever and however attained, 
recognized by institutions where they enroll for further study. It is 
important for reasons of social equity and educational effectiveness 
for all institutions to develop reasonable and definitive policies and 
procedures for acceptance of such learning experiences, as well as for 
the transfer of credits earned at another institution. Such policies 
and procedures should provide maximum consideration for the individual 
student who has changed institutions or objectives. It is the receiving 
institution's responsibility to provide reasonable and definitive 
policies and procedures for determining a student's knowledge in 
required subject areas. All sending institutions have a responsibility 
to furnish transcripts and other documents necessary for a receiving 
institution to judge the quality and quantity of the student's work. 
Institutions also have a responsibility to advise the student that the 
work reflected on the transcript may or may not be accepted by a 
receiving institution as bearing the same (or any) credits as those 
awarded by the provider institution, or that the credits awarded will 
be applicable to the academic credential the student is pursuing.
            Inter-Institutional Transfer of Credit
    Transfer of credit from one institution to another involves at 
least three considerations:
    (1) the educational quality of the learning experience which the 
student transfers;
    (2) the comparability of the nature, content, and level of the 
learning experience to that offered by the receiving institution; and
    (3) the appropriateness and applicability of the learning 
experience to the programs offered by the receiving institution, in 
light of the student's educational goals.
Accredited Institutions
    Accreditation speaks primarily to the first of these 
considerations, serving as the basic indicator that an institution 
meets certain minimum standards. Users of accreditation are urged to 
give careful attention to the accreditation conferred by accrediting 
bodies recognized by the Council for Higher Education Accreditation 
(CHEA). CHEA has a formal process of recognition which requires that 
all accrediting bodies so recognized must meet the same standards. 
Under these standards, CHEA has recognized a number of accrediting 
bodies, including:
    (1) regional accrediting commissions (which historically accredited 
the more traditional colleges and universities but which now accredit 
proprietary, vocational-technical, distance learning providers, and 
single-purpose institutions as well);
    (2) national accrediting bodies that accredit various kinds of 
specialized institutions, including distance learning providers and 
freestanding professional schools; and
    (3) professional organizations that accredit programs within 
multipurpose institutions.
    Although accrediting agencies vary in the ways they are organized 
and in their statements of scope and mission, all accrediting bodies 
that meet CHEA's standards for recognition function to ensure that the 
institutions or programs they accredit have met generally accepted 
minimum standards for accreditation.
    Accreditation thus affords reason for confidence in an 
institution's or a program's purposes, in the appropriateness of its 
resources and plans for carrying out these purposes, and in its 
effectiveness in accomplishing its goals, insofar as these things can 
be judged. Accreditation speaks to the probability, but does not 
guarantee, that students have met acceptable standards of educational 
accomplishment.
Comparability and Applicability
    Comparability of the nature, content, and level of transfer credit 
and the appropriateness and applicability of the credit earned to 
programs offered by the receiving institution are as important in the 
evaluation process as the accreditation status of the institution at 
which the transfer credit was awarded. Since accreditation does not 
address these questions, this information must be obtained from 
catalogues and other materials and from direct contact between 
knowledgeable and experienced faculty and staff at both the receiving 
and sending institutions. When such considerations as comparability and 
appropriateness of credit are satisfied, however, the receiving 
institution should have reasonable confidence that students from 
accredited institutions are qualified to undertake the receiving 
institution's educational program. In its articulation and transfer 
policies, the institution should judge courses, programs and other 
learning experiences on their learning outcomes, and the existence of 
valid evaluation measures, including third-party expert review, and not 
on modes of delivery.
Admissions and Degree Purposes
    At some institutions there may be differences between the 
acceptance of credit for admission purposes and the applicability of 
credit for degree purposes. A receiving institution may accept previous 
work, place a credit value on it, and enter it on the transcript. 
However, that previous work, because of its nature and not its inherent 
quality, may be determined to have no applicability to a specific 
degree to be pursued by the student. Institutions have a responsibility 
to make this distinction, and its implications, clear to students 
before they decide to enroll. This should be a matter of full 
disclosure, with the best interests of the student in mind. 
Institutions also should make every reasonable effort to reduce the gap 
between credits accepted and credits applied toward an educational 
credential.
Additional Criteria for Transfer Decisions
    The following additional criteria are offered to assist 
institutions, accreditors and higher education associations in future 
transfer decisions. These criteria are intended to sustain academic 
quality in an environment of more varied transfer, assure consistency 
of transfer practice, and encourage appropriate accountability about 
transfer policy and practice.
    Balance in the Use of Accreditation Status in Transfer Decisions. 
Institutions and accreditors need to assure that transfer decisions are 
not made solely on the source of accreditation of a sending program or 
institution. While acknowledging that accreditation is an important 
factor, receiving institutions ought to make clear their institutional 
reasons for accepting or not accepting credits that students seek to 
transfer. Students should have reasonable explanations about how work 
offered for credit is or is not of sufficient quality when compared 
with the receiving institution and how work is or is not comparable 
with curricula and standards to meet degree requirements of the 
receiving institution.
    Consistency. Institutions and accreditors need to reaffirm that the 
considerations that inform transfer decisions are applied consistently 
in the context of changing student attendance patterns (students likely 
to engage in more transfer) and emerging new providers of higher 
education (new sources of credits and experience to be evaluated). New 
providers and new attendance patterns increase the number and type of 
transfer issues that institutions will address--making consistency even 
more important in the future.
    Accountability for Effective Public Communication. Institutions and 
accreditors need to assure that students and the public are fully and 
accurately informed about their respective transfer policies and 
practices. The public has a significant interest in higher education's 
effective management of transfer, especially in an environment of 
expanding access and mobility. Public funding is routinely provided to 
colleges and universities. This funding is accompanied by public 
expectations that the transfer process is built on a strong commitment 
to fairness and efficiency.
    Commitment to Address Innovation. Institutions and accreditors need 
to be flexible and open in considering alternative approaches to 
managing transfer when these approaches will benefit students. Distance 
learning and other applications of technology generate alternative 
approaches to many functions of colleges and universities. Transfer is 
inevitably among these.
Foreign Institutions
    In most cases, foreign institutions are chartered and authorized to 
grant degrees by their national governments, usually through a Ministry 
of Education or similar appropriate ministerial body. No other nation 
has a system comparable with voluntary accreditation as it exists in 
the United States. At an operational level, AACRAO's Office of 
International Education Services can assist institutions by providing 
general or specific guidelines on admission and placement of foreign 
students, or by providing evaluations of foreign educational 
credentials.
            Evaluation of Extra-Institutional and Experiential Learning 
                    for Purposes of Transfer and Award of Credit
    Transfer and award of credit policies should encompass educational 
accomplishment attained in extra-institutional settings. In deciding on 
the award of credit for extra-institutional learning, institutions will 
find the services of the American Council on Education's Center for 
Adult Learning and Educational Credentials helpful. One of the Center's 
functions is to operate and foster programs to determine credit 
equivalencies for various modes of extrainstitutional learning. The 
Center maintains evaluation programs for formal courses offered by the 
military and civilian organizations such as business, corporations, 
government agencies, training providers, institutes, and labor unions. 
Evaluation services are also available for examination programs, for 
occupations with validated job proficiency evaluation systems, and for 
correspondence courses offered by schools accredited by the Distance 
Education and Training Council. The results are published in a Guide 
series. Another resource is the General Educational Development (GED) 
Testing Program, which provides a means for assessing high school 
equivalency.
    For learning that has not been evaluated through the ACE evaluation 
processes, institutions are encouraged to explore the Council for Adult 
and Experiential Learning (CAEL) procedures and processes.
            Uses of This Statement
    Institutions are encouraged to use this statement as a basis for 
discussions in developing or reviewing institutional policies with 
regards to the transfer and award of credit. If the statement reflects 
an institution's policies, that institution may wish to use these 
guidelines to inform faculty, staff, and students.
    It is also recommended that accrediting bodies reflect the 
essential precepts of this statement in their criteria.

American Association of Collegiate Registrars and Admissions Officers

American Council on Education

Council for Higher Education Accreditation
                                 ______
                                 

      Statement of Rolf Th. Lundberg, Jr., Senior Vice President, 
Congressional and Public Affairs, United States Chamber of Commerce on 
      behalf of The Coalition for a Competitive American Workforce

    Mr. Chairman, Mr. Miller and members of the Committee, I am 
grateful for the opportunity to offer my thoughts, on behalf of the 
U.S. Chamber's Coalition for a Competitive American Workforce, 
regarding the inequities in the Higher Education Act of 1965, as 
amended (HEA), as well as the proposed modifications outlined in H.R. 
4283, ``The College Access and Opportunity Act''.
    In order to provide some context for my comments, it is important 
to begin by discussing the challenges employees and employers face, as 
they strive to build and maintain a competitive American workforce.
    Across America, employers of all sizes share the view that a 
skilled workforce is essential to maintaining competitiveness. A 
business' quality, productivity and profitability depends upon its 
ability to hire, train and retain qualified workers, who can perform on 
the job today and adapt to the new demands of tomorrow. It should 
concern us that State and local chambers of commerce report that 
workforce development is consistently among the top three problems for 
their business members.
    Over the past three years, The U.S. Chamber's Center for Workforce 
Preparation has conducted surveys of small and medium-sized businesses. 
These surveys found that employers are experiencing difficulty in 
finding qualified workers due to the lack of skills possessed by job 
applicants. Even more revealing were employers' responses when asked 
about the ability of their current workforce to meet their future skill 
requirements. About 30% of the employers surveyed indicated that, 
within two years, their employees' skills would be outpaced by 
competitive demands.
    Technology, demographics and diversity have brought far-reaching 
changes to the U.S. economy and the workplace, increasing demand for a 
well-educated and highly skilled workforce. In 1950, eighty percent of 
jobs were classified as ``unskilled''; today, an estimated eighty-five 
percent of all jobs are classified as ``skilled''. Today, few working 
adults have the education and skills required for the knowledge 
economy--only 40 percent of adults in the workforce in 2000 had any 
postsecondary degree, associate or higher. In this decade 40 percent of 
job growth will be in jobs requiring postsecondary education; those 
requiring associate degrees growing the fastest. Hedrick Smith states 
that, ``60% of our corporations are prevented from upgrading 
technologically by the low...educational and technical skill levels of 
our workers.'' Clearly, there is a greater need for more educated and 
highly skilled workers than ever before.
    One might think the answer lies in simply replacing unqualified 
workers with new, more qualified workers because that has been the 
response over the past twenty years. From 1980 to 2000, the size and 
skill of the workforce grew significantly. Baby boomers were in their 
prime employment years, women entered the labor force in large numbers, 
and the number of college-educated workers more than doubled. However, 
these trends have ended.
    The native-born workforce is aging--no new net growth is expected 
through 2020 in prime age workers. Immigrants and those workers 
remaining in the workforce longer than expected will account for all 
net workforce growth between now and 2020. Between the years 1980 and 
2000, growth in workers with education beyond high school was 138%. 
Between 2000 and 2020 it is projected to be only 19%. Most of the 2020 
workforce is already beyond reach of the K-12 system, which means 
employers and workers will need to rely on postsecondary education to 
upgrade skills.
    These findings suggest the severity of the current workforce 
challenges is just a precursor to a disconcerting future. It is 
estimated that sixty percent of tomorrow's jobs, while involving 
variations of current business operations and practices, will continue 
to reflect the rapid advance of technology, requiring skills that are 
only possessed by twenty percent of today's workers. Many of tomorrow's 
jobs--estimated at forty percent--don't exist today. These jobs will 
most certainly require a workforce of highly educated workers, 
utilizing skills that have not yet been identified in fields and 
operations that today are only being discussed in theory. These 
forecasts have led experts and analysts to project that in the future, 
4 out of every 5 jobs will require postsecondary education or 
equivalent training and that seventy-five percent of the today's 
workforce will need to be retrained just to keep their current jobs.
    However, if we are to correct these deficiencies, remedy the 
current workforce dilemma and alleviate the threat to American 
competitiveness and our economy, it is not enough to just consider the 
challenges confronting employers. It is critical that we also have an 
accurate understanding of the make-up of our workforce, appreciate 
current and prospective employees' needs and recognize the obstacles 
workers and students encounter in the pursuit of their own dreams and 
career aspirations.
    Seventy-three percent of all postsecondary students are non-
traditional students. That is to say, they are not individuals who 
graduate from high school, immediately attend a four-year college or 
university and depend on their parents for financial support. This 
large and growing segment of our population is mostly comprised of 
working adults who are seeking additional education and training to 
return to the workforce, remain current in their field, increase their 
earnings potential, pursue another job or consider a career change in 
today's demanding economy.
    During 1999-2000 almost three quarters of American undergraduates 
were non-traditional in some way:
      More than half (51%) were financially independent
      Almost half (46%) delayed enrolling in college
      39% were adults 25 years of age or older
      Almost half attended part-time (48%)
      39% worked full time
      Just over one-fifth (22%) had dependents; 13% were single 
parents.
    In 1999-2000 most non-traditional students (82%) age 24 or older 
worked. Over 80 percent report that gaining skills to advance their 
current job or future career was an important consideration in their 
postsecondary education. Roughly one-third enrolled to obtain 
additional education required by their jobs.
    From 1991 to 1999, the number of adults participating in some form 
of education increased from 58 million to 90 million. Almost 45 million 
were taking work-related courses and 18 million were seeking formal 
postsecondary credentials during this same period.
    When the Higher Education Act was enacted in 1965, a recognized 
purpose of the Act was the development of the workforce directly out of 
high school. These policies did not anticipate the role postsecondary 
education would have in the ongoing advancement of working adults.
    To a greater extent than ever before, employers and workers are 
relying on postsecondary education to address the ever-increasing skill 
demands of a competitive American economy.
    Yet, many of our higher education policies and institutions only 
focus on the needs of traditional students, and, in doing so, these 
policies and our colleges and universities are failing the non-
traditional and working adult students as well as one of the principal 
purposes of the Higher Education Act.
    Working adults are trying to balance careers, family 
responsibilities, financial and other personal obligations to get the 
education they need to advance in the workforce. They often cannot 
afford to reduce their hours on the job and risk losing valuable wages 
while incurring additional expenses, such as tuition and childcare.
    Similarly, at the same time that employers need their employees to 
keep pace with the escalating skill demands of the workplace, they are 
not able to interrupt their operations for employees who are attending 
classes that make them unavailable during normal business hours. This 
is particularly true for small and medium-sized businesses.
    With longer workweeks, there is limited time for education and 
training, and employees find it difficult to sustain even a part-time 
commitment over a period of 15 weeks--the length of the traditional 
college semester. It is understandable then that working adults and 
their employers overwhelmingly prefer short, intensive programs
    Employees and employers are seeking curriculums and training 
programs that impart relevant knowledge and skills that have a 
practical application in the workplace. The availability of flexible 
and modularized programs is key to meeting these needs.
    Mr. Chairman, any meaningful strategy to combat these workforce 
challenges must begin with a comprehensive education and workforce 
development system that incorporates the realities of a global economy. 
We are already attempting to improve our K-12 system, making it more 
competitive with other industrialized nations and leading to a more 
knowledgeable and highly skilled American workforce in the coming 
decades.
    However, it is equally important to note that the deficiencies and 
challenges within the existing workforce--individuals who are beyond 
the reach of on-going K-12 initiatives--also demand immediate 
attention. Absent a sustained investment in a comprehensive educational 
system that is responsive to the needs of employers and their incumbent 
workers, the American workforce will be ill-equipped to compete in the 
global economy, American businesses will become less profitable and the 
nation's economic security less certain.
    It is, therefore, imperative that employees have access to 
continuing education and training that is flexible and responsive to 
the rapid changes in the marketplace. Lifetime education and training 
is no longer an option, it is a necessity--for individuals, for 
employers and for the economy.
    The strength of America's postsecondary education system is the 
diversity and types of institutions providing courses, programs and 
training'' two and four year, public and private, and non-profit and 
for profit. However, some institutions are better able than others to 
provide coursework that is relevant to the workplace and to adjust more 
quickly to the needs of employers with just-in-time training.
    One example, of the more relevant, responsive and adaptable 
institutions that have evolved to supply this demand for educated and 
skilled employees and to rectify workforce deficiencies can be found in 
the schools of the enterprising, market-oriented postsecondary 
education and training companies. These private sector postsecondary 
institutions have developed focused, market-responsive and innovative 
approaches that result in immediate and effective improvements in the 
workforce.
    Proprietary postsecondary education companies offer working adults 
access to quality, affordable, convenient and flexible educational 
opportunities. In addition, the industry provides employers more 
realistic options, such as the ability to work with proprietary 
companies in a cooperative effort to develop timely, relevant and 
flexible studies and programs, which address deficiencies and improve 
the quality of their employees.
    The Chamber has partnered with Corinthian Colleges, Inc., Capella, 
Inc., DeVry Inc., and Kaplan, Inc. to form The Coalition for a 
Competitive American Workforce (CCAW). The U.S. Chamber's partners in 
CCAW are leaders among these market-oriented, innovative companies that 
contribute to the nation's economic development. Like other private 
enterprises, they operate to make a profit for their shareholders. They 
employ thousands of instructors, job placement counselors, admissions 
representatives, and other personnel. They pay federal, state and local 
taxes. They have grown by accessing private and public capital markets 
and by reinvesting the income generated from providing educational 
services to students. Their success demonstrates how free enterprise 
goals can harmonize with a public mission: to provide career-focused 
degree and non-degree programs for students seeking educational and 
economic advancement and to provide American business and industry with 
a skilled and knowledgeable workforce.
    Critical financing that enables individuals to pay for the 
education and training offered by these companies comes from the 
student financial assistance programs authorized by the HEA of 1965, as 
amended (HEA). These programs include guaranteed student loans, direct 
loans from the federal government, and Pell Grants for those with 
substantial financial need. The HEA's goals of expanding access to 
postsecondary education and training, improving its affordability, and 
demanding accountability for institutions' use of the public's funds 
match well with the focus and achievements of the members of the 
Coalition.
    The proprietary postsecondary education companies comprising the 
membership of CCAW provide a vital means by which both those seeking to 
enter the workforce and those needing to retrain or upgrade knowledge 
and skills can better their lives.
    However, a number of provisions in the HEA are outdated and impede 
adult workers' access to education and training and limit the ability 
of proprietary postsecondary education institutions to provide 
innovative solutions to America's workforce needs. The reauthorization 
of the HEA provides an opportunity, at a critical juncture in the 
development of the economy, for the members of this Committee and this 
Congress to modernize the Act to meet the new competitive demands of 
the 21st century.
    Mr. Chairman, your bill, H.R. 4283, includes four key modifications 
to the HEA that will enable proprietary postsecondary educational 
institutions to better serve non-traditional students, significantly 
improving our nation's ability to maintain a competitive workforce and 
helping to meet the new competitive demands of the 21st Century.
First, H.R. 4283 proposes to remove restrictions on the availability of 
        financial aid to students in online education programs.
    The HEA currently equates online education with correspondence 
schools and imposes arbitrary 50% rules that impede the offering of 
fully online education programs. The Web-Based Education Commission, 
the U.S. Department of Education, and Congress itself have all found 
that online education is an effective method of delivery of education 
and training that leverages the power of technology to create new 
educational opportunities, especially for working adults who cannot 
afford to stop their lives and to enroll in traditional colleges and 
universities. CCAW supports the bills provision to remove the outmoded 
restrictions in the HEA and opening up the student financial assistance 
programs, with appropriate safeguards, to those who enroll in quality 
online educational programs. The U.S. Chamber and members of CCAW 
strongly support this provision. Removing this restriction will provide 
working adults with more flexible and convenient options, making the 
pursuit of necessary education and training more plausible.
Second, the Chairman's bill proposes to repeal the ``90-10'' rule.
    The HEA requires for-profit enterprises, like the institutions 
operated by the members of the Coalition, and them alone, to obtain at 
least 10% of their revenues from sources other than the student 
financial assistance programs. Non-profit and public institutions, even 
though they are advantaged through favorable tax treatment and public 
subsidies, are free to secure all their revenues from HEA programs. 
This 90-10 Rule had the ostensible purpose of curbing abuses and 
providing an indication of educational quality. Yet, however well 
intentioned, the rule has created perverse and counterproductive 
incentives that conflict with the HEA's aims. Experience under the rule 
now clearly shows that it measures not institutional integrity and 
quality, but the socio-economic status of students. Simply put, the 
more needy an institution's students, the more they will qualify for 
Pell Grants and other forms of financial aid. The more aid they 
receive, however, the more the institution is at peril of violating the 
90-10 Rule. The consequence of violating the rule is draconian: the 
institution and its students cease to be eligible for the critical 
financial aid programs. Thus, the rule incentivizes institutions either 
not to serve the most needy students or to raise their tuition--results 
that are contrary to the purposes of access and affordability in the 
HEA. It is time to correct this inequity that penalizes those most in 
need of the relevant and timely education and training provided by 
proprietary postsecondary schools, and CCAW offers its enthusiastic 
support for this overdue modification.
Third, H.R. 4283 increases loan limits and allows year-round 
        eligibility for Pell Grants.
    Limits on the amount of loans that students may take out to finance 
their education and training have not been increased in over ten years. 
Furthermore, the HEA currently specifies loan limits for first and 
second-year students that are significantly lower than the limits for 
third and fourth-year students. First-year students are especially 
affected, with a limit that is less than half that of third and fourth-
year students. Yet tuition is the same for all these students, and 
students in the early stages of education and training need more and 
not less help to ensure that they will succeed. Similarly, non-
traditional students, who are now the majority (73%), need access to 
education and training on a year-round basis, not on the September-May 
schedule of the traditional academy. Pell Grants should be available to 
these students throughout the year. This modification will greatly 
enhance educational opportunities for working adults and CCAW is 
pleased this important change has been included in the proposed bill.
Fourth, the introduced bill modifies the definitions to treat for-
        profit institutions and their students more equitably than 
        under current law.
    The HEA currently has multiple definitions of institutions of 
higher education and distinguishes for-profit from non-profit and 
public institutions. These multiple definitions are a source of 
confusion and fail to recognize the maturation of for-profit 
institutions and the contributions they make to the education and 
training of students. These distinctions and other unfounded 
discriminatory practices also impede the ability of students to 
transfer the credits they earned at for-profit institutions to other 
institutions. The ability to transfer credits is more than a matter of 
equity. By requiring students to retake courses, the cost of education 
is driven up. And, the ability of the postsecondary educational system 
to efficiently respond to workforce needs is constrained. For-profit 
institutions should be recognized in the HEA as full and equal 
participants in its programs, and anticompetitive rules and practices 
should not be allowed to substitute for an examination of what students 
have actually learned and achieved. CCAW is supportive of this 
modification. The time has come to abolish this statutory distinction, 
eliminating any perceived inferiority inferred by this outdated 
distinction and treating proprietary postsecondary schools and their 
students equitably.
    Again, Mr. Chairman, I appreciate the opportunity to offer my 
thoughts and comments on this important issue. On behalf of the U.S. 
Chamber's Coalition for a Competitive American Workforce, I thank you 
for holding this hearing and for continuing to shine a light on our 
current workforce challenges and the consequences of these outdated 
provisions of the HEA.
                                 ______
                                 

     Statement of David Rhodes, President, School of Visual Arts, 
 Commissioner, Middle States Commission on Higher Education, and Vice 
  Chair, Regents Advisory Council on Institutional Accreditation, on 
           behalf of the Association of Proprietary Colleges

    Mr. Chairman, I would like to thank you for this opportunity to 
submit written testimony with respect to the Reauthorization of the 
Higher Education Act.
    My name is David Rhodes. I am President of the School of Visual 
Arts (SVA), a specialized master's level institution of the State of 
New York. I am also a Commissioner on the Middle States Commission on 
Higher Education and Vice Chair of the Regents Advisory Council on 
Institutional Accreditation. Both Middle States and the Regents are 
recognized by the Department of Education as institutional accreditors 
of institutions of higher education for Title IV purposes.
    Today, I am representing the Association of Proprietary Colleges, a 
group of some 30 degree granting institutions in the State of New York 
recognized by the State as institutions of higher education.
    What we seek today is the same recognition from the Federal 
Government that we already receive from our own State Government. In 
fact, what we seek today is simply recognition of reality--the reality 
of the changes in higher education in the last 30 years and the reality 
that an institution's corporate structure does not determine its status 
as an institution of higher education. Rather, it is the institution's 
programs, and their outcomes, which determine whether an institution is 
recognized as a member of the higher education community. It should be 
patently obvious to all that institutions which grant degrees at the 
Associate, Bachelor's, Master's or Doctoral level and are accredited by 
those accrediting bodies, such as the Middle States Association and the 
New York State Board of Regents which are recognized by the Department 
of Education as accreditors of institutions of higher education, should 
be recognized as institutions of higher education by Congress.
    What we are asking the Federal Government to do is follow the 
example set by New York over thirty years ago. By way of history, in 
1971 the Commissioner of Education, Ewald Nyquist, convinced the 
Regents that what mattered was not corporate structure, but student 
outcomes. If the outcomes were the same, all institutions should have 
the same responsibilities and the same powers. This understanding was 
incorporated into the Commissioner's Regulations. Soon after the State 
Department of Education began a series of visits to those schools which 
wanted to become degree granting. In all about 20 qualified based upon 
the standards contained in Part 52 of the Commissioner's Regulations 
and were able to begin issuing degrees. (Part 52 defines colleges and 
what is required of them in New York State.) The powers under Part 52 
are also broad enough that proprietary colleges are allowed to issue 
honorary degrees, something heretofore reserved for colleges chartered 
by the Regents. At the moment there are two proprietary colleges which 
issue doctoral degrees.
    The first immediate impact of being degree granting was the 
inclusion of all of the degree institutions in the New York State 
Tuition Assistance Program (TAP). On a personal note, I remember 
receiving the phone call telling us we were in TAP. We had not applied, 
but because we were degree granting, we were automatically included. 
Over the years a two-tiered system of payments has developed. Non-
degree granting institutions have one set of payments (lower) and all 
other institutions, public, independent and proprietary, have another 
more generous payment table. The important thing is we are treated 
identically with all other degree granting institutions.
    Over the years the State has developed a number of initiatives to 
help students graduate from high school and go to college. One of these 
initiatives was modeled on Eugene Lang's famous offer to a class in the 
elementary school from which he graduated. The Cuomo administration 
placed the idea into law and called it the Liberty Partnership Program. 
All degree granting institutions were eligible to apply. SVA has always 
run one of the these programs and in fact ours is one of two in the 
State which mentors students from junior high school through to college 
admissions.
    Finally, higher education in New York is divided into four sectors: 
CUNY (City University of New York), SUNY (Sate University of New York), 
CICU (Council of Independent Colleges and Invitees) and APC 
(Association of Proprietary Colleges). Each sector has representatives 
on the Commissioner's advisory task force and on the Advisory Board of 
the Higher Education Services Corporation which is New York State's 
Loan guarantor and administers the TAP program. As a sector we are also 
required, as are the other sectors, to prepare a sector wide master 
plan. In short, because New York State sees all degree granting 
institutions as institutions of higher education, Proprietary Colleges 
are included in all of the State's Higher Education activities.
    We understand that the notion of single definition is controversial 
for some because of the eligibility for titles other than Title IV. 
There is a notion sometimes expressed that for-profit institutions are 
somehow less worthy of governmental support than public or not-for-
profit institutions. This is a deeply ingrained prejudice, but one that 
I hope you would agree, upon reflection, is wrong. This prejudice would 
disappear if you were to think of these funds as contracts and not 
grants. The Federal Government contracts with for-profit institutions 
for all sorts of goods and services, the largest area, of course, being 
military procurement, almost all of which is done with for-profit 
entities. Various departments of government contract with universities, 
public, private and proprietary, to provide services for a fixed number 
of students, usually at a fixed price. The various titles are really no 
different. The institutions applying for and receiving these contracts 
(grants) are obligated to spend and invest these monies only in ways 
that will benefit students. To use the monies in any other way would be 
to violate the terms of the contract. Not all money is fungible.
    By way of example, the current definition of Institution of Higher 
Education precludes proprietary institutions of higher education from 
participating in the contracting (granting) process of the Foundation 
for the Improvement of Post Secondary Education (FIPSE). Because FIPSE 
contracts (grants) specify how the money must be used and that it must 
supplement, not supplant, existing funds, no one has ever suggested 
that these monies were fungible. The same would be true with funds from 
all of the other titles. Like FIPSE, the other titles are competitive 
and the uses of funds clearly specified before they are released.
    I would hope that this is sufficient to persuade you that 
proprietary institutions of higher education, which are seeking 
appropriate recognition from Congress, should not be accused of trying 
to abuse the public purse.
    Thank you again for this opportunity.

                                 
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