[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
ENSURING STUDENT ELIGIBILITY REQUIREMENTS FOR FEDERAL AID
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HIGHER EDUCATION,
LIFELONG LEARNING, AND COMPETITIVENESS
COMMITTEE ON
EDUCATION AND LABOR
U.S. House of Representatives
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, OCTOBER 14, 2009
__________
Serial No. 111-36
__________
Printed for the use of the Committee on Education and Labor
Available on the Internet:
http://www.gpoaccess.gov/congress/house/education/index.html
----------
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COMMITTEE ON EDUCATION AND LABOR
GEORGE MILLER, California, Chairman
Dale E. Kildee, Michigan, Vice John Kline, Minnesota,
Chairman Senior Republican Member
Donald M. Payne, New Jersey Thomas E. Petri, Wisconsin
Robert E. Andrews, New Jersey Howard P. ``Buck'' McKeon,
Robert C. ``Bobby'' Scott, Virginia California
Lynn C. Woolsey, California Peter Hoekstra, Michigan
Ruben Hinojosa, Texas Michael N. Castle, Delaware
Carolyn McCarthy, New York Mark E. Souder, Indiana
John F. Tierney, Massachusetts Vernon J. Ehlers, Michigan
Dennis J. Kucinich, Ohio Judy Biggert, Illinois
David Wu, Oregon Todd Russell Platts, Pennsylvania
Rush D. Holt, New Jersey Joe Wilson, South Carolina
Susan A. Davis, California Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona Tom Price, Georgia
Timothy H. Bishop, New York Rob Bishop, Utah
Joe Sestak, Pennsylvania Brett Guthrie, Kentucky
David Loebsack, Iowa Bill Cassidy, Louisiana
Mazie Hirono, Hawaii Tom McClintock, California
Jason Altmire, Pennsylvania Duncan Hunter, California
Phil Hare, Illinois David P. Roe, Tennessee
Yvette D. Clarke, New York Glenn Thompson, Pennsylvania
Joe Courtney, Connecticut
Carol Shea-Porter, New Hampshire
Marcia L. Fudge, Ohio
Jared Polis, Colorado
Paul Tonko, New York
Pedro R. Pierluisi, Puerto Rico
Gregorio Kilili Camacho Sablan,
Northern Mariana Islands
Dina Titus, Nevada
Judy Chu, California
Mark Zuckerman, Staff Director
Barrett Karr, Republican Staff Director
------
SUBCOMMITTEE ON HIGHER EDUCATION,
LIFELONG LEARNING, AND COMPETITIVENESS
RUBEN HINOJOSA, Texas, Chairman
Timothy H. Bishop, New York Brett Guthrie, Kentucky,
Jason Altmire, Pennsylvania Ranking Minority Member
Joe Courtney, Connecticut John Kline, Minnesota
Paul Tonko, New York Michael N. Castle, Delaware
Dina Titus, Nevada Mark E. Souder, Indiana
Robert E. Andrews, New Jersey Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts Judy Biggert, Illinois
David Wu, Oregon Bill Cassidy, Louisiana
Susan A. Davis, California David P. Roe, Tennessee
Mazie Hirono, Hawaii Glenn Thompson, Pennsylvania
Marcia L. Fudge, Ohio
Jared Polis, Colorado
Pedro R. Pierluisi, Puerto Rico
C O N T E N T S
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Page
Hearing held on October 14, 2009................................. 1
Statement of Members:
Guthrie, Hon. Brett, Senior Republican Member, Subcommittee
on Higher Education, Lifelong Learning, and Competitiveness 3
Prepared statement of.................................... 4
Hinojosa, Hon. Ruben, Chairman, Subcommittee on Higher
Education, Lifelong Learning, and Competitiveness.......... 1
Prepared statement of.................................... 2
Statement of Witnesses:
Miller, Harris N., president and CEO, Career College
Association................................................ 24
Prepared statement of.................................... 26
Mitchelson, Mary, Acting Inspector General, U.S. Department
of Education............................................... 18
Prepared statement of.................................... 19
Scott, George A., Director, Education, Workforce, and Income
Security, U.S. Government Accountability Office............ 6
Prepared statement of.................................... 8
GAO report, ``Proprietary Schools: Stronger Department of
Education Oversight Needed to Help Ensure Only Eligible
Students Receive Federal Student Aid,'' Internet
address to............................................. 8
Shireman, Hon. Robert M., Deputy Undersecretary, U.S.
Department of Education.................................... 12
Prepared statement of.................................... 13
ENSURING STUDENT ELIGIBILITY REQUIREMENTS FOR FEDERAL AID
----------
Wednesday, October 14, 2009
U.S. House of Representatives
Subcommittee on Higher Education,
Lifelong Learning, and Competitiveness
Committee on Education and Labor
Washington, DC
----------
The subcommittee met, pursuant to call, at 10:03 a.m., in
room 2175, Rayburn House Office Building, Hon. Ruben Hinojosa
[chairman of the subcommittee] presiding.
Present: Representatives Hinojosa, Miller, Bishop of New
York, Altmire, Courtney, Andrews, Tierney, Wu, Fudge, Polis,
Guthrie, Kline and Ehlers.
Staff present: Tylease Alli, Hearing Clerk; Jeff Appel,
Senior Education Policy Advisor/Investigator; Patrick Findlay,
Investigative Counsel; David Hartzler, Systems Administrator;
Broderick Johnson, Staff Assistant; Fred Jones, Staff
Assistant, Education; Ricardo Martinez, Policy Advisor,
Subcommittee on Higher Education, Lifelong Learning and
Competitiveness; Alex Nock, Deputy Staff Director; Helen
Pajcic, Staff Assistant; Rachel Racusen, Communications
Director; Julie Radocchia, Senior Education Policy Advisor;
Melissa Salmanowitz, Press Secretary; Ajita Talwalker,
Education Policy Advisor; Daniel Weiss, Special Assistant to
the Chairman; Mark Zuckerman, Staff Director; Stephanie Arras,
Minority Legislative Assistant; Kirk Boyle, Minority General
Counsel; Casey Buboltz, Minority Coalitions and Member Services
Coordinator; Amy Raaf Jones, Minority Professional Staff
Member; Barrett Karr, Minority Staff Director; Alexa Marrero,
Minority Communications Director; Susan Ross, Minority Director
of Education and Human Services Policy; and Linda Stevens,
Minority Chief Clerk/Assistant to the General Counsel.
Chairman Hinojosa. A quorum being present, the committee
will now come to order.
Pursuant to the committee rules, any member may submit an
opening statement in writing, which will be made part of the
permanent record. I now recognize myself, followed by the
ranking member, Brett Guthrie, for an opening statement.
I want to welcome my colleagues, on both sides of the
aisle, to this important hearing on ``Ensuring Student
Eligibility Requirements for Federal Aid.''
I want to give a special welcome to Chairman George Miller
for his tremendous leadership on these issues and thank him for
joining us today.
As members of this committee, we have the responsibility of
providing oversight of our institutions of higher learning,
regardless of whether they are public, nonprofit, or part of
the for-profit post-secondary education sector.
I want to thank the Government Accountability Office for
the release of their report, entitled ``Proprietary Schools:
Stronger Department of Education Oversight Needed to Help
Ensure Only Eligible Students Receive Federal Student Aid.''
In August of 2007, I requested that GAO study the for-
profit post-secondary education sector to learn more about how
these institutions function and deliver educational services. I
am troubled by what GAO found.
First of all, I am concerned that Congress and the
Department of Education have not been providing the appropriate
oversight necessary to protect students as they pursue
educational opportunities at for-profit colleges and
universities. We have also not done enough to monitor the
quality of educational programs offered at some of these
institutions, despite the growth of the for-profit sector in
recent years.
As you know, for-profit colleges and universities enroll
large numbers of low-income and minority students. Based on the
findings of the GAO report, it is clear to me that some of
these institutions have not served students well. I am
particularly concerned that some for-profit institutions have
engaged in a number of unscrupulous practices to increase their
access to Title IV funds.
In some cases, officials from for-profit-sector
institutions, assisted students in obtaining invalid high
school diplomas from diploma mills in order to gain access to
federal loans. In another case that I read, the GAO found that
there were irregularities in the administration of the ability
to benefit, known as the ATB tests, such as providing students
with the answers to the test questions so that students would
meet the minimum eligibility requirements for Title IV
programs.
Encouraging students who do not possess a high school
diploma to incur an inordinate amount of student loan debt and
to pursue a course of academic study that they are unprepared
for does a disservice to those students.
The GAO report is a great starting point for today's
congressional hearing, and I hope that we can have a robust
discussion and learn more about these issues from our
distinguished witnesses.
Thank you. I now yield to my friend, Ranking Member Brett
Guthrie.
[The statement of Mr. Hinojosa follows:]
Prepared Statement of Hon. Ruben Hinojosa, Chairman, Subcommittee on
Higher Education, Lifelong Learning, and Competitiveness
I want to welcome my colleagues, on both sides of the aisle, to
this important hearing on ``Ensuring student eligibility requirements
for federal aid.''
I want to give a special welcome to Chairman Miller for his
tremendous leadership on these issues and thank him for joining us
today.
As members of this Committee, we have the responsibility of
providing oversight of our institutions of higher learning, regardless
of whether they are public, non-profit, or part of the for-profit
postsecondary education sector.
I want to thank the GAO for the release of their report:
``Proprietary Schools: Stronger Department of Education Oversight
Needed to Help Ensure Only Eligible Students Receive Federal Student
Aid''.
Earlier this year, I requested that GAO study the for-profit
postsecondary education sector to learn more about how these
institutions function and deliver educational services. I am troubled
by what GAO found.
First of all, I am concerned that congress and the department of
education have not been providing the appropriate oversight necessary
to protect students as they pursue educational opportunities at for-
profit colleges and universities.
We have also not done enough to monitor the quality of educational
programs offered at some of these institutions despite the growth of
the for-profit sector in recent years. As you know, for-profit colleges
and universities enroll large numbers of low-income and minority
students. Based on the findings of the GAO report, it is clear that
some of these institutions have not served students well.
I am particularly concerned that some for-profit institutions have
engaged in a number of unscrupulous practices to increase their access
to title iv funds. In some cases, officials from for-profit sector
institutions, assisted students in obtaining invalid high school
diplomas from diploma mills, in order to gain access to federal loans.
In another case, the GAO found that there were irregularities in
the administration of the ``ability to benefit,'' (ATB) tests, such as
providing students with the answers to the test questions, so that
students would meet the minimum eligibility requirements for title iv
programs.
Encouraging students who do not possess a high school diploma to
incur an inordinate amount of student loan debt and to pursue a course
of academic study that they are unprepared for does a disservice to
students.
The GAO report is a great starting point for today's hearing, and I
hope that we can have a robust discussion and learn more about these
issues from our distinguished witnesses.
Thank you, I now yield to Ranking Member Guthrie.
______
Mr. Guthrie. Thank you, Mr. Chairman. Thank you for holding
this hearing.
And, you know, this hearing is about how the federal
government works with all institutions of higher education to
ensure that student eligibility requirements for federal
student aid, outlined in the Higher Education Act, are being
met.
I understand that there is significant history on this
topic before us, and I look forward to hearing more about the
GAO study and the oversight measures that are being taken to
protect students and taxpayers.
The diversity that currently exists within the American
higher education system is what makes ours the best in the
world. For example, this past weekend, I was pleased to
participate in the commencement ceremony at Sullivan University
in Louisville, Kentucky. Sullivan graduate over 650 students
with associate's, bachelor's and master's degrees. The
commencement ceremony reminded me of what our goals should be,
that ensuring that students are well equipped for the future.
Proprietary schools like Sullivan University have a history
of offering quality education to students in a variety of
fields. These institutions also have a history of educating
underserved populations, including those in rural and urban
areas, where students have very limited options for job
training.
These institutions also educate a high percentage of non-
traditional college students. In fact, according to the GAO
report before us, more than half the students attending
proprietary schools are over the age of 25. In addition, over
half the student population is from a minority background.
Finally, in many cases, these institutions are geared
toward graduating students with specific skills that will help
them find jobs in a weakened economy. The competition the
exists between proprietary institutions, community colleges,
and 4-year public and private institutions ensures that
students from all types of background have plenty of options if
they choose to pursue some form of post-secondary education.
We must do all we can to ensure that all institutions--for-
profit and nonprofit--and their institutional partners are
following the rules outlined by the Higher Education Act.
Because I know how important post-secondary education is,
in particular in this economic downturn, I was concerned by the
GAO's recent findings. I strongly believe that mismanagement in
testing or abuse of federal financial aid should not be taken
lightly.
These cases must be addressed. And hopefully, the findings
of GAO can help us determine whether there is an underlying
vulnerability of the system that needs to be addressed.
One thing I hope that we will not lose sight of during the
hearing is that the GAO did not find a pattern of infractions
in its review. While even one incident of mismanagement or
abuse is one too many, it is important to understand the scope
of this issue as we work to address it.
I would also note that the GAO did not visit or review any
nonprofit institutions of higher education. The student
eligibility rules that we are talking about here are required
of both proprietary and nonprofit institutions and, as such,
should be reinforced regardless of profit status of the school.
In the interests of protecting all students, I hope we
continue to work to apply federal safeguards across all sectors
of higher education. Our country is facing a difficult economic
time, and many are finding themselves unemployed or with an
uncertain future. As we work to enhance ourselves and root out
those who have broken the law, we must be vigilant about
preserving and expanding a diverse array of options for
students in need of additional education.
Thank you. And I yield back.
[The statement of Mr. Guthrie follows:]
Prepared Statement of Hon. Brett Guthrie, Senior Republican Member,
Subcommittee on Higher Education, Lifelong Learning, and
Competitiveness
Thank you Mr. Chairman.
This hearing is about how the federal government works with all
institutions of higher education to ensure that the student eligibility
requirements for federal student aid outlined in the Higher Education
Act are being met. I understand that there is significant history on
this topic before us and I look forward to hearing more about GAO's
study and the oversight measures that are being taken to protect
students and taxpayers.
The diversity that currently exists within the American higher
education system is what makes ours the best in the world. For example,
this past weekend I was pleased to participate in the commencement
ceremony at Sullivan University in Louisville, Kentucky. Sullivan
graduated over 650 students with Associates, Bachelors, and Masters
degrees. The commencement ceremony reminded me what our goal here
should be--ensuring that students are well equipped for the future.
Proprietary schools like Sullivan University have a history of
offering quality educations to students in a variety of fields. These
institutions also have a history of educating underserved populations,
including those in rural and urban areas where students have very
limited options for job training.
These institutions also educate a high percentage of ``non-
traditional'' college students. In fact, according to the GAO report we
are here to discuss, more than half of the students attending
proprietary schools are over the age of 25. In addition, over half of
the student population is from a minority background.
Finally, in many cases, these institutions are also geared toward
graduating students with specific skills that will help them find jobs
in a weakened economy.
The competition that exists between proprietary institutions,
community colleges, and 4 year public and private institutions ensures
that students from all types of backgrounds have plenty of options if
they choose to pursue some form of postsecondary education. We must do
all that we can to ensure that all institutions, for-profit or non-
profit, and their institutional partners are following the rules as
outlined by the Higher Education Act.
Because I know how important postsecondary education is,
particularly in the current economic downturn, I was concerned by the
GAO's recent findings. I strongly believe that mismanagement in testing
or abuse of federal financial aid should not be taken lightly. These
cases must be addressed, and hopefully the findings of the GAO can help
us determine whether there is an underlying vulnerability of the system
that needs to be addressed.
One thing I hope that we will not lose sight of during this hearing
is that the GAO did not find a pattern of infractions in its review.
While even one incident of mismanagement or abuse is one too many, it
is important to understand the scope of this issue as we work to
address it.
I would also note that the GAO did not visit or review any non-
profit institutions of higher education. The student eligibility rules
that we are talking about here are required of both proprietary and
non-profit institutions of higher education and, as such, should be
enforced regardless of the profit status of the institution. In the
interest of protecting all students, I hope we continue working to
apply federal safeguards across all sectors of higher education.
Our country is facing a difficult economic time, and many are
finding themselves unemployed or with an uncertain future. As we work
to enhance oversight and root out those who have broken the law, we
must be vigilant about preserving and expanding a diverse array of
options for students in need of additional education.
Thank you, and I yield back.
______
Chairman Hinojosa. Thank you.
At this time, I ask unanimous consent to recognize the--I
wanted to recognize the chairman of the committee of the whole,
George Miller.
Would you like to have an opening statement?
Mr. Miller of California. I will just wait until we go to
questions, Mr. Chairman. Thank you for holding the hearing.
Chairman Hinojosa. Yes, thank you.
At this time, I want to welcome all of our witnesses. But
before I do that, I wish to speak to the lighting system that
we have before us. For those of you who have not testified
before this subcommittee, please let me explain our lighting
system and the 5-minute rule.
Everyone, including members, is limited to 5 minutes of
presentation or questioning. The green light is illuminated
when you begin to speak. When you see the yellow light, it
means you have 1 minute remaining. When you see the red light,
it means your time has expired and you need to conclude your
testimony.
Please be certain as you testify to turn on and speak into
the microphone in front of you. We will now hear--I will now
start with the introductions.
The first witness will be Mr. George Scott. He is director,
education and workforce and income security issues for the
United States Government Accountability Office. He is a
frequent witness before our committee. He oversees the high-
quality work the GAO provides for our committee in various
areas of our jurisdiction. He is a graduate of North Carolina
at Chapel Hill and has received several GAO management awards.
George been recognized for exemplary achievement in public
administration.
Once again, we are anxious to hear from you, and welcome.
The second presenter will be Robert Shireman, who is the
deputy undersecretary in the Department of Education. He is a
leading expert on college access and financial aid. Prior to
his appointment, he served on the Federal Advisory Committee on
Student Financial Assistance. Robert has served as staff for
Senator Simon. And during the Clinton administration, he served
on the National Economic Council. He holds a bachelor's degree
in economics from the University of California at Berkeley and
a master's degree from Harvard in education, as well as the
University of San Francisco in public policy.
Thank you for being with us today.
Next will be Ms. Mary Mitchelson, who is the acting
inspector general, Office of Inspector General, at the
Department of Education. In the year 2000, she served as
assistant inspector general for analysis and inspection. And in
the year 2002, she became counsel to the inspector general and
has been in her current position for 13 months. She has served
as a law school dean, has clerked in the U.S. district court,
and has served in two federal departments, and has been
recognized for her professional contributions on numerous
occasions.
It is a pleasure having you here this morning.
Also, we will hear from Mr. Harris N. Miller, who was named
CEO and president of the Career College Association in February
2007. Prior to his appointment, Harris was president of the
Information Technology Association of America for 11 years, the
leading trade association representing the I.T. industry. Mr.
Harris has also served as House staff on the Judiciary
Committee, as well as Senate staff as a legislative director
for Senator Durkin. He also has experience working for the U.S.
Office of Personnel Management. Mr. Miller has a B.A. in
political science and philosophy from the University of
Pittsburgh and has earned a master's in philosophy and
political science from Yale.
Welcome to our hearing. And we look forward to your
testimony.
With that, we are ready to begin. We call on Mr. Scott.
STATEMENT OF GEORGE A. SCOTT, DIRECTOR OF EDUCATION, WORKFORCE,
AND INCOME SECURITY, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Scott. Chairman Miller, Chairman Hinojosa, Ranking
Member Guthrie, and members of the subcommittee, I am pleased
to be here today to discuss the Department of Education's
oversight of eligibility for federal student aid at for-profit
schools, also known as proprietary schools.
Generally, students who do not have a high school diploma
or GED are required to pass an ability to benefit, or ATB test,
of basic math and English skills in order to be eligible for
federal student aid. Under the ATB test program, education is
responsible for overseeing test publishers, who in turn are
responsible for certifying and monitoring test administrators
to ensure the proper administration of ATB tests.
Education's oversight over the ATB test program is critical
to protecting students and guarding against potential fraud and
abuse of federal student aid funds. My testimony today is based
on work from our recent report.
In summary, we found that test administrators violated
rules intended to ensure prospective students without high
school diplomas pass required ATB tests before obtaining access
to federal student aid. For example, when GAO analysts posing
as students took and intentionally failed an ATB test at a
proprietary school, the independent test administrator gave
them and all the test-takers in the room answers to some of the
questions.
I will pause here for a moment so that we can play the
audio from our undercover visit.
[Begin audio clip.]
Voice. So, yeah, this is correct. Give it a C. Number one
on your answer sheet, that is a C. Okay, mark it in. Nice and
hard so it will go through that part of the paper, people.
Everybody got it?
Voice. Number three. I personally don't like number three.
I don't like they ask it of you. I don't like the way they ask
it of you, so I am telling you the answer is E.
Voice. Good news. I am going to help you with the first
three. More good news. You have got to nail 10 of them to pass.
Ah, I am going to give you three; that means you have got to
get to nail seven.
[End audio clip.]
Mr. Scott. Our analysis test forms were also tampered with.
[Begin audio clip.]
Voice. It is not D. It is not C. It is not A, so it is B.
Number one is B. Thank you.
[End audio clip.]
Mr. Scott. Our analysis test forms were also tampered with.
As you can see on the screen, their incorrect answers were
crossed out and changed to correct answers to ensure that they
passed the test.
Our work confirms similar findings by Education's Office of
Inspector General and New York state investigators. The
problems we identified result in part from weaknesses in
Education's oversight of ATB testing. We found that Education
had not followed up with test publishers to ensure compliance
with certain requirements.
For example, as of early 2009, one of the approved test
publishers had not submitted test score analyses due in 2005
and 2008 for two of its approved tests. Education officials
told us that the employer responsible for test publisher
oversight had retired in 2008. After that time, no one at
Education had followed up with test publishers to obtain pass-
through test score analyses until earlier this year in response
to our review.
In 2002, Education's Office of Inspector General reported
on problems with ATB testing. However, Education has done
little since then to strengthen its oversight of test
publishers.
We also identified cases in which recruiters at two
separate proprietary schools helped prospective students obtain
invalid high school diplomas so that the students could obtain
federal student loans. For example, one student told us that he
was flunking out of high school, when a recruiter at the
proprietary school directed him to a place where he could pay a
fee to take a test and obtain a high school diploma. Based on
our further review, we confirmed that the entity was a high
school diploma mill.
Problems with the use of invalid high school diplomas to
gain access to federal student aid are due in part to
weaknesses in Education's policies and the lack of information
and guidance on high school diplomas. We found that several
states already provide lists of the high schools they recognize
and make them available to the public on their Web sites.
However, Education provides little information on these
available resources that could help identify invalid high
school diplomas.
In conclusion, our findings do not represent nor imply
widespread problems at all proprietary schools. Many of these
schools play an important role in providing a range of students
the opportunity to obtain the education they need, to increase
their work skills and find jobs. However, our work has
identified potential fraud at a few schools and significant
vulnerabilities in Education's oversight.
Education has announced steps to help address these issues,
and we plan to monitor their progress in strengthening
oversight in this area.
Mr. Chairman, this concludes my prepared remarks, and I
would be happy to any questions you or other members of the
subcommittee may have. Thank you.
[The statement of Mr. Scott follows:]
Prepared Statement of George A. Scott, Director, Education, Workforce,
and Income Security, U.S. Government Accountability Office
Mr. Chairman and Members of the Subcommittee: I am pleased to be
here today to discuss the Department of Education's oversight of
student eligibility for federal aid at private for-profit schools, also
known as proprietary schools. Education's monitoring of eligibility
requirements is part of a larger oversight structure governing federal
aid to students at all schools. For example, in order to receive
federal aid, students must attend schools that are legally authorized
to operate in a state, accredited by reliable authorities to help
ensure education programs meet acceptable levels of quality, and
certified by Education to participate in federal student aid
programs.\1\ In addition, students attending proprietary, public, or
private non-profit schools are also required to demonstrate that they
are ready for higher education. Generally, students who do not have a
high school diploma or general equivalency diploma (GED) are required
to pass an ``ability to benefit'' (ATB) test of basic math and English
skills in order to be eligible for loans, grants, and campus-based aid
under Title IV of the Higher Education Act of 1965, as amended.\2\
Education's monitoring of ATB tests and high school diploma
requirements is critical to protecting students and guarding against
potential fraud and abuse of federal student aid funds. When students
who do not have the skills needed to succeed in school are fraudulently
given passing scores on the ATB test or directed to diploma mills for
fake high school degrees, they are at greater risk of dropping out of
school, incurring substantial debt, and defaulting on their federal
loans. When this happens, students' credit records are tarnished and
their long-term financial well-being is jeopardized. In addition,
taxpayers and the government, which guarantees the loans, bear the
risks associated with federal loans when a student defaults.
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\1\ In addition to these requirements for all schools, proprietary
schools must also comply with the 90/10 rule, which provides that these
schools may not receive more than 90 percent of their revenue from
federal student aid grants and loans.
\2\ While there are other ways a student without a high school
diploma or GED can establish eligibility, for the purposes of our
testimony we focus on whether a student has passed an independently
administered ATB test.
---------------------------------------------------------------------------
Today I will discuss the extent to which Education's policies and
procedures for monitoring eligibility requirements for federal aid at
proprietary schools protect students and the investment of Title IV
funds. This testimony is based on a GAO report that we released on
September 21, 2009, titled Proprietary Schools: Stronger Department of
Education Oversight Needed to Help Ensure Only Eligible Students
Receive Federal Student Aid.\3\ To address Education's monitoring of
federal aid eligibility requirements, we reviewed Education's policies
and procedures for overseeing the administration of ATB tests and for
enforcing high school diploma requirements; reviewed relevant
Department of Education program reviews and independent audits; and
reviewed enforcement actions taken against schools. We reviewed
relevant federal laws and regulations, conducted interviews with
officials from Education, state education licensing agencies and higher
education associations; and gathered information during school site
visits. In addition, GAO anonymously tested institution compliance with
ATB test requirements by sending, on two separate occasions, analysts
posing as prospective students to take and purposely fail ATB tests at
a proprietary institution. We supplemented this work with a review of
investigations conducted by Education's Office of Inspector General
(OIG) and the New York Department of Education. A more detailed
explanation of our methodology is available in our full report. We
conducted our work from October 2007 to August 2009, in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
---------------------------------------------------------------------------
\3\ GAO-09-600 (Washington, D.C.: August 17, 2009).
---------------------------------------------------------------------------
In separate investigations at proprietary schools, we, along with
other federal and state investigative agencies, found test
administrators or school officials violated rules intended to ensure
prospective students without high school diplomas pass required ATB
tests before obtaining access to Title IV financial aid. For example,
when GAO analysts posing as prospective students took the ATB test at a
proprietary school, the independent test administrator gave them and
all the test takers in the room--about 20 people in total--answers to
some of the test questions. In addition, the analysts' test forms were
tampered with: their intentionally incorrect answers were crossed out
and changed to correct answers to ensure the individuals passed the
test. Our work confirmed similar findings by Education's OIG and New
York state investigators.
These problems result, in part, from key weaknesses in Education's
oversight of ATB testing. Under the ATB test program, Education is
responsible for overseeing test publishers who, in turn, are
responsible for certifying and monitoring test administrators who give
the ATB tests to prospective students at schools. Regulations governing
the test process require test administrators to be independent of the
school where they administer the test and to submit test answer sheets
directly to the test publisher for official scoring. The test
publishers, in turn, are responsible for analyzing test scores and
submitting an analysis of these test scores to Education every 3 years
to help identify improper testing (see figure 1).
figure 1.--atb test process
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Nevertheless, we found that Education had not followed up with test
publishers to ensure that all comply with these requirements. For
example, as of early 2009, one of the four approved test publishers had
yet to submit test score analyses due in April 2005 and in April 2008
for two of its approved tests. Education officials told us the employee
responsible for test publisher oversight and review of test submissions
had retired in 2008 and no one at Education had followed up with test
publishers to obtain unsubmitted test score analyses until March 2009,
in response to our review. We also learned from OIG and Education
officials that while one test publisher provides thorough analyses that
have led to the identification of possible violations, other test
publishers provide only cursory analyses of test scores. In addition to
problems with Education's monitoring of test publishers, Education
regulations do not allow for the timely identification of improper test
administration. For example, as noted earlier, regulations require test
score analyses to be conducted every 3 years, which may leave improper
testing undetected for years. Furthermore, regulations do not require
test publishers to follow up when irregularities are identified, or to
report corrective actions to Education. Given the risks of potential
fraud and abuse associated with ATB testing, such weaknesses in
Education's monitoring and oversight leave the ATB test program
vulnerable to future violations.
We also identified cases in which recruiters at two separate
publicly traded proprietary schools helped prospective students obtain
invalid high school diplomas from diploma mills--entities that provide
invalid diplomas, usually for a fee and little academic work--so that
students could gain access to federal loans. In one case,
representatives of a student interest group told us a student who
dropped out of high school in the 9th grade was guided by the
proprietary school to take an online test to receive a high school
diploma. In another case, a student told us during a site visit that he
was flunking out of high school when a recruiter at the proprietary
school directed him to a place where he could pay a fee to take a test
and obtain a high school diploma. Based on further review, we confirmed
that state and county government agencies had determined these entities
to be diploma mills. Our findings also confirmed similar problems
identified by Education, and Education regional officials told us the
problem may be more widespread than is known.
Problems with the use of invalid high school diplomas to gain
access to federal student aid are partly attributed to key weaknesses
in Education's policies governing high school diploma requirements, and
the lack of information and guidance on valid high school diplomas. For
example, while senior Education officials told us it is the
department's official policy that high school diplomas from diploma
mills are not acceptable for federal aid eligibility, Education has not
communicated this position in clearly written policies. Without written
and clear communication of its policy, Education staff and external
parties, including schools and independent auditors, lack important
information regarding eligibility and compliance requirements under
Title IV rules.\4\ Education officials have acknowledged that the use
of high school diploma mills is a problem and that more guidance would
be helpful. In May 2009, Education announced plans to convene public
forums to help inform negotiated rulemaking sessions on, among other
matters, the definition of a high school diploma as a condition of
receiving federal student aid. We also found that Education provides
limited guidance and tools that Education staff, schools, and
independent auditors can use to help identify high school diploma
mills. In its Federal Student Aid Handbook, Education advises officials
to contact state education agencies if they question the validity of a
high school diploma.\5\ Yet, Education officials told us that Education
staff have no other guidance to help them judge whether there is a
potential problem with a diploma. In addition, Education officials told
us a list of recognized high schools could help its staff and schools
better identify diplomas from diploma mills. Several states already
provide lists of recognized high schools and make them available to the
public on their Web sites. Yet, Education provides little information
on these already available resources. In contrast, Education does offer
information and resources on its Web site to help individuals identify
and avoid higher education diploma mills by listing colleges and
universities that are eligible to participate in federal student aid
programs.\6\
---------------------------------------------------------------------------
\4\ Education is responsible for overseeing schools' compliance
with Title IV laws and regulations including their role in ensuring
that only eligible students receive federal student aid. As part of its
compliance monitoring, Education relies on department employees and
independent auditors of schools to conduct program reviews and audits
of schools to monitor compliance with eligibility requirements for
Title IV.
\5\ The Federal Student Aid Handbook provides guidance to Education
staff, schools, and lenders that offer federal student assistance to
students and borrowers.
\6\ The Higher Education Opportunity Act, which reauthorized and
amended the Higher Education Act of 1965, provides that the Secretary
shall maintain information and resources on the Department's Web site
to assist students, families, and employers in understanding what a
college diploma mill is and how to identify and avoid such diploma
mills. Pub. L. No. 110-315, Sec. 109.
---------------------------------------------------------------------------
Our findings do not represent nor imply widespread problems at all
proprietary schools. Many proprietary schools play an important role in
providing a range of students, including non-traditional and
disadvantaged students, with an opportunity to obtain the education
they need to increase their work skills and find jobs. However, our
work has identified potential fraud at a few proprietary schools and
significant vulnerabilities in Education's oversight of a key aspect of
the federal student financial aid program. In our recently issued
report, we recommended that Education strengthen its monitoring and
oversight of federal aid eligibility requirements to (1) improve its
monitoring of ATB tests and target schools that fail to follow testing
regulations for further review; (2) revise regulations to strengthen
controls over ATB tests; and (3) provide information and guidance on
valid high school diplomas for use in gaining access to federal student
aid. After reviewing the draft report, Education provided comments and
noted the steps it would take to address GAO's recommendations. A
complete discussion of our recommendations, Education's comments, and
our evaluation are provided in the recently issued report.
Mr. Chairman, this concludes my prepared remarks. I would be happy
to answer any questions that you or other members of the subcommittee
may have.
For further information regarding this testimony, please contact
George A. Scott (202) 512-7215 or [email protected]. Contact points for
our Office of Congressional Relations and Public Affairs may be found
on the last page of this statement. Individuals who made key
contributions to this testimony include Melissa Emrey-Arras (Assistant
Director), Claudine Pauselli, Jessica Botsford, Susan Aschoff, Mimi
Nguyen, and Paul Desaulniers.
______
[The August 2009 GAO report, ``Proprietary Schools:
Stronger Department of Education Oversight Needed to Help
Ensure Only Eligible Students Receive Federal Student Aid,''
may be accessed at the following Internet address:]
http://www.gao.gov/new.items/d09600.pdf
------
Chairman Hinojosa. I now call on Mr. Shireman.
STATEMENT OF ROBERT SHIREMAN, DEPUTY UNDERSECRETARY, U.S.
DEPARTMENT OF EDUCATION
Mr. Shireman. Chairman Hinojosa, Chairman Miller, Ranking
Member Guthrie, thank you very much for the opportunity to
testify today.
Federal student aid serves a particularly important role in
helping our nation recover from the economic downturn. Last
year, we saw an unprecedented 20 percent increase in the number
of applications filed for financial aid for college. More
students than ever qualified for Pell Grants, and more students
from all economic backgrounds took out federal loans.
In light of the vital importance of federal student aid in
these uncertain economic times, it is extremely important that
we maintain program integrity and ensure that the consumers and
taxpayers are protected.
I want to speak broadly about this issue of program
integrity, but let me start by addressing the issues raised in
the GAO report. As Mr. Scott mentioned, the Higher Education
Act requires that an institution participating in federal
student aid programs has to admit as regular students those who
either have a high school diploma or have taken the ability to
benefit test. These serve as important indicators of whether a
student is qualified to study at the post-secondary level.
In general, we agree with the findings and recommendations
that GAO has made about ATB tests. Even before the release of
the report, we had taken steps to improve our monitoring and
oversight of the ATB test publishers. The Department of
Education now has systems in place to monitor and track the
three-year test analyses required of all test publishers. We
are in the process of contracting for the services of
independent psychometricians, who will review not only those
three-year test analyses, but also any new or renewal requests
received from test publishers for approval of those tests.
Moreover, the department has begun planning for changes to
its school reporting systems that will support student-specific
ATB reporting. The results of this reporting will help us to
focus on monitoring efforts on institutions that have a high
number of ATB-eligible students.
Ability to benefit testing is among the issues for upcoming
rulemaking sessions that we started the process for in May.
Among the topics around ability to benefit testing that will be
discussed in these negotiations are the establishments of
controls on individuals who have been decertified by test
publishers and possibly more frequent reporting by test
publishers.
Also at the rulemaking, we will discuss how we might
address the problem of high school diploma mills. This could
involve regulations, or it might simply involve the department
identifying resources for helping colleges to identify
legitimate sources of high school diplomas.
Mr. Chairman, we expect more than 14 million students to
take advantage of federal financial aid in this coming year,
and we want to do all we can to ensure the best possible
outcome for students having a real opportunity to gain the
skills and knowledge to be successful in the workforce and in
their communities.
In recent months, the department began to take additional
steps to improve accountability. First, we have improved
communication and cooperation both within the Department of
Education and with other agencies that fund and monitor post-
secondary education institutions. For example, our program
review office at federal student aid is now linked to the
Federal Trade Commission's database of consumer complaints so
that we can tap into the complaints that the Federal Trade
Commission receives.
We have now created a database of state consumer agencies,
state attorneys general offices so that we can refer complaints
that we receive to the appropriate state offices.
We have expanded an internal--a joint project to identify
areas that are at high risk for fraud. This is in working with
the inspector general's office at the Department of Education.
Second, we have increased our efforts to get more and
better information to consumers. For example, now when students
are--when prospective students are applying for financial aid
on the Web using FAFSA on the Web and are identifying the
schools that they want to receive their financial aid
information, they can see what the graduation, transfer and
retention rates are at those particular schools, giving some
initial information to students. We are also looking into ways
that we might be able to make better use of the Department of
Labor's useful career information.
The third area that we are launching is a--this rulemaking
process that I mentioned, where in addition to addressing the
issue of high school diploma mills and ability to benefit tests
through input that we receive starting in May, we have
identified a number of areas that we will be working on, such
as satisfactory academic progress, links between training
programs and specific occupations, earnings and costs of those
programs, recruitment tactics, and the role of states.
Mr. Chairman, our goal is to further strengthen the
integrity of the financial aid programs. And I thank you for
the opportunity to testify.
[The statement of Mr. Shireman follows:]
Prepared Statement of Hon. Robert M. Shireman, Deputy Undersecretary,
U.S. Department of Education
Chairman Hinojosa, Ranking Member Guthrie and Members of the
Committee: Thank you for the opportunity to testify about the integrity
of the Federal student financial aid programs. During the upcoming
academic year, the Department of Education will help an estimated 14.2
million students enrolled at 6,200 of our Nation's colleges and
universities, community colleges, and trade and technical schools begin
and complete programs of study that will prepare them to be an active
and important part of America's future. Students with degrees and other
formal credentials from our Nation's postsecondary education
institutions are more likely to be employed, even during these
difficult economic times. So, we were pleased to see additional funds
invested in student financial aid, including additional funds provided
for Pell Grants and Federal Work-Study in the American Recovery and
Reinvestment Act (ARRA), which will result in an estimated $129 billion
in federal aid--$31 billion in grants and $98 billion in loans.
According to the College Board's 2008 Trends in Student Aid report,
Federal student aid accounted for nearly 60 percent of all student aid
provided and it is likely that the Federal share will increase, given
the current economic conditions that limit the ability of States and
institutions to increase aid.
Federal student aid serves a particularly important role in helping
our Nation recover from the economic downturn. Last year, there was an
unprecedented 20 percent increase in the number of applications filed
for aid. More students than ever qualified for Pell Grants, and more
students from all economic backgrounds took out Federal loans. Federal
student aid provides a critical safety net. Far too many families have
found themselves in increased financial difficulty, and wondering
whether they can afford to send their children to college. Far too many
of our citizens have, through no fault of their own, found themselves
needing to return to school for additional training, either because
they had lost a job, or feared losing one. In light of the vital
importance of Federal student aid in these uncertain economic times, it
is extremely important that we maintain program integrity and ensure
that the consumers of these programs are protected.
The issues of program integrity and consumer protection are complex
and are not limited, as some have asserted, to for-profit postsecondary
education. There are many factors that are more important than whether
a college is a non-profit, for-profit or public institution. To protect
student consumers, we intend to monitor postsecondary education
institutions, paying particular attention to indicators such as: high
dropout rates, heavy reliance on federal funds, students with high
levels of debt or defaults, the financial distress or difficulty
managing the institution's financial affairs, consumer complaints, and
rapid growth. If we find violations of our rules, we will take
appropriate limitation, suspension or termination action. For example,
in FY08, ED compliance staff conducted 190 in-depth program reviews at
institutions that were triggered by our risk-based indicators.
Ultimately, these reviews led to five administrative actions, including
the loss of Title IV eligibility at an institution of higher education.
In addition, through its other monitoring activities, ED compliance
staff initiated 30 additional administrative actions resulting in 19
other institutions' loss of eligibility. However, if an institution is
compliant with our rules, we will provide additional technical
assistance to address problems they face.
I appreciate the opportunity to appear here today, because we have
a great deal to report on in terms of the steps we are taking to ensure
that Federal student financial aid funds are used appropriately, and
that the students they are intended to help are not harmed by the
actions of institutions and other participants in the Federal student
aid programs. The Secretary, the Under Secretary, the newly appointed
Chief Operating Officer for Federal Student Aid (FSA), and I all share
the view that it is more important than ever that the Department ensure
that the right aid gets to the right students, with the right end
result: ensuring that students have the opportunity to gain the skills
and knowledge to be successful in the workforce and in their
communities.
In recent months, the Department began to take additional steps to
ensure accountability from institutions participating in the Federal
student aid programs, and to ensure meaningful results for students. We
have been focusing our efforts on enhancing our leadership role in
protecting students and families, and improved communication and
cooperation, both within the Department and with other agencies that
fund and monitor postsecondary education institutions. Over the last
several months, we have met with officials from other agencies,
including the U.S. Departments of Veterans Affairs and Labor, the
Government Accountability Office, the Federal Trade Commission (FTC),
the National Association of Attorneys General, the National Association
of State Administrators of Private Schools, and the New York State
Education Department. Just last week we met with officials at the White
House. These efforts were designed to share information about effective
program monitoring, including how risk factors are identified and used,
and to improve inter- and intra-agency communication on postsecondary
education issues. In addition, we have been working with the
Department's Office of Inspector General (OIG) to identify the
recurring findings and recommendations OIG makes during audits of
Federal student aid program participants in order to identify ways in
which we can quickly reduce program vulnerabilities.
We have begun to retool our process for reviewing participants in
the Federal student aid programs and to assess recently-revised program
review guidelines. The Department's FSA office is working to improve
the program review process, strengthen State and interagency
partnerships, and identify other steps to improve program compliance.
These efforts have resulted in better inter- and intra-agency
coordination, use of available technology and information, and staff
preparation, including the following examples.
Access to, and use of, the FTC database of consumer
complaint information: The Department is now able to input and extract
trend information about student-reported problems regarding
postsecondary schools. This information will be used to help make
decisions about the institutions we should monitor given available
resources.
Creation of a database to promote student consumer
complaint resolution: The Department has created a database of contact
information to allow student consumer complaints to be referred, as
appropriate, to State Attorney General offices or State agencies
responsible for consumer protection or licensing.
Expansion of the joint project to improve targeting of
limited monitoring resources: The Department plans to build on the
previous successes of the OIG and FSA in identifying risk factors for
use in targeting program review activities. These offices combined the
efforts of staff with expertise in auditing, investigation,
inspections, program reviews, and system data knowledge to identify
areas that were at high risk for fraud. They then used this information
to deter this activity and to propose legislative or regulatory changes
to reduce further instances of fraud. The initial OIG/FSA Fraud
initiative conducted resulted in approximately 65% of the 17 schools
identified being found to have committed the frauds or abuses
identified by the data queries/fraud/abuse indicators.
Notwithstanding our enhanced monitoring efforts, we have an
additional safeguard in protecting against waste, fraud, and abuse in
the Federal student aid programs--the students who are the direct
beneficiaries of those programs. We need to equip them with the tools
they need to make good choices. We have increased our efforts to get
more and better, information to consumers. In August, the Department
began showing graduation rates, collected as part of the National
Center for Education Statistics' Integrated Postsecondary Education
Data System (IPEDS), to aid applicants when they select an institution
to receive their ISAR information. We anticipate that this additional
consumer disclosure will help students and families assess whether they
should enroll in a particular institution. This information helps to
remind students to review their choices carefully, and leads them to
sources for more comprehensive information. As a possible next step, we
are looking into ways that we might link students and their families to
the Department of Labor's useful career information, which would enable
students to assess what careers are in demand and what wages they might
expect to earn in order to inform their decisions on further education
in a selected field.
Over the last several years, the Department has been engaged in
rulemaking on a variety of issues arising from changes to the Higher
Education Act of 1965 (HEA). These rulemaking efforts have been very
important to ensuring that new programs, like Academic Competitiveness
Grants, National SMART Grants, and TEACH Grants, have been
appropriately and efficiently implemented. These rulemaking efforts
have also led to important changes to the Federal student loan
programs. While some of these rulemaking efforts have helped improve
program integrity indirectly, little has been done to focus rulemaking
on that specific topic.
On May 26, 2009, the Department published a Federal Register Notice
announcing our intent to establish two negotiated rulemaking
committees. One committee will develop proposed regulations governing
foreign schools. The second committee will develop proposed regulations
to maintain or improve program integrity in the Federal student aid
programs. In late June 2009, the Department held three public hearings
for interested parties to discuss the agenda for the negotiated
rulemaking sessions and sought input about whether we should consider
rules to modify certain practices related to program integrity and how
and when to implement these modifications. We heard testimony and
received written comments from approximately 290 individuals.
Transcripts from the hearings and copies of the written comments are
available on the Department's website. Comments on program integrity
issues during the hearings ranged widely, from ``make no change'' to
recommendations for significant change.
The negotiated rulemaking process is continuing. We have received
nominations for individuals to serve on the negotiating committees and
we have started the process to select individuals to serve on those
committees. We will begin negotiations in early November 2009, and
expect to complete negotiations by February 2010.
Based on the feedback received at the public hearings held in
Denver, Philadelphia and Little Rock, we have identified a dozen topics
for negotiations. Let me talk briefly about several of those topics as
they relate directly to program integrity in the Federal student aid
programs.
One concern that arose during the public hearings and the public
comments was about the level of debt that students were incurring in
relation to the education and training being provided. As we looked at
the regulatory requirements, several changes seemed to be appropriate
for consideration to address the debt that students incur. In this
context, we plan to consider regulatory changes in three areas:
satisfactory academic progress; the definition of a ``credit hour;''
and ``gainful employment in a recognized occupation.''
With regard to satisfactory academic progress (SAP), to be eligible
to receive Federal student financial aid, a student must meet standards
of satisfactory academic progress toward a degree or certificate
offered by that institution. During the public hearings, the Department
sought input on whether, or how, to clarify the definition of SAP. As a
result of those hearings, during the negotiations we will discuss
whether the current regulations on retaking courses to meet qualitative
standards should be reconsidered; whether students should be permitted
to use Federal student aid funds to retake courses to get a better
grade; whether the regulations governing SAP should be changed to
require reviews more frequently than once each year; and whether the
regulations governing cumulative completion and grade point average
requirements should be revisited.
Another issue that will be considered during the upcoming
negotiations is the definition of ``credit hours''. Credit hours are
used to measure progress toward the completion of a degree or
certificate, and in the award of Federal student aid, but there is no
commonly accepted definition of what is an appropriate measure of a
credit hour. A credit hour is a unit that weights the value, level, or
time requirements of an academic course taken at an educational
institution. At its most basic, a credit hour is a proxy measure of
student learning. During the public hearings, the Department sought
input on whether there should be a regulatory definition of a credit
hour for Federal student aid purposes; whether different standards for
earning a credit hour should be developed for undergraduate education,
graduate study, distance education, and other non-traditional programs;
and what relationship such a definition for purposes of Federal student
aid should have to accrediting agencies' standards for program length.
Another issue to be discussed in the negotiations is ``gainful
employment in a recognized occupation''. Certain for-profit
institutions of higher education and postsecondary vocational
institutions are generally allowed to use Federal student aid only for
programs that prepare students for ``gainful employment in a recognized
occupation.'' This HEA requirement was restated in 2008 by the Higher
Education Opportunity Act (P.L. 110-315), and we sought input during
the hearings on whether and how ``gainful employment'' could be more
clearly defined. One suggestion was that the term could be defined in a
way that takes into consideration a student's likely earnings as well
as the likely amount of student loan debt. The negotiators, in
consultation with the Department of Labor, can consider that suggestion
and other ideas on the issue.
During the public hearings, we also heard concerns expressed about
overly-aggressive admissions officers and misleading advertising by
postsecondary institutions. To address these concerns, we will consider
whether the rules related to the prohibition against making incentive
payments to recruitment personnel should be re-examined. The HEA
prohibits an institution, as a condition of eligibility for
participating in the Federal student aid programs, from providing any
commission, bonus, or other incentive payment based directly or
indirectly on success in securing enrollments or financial aid to any
individual or entity engaged in recruiting or admissions. Current
``safe harbor'' regulations were intended to help institutions adopt
compensation arrangements that are not considered to run afoul of these
prohibitions. Unfortunately, these regulations can result in what might
otherwise be viewed as improper student recruiting activities by some
unscrupulous institutions. The Department has received a large number
of complaints from students and enrollment advisors about the high-
pressure sales tactics of some postsecondary institutions. Some argue
that tying staff compensation to the number of students enrolled is an
inherent conflict of interest, and that the safe harbors undermine the
statutory ban on incentive compensation. The Department has also heard
from a number of educational institutions that the purported lack of
clear guidance prior to establishment of the safe harbors made it
difficult for institutions to be confident of their compliance with the
law. During the upcoming negotiations, we will consider whether the
safe harbors should be maintained, amended, or eliminated in whole or
in part from the regulations.
During the public hearings, we also heard complaints about false
and misleading advertising and other information that is provided to
prospective students and their families. While this issue is also under
the purview of the FTC as it relates to for-profit entities, it is
clear that the potential for false and misleading information can be an
issue at all types of postsecondary education institutions. We will
discuss this issue during the upcoming negotiations, and hope to have
input from the FTC on its experience.
The HEA also includes a requirement that, to be eligible for
Federal student aid, an institution be legally authorized by a State to
offer a postsecondary educational program. The Department's
interpretations of this provision have, over time, evolved into
considering a State's failure to preclude the provision of
postsecondary education as constituting that authorization. In the
upcoming negotiations, we will discuss whether the HEA's State
authorization requirement should involve at least some minimal level of
affirmative approval by a State.
With this description of the Department's program integrity and
consumer protection efforts as background, I will now address the
recommendations made by the Government Accountability Office (GAO) in
its recent report, Proprietary Schools: Stronger Department of
Education Oversight Needed to Help Ensure Only Eligible Students
Receive Federal Student Aid. Even before the Department received the
report, we had already identified the two topics discussed by GAO--the
Definition of High School Diploma for the Purpose of Establishing
Eligibility to Participate in Federal Student Aid and Ability to
Benefit--as potential topics for negotiations in the upcoming round of
negotiated rulemaking.
The HEA requires an institution of higher education participating
in the Federal student aid programs to admit as a regular student only
a person who have obtained a high school diploma, or its recognized
equivalent, unless the student passes an ``Ability to Benefit'' test,
as discussed below. The high school diploma serves as an indicator that
the student is qualified to study at the postsecondary level. During
the public hearings, institutions expressed concern about the
administrative burden related to researching the legitimacy of a high
school diploma. In addition, some witnesses described situations in
which institutions direct students without high school diplomas to high
schools with which the institution may have a business arrangement to
complete their secondary school degree. Many institutions have asked
the Department or State educational agencies, in order to reduce the
burden on institutions, to develop either a comprehensive list of
legitimate high schools or a listing of schools that are known as
``diploma mills.'' During the upcoming negotiated rulemaking, we will
discuss these issues and develop regulatory changes, if appropriate.
Generally, students without a high school diploma or its recognized
equivalent, a GED, can qualify for Federal student aid if they pass an
independently administered test of basic math and English skills
approved by the Secretary, called an ``Ability to Benefit'' (ATB) test.
These ATB tests are published by private, for-profit and non-profit
test publishers, and are administered to students by an independent
assessment center operated at public or non-profit institution of
higher education, or by a certified independent test administrator.
The Department is responsible for approving ATB tests, and ensuring
that each test publisher is monitoring the administration of its tests
to students. The regulations provide that the test publishers are
responsible for certifying and monitoring test administrators to ensure
the independent and proper administration of ATB tests. Under the
current regulations, test publishers are required to conduct, and
submit to the Department, an analysis of test scores every 3 years to
identify any test irregularities that would suggest that ATB tests are
not being administered in accordance with the Department's regulations.
In its report, GAO recommended that the Department strengthen its
monitoring of test publishers. GAO also recommended that the Department
take steps to ensure that the analyses conducted by test publishers are
sufficient to identify improper testing. Finally, GAO recommended that
the Department modify its regulations to obtain more frequent analysis
of test scores by test publishers to improve the integrity of the
testing process.
In general, we agree with the findings and recommendations in the
GAO report and, even before release of the report, we had taken steps
to improve our monitoring and oversight of the ATB test publishers. The
Department now has systems in place to monitor and track the 3-year
test-anomaly analyses required of all test publishers. We are currently
contracting for the services of independent psychometricians who will
review not only the 3-year test analyses, but also any new or renewal
requests received from test publishers. Moreover, the Department has
begun planning for changes to its school-reporting systems that will
support student-specific ATB reporting. The results of this reporting
will help us focus monitoring efforts on institutions that have a high
number of ATB eligible students.
ATB testing is among the issues for the upcoming negotiated
rulemaking sessions. Among the topics around ATB testing that will be
discussed in those negotiations will be the establishment of tighter
reporting and other controls on individuals who have been de-certified
by a test publisher, and more frequent reporting by test publishers.
Let me conclude my remarks by emphasizing that our goal is to work
to protect students and families as consumers of educational and
training services of all types, to ensure the integrity of the student
aid programs, and to use all the tools available to achieve those ends.
I would be pleased to respond to any questions that you might have.
______
Chairman Hinojosa. Thank you.
I now call on Ms. Mitchelson.
STATEMENT OF MARY MITCHELSON, ACTING INSPECTOR GENERAL, U.S.
DEPARTMENT OF EDCUATION
Ms. Mitchelson. Thank you. Chairman Hinojosa, Chairman
Miller, Ranking Member Guthrie, and members of the
subcommittee, thank you very much for inviting me to testify
today.
I will focus my testimony on the two issues highlighted in
GAO's report, ATB examinations, and online diploma--high school
diploma mills. I will also address an area that is in need of
greater oversight and statutory or regulatory change, and that
area is online distance education.
First, regarding ATB, statutory changes in the program in
1992, implemented by department regulations, eliminated the
largest opportunity for abuse. We have conducted a series of
audits in 2002 that made recommendations to the department on
how it could improve its oversight of the test publishers.
While the department did respond to our recommendations, as GAO
noted, more improvements are needed in that area.
We will continue to investigate ATB violations, which often
are an aspect of multifaceted fraud schemes involving other
criminal conduct. Currently, we have 15 ATB-related
investigative matters underway and an analytical project that
is generating even more leads.
Now, turning to the second issue, online high school
diplomas, the Higher Education Act and department regulations
do not define what a valid high school diploma is for purposes
of receiving federal student aid. We have identified efforts by
some entities to exploit this ambiguity. These efforts include
cases in which schools help students obtain diplomas from high
school diploma mills.
As an example, we conducted an undercover operation in
which a proprietary school official directed our undercover
agent to purchase an online high school diploma and provided
him a copy of the test answers to render him eligible for
federal student aid.
As a result of this investigation and other information we
have received, we identified a number of online high schools
and obtained via OIG subpoena records from 13 of them. Our
analysis of that data identified more than 9,500 students who
had purchased diplomas from these high schools and who were now
receiving federal student aid or had received it between the
years 2005 and 2008.
We are currently working with the department on ways to use
this information to prevent the disbursement of federal student
aid to individuals who purchased fraudulent diplomas.
Finally, for my third issue, I would like to discuss the
potential for fraud in distance education. The risk here stems
from the difficulty in ensuring that students are actually
enrolled and engaged in academic activities and that they are
who they say they are.
In order to receive federal student aid, a student must be
in attendance in school. Recent work of my office has concluded
that determining what constitute a class and class attendance
in the online environment is a challenge in the absence of
defined class times or delivery of instruction by instructors.
The online environment also creates challenges for
determining whether a student has enrolled for purposes of
obtaining a credential or is simply completing sufficient
online activity to receive a disbursement of student aid funds,
which he or she will then use for other purposes.
At present, neither the HEA nor department regulations
define what constitutes instruction or what constitutes
attendance in an online environment. Without such definition or
adequate controls at the institutions themselves, student aid
funds are at risk of being disbursed to ineligible students in
the online programs or to students who have dropped out from
these programs.
Our investigative work also has confirmed the vulnerability
of online distance education programs to fraud. We currently
have 29 distance education-related investigative efforts
underway, 19 of which were identified in just the last 2 years.
In my written testimony, I provide more examples of problems in
this area.
In closing, let me reiterate that OIG will continue its
efforts in fighting waste, fraud and abuse in the federal
student aid programs, including addressing the issues that we
have discussed here today. This concludes my statement, and I
am happy to answer any questions.
Thank you.
[The statement of Ms. Mitchelson follows:]
Prepared Statement of Mary Mitchelson, Acting Inspector General,
U.S. Department of Education
Chairman Hinojosa, Ranking Member Guthrie, and members of the
Subcommittee: Thank you for inviting me here today to discuss student
eligibility requirements related to the Federal student aid programs. I
am the Deputy Inspector General for the U.S. Department of Education
(Department) Office of Inspector General (OIG) and I am currently the
Acting Inspector General. As requested, I will provide information on
our work in the area of student eligibility for Federal student aid,
focusing on the two issues highlighted in the Government Accountability
Office's (GAO) report titled, ``Proprietary Schools: Stronger
Department of Education Oversight Needed to Help Ensure Only Eligible
Students Receive Federal Student Aid.'' The two issues are Ability-to-
Benefit (ATB) examinations and oversight and on-line high school
diploma mills. I will also address student eligibility problems
associated with distance education, a developing vulnerability where
OIG is currently focused on combating fraud and abuse.
Background on the OIG
For over 29 years, the OIG has worked to promote the efficiency,
effectiveness, and integrity of the Department's programs and
operations. We conduct independent audits, investigations, inspections,
and other reviews, and based on our findings, make recommendations to
the Department to address systemic weaknesses and initiate
administrative actions. We also recommend changes needed in Federal
laws. Our staff of approximately 300 includes auditors, financial
analysts, information technology (IT) professionals, criminal
investigators, inspectors, management and budget analysts, and
attorneys. We have 14 offices located across the U.S., including Puerto
Rico.
As the Department's responsibilities have grown substantially over
the years, so too has our challenge to identify and combat waste,
fraud, and abuse in Federal education programs and operations. In
recent years we have increased our efforts in identifying emerging and
evolving threats to the integrity of Federal education funds, including
IT security and issues involving on-line distance education. We have
enhanced our work with the Department and its program participants,
providing fraud awareness and prevention information and training that
have increased the identification and reporting of fraud to us, which
we use to investigate and assist in prosecuting to the fullest extent
of the law.
Focus on Student Financial Aid Programs
As members of this Subcommittee know, the Federal student aid
programs have long been a major focus of our audit and investigative
work, as they have been considered the most susceptible to fraud and
abuse. The programs are large, complex, and inherently risky due to
their design, reliance on numerous entities, and the nature of the
student population. OIG has produced volumes of significant work
involving the Federal student aid programs, leading to statutory
changes to the Higher Education Act of 1965, as amended (HEA), as well
as regulatory and Departmental changes.
In OIG's early years in the 1980s, the need to address fraud and
abuse in these programs was so severe that the OIG dedicated over 75
percent of its resources to fighting fraud and abuse in the Federal
student aid programs. This commitment led to numerous OIG
recommendations for improved management and oversight of the programs,
administrative actions to terminate program participants, and much-
needed legislative and regulatory reforms. The Department implemented
many of our recommendations, and many requiring legislative action were
adopted in the 1992 reauthorization of the HEA. Some of these changes
involved ATB--controls were established over the ATB program, including
a requirement that ATB tests be administered by independent evaluators,
and a limit on the number of ATB students at a particular institution.
In 1990, GAO placed the Federal student aid programs on its
inaugural high-risk list, opening them to a new level of scrutiny by
the media, the general public, and the Congress. OIG continued its
heightened efforts to identify waste, fraud, and abuse in the programs
throughout the 1990s. We supplemented our traditional audit and
investigatory efforts with new forensic audit technologies enabling us
to identify additional areas of concern involving student eligibility.
We identified hundreds of millions of ineligible awards or loan
forgiveness to individuals based on inaccurate or fraudulent data
included on the Free Application for Federal Student Aid (FAFSA) and
other forms. We made numerous recommendations for improved controls
that the Department implemented, including new computer matches in
screening for: (1) previous loan defaulters; (2) citizenship; and (3)
death and disability loan forgiveness for individuals claiming a total
or permanent disability or reported as deceased to ensure they were not
earning income from employment. As a result of our work in the 1990s
and in anticipation of the 1998 reauthorization of the HEA, OIG
submitted a detailed report to Congress with 17 proposals for its
consideration in the reauthorization process, a number of which were
adopted, including two directly impacting student eligibility: (1)
verification of applicants' income match with the Internal Revenue
Service (IRS) to ensure that the income reported on the FAFSA was the
same as the individual's Federal tax return; and (2) and defining
appropriate use of professional judgment by financial aid
administrators. Although Congress provided the authority to match
applicants' income with the IRS, the needed corresponding statutory
change to the IRS Code has not yet been enacted.
Over the last decade, there have been significant changes in the
Federal student aid programs: in 1998, the Federal Student Aid office
(FSA) was created as the government's first Performance Based
Organization to manage and administer the Federal student aid programs;
and in 2005, GAO removed the Federal student aid programs from its
high-risk list. In addition and in response to our recommendation,
Congress amended the HEA in 2006 to provide that those convicted of
fraud in obtaining Federal student aid funds are ineligible to receive
additional aid until such funds are repaid.
As a result of the 1992 and 1998 HEA reauthorization statutes,
which addressed those student eligibility problems that were so
prevalent in the 1980s, OIG has shifted its resources to new high-risk
areas, including FSA management and oversight of its programs and
program participants, lender practices, and the significant growth of
on-line distance education. The potential for fraud in distance
education stems from the difficulty in ensuring that students are
actually enrolled and engaged in academic activities, and are who they
say they are. Schools may never have an in-person relationship with the
student, making it more difficult to ensure the correct identity of the
aid recipient. The rapid growth of distance education, combined with
the virtual paperless electronic delivery of student aid funds, makes
this an area vulnerable to fraud.
In 2008, GAO officials contacted us regarding a project they
intended to take up involving proprietary schools. We provided the GAO
team with information on our long history of examining student
eligibility and other issues involving the Federal student aid programs
and proprietary schools. We highlighted those areas we believe present
the greatest risk, specifically distance education, and provided GAO
with information from our data analytics efforts, to which it refers in
its report.
I will focus the remainder of my testimony in three areas: (1) our
work involving ATB; (2) our work involving on-line high school
diplomas; and (3) our work involving distance education. We currently
have a number of efforts underway in each of these areas. To protect
and maintain the integrity of these efforts, we cannot discuss or
provide details of our ongoing work, but we are able to discuss the
public or general aspects of it.
Eligibility Issues Involving ATB
As the GAO recognized in its report, we concluded a series of
audits in 2002 that examined the Department's monitoring of ATB test
publishers, the ATB testing program at the two largest independent test
publishers, and the administration of tests at three institutions. We
recommended at that time that the Department improve its oversight of
test publishers. The Department did improve its oversight; however, as
GAO reported, additional improvements are needed, due in part to a
turnover in personnel at the Department.
As we noted in 2002, the statutory changes to ATB in 1992 and
implemented by Departmental regulations eliminated the largest
opportunity for abuse of ATB testing by removing schools from the
testing process and requiring independent testing, using tests and
scores approved by the Secretary. Since that time, we have continued to
investigate ATB violations, which often are an aspect of multifaceted
fraud schemes involving other criminal conduct. These investigations
have resulted in the successful prosecution of many instances of
Federal student aid fraud, including prosecutions of school officials
who falsified ATB examinations in order to qualify students for Federal
student aid. Currently, we have 15 open ATB-related investigative
matters. Our closed ATB investigations have resulted in jail sentences,
restitutions, fines, and other significant penalties for wrongdoers.
Below are three examples of the work we have conducted related to
fraudulent ATB practices; all involved proprietary schools that are now
closed:
In 2006, the former owners of the Moler Beauty College,
located in Louisiana, and their associates were sentenced to prison or
probation and were ordered to pay $165,000 in restitution for altering
individuals' failing ATB test scores to qualify them for financial aid.
They also administered ATB examinations without being qualified to do
so, and falsely certified that the school complied with the
Department's ATB standards.
In 2004, the owner of the Training Center, located in
Michigan, along with six other individuals, including the school's ATB
test administrator, were convicted of fraud. The owner was sentenced to
prison, and, in conjunction with a civil settlement, was ordered to pay
approximately $1 million in restitution for falsifying or directing the
falsification of records, which included ATB exams.
In 2004, the owner and four officials of the Instituto de
Estitica y Belleza Marugie, located in Puerto Rico, agreed to pay
$400,000 and were banned for life from holding positions with any
company or entity participating in Federal education programs for,
among other violations, providing false information in ATB test records
to obtain Federal student aid.
Eligibility Issues Involving On-line High School Diplomas
A growing issue impacting student eligibility for Federal student
aid is on-line high school diplomas. The HEA and Department regulations
do not currently specify that a high school diploma must be State
recognized or approved, or issued by an accredited or State approved
high school in order for a student to qualify for Federal student aid.
Our office, GAO, and the Department have identified efforts to exploit
this perceived ambiguity.
In its report, GAO identified cases in which proprietary schools
helped students obtain high school diplomas from diploma mills. We are
well aware of this problem and have related investigative matters
underway:
In 2007, as a part of an ongoing investigation into
allegations we received about a proprietary school that was assisting
ineligible students to obtain Federal student aid, we conducted an
undercover operation in which a school official directed our undercover
agent to purchase an on-line high school diploma to render the
undercover agent eligible for the aid. The proprietary school official
provided our undercover agent with a copy of the answers to the on-line
high school's test. We purchased the diploma and then executed a search
warrant at the proprietary school. During the execution of the search
warrant, we found a list of 22 on-line high schools in an office of one
of the school officials.
In 2008, we received another list of on-line high schools
from an FSA employee. The FSA employee attended a roundtable discussion
at a private career college symposium, and an administrator of a
private career college approached the employee and provided a list of
32 on-line high schools that were potentially operating as diploma
mills. Using both of these lists, we were able to identify and obtained
records from 13 on-line high schools that appeared on both lists. An
analysis of the data from these on-line schools identified over 9,500
students who purchased a diploma and had received Federal student aid
between January 2005 and June 2008.
We are working with the Department to explore how to use the
information on on-line high school diplomas and the individuals who
have purchased them in the upcoming awards cycle to prevent the
disbursement of Federal student aid to individuals who purchased
fraudulent diplomas. In addition, we have encouraged the Department, in
its upcoming higher education negotiated rulemaking session, to
establish a definition of a high school diploma as a condition for
receiving Federal student aid. The Department has informed us that it
will discuss on-line high school diplomas at the upcoming session and
will develop regulatory changes, if appropriate, to address the issue.
Eligibility of Students for Disbursements in Distance Education
Finally, we would like to bring to your attention an issue in the
area of student eligibility that is placing increased demands on our
investigative and audit resources and highlights the need for greater
oversight and statutory or regulatory change: determining whether
students in distance education are ``regular students'' and actually in
attendance for Federal student aid purposes.
In order to receive Federal student aid, an individual must be a
``regular student,'' that is, someone ``enrolled for * * * the purpose
of obtaining a degree, certificate, or other recognized credential.'' A
student must also certify that the aid will be used solely for
education-related expenses. For their part, institutions are obligated
to return any Federal student aid received if a student does not begin
attendance during the period for which aid was awarded. Institutions
must be able to document attendance in at least one class during a
payment period.
If a student begins attendance and later drops out or withdraws,
institutions must determine what funds must be repaid to the Federal
student aid programs or to the student. The HEA and Department
regulations require the return of funds in proportion to the
uncompleted portion of the payment period. However, once a student
attends or completes 60 percent of a payment period, then no refund is
required. For institutions that are not required by a State licensing
agency or an accrediting agency to take attendance, the regulations
permit institutions to keep 50 percent of all student aid funds
received if a student withdraws or drops out at any point prior to the
60 percent point. Institutions are allowed to keep 50 percent of the
funds even when they have an actual record or knowledge of when a
student last attended. That point could be as early as the first day or
week of class, yet the rules permit an institution to keep 50 percent
of all Federal student aid funds received, including loan funds that
students will still be obligated to repay.
This framework provides unique management challenges and
opportunities for abuse in programs that are offered through distance
or on-line instruction. We have completed two audits at distance
education institutions that demonstrate our concerns in this area, and
we are presently in the final stages of completing two additional
audits examining the same issues. Determining what constitutes a class
and class attendance in the on-line environment is a challenge in the
absence of defined class times or delivery of instruction by
instructors. The on-line environment also creates challenges for
determining whether a student has enrolled for purposes of obtaining a
credential or is just completing sufficient on-line activity to receive
a disbursement of Federal student aid to use for other purposes. On-
line instruction typically consists of posted reading materials and
assignments, chat-room and email exchanges, and posting of completed
student work. The point at which a student progresses from on-line
registration to actual on-line academic engagement or class attendance
is often not defined by institutions and is not defined by Federal
regulations.
As an illustration of this problem, our 2008 audit of Capella
University found that the school did not have adequate controls to
determine whether students actually began attendance in on-line
classes. As a result, Capella failed to return funds for students who
dropped out before their first day of class, and continued to disburse
funds for students who did not return for subsequent payment periods.
Capella's documentation did not indicate that students who dropped
out had engaged in academic activity. As a result, Capella should have
returned all Federal student aid, and should not have calculated a
refund using the midpoint of the payment period as the withdrawal date.
Capella disagreed and asserted that a student's agreement to a faculty
expectation sheet, introduction to the teacher or other students, or
general questions about the homework process, and similar activity for
which it had documentation, were sufficient to justify retention of 50
percent of the aid disbursed to the students who dropped out. We
estimated that Capella failed to return over $500,000 in Federal
student aid from 2002 to 2005.
In August of 2009, we completed another audit of another large
distance education institution, TUI University, which found that the
school did not have adequate policies and procedures for ensuring
student eligibility for Federal student aid funds at the time of
disbursement and for identifying students who had withdrawn from the
institution. We estimated that $923,379 of the $8.6 million in Federal
student aid disbursements made to students for the Fall 2007, Winter
2008, and Spring 2008 sessions was either disbursed to ineligible
students or not earned by students who withdrew from the institution.
TUI did not confirm academic activity prior to disbursing Federal
student aid, and had no policies to address circumstances when students
ceased attendance without notifying the institution and no procedures
to identify such students in order to perform refund calculations.
These audits highlight the difficulty of determining attendance,
and thus student eligibility for funding in an on-line environment.
Neither the HEA nor the Department's regulations define what
constitutes instruction or attendance in an on-line environment.\1\
Without such definition, or adequate controls at the institutions
themselves, we believe Federal student aid funds are at significant
risk of being disbursed to ineligible students in on-line programs, and
that inadequate refunds will be made for students who cease attendance
in these programs.
---------------------------------------------------------------------------
\1\ Neither the HEA nor the Department's regulations define what
constitutes instruction or attendance--for the on-line environment, or
for traditional classroom instruction.
---------------------------------------------------------------------------
Our investigative work has also confirmed the vulnerability of on-
line or distance education to fraud in the area of student eligibility.
Since 2005, we have initiated 29 distance education-related
investigative efforts, 19 of which were identified in the last 2 years.
Our ongoing work has revealed that criminals seek to exploit
institutions with minimal requirements to establish eligibility for
initial and continued student aid disbursements. Community colleges and
other low-cost institutions are the primary target of this type of
fraud. A number of these institutions have been aggressively engaged in
trying to identify fraud and have been communicating with our office
regarding their findings or concerns. Below are two very recent
examples of our work in this area:
This summer, a Federal grand jury in Arizona indicted 65
individuals, 19 of whom have pled guilty, for their roles in a $538,000
student aid fraud scheme at Rio Salado Community College. The
ringleader allegedly recruited individuals to act as ``straw students''
at the school in order to apply for and receive Federal financial aid,
completed and submitted admission forms, financial aid applications,
and supporting documentation containing forged and false statements,
and then assumed the identity of those individuals to access Rio
Salado's on-line classes. This was done to generate records of the
individuals' participation in on-line classes, which caused Rio Salado
school officials to authorize financial aid payments to those
individuals. When the straw students received the financial aid checks,
they kicked back a significant portion of the proceeds to the
ringleader. Rio Salado Community College referred this matter to us for
investigation.
As of September 30, six individuals have been sentenced
and another has pled guilty for their roles in an on-line fraud scheme
at Axia College, a two-year on-line college of the University of
Phoenix. The scheme's two ringleaders were former employees of ACS, a
third party servicer to the school, who recruited individuals to enroll
at Axia in order to fraudulently obtain student financial aid. The
former employees assisted the individual in completing the enrollment
forms and student aid applications, then enrolled the individuals in
the classes and posted homework assignments for them in order for it to
appear as though the individuals were attending the on-line courses.
When the individuals received their student aid checks, they would kick
back a portion to the two ringleaders. Axia College referred this
matter to us for investigation.
These cases, Mr. Chairman, represent what we believe is a
significant challenge facing the higher education community in the area
of student eligibility: confirming that an individual enrolled in
distance education is actually a regular student seeking to obtain a
degree or credential and is actually in attendance. We will continue
our proactive work in this area to identify issues impacting the
integrity of the programs, and aggressively root out fraud and abuse.
On the issues of concern to the Subcommittee today, we will
continue to pursue cases of ATB and high school diploma fraud.
Implementation of the recommendations made by GAO, along with the
Department's proposed improvement plans, should help better detect ATB
abuse in the future. Issues involving on-line high school diplomas,
however, are an evolving phenomenon which will continue to be a special
focus of our investigative efforts. Until regulatory changes can be put
into effect, the attention this Subcommittee and the full Committee
have focused on student eligibility issues should help financial aid
administrators across the country in being wary of dubious credentials.
Closing Remarks
In closing, let me reiterate that OIG is committed to promoting
accountability, efficiency, and effectiveness in all Federal education
operations and programs. We will continue to work with FSA, the
Department, and our colleagues at GAO to successfully address areas of
risk in the Federal student aid programs, and help reduce waste, fraud,
and abuse in these important programs. On behalf of the OIG, I want to
thank you for the support Congress has given to this office over the
years. We look forward to working with the 111th Congress in furthering
our goals and achieving our mission.
This concludes my written statement. I am happy to answer any of
your questions.
______
Chairman Hinojosa. Thank you.
I now call on Mr. Miller.
STATEMENT OF HARRIS N. MILLER, PRESIDENT AND CEO, CAREER
COLLEGE ASSOCIATION
Mr. Miller. Chairman Hinojosa, Chairman Miller, Mr.
Guthrie, and other members of the subcommittee, thank you for
allowing me to represent the Career College Association, which
consists of almost 1,600 member schools and 1.7 million
students being trained in 200 professions for PhDs,
professional degrees, bachelor's degrees, associate degrees,
and certificates.
We want to thank you for holding this hearing today,
because we at CCA share the displeasure that the chairman
expressed in his opening comment about schools that violate the
rules and regulations. Let me say this right upfront: There is
no room for cheating in the process of higher education,
whether by students, teachers, administrators, or other school
personnel.
As for the woman that the GAO recorded, obviously, she is
entitled to due process, but our position would be, when she
goes through due process, hang her high.
We also hate high school diploma mills. These are abhorrent
to the basic processes of our education system, and we support
both the recommendations in the GAO report that there be
increased oversight of the ATB testing system by the
department, and we look forward to working with the department
during the negotiated rulemaking session to figure out how to
cut down on ATB problems and to figure out a way to be able to
track more easily diploma mills so we don't run into them.
I am going to address simply three topics: the role of our
sector, compliance in student loan default prevention, which is
also underlying a lot of the GAO report.
Clearly, we believe that, as we try to expand this
country's pool of people with post-secondary degrees, we try to
achieve the objective that President Obama outlined in his
speech in February, to be number one in the world again by
2020. Career colleges have a great opportunity to contribute to
that.
We are by far the fastest growing sector of higher
education--foundation finds at career colleges students
actually outperform students in terms of graduation at many
other institutions. But the simple reality is that we do admit
students sometimes who go through the ATB tests.
The ATB tests are not good for students, for taxpayers, for
the country if they are not administered properly. And as I
said before, that is why we endorse the GAO recommendation for
clearer oversight of the test administrators, but we do not see
any evidence that ATB fraud is widespread.
But yet one episode of cheating is too many, as Mr. Guthrie
said, and particularly in the diploma mill area, again, we
think we need to have more work done to make it more visible as
to what can be done by schools to prevent inadvertently being
tied up with diploma mills.
Compliance is a constant theme at CCA, and that is my
second point. We know there is a triad of oversight: the
government, Department of Education, the state departments of
education, and other regulators at the state level, and the
accrediting bodies.
We promote regulatory compliance at all times at CCA. In
the 2.5 years I have headed the organization, we have presented
60 separate compliance sessions for our members at our
conventions, at our leadership institutes, at our conferences,
and through monthly webinars that we do at CCA.
We also urge our schools to attend all the compliance
seminars done by the Department of Education itself, and our
state associations also do training on compliance.
Our schools engage in extensive investment in internal
compliance, including training, oversight. Many of our schools
hire their own mystery shoppers to come in and make sure that
the admissions officers and the financial counselors are not
providing advice or information that is in any way inaccurate.
Now, let me talk finally about the default rate issue. It
is an issue that disturbs all of us. In a perfect world, no
students would default. But the simple reality, as that GAO
points out quite clearly in its report, is that institutions
who have a higher percentage of lower-income students and
minorities tend to have higher default rates, not just in our
sector, but also in traditional higher education.
This has to do a lot with the simple fact that, as Mr.
Shireman pointed out, many more students are applying for
federal aid, up to 14 million anticipated this year, and many
of those students do not come from upper-middle-class
backgrounds, where it is easy for them to repay loans.
But it is not the position of our sector or our schools to
simply give up on these students and assume that they are going
to default. On the contrary, CCA has had a partnership with the
Department of Education since 2003, the default prevention
initiative, where we work closely with the department to try to
help lower default rates. We have studies underway to help
schools understand best practices.
We believe that students must repay their loans, must get
their education to repay their loans. We are very pleased that
this Congress last year enacted the income-based repayment
plan, which I believe was Mr. Shireman's recommendation several
years ago, which will enable many more students to do it.
At the end of the day, Mr. Chairman, we are all about
compliance and accountability. And we look forward to your
questions. Thank you very much.
[The statement of Mr. Miller follows:]
Prepared Statement of Harris N. Miller, President and CEO,
Career College Association
Good morning. My name is Harris N. Miller, and I am President and
CEO of the Career College Association (CCA). CCA represents almost
1,600 accredited career colleges, educating an estimated 1.7 million
students in 200 professional, technical, and career fields. Our schools
offer PhDs, Masters, baccalaureate, and associate degrees and
certificate and diploma programs. All of our schools must have approval
of the Federal government, appropriate state government agency, and one
or more accrediting bodies recognized by the U.S. Department of
Education in order to participate in Title IV student aid programs.
I want to thank Chairmen Hinojosa, Ranking Member Guthrie, and all
the Subcommittee Members for holding this hearing today. The career
college sector shares a commitment to regulatory oversight that
protects students and taxpayers, maintains high standards for schools
and the delivery of education, and fosters the ability of Americans to
improve themselves and to take their place in a competitive workforce.
The very name of this Subcommittee, with the tie between higher
education and competiveness, speaks directly to the purpose and vision
of the sector I represent.
Our sector focuses strongly not only on the educational inputs of
higher education--great teachers, top notch classrooms with up to date
technology, strong reference materials, a positive learning
environment--but also on the outputs--graduating students and getting
them started in careers--which are another key measure of the success
of institutions of higher learning. Our national drop in the world
rankings from 1st to 10th or lower in people with college degrees has
as much to do with students not completing the education they start as
any other factor. And while the previous Administration and this
Administration use slightly different terminology when talking about
outputs, we applaud them both for asking the tough questions and
pushing for answers on how we get more students to the finish line and
into careers for which they are being educated. The American taxpayers
and this Congress--in a bipartisan fashion--are asking a key
accountability question about this nation's financial commitment to
higher education: What is the return on the investment? CCA and our
members strive to answer that question every day for our economy and,
most importantly, for the students who give their time and money to
attend our institutions.
Schools in our sector are also proud of their ability to adjust
their programs to ensure that the education they are providing will
help their students launch or improve their careers. This nimbleness
reflects the changing nature of work, and the preparation necessary to
be effective. Job titles such as nurse, computer programmer, and
automobile mechanic require quite different skills than twenty years
ago or even five years ago. By constant interaction with the employer
community, our schools are aware of changing education requirements and
the labor market generally. They can add capacity quickly when labor
market trends demand it. That is why, for instance, our sector now
produces the largest percentage of new entrants into allied health in
Florida. Our schools have seen a demand, and increased their capacity
to educate individuals to meet it.
Our schools are leaders in innovation. While much of higher
education now uses web-based learning--a learning technique that was
recently endorsed by a report commissioned by the United States
Department of Education--schools in the for profit sector were on the
forefront of using technology to improve access and provide flexibility
to higher education, while maintaining high standards. Schools in our
sector have partnered with high schools in cities such as Chicago to
offer disadvantaged students the opportunity to obtain a high school
degree and an associate's degree at the same time, increasing
graduation rates and providing students a jump start on their careers.
Let me say up front: there is no room for cheating in the process
of higher education, whether by students, teachers, administrators,
other school personnel, or outside testers and evaluators. Last month,
the Government Accountability Office (GAO) issued a report on career
colleges. We were disappointed to learn about a limited number of
abuses allowing unqualified students to gain admittance and to access
federal Title IV funds. We abhor any practice that breaks the rules or
the law to admit unqualified students, whether through fraudulent
testing practices or bogus high school degrees. We also hate high
school diploma mills. We share the government's interest in eliminating
any form of fraud and abuse associated with the Title IV program.
At a time of economic turmoil, when the nation needs to get the
most from its human capital, episodes of cheating are a costly
distraction from our core mission: helping America to build a more
globally competitive workforce. Our schools work to advance this
mission every day. For instance, eight of the ten fastest growing
occupations and occupations projected to have the largest numerical
increases requiring an associate level degree are in healthcare or
computer professions. Half of those requiring a baccalaureate degree
are in the healthcare or computer professions.\1\ Almost one-third of
the degrees, diplomas and certificates conferred by schools in the
career college sector (30.6 percent) relate to healthcare or medical
careers; an almost identical percentage (29.9 percent) is awarded in
information technology.
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\1\ Growth in HIT Workforce: Bureau of Labor Statistics
Occupational Outlook Handbook, 2008-09
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In the career education sector, we leave basic and applied
research, classes in Middle English or Renaissance Art, and major
intercollegiate athletics to others. Instead, career college curricula
respond to the skills employers seek most, today and tomorrow. By doing
so, our institutions raise higher education to the power of the
marketplace. We reject the agrarian era timetable for education, in
which students take off summers and often long periods in the winter,
in favor of year round education that allows students to complete their
degrees quickly--2.5 or 3 years for a bachelor's degree, for instance--
and get on with their professional lives. We see the students as
customers who deserve not only the most up to date classrooms,
textbooks, faculty, and facilities, but personal attention to assist
them find jobs, deal with personal challenges in their lives, and help
remediate educational shortcomings that too often remain from their
primary and secondary education.
Americans are responding to this different approach to
postsecondary education in dramatic numbers. The career education
sector represents nine percent of higher education enrollments and
average annual enrollment is growing at almost double digit rates. That
rapid growth has accelerated even more during the last 18 months as
higher unemployment has lead many more people to turn to education as
they prepare for economic recovery.
But even this pace understates the importance of the career
education sector to the economy and the nation. For instance, in terms
of associates' degrees, the basic credential for a growing number of
entry and mid-level jobs today, our sector awards over 16 percent of
all such degrees. Between the 1996-1997 and the 2006-2007 academic
years, the number of total degrees awarded by career colleges has
increased by 224 percent, from approximately 75,000 to over 240,000.\2\
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\2\ The Condition of Education 2009, U.S. Department of Education,
National Center for Education Statistics, Table 42-1, page 103
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We are particularly mindful of issues that relate to how our
students enter school because the route is not always the high school-
to-postsecondary institution, traditional route. Career college
students tend to be working class and lower income individuals, often
the first in their family to attend college. About 40 percent are
minorities and over half are women. Career college students are often
independent working adults with family obligations. Generally speaking,
career colleges serve a non-traditional student population--and serve
them very well. Although its students are very often not on the
``college track'' in high school, they get on the fast track in career
colleges. Indeed, a new study by the Imagine America Foundation finds
that career colleges out-perform other types of institutions when it
comes to dealing successfully with at-risk students. The study looks at
two key outcome measures across higher education sectors, persistence
and attainment, and finds that career colleges often produce better
results in these critical areas.\3\
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\3\ Pre-Release Study, Imagine America Foundation
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Non-Traditional Students/All American Values
So who is a non-traditional student? First, as this Subcommittee
knows, they may soon be the majority of students in postsecondary
institutions. At career colleges, community colleges, and even many so-
called traditional schools, students who did not enter college directly
out of high school and who did not follow a classic college preparation
high school curriculum are growing dramatically.
Non-traditional students themselves are varied. For instance, many
career college students come back to postsecondary education after
first serving in the military. Michael Vera, for example, joined the
Marines at age 17. As we first reported in CCA's Link magazine last
fall, Vera, a Jersey City, NJ native, says he was not ready for college
immediately after high school:
``I was decent in high school. I just didn't have the focus. I know
that doing the traditional college wasn't the right time for me * * * I
thought I needed a good kick in the butt to get myself straight * * *
to mature and to learn some type of responsibility.''
Michael's military service included a posting at the Pentagon and
duty there on September 11, 2001. Vera was injured when terrorists flew
a Boeing 757 into the building. Despite his injuries, he helped 25
others escape the wreckage. Michael ultimately left the military and,
while working at the Department of State, enrolled at DeVry University
in Arlington, Virginia, to advance his career. And perhaps his
traumatic past experience shaped his attitude towards the future.
``I didn't want to go to school and just take courses just to take
them,'' he told CCA's Link magazine. ``I wanted to be focused on what I
really want to study.'' Michael, who won the 2008 LDRSHIP Award for his
heroism from the Imagine America Foundation, plans to become a security
engineer.
Michael is not alone. Approximately 20 percent of those receiving
veterans' benefits enroll in career colleges. Like other non-
traditional students, they are attracted by the flexible schedules and
hands-on approaches that characterize our schools. But they are also
apt to find that career colleges are better aligned with their
interests in getting an education and getting on with life.
Our students can also be individuals who have taken life out of the
traditional order, many entering college after starting a family or
working for a few years perhaps at places that do not require
postsecondary skills--but also offer few chances for economic
advancement. Sometimes these individuals become heroes of the home
front. I am struck by how many times I hear older students tell me that
their own young children see them studying at the kitchen table and get
motivated to do likewise. When I speak at a college graduation, I am
impressed and moved by the life challenges so many of the graduates
have overcome to earn their sheepskins.
Motivation is the key. Students come to career colleges ready to
succeed, and career colleges help students put the pieces where they
belong. This assistance means working together to remove obstacles to
success, whether academic, personal or professional. About 50 percent
of our schools operate on an open admissions basis. Our emphasis is on
helping every student succeed, not on building a more selective student
body than the next school. There are no ivory towers in our sector, but
plenty of students with a towering desire to get an education and to
get ahead.
Take the example of Pamela Jackson, who attended Everest College in
Merrillville, Indiana. Pamela grew up in Cabrini-Green on Chicago's
North Side--a development known for being one of the worst public
housing communities in the country. As the daughter of a mother
addicted to drugs, Pamela's childhood was hard. Many nights, she and
her siblings were left alone with no food and no one to take care of
them. When she was 14, Pamela became involved in a gang. This was also
when she began living two lives: One as a gang member, the other as an
honor student. Pamela's father was one of the few positive role models
in her life, instilling in her that education was the key to a better
life. But when Pamela was 17, her father was killed as a result of gang
violence. While still in high school, Pamela gave birth to two
children. Soon after, her mother kicked her out of her home. But those
personal challenges did not stop Pamela from being a good student. In
fact, she worked harder, graduating high school with honors.
After the birth of her third daughter, Pamela, then 18, realized
she needed to focus on a stable career.
She eventually discovered Everest's practical nursing program.
Pamela encountered many personal hardships while enrolled in the
program--including domestic violence and homelessness--but with the
help and encouragement of her nursing instructors and the assistant
nursing director, she managed to complete the practical nursing program
last April. Despite her many challenges, Pamela was an ideal student
with excellent attendance. Pamela passed her state board examination in
June 2009 and obtained her nursing licenses in both Indiana and
Illinois. Pam had several job offers upon graduation, and with the help
of Everest's Career Services team, she currently works at a nursing
home as a licensed practical nurse.
Career colleges proved to be the right solution for a younger
person like Pamela Johnson. But a difficult economy has forced many
middle-aged adults to re-evaluate their skills and to gain a more
competitive employment posture. Rick Brandburg, 47, had not been in a
classroom in 28 years. He had reservations about whether he had the
stamina and funds to go back to school. With an emerging passion in
criminal justice, however, Rick decided to enroll at Kaplan College in
Hagerstown, Maryland.
Rick was also impressed with the level of instruction provided by
members of the faculty and the flexibility of class schedules. Having a
schedule that allowed Rick to work was essential, and he received
hands-on instruction from the faculty during his night courses.
According to Rick, ``The way Hagerstown College has the classes set
up is much more flexible than the local community college. I am able to
have a full-time class schedule that only has classes three nights a
week. The flexibility made a difference for me.''
``I also enjoyed the idea that most of the instructors I've had
have experience in the real world. Who better to teach evidence and
testimony than someone who deals with it every day? This is the best
experience I think you can get.''
Since graduation, Rick has been hired by the state of Maryland as a
child support enforcement agent.
``I love my job. It is still fairly new, but my education has
allowed me to catch on to it very well--it's my ultimate job.''
Test Fraud: No Pattern of Abuse
Both Pamela Jackson and Rick Brandburg graduated from high school,
but many others do not. Drop-out rates in several major metropolitan
areas across the country are 50 percent or more. Ability to Benefit
tests are an important tool for helping those who may have dropped out
of high school and who do not have a GED to regain a foothold on the
ladder of success.
But not if the tests are misused. Beyond the civil and criminal
penalties that may attach to engaging in such fraud, schools that
participate in or support this activity ultimately damage themselves,
their reputations and their future viability. The vast majority of
schools that play by the rules dislike intensely those that do not.
Walk into a career college and you will find students who cannot wait
to get to work * * * to get on with the next lab or classroom
experience * * * to find the answer to the next question. In fields
like automotive repair and allied healthcare it is not unusual to see
people working in teams or on common, hands-on projects. The education
is concise, concentrated, streamlined. Allowing students without the
basic ability to perform the work simply slows progress, distracts
instructors, and diminishes the learning process for all involved.
The good news is that we do not see evidence that fraud in Ability
to Benefit tests or diploma mill use are widespread--nor does the GAO.
In fact, the GAO says in its report, ``GAO's findings do not represent
nor imply widespread problems at all proprietary schools.'' To the
extent that admissions problems exist, they are not found exclusively
in the career college sector.
Yet one episode of cheating is too many. We support the GAO
recommendations to increase Department of Education oversight of ATB
testing. Our members maintain lists of diploma mills, and we support
the GAO recommendation that the Department of Education provide a list
of diploma mills so that schools will not have questions about the
legitimacy of a degree. We support appropriate actions against testers
or schools operators who are found to have violated the law. We look
forward to working with the Department and other stakeholders in the
upcoming negotiated rulemaking which will have ATB and diploma mills on
the agenda.
Putting the Situation in Context
When considering situations where someone in a school crosses the
line, context is critical. Take the example of Ohio, where
approximately 300 career colleges educate some 75,000 students. Last
year, the State Board of Colleges and Schools reported just six non-
student complaints related to advertising and recruitment and just 10
non-student generated complaints overall. The Board reported 58 student
complaints, with just five related to admissions problems. Note that
complaints are just that and are not necessarily found to have merit.
When investigated, oftentimes they are found to have no merit.
In its report, the Ohio Board found much to praise about career
colleges in the state:
``Placement statistics compiled in this report indicate that 81% of
the individuals who complete their education find employment following
their graduation. Ohio's career colleges and schools have been of great
assistance in helping unemployed adults to find jobs. Some of the
schools work closely with government agencies like WIA and Vocational
Rehabilitation, and in some cases, employers, to assist in paying the
cost of these training programs. Through this effort, career colleges
and schools are removing some people from public assistance and once
again making them taxpayers.'' \4\
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\4\ State Board of Career Colleges and Schools, 2008 Annual Report,
page 12
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The report calls Ohio's career colleges ``a positive, economic
asset to the State, both as businesses and as educational institutions
for several reasons. First, career college and school graduates make a
continuing contribution to the economy because of their improved
productivity. Graduates of these institutions have higher personal
incomes and pay more taxes. Second, career colleges and schools are
businesses that pay salaries, buy goods and services from other
businesses and pay taxes to the local, state and federal government.''
According to the report's findings, career colleges generate $450
million in economic activity in Ohio and pay $37 million in taxes.
Moreover, were there no career colleges in Ohio, the Board estimates
that the state would be paying an additional $75 million to educate
these students.\5\
---------------------------------------------------------------------------
\5\ Ibid, page 14
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Job placement assistance is one of the most attractive aspects of
career colleges and placement in field is a key to success in student
loan repayment. To retain their accreditation status, institutions
accredited by the Accrediting Council for Independent Colleges and
Schools must maintain a placement rate of 65 percent. In 2008, ACICS
accredited schools had an overall placement rate of 71 percent.\6\
Other national accreditation agencies have similar placement
requirements.
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\6\ ACICS, Educating America's Workforce: Key Operating Statistics,
page 12
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Cohort Default Rates
In a perfect world, no students would default on Federal loans. And
there is a way to achieve close to that perfect world--only lend money
to students who are well to do or have well to do parents.
But we know as a society, as an economy, that is not an acceptable
policy path, because such a policy would discriminate against the poor,
against lower middle income families, and against minorities. It would
prevent millions of capable students from pursuing their American dream
by obtaining a post-secondary education. It would lower the standard of
living for our citizens, making us less globally competitive and
locking generations into cycles of poverty.
So we have a Federal student lending system that is open to all and
accept the fact that such a policy carries some risks given the socio-
economic status of the students. And, sure enough, we find that at
institutions that accept lower income students and working adults, the
average default rate of students is higher than that at traditional
elite institutions. The GAO report makes the same point. Some students
who graduate will not be able to repay their loans, even with their
sheepskin. Those who do not complete usually have a much higher default
rate.
This higher default rate is true of most, but not all, community
colleges, minority serving institutions, and career colleges, as the
GAO indicates. CCA does have member institutions with default rates as
low as the most elite traditional institutions, but we also have those
with higher default rates, often those in inner cities and other low
income areas. The average across all career colleges is now 11%,
slightly higher than the 9.9% for community colleges.
The current difficult economy, with so many unemployed or
underemployed, is likely to lead to even higher default rates next
year, just as it is leading to higher defaults in home mortgages,
automobile loans, and credit cards.
However, it is not the policy of our sector simply to accept higher
defaults as inevitable and unavoidable. We work aggressively as an
Association and as a sector to minimize student defaults. Our Default
Prevention Initiative (DPI) began in early 2003 as a way for CCA member
institutions and members of the Department of Education's Default
Prevention staff to share best practices in late state delinquency. The
group evolved to its current form, with an active group of 40
institutional personnel, Department representatives, and CCA staff.
Over the past year, the school members worked to gather data on the
characteristics of defaulters at various stages (early missed payments,
late stage delinquency and defaulters) and developed strategies for
identifying potential defaulters before the first late payment. Our
goal is to use previously identified best practices to provide
additional loan counseling and financial literacy education.
Currently, the DPI is working on developing a student loan default
prevention program more rigorous than would be required by the
Secretary should an institution be above the CDR threshold. The goal is
to introduce this plan to the CCA membership at large as a tried-and-
true default prevention plan and eventually to all of postsecondary
education as a means of reducing CDRs universally.
The CCA/ED DPI will include intervention strategies for all stages
of student borrowing and potential default, from before the first loan
is disbursed through all possible points of contact during enrollment,
graduation or withdrawal, and repayment or delinquency and
rehabilitation.
We support policy changes that will help students not default. We
are very pleased with the passage last year of the Income Based
Repayment plan that took effect July 1 of this year that will allow
students to pay lower amounts when they first graduate and have a lower
earning capacity, with payments increasing as earnings increase. And we
support a change in the law that would allow financial aid officers to
prevent students from overborrowing when their costs of education and/
or post-graduation earnings capacity do not justify the loan amounts
they are taking. I understand that the community colleges also support
this idea.
We see no evidence that the type of isolated fraud found by GAO has
more than a de minimis impact on default rates.
Proactive Compliance Programs
The record suggests that instances of fraud are few and controls
exist to catch cheaters. That does not mean that we can rest on our
laurels. Compliance is a subject on which I, my Board Chairman and
other Members, and all of our leaders preach constantly to our members.
CCA maintains an active compliance program educating our members across
a range of issues, including admissions, required outcomes, financial
aid, student records and other topics. We deliver this education
through monthly webcasts, sessions at our Annual Convention, an
extensive online library, feature articles in CCA's Link magazine, a
Compliance Officer's Roundtable, and our annual Leadership Institute
for next generation school leaders. In the 2+ years since I became
CCA's head, we have conducted sixty compliance training sessions. State
associations of career colleges also focus intensively on compliance
training, including several that were offered at the Texas state
association meeting last week. We urge our schools to attend training
sessions put on by the Department, especially in the financial aid
area, one of the most complex areas of law and regulation not just in
higher education, but in the entire legal world.
Our schools carry out internal compliance programs, understanding
the legal and reputational risks to their institutions. These include
intensive training, oversight and review, internal and external audits,
and even such tactics as ``mystery shopping,'' in which schools hire
outside firms to appear as potential students to ensure that admissions
officers and financial aid officers are being accurate and informative
in all their presentations.
The schools are all subject to what is referred to in higher
education as the ``triad of regulation,'' Federal Department of
Education oversight, state regulation and oversight, and accreditor
review and oversight. And they are reviewed daily by their customers--
the students who attend.
Conclusions
The Career College Association and its members have zero tolerance
for fraud in the admissions process or in any other aspect of school
operations. Both the Association and its members maintain active
compliance programs and seek to uphold the highest standards of ethical
practice. From time to time, as with all types of institutions in
higher education, individuals cross a line and engage in activity that
abuses the system and harms both the school and its students. Such
episodes are small in number and do not significantly contribute to
elevated cohort default rates. Career colleges do better than other
types of institutions in educating non-traditional students and working
with them to complete postsecondary programs. That being said, non-
traditional students are often those with the greatest social pressures
and fewest financial resources starting out in life. It is not
surprising, therefore, that studies would show that non-traditional
students have the highest rates of loan default. CCA and its member
schools are committed to working with all students to assure high rates
of academic success, job placement and loan repayment.
______
Chairman Hinojosa. Thank you. I wish at this time to ask
Chairman Miller if he has questions for any of the panelists.
Mr. Miller of California. Thank you, Mr. Chairman. And
thank you very much for holding this hearing.
Mr. Scott, thank you for all of the work of you and your
office. At the end of your testimony, you suggested that this
was not--did not represent or imply a widespread problem in all
proprietary schools.
And I have no reason to disagree with that, but I ask you
to sort of marry your testimony with that of Ms. Mitchelson and
ask you whether we have got additional problems here that we
ought to be concerned about. I mean, you see what the I.G. is
encountering in their--it is somewhat broader and across
different fields of, unfortunately, opportunities to engage in
nefarious activities.
Mr. Scott. Yes, Mr. Chairman, as I said in my statement,
you know, we didn't intend our work, which is narrowly focused
and only encompasses visit to a few schools, and so that is why
we really wanted to make sure we properly characterize the
scope of our work.
That said, given that these problems have continued, you
know, even after, you know, the Office of Inspector General has
pointed out these problems, we do believe they do rise to a
level of concern that we believe it is important for Department
of Education to take action.
Some of the steps Mr. Shireman outlined certainly sound
very promising, but we are going to make sure we continue to
monitor their implementation of those actions to address those
weaknesses that we and others have identified.
Mr. Miller of California. Thank you.
Ms. Mitchelson, one of my concerns is that, in the--I don't
know why I am asking the GAO about the I.G. and the I.G. about
the GAO, but we will get that sorted out--is that in a number
of these--it seems to me the student is a bit of a pawn here.
They are told they pass. They got a diploma from a diploma
mill.
I am not saying they are not necessarily willing, but they
may be willing because they are desperate to get an education
and try to figure out how they can navigate. So let's assume a
little bit of good faith there. Or they pass a rigid test, they
take on this debt--in some cases, this is very high-interest
debt--and then they don't thrive, they don't complete the
system here.
They now end up with a debt, with a default, with a ruined
credit report, and it seems to me all their problems just got
worse. And yet, when I look at your report, it also suggests
there may be some students who are figuring out how to game the
system. If they can show up for the first day of college,
community college or proprietary school, they can get part of
that money back for their living expenses and what have you,
and go on their way, and really not show up online, in class,
or on campus, wherever the hell it is.
So we are kind of getting hit from both ends here, are we
not?
Ms. Mitchelson. Yes, sir. And there is effort needed by the
department to clarify what the rules are in this area, both to
protect the students and to protect the taxpayer.
In the online context right now, we don't really know--the
challenges are to try to identify whether the student is
actually who she says she is. Many times, nobody is required to
show up in person, so it is hard to make an identification on
the distance.
Secondly, is she actually enrolling because she wants to
get the instruction? Or is she merely enrolling just long
enough to get the financial aid, which she will then use for
other purposes?
A third problem is, is she receiving the correct amount of
aid? As you know, aid is delivered based upon credit hour. If I
am taking 12 credit hours, I am entitled to a full aid package.
Well, the department has not defined credit hours. Neither the
statute nor the regulation define what a credit hour is. So it
is not clear whether the student, particularly in an online
environment, is receiving enough instruction to justify the
amount of credit hours she is receiving.
And the fourth question then is, should she drop out and
not continue her study in that program, what amount of refund
of student financial aid is due? What degree of instruction did
she actually receive? Was she actually in attendance? Many
schools do not require to take attendance, and so particularly
in the online context, there is a lot of ambiguity about who is
participating, for what purpose, how long, and whether they are
actually due the full amount of financial aid.
Now, we have just done some work looking at the question of
credit hour, because Mr. Scott mentioned the triad. And one of
the triads is the accrediting agencies. Accrediting agencies
are relied upon to determine what credit hours should be
awarded based upon a particular program of instruction.
We went to three different crediting agencies and asked
that question about, tell us how you make that judgment about
what amount of credit hours is appropriately awarded in this
situation? We found varying standards and, to some extent, no
standards.
And that is a set of inspections that we will be issuing
starting the near term, information that I think the department
will find very useful as it takes up this issue in its
negotiated rulemaking next month.
Mr. Miller of California. Thank you.
If I might, Mr. Chairman, I would just like to ask Mr.
Shireman a question.
Mr. Shireman, when I look at part of this, as I said, we
are kind of getting gamed from both ends here, in some cases.
But when I look at part of this, it sort of reminds me of where
we were 2 years ago with liar loans and no-doc loans in the
housing market, where people started accepting people who
couldn't prove their income, couldn't prove employment, but we
sold them a $450,000 house. And that all came crashing down
here.
I am a little worried when I see these tapes and I see
these tests and I see the diploma mills outlined here that we
are developing a process here that looks a lot like sort of
subpoena student loans. And knowing that these people don't
have the capacity to pay it back, knowing that they may not
have the ability to benefit from this education, we go ahead
and extend them the credit in the private market and in--
because in the private market, you just keep adjusting the
interest rate up until they yell, ``No,'' and in the federal
loans programs.
And I just--as you listen to this testimony--and I see what
you are doing, and I am delighted by the changes you have made,
but at some point, I hate to say this, but, I mean, I think we
are going to have to sort of develop a watch list on certain
institutions, because if they become the feeder systems for
subprime loans to these students, we have got a real problem
here, and it is going to go beyond just the school, if you
will.
It is going to be out in society, in terms of people
inheriting this--you know, what can be a substantial amount of
debt for their situation.
Mr. Shireman. Yes, there is certainly--the reason to have
the requirement of a high school diploma or passage of an
ability to benefit test is to at least have some measure of
confidence that the students are entering post-secondary
education and will be able to achieve, get through those
courses, perhaps get a degree, get the benefit of the income,
and be able to repay their loans.
And when we fail to have the appropriate checks to make
sure that they are qualified, we are not just potentially
costing taxpayers, but also jeopardizing those students by
putting them into debt for degrees that they are likely not
going to get, not be able to get that employment. So we need to
be vigilant.
We do--the statute requires and we do look at various types
of risk factors in identifying the institutions that are
subject to our program reviews. We look at dropout rates. We
look at sudden large increases in the amount of loans or Pell
Grants that might be going to an institution, default rates,
volume of defaults, as well.
So we are always on the lookout for--and we are working
with the inspector general and other kinds of risk factors that
we can use to identify schools where our program review staff
should be going to make sure that there is not anything
inappropriate going on.
Mr. Miller of California. You know, I just--I will finish
with--Mr. Chairman, I appreciate my colleagues bearing with me
here in a minute--but, you know, I have been reviewing and
looking at--I guess it is, you know, one of these earnings
calls that companies go on to discuss with the financial
institutions, their prospective earnings.
You know, one of the very large proprietary operations,
they are anticipating a 50 percent default rate on their loans
that they make to their students. I just got to ask the
question, so does that mean you just go forward, and if you can
absorb that with respect to the financial markets, it is okay?
Or do you have to figure out--and it is very hard to tell a
student that, you know, you can't afford to do this or this
isn't going to work out for you, but, you know, they are
suggesting we can manage all this from an institutional point
of view.
I am asking, what happens to the student out there? From
their point of view, if you expect 50 percent of them to
default on the private loans--but we will leave that open for a
question, because--I mean, for an answer.
But I just--I am a little concerned here that we are not
focusing too much on what happens to--let's just assume--good
faith on part of these students and what they are being told,
you know, they can handle or they can't handle at this point.
Thank you, Mr. Chairman, again, for holding this hearing. I
think it raises a number of very serious issues going forward
for all parts of the student loan community.
Chairman Hinojosa. Thank you for your questions.
At this time, I would like to recognize myself for a few
questions. And the first one is to Mr. Scott.
Can you share with us any positive experiences you may have
had in your visits to proprietary schools?
Mr. Scott. Yes, Mr. Chairman. In some of our visits, we
clearly learned that some of these schools are really providing
good student supports to help these students, you know, persist
and complete their certificate or program.
Now, as I said in my statement, you know, these schools
often provide the access and opportunity for students who
otherwise would not be able to pursue a post-secondary
education. And so it was sort of, in one respect, reassuring to
see that some of these schools are, in fact, taking the
necessary steps to support their students.
That said, however, you know, we continue to have some
concerns with some of the practices, and therefore, we do
believe it is important for Department of Education to increase
its oversight in this key area.
Chairman Hinojosa. Well, that leads me, then, to the next
question to you. You have identified problems in your testimony
with the ability to benefit test abuse and point to weaknesses
in the Education's monitoring of the test publishers who
provided these tests to the schools. So what steps should
Department of Education take to better monitor the ATB program?
Mr. Scott. Mr. Chairman, as I mentioned earlier, it sounds
like Education has already started down that road, in terms of
improving its oversight of test publishers. As you may know, in
our report, we made a number of recommendations to the
department to improve its oversight in this area, including
providing, you know, sort of midpoint test analyses to try to
more quickly identify cases of testing irregularities.
We also, you know, noted that the department needs to make
sure that it is following up in cases where irregularities are
identified more routinely. And so those are the number of other
steps that we outlined in our report, we believe will help
improve the oversight in this area.
Chairman Hinojosa. Thank you.
I would like to ask the next question of Ms. Mitchelson.
What challenges does your office face in combating fraud and
abuse in the federal student aid programs?
Ms. Mitchelson. Well, sir, I can sum that up in one word,
and that is resources. You know, these are immense programs,
and there are lots of participants. We have a very talented,
multidiscipline staff that is highly skilled and well equipped.
Having said that, we still have only approximately 300 people
whose job it is to help oversee over $782 billion worth of
programs.
That is the department's annual appropriation, of around
$65 billion, the amount of money they----
Chairman Hinojosa. How many more should we add to be able
to get the job done?
Ms. Mitchelson. That is an excellent question, sir.
Chairman Hinojosa. I will let the secretary figure that one
out.
Yes?
Ms. Mitchelson. Let me say that our challenges go beyond
just adding bodies. We really need to find ways to do
analytical work where we can target the highest degree of
fraud, the highest degree of risk.
For example, we took a look at the population of students
that we think maybe have taken ATB tests in the fiscal year
2009. And by looking at those students who on their FAFSA did
not identify that they either had a GED, a high school diploma,
or were home-schooled, we assumed that the remaining population
must have taken and passed an ATB test.
When we looked at fiscal year 2009, that amounted to about
11 percent of the population receiving financial aid in that
year. And that amounted to $12 billion. That is a lot of funds.
These programs are so large and so expensive that, in order to
do effective fraud deterrence, we are developing analytical
tools that help us identify where the riskiest places are.
We have now approximately just a little over 90 special
agents. Obviously, they are not going to be able to
investigate, you know, a great deal of cases. Currently, we
have pending about 430 cases.
Chairman Hinojosa. Thank you for your response.
Ms. Mitchelson. Thank you.
Chairman Hinojosa. I want to be sure that I have time to
ask Mr. Shireman the question--I have noticed and I have heard
the president, so I know that the administration is strongly
supportive of post-secondary education. And although your
tenure is only a few months along, do you see or do you foresee
some legislation changes the Congress might consider in the
recent reauthorization of Higher Education Act or the now-
pending WIA?
Mr. Shireman. I expect that--well, first off, we are in the
process of implementing those changes, the reauthorization of
the Higher Education Act that you all enacted last year, which
addresses some of the issues that we are discussing today, in
particular, the issue of validating a student's identity in
distance learning. So we have been in the process of finalizing
regulations about what we will expect of accrediting agencies
in that regard.
There are a number of other items like that where we need
to implement what Congress has already done. There is
legislation, of course, that was passed out of the House a
month before last and what I would anticipate in the job
training arena that there would also be Workforce Investment
Act reauthorization.
So all of these are opportunities for us to take a closer
look at program integrity generally and ways that we--
particularly in the job-training realm--ways that we might work
with Department of Labor and Department of Education to better
connect the training opportunities with the needs of the
workforce.
Chairman Hinojosa. Well, in closing, I want to say that I
have noticed the willingness by the secretary of education and
the secretary of labor of coming together and communicating so
we can, indeed, do what you just ended your statement with.
My time has run out, and I would like to yield time to
Ranking Member Guthrie.
Mr. Guthrie. Thank you, Mr. Chairman.
You know, there were some--a couple of really good points I
just want to reiterate myself that Chairman Miller, Mr.
Shireman made about these students going into--you know, if you
are a nontraditional student, which is typically without a high
school diploma, and you show up in post-secondary education, it
is usually because some trauma has happened in your life, you
have lost your job, so you are getting back into the--so
putting them further in debt.
Another thing, putting somebody who is probably lost a
little confidence, losing their job, into a classroom where
they are not going to be successful, if the ATB is a predictor
of being successful, if it is valid, then--you know, that is a
moral problem, as well. And thanks for this hearing to check
that out.
But about the ATB, I know that we have a problem now with
the diploma mills we are talking about, but one of my questions
is why--Mr. Miller, why use the ATB as opposed to requiring a
GED?
Mr. Miller. Mr. Guthrie, the simple reality is that some
people who are down on their luck, that maybe they were
discouraged from going to high school, maybe they are
immigrants, they simply are never going to be successful in
passing a GED. And we as a society have to make a decision as
to whether to cut them off from post-secondary education or
not.
The reality is that we have decided as a society, this
Congress has approved, the department has approved admitting
these students, because we believe they deserve another chance,
they deserve a chance to get the education, get the skills they
need to more into a career which puts them into the middle
class. And I think we all should support that.
The department recognizes, even though, obviously, some
improvements are needed based on today's hearing, that this
does run some risks. And I think the thickest--one of the
thickest parts of the regulations, Mr. Chairman, if I am not
mistaken, are the regulations about ATB testing.
Even though there are relatively few students involved--Ms.
Mitchelson said about 11 percent of those who receive federal
aid, probably about 5 percent of all students--the department
is very cognizant of this and has created a lot of rules and
regulations that, if properly enforced, should make sure that
only students who are truly qualified pass the ATB test and
then have a good chance of completing and getting the degree
and the new job opportunity which they seek.
Mr. Guthrie. Thank you.
And then, for Mr. Scott, I have a question. When you
selected schools to do your investigation, I mean, how did you
select those? Did you randomly select schools and, all of a
sudden, you walk in and you have something as obvious or as
blatant as--we just saw something that couldn't be more
blatant, blatantly wrong.
I mean, did you have some kind of insight into that
particular school to attend? Or is this--did you just randomly
pick one and you found this type of fraud?
Mr. Scott. The school where we conducted the undercover
visit and actually sent our analysts in was chosen primarily
based on demographics. There was a local school here. And
since, you know, we were unsure what we would find. We didn't
want to invest significant resources and travel, that sort of
thing, so we just happened to pick a local, you know, publicly
traded proprietary school. And this is what we found.
Mr. Guthrie. And do you think that--I mean, obviously, we
looked at proprietary schools in this GAO. Do you think that
this type of issues could be at all types of different
institutions, as well?
Mr. Scott. Absolutely. The rules apply to all sectors of
the post-secondary education community. And so, you know, the
things we found and the recommendations we made to the
Department of Education would benefit all students across the
sectors. Although our work was focused on proprietary schools,
clearly, you know, these vulnerabilities can exist in other
sectors.
Mr. Guthrie. Thanks. I appreciate that.
And then, also, again for Mr. Miller, I was at Sullivan
University, which is a proprietary school in Louisville, as I
mentioned, at graduation and noticed and talked to people after
you noticed the demographics of the student body were more
reflective of the city of Louisville than some of the other
schools in the area.
And it just seemed like--and what I was told or was--and I
believe it is true, because it was a very--highly regarded
career college there, proprietary school, is the personal
attention that they do give to the students. And there were a
lot of first--because I asked that question, a lot of first-
generation college graduates, nontraditional students getting
their associates and diplomas and some getting masters',
actually.
In your experience, is that how career colleges typically
operate, with a lot more personal touch, do you think?
Mr. Miller. Absolutely, Mr. Guthrie. That is one of the
expectations that a student has coming to our school, and that
is one of the expectations our schools have.
They see students as customers, not students as
supplicants. And the reality is, Mr. Guthrie, that many of
these students have challenges coming into a career college.
They may have academic challenges and not have a particularly
good education. Whether they are ATB, GED or even a high school
degree, unfortunately, we know a lot of people come out with
high school legitimate diplomas that are not prepared for post-
secondary education.
They may have an issue of confidence. They may have an
issue of family issues, dealing with childcare or dealing with
a changing work schedule. So our schools put a tremendous
amount of resources into staff support.
Let me give you just one interesting piece of data.
According to Mark Kantrowitz, Dr. Mark Kantrowitz, the head of
FinAid, he did a study earlier this summer, and he looked at
what percentage of students at career colleges and the
community colleges were Pell-eligible. And then he looked at
the percentage of students who actually received Pell Grants.
And he found that at community colleges, less than 50
percent of the students that were Pell-eligible were receiving
Pell Grants, whereas a career college is 97 percent receiving
them.
Now, that is unfortunate for the students to go to
community colleges, and I don't think it is because community
colleges don't want their students to receive the federal aid
which they are entitled to and which this Congress approved. It
is because often a community college simply doesn't have the
financial staff to assist an applicant to fill out what we all
admit is a very complicated application process that I know Mr.
Shireman and this Congress are trying to simplify.
But I think that is a perfect example, Mr. Guthrie, of the
focus on personal attention. The other thing that is important
is that, when you go to a career college, you are not going to
grow up. You are not going to learn to drink beer. You are not
going to root for your football team, the reason that a lot of
people go to traditional colleges.
People go to career colleges because they want a career.
They are very focused. And so from the day you walk into our
institutions, the institution is structured to support you in
getting your career, how to write a resume, how to--basic work
habits, giving you information that is current in the
employment market, in the career market, so you are being
trained for what would get you that career. Now, that is what
our students want, and that is what we provide.
Mr. Guthrie. Thank you. I yield back.
Chairman Hinojosa. Thank you.
At this time, I would like to recognize the gentlewoman
from Ohio, Congresswoman Fudge.
Ms. Fudge. Thank you very much, Mr. Chairman. And thank you
for holding this hearing today.
I want to thank career colleges and those who have been
working so hard to make sure that nontraditional students have
an opportunity for careers, but I do have a couple of concerns.
One, of course, is that many students, obviously, who take
the ATB do very well, but many of these students are purposely,
I think, targeted for failure, based upon the fact that they
are put in institutions they know they can't finish. I mean,
they really do know that these students are not prepared to go
forward.
So I would just like to know, what, if any, sanctions are
appropriate for institutions that are found to be fraudulent?
And if there are none, what should there be?
Mr. Shireman. I will start on that one. Well, an
institution that enrolls students and provides them with
federal financial aid, if those students were not eligible for
financial aid, that becomes--they have to repay those funds to
the federal government. If it was purposeful, then we would
likely refer that to the inspector general, others, and there
would be possible criminal action in relation to that.
But if it was carelessness on the part of a college, it
becomes a liability. Those are the kinds of things that we do
find in compliance audits and our program reviews of
institutions. So there are consequences for a school in
enrolling those kinds of students.
There is not any minimum level of dropout or graduation
rate, for example, that is expected of an institution, so there
is not a penalty, per se, for something like that. However,
that is one of the risk factors that we look at in identifying
institutions that should be subjected to a program review.
Ms. Fudge. So in the instance that Mr. Scott displayed for
us, what would happen to that institution who purposely was
violating the rules?
Mr. Shireman. Right. Well, what we don't know in this
situation was, was this the individual? Was this the testing
company? Was this the institution? What was the intent? Who
made what kinds of instructions to whom? So depending on what
we or others found about the situation and what the real
pattern was, that would determine where some liability might
lie.
Mr. Miller. Congresswoman, there is the regulatory points,
which Mr. Shireman made. There is also the accreditation
process. If a school is nationally accredited, and the national
accreditors themselves are subject to approval by the U.S.
Department of Education, most of them do have graduation
completion rates and placement rates as a criteria for
maintaining that accreditation.
And if a school fails to meet those requirements, fails to
prove to the oversight accrediting body that students are
graduating at a rate that is set out by the accrediting body,
and/or is to failing to place students in their chosen career
field, then they can be put on provisional status by the
accreditor. And if it is repeated, they will lose their
accreditation. If they lose their accreditation, Congressman
Fudge, that means they lose the ability to have their students
eligible for Title IV funds. So it is a very serious risk they
run.
The other point I would make, Congresswoman, is the basic
place that our schools get their referrals--even though there
is a lot of talk about marketing and advertising--but if you
talk to any of our schools, large or small, the basic place
they get sources of students is referrals, personal referrals.
And the students who come to the schools almost always talk
to someone else that they know personally, a relative, a
friend, an employer that they trust, just the way you decide to
go to a movie based on what your friends say or you may decide
to buy a car based on what your friends say. Our students talk
to somebody else.
So if you are running a sham school, if you are not really
providing quality education, then you are not going to be
getting those referrals. In fact, you are going to be getting
negative referrals, because people are going to say, ``Don't go
to that school,'' and you are not going to enroll the student,
because when the prospective student checks with his friends or
neighbors or relatives.
The last point I would make, Congresswoman--and I don't
think this is fully appreciated--is you are going to be a very
unsuccessful school financially if you are just churning
students. The way a school is able to be profitable, grow, have
money to invest, expand, is by getting students, keeping them,
graduating them, and making sure that you have a quality
outcome for the students, because ultimately, if you are just
turning students over and just churning them over, you are not
going to have a good reputation, you are not going to be able
to place your students, you are not going to get the referrals,
and you are going to be out of business.
The students are smart. They understand--they shop on the
Internet. They talk to their friends. They have a lot of
sources. They have a lot of competition in major cities now.
Many of our schools are competing with one another.
So schools that are not playing by the rules, that are not
turning people out, that are not graduating students, yes, a
few may get away with it here and there--and that is the job of
the I.G. to investigate that and the accreditors to investigate
and the state departments to investigate--but if that were the
rule, not the exception, these schools would not be growing,
these schools would not be successful.
Ms. Fudge. Thank you, Mr. Chairman. I yield back.
Chairman Hinojosa. Thank you.
I now call on the gentleman from Minnesota, Congressman
Kline.
Mr. Kline. Thank you, Mr. Chairman. Thank you for yielding
time and for holding this hearing. This is a terrific panel
that we have. Again, I am always excited when we have a panel
of real experts, and that is what we have here today, so I want
to thank the witnesses for your attendance today, for your
testimony, and for addressing our questions.
Today, we have--this report--the GAO report is focused
entirely on proprietary schools, that sector. And, Mr. Scott,
in response to an earlier question, you indicated that other
sectors in education accept students through the ATB test
process, and so they may be subject to some of the same
problems. Can you tell me--do you know, is the GAO looking at
the rest of the schools, beyond the proprietary sector?
Mr. Scott. Mr. Kline, the work that was requested by
Chairman Hinojosa asked us to focus specifically on proprietary
schools. So, no, we are not looking more broadly across other
sectors.
Mr. Kline. Okay, thank you. That is what I assumed. I just
want to get it straight here.
On the fraudulent activity, again, were you able to
determine--and make sure I have got this clear--that this is
not pervasive throughout the sector?
Mr. Scott. As I mentioned earlier, the scope of our work
was narrowly focused. We visited a few schools in the
undercover investigation that we conducted, took place at one
school. So I am not really in a position to say. GAO is not
really in a position to say whether this is widespread or not.
As I mentioned, you know, the fact that this has continued,
you know, despite prior I.G. work and the work of others, does
cause concern. And so we think, at the end of the day, this is
really about protecting students, protecting the taxpayers and
the integrity of our higher education system.
So it is important for the Department of Education to
really step up here and improve its oversight of this area.
Mr. Kline. And look across the board.
Mr. Scott. And look across all sectors, absolutely.
Mr. Kline. Right. Okay. Thank you very much.
Mr. Miller, since we are talking about proprietary schools,
career colleges, and you are here representing them, just a
couple of comments and questions. I come from a district where
I have got every sector represented, I have got some very fine,
traditional, 4-year colleges located in the same city, which I
always find interesting, so they have a cross-city rivalry
there in Northfield, Minnesota. I have got some wonderful
community colleges. And, of course, we have quite a large
number of career colleges and across a wide array, some of them
granting master's degrees and PhDs, and some A.A.s and so
forth.
And it seemed to me--and I visited all of them, even walked
out of my district and visited the giant University of
Minnesota. It is big enough to be a lot of districts. But it
seemed to me--I mean, it was pretty clear to me, as I was
visiting the career colleges, that they seem to be pretty
nimble in adjusting to the work demands and the need to shift
careers. And that, I suppose, applies to the name of career
colleges.
But as we see the economy in shambles and unemployment
continuing to rise, there is this demand for a shift in
careers, a shift in jobs in many places, and the career
colleges seem to be adjusting to that, and we are picking up
students for everything from pharmacy assistants to nursing
and--why do you think that those career schools are able to do
that, to make that adjustment?
Mr. Miller. I agree with your assessment, Mr. Kline, and it
is because we are single purpose. Traditional colleges and
universities, community colleges serve a whole series of
missions and functions. They have a lot of different groups
they have to respond to: trustees, faculty, alumni, all of whom
are pulling in different directions, lots of fights about what
kind of programs, they would have, football coaches, sometimes.
Mr. Kline. You don't have any alumni pulling in any
direction?
Mr. Miller. We listen to our alumni, but our number-one
customer is our student, always. Our number-two customer are
the employers who hire our students. And that means that every
single one of our members has a close relationship with the
employer community in the locality in which that school
operates.
And that enables two things, Mr. Kline. Number one, that
ensures that the school is offering the coursework, the
textbooks, the technology in the classroom that is current to
the career opportunities, not teaching computer programming
courses that were for computer programs that aren't being used
anymore, and not using nursing technology that are in no
hospitals today. They teach what is current today.
And secondly, Mr. Kline, that enables the school to work
with the employers to make sure that the students have
internships, externships, and most importantly, a chance to
actually launch their career, because the employer community
knows these schools, knows the quality of the students, so you
have that constant dialogue.
Today, in Florida, for example, according to the Florida
Department of Health, 56 percent of all new entrants into the
allied health field in the state of Florida come from career
colleges, even though we are only about 12 percent of the
students in the state of Florida. Well, Florida needs a lot of
health care workers. It is an older population. They need it.
And so our schools are ramping up their programs quickly
because that is what the employment market demands.
Mr. Kline. And that addresses the issue of how you are
getting such--what it appeared in my district, that the career
colleges had a very high success rate in actually placing their
graduates in jobs. And I think that--I was going to go into
that, but I think you have covered that there with your answer,
that it is this close working--focusing on the needs of the
students and their career aspirations and the employers.
And I applaud the schools that I visited in your sector for
doing that and hope that the rest of my very fine schools are
going to be able to do, as well.
Thank you, Mr. Chairman. I yield back.
Chairman Hinojosa. Thank you.
I now call on the gentleman from the great state of New
York, Timothy Bishop.
Mr. Bishop. Thank you, Mr. Chairman. Thank you very much
for holding this hearing.
And to the panel, thank you all for your testimony.
I want to focus on the issue of test administration. My
understanding is that current regulations require the ATB test
to be administered independently, but our definition of
independent is a rather liberal one. That definition would
allow for on-campus assessment offices to provide the testing.
Am I correct in that, Mr. Shireman?
Mr. Shireman. That is my understanding, yes.
Mr. Bishop. All right. So my question: Mr. Scott, do you
know if the two examples you cited of the--where there was
clearly fraudulent behavior taking place--were the testers,
were they truly independent of the school for which the testing
was being conducted? Or were they employees of the school, but
independent of the admissions office?
Mr. Scott. My understanding from our undercover visit, that
the independent test administrator was contracted, was under
contract. It is not clear in terms of, you know, whether they
were contracted by the test publishers or by the school itself,
but they were certified, you know, by the test publishers to be
eligible to administer tests.
Mr. Bishop. Okay. But eligible based on a rather liberal
definition of independent, correct?
Mr. Scott. Consistent with, yes, current rules.
Mr. Bishop. The House version of the Higher Education Act
that we passed, whenever that was--a year-and-a-half ago or
longer--included a provision that, if a school enrolled more
than 5 percent of its Title IV-eligible population under
ability to benefit testing, that the test, the ability to
benefit test, would have to be administered by a truly
independent entity, that it could not be an employee of the
school in some other department. And that provision was knocked
out in conference, so it was not in the final Higher Education
Act.
If we were to make such a provision law, do you think that
might help us deal with at least a part of this problem?
Mr. Scott. Mr. Bishop, in light of, you know, some of the
problems we and others have identified, I think that--you know,
there are clearly opportunities to improve oversight of this
area.
I mean, currently, you know, the Department of Education is
already in a position to take certain steps that we think would
help address certain vulnerabilities. So, at a minimum, I would
expect the department to follow through on some of the things
Mr. Shireman pointed out, in terms of steps it is in the
process of taking to improve oversight of ATB testing.
Mr. Bishop. Ms. Mitchelson, do you think that provision
might help to mitigate this problem somewhat?
Ms. Mitchelson. It does sound as though it would be a
provision that would take a step toward integrity, yes.
Mr. Bishop. Okay, thank you.
Mr. Shireman?
Mr. Shireman. Yes. In fact, those are the kinds of things
that we will discuss in the context of the current rulemaking,
as well as we are developing the ability for us to know what
percentage of a school's population is there under an ability
to benefit test, which will also help in our monitoring, with
or without any particular rule applied to those institutions.
Mr. Bishop. Let me go to a somewhat different suggestion.
Mr. Miller, I mean, and I know that the GAO study focused just
on proprietaries. I also know that this is an issue for any
non-selective or open admission school.
The other way that a student may qualify for Title IV money
is to earn six credits with a reasonable average and show that
he or she is capable of post-secondary-level work. Would there
be any interest in a pilot program for schools to allow a
student to enroll for six credits at no charge to the student,
to demonstrate that they can handle post-secondary-level work?
My thought here is that, unless the population that is--
that would be subject to such a pilot program is too large, I
mean, there would be no marginal cost to the institution. If
you are going to enroll 15 students in an entry-level course
and now you are going to enroll 18, you are not going to add an
instructor.
So would there be any interest in trying that as a pilot
program, to see if students truly are capable of post-
secondary-level work? And that would then allow us to offer
loans to them once they fully enroll with greater confidence
that they can succeed, greater confidence that they will repay.
Any interest in that?
Mr. Miller. With your usual brilliant insight, Mr. Bishop,
some of our schools are already trying this.
Mr. Bishop. Okay.
Mr. Miller. Whether they----
Mr. Bishop. See, I have never had an original idea in my
life, so this is----
Mr. Miller. Whether they--this is their competitors, of
course, though, whether they would be willing to allow me to
anonymize and share it with you, I can talk to them about it.
But I do know some of our schools have been experimenting in
this area, because they feel it is best for the students and
ultimately for the school itself, that they know these school
students are high risk.
Actually, Mr. Bishop, what we haven't talked about is the
fact that some of our schools, candidly, are cutting way back
on ATB students, and that is a blessing and a curse for our
society. I mean, it is a blessing, one can argue, because it is
more likely that you are not going to have fraud and not going
to have the problems and not going to have the negative
outcomes that frequently occur with ATB students, even those
who are legitimately enrolled.
But for our society, for the purposes that President Obama
articulated in his speech in February, which many members on
both sides of this aisle have talked about, the need to have a
more highly educated workforce and not drop to 12th or 14th in
the world, where we are today, in terms of post-secondary
education, when our schools, the schools who try to be open, in
many cases, are cutting back on ATB because of concerns about
cohort default rate, because of concerns about 90-10, because
of concerns about failure to graduate and not meeting their
accreditation standards, is that good from the societal point
of view? I would argue, as a citizen, it is not.
Now, maybe that is what they have to do, as self-interested
parties, to stay inside the lines that we have all drawn. But I
will tell you candidly: That is what occurring, that many of
our schools are beginning to cut back on their ATB population,
and I am not sure that is good for our society, but that is
sort of in the box that many of them are finding themselves in.
Mr. Bishop. Thank you.
I yield back, Mr. Chairman. Thanks.
Chairman Hinojosa. Thank you.
I now call on the gentleman from Colorado, Congressman
Polis.
Mr. Polis. Thank you, Mr. Chair.
A question, you know, for Mr. Scott, two questions,
actually. In your report, you discuss a number of the factors
related to higher default rates, including the demographic
characteristics of the borrowers, their success in school, the
characteristics of their loans, their repayment options.
However, it seems that pricing and availability of
institutional grant aid would also be critical factors and are
also a critical variable. Despite serving a high share of low-
income students, tuitions and fees at the for-profit
institutions are among the highest in post-secondary education.
And given the profitability levels, one would think that they
could offer significant grant aid to their students. Some do;
some don't. And an evaluation of their efficacy could be
valuable.
So my first question is if you can explain why pricing and
grant aid were not discussed in your report. Secondly, are
there any studies that you are aware of that compare default
rates for students attending proprietary, public, and nonprofit
institutions that control for student characteristics to allow
for an apples-to-apples comparison that could shed light on
issues of quality by comparing the actual default rates over
time and how they differ between the graduates of public,
proprietary, and nonprofit institutions?
Mr. Scott. In response to your first question, the scope of
our study was really limited to the--in the respect that we
were asked to look specifically at the cohort default
differences across, you know, a variety of institutions. We
were not asked to sort of look at other factors, you know, such
as institutional based aid that, you know, clearly would play
some role in that.
In terms of your second question, our report did contain
some comparisons of cohort default rates across a number of
sectors. However, you know, by and large, as we point out in
our study, the general research that we saw in this area is
pretty limited, and so we were really constrained to sort of
looking at the existing research.
Mr. Polis. Thank you.
Mr. Shireman, in addition to the surge in demand in
proprietary schools for federal student loans, proprietary
schools have the largest proportion of students taking out much
higher cost private loans and the largest increase in private
loan borrowing: 42 percent of all proprietary school students
have private loans. Students attending for-profit schools
composed about 9 percent of all undergraduates, but 27 percent
of those with private loans.
Even more troubling, about two-thirds of the private loans
borrowers borrowed less than they could have in the Stafford
Loan program, compared to less than half of private loan
borrowers.
As Congress is expanding and making even more safe and
reliable the federal student aid program, how can we encourage
students to exhaust every last dollar of the lower cost federal
aid options before turning to high-cost private loans that
aren't eligible for the deferment income-based repayment or
loan forgiveness options that come with federal student loans?
Do you think that schools should be required to inform
prospective students of these federal loan measures or the
default rates?
Mr. Shireman. We are very concerned about the amount of
debt that students are taking on, whether that be federal
student loans, as well as private loans, that do tend to have
much higher interest rates and lack the kind of consumer
protections that federal loans have.
The previous administration did begin a campaign, really, a
federal aid first effort to make sure that students and
colleges did more to help students be aware of the availability
of federal loans. We are noticing in this current economy a lot
of families had assumed they weren't eligible for federal loans
and were pleasantly surprised to find out that they were, once
applying.
We do think it will help to simplify the FAFSA to make
that--some of the advertisements for private student loans say,
you know, easy to apply, easier--you know, no FAFSA required,
things like that. So getting that complicated FAFSA out of the
way could help for those who don't take--who aren't using
federal loans at all.
I think the toughest question is a question of students who
for some reason, they do have some federal loans, but they are
not taking full advantage. And we need to take a closer look at
what is happening in those situations and whether it is the
school not having enough information about levels of--potential
levels of borrowing students could take out, so that is an area
where we need to get a better handle on what is going on in
those situations.
Mr. Scott. I would just second Mr. Shireman's statement
there. I think the level of student debt across all sectors in
a post-secondary education world is of concern. And I think the
area in particular that we should be concerned about is, you
know, the level of financial literacy among parents and
students when it comes to, you know, deciding how best to pay
for college, and in particular in instances where students are
not, you know, sort of maximizing their federal student aid
options before going to other non-federal options. And I think
that is an area where further study is definitely warranted.
Mr. Polis. Thank you. I yield back.
Chairman Hinojosa. Thank you.
At this time, I would like to call on the gentleman from
Pennsylvania, Congressman Altmire.
Mr. Altmire. Thank you, Mr. Chairman.
Ms. Mitchelson, when the GAO did their investigation, they
sent its staff into a school posing as prospective students and
intentionally failed ATB exams to test compliance. And I
wondered, under your umbrella at OIG, is that a technique that
the OIG uses as part of its work, as well? And what do you
think about the use of that technique?
Ms. Mitchelson. Yes, sir. We have used that a number of
times, and we do--we will continue to use it as appropriate. It
is a very effective technique to develop an individual case
against an individual tester, which sometimes then can be
related back to a school.
Mr. Altmire. Thank you.
And, Mr. Miller, similar to that, the CCA uses audit
tactics such as mystery shopping to ensure that schools are not
committing fraud in admissions and financial aid. And does your
evidence from these exercises indicate the same results as the
GAO investigation?
Mr. Miller. Unfortunately, once in a while, Mr. Altmire,
there is a case. And, of course, that summarily leads to firing
of the employee, whether it is an admissions representative or
a financial aid officer. Generally, we find these cases rare,
but any school focusing on compliance--and I hope that is all
the CCA members, because we have reached compliance all the
time--has a mystery shopping program.
The simple reality is that humans are fallible and they
make mistakes. Obviously, sometimes they are apparently
intentional mistakes--this is the one Mr. Scott demonstrated
earlier--sometimes for inadvertent mistakes, that they simply,
even with all the training, they don't understand. And that is
why our schools focus so much on compliance, including
anticipating the situation that a person will either
intentionally mislead a prospective student or unintentionally,
but in both cases our schools engage, usually hiring an outside
firm, often headed by a former law enforcement person, who will
come in and do mystery shopping to try to make sure that the
people at ground level, actually talking to the students, are
telling them the truth.
Obviously, we do not control directly the testing
companies, but we support the GAO recommendation that there
needs to be aggressive oversight of the testing companies for
the ATB program.
Mr. Altmire. And, Mr. Miller, also, one of the concerns
that you highlight--high default rates at CCA institutions,
especially from inner cities and low-income areas, which you
have talked about at some length, does the CCA identify
targeted institutions for specific monitoring or default
prevention? What is your process there?
Mr. Miller. The CCA does not do that itself. The
accrediting agencies do. And as Mr. Shireman said, that is
often a yellow light that goes on when the department itself is
deciding whether to do a detailed program review.
But what we have tried to do, Mr. Altmire, is to come up
with best practices, to find out from our schools--many of whom
have very low default rates, Mr. Altmire. We recently had an
article in our quarterly magazine, we have a welding school
where the default rate is less than 0.5 percent. And in the GAO
report, Mr. Scott and his colleagues reported that they found
many schools in our sector with very low default rates,
including even a few in inner cities. So, clearly, they are
doing something different, doing something better.
And so our purpose at CCA, working in conjunction with Mr.
Shireman and his colleagues at the Department of Education with
our default prevention initiative, is to take those best
practices and make sure they are dispersed widely through our
association so that our members know what works and what
doesn't work.
Mr. Altmire. Thank you.
And lastly, Mr. Shireman, the GAO report highlights the use
of invalid high school diplomas to inappropriately gain access
to financial aid. And as Mr. Scott pointed out, these students
who are unqualified are at risk of dropping out of school,
incurring substantial debt, defaulting on their loans.
And I was wondering what your opinion is on striking the
balance between having unqualified students who have no
business being in a higher education setting of any kind versus
giving an opportunity to troubled kids who have had hard times
in their life and maybe on the surface might not look like a
good prospect, but giving them that opportunity that could pay
off for society in the long run?
Mr. Shireman. Well, I think it makes sense to provide
opportunity. It is useful to use something like a placement
test or an ability to benefit exam so that the students are
provided with the kind of instruction that meets their needs,
to increase the likelihood that they will succeed.
So I think it should be done carefully. And we certainly
don't want to be, if we know that they are not well prepared,
throwing them into a program where they are likely not to
complete, especially if it is a program where they are taking
on student debts that they are likely not going to be able to
repay.
Mr. Altmire. Thank you.
Thank you, Mr. Chairman. I yield back.
Chairman Hinojosa. Thank you.
I would like to at this time call on Congressman Andrews
from New Jersey.
Mr. Andrews. Thank you, Mr. Chairman.
I would like to thank my friend, Mr. Courtney, for letting
me go out of turn. I appreciate it.
I thank you for holding this hearing. I think that the work
that you are doing here, the subcommittee is doing on
fraudulent administration tests is very important. Test
integrity is very important. I think there is unanimity among
the panel members that that is the case.
I wanted to also talk about the loan default problem. And,
Mr. Scott, as usual, the GAO has done exemplary work in
examining this area. Thank you for the excellent report that
you have written. And I wanted to walk through some of the
issues in it.
First of all, does the academic research tend to indicate
that students who are nontraditional students, which I believe
is defined as 25 and over, for purposes of this, are more
likely to be loan defaulters than conventional students?
Mr. Scott. Mr. Andrews, as I said, based on the limited
research, we did find a number of characteristics associated
with higher default rates. I mean, that included, you know, for
example, you know, being more nontraditional students, family
income, parental education of the parent. So there are a number
of factors in that research.
Mr. Andrews. Was one of those factors also financially
independent, that students who were financially independent had
higher instances of default?
Mr. Scott. I don't recall. I would have to look that up.
Mr. Andrews. And I think there was also a gender issue,
that women tend to have higher default rates, as well. The
reason I raise this question is that, is there any research
that has been done on the effect of the combination of these
factors on default rates? In other words, if there are four or
five indicia which tend to lead toward higher default rates, is
there any research on what happens when you combine those
indicia?
Mr. Scott. Based on the limited studies that we looked at,
I think there was some research that pointed out that, you
know, there are a combination of factors. I would have to look
back--I would have to research to see whether there was some
regression or some other analysis that looked at all of those
factors in combination.
Mr. Andrews. Yes. And I do think I read in your report that
the proprietary sector has a disproportionately high share of
students that have some of those indicia of default problems,
right, so that--if I read this correctly--students over the age
of 25 make up 56 percent of the student body at the proprietary
schools, only 35 percent at the publics, and 38 percent at the
private nonprofits.
Students at proprietary schools make up 76 percent--or,
rather, 76 percent of the students at proprietary schools are
financially independent of their parents, whereas it is only 50
percent at the publics and 39 percent at the private
nonprofits. And I think the income data would reflect that, as
well.
I think we would be interested in seeing more robust
research by GAO in this area, for this reason. I think we want
to be very--certainly, I think there is unanimity that we want
to discourage student loan defaults. I think everyone here
agrees to that.
But I think it is important that we not run the risk of
mischaracterizing the ownership of a school with the problem of
student loan default. Would you agree that there is nothing in
the record that would suggest that the form of ownership of a
school is a causal factor of the rate of default?
Mr. Scott. I mean, that is clearly the balance we were
trying to strike in our report, while pointing out, you know,
as Mr. Miller and others have stated, I mean, clearly,
proprietary schools are offering opportunities to students who
probably otherwise would not have access to post-secondary
education.
And so we want to make sure that, you know, we didn't try
to draw some causal link there between the type of school or
the sector of school. And we really wanted to see what the
research said. And the limited research we did look at pointed
more to student characteristics as being key indicators of
default rather than type of ownership.
Mr. Andrews. That is right. So I would just repeat that,
that because the report seems to indicate that student
characteristics are more causal in the area of defaults than
ownership characteristics, I think we would be interested in
some regression analysis that could be done on those points.
If you follow, that if we could identify the key factors
that drive loan default, we could then reduce defaults, by
focusing on those factors--on the very serious problem.
The other thing I want to ask you--the data show that, not
surprisingly, loan defaults climb as students are further away
from their graduation. So, for example, for the traditional
private nonprofits, there is a 3 percent default rate after
the--in the second year, 6.5 percent in the fourth year. In the
proprietaries, it is 8.6 percent for the second year, 23.3
percent for the fourth year.
Is there any evidence that suggests that that jump in
default is caused by defects in educational quality? Or would
the evidence suggest that it is caused by other life factors,
like losing your job or getting sick or going through a family
crisis? What is the causal relationship there, do we know?
Mr. Scott. I am not aware of whether the research was able
to sort of tease out what some of the causal factors are there.
I mean, clearly, you know, to the extent that as students get
further away from their education, life intervenes, especially
when you are looking at populations who are traditionally
disadvantaged, in some cases, first-generation students. There
are a number of factors that will affect those students'
abilities to persist and complete successfully and then go on
to enter the workforce and be able to obtain----
Mr. Andrews. I see my time is up, and I appreciate it. I
would just reiterate, then, if I read the GAO report correctly,
you are not suggesting there is any research that says that the
climb in default rates over time is attributable to lack of
quality education? I am not saying it isn't, but you are not
saying it is?
Mr. Scott. Right.
Mr. Andrews. Okay. Thank you.
I yield back.
Chairman Hinojosa. Thank you.
I certainly want to welcome Congressman Vernon Ehlers from
Michigan and, if and when you wish to ask questions, I will be
glad to recognize you.
At this time, I wish to call on Congressman Courtney from
Connecticut.
Mr. Courtney. Thank you, Mr. Chairman.
I just wanted to follow up on Mr. Bishop's questions
earlier, where he inquired whether or not there is more that we
should be doing in terms of tightening up the statutes. I mean,
the recommendations seem to be focused on administrative
enforcement.
And, Mr. Scott, I would just--it sort of was silent on
whether or not there are statutory changes, you know, that
would help, in terms of this problem that your report
identified.
Mr. Scott. You know, as I stated earlier, I believe that,
you know, from our perspective, you know, while additional
statutory changes may be warranted, we believe that the
Department of Education is already currently in the position to
take action on its own. And it sounds like from Mr. Shireman's
statement that they are, in fact, doing that.
Mr. Courtney. Well, maybe this is kind of a simpleminded
question, but I guess, in a situation where there is an open-
and-shut case of fraud, which--you know, whether it was by OIG
or self-reporting by the schools, I mean, is there some
procedure for referring that to the Department of Justice? I
mean, is there some criminal sanctions or other sanctions that
people are exposed to?
Mr. Scott. Well, in the case that we highlighted here--and
I would like to, just for the record, thank the Department of
Education's Office of Inspector General. We work closely with
them, and we did refer that case to the department's inspector
general for further investigation.
Ms. Mitchelson. Yes, sir. We commonly investigate these
cases of fraud, and we work with the Department of Justice or a
state prosecutor to bring the prosecution against the
individuals.
And I might add to the litany of penalties that were
addressed earlier, we talked about administrative penalties,
criminal penalties, could be and could encompass prison time,
probation, or restitution, and then a third penalty is civil
fraud. The False Claims Act provides that the individual or the
institution may be liable to three times the damages of the
harm they cause the United States, plus an $11,000 penalty for
each false claim submitted. So those are the three common
avenues of penalties that we find are levied against those
individuals and institutions.
Mr. Courtney. Okay. Well, again, I got here a little late,
so I apologize if you have already been over this ground
before. I guess the only other question I just was wondering is
that is--when people take these tests, I mean, is there some
warning that is on there that, you know, maybe people should be
alerted to, that, you know, they have got to do this by the
book?
Mr. Shireman. Do you mean in terms of the people who are
administering them?
Mr. Courtney. And taking the test. I mean, that--you know,
that if you, you know, act fraudulently, that you are exposed--
--
Mr. Shireman. Right, right.
Mr. Courtney [continuing]. To some penalties.
Mr. Shireman. I am not aware of anything. I don't know if
my colleagues here are aware of anything like that that is on
the actual exam.
Ms. Mitchelson. I am not aware either, sir.
Mr. Courtney. Okay. Thank you.
All right. I would yield to Mr. Bishop.
Mr. Bishop. Yes, I would just--if the chairman--with your
indulgence, if I could just pick up. We right now have a
situation where if a student--if an institution's default rate
exceeds a certain threshold, they are subject to penalty where
they would lose eligibility to administer Title IV programs for
2 years, have to apply for readmissions on it.
Does such a penalty exist--is it in the menu of penalties
that could be visited upon a school that engages in the kind of
fraudulent behavior that Mr. Scott uncovered?
Mr. Shireman. Certainly, a school that engages in fraud
could be subject to limitation, termination of their
eligibility for financial aid at all under our, the Department
of Education's, responsibility of affirming their ability to
efficiently and properly administer federal financial aid. So
we certainly have that authority in these kinds of severe
cases.
Mr. Bishop. Has it ever been imposed for the kind of
situation we are dealing with now, with ability to benefit
testing being fraudulently administered?
Ms. Mitchelson. Yes, it has, sir. We commonly work with the
federal student aid office. When we have a successful
prosecution against an individual or a school, we will then
refer that matter to FSA for a debarment proceeding. And we
have had some experience in ATB fraud cases.
Mr. Bishop. Okay. Thank you very much. I yield back.
Thank you, Joe.
Chairman Hinojosa. I want to be sure that I give Mr. Ehlers
an opportunity, if he wishes to make a statement or to ask
questions.
Mr. Ehlers. Thank you, Mr. Chairman. And I will not ask any
questions. It has been one of those busy mornings again, but I
wanted to drop in.
I do want to make a brief statement. And based on the
experience I had some years ago when I first got here, we had a
small college in my district run by people I knew well who were
working at essentially a substandard wage and a faculty that
was equally dedicated.
And they developed programs to try to get students who--
from very limited educational backgrounds--in fact, to get
parents, as well, interested in higher education, get involved
in the program, and so forth.
The school eventually went out of business, primarily
because the Department of Education was very suspicious of the
school and felt that they were misusing the student loan
program, et cetera, et cetera, for their own benefit, and they
were not, both--and Senator Levin and I argued strenuously that
these were good people trying to do something good in very bad
neighborhoods. And we did not prevail.
So I am just saying that, Mr. Chairman, to let you know,
there is two sides to some of these stories. And this was a
case I felt where some really good effort was--based on good
principles--failed because they didn't fit in the framework of
law and practice as it was then observed in the Department of
Defense.
So we shouldn't automatically assume that someone is trying
to commit fraud when they are in a very tough situation like
that. And I am sure you are very sensitive to that, as well.
So I am not saying go easy. Clearly, I expect you to really
go after those who have done something wrong, but just make
sure that it is people who have done something wrong.
With that, I will yield back. Thank you.
Chairman Hinojosa. Thank you very much, Congressman. I have
a great deal of respect for you, and I certainly agree with
you, that not everybody is bad, not everybody is committing
fraud, but those who do, I think, should be reprimanded.
Mr. Ehlers. Yes.
Chairman Hinojosa. I also want to acknowledge the
chairman--rather, the member of our committee, John F. Tierney
from Massachusetts, who arrived. And if you have questions or
wish to make a statement, please feel free.
Mr. Tierney. No, I appreciate the opportunity, but I am
going to let it pass, Mr. Chairman. I am content to just listen
to the witnesses and read their testimony, as well. Thank you.
Chairman Hinojosa. Very well.
If there are no other questions, I would like to give my
closing statement. I would like to thank our witnesses for
their testimony, as well as my colleagues on this committee for
their questions and comments today. This has been a very
productive and informative hearing.
I commend the Department of Education for taking initial
steps to address the GAO recommendations. It is clear that
Congress needs to provide guidance and oversight in this sector
of post-secondary education.
At the state level, the secretary may want to reach out to
existing federally sponsored entities that have the capacity or
that they are already involved in collecting student financial
aid data to join this effort in accordance with regulatory
guidance or directives of the department.
The Education and Labor Committee and this administration
have been working diligently to increase affordability and
accessibility in higher education. In the past 2 years, we have
passed landmark legislation to make college more accessible and
affordable. We have also encouraged states to keep tuition
costs down so that students can go to college without carrying
the burden of long-term debt.
In closing, I want to say that, as we continue to increase
accessibility and affordability in higher ed, I urge the
department to act on the GAO's recommendations and to take a
much more active role in monitoring the practices of for-profit
colleges and universities. We must do our due diligence to
protect the interests of our students and their families.
Without objection, all members will have 14 days to submit
additional materials or questions for the hearing record.
With that, I call this meeting and this hearing to adjourn.
[Whereupon, at 11:43 p.m., the subcommittee was adjourned.]