[Senate Hearing 111-1162]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 111-1162




                                 OF THE

                          LABOR, AND PENSIONS

                          UNITED STATES SENATE


                             SECOND SESSION


                       IF STUDENTS ARE SUCCEEDING


                           SEPTEMBER 30, 2010


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                       TOM HARKIN, Iowa, Chairman

CHRISTOPHER J. DODD, Connecticut     MICHAEL B. ENZI, Wyoming
BARBARA A. MIKULSKI, Maryland        JUDD GREGG, New Hampshire
JEFF BINGAMAN, New Mexico            LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington             RICHARD BURR, North Carolina
JACK REED, Rhode Island              JOHNNY ISAKSON, Georgia
BERNARD SANDERS (I), Vermont         JOHN McCAIN, Arizona
ROBERT P. CASEY, JR., Pennsylvania   ORRIN G. HATCH, Utah
KAY R. HAGAN, North Carolina         LISA MURKOWSKI, Alaska
JEFF MERKLEY, Oregon                 TOM COBURN, M.D., Oklahoma
AL FRANKEN, Minnesota                PAT ROBERTS, Kansas
MICHAEL F. BENNET, Colorado          
CARTE P. GOODWIN, West Virginia      

                    Daniel E. Smith, Staff Director
                  Pamela Smith, Deputy Staff Director
     Frank Macchiarola, Republican Staff Director and Chief Counsel


                            C O N T E N T S



                      THURSDAY, SEPTEMBER 30, 2010

Harkin, Hon. Tom, Chairman, Committee on Health, Education, 
  Labor, and Pensions, opening statement.........................     1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, 
  opening statement..............................................     4
Johnson, Danielle, Tama, IA......................................    10
    Prepared statement...........................................    11
Mitchem, Arnold, Ph.D., President, Council For Opportunity in 
  Education......................................................    13
    Prepared statement...........................................    15
Bittel, Kathleen A., Acme, PA....................................    17
    Prepared statement...........................................    19
Asher, Lauren, President, The Institute for College Access and 
  Success, Oakland, CA...........................................    22
    Prepared statement...........................................    24
Burr, Hon. Richard, a U.S. Senator from the State of North 
  Carolina.......................................................    38
Franken, Hon. Al, a U.S. Senator from the State of Minnesota.....    41
Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon......    44
McCain, Hon. John, a U.S. Senator from the State of Arizona......    45
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of 
  Pennsylvania...................................................    50
    Prepared statement...........................................    52
Reed, Hon. Jack, a U.S. Senator from the State of Rhode Island...    53

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Response to questions of Senator Harkin and Senator Enzi by 
      Arnold Mitchem, Ph.D.......................................    68
    Response to questions of Senator Enzi by Kathleen Bittel.....    70
    Response to questions of Senator Enzi by Lauren Asher........    79
    Letters from:
        Iowa Chapter--Mid-America Educational Opportunity Program 
          Personnel (IA--MAEOPP).................................    83
        Council for Opportunity in Education (COE)...............    84
        Education Management Corporation (EDMC)..................    85
        Kaplan University........................................    93
        Senator Harkin to Susan Spivey, Kaplan University........    94





                      THURSDAY, SEPTEMBER 30, 2010

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:07 a.m., in 
Room SD-124, Dirksen Senate Office Building, Hon. Tom Harkin , 
chairman of the committee, presiding.
    Present: Senators Harkin, Reed, Casey, Merkley, Franken, 
Enzi, Burr, and McCain.

                  Opening Statement of Senator Harkin

    The Chairman. The Senate Committee on Health, Education, 
Labor, and Pensions will come to order.
    This is the third in a series of hearings by this committee 
examining the Federal investment in for-profit colleges and 
universities. As we have seen in recent months, this is a very 
wealthy and powerful industry. It has spent a small fortune on 
full-page ads in major newspapers drawing attention to its 
    I certainly agree, that at their best, for-profit colleges 
may offer an alternative model for higher education. But this 
committee's ongoing investigation has brought to light 
disturbing practices that appear to be systemic to this 
industry and that raise serious questions about the enormous 
taxpayer investments in these schools.
    During our hearing on August 4, the Government 
Accountability Office presented a troubling picture of student 
recruitment at for-profit colleges. Undercover investigators 
from GAO visited 15 campuses of 12 companies and found 
misleading, deceptive, overly aggressive or fraudulent 
practices at every one of those campuses. We heard testimony 
that these recruitment practices result in students unprepared 
or poorly matched to their academic program, with a high 
probability of dropping out, leaving school not with a degree 
but with a mountain of debt.
    Frankly, it is hard to imagine that an educational 
relationship that begins with a school deliberately misleading 
and sometimes outright lying to the student could result in a 
meaningful degree or a positive outcome. Nevertheless, we 
continue to hear claims from for-profit colleges that, despite 
deceptive marketing, they provide a meaningful educational 
opportunity to low-income college students. At today's hearing 
we will explore the credibility of that claim.
    Following our last hearing, I issued a request for 
documents from 30 for-profit higher education companies. Each 
of those companies has complied and cooperated. I'd like to 
thank the companies, especially the smaller schools, who may 
not have expected to be included and have provided particularly 
clear and thorough responses. I look forward to the completed 
submissions in the next 2 weeks.
    The information provided by the companies is helping to 
fill in the serious gaps in publicly available information 
about the for-profit education sector and its students and 
about what taxpayers are getting for the $24 billion annual 
investment in these schools. Let me repeat that: the taxpayers' 
investment is $24 billion a year.
    In preparation for today's hearing, I asked my staff to 
assemble a report based in large part on data about Federal and 
State revenues and student outcomes provided by the companies 
and analyzed by my staff. I'd like to ask consent to put this 
report and the summary sheet of data, which I have here, in the 
record at this point.
    Senator Enzi. To the extent the documents included with the 
report are not proprietary or trade secret data, I have no 
problem with it.
    The Chairman. And they don't.
    [The material referred to may be accessed electronically at 
    I will say that late last evening, about 8 o'clock, we were 
informed by one of the larger companies that they had provided 
inaccurate data to this committee. The HELP Committee depends 
on companies to completely and accurately provide information 
for analysis. If this incorrect data provided by the school 
requires adjustment to the report, it will be made accordingly.
    I might just add that this is one of the larger companies. 
They called last night at 8 o'clock. They went through the 
methodology for a couple of hours with my staff. My staff 
thought it was resolved at about 10 p.m. last night. At 5 a.m. 
today, we received another email, followed by a phone call at 7 
a.m. today, to my staff, from the same company, saying that 
they still had additional inaccuracies.
    This makes me wonder. If a large company like this can't 
even provide an accurate list of their students, what is going 
    The report is titled ``The Federal Investment in For-Profit 
Higher Education: Debt Without a Diploma.'' It shows how for-
profit colleges have raised the stakes for the Federal 
taxpayers and for students. I have a series of slides that kind 
of indicate this.
    Slide 1 shows that, because of their almost total reliance 
on taxpayers' dollars, for-profit colleges have made the 
Federal Government their primary free-money spigot. And I think 
that slide shows that at least at 14 of these schools, 87 
percent of their money came from the Federal Government. At 
least four of these, the Federal dollars now account for over 
90 percent of the revenues. But at 16 companies, profits in 
2009 totaled $2.7 billion, with some profit margins going as 
high as 37 percent. I think the Standard and Poor's last year 
was about 6.5 percent.
    View Slide No. 2.
    Second, by obligating almost every student to take out 
loans, for-profit colleges have turned higher education into a 
high-stakes gamble for low-income students. Ninety-five percent 
of for-profit college students borrow to attend school, 
compared to just 16 percent of community college students. For-
profit colleges account for only 10 percent of students 
enrolled in higher education, but those students receive 23 
percent of Federal student loans and grants and account for 44 
percent of the student loan defaults.
    The new report examines the rate at which students withdraw 
from 16 institutions. Of students who enrolled during the 2008-
9 school year, 57 percent had withdrawn by this past summer. 
That is 57 percent of students withdrawing within the first 2 
years, based on self-reported numbers by the institutions 
themselves. Now, these students take with them thousands of 
dollars in student loan debt and none of the earning potential 
that comes with a college degree.
    Over the past 3 years, almost 2 million students have 
withdrawn from for-profit colleges. None of these students 
gained a degree or a certificate, but almost every one of them 
left with a debt that they are struggling to repay, debt that 
is not dischargeable in bankruptcy and could bar them from 
getting future student loans. Let me repeat that. Over the past 
3 years, almost 2 million students have withdrawn from for-
profit colleges. They got neither a degree nor a certificate, 
but almost every one left with debts, sometimes huge debts, not 
dischargeable in bankruptcy and could bar them from getting 
future student loans.
    The bottom line is this. For students enrolling in for-
profit schools, graduation with a degree is a possibility, but 
a debt without a diploma is a probability. Going to college 
should not be like going to a casino, where the odds are 
stacked against you and the house usually wins.
    This last slide shows the tuition costs for average 
withdrawing bachelor's degree students. As you can see, it 
ranges from $8,904 up to $11,328, and that is for a period of 
15 to 22 weeks. That's not per year. For some of them, their 
semesters range from 15 weeks to 22 weeks. But that's the 
tuition cost for 15 to 22 weeks, as high as $11,000.
    I had some students in at my breakfast yesterday morning 
from one of the for-profit colleges located in my home State. 
Nice young people. They all receive both scholastic and sports 
scholarships. I just happened to randomly ask one of the 
basketball players, who was there on a basketball scholarship, 
I asked him if he'd taken out student loans. He said, ``Yes.'' 
I said, ``How much is your debt?'' He said, ``About $50,000.'' 
And he hasn't even graduated yet.
    I turned to another young person who was there on a track 
scholarship. I said, ``Do you take out student loans?'' He 
said, ``Yes.'' I said, ``Well, how many have you taken out?'' 
He said, ``Oh, about $40,000.''
    Think about these kids. Even if they are lucky enough to 
graduate, what kind of jobs are they going to get to pay back 
that kind of a huge debt?
    So, given the financial risks that some for-profit schools 
pose to prospective students, my question is, are they the 
right institutions to be targeting low-income students? Today 
we'll hear from several witnesses with insight on this 
    Now I invite Senator Enzi to give his opening statement.

                   Opening Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman.
    I agree there is clearly a problem in higher education. 
Now, you'll notice I didn't limit that comment to for-profit 
schools. Students are taking on too much debt, defaults are too 
high, and students are having too much difficulty finding jobs 
or even completing their program of study. After two hearings 
devoted to highlighting these issues in the for-profit sector, 
which amounts to only 10 percent of higher education 
enrollments, I don't think there's a single person in the room 
that would disagree that there is a problem.
    However, it's naive to think that these problems are 
limited to just the for-profit sector. We've been looking at 
this in a vacuum. $24 billion of taxpayer money, that's money 
that goes to students for their tuition help, which of course 
winds up with the institution. That's no different than other 
colleges and universities where the students get help from the 
Federal Government. That also goes to that institution, not to 
mention the taxpayer dollars from the States and other sources 
that go into that sector.
    Two million withdrew and had debt. How many have withdrawn 
from community colleges and other colleges and had debt? We're 
looking at this issue in a vacuum. For instance, I saw an 
article this last week about law schools and the amount of 
tuition they charge, the students completing it, how much debt 
they have, and that's one of the sectors where they're 
overstocked with people. So we're just looking at all of this 
in a vacuum and that's not fair.
    As Senator Burr correctly explained during the last 
hearing, many public and private nonprofit schools are having 
difficulty graduating even 20 percent of their students. Just 
this month we learned that the cohort default rate has 
increased over the past year in every sector of higher 
education--public, nonprofit, and for-profit. And underlying 
all of this is the fact that tuition continues to rise in all 
sectors of higher education faster than the rate of inflation, 
putting the dream of a college education out of reach for many 
of our most financially vulnerable students.
    So what are we going to do about it? Are we going to find 
solutions? Why aren't we holding hearings with experts who can 
offer constructive solutions? If we want to make the for-profit 
sector better, why aren't we looking at what is being done 
right as an example of how to move forward? If we want to weed 
out the bad actors, why have these hearings been designed to 
suggest that all for-profits are inherently bad? If we want to 
understand why defaults are increasing and completion rates are 
declining, why have only one-third of the witnesses in the past 
two hearings had any expertise in education policy? If we want 
to make sure that students have access to high-quality college 
education and make higher education more affordable, why are we 
not looking at these problems throughout higher education?
    Furthermore, why are we not looking at the dramatic 
regulatory changes being proposed by the Department of 
    Mr. Chairman, this committee has an obligation to protect 
the interests of students. Unfortunately, the interests of 
students are not being served by this series of hearings. 
Moreover, Mr. Chairman, you've requested hundreds of thousands 
of pages of information, much of which is highly confidential 
information, from 30 for-profit schools. Onerous document 
requests, hastily conducted investigations, and narrowly 
focused anecdotal data analysis that blatantly ignore the 
problems faced by the vast majority of students are not the way 
to address this or any other problem.
    I came here to make a difference, not to make headlines. So 
I'm ready and willing to work with the chairman to begin 
addressing these problems and help achieve the President's goal 
of being first in the world in college completion by 2020. 
However, instead of working to find solutions to improve these 
schools, the two previous hearings have focused entirely on 
tearing these schools down. After reviewing Chairman Harkin's 
report and reading the testimony of the witnesses, it appears 
that this hearing will simply be more of the same.
    This hearing appears to have been planned in conjunction 
with the Department of Education's proposed Gainful Employment 
Rule, discriminating against all for-profit schools while 
ignoring colleges and universities with the same record. That 
rule drew 90,000 comments. Several full-page ads about the 
effect on low-income students have been in the newspapers. You 
probably recognize this one. I hope everybody not only 
recognizes it, but reads the text that goes with it.
    I would mention that the proposed rule has been partially 
withdrawn by the Administration. Actually, it's been delayed 
until next year. That would be after elections, right?
    So I ask that the text of my letter making comments on that 
rule be included in the record.
    [The material referred to was not available at time of 
    Senator Enzi. And I ask that the text from this ad by the 
National Black Chamber of Commerce be included in the record as 
well. According to the NBCC, the Department's proposed Gainful 
Employment Rule, will lead to 400,000 students leaving 
postsecondary education, it will lead to a 15 percent reduction 
in lifetime salary for those students, it will eliminate 90,000 
to 100,000 jobs, and it will create a $5.3 billion burden on 
taxpayers. That's according to the National Black Chamber of 
Commerce. That's some of the text that's on that page.
    [The material referred to was not available at time of 
    Senator Enzi. These numbers are staggering and not 
something the committee should ignore, especially in a down 
economy. But that hasn't stopped the pounding here. There are 
problems in all sectors of higher education and it's not fair 
to pick on and abuse one sector in a vacuum.
    Finally, you'll notice there are no Republican witnesses on 
this panel. During the two previous hearings we invited 
individuals with extensive and highly respected backgrounds in 
education. Each acknowledged that the for-profit sector is not 
perfect and that there's room for improvement. However, instead 
of engaging in a productive and professional conversation about 
what we can do to fix the problems, the majority chose to 
mischaracterize their testimony and attempted to lead them into 
misstatements. Given the hostile treatment received by our 
previous witnesses, I refrained from leading other witnesses 
into that kind of treatment.
    I also want to point out that this isn't just a college 
thing. I have the ``Diary of Alpha Kappa Psi.'' It's a business 
fraternity that I belonged to when I was in college, and every 
month it has an article that deals with ethics. This one's 
called ``Servant Leadership'' and it says,

          ``I was asked by a reporter recently, how can servant 
        leadership in a capitalistic society be based on greed? 
        The answer was simple: The free enterprise system works 
        best when business leaders are servant leaders. Why? 
        Because servant leaders listen to the customers. The 
        theory of the invisible hand is that each producer is 
        free to choose what to sell and at what price, and if 
        each consumer is free to choose what to buy and at what 
        price then the market will settle on the product and 
        prices that are beneficial not only to the 

    I would ask permission that the entire article be included 
in the record. It's a good discussion of greed and whether it's 
widespread and what to do about it. That's what we ought to be 
concentrating on, what to do about it.
    [The material referred to follows:]

       [Diary of Alpha Kappa Psi: Summer 2010, (Vol. 99, N0. 2)]

   Servant Leadership: Making the Free Enterprise System Work Better

  (By Dr. Kent M. Keith, CEO, Greenleaf Center for Servant Leadership)

    Indianapolis.--I was asked by a reporter recently,

          ``How can servant leadership work in a capitalist system that 
        is based on greed?''

    My answer was simple.

          The free enterprise system works best when business leaders 
        are servant-leaders. Why? Because servant-leaders listen to 
        their customers.

    Capitalism is not about greed, it's about the freedom to choose

    Let's start by unraveling some of the assumptions in that 
reporter's question. First of all, I don't accept the assumption that 
capitalism is based on greed. Capitalism is an economic system in which 
the means of production and distribution are privately owned by 
individuals or corporations, instead of being owned by the government. 
It is characterized by the existence of a free market for goods and 
    Yes, there have been--and still are--some greedy capitalists. But 
the idea that ``greed is good'' is not part of the definition of 
capitalism. In 1776, the Scottish philosopher Adam Smith published An 
Inquiry into the Nature and Causes of the Wealth of Nations, which may 
have been the first modern work on economics. Smith described the 
advantages of the division of labor, and the way in which an 
``invisible hand'' would lead to the efficient allocation of resources 
in the marketplace. That ``invisible hand'' was the sum of millions of 
decisions that individuals made about what to produce, where to work, 
what to buy and at what price. It was not about greed, but about the 
freedom to choose.
    The theory of the ``invisible hand'' is that if each producer is 
free to choose what to sell and at what price, and if each consumer is 
free to choose what to buy and at what price, then the market will 
settle on the products and prices that are beneficial not only to 
individuals but to the community as a whole. Producers will provide 
what consumers really want, at prices they are willing to pay.
    Is there self-interest in all this? Of course. People prefer to 
work at some tasks and not others; producers try to be efficient in 
order to make the most money; investors go where the return promises to 
be the highest; consumers prefer to buy some products and not others; 
and buyers like low prices. No surprises, here. But self-interest 
expresses itself not as greed, but as free choice in the marketplace, 
leading to the optimum allocation of resources.
    There is another reason that ``greed is good'' doesn't match up 
well with Adam Smith. Few people know that Adam Smith considered 
himself a moral philosopher, and he thought his best book was The 
Theory of Moral Sentiments. He argued that it was in our self-interest 
to be compassionate and sympathetic toward others. Invisible hand, yes; 
greedy hand, no.

          Servant-leaders don't begin with the answer. They don't begin 
        with their own knowledge or expertise. They begin with 
        questions that will help identify the wants and needs of their 
        customers. Once those wants and needs are identified, servant-
        leaders find the people and resources to respond with the right 
        programs, products or services to make their customers happy.
Making better choices
    Now--if the essence of the capitalist system is the freedom to 
choose, then the free enterprise system works best when companies 
choose to make the things that people really want. Let's say that a 
company decides to produce item A, and the marketing and sales 
departments work hard to sell it. But what if consumers don't want to 
buy A? What if they prefer B, instead? Then a lot of time and money is 
wasted developing, producing, and trying to sell an unwanted product.
    But what if that company had really listened to its customers 
before creating A? Imagine that the company had done market research 
through surveys and focus groups. They also asked their frontline sales 
and service colleagues to give them input. What are customers saying? 
What are they asking for? What do they like and not like? If the 
company had been good at listening, it might have discovered that 
people wanted B. If they had created B, the customer would have been 
happy, and the company would have been more profitable. It would not 
only have sold a lot of B, it would also have saved all the money it 
wasted creating and marketing A. When companies are close to the 
customer, they make better choices, and the free enterprise system as a 
whole is more efficient and effective in allocating resources.
    So, what's the tie-in to servant leadership? Listening.
    One of the key practices of servant-leaders is listening. Robert 
Greenleaf, the businessman who launched the modern servant leadership 
movement, said that only a natural servant leader begins by listening.
    Listening to your customers is of fundamental importance. It's the 
way you become relevant, the way you link up. How can you meet the 
needs of your customers if you don't know what those needs are? And how 
will you know if you don't listen?
    The main point is this: Servant-leaders don't begin with the 
answer. They don't begin with their own knowledge or expertise. They 
begin with questions that will help identify the wants and needs of 
their customers. Once those wants and needs are identified, servant-
leaders find the people and resources to respond with the right 
programs, products or services to make their customers happy.
    Howard Behar is a member of the board of trustees of the Greenleaf 
Center for Servant Leadership and the author of It's Not About the 
Coffee: Leadership Principles from a Life at Starbucks. Howard Behar 
joined Starbucks in 1989 when it had only 28 stores. Over the years he 
was executive vice president of sales and operations, president of 
Starbucks International, and president of Starbucks North America. 
Howard has a sign on his wall that has two words on it: ``compassionate 
emptiness.'' He says:

          Compassionate emptiness involves listening with compassion 
        but without preconceived notions. Compassionate emptiness asks 
        us to be caring but empty of opinions and advice.

    That's how we can listen--being truly attentive to the person who 
is speaking, instead of thinking about what we are going to say next. 
That makes it possible to really hear, and then respond appropriately.
    One of the most relentless listeners I have ever met is Dick 
Pieper, recently retired chairman of PPC Partners, Inc., headquartered 
in Milwaukee. Dick is chairman of the board of trustees of the 
Greenleaf Center for Servant Leadership. PPC Partners owns a series of 
electrical service and construction firms. Dick joined Pieper Electric 
as president in 1960, when the family-owned business had eight 
employees doing $250,000 of business per year. Today, PPC Partners, 
Inc. employs 900 to 1,100 people, does hundreds of millions of dollars 
in sales, and is one of the top electrical contracting firms in the 
United States.
    One reason for the company's dramatic growth is that Dick is always 
getting feedback from colleagues and customers. He is always asking and 
listening, inside and outside the company.
    Comments are solicited and studied, and the follow-up is 
comprehensive. At Dick's company, listening is a broad-based, 
systematic process with a focus on constant improvement.
    Muhammad Yunus has changed the lives of hundreds of thousands of 
people in Bangladesh through micro-credit. He and his bank, Grameen 
Bank, won the 2006 Nobel Peace Prize for their work, which has spread 
to other parts of the world. In his book, Creating a World without 
Poverty, he describes how he was an economics professor, teaching about 
the nation's long-term plans. But things in Bangladesh were not getting 
    Finally, Yunus went out into the villages and listened. What he 
discovered was that people needed small amounts of capital. They had no 
collateral, so banks would not loan money to them. But the villagers 
had energy and potential, and the amounts of capital they needed were 
very small--50 cents or 75 cents. Yunus made 42 loans out of his own 
pocket, for a total of $27. He asked for no collateral, but the 
villagers paid their loans back. Yunus has continued to watch and 
listen, and has launched an array of companies, each designed to give 
opportunities to the poor. Hundreds of thousands of people in 
Bangladesh and around the world are now part of this micro-credit 
revolution. It would have never happened if Yunus had not decided to 
listen first.
    We cherish the free enterprise system. If we want it to be as 
efficient as possible in allocating resources and meeting the needs of 
consumers, we must have the kind of leaders who are good at listening: 
    Through the fraternity's partnership with the Greenleaf Center for 
Servant Leadership, our members get discounted memberships and access 
to conferences. Learn more about what it means to be a servant-leader 
and take advantage of this special Alpha Kappa Psi member benefit by 
visiting akpsi.org.

    Senator Enzi. I do stand ready to work with the chair on 
solutions to the problems facing our Nation's students and 
higher education. Over the past 15 years, wages of young 
college graduates ages 25 to 34 have basically remained 
stagnant, while tuition and fees at public and private 4-year 
colleges have risen dramatically. Over the past 3 years, that 
cycle has accelerated. Let's get to work solving that problem, 
Mr. Chairman.
    In my 14 years, I haven't been through a series of hearings 
that have been this one-sided.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Enzi. I'd just say that I 
guess it is less than 10 percent of all the students, but it's 
now approaching 25 percent of all the Federal money. And that's 
growing. That's one of the reasons that drew our attention to 
    The question had to do with how many withdraw from 
community colleges and whether or not we're focusing just in a 
vacuum on this. Well, the point is that only 16 percent of 
community college students borrow money. Ninety-five percent of 
for-profit college students borrow money and they borrow money 
at a higher amount than students at community colleges.
    Plus there's the whole thing of tuition. In our report that 
we put in the record, according to GAO's August 4 testimony, of 
the 15 schools investigated 14 had higher tuition than the 
nearest public college offering a similar program. One 
particular for-profit college offered a, ``computer-aided 
drafting certificate'' for $13,945, when the same program at a 
community college would cost $520. That's from the GAO, not 
from me.
    The cost of an associate's degree offered by the second 
largest for-profit school is over $38,000 and a bachelor's 
degree from the same school can cost up to $96,500. Thus, a 
student who enrolls in a for-profit school, even for a short 
period of time, can amass many thousands of dollars of debt 
that can take years to repay.
    So again, I agree with my friend from Wyoming that it is 
about access to poor kids, but access to what? A quality 
education or a lifetime of debt, without a diploma or without a 
    Senator Enzi. When we had our first meeting on this, I 
mentioned that we should not do it in a vacuum, that we should 
include all institutions of higher education--and not just use 
some selective statistics. So I'll leave you to go ahead and 
beat up on the for-profit schools.
    The Chairman. Well, I just looked at that ad. By our 
estimation, the for-profit schools have spent $3.3 million on 
these ads, and guess where the money came from? It came from 
you, the taxpayers. Ninety percent of all their money comes 
from the taxpayers, paying for these ads.
    In response to my friend, I say that, look, they talk about 
proprietary information. If you're getting over 90 percent of 
your money from the taxpayers, it seems to me the taxpayers 
have a right to know the data and the information about what's 
happening to those students, what their debt loads are, what is 
happening to them out there. That's why we're looking at this.
    Now, I would say that this is not new. In 1991--and I spoke 
with him on the phone recently--Senator Sam Nunn had an 
investigation into this same thing. As a result of those 
investigations, rules and regulations were adopted and laws 
were passed to tighten down on this industry. That was 1991.
    But what happened is those things that were enacted were 
taken off later on. I might point out that at that time in 1991 
there were fewer students enrolled in the entire for-profit 
sector than there are enrolled today in just one university. In 
1991, the University of Phoenix enrolled just over 7,000 
students. Last year it had 475,000 students. So, it is a lot 
bigger, there is a lot more money, a lot more power, a lot more 
    So I hardly think that this one Senator is beating up on 
the for-profit industry. We're just trying to get information 
about what's happening to $24 billion a year in taxpayers' 
    Well, to move right along, let me introduce each of our 
witnesses who are here today to testify. First we have Danielle 
Johnson, who is currently seeking her practical nursing diploma 
at Kaplan University, Cedar Rapids, IA, campus. She lives on 
the Meskwaki Settlement in Tama, IA, with her husband and 
    Next is Dr. Arnold Mitchem, founder and president of the 
Council for Opportunity in Education. COE is a national 
nonprofit organization established in 1981 and is dedicated to 
expanding college opportunities for low-income, first 
generation students and students with disabilities. The council 
works in conjunction with colleges, universities, and agencies 
that host Federal TRIO programs to help low-income students 
enter college and graduate.
    After Dr. Mitchem, we'll hear from Kathleen Bittel, who is 
a career services adviser at Education Management Corporation 
and lives in Acme, PA. She's the proud mother of three children 
and has been employed by EDMC for almost 3 years, working 16 
months as an assistant director of admissions for Argosy 
University and approximately a year and a half as a career 
services adviser for the Art Institute of Pittsburgh Online.
    Finally, we welcome Lauren Asher, president of the 
Institute for College Access and Success, an independent 
nonprofit organization working to make higher education more 
available and affordable for people of all backgrounds. Ms. 
Asher is a nationally recognized expert on student loans and 
financial aid and co-founded the Project on Student Debt.
    I thank you all for joining us here today. We will start 
first with Danielle Johnson and then we'll work down the line. 
All of your statements will be made a part of the record in 
their entirety. I read them all last evening. They're very good 
    What I'd like is for each of you to summarize your 
statements in 5 minutes or so and sum up what it is you want 
our committee to know for the record.
    Ms. Johnson, welcome. Again, I've read your testimony, and 
please just tell us in your own words what it is you want us to 


    Ms. Johnson. Thank you. First of all, I would like to say 
that I am very grateful for the chance to tell my story.
    My name is Danielle Johnson and I live on the Meskwaki 
Settlement in Tama, IA. This is where my husband and children 
have our home. My mother passed away when I was 8 years old, I 
never knew my father, and I have no siblings. After my mother's 
passing, my grandparents raised me. I graduated from an all-
Native American high school in Flandreau, SD.
    I ended up pregnant with my first daughter at the age of 
21. I worked odd jobs until my child was about 3 years old and 
I decided it was time to get serious about life and moved away 
to Waterloo, IA, to go to college. I was a single mother living 
on welfare, trying to get through college, and taking out a lot 
of student loans, to go to hair school and community college.
    I worked at a hair salon, but I had to stop after injuries 
from a car accident that made me unable to withstand long hours 
on my feet. This all sent me into a depression for quite some 
time. I felt all sorts of emotions as I had spent a lot of 
time, money, and effort on acquiring this schooling, only to 
find out that it was all just a waste.
    I moved back to Tama with my grandmother in 2000 to try and 
start over. I decided to go back to school so that I could work 
at our newly built health facility on the settlement and help 
my community.
    I enrolled in Kaplan University's practical nursing program 
in Cedar Rapids, IA, in February 2010 and currently am a 
student. I decided to choose Kaplan because they told me that 
they could accommodate me, as most of their students were those 
who hadn't been in school for a while, middle aged, family-
oriented, and people who needed to work on the side. I also 
chose it because I was told that I could do my clinical 
training at the facility on the settlement. It's a 2-hour 
commute and I was concerned about the gas, time, and what it 
would take away from my responsibilities at home. But I was 
assured during the admissions process that the classroom work 
in Cedar Rapids would taper off and I would be able to finish 
my clinical work on the settlement. I was relieved that I could 
be close to home and continue taking care of my kids and 
grandmother while also earning my practical nursing diploma.
    Into my second term, I found out there was no possible way 
that I was able to do my clinical work on the settlement. The 
director of nursing asked me who told me this and I told her 
how they had told me this during the admissions process. I was 
placed in Vinton, IA, which is also a 2-hour commute, and it 
was taking quite a toll on me.
    I am discouraged and overwhelmed. If I knew that things 
were going to be this way I would never have tried to go to the 
school there. Not only that, but now I have added almost 
$10,000 more in student loans to what I already borrowed to go 
to hair school and community college. Right now I owe more than 
$26,000 and will continue to take on more debt as I continue in 
the program.
    I now feel like I am at a place where I am stuck and have 
no real future. This has been a very disheartening experience 
and I hope by telling my story I can prevent it from happening 
to anyone else.
    [The prepared statement of Ms. Johnson follows:]
                 Prepared Statement of Danielle Johnson
    First of all, I would like to say that I am very grateful for the 
chance to tell my story. My name is Danielle Johnson and I live on the 
Meskwaki Settlement in Tama, IA. This is where my husband and children 
have our home. This is also where I can be close to take care of my 
grandmother. My mother passed away when I was 8 years old, I never knew 
my father, and I have no siblings. After my mother's passing, my 
grandparents raised me. My grandfather died the summer after my 6th 
grade year, but my grandma continued to take care of me. I graduated 
from an all Native American high school in Flandreau, SD. This is where 
I chose to go because I felt more comfortable fitting in and also to be 
around peers my age.
    After high school, I tried to go to college right away but really 
had no interest. I chose to work and play. I ended up pregnant with my 
first daughter at the age of 21. I continued working odd jobs but when 
my child was about 3 years old, I decided it was time to get serious 
about life and moved away to Waterloo, IA to go to college. I was a 
single mother, living on welfare, trying to get through college, and 
taking a lot of student loans out. I had been cutting hair ever since I 
was in junior high for the fun of it, so I thought that it would be a 
smart idea to get licensed in cosmetology as a source of income. I 
believed that once I obtained this license, I could do hair on the side 
while I went back to the community college. It wasn't until after I 
completed hair school and began working at a salon, that I began to 
develop pain in my neck and back. After numerous doctor visits, I 
learned that I could not physically withstand long hours on my feet and 
that this all stemmed from a 1995 car accident that I was involved in. 
A car had rear ended mine going full speed on a highway that year but I 
didn't begin to experience the results until after trying to work full-
time. This all sent me into a depression for quite some time. I felt 
all sorts of emotions, as I had spent a lot of time, money and effort 
on acquiring this schooling only to find out that it seemed all just a 
waste. After enough of sitting in my pity, I moved back to Tama to try 
and start over. I moved in with my grandmother in 2000 and found a job 
working for the tribe. I worked as a personnel assistant for a couple 
years before I joined the Natural Resources Department as a Soil 
Technician for another year. Somewhere in this timeframe, I met and 
married my husband and had my second daughter. He had four from a 
previous marriage, making us a blended family. We decided that I would 
stay home with our youngest and did that until she was old enough for 
school, then went back to work in order to make ends meet.
    Over the years, I have continued to care for my grandmother as she 
has been losing her independence with age. She has been unable to drive 
for awhile so I've been responsible for getting her to the grocery 
store, doctor appointments, and any other places that she needs to get 
to. One day I took her to the Meskwaki Senior Center, where they were 
having a birthday luncheon. The director from the health clinic was 
there to speak about the newly built facility that was getting up and 
running on the settlement. He was describing the different kinds of 
services they wanted to incorporate there and how they were looking for 
people from the community to become involved as they wanted to become 
self-sufficient. One of the things that I thought was a great idea was 
that they wanted to get a nursing home going. Being that my grandmother 
is getting up in the years, I wanted to see this happen for her as well 
as the other elders in our tribe. Throughout the years, we have had to 
hire outside help and even send out our elderly to nursing homes where 
they are not as familiar with others as they are with those they've 
been in the community with. This way at least they could stay with each 
other and continue to share their common culture, heritage and 
language. It was perfect and I wanted to be a part of it.
    This is when I first began to form an interest in taking action on 
what I was seeing. I believe that I am good with people, genuinely care 
for others, and am capable of building up our tribe. There were some 
clinic workers there so I voiced my interests with them and they told 
me that they had new x-ray equipment there but no one to run it. After 
I got home that evening, I went online and began searching for any 
local schools that could offer x-ray technician training. There was a 
place about an hour away in Cedar Rapids, IA called Kaplan University. 
They offered a Medical Assisting (MA) Program and the ad read that if I 
wanted more information about this then I was to input my contact 
information. I did just that and the next morning the recruiter called 
me to come in. I explained what my current situation was and what I was 
looking for. He told me that their school could accommodate me as most 
of their students were those who hadn't been in school for awhile, 
middle-aged, family-oriented, and people who needed to work on the 
side. I went in and met with the recruiter shortly thereafter and found 
out that the MA program would mean that I would probably end up in an 
office setting, which is not what I was wanting. I came home and talked 
to my cousin who had some medical background, and she told me that I 
should try to go for a nursing career. She said that they have more 
person to person contact, more income, and that I could still get x-ray 
    I called the recruiter back and he told me to come back in and meet 
with the guy that knew more about the nursing program to see if that 
was right for me. I went in and met with the assistant director of 
admissions and he told me that these things were indeed true. I 
explained to him how we had this newly built facility on our settlement 
and how I wanted to help my community. He told me that in the beginning 
of the program I would have to be there and go back and forth more 
because of the classroom instructing. He said that eventually the 
classroom setting would taper off and that I would have to do more 
clinical training. I told him that I was concerned about the gas, time, 
and what it would take away from my responsibilities at home. The 
recruiter told me that I could do some of my clinical training there at 
our facility in Tama. He explained that I would just be in Cedar Rapids 
mostly in the beginning and then be home more towards the end of my 
    So I went home and set up an appointment with our health director 
and spoke to him about my ideas. He told me that it was a very 
demanding program and I told him about how they were going to let me do 
some of my training there at home. Our health director thought that was 
a great idea and was even going to talk to the doctor there to let him 
know to be expecting me as a student somewhere down the road. As I 
weighed it all out, it seemed worth all the sacrifice. I kept thinking, 
I just need to keep my nose to the grindstone and it will eventually 
get easier. The recruiter had even told me that doing my training at 
the clinic on the settlement would help the transition from me being a 
student there to being an actual employee. I thought that everybody 
from the school to the clinic at home was on board and had my goals in 
sight. I enrolled and so far, I have taken out $9,642.25 in student 
loans to attend Kaplan University. This is on top of the $16,640 I 
still owe for hair school and community college.
    The first term was indeed very demanding as I had 19 credits hours 
to complete and pass on top of the daily 2-hour commute. It seemed like 
I hardly ever had time to study. I thought that it was strange that I 
failed my mid-term and final exams in my Anatomy & Physiology class but 
had yet somehow passed. I was puzzled but yet relieved.
    It was at the end of my first term that we received our schedules 
for 2d-term clinical. They were placing me in Vinton, IA. After 
studying it on the map, I figured it to be about the same distance I 
was already driving. I let it go for awhile thinking that this was just 
all part of getting through the first part of my program. Just out of 
curiosity, I decided that I would go and talk with the director of 
nursing to see just when exactly I would be able to begin doing my 
training at home. This is when she broke the news to me that this would 
not be at all possible. She explained that they already had clinical 
set up with hospitals in the Cedar Rapids area. She asked me who told 
me this and I told her how they told me this in the admissions process. 
She apologized for him and tried to explain how in order for them to do 
this would mean that she would have to set up an instructor along with 
a group of girls to go to Tama and that no one would want to do this, 
nor had they ever done this in the past. As I've progressed through the 
program and from talking with others, I have found out that this is 
most common, if not always, protocol with nursing school; you have to 
have your training in a hospital setting. Being that I had no medical 
experience before enrolling, I had no way of knowing that this is the 
way things worked and left me wondering why the director of admissions, 
whom was also in charge of enrolling students into the nursing program, 
had failed to share this kind of information with me?
    I continued talking with other students, especially those that were 
further along in the program and began to get a feel for what I was in 
for. I found out that the time and demands only got more intense and 
would require more of me being away from home. By 4th term I would have 
to go back and forth 6 out of 7 days a week, and that the classes were 
going to get more demanding leaving me with less time to study. I 
couldn't see how I was going to balance it all. I decided I would just 
cut my losses and try to go to school at Marshalltown Community College 
(MCC) which is only 15 minutes away from home. The reason I didn't 
enroll here in the first place was because I was told that it would 
take longer because of pre-requisites and that Kaplan could get me in 
and out at a faster pace. I went ahead and got accepted into the fall 
program at MCC but did not have my official transcripts from Kaplan. I 
requested that Kaplan transfer them over, but they told me that because 
it showed that I still owe them that they could not send them for me.
    Hindsight, I see how everything happens at too fast of a pace. Our 
very first day, during orientation, we were trained in CPR within a 
matter of hours. I am now certified but cannot recall how to do 
anything and can see how I do not feel confident at all if it came down 
to trying to save a life. I now feel like I am at a place where I am 
stuck and have no real future with what I am being taught, or being 
kept from. I feel like I am at a place where I don't know how I can 
continue. I want to but I don't know how. This has been a very 
disheartening experience and I hope by telling my story I can prevent 
it from happening to anyone else.

    The Chairman. Ms. Johnson, thank you very much for a very 
poignant statement. Thanks for being here and coming all the 
way from Iowa for this. I appreciate it very much.
    Dr. Mitchem, welcome to the committee and please proceed.

                    OPPORTUNITY IN EDUCATION

    Mr. Mitchem. Chairman Harkin and members of the Health, 
Education, Labor, and Pensions Committee, I deeply appreciate 
the opportunity to testify this morning. My name is Arnold 
Mitchem and I'm the president of the Council for Opportunity in 
Education, an organization representing over a thousand 
colleges and over 5,000 administrators, counselors, and 
teachers who work every day to provide low-income and first-
generation students a realistic chance to enter and succeed in 
    In developing my testimony, I spoke with many of these 
educators and I also drew upon my own experience of nearly 40 
years of working directly with low-income young people and 
adults. Throughout these 40 years, I've tried to govern my 
interactions with students by a simple maxim: Work so that 
other people's children have the same range of options that my 
own children had and now my grandchildren have. I believe this 
view is consistent with President Johnson's closing remarks as 
he signed the Higher Education Act 45 years ago, 
parenthetically, paraphrasing: Tell your children and 
grandchildren that the doors of opportunity are now open.
    At the time he was advancing an equal educational 
opportunity policy, a policy that envisioned access to and the 
inclusion of all segments of the American family in all 
categories of colleges and universities.
    Mr. Chairman, I and many others are troubled today by the 
over-concentration of low-income Americans in the for-profit 
sector institutions. This racial, ethnic, and class 
stratification is troubling for two reasons. First, there is 
little evidence that this stratification is a result of the 
informed choice of students or their families. Second, in far 
too many instances the enrollment in a program in the for-
profit sector does not appear to provide upward mobility. Let 
me briefly elaborate on each of these points.
    What do we know about the circumstances surrounding 
students' decisions to attend for-profit institutions? First, 
we know that in most instances the low-income student and his 
or her family comes to the table with limited information about 
college. We all know that discussions about the relative 
ranking of colleges, the sticker price of college as opposed to 
the actual price, transferability of credits, or how financial 
aid works are confusing even to families with resources. 
Families without college experience most often do not even know 
the right questions to ask.
    When low-income, first-generation students enter the 
college marketplace, they think they are dealing with 
counselors, not sales people. So on one side of the table we 
have a poorly informed consumer and on the other side of the 
table we have a business that is marketing its products using 
sophisticated state-of-the-art marketing techniques.
    Over and over again, we were told stories of students being 
subjected to high-pressure marketing to enroll in for-profit 
institutions. Some would argue that these situations are rare, 
that there are only a few bad apples in the for-profit sector 
who engage in marketing tactics. Mr. Chairman, I believe this 
is a very fair point. But while the most egregious of the 
behaviors uncovered by the GAO or your committee are limited, 
the basic inequity in the relationship between the low-income 
consumer and the industry is inherent. A sophisticated business 
with a high-cost product it wants to sell and a poorly informed 
consumer is a cocktail for abuse.
    TRIO educators over and over again pointed to students 
choosing high-cost for-profit programs and taking out large 
loans to do so when a comparable program was available to the 
same student at a much lower cost, often, often, within 
reasonable proximity to their home.
    As I said earlier, Mr. Chairman, our second major concern 
about the current regulations governing low-income students and 
for-profit institutions is that in too many instances a 
student's enrollment is not a real opportunity, but instead 
results in a situation where the individual is worse off than 
they were before they enrolled.
    There are a variety of scenarios where such is the case. 
No. 1, the school holds out the promise of high-paying jobs in 
a field, but either no such jobs exist or they require 
education or experience beyond that provided in the program in 
which the student was enrolled. No. 2, the student's enrolled 
in a program that requires skills beyond those they bring to 
college and he or she drops out with no degree or certificate, 
just a large loan to pay back. No. 3, the student enrolls in a 
program thinking that credits are transferable and they aren't, 
so he or she has to pay to get his ultimate academic goal.
    A final situation where enrollment in a high-cost for-
profit program does not lead to a better life is when the 
student's education does not provide a real and significant 
boost in earnings. Paying back student loans over a long period 
sometimes makes it impossible, impossible, for the individual 
to make the other financial decisions that will create a better 
life for his family--buying a house, saving for retirement, or 
for one's children.
    Mr. Chairman, my final point is this. Earlier this week, I 
was able to participate in NBC's Education Summit held in New 
York City. Participants from all walks of life--business, 
education, local and State politics--reaffirmed a shared belief 
that providing the next generation of Americans a high-quality 
education is not simply a matter of American competitiveness; 
it is in fact now an issue of national security. General Powell 
was very, very clear on that point.
    A stratified system of postsecondary education, where 
individuals with limited information and limited means are 
over-concentrated in one sector, is, I am convinced, not at all 
good for our country. So I applaud the committee's work and 
understanding in addressing these serious and complex concerns.
    Thank you.
    [The prepared statement of Mr. Mitchem follows:]
              Prepared Statement of Arnold Mitchem, Ph.D.
    Chairman Harkin, Ranking Member Enzi and members of the Health, 
Education, Labor, and Pensions Committee, I deeply appreciate the 
opportunity to testify before you today. While I believe that the 
question asked in the title of this hearing is an extremely critical 
one with respect to the Federal investment in student aid, in my view, 
it is a question that must be parsed and expanded. If the committee is 
simply questioning whether the Federal Government is getting an 
adequate return on aid dollars used by students to attend for-profit 
schools, I would probably not be the best witness to have been invited.
    However, by asking the question of whether students are succeeding, 
the committee, in fact, has raised some deeper, related issues. The 
most central one--and the one I believe I am most qualified to speak on 
is this: Do the current laws and regulations governing Federal Student 
Assistance, particularly student loans, sufficiently protect low-income 
students vis-a-vis for-profit schools? This leads to a more basic 
question that lies at the heart of this congressional inquiry: Are low-
income students adequately protected from assuming inappropriate loan 
debt to attend for-profit schools?
    And my answer to these two questions is a resounding NO.
    I began my career in higher education over 40 years ago when I was 
appointed the first director of the Educational Opportunity Program for 
low-income and minority students at Marquette University. My experience 
guiding underrepresented students through college was a key motivator 
during my years at the university. Currently, the Educational 
Opportunity Program and thousands of other TRIO programs continue to 
steer low-income, first-generation students towards the most 
appropriate means of pursuing and financing their postsecondary 
educations. Yet, I appear before the committee today on behalf of the 
millions of other low-income students who have not had the benefit of 
receiving objective information about colleges. It is these students 
that we must seek to protect not only from unscrupulous and abusive 
practices within the for-profit sector, but also from the inequities 
inherent in the relationship between low-income students and for-profit 
    As you may know, the organization that I direct, the Council for 
Opportunity in Education (or ``COE''), represents teachers, counselors 
and administrators who work with low-income and first-generation 
students. Before COE issued its statement on for-profits and gainful 
employment, I consulted with many of these individuals, particularly 
those working in TRIO's Educational Opportunity Centers, Veterans 
Upward Bound and Talent Search programs, to gain insight into their 
perspectives on for-profit institutions. In particular, I wanted to 
find out from them:

      (1) Were they often able to recommend a for-profit program as the 
best fit for their students?
      (2) If yes, when was there a particularly good fit? If no, why do 
they seldom recommend for-profit programs?
      (3) How often did they encounter individuals whom they felt had 
previously been treated inappropriately by for-profit institutions?

    Almost without exception, each of the answers I received indicated 
that it was rare that they found for-profit programs to be the best fit 
for the students they counseled. Two reasons emerged. First, almost 
always, they could identify less expensive, publicly supported 
alternatives in the same area that would not require the student to 
assume as high a loan burden. Second, in very many instances, TRIO 
counselors found that many for-profit admissions counselors were not 
fully forthcoming and did not distinguish their programs from those 
offered at other public and independent colleges.
    Also, virtually all of these TRIO counselors could identify 
individuals who had been, in their view, harmed by enrolling in a for-
profit program. COE is submitting a number of such examples along with 
my written testimony.
    Many TRIO staff pointed to the marketing techniques of the for-
profit institutions as the root cause of this problem. As a result of 
current Federal policy, the playing field for low-income students 
simply is not level. Unwittingly, we have created an environment in 
which the for-profit institutions have very good reason (and an 
exceptional level of resources) to heavily recruit low-income students 
while many publically supported and independent colleges have neither 
the financial incentives nor the resources to engage in the same state-
of-the-art, well-targeted, high-pressure marketing. Now the GAO, and 
TRIO staff, can point to a number of instances that I would say go 
beyond ``state-of-the-art, well-targeted marketing.'' But, I would urge 
this committee to recognize that even in the absence of unscrupulous or 
simply greedy behaviors on the part of institutions or individuals, 
currently there simply are not sufficient safeguards in place to 
protect low-income students in their interactions with for-profit 
    These institutions hold up the promise of a better life--in fact, 
the promise of the American Dream--to individuals of modest means. In 
the face of such glossy advertisements and tenacious recruiting 
tactics, it is, in my view, unrealistic to assume that a majority of 
first-generation and low-income students--who are tackling higher 
education on their own--will be able to step back, assemble a team of 
wise and experienced advisors, and ultimately make the best decisions.
    A concern repeatedly raised by TRIO counselors was the difficulties 
many low-
income individuals had distinguishing between the value of a particular 
program and the value of ``college.'' Families where parents are 
college graduates might find this hard to understand. But many low-
income individuals and families have difficulty distinguishing between 
a for-profit education and a traditional college experience when both 
can put ``college'' in their names and both are ``endorsed'' by the 
Federal Government--which provides financing to facilitate their 
    A story of a former serviceman served by one of TRIO's Veterans 
Upward Bound programs comes to mind. This individual completed 54 
credits of a 60-credit associate's degree program at a for-profit 
``college'' before being deployed to Iraq. When he returned home and 
attempted to enroll in a university, he found that none of those 
credits were transferable, though he had been assured that they would 
transfer. Often TRIO-eligible students begin their postsecondary 
careers at for-profit institutions, assuming that it is a building 
block in their long-term educational plans. But, too often, their 
enrollment at these institutions hinders those plans. Debt to the for-
profit institution, which prevents transfer of credit; confusion about 
transferability; and default on student loans after enrollment at a 
high-cost for-profit institution can each serve to create a dead-end 
for a student's aspirations.
    Now, when advocates like me raise concerns about for-profit 
institutions, a distinct line of counterarguments emerge. The first and 
most pronounced is that for-profits are the only institutions providing 
access to postsecondary education for many low-income youth and adults. 
This argument is often raised by individuals from minority communities, 
like me, who are deeply sensitive to issues of discrimination and 
access. My problem with this argument is that I believe it is based on 
inaccurate information. In fact, many public and independent colleges 
are offering comparable programs to low-income students at a much lower 
cost than what is being provided at for-profit institutions. Low-income 
students are simply unaware of the entire range of educational 
opportunities available to them. At this juncture, I would like to take 
a brief moment to commend this committee, which has worked diligently 
to address this issue through the reauthorization of Talent Search, 
Educational Opportunity Centers and other postsecondary information 
programs governed by the Higher Education Act. Your emphasis on 
ensuring financial literacy in these programs is particularly timely. 
Similarly, efforts made to provide reasonable, income-based repayment 
plans for student borrowers are also key.
    I think all of us in this room agree that access is critical, but 
access to what? Mountains of debt? Personal and career success must be 
the answer to the access question. What we are witnessing at COE is 
that many low-income and first-generation students are not achieving 
success after participating in for-profit programs. Instead, we are 
seeing students who emerge with considerable loan burdens and without 
the ability to obtain meaningful employment or to transfer the credits 
earned at for-profit institutions to accredited, publically supported 
or independent institutions.
    Similarly, many who oppose greater controls on for-profit 
institutions argue simply that freedom in the marketplace is a core 
value of American institutions, and that to interfere with the right of 
for-profit institutions to make a profit is inappropriate. To go that 
route, however, would lead us down a road that too closely parallels 
the one that played a major role in the recent recession. As we saw in 
the mortgage and banking industries, lending directed at low-income 
borrowers that is not closely monitored will, almost without exception, 
lead to abuse. My greatest fear is that the presence of such abuses in 
the educational arena will--in the foreseeable future--undermine public 
support for the entire range of Federal financial assistance programs.
    I began this testimony by noting that I had been involved in issues 
and programs designed to increase college opportunity for low-income 
youth and adults for over 40 years. Throughout these four decades, I 
have tried to govern my interactions with students by a simple maxim: 
work so that other people's children have the same range of options 
that my own children, and now grandchildren, have available to them. 
Like most African-Americans and Hispanic-Americans, I am extremely wary 
of a two-tiered system of education whereby one set of institutions is 
available to individuals with information, guidance and means, and 
another set is provided for those with less information, little 
guidance and lower means.
    If each of the institutions being examined by this committee were 
targeting students from a range of economic backgrounds, the necessity 
of your work would be lessened. But my experience is that they are not. 
Many of these institutions purposely target low-income students. I 
believe that there is a moral imperative and a responsibility to ensure 
that all students, regardless of background, race or income level, are 
fairly represented in higher education. These students can only look to 
you for protection, and I am deeply honored, Mr. Chairman, that you 
have asked the Council for Opportunity in Education to join with you in 
this important work.

    The Chairman. Dr. Mitchem, thank you for a very, very 
profound statement and for all of the work that you've done in 
the past, especially in the TRIO programs, and I'll cover that 
with you in my questioning period.
    Now, Ms. Bittel, welcome again to the committee and please 


    Ms. Bittel. Mr. Chairman and members of the committee, 
thank you for the opportunity to testify before you.
    I come here today to ask you to listen to my one little 
voice and hear the chorus of voices behind me of those whose 
lives are being ruined by insurmountable student debt. I don't 
have a lot of money to hire people to fly to Washington and 
shout my message into the streets. In fact, I stand to lose 
everything by coming here to see you today. Yet, I am willing 
to risk all that I have to stop the unethical funneling of tax 
dollars through low-income individuals to further fill the 
coffers of mega-rich corporations.
    As you've seen in previous testimony, high-pressure sales 
tactics are being used to recruit individuals targeted from the 
lower income sector of our population as they are eligible for 
the most amount of aid. Many of the programs offered are in 
highly saturated job markets within the passion fields, making 
the achievement of gainful employment utilizing their degree 
different, if not impossible to achieve.
    I assert that the most egregious harm perpetrated upon 
these students is the lack of support they receive once they do 
graduate the program--if they do graduate their programs. As I 
reported in my testimony, there are many tricks and sleight-of-
hand techniques used to create outstanding but unrealistic job 
placement statistics. But that does not mean that every 
employee of Career Services is dishonest. Very, very much the 
contrary. Many of my co-workers are honest individuals doing 
everything they can to help as many graduates as they can in 
the very limited time to do so.
    I see a systemic problem here when there are only nine 
employees servicing the students that are being recruited by an 
admissions workforce of almost 1,600. Career Services employees 
are being paid nearly a third of what the top performers in the 
admissions department receive. I believe these facts speak 
volumes as to where the real priorities lie within these 
    If it truly were the students' success that was of primary 
importance to these for-profit institutions, then why not spend 
the millions of dollars being spent on trying to convince 
America that they are wholesome and good on finding jobs for 
their graduates and providing their quality educations?
    I believe you need to take a good hard look at these so-
called employment statistics and question just how they are 
being derived. Additionally, the Department of Education needs 
to be given the authority to monitor these institutions, rather 
than the accrediting bodies whose very existence depends upon 
the schools they're supposed to be policing.
    Across-the-board criteria for just what constitutes a job 
placement needs to be developed and enforced so that these 
commonplace tricks to justify employment can no longer exist.
    Thank you so very much for the opportunity to speak before 
this honorable committee today. I would be very happy to answer 
any and all of your questions. But since I have 1 minute and 33 
seconds left, I would like to say----
    The Chairman. You can have a little more than that if you 
    Ms. Bittel [continuing]. Thank you so very much, Senator 
Harkin, for being the champion of so many people who cannot 
speak for themselves or are afraid to do what I am doing here 
    I am appalled that the Republicans have left the room.
    The Chairman. We've got one here.
    Ms. Johnson. I'm sorry, sir. I'm sorry, sir.
    Senator Burr. Go ahead, go right ahead.
    Ms. Johnson. I'm sorry. Thank you for being here.
    But I would like to make note that I expected to speak with 
those gentlemen. I expected to speak with a full panel, and I 
expected my voice to be heard. It tells me, OK, thank you. 
There is one person in the room who is here to represent them, 
but where are the others?
    They're accusing you of having a one-sided issue, but yet 
the co-chairman has left. I'm sorry, I just find that 
offensive. That's totally off the cuff.
    [The prepared statement of Ms. Bittel follows:]
                Prepared Statement of Kathleen A. Bittel
    Mr. Chairman and members of the committee, thank you for the 
opportunity to testify before you today. I come here today to talk 
about all those whose lives have been ruined by insurmountable student 
loan debt.
    I began working at Education Management Corporation after being a 
stay-at-home mom for 14 years. Those years were the happiest time of my 
life and I am thankful that I was afforded a luxury that many families 
cannot afford. But that happy time came to an end 3 days after our 
third child was born when we discovered that my husband had testicular 
cancer. A highly curable cancer, he had surgery and radiation and was 
pronounced ``cured'' . . . released from follow up treatment. The 
cancer came back with a vengeance 5\1/2\ years later. It was in that 
moment I realized the folly of not pursuing higher education. I was a 
mom, with no education and no work experience . . . how was I going to 
support my children when he died? I immediately enrolled at the 
University of Pittsburgh in their psychology program. My goal was to 
counsel troubled children. It was also to complete the degree before he 
died but that was not meant to be.
    Shortly after I began my studies, one of my township supervisors 
appeared at my back door and stated that they had become aware of my 
situation. Because both my husband and I had been such active 
volunteers, doing much good in the community, they wondered if perhaps 
I would like them to help me get a job within our county government. I 
started in the secretarial pool, and was subsequently promoted through 
seven positions culminating in the dual positions of Child Support 
Enforcement Officer specializing in Interstate cases and Court Officer 
where I helped to prosecute non-compliant cases by presenting evidence 
to the presiding judge in court.
    I did not pro-actively seek employment with Education Management 
Corporation. EDMC contacted me by phone, stating that they had found my 
resume on Monster.com and wanted to interview me for the assistant 
director of admissions of Argosy University opening.
    I have worked at Education Management Corporation for almost the 
past 3 years. For the first 16 months I worked in the admissions 
department at Argosy University, which is owned by EDMC. The department 
was a high-pressure and unsatisfying work environment. We were 
constantly pressured to deliver a minimum of two applications per week. 
New ``leads'' were to be called three times a day for at least a week, 
then you could drop back to two, then one as the month progressed. Most 
of these leads were also being sold to the other online schools, so 
these poor people were inundated with phone calls mere minutes 
following their oftentimes unwittingly submitted information. These 
calls would continue to each of them for months.
    I did not feel that I was helping students to achieve their goals 
beyond their enrollment. Assistant Directors of Admissions (ADAs) were 
responsible only to keep the student enrolled and attending the classes 
for 1 week. Subsequent to that first week, we were discouraged from 
``wasting time'' in speaking with anyone already enrolled in the 
program. Out of the 96 students I enrolled, only 46 continued to be 
taking classes when I checked on their status 16 months later. 
Additionally, more than half of the students still enrolled were on 
Academic Probation. This distressed me.
    The more I spoke up against what I felt to be inappropriate 
direction of the department, the lower I fell in the ``lead stream,'' 
making the meeting of my quota extremely difficult to do. I worked many 
overtime hours to reach my goals. I knew if I was to stay with the 
company then I needed to find a healthier work environment.
    I found my way into the Career Services Department, working with 
the Art Institute brand. Although previously earning $55,000, I took a 
pay cut to $36,000 because I was honestly seeking a way in which I 
could give back to the students I had talked into the program. I was 
also promised an additional $3,000 per quarter as a bonus for meeting 
my quota.
    At first, I found it very rewarding to have the opportunity to get 
to know and work with the industrious graduates of the Art Institutes 
who were actively seeking a better life. I felt I could provide 
valuable assistance in helping students find good jobs in a poor job 
    But that feeling did not last long. I realized quickly it was all 
about hitting quotas instead of really helping students find meaningful 
work. I quickly came to see that career service department's primary 
role is to lend credibility to the brands of EDMC by allowing them to 
claim such large numbers of successful graduates working in their 
fields. But these are not realistic numbers that are being reported.
    It is important to note, that although there are approximately 
1,600 admissions recruiters at EDMC, there are only 9 career service 
advisors to accommodate the graduates of all of their online programs. 
This number was broken down into five advisors for the Art Institute 
Online graduates, two advisors for the Argosy University Online 
graduates, and two advisors for the South University Online graduates. 
I worked with the Art Institute brand and was responsible for 50-60 
graduates in each class. We were responsible to work three classes 
simultaneously. We have only 6 months to work with each class and the 
pressure to find gainful employment for so many in such a short period 
of time was overwhelming.
    Early on in my employment with career services, a co-worker showed 
me how to manipulate information received from a student, to ensure 
that the student could be listed as ``gainfully employed'' for the 
purposes of the company's statistics. This same co-worker later came to 
me exhibiting two documents: one was a signed Employment Verification 
form from the graduate stating they were working in their field earning 
$8,000 a year, the other a printout from salary.com estimating that the 
average salary in that field and in their zip code would be $25,000, 
which would meet the salary threshold of $10,500 to justify marking 
them as employed in their field. ``Which one do you think I'm going to 
turn in?'' they laughed as they tossed the graduate's document in the 
trash and entered the salary.com data into the student's file. These 
kinds of actions were not discouraged by managers. It is important to 
note that I immediately reported these actions to the supervisor I had 
at the time, who promised to discuss this with the head of the 
department. No disciplinary action was taken.
    Much to the contrary, this same co-worker who changed the student's 
salary data received EDMC's ``North Star Award'' shortly thereafter. 
The intent of the award is to exhibit to other employees that ``this 
was a star to follow.'' Although the policy is not written down, the 
message of the company giving this award was abundantly clear. 
Employees who hit their numbers will be rewarded regardless of whether 
graduates actually succeed, or whether the information entered truly 
represents the graduates' circumstance.
    Refusing to cheat my students by withholding my help, I struggled 
to reach the increasingly impossible quotas by doing it the honest way. 
But as the job market grew dim, it became impossible to honestly reach 
the 85.9 percent employment quota. When I missed my quota by \1/10\th 
of 1 percent, the company docked $500 from my ``bonus'' and I was told 
that I could lose my job if I failed to meet October's goal. That 
``verbal warning'' was subsequently put into writing and delivered to 
me during the next meeting.
    I was constantly reminded that my numbers were not as high as they 
wanted them to be. The situation culminated when I was called into a 
conference room with my supervisor as well as the head of the 
department. The head of the department interrogated me, asking the same 
questions over and over. ``Why were my numbers the lowest on the team, 
and why did I think that everyone else had the numbers he wanted and 
not me?'' He demanded that I provide him with a plan on how I intended 
to meet his number, reminding me that my job was in jeopardy should I 
fail. He decided that he was going to impose a new weekly quota on me 
to place two of my graduates in field-related jobs, it was specified 
that no waiver was permitted, it must be field-related employment. 
Given that only 3 out of the 11 graduates I was working with were 
actively looking for employment, I believed it to be impossible to 
achieve this goal without inventing their employment.
    In some instances we were able to essentially eliminate graduates 
from the employment statistics if we could prove they had extenuating 
circumstances that prevented them from seeking field-related 
employment. A waiver could be used for:

     Military--active duty military or the spouse of a soldier.
     Medical Condition--primary caregiver or suffering from a 
medical condition or disability preventing them from work.
     Established Professional--someone who had worked in an 
unrelated field for at least 6 months earning a minimum of 10 percent 
more than the average starting salary in their degree program.
     Stay-at-Home Parent--one not seeking employment, choosing 
to raise their children instead.
     Education--one who was continuing their education and 
choosing not to seek employment at that time.

    In other words, if a graduate was not actively seeking employment 
due to one of the above listed situations, they were removed from the 
total number of graduates prior to calculating the number of those 
gainfully employed. The established professional, by signing this form, 
was essentially acknowledging that they could not leave their current 
employment due to the ``financial hardship'' it would cause them, 
because a job in their degree field would pay them far less than what 
they were already earning in the field they had hoped to leave by 
obtaining the education.
    In addition to these waivers, there were other problems with the 
statistics that EDMC reported. I was repeatedly pressured to call 
graduates working in unrelated fields and review with them the courses 
they had taken while at the Art Institute to find obscure details of 
their current jobs where it could be considered that they were indeed 
``using their skills.'' If one could convince them that they were using 
these ``skills'' at least 25 percent of the time in their current job, 
and to sign the employment form stating so, then their job could be 
counted as field-related employment. This was rife with abuse. 
Employees were expected to convince graduates that skills they used in 
jobs such as working as waiters, payroll clerks, retail sales, and gas 
station attendants were actually related to their course of study in 
areas like graphic design and residential planning.
    Also to be counted as employed for EDMC's statistics, a graduate 
only needs to be working at their job for merely 1 day. There was no 
company policy stating that a graduate had to be currently employed in 
order for their job to be counted among the statistics. If they had 
worked in their field for 1 day within the time period between 
graduation and the 6-month deadline, it was routinely included in the 
statistics as gainful employment.
    Weekly meetings were held with the team including all nine advisors 
and two supervisors where we discussed one another's problem graduates. 
By problem graduates I mean those who were either non-responsive, non-
cooperative, lived in remote locations with minimal opportunity 
available to them, or unemployed with no viable prospects in sight. 
Much brainstorming was done in order to come up with other angles that 
we could employ to make them fit into the employment category before 
the deadline. Many of the examples that I have previously listed are 
the result of these brainstorming meetings.
    Reaching the breaking point of my conscience due to the constant 
pressure to do things I felt to be morally unethical, I requested, and 
was granted, a leave of absence on August 23, 2010. I requested a 
meeting with the director of Human Resources and ``blew the whistle'' 
on all of the practices previously stated in this report. I verbally 
provided this information to the director of Human Resources and 
answered her many questions, allowing her all the time she needed to 
take what appeared to be copious notes. The only information I did not 
provide to her was a hard copy of my notes, and I did not name names. I 
was assured that the matter would be taken seriously and that there 
would be an investigation.
    The Art Institute is expensive, ranging from $21,000 for a diploma 
to $84,000 for a bachelors degree. This does not include the cost of 
books and expensive equipment such as computers, cameras, and software 
programs. I know that some of this required software can cost as much 
as $1,900. The school also charges a $100 per class in ``lab fee'' 
which is not included in tuition. This adds an additional $1,500 to the 
cost of a diploma, $3,000 to an associates and $6,000 to the bachelors. 
The total cost for this education may be more than any of these 
students will be able to afford to invest in a home because all of 
their future dollars will be going to repay this enormous debt and 
    I believe that the EDMC schools, including the Art Institute, do 
offer some great courses. There are many excellent teachers, especially 
those who teach in the ground facilities. For online courses, because 
an 11-week curriculum is squeezed into 5\1/2\ weeks, it can be a 
struggle to learn. Students must mostly learn on their own, and there 
is often insufficient support provided by the school. If the student 
does not have the prior education, background, and abilities needed to 
succeed then they will either drop out before completion, or complete 
with low-level skills that will never find them ``field-related'' 
employment earning enough to repay their debt, much less live 
meaningful lives.
    I believe this to be a systemic problem, and not one found only in 
this school system. More focus should be put into researching and 
developing programs in the sectors where jobs will be needed in the 
future, and training should be being developed in those areas and not 
the ``easy sell passion fields.''
    Thank you for this opportunity to present this testimony to you 

    The Chairman. Well, Ms. Bittel, I will say this, that the 
Senate did adjourn yesterday and a lot of people have gotten on 
planes and are headed back to their respective States. I did 
not anticipate that when I set up this hearing today. I figured 
we were going to be in all next week, too. So I will excuse 
Senators on both sides of the aisle who were anxious to get 
back to their States after the adjournment last evening.
    I don't know what the situation is with Senator Enzi. He 
may be on his way back to Wyoming. I don't know, but I wouldn't 
doubt that that is the case for many of them. So I just want to 
make that very clear.
    And had we been in session and going into next week, we 
probably would have had a lot more people here.
    Senator Franken. Can we do a bed check and see who's in 
    Ms. Bittel. You understand, you understand my 
    The Chairman. I understand that.
    Ms. Bittel. I believe that this is an issue that they would 
be paying attention to.
    The Chairman. And I will also talk about your situation 
when it comes my time to question.
    Ms. Bittel. Thank you.
    The Chairman. But I did want to say that also I have a 
letter here from the president of EDMC regarding their efforts 
to ensure they collect accurate placement data, and I ask that 
it also be included in the record, in fairness to EDMC.
    [The material referred to may be found in Additional 
    Now, Ms. Asher, Lauren Asher, president of the Institute 
for College Access and Success. Welcome and please proceed.


    Ms. Asher. Thank you, Chairman Harkin and members of the 
committee, for the opportunity to testify today on the Federal 
investment and student outcomes of for-profit colleges.
    At the Institute for College Access and Success, our 
mission is to improve both college opportunity and outcomes so 
that more Americans complete meaningful credentials and do so 
without burdensome debt. Our Project on Student Debt studies 
trends in loan borrowing and repayment and our analyses have 
revealed a really disturbing pattern. Compared to other types 
of schools, for-profit colleges have the highest share of 
students with debt, the highest debt loads for degrees, and the 
worst Federal student loan default rates.
    Student debt, as you've noted, is pervasive at for-profit 
colleges. At least 95 percent of students at both 2- and 4-year 
for-profit colleges have loans. This is especially striking 
when you consider that just about 15 percent of students at 
community colleges have loans and less than half of students at 
public 4-year colleges have loans.
    It's not just because of the type of students enrolled at 
for-profit colleges. Low-income students and students from 
underrepresented minorities are much more likely to borrow and 
to borrow more at a for-profit college. Low-income African-
American and Hispanic undergraduates are about three times more 
likely to borrow Federal student loans and four times more 
likely to borrow risky private loans than their counterparts at 
other colleges.
    Students who complete degrees at for-profit colleges are 
also much more likely to have loans and to have more debt than 
students at other schools. At for-profit colleges, 98 percent 
of those who graduate with an associate degree have loans and 
their average debt is nearly $20,000. A majority of those who 
graduate from community colleges, in contrast, have no debt. 
Those who do borrow, borrow much less, on average around 
    These numbers point to the fact that students are generally 
at much greater risk of ending up with unmanageable debt if 
they go to a for-profit school. More than 40 percent of 
students at for-profit schools have private student loans and 
that further compounds the risk. Private loans are one of the 
riskiest ways to pay for college. They typically have variable 
interest rates with no cap and they're nearly impossible to 
discharge in bankruptcy. They also lack the affordable 
repayment options and consumer protections that come with all 
Federal student loans and help students repay those loans if 
they hit hard times.
    If you go to a community college and don't complete a 
program, you'll probably have very little debt, if any, to pay 
off and it will be Federal loans. But if you don't or can't 
finish a program at a for-profit school, you'll almost 
certainly have loans and there is a good chance that you'll 
have both Federal and private loans.
    Even if you complete a program at a for-profit school, as 
some of my fellow panelists have noted, there is a good chance 
that you might not be able to earn enough to pay back what 
you've borrowed. Ending up with a worthless or grossly 
overpriced credential, especially if you borrowed to pay for 
it, can be worse than no credential at all.
    As a recent Government Accountability Office investigation 
revealed, students are all too often misled, pressured, and 
outright lied to so they'll enroll in for-profit schools and 
take out loans. The GAO found that some for-profit colleges 
obscure the true cost of attendance and how much borrowing 
would be required, grossly exaggerated likely earnings and job 
prospects, and one even claimed that Federal loans don't have 
to be repaid. Others use aggressive sales tactics to pressure 
students to sign contracts before they could see a financial 
aid package.
    We frequently hear from students whose colleges urged them 
to take on private loans as well as Federal loans without 
making clear that there was any difference.
    Several large for-profit colleges make private loans from 
their own funds to their own students, knowing that the 
majority will not be able to repay. Corinthian Colleges, for 
instance, told investors it will write off nearly 60 percent of 
the $270 million in loans it made to its own students in the 
last 2 fiscal years.
    It should not be surprising, then, that students in the 
for-profit sector face the highest risk of default on Federal 
student loans. The average 2-year default rate at for-profit 
colleges is nearly double the average rate at public colleges 
and triple the rate at private nonprofit colleges. The Career 
College Association's own study concludes that, even after 
controlling for demographics and graduation rates, students at 
for-profit colleges are twice as likely to default as their 
counterparts at other schools.
    Schools clearly have an impact on whether and when students 
default. For-profit colleges routinely tell investors that they 
can lower their default rates and many for-profit schools have 
kept Federal student loan default rates down in the 2-year 
window that the Department of Education uses to determine their 
access to Federal student aid. However, many seem to lose 
interest in their students' outcomes as soon as that window is 
    Unfortunately and predictably, weakened regulation and 
reduced oversight over the past decade, along with a large 
potential revenue stream of Federal dollars, as you described 
this morning, have increased the incentives for less scrupulous 
for-profit colleges to game the system. This is not the first 
time such problems have come to light, but the risks to 
students and taxpayers are much larger in scale and cost than 
ever before.
    In the early 1990s, the last time Congress passed major 
reforms to address abuses at for-profit colleges, the industry 
was a fraction of its current size. In 1991, fewer students 
enrolled in the entire for-profit sector than now enroll in the 
University of Phoenix alone.
    I thank the committee for shining a spotlight on this 
important issue for both students and taxpayers across the 
Nation and I look forward to answering your questions.
    [The prepared statement of Ms. Asher follows:]
                   Prepared Statement of Lauren Asher
    Lauren Asher is president of The Institute for College Access & 
Success (TICAS), an independent, nonpartisan, nonprofit research and 
policy organization. TICAS works to increase all Americans' access to 
quality and affordable higher education and improve the odds of 
successful educational outcomes for students and for society.
    Our ongoing analyses of student debt trends at the national, State, 
and college level led us to look more closely at what is happening to 
students in the growing for-profit college industry. Compared to other 
types of colleges, for-profit colleges enroll the highest share of 
students with debt, have the highest student debt levels, and the worst 
Federal student loan default rates. Students who attend for-profit 
colleges are also much more likely to take out risky private student 
loans, which are more like credit cards than financial aid, and lack 
the basic consumer protections that Federal loans have.
    The costs are high for both students and taxpayers when students 
take on student loan debt that they cannot repay. Students who default 
on their Federal loans will have difficulty renting an apartment or 
buying a car, and increasingly, getting a job. The debt can follow you 
until you die, and it is nearly impossible to discharge student loans 
through bankruptcy. Private student loans can follow you not only to 
the grave but beyond, and, unlike comparable forms of consumer debt, 
are also rarely dischargeable through bankruptcy.
    Because the for-profit college industry relies on federally funded 
grants and taxpayer-backed loans for the bulk of its revenue, 
taxpayers, as well as students, have a lot at stake in the quality and 
cost of for-profit education. The sector enrolls about 10 percent of 
college students, but accounted for nearly one in four Federal student 
loan dollars (at least $20.3 billion) in 2008-9. This is more than 
double the share of Federal student loans that students at for-profit 
colleges received a decade earlier. Combined with high default rates, 
it is understandable that taxpayers want better information about the 
value of their investment.
    Unfortunately and predictably, weakened regulation and reduced 
oversight, combined with a large potential revenue stream of Federal 
dollars, have led once again to an environment where the incentives for 
less scrupulous for-profit colleges to game the system appear to exceed 
the risks. At the same time, the risks to students and taxpayers are 
much larger in scale and cost more than ever before. The last time 
Congress passed major reforms to address abuses at for-profit colleges, 
the sector was a shadow of the size it is today. In 1991, there were 
fewer students enrolled in the entire for-profit sector than there are 
enrolled today in just the University of Phoenix. Given the rising 
costs and stakes to students and taxpayers, we thank the committee for 
raising important questions and for its commitment to preserving 
student access to quality, affordable higher education.
    Chairman Harkin, Ranking Member Enzi and members of the committee, 
thank you for the opportunity to testify on the high debt and default 
levels for students who attend for-profit colleges, and the need for 
greater oversight of the for-profit education industry to protect the 
substantial interests of both students and taxpayers.
    My name is Lauren Asher. I am president of The Institute for 
College Access & Success (TICAS), an independent, nonpartisan, 
nonprofit research and policy organization based in Oakland, CA. TICAS 
works to increase all Americans' access to quality and affordable 
higher education and improve the odds of successful educational 
outcomes for students and for society. Our Project on Student Debt, 
launched in 2005, focuses on increasing public understanding of rising 
student debt and the implications for individuals, families, the 
economy, and society.
    At TICAS, our mission is to improve both educational opportunity 
and outcomes, so that more under-represented students complete 
meaningful credentials and do so without burdensome debt. That is why 
much of our work has focused on community colleges, which enroll the 
largest share of the Nation's low-income, underrepresented minority, 
older, and part-time students, as well as students who work full-time 
while going to school.\1\ Student loan borrowing rates at community 
colleges are quite low compared to other sectors. Indeed, because 
Federal student loans can be a valuable tool both for expanding college 
access and supporting student success, we have urged community colleges 
to participate in the Federal student loan program, so that their 
students are not forced to rely on riskier and more expensive forms of 
credit if they do need to borrow to stay and succeed in school. We also 
developed the underlying policy framework for what has become the 
Income-Based Repayment Program (IBR) for Federal student loans. IBR 
caps Federal student loan payments at a reasonable percentage of the 
borrower's income and forgives any remaining debt after 25 years of 
responsible payments, or as soon as 10 years for borrowers who work in 
public service.
    \1\ Calculations by The Institute for College Access & Success on 
data from U.S. Department of Education, National Center for Education 
Statistics (NCES), National Postsecondary Student Aid Study (NPSAS), 
2007-8, http://nces.ed.gov/surveys/npsas. Unless otherwise specified, 
``students'' refers to undergraduate students throughout this document.
    In our ongoing analyses of student debt trends at the national, 
State, and college level, a disturbing pattern emerged that led us to 
look more closely at what is happening to students in the growing for-
profit college industry. Compared to other types of colleges, for-
profit colleges have the dubious distinction of the highest share of 
students with debt, with the highest debt levels for degree completers, 
the worst Federal student loan default rates, and the lowest completion 
rates for bachelor's degree programs. For-profit colleges now enroll 
about 1 in 10 postsecondary students in the United States, but they 
absorb a far greater share of Federal student aid: one in four Federal 
Pell grant and student loan dollars goes to students in the for-profit 
sector. At the same time, for-profit colleges also have the highest 
share of students taking out private (nonfederal) student loans, one of 
the riskiest ways to pay for higher education.
    Because for-profit colleges recruit and enroll a disproportionate 
share of low-
income students and students of color, we and many other student, 
college access, consumer, and civil rights advocates are particularly 
concerned about the disparate impact of this sector's alarmingly high 
student debt and default levels. Considered together, the for-profit 
college industry's rapid growth, aggressive recruiting practices, heavy 
reliance on Federal funds, disturbing student debt patterns, and 
disproportionate enrollment of under-represented students clearly point 
to high and rising stakes for both students and taxpayers.
    Twenty years ago, when the for-profit college industry was much 
smaller but similarly lacking in meaningful oversight, these same 
patterns and problems emerged. It is striking to see what the U.S. 
Senate Permanent Subcommittee on Investigations concluded in 1991, and 
how applicable its findings remain today.

          Unquestionably, the Guaranteed Student Loan Program [GSLP] 
        has vastly expanded accessibility to education for those 
        Americans who seek it. The value of accessibility, however, 
        depends on what it is that one is being given access to. On 
        that point, the Subcommittee found that the program has failed, 
        particularly in the arena of proprietary schools, to insure 
        [sic] that Federal dollars are providing quality, and not 
        merely quantity, in education.
          As a result, many of the program's intended beneficiaries--
        hundreds of thousands of young people, many of whom come from 
        backgrounds with already limited opportunities--have suffered 
        further because of their involvement with the GSLP. Victimized 
        by unscrupulous profiteers and their fraudulent schools, 
        students have received neither the training nor the skills they 
        hoped to acquire and, instead, have been left burdened with 
        debts they cannot repay.
          Likewise, the American taxpayer has suffered both in terms of 
        footing the bill for billions of dollars of losses in defaulted 
        loans and the ultimate cost of the program's failure to provide 
        the skilled labor force our Nation needs in the increasingly 
        competitive global marketplace.\2\
    \2\ U.S. Senate, Committee on Governmental Affairs, Permanent 
Subcommittee on Investigations. Abuses in Federal Student Aid Programs 
(Senate-R-102-58). 1991. http://www.eric.ed.gov

  high debt and loan defaults: consequences for students and taxpayers
    Not all student loan debt is harmful. Federal student loans fulfill 
their purpose when they help more students get quality education and 
training, and leave them in a position to pay off their loans, support 
themselves and their families, and contribute to our society and 
economy, whether as teachers, truck drivers, or technology 
    While student loans can help students acquire valuable skills and 
credentials, they do carry real risks for all borrowers. High student 
loan debt, and even low debt when paired with low earnings, can leave 
students with unmanageable payments that can jeopardize their families' 
basic needs and lead to delinquency and default. Leaving college with 
burdensome debt also prevents or delays borrowers from taking important 
steps that benefit not only individuals but our society and economy as 
a whole. These include starting a business, buying a home, marrying, 
having children, saving for retirement, and saving for their own 
children's education.
    While Federal student loans provide a variety of tools and consumer 
protections that can help informed borrowers manage their debt and 
avoid default, many borrowers are unaware of their options or lack 
access to unbiased advice. Borrowers with private student loans can 
face much higher costs and have far fewer options when their payments 
become unmanageable. They are really at the mercy of their lender. Even 
if a student loan borrower faces severe financial distress and 
qualifies for bankruptcy, it is nearly impossible to discharge student 
loans under current bankruptcy law.
      student debt at for-profit colleges: most students borrow, 
                          and they borrow more
    Student loan debt is rising in all sectors, but the for-profit 
sector stands out with by far the highest share of students who borrow 
and the highest average debt levels. The recent Government 
Accountability Office (GAO) investigation found that colleges misled, 
pressured, and outright lied to students in order to get them to enroll 
in for-profit schools and to borrow to cover the costs. \3\ The GAO 
uncovered some for-profit colleges obscuring the true cost of 
attendance and understating how much borrowing would be required. It 
also revealed schools significantly overstating likely earnings and job 
prospects to help justify high borrowing, making students believe that 
their debt will be easy to pay off. And it showed colleges using 
aggressive sales tactics to get students to sign a contract before they 
see a financial aid package. As this committee heard at the June 
hearing as well, these tactics are well-documented.\4\ Some colleges 
push students to take out risky private loans as well as Federal loans 
without making the differences or costs clear.\5\ Several large for-
profit college companies even make private loans directly to their own 
students, knowing that the majority of these borrowers will not be able 
to repay (I discuss private loans and this practice in more detail 
    \3\ U.S. Government Accountability Office. For-Profit Colleges: 
Undercover Testing Finds Colleges Encouraged Fraud and Engaged in 
Deceptive and Questionable Marketing Practices (GAO-10-948T). August 4, 
2010. http://www.gao.gov/products/GAO-10-948T.
    \4\ See also testimony of Margaret Reiter before the Senate Health, 
Education, Labor, and Pensions Committee, Hearing on Waste, Fraud and 
Abuse in the For-Profit Education Sector, June 24, 2010, http://
    \5\ See also testimony of Valisha Cooks before the House Committee 
on the Judiciary Subcommittee on Commercial and Administrative Law, 
Hearing on H.R. 5043, the ``Private Student Loan Bankruptcy Fairness 
Act of 2010.'' April 22, 2010. http://judiciary.house.gov/hearings/pdf/
Cooks100422.pdf. Andrews, Wyatt. ``Student Complaints Rising at For-
Profit Schools.'' CBS Evening News. September 5, 2010.
    Any way you slice it, students at for profit-colleges are much more 
likely to have debt than students at other types of schools, because 
nearly every student who attends a for-profit school gets signed up for 
Federal and/or private student loans.

     In 2007-8, almost all (97 percent) undergraduates 
attending for-profit 2-year colleges took out student loans, while only 
13 percent of undergraduates attending public 2-year colleges took out 
student loans.\6\
    \6\ Calculations by The Institute for College Access & Success on 
data from U.S. Department of Education, NCES, NPSAS, 2007-8, http://
     In 2007-8, 95 percent of undergraduates attending for-
profit 4-year colleges took out student loans, while only 47 percent of 
undergraduates attending public 4-year colleges took out student 
    \7\ Ibid.

    Looking just at those who actually receive an associate's or 
bachelor's degree, nearly everyone who graduates from a for-profit 
college has loans, compared to significantly lower shares of graduates 
of other types of schools. And after graduation, degree holders from 
for-profits have a lot more debt to pay off, on average, than those who 
graduated with debt from other types of schools.

     At for-profit institutions, 98 percent of associate's 
degree recipients had loans in 2007-8, and their average debt was 
$19,700. At public and non-profit colleges, 38 percent of associate's 
degree recipients had loans, and their average debt was $10,950.\8\
    \8\ Ibid.
     At for-profit institutions, 96 percent of bachelor's 
degree recipients had student loans in 2007-8, and their average debt 
was $33,050. At public and non-profit colleges, 65 percent of 
bachelor's degree recipients had loans, and their average debt was 
$22,750. \9\
    \9\ Ibid.
     Among bachelor's degree recipients, those who attended 
for-profit colleges are much more likely to have very high debt. Almost 
one in four (24 percent) of all 2008 graduates from for-profit 4-year 
colleges owed at least $40,000 in student loans, compared to just 6 
percent of graduates from public 4-year colleges and 15 percent from 
private nonprofit 4-year colleges. The average debt for all 4-year 
college graduates with loans, from all sectors, was $23,200.\10\
    \10\ The Institute for College Access & Success. High Hopes, Big 
Debts (Class of 2008). May 2010. http://ticas.org/files/pub/

    In addition to the largest share of students with overall debt, 
for-profit colleges have the largest proportion of students taking out 
private student loans, and the largest increase in this risky type of 

     In 2007-8, 42 percent of all proprietary school students--
not just degree completers--had private loans in 2007-8, up from 12 
percent in 2003-4. At private non-profit 4-year schools, which have the 
second highest rate, 25 percent of students had private loans in 2007-
8, up from 11 percent in 2003-4. At public colleges, private loan rates 
were even lower: 14 percent at public 4-year and 4 percent at public 2-
year colleges in 2007-8.\11\
    \11\ The Institute for College Access & Success. Private Loans 
Facts and Trends. August 2009. http://projectonstudentdebt.org/files/
pub/private_loan_facts_trends_09.pdf. Note that ``private loans'' here 
refers to bank and lender-originated loans, not all non-Federal loans.

    The majority of students who complete a degree or certificate at a 
for-profit college have private loans.

     In 2007-8, 60 percent of students who completed an 
associate's degree at a for-profit college had private loans, four 
times the rate for associate's degree completers at community colleges 
(15 percent).
     For bachelor's degree completers, 64 percent graduated 
from for-profit colleges with private loans, compared to 28 percent at 
public 4-year colleges and 42 percent at private nonprofit 4-year 
     Half (51 percent) of those who completed a certificate at 
for-profit colleges had private loans, compared to 12 percent at 
community colleges.\12\
    \12\ Baum, Sandy and Steele, P. How Much are College Students 
Borrowing? The College Board. August 2009. http://
     low-income and underrepresented minority students borrow more 
                         at for-profit colleges
    Most low-income and underrepresented minority undergraduates attend 
either public or private nonprofit schools, with the greatest 
concentration at community colleges.\13\ Among all African-American and 
Hispanic undergraduates, nearly 8 out of 10 (78 percent) attended 
public or private nonprofit schools in 2007-8, including 42 percent at 
community colleges, while 15 percent attended for-profit colleges.\14\ 
The proportions are similar for low-income students and adult students 
working full-time: 80 percent of students with incomes below the median 
attend public and private nonprofit colleges, and 81 percent of 
students age 24 and older who are working full-time attend public and 
private nonprofit colleges.\15\
    \13\ Unless otherwise specified ``low-income'' refers to students 
whose family income is less than the median income of undergraduates. 
Family income includes the student's income for all students plus 
parents' income for dependent students and a spouse's income for 
married independent students. NPSAS reports the median income for 
dependent undergraduate students was $66,637, and the median income for 
independent undergraduate students was $26,099. Throughout this 
document ``underrepresented minorities'' refers to African-American and 
Latino students.
    \14\ These percentages do not sum to 100 because some students 
attended more than one college during the 2007-8 year.
    \15\ Calculations by The Institute for College Access & Success on 
data from U.S. Department of Education, NCES, NPSAS, 2007-8, http://
    However, while most low-income and underrepresented minority 
students attend public colleges, these students are also heavily 
recruited by many for-profit colleges, where they enroll 
disproportionately and in growing numbers.

     African-American and Hispanic students make up 28 percent 
of all undergraduates, but they represent nearly half (46 percent) of 
undergraduates in the for-profit sector.\16\
    \16\ Ibid.
     Low-income students, many of whom are also students of 
color, are also over-represented at for-profits; 64 percent of students 
attending for-profit college have incomes below the median for all 
    \17\ Ibid.

    The majority of students who are low-income, underrepresented 
minorities, and adults working full-time do not take out student loans 
to pay for college. \18\ However, those who attend for-profit colleges 
are much more likely to borrow--and borrow more--than their 
counterparts at other types of schools. The data clearly show that 
across levels of income and categories of race/ethnicity, for-profit 
college students borrow more than those who attend elsewhere.
    \18\ Ibid.

     At for-profit colleges, low-income and minority 
undergraduates are about three times more likely to borrow Federal 
student loans--and four times more likely to borrow private student 
loans--as their counterparts at public or private nonprofit 
    \19\ Ibid.
     At for-profit colleges, adults working full-time are 
almost five times more likely to borrow Federal student loans--and over 
six times more likely to borrow private student loans--than their 
counterparts at public or private nonprofit colleges.\20\
    \20\  Ibid.
     Pell Grant recipients who graduate from 4-year colleges 
are more likely to have high debt if they attended a for-profit 
college. Among graduating seniors in 2008, 23 percent of Pell Grant 
recipients from for-profit colleges carried at least $40,000 in student 
loans, compared to 14 percent at all other colleges. Most Pell Grant 
recipients have family incomes below $40,000.\21\
    \21\ High Hopes, Big Debts (Class of 2008), May 2010.

         consequences of not completing are worse for students 
                         at for-profit colleges
    Regardless of what kind of college you attend, success is what you 
hope for, but it is never guaranteed. Completion rates vary 
considerably both across and within different types of schools.\22\ 
Some schools offer more support than others to help students succeed, 
and students can face all kinds of obstacles to completing their course 
of study, from financial challenges to family health crises. Graduation 
rates are much lower at for-profit colleges than at other types of 
colleges for students seeking bachelor's degrees, as documented by a 
report issued last week by the College Board.
    \22\ See, for example: Haycock, Kati, Lynch, M., and Engle, J. 
Opportunity Adrift: Our Flagship Universities are Straying from their 
Public Mission. The Education Trust. January 2010. http://
Opportunity%20Adrift%28%29.pdf. Hess, Frederick, et al. Diplomas and 
Dropouts: Which Colleges Actually Graduate their 
Students (and Which Don't). American Enterprise Institute. June 2009. 
college_dropout_factories.php?page=all. Miller, Ben, and Ly, P. 
``College Dropout Factories.'' Washington Monthly. August 23, 2010. 

     The 6-year graduation rate for first-time, full-time 
bachelor's degree students is just 22 percent at for-profit 4-year 
colleges, less than half the rate at public 4-year colleges (55 
percent) and only a third of the rate at private nonprofit 4-year 
colleges (65 percent).
     This rate is lowest (16 percent) for African-American 
students at for-profit colleges, much lower than for African-American 
students at public 4-year colleges (39 percent) or private nonprofit 
colleges (45 percent). For-profit colleges also have the widest gap 
between bachelor's degree completion rates for African-American 
students and for White and Asian students.\23\
    \23\ Baum, Sandy, Ma, J., and Payea, K. Education Pays: The 
Benefits of Higher Education for Individuals and Society. The College 
Board. September 2010. http://trends.collegeboard.org/files/

    Currently, the graduation rates reported by the U.S. Department of 
Education only capture full-time students who complete a degree or 
certificate from the college where they first enrolled. By excluding 
part-time, returning, and transfer students, as well as in many cases 
students who do not start college in the fall semester, these rates 
paint an imperfect picture of completions. In response to widespread 
concern about the need for more meaningful graduation figures for 2-
year schools in particular, the Higher Education Opportunity Act of 
2008 established a task force to study the issue and develop 
recommendations for alternative measures.\24\ But for now, the only 
graduation rates available for students completing associate degrees or 
certificates have the significant limitations described above. These 
data indicate that for first-time, full-time students, completion rates 
for associate degrees and certificates combined are higher at for-
profit 2-year colleges (60 percent) than at public 2-year colleges (22 
percent). Notably, the vast majority of these completions at for-profit 
colleges are short-term certificate programs, while most community 
college completions are 2-year associate's degrees.\25\
    \24\ ``U.S. Education Secretary Appoints Members and Chair of New 
Committee on Measures of Student Success.'' U.S. Department of 
Education. June 2, 2010 Available at http://www.ed.
    \25\ Baum, Ma, and Payea, 2010.
    Regardless of programs of study, the consequences of non-completion 
are far worse for students who drop out of for-profit schools. If you 
borrowed to help pay for school and did not complete your program of 
study, the more you borrowed, the worse off you are. You do not have a 
degree, certificate, or better job to show for your time in school, but 
you still have to pay your loans. That puts non-completers at for-
profit colleges in the worst position, as they are the most likely to 
borrow, and borrow larger amounts than students at other types of 
colleges. Even at 2-year schools, nearly every for-profit college 
student takes out loans. A full 97 percent of students enrolled at for-
profit 2-year colleges have loans, compared to just 13 percent of 
students at public 2-year colleges.\26\
    \26\ Calculations by The Institute for College Access & Success on 
data from U.S. Department of Education, NCES, NPSAS, 2007-8, http://
    When students drop out of a quality, affordable program, there are 
other costs, as well. They have foregone earnings and time without the 
benefit of a recognized credential. There are also social costs, 
because in addition to being more likely to have a job and higher 
taxable earnings, college graduates are also more likely to vote, to be 
healthier, and to pass on the value of education to their children.\27\
    \27\ Baum, Sandy, Ma, J., and Payea, K. Education Pays: The 
Benefits of Higher Education for Individuals and Society. The College 
Board. September 2010. http://trends.collegeboard.org/files/
    In general, students are taking a much bigger risk by going to a 
costly for-profit school than to a community college. If you do not or 
cannot finish a program of study at a for-profit school, the odds are 
very high that you will be left with a lot of debt that will be 
difficult to pay off, since nearly all students at for-profits borrow 
to cover the high costs, and for more than 40 percent that borrowing 
includes risky private student loans.\28\ But if you go to a community 
college and find that you are not suited to the field you were 
pursuing, or cannot keep up with the coursework because of a family 
illness or job loss, you will probably have very little debt, if any, 
to pay off. If you did borrow to attend community college, in most 
cases you will have only Federal student loans, which give borrowers 
many more options for managing their debt and staying out of default.
    \28\ Private Loans Facts and Trends, 2009.
        debt for worthless degrees--when completion doesn't pay
    While college completion, in general, leaves you better off, a 
worthless or grossly overpriced credential can be worse than no 
credential--especially if you took out student loans. That is what 
happened to Yasmine Issa, a single mother who testified before this 
committee in June.\29\ She completed a for-profit program that 
purported to prepare her for work as a sonographer, only to find out 
$32,000 later--including $15,000 in loans--that the program did not 
actually qualify her to sit for the licensing exam or work in the 
field. While the school's aggressive recruiters went out of their way 
to tell her that the school was accredited, its sonography program was 
un-accredited and effectively worthless. She found out too late that 
the local community college offered an accredited sonography program 
for about half the cost.
    \29\ Testimony of Yasmine Issa before the Senate Health, Education, 
Labor, and Pensions Committee, Hearing on Waste, Fraud and Abuse in the 
For-Profit Education Sector, June 24, 2010, http://help.senate.gov/imo/
    Unless you work in higher education policy or watched the June 
hearing, it would never occur to you that an accredited school could 
offer an unaccredited program. This is just one way that hard-working 
students who follow the rules--along with taxpayers--are getting ripped 
off by some for-profit schools and left with loans they cannot repay.
    Another unfortunate student, Michelle Zuver, shared her story at a 
forum Senator Durbin held in Chicago on August 31, 2010. Michelle 
earned a bachelor's degree in criminal justice from a for-profit 
college, but her degree is not recognized by any law enforcement 
agencies in her area, although she went to school specifically to 
qualify for that profession. A college recruiter pressured her to 
enroll and told her the program would cost $52,000. She ended up 
borrowing $86,000, mostly in private student loans, for a degree she 
cannot use. Her credits will not even transfer to a properly accredited 
program in her field.
    All 15 of the colleges investigated in the GAO's recent report 
received at least 89 percent of their revenues from Federal student 
grants and loans, and all 15 engaged in at least some deceptive 
practices designed to get students to borrow more than they planned or 
realized, and several committed outright fraud. In one striking 
example, a beauty school recruiter told a prospective student that once 
he completed their program, he would earn $150,000-$250,00 a year as a 
barber. The GAO report notes that 90 percent of barbers actually earn 
less than $43,000 a year.\30\
    \30\ GAO, 2010.
   higher default rates at for-profit colleges: not just demographics
    Students who attend for-profit colleges face much higher odds of 
defaulting on a Federal student loan than those who attend other types 
of schools. As a sector, for-profit colleges have the highest default 
rate for Federal student loans.\31\
    \31\ Unless otherwise noted, default rates and shares of defaulters 
reflect only those who default within 2 years of first entering 
repayment. Federal student loan default data are not available by 
borrowers' income or race/ethnicity.

     Nearly half of all Federal student loan borrowers who 
entered repayment in 2008 and defaulted by 2010 attended for-profit 
schools (43 percent), even though only about 10 percent of students 
attended these schools.\32\
    \32\  Calculations by The Institute for College Access & Success on 
data from U.S. Department of Education, ``Official Cohort Default Rates 
for Schools,'' http://www2.ed.gov/offices/OSFAP/defaultmanagement/
cdr.html, accessed September 13, 2010 and U.S. Department of Education, 
National Center for Education Statistics (NCES), Integrated 
Postsecondary Education Data System (IPEDS), http://nces.ed.gov.ipeds. 
Default figures include borrowers who entered repayment in Federal 
fiscal year 2008 and had defaulted by the end of the 2009 Federal 
fiscal year.
     The average 2-year default rate for Federal loan borrowers 
at for-profit colleges is nearly double the average rate at public 
colleges, and it is triple the rate at private non-profit colleges.\33\
    \33\ U.S. Department of Education. ``Student Loan Default Rates 
Increase.'' September 13, 2010. http://www.ed.gov/news/press-releases/

    While student demographics play a role, the evidence is clear that 
demographics are by no means the sole explanation for the sector's high 
default rates. Schools play an important role as well.

     The Career College Association's own study concludes that 
even after accounting for differences in student demographics, students 
attending for-profit colleges are twice as likely to default as 
students at other types of colleges. \34\
    \34\ Charles River Associates for the Career College Association. 
``Report on Gainful Employment,'' April, 2010. http://

     Lenders have noted that attending a for-profit school is a 
risk factor for default.\35\ In its private student loan business, 
Sallie Mae has reported that it expects to see a 30 percent difference 
in default rates for a borrower with a FICO score greater than 700, 
``depending on the school that borrower attends.'' \36\
    \35\ Student Lending Analytics. ``Sallie Mae To Discontinue Career 
Training Loan Program.'' January 15, 2010. http://
    \36\ Student Lending Analytics. ``Highlights of Sallie Mae Investor 
Meeting at Credit Suisse Conference.'' February 12, 2010. http://
     For-profit schools regularly tell investors that they can 
lower their default rates. For example, on a recent earnings call, 
Corinthian Colleges stated, ``[W]e are aggressively attacking cohort 
default rates, and expect to see measurable results.'' \37\ ITT 
Educational Services stated on an earnings call, ``default management 
is a very important part of what we'll be doing and focusing on in 
2010.'' \38\
    \37\ Call transcript available online at: http://seekingalpha.com/
    \38\ Call transcript available online at: http://seekingalpha.com/
     A recent report by Education Sector documents the role 
schools can play in lowering default rates: ``the experience of the 
Texas HBCUs, along with a new statistical analysis of cohort default 
rates, suggests that dangerously high default rates for institutions 
that serve at-risk students are not inevitable . . . Their [the Texas 
HBCUs] success is not only applicable to other similar institutions, 
but to all schools that serve those students most at risk for default 
and who are committed to helping them succeed.'' \39\
    \39\ Dillon, Erin and Smiles, Robert. ``Lowering Student Loan 
Default Rates: What One Consortium of Historically Black Institutions 
Did to Succeed.'' Education Sector. February 2010. http://

    Many for-profit schools have kept Federal student loan default 
rates down during the period when cohort default rates are measured and 
could affect schools' eligibility for Federal student aid.\40\ Last 
December, in preparation for the shift from measuring a school's cohort 
default rate based on the first 2 years of repayment to the first 3 
years of repayment, the U.S. Department of Education published data 
showing what school default rates would look like based on a 3-year 
window. The default rates at 183 for-profit institutions were at least 
15 percentage points higher for a 3-year window compared to a 2-year 
window. This suggests that the colleges were aggressive about keeping 
defaults down during, but not after, the period in which they were 
being tracked as a measure of institutional accountability. These 183 
for-profit institutions collectively enrolled 9 percent of all students 
attending for-profit institutions. By comparison, only 20 schools in 
all other sectors saw a similar increase in their default rates when 
the window was extended from 2 to 3 years, and these 20 schools 
enrolled one-tenth of 1 percent of students in all other sectors.\41\
    \40\ ITT Educational Services, Inc. Q4 2009 Earnings Call 
Transcript. January 21, 2010. http://seekingalpha.com/article/183751-
    \41\ Calculations by The Institute for College Access & Success on 
data from the U.S. Department of Education, ``Trial Three-Year Cohort 
Default Rates FY 2007.'' Excludes institutions with 50 or fewer 
borrowers who entered repayment in Federal fiscal year 2007.
    Clearly, for-profit colleges are not powerless in the face of 
student demographics when it comes to managing default rates, and they 
are responsive to changes in policy that have implications for their 
bottom line.
                  what happens to students who default
    Defaulting on a Federal student loan has severe and long-lasting 
consequences.\42\ It wrecks your credit rating, making it difficult to 
rent an apartment or buy a car, and increasingly, to get a job. You 
will likely be hounded by collectors, and your debt will increase 
significantly because of default and collection fees. You cannot get 
Federal grants or loans to return to school, and the debt can follow 
you until you die. There is no statute of limitations, and the 
government can garnish your wages, seize your tax refunds, and 
eventually take a slice of your Social Security check. Even if you are 
in such severe financial distress that you meet the requirements for 
declaring bankruptcy, it is nearly impossible to discharge student 
    \42\ U.S. Department of Education. Collections Guide to Defaulted 
Student Loans. Accessed September 26, 2010 at http://www2.ed.gov/
offices/OSFAP/DCS/index.html. See also, Student Loan Borrower 
Assistance, National Consumer Law Center. Default and Delinquency. 
Accessed on September 26, 2010 at http://
    Private student loans can follow you not only to the grave but also 
beyond. Unlike Federal loans, most private loans have co-signers and 
remain collectible even if the borrower dies.\43\ Since 2005, private 
student loans have been treated just as harshly as Federal student 
loans in bankruptcy. While similar kinds of private, profit-driven 
consumer debt are discharged when you are approved for bankruptcy, 
private student loans are not. Ironically, it is easier to get relief 
from credit cards and gambling debt than from private student loan 
    \43\ National Consumer Law Center's Student Loan Borrower 
Assistance Web site: Disability and Death section. Available at http://
death/. See also Pilon, Mary. ``When Student Loans Live on After 
Death.'' Wall St. Journal. August 7, 2010. http://online.wsj.com/
   private student loans: a particular problem at for-profit schools
    As noted above, in addition to high overall student debt, the for-
profit college sector has the largest share of students with private 
student loans, which carry serious financial risks for borrowers. While 
private student loans are no more a form of financial aid than a credit 
card is when used to pay for tuition or books, they are sometimes 
included in financial aid packages, and some for-profit colleges even 
offer their own private loans directly to students.

     The odds of having a private loan are highest for students 
at for-profit colleges, where 42 percent used a private loan in 2007-8, 
the most recent year for which data are available. Next come students 
at private nonprofit 4-year schools at 25 percent, public 4-year 
schools at 14 percent, and community colleges at 4 percent.
     Due at least in part to their over-representation at for-
profit colleges, 17 percent of African-American undergraduates took out 
a private student loan in 2007-8, making them the most likely to borrow 
these risky products among all racial and ethnic groups. Their rate of 
private loan borrowing also rose the most steeply, quadrupling from 
2003-4 to 2007-8.\44\
    \44\ Private Loans: Facts and Trends, August 2009.

    Like credit cards, private student loans typically have uncapped, 
variable interest rates that are highest for those who can least afford 
them. Lenders typically reserve the right to raise interest rates and 
charge high fees for myriad reasons and to declare borrowers in default 
for something as simple as being a day late on a payment. These loans 
also lack the important deferment options, affordable repayment plans, 
loan forgiveness programs, and cancellation rights in cases of death, 
severe disability, and school closure that Federal student loans 
provide. But, as noted above, unlike credit card debt and other 
consumer loans, private student loans are virtually impossible for 
borrowers to discharge in bankruptcy.
    Some for-profit colleges are aggressively expanding their own 
private lending to students who are at very high risk of default.\45\ 
Pushing these students to take on private loan debt they cannot repay 
can be devastating for the students in the long run, but quite 
profitable for the school.
    \45\ Pope, Justin. ``For-Profit Colleges' Increased Lending Prompts 
Concerns.'' Associated Press. August 15, 2009. http://www.usatoday.com/

     For example, Corinthian Colleges, Inc. made $150 million 
of such loans in the fiscal year that ended this June, as well as $120 
million the year before. They fully expect a shocking 56 to 58 percent 
of the borrowers to default.\46\ Yet they consider these loans good 
investments because they will increase enrollment and with it a 
profitable flow of Federal grant and loan dollars that outweighs the 
planned write-offs. Corinthian owns more than 100 colleges across the 
United States.\47\ Other large for-profit college companies, such as 
ITT and Career Education Corporation, are also lending to their own 
students and expecting very high defaults.\48\
    \46\ ``Corinthian Colleges, Inc. F4Q09 (Qtr End 06/30/09) Earnings 
Call Transcript'' http://seekingalpha.com/article/158257-corinthian-
transcript?source=bnet; and ``Corinthian Colleges, Inc. F2Q10 (Qtr End 
12/31/09) Earnings Call Transcript'' http://seekingalpha.com/article/
    \47\ From Corinthian College's Web site as of September 22, 2010: 
    \48\ ``Career Education Corporation Q1 2009 Earnings Call 
Transcript'' http://seekingalpha
transcript?page=-1. Wall Street Journal, ``For-Profit Schools Face 
Detention Not Expulsion,'' Aug. 20, 2010.
     In addition to using these loans to gain access to 
profitable amounts of Federal student aid, for-profit colleges can 
immediately count these private loans towards the 10 percent of 
revenues these schools are required to get from sources other than 
Federal student aid. From July 2008 through June 2012, the Higher 
Education Opportunity Act (HEOA) lets for-profit colleges count the net 
present value of their institutional loans as non-Federal revenue in 
the year these loans are made, rather than counting them as revenue if 
and when they are actually repaid by the students.\49\
    \49\ ``For loans made to students by the institution from July 1, 
2008, but before July 1, 2012, the net present value of the loans made 
during a fiscal year if the loans are evidenced by promissory notes, 
issued at intervals related to the institution's enrollment periods, 
and are subject to regular loan repayments and collections. For loans 
made on or after July 1, 2012, only the amount of loan repayments the 
institution receives during a fiscal year, excluding repayment on any 
loans for which the institution previously used the net present value 
in its 90/10 calculation.'' From U.S. Department of Education, ``Dear 
Colleague'' letter summarizing the Higher Education Opportunity Act 
(DCL ID: GEN-08-12 FP-08-10). December 2010. http://www.

    These are attempts to get around market corrections that 
appropriately reduced access to expensive, subprime private loans for 
very high risk borrowers, and to justify prices for for-profit 
education and training programs that may exceed Federal aid limits. In 
2008, Sallie Mae stopped most of its lending to these types of schools 
because of high default rates and other questionable practices. But 
whether the source is their own school or an outside lender, the 
students who are pushed into private loans they cannot afford are stuck 
with them even in bankruptcy, while the lenders are free to move on.
                     costs and risks for taxpayers
    Because the for-profit college industry relies on federally funded 
grants and taxpayer-backed loans for the bulk of its revenue, 
taxpayers, as well as students, have a lot at stake in the quality and 
cost of for-profit education. While for-profit schools have a fiduciary 
responsibility to act in the best interest of their shareholders and 
generate profits, Congress has a fiduciary responsibility to act in the 
best interest of taxpayers.
    This committee's June 2010 report, Emerging Risk, outlined just how 
heavily taxpayers are subsidizing the for-profit college industry.\50\ 
While for-profit colleges may get up to 90 percent of their revenue 
from Federal student aid (title IV grants and loans), that 
extraordinarily high percentage currently excludes some Federal student 
loans, and it does not include other government revenue sources, such 
as GI bill benefits or Federal job training funds. Here are just a few 
examples of how much taxpayers are spending on for-profit colleges.
    \50\ U.S. Senate Health, Education, Labor, and Pensions Committee. 
``Emerging Risk?: An Overview of growth, Spending, Student Debt and 
Unanswered Questions in For-Profit Higher Education.'' U.S. Senate. 
June 24, 2010. http://harkin.senate.gov/documents/pdf/4c23515814

     One in four Federal Pell grant dollars (more than $7.3 
billion) went to students attending for-profit schools in 2009-10, 
almost double the share a decade earlier.\51\
    \51\ Calculations by TICAS on data from U.S. Department of 
Education, Federal Student Aid Data Center, Programmatic Volume 
Reports. http://federalstudentaid.ed.gov/datacenter/programmatic.html, 
accessed July 22, 2010; U.S. Department of Education, Office of 
Postsecondary Education (OPE). ``Pell End of Year Report, 1999-2000.'' 
http://www2.ed.gov/finaid/prof/resources/data/pell-data.html, accessed 
July 28, 2010.
     Nearly one in four Federal student loan dollars (at least 
$20.3 billion) went to students at for-profit schools in 2008-9 (the 
latest year of available data), more than double the share in 1999-
2000.\52\ In the coming year, for-profit colleges are expected to 
absorb an estimated $30 billion in Federal student loans.\53\
    \52\ Calculations by The Institute for College Access & Success on 
data from U.S. Department of Education, Federal Student Aid Data 
Center, Programmatic Volume Reports. http://federalstudentaid.ed.gov/
datacenter/programmatic.html, accessed September 27, 2010.
    \53\ Calculations by The Institute for College Access & Success on 
data from the U.S. Department of Education. ``Fiscal Year 2011 Budget 
Request: STUDENT LOANS OVERVIEW.'' http://www2.ed.gov/about/overview/
budget/budget11/justifications/t-loansoverview.pdf, accessed June 22, 
     Since August 2009, taxpayers have spent $618 million on 
tuition and fees at for-profit colleges through the post-9/11 GI bill. 
That amounts to more than a third (35 percent) of taxpayer spending in 
that period on veterans' tuition and fees.\54\
    \54\ Golden, Dan. ``Veterans Failing Shows Hazards of For-Profit 
Schools in GI Bill.'' Bloomberg News. September 23, 2010. http://
     In fiscal year 2010, an estimated $230 million in tuition 
assistance for active-duty troops went to for-profit, online 
    \55\ Reed. Charlie. ``DOD to tighten scrutiny of for-profit, online 
colleges.'' Stars and Stripes. September 24, 2010. http://

    The best available estimate for the average, undiscounted cost of 
tuition and fees for all for-profit colleges in 2009-10 is nearly 
$14,200, which is more than twice the average undiscounted cost for in-
State students at public 4-year colleges, and more than five times the 
cost at public 2-year colleges.\56\ For-profit colleges, which have an 
obligation to maximize profits for shareholders, can set their prices 
to generate the maximum possible revenue from Federal student loans, as 
well as other Federal and State Government sources.
    \56\ The College Board. Trends in College Pricing 2009. http://
1_1_published_prices_by_sector.html?expandable=0. See also http://
     Online colleges that market heavily to members of the 
military typically price their course credits at the maximum amount 
covered by GI benefits, $250, which is five times more than the typical 
cost of community college credits offered on military bases, according 
to a Bloomberg News analysis.\57\
    \57\ Golden, Dan. ``Marine Can't Recall His Lessons at For-Profit 
College.'' Bloomberg. December 15, 2009. http://www.bloomberg.com/apps/
     Some State grants can be used to attend for-profit 
colleges. For example, California's Cal Grant program made some awards 
of more than $15,000 to students at for-profit colleges in 2007-8, 
including colleges that the California Attorney General found in 2005 
to have falsified job placement and salary data for graduates. This is 
roughly 10 times the value of a typical Cal Grant received by a 
community college student.\58\
    \58\ California Student Aid Commission, ``Cal Grant Statistics, 
Academic Year 2007-8.'' http://www.csac.ca.gov/pubs/forms/grnt_frm/07-
08PreliminaryGrantStatistics.pdf. See also, California Office of the 
Attorney General, July 31, 2007, ``Brown Reaches Multi-Million 
Settlement with Corinthian Vocational School.'' http://ag.ca.gov/

    Even after taking substantial State subsidies for public colleges 
into account, taxpayers and students combined can still end up paying 
less for career education programs at public colleges than at for-
profit colleges. This is what the Florida Office of Program Policy 
Analysis and Government Accountability (OPPAGA) found earlier this 
year, when it compared five career education programs offered by both 
public and for-profit colleges in the State.\59\
    \59\ Florida Office of Program Policy Analysis and Government 
Accountability (OPPAGA), Public Career Education Programs Differ From 
Private Programs on Their Admission Requirements, Costs, Financial Aid 
Availability, and Student Outcomes, January 2010. Report 10-18. http://

     Three out of the five programs studied cost thousands of 
dollars less at public colleges than at for-profit colleges after 
combining the student and State contributions. These programs were 
$2,250 to nearly $5,100 cheaper at public colleges. The two programs 
that cost less at for-profit colleges were cheaper by much smaller 
amounts: $46 and $837.
     One for-profit program--massage therapy--had a per-student 
cost more than double the public college program's cost, along with 
fewer completions and a lower pass rate on the licensure exam.
     The public programs also had much higher rates of 
accreditation and much higher pass rates on licensure and certification 
exams. For example, 95 percent of the public phlebotomy programs were 
accredited, compared to 26 percent of the for-profit programs.
                         deja vu all over again
    Sadly, this is not the first time that policymakers have had to 
raise concerns about these kinds of problems in the for-profit college 
sector. Following the creation of the GI bill in 1944, thousands of 
for-profit colleges sprung up virtually overnight to enroll 
veterans.\60\ In response to well-founded concerns about waste, fraud 
and abuse, Congress established an important market mechanism for 
veteran education programs. It capped the percentage of a program's 
students that could receive veteran benefits at 85 percent. This ``85-
15 Rule'' is intended to ensure that at least 15 percent of a program's 
students are willing to pay the sticker price without the Federal 
subsidy. \61\
    \60\ Altschuler, Glenn C. and Stuart M. Blumin. The G.I. Bill: A 
New Deal for Veterans. Oxford University Press. 2009.
    \61\ Decision by the U.S. Supreme Court: 435 U.S. 213, 98 S.Ct. 
1024, 55 L.Ed.2d 225, Max CLELAND, Administrator of the Veterans 
Administration, et al. v. NATIONAL COLLEGE OF BUSINESS, No. 77-716. 
March 20, 1978.
    In 1972, amendments to the Higher Education Act allowed for-profit 
schools to participate in the Federal title IV student financial 
assistance programs for the first time. Problems arose almost 
immediately. Throughout the next two decades, there were congressional 
hearings, investigations and legislative attempts to uncover and thwart 
deceptive and fraudulent practices in the proprietary sector. The most 
notable investigation came in 1990, when the Senate Permanent 
Subcommittee on Investigations of the Committee on Governmental Affair, 
led by Senator Sam Nunn, documented a wide range of pervasive problems 
plaguing virtually every part of for-profit college administration and 
    \62\ The 1990 hearings culminated in Senate Report 102-58, Abuses 
in Federal Student Aid Programs, Report Made by the Permanent 
Subcommittee on Investigations of the Committee on Governmental 
Affairs, United States Senate, May 17, 1991.
    In response, Congress passed a series of reforms in 1992. These 
included establishing an 85-15 rule for title IV financial aid, modeled 
after the GI bill provision but focused on revenues rather than 
students. It required proprietary schools to get at least 15 percent of 
their revenues from sources other than title IV programs. A ``50 
percent Rule'' made schools ineligible for title IV funds if more than 
half their courses were provided through correspondence. Importantly, 
the 1992 reforms also banned incentive compensation for college 
recruiters and personnel.
    The results were clear. In less than 10 years, for-profit sector 
default rates fell from 29 percent in 1991 to 9 percent in 2000.\63\
    \63\ Calculations by The Institute for College Access & Success on 
U.S. Department of Education data on student loan defaults, for Federal 
Fiscal Years 1991 and 2000.
    However, it did not take long for the newly strengthened rules to 
get weakened under intense lobbying from the for-profit college 
industry. In 1998, Congress reduced the percentage of revenue that 
schools had to obtain from non-title IV sources from 15 percent to 10 
percent (changing the 85-15 rule to 90-10). This was just 1 year after 
a GAO report concluded that proprietary schools that relied more 
heavily on title IV funds tended to have poorer student outcomes: ``Our 
analysis showed that, on average, the higher a school's reliance on 
Title IV, the lower its students' completion and placement rates, and 
the higher its students' default rates.'' \64\ The rules continued to 
be watered down through the 2000s, including: \65\
    \64\ GAO. ``Proprietary Schools: Poorer Student Outcomes at Schools 
That Rely More on Federal Student Aid,'' GAO/HEHS-97-103 Proprietary 
Schools and Student Aid. June 1997.
    \65\ Congressional Research Service Report RL-33909. Institutional 
Eligibility for Participation in Title IV Student Aid Programs Under 
the Higher Education Act: Background and Reauthorization Issues, by 
Rebecca R. Skinner.

     2002--The Department of Education added ``safe harbors'' 
to the ban on incentive compensation which, in direct contradiction to 
the statute, allowed forms of incentive compensation. These loopholes 
directly contributed to the growth of high-pressure recruiting tactics 
at some for-profit colleges. \66\
    \66\ Testimony of David Hawkins, Director of Public Policy and 
Research, National Association for College Admission Counseling, before 
the Senate Health, Education, Labor, and Pensions Committee, Hearing on 
Marketing and Recruitment in For-Profit Education. August 4, 2010. 
     2005--The rule limiting distance courses to 50 percent of 
a college's total enrollment was gutted by eliminating the requirement 
that eligible telecommunications (i.e., online) courses be part of 
programs at least 1 year in length, opening doors to 100 percent online 
colleges. In the Internet age, this allowed colleges to double in size 
virtually overnight.
     2008--The Higher Education Opportunity Act (HEOA) 
substantially weakened the already weak 90-10 rule for title IV student 
aid. It allowed for-profit schools to immediately count institutional 
loans towards their 10 percent of non-Federal revenues, rather than 
counting them as they are repaid; allowed schools to count some title 
IV aid towards the 10 percent, rather than the 90 percent, side of the 
90-10 calculation; and eased penalties for proprietary institutions 
that fail to comply with the 90-10 rule.

    Unfortunately and predictably, weakened regulation and reduced 
oversight, combined with a large potential revenue stream of Federal 
dollars, have led once again to an environment where the incentives for 
less scrupulous for-profit colleges to game the system appear to exceed 
the risks. At the same time, the risks to students and taxpayers are 
much larger in scale and cost than ever before.
    The last time Congress cracked down on abuses at for-profit 
colleges, the sector was a shadow of the size it is today. In 1991--the 
point at which the Permanent Subcommittee on Investigations found 
proprietary colleges to be ``leaving hundreds of thousands of students 
with little or no training, no jobs, and significant debts that they 
cannot possibly repay''--there were fewer students enrolled in the 
entire for-profit sector than there are enrolled today in just the 
University of Phoenix. In 1991, the University of Phoenix enrolled just 
over 7,000 students. Last fall, it enrolled more than 475,000.\67\
    \67\ Calculations by TICAS on IPEDS for the years noted.
    In 1991, Ashford University did not exist. It was then a tiny 
nonprofit college in Iowa with a different name and fewer than 300 
students. In 2005, the year Congress eliminated the rule limiting aid 
to online schools, this tiny nonprofit college with fewer than 1,000 
students became Ashford University. By last year, just 4 years later, 
it was a publicly traded for-profit corporation with more than 46,000 
students--more than the University of Iowa or Iowa State, and more than 
all the colleges in Wyoming combined.\68\
    \68\ Ibid.
    The fact that for-profit schools are growing quickly is not 
inherently problematic, but the high stakes for both students and 
taxpayers suggest that the sector should be actively and carefully 
monitored. Our higher education and financial aid systems are very 
complicated, even for highly educated consumers. As David Hawkins of 
the National Association for College Admission Counseling (NACAC) 
testified before this committee in August, ``the information asymmetry 
between the employees in charge of recruiting and prospective students 
is immense. In an unregulated environment, the potential for 
misrepresentation and outright fraud is a clear and present threat, 
which can result in harm to students and, in the case of Federal aid 
and loans, to the taxpayer.'' \69\
    \69\  Testimony of David Hawkins, Director of Public Policy and 
Research, National Association for College Admission Counseling, before 
the Senate Health, Education, Labor, and Pensions Committee, Hearing on 
Marketing and Recruitment in For-Profit Education. August 4, 2010. 
    For example, an article in this June's issue of Good Housekeeping 
magazine offered a thoughtful but daunting list of 11 different kinds 
of research students should do if they are considering a for-profit 
college for career education--from checking with local public colleges 
to see if they offer similar programs at lower cost, to interviewing 
prospective employers, to figuring out the name of the school's parent 
company and, if it is publicly held, reading its most recent 10-K 
filing with the SEC.
    Missing from this already long list are any questions about 
program-level accreditation and licensing requirements, which, as this 
committee heard from Yasmine Issa in June, are arcane issues that can 
render even a completed credential completely useless. This level of 
sophisticated, defensive research and analysis is more than should be 
required of any consumer, and is particularly burdensome for the less-
educated consumers deliberately targeted by much of this industry. The 
ability to interpret corporate SEC filings and detailed knowledge of 
the different types of accreditation should not be required to avoid 
getting ripped off by a for-profit school.
    Thank you again for holding today's hearing and for the opportunity 
to testify today. I look forward to answering your questions.

    The Chairman. Thank you very much, all of you, for your 
testimony. We'll now begin a round of 5-minute questions.
    Ms. Asher, we'll start where you just left off. I read your 
testimony. You gave an example here about expanding their 
private lending to students. Some of these colleges, for-
profits, say they also loan money. You pointed out an example 
in your written testimony that Corinthian Colleges, Inc., made 
$150 million of such loans in the fiscal year that ended this 
June, as well as $120 million the year before.
    Now, most career colleges tout that as a good thing, that 
they're loaning money to students. Yet you say,

          ``They fully expect a shocking 56 to 58 percent of 
        the borrowers to default. Yet they consider these loans 
        good investments because they will increase enrollment 
        and with it a profitable flow of Federal grant and loan 
        dollars that outweighs the planned writeoffs.''

    Would you want to elaborate on that?
    Ms. Asher. Sure.
    The Chairman. Tell us what you mean by that?
    Ms. Asher. First of all, it's important to note that this 
information was provided by Corinthian to investors in public 
calls as well as in some SEC filings.
    What's interesting about this lending pattern is partly 
that it has expanded at Corinthian and some other schools like 
ITT Tech and Career Education Corporation as Sallie Mae and 
some other lenders withdrew from the subprime private student 
lending industry. Many of them were making subprime loans, 
expensive loans to students who probably couldn't afford them, 
during the credit boom that we also saw in the mortgage 
industry, and pulled out once the risks could no longer be 
offloaded onto third parties.
    Some schools stepped in to fill that gap because of the 
financial interest in their larger amount of financial aid from 
the Federal Government that students could bring in.
    The Chairman. I think what you're saying in your 
testimony--correct me if I'm wrong--is that they were willing 
to make those loans, write them off because students would 
default, knowing that if they're loaning $150, they may get 
$300 in Federal money coming in, which means they get a profit 
of 150 bucks.
    Ms. Asher. I suspect it's much more.
    The Chairman. Well, I'm just using that as an example. In 
other words, that's what you're saying, that they were willing 
to do that because it brings in more students.
    Ms. Asher. That's correct.
    The Chairman. Also, is it your observation that these 
schools basically first go after the lowest income students 
because they get the most Federal dollars?
    Ms. Asher. I would refer in part to my esteemed co-panelist 
here, but yes, it's clear that if you can make more money by 
capturing more Federal aid per student and convert that into 
profits, that's a very, very strong incentive for some of the 
abuses that these hearings have documented.
    The Chairman. Ms. Bittel, again I'm well aware of the risks 
that you've taken to come here and to testify. Rarely we get 
people that I call real profiles in courage. You are one of 
those. In a very tough job market, I know that you're risking 
your employment to be here.
    I've read your testimony thoroughly and of course I 
listened intently to your comments. I just want to read from 
your written testimony one thing and take a little bit of time 
to do this, just about a minute. You talked about a co-worker 
who came to you to verify employment. Someone had sent it in 
saying they were making $8,000 a year, but they went to 
salary.com, ``estimating average salary in that field in their 
ZIP code would be $25,000.'' They threw the one from the real 
person in the wastebasket and used the one from the salary.com.
    You said that you had taken this action to the supervisor, 
and no disciplinary action was taken, and you said,

          ``Much to the contrary, this same co-worker who 
        changed the student's salary data received EDMC's North 
        Star Award shortly thereafter. The intent of the award 
        is to exhibit to other employees that `this was a star 
        to follow'.''

    Are you saying that basically it was an encouragement to do 
    Ms. Bittel. That was the way I took it. It wasn't written 
down in a memo. They're far too smart for that. As you saw a 
minute ago, I'm not afraid to speak up, and when I thought I 
saw wrongdoing I went to my supervisor about it. I was outraged 
that such a thing could happen. I was assured that they would 
go to the head of the department and I anticipated seeing some 
sort of disciplinary action of some sort. But I saw those types 
of actions continue. And when the award was given, the legend 
of the North Star is that that is the star that the mariners 
followed for clear direction. That's the meaning of the award.
    What more could I take from that? I mean, no, it didn't 
come to me in a written policy, but I saw that person rewarded 
in many ways, and it to me was subliminally--it was put out 
there. Actions speak louder than words, and this is the way I 
took it to be.
    The Chairman. Thank you very much.
    My 5 minutes are up. We'll continue 5-minute rounds.
    Senator Burr.

                       Statement of Senator Burr

    Senator Burr. Thank you, Mr. Chairman. The only Republican 
in the room.
    Ms. Bittel, I thought that was very telling, the comment 
that you said, and I apologize for the other members that have 
other committees or hearings that they may find as important as 
this one. Quite honestly, I would rather see the panel a little 
more balanced than it is. But I think the Ranking Member stated 
it very well.
    Let me move to the letter that the chairman was so gracious 
to put in the record from EDMC. I take for granted, Mr. 
Chairman, that's the letter dated September 29?
    The Chairman. It's dated September 30.
    Senator Burr. Well, let me ask unanimous consent to enter 
into the record the letter you have from September 29 to 
yourself and to Chairman Enzi.
    [The material referred to may be found in Additional 
    Ms. Bittel, if what this letter states is correct you're 
currently on leave at your request. Is that right?
    Ms. Bittel. That is correct, sir.
    Senator Burr. Upon learning of the allegations, EDMC 
company policy, and consistent with company policy, conducted a 
full internal investigation, and part of that was to ask you 
for specific information. Is that correct?
    Ms. Bittel. That is correct, sir.
    Senator Burr. And this letter states that you refused to 
provide that information.
    Ms. Bittel. That's not entirely accurate, sir. When I--
first of all, clearly----
    Senator Burr. What part's not accurate?
    Ms. Bittel. That----
    Senator Burr. Did you supply the information they 
    Ms. Bittel. Please let me just explain, if you would, 
    Senator Burr. Well, I'm just asking, did you supply the 
    Ms. Bittel. I did supply information, yes, sir.
    Senator Burr [continuing]. That they requested for the 
internal investigation?
    Ms. Bittel. Yes, sir.
    Senator Burr. You supplied it?
    Ms. Bittel. I supplied--I went to them. I sat with them for 
more than an hour. I had talking notes that I had written. I 
spoke with the human resources director for quite some time and 
I allowed her to ask all questions. I answered all questions.
    Senator Burr. Let me just read the letter and you tell me 
what part you disagree with. It says,

          ``Ms. Bittel refused to provide specific information 
        about her allegations, despite being informed that the 
        failure to do so would hinder the investigation.''

    Ms. Bittel. The only thing that I refused to provide were 
the names of people. I did not feel that it was proper for me 
to do so. They have the records to be able to see.
    Senator Burr. Let me go on to state, the letter:

          ``The internal investigation found no support for Ms. 
        Bittel's claim of undue pressure placed upon Career 
        Service advisers at EDMC Online Higher Education to 
        meet placement goals or to falsely graduate or verify 
        graduates' employment was released to their field of 

    Now, clearly you've got a difference with the company, but 
I think it's important for the record--and again, I would ask 
unanimous consent that this be a part of the record, Mr. 
Chairman, since it is a response to you.
    Let me turn now to the panel. I have one simple question 
that I will ask all of you: Is it more important whether an 
institution is for-profit or not-for-profit or is it more 
important what the graduation rate is of the institutions in 
this country? Let me go to you, Ms. Johnson. Graduation rates 
or the profit or nonprofit status of a company, of an 
    The Chairman. What was the question?
    Senator Burr. The question is, is it more important whether 
an institution is for-profit or not-for-profit or what the 
graduation rate is of the institution, how many kids leave the 
door achieving the goal of why they went there? Which is more 
important, the graduation rate or the status of the 
institution--profit or nonprofit?
    Ms. Johnson.
    Ms. Johnson. Well, when I went into this school I guess my 
goal was to graduate.
    Senator Burr. OK, I'll take that as graduation.
    Dr. Mitchem.
    Mr. Mitchem. Graduation.
    Senator Burr. Graduation.
    Ms. Bittel.
    Ms. Bittel. Graduation is, but it's the job that follows 
    Senator Burr. Ms. Asher.
    Ms. Asher. Graduation rates matter, but not all graduation 
rates capture----
    The Chairman. I can't hear you, Ms. Asher.
    Ms. Asher. Graduation rates clearly matter, but they do not 
capture the full extent of what's happening at schools. As my 
full testimony documents, there are great limitations to the 
official graduation rates currently collected by the Federal 
Government. They only cover those who enroll for the first time 
at the same school that they graduate from and attend full-
    Whether or not you borrow matters and what happens after 
you graduate matters a lot, too.
    Senator Burr. It sure does, and the lack of the ability to 
graduate limits one's marketability, employment opportunities, 
whether it's high school, whether it's 2-year or 4-year.
    Now let me share with you just some quick statistics 
because my time is up. North Carolina has 58 4-year 
institutions, 58. Graduation rate after 4 years, 9 institutions 
exceed 50 percent; after 6 years, 22 institutions exceed 50 
percent; after 8 years, 24 institutions exceed 50 percent 
graduation rate.
    In the 2-year institutions, we have 120 of those 
institutions. Twenty-six institutions have a graduation rate of 
over 50 percent after 3 years. Twenty of those institutions are 
for-profit; six are not-for-profit. We have 94 institutions 
that after 3 years have a graduation rate below 50 percent. Of 
that, 88 are public institutions, not-for-profit; 6 are for-
profit institutions.
    As the only Republican here, let me say this is something 
we need to look at, the question of whether the value of what 
our students receive, whether it's from a for-profit or not-
for-profit institution, is in fact delivered.
    But let me just caution my fellow members. As our 
population grows, the need for outlets for continued education 
is going to continue to grow. Right now when we look at our 
returning veterans who come back with a Federal commitment to 
supply an education for them based upon the commitment they 
made to their country, the preferred choice is the for-profit 
institutions that are around the country that provide them the 
skills they need to find a job.
    The wrong thing we do here not just continues this quest, 
that I think this committee has been on as it relates to for-
profits, which is not to weed out the bad apples; I think it's 
to eliminate the for-profit side as it relates to public--Ms. 
Bittel, this is my time now; you've had your show--to eliminate 
the taxpayer participation for the for-profit side.
    Let me just caution you: When you do that, you will be 
making the first step toward telling these service members that 
come back: No, you can only use that GI money where we say you 
can use it; you can't use it to go to the NASCAR 2-year 
institution that teaches you to be a mechanic.
    The Chairman. Senator Burr.
    Senator Burr. Well, Mr. Chairman, I'm the only one here.
    The Chairman. I will let you. I tried to set the example by 
going for 5 minutes. I will let people go to 8 minutes since I 
had an opening statement and you didn't, so I took about 3 
minutes on my opening statement.
    Senator Burr. Mr. Chairman.
    The Chairman. But we'll go around. We'll come back to you.
    Senator Burr. No, you're gracious and I probably can't take 
but a few more minutes of it. I think I know what I'm going to 
hear. But I appreciate the fact that you've allowed me to come 
and be a part of this.
    The Chairman. You can stay as long as you want.
    Senator Burr. I can assure you that I have built some 
character this morning that I didn't plan to build.
    The Chairman. Obviously, stay as long as you want. It's an 
open hearing.
    Senator Burr. But the purpose of mine was to point out, 
we're focused on the wrong thing, Mr. Chairman. I know you'd 
like to go on. Let me just make this and I'll shut up.
    The Chairman. We have other Senators who are here who would 
like to ask questions.
    Senator Burr. I hope that at some point collectively we 
look at the graduation rate of our students and whether they 
get across the goal line, getting that certificate that 
entitles them to a greater future, and not a witch hunt. Thank 
    The Chairman. Thank you, Senator Burr.
    Senator Franken.

                      Statement of Senator Franken

    Senator Franken. Boy. I don't know what to say. I feel like 
my motives have been impugned. I have no goal to de-fund from 
Federal money the good actors. We have Walden in Minnesota that 
does a great job.
    We had the Ranking Member say that we treated the witnesses 
that were called by the minority the last time, that we treated 
them rudely. We had someone from DeVry here that I thought I 
treated--that I actually complimented them. I don't get this, I 
really don't. If you wanted to hear some more balanced panel, 
it might have been nice if the minority had actually called 
some folks.
    I hear all this stuff about the invisible hand. Well, that 
all depends on informed choices. There are these enormous 
marketing budgets that some of these bad actors have, and we're 
trying to--look, when my wife was 18 months old her father 
died, leaving her mother widowed at age 29 with 5 kids, 4 of 
them girls. They all graduated from college with combinations 
of scholarships and Pell grants. I'm a big champion of Pell 
grants. But I don't want Pell grants being used in a way that 
is just going to waste.
    We should be talking about all kinds of education, and it 
isn't as if we can't. The Ranking Member made a big speech and 
left, and he's a friend of mine, but--look, these private 
schools, these private colleges or postsecondary institutions, 
have 10 percent of the students and 44 percent of the defaults. 
So there's an issue here.
    I, like the chairman, have done everything I can every time 
to fight for Pell grants, but I don't want them wasted.
    So let's talk about this, the invisible hand. We heard 
about Adam Smith's invisible hand and that's always going to do 
the job. Dr. Mitchem, in your testimony you say that some low-
quality for-profit colleges have the upper hand over cheaper, 
higher-quality programs because they have the resources to run, 
``state-of-the-art marketing and recruitment campaigns.''
    As Members of Congress, what can we do to encourage a 
marketplace where the competition among schools is based on the 
quality of the education, not the quality of marketing?
    Mr. Mitchem. Congress can do a lot of things, Senator, but 
I don't know if you can assure that. It's a very complex issue. 
The truth is that our independent colleges and our publicly 
supported colleges don't have the resources to compete with the 
marketing techniques and tactics that are used by the 
proprietary schools. So that will always be an uneven battle. 
They just can't invest the same amount of resources in the 
    I wish that the proprietary schools would invest more of 
their resources in supportive services for the students that 
they do indeed recruit. I wish that the proprietary schools 
would look to the Federal Government for more support from the 
TRIO program, the student supportive services program. They 
don't provide anything like that, which is an issue and a 
    So I don't know if we can ever right this balance, is the 
bottom line.
    Senator Franken. Now, the TRIO programs are focused on 
    Mr. Mitchem. Exactly.
    Senator Franken. I was the first generation going to 
college. But also minority and impoverished folks, right? And 
TRIO does an amazing job.
    Mr. Mitchem. It's a class-based program. In fact, the 
majority of the students in the TRIO programs right now are 
white, because it's class-based.
    Senator Franken. Thank you.
    Ms. Asher, most students who enroll in the schools analyzed 
in Chairman Harkin's report eventually drop out, right?
    Ms. Asher. As I understand it, yes, sir.
    Senator Franken. While many of these students drop out 
after only 20 weeks, they nevertheless rack up a substantial 
amount of debt. And student loan debt is uniquely damaging, a 
uniquely damaging form of debt, because it cannot be discharged 
in bankruptcy.
    This year I joined Senators Durbin and Whitehouse in 
introducing the Fairness for Struggling Students Act, which 
would treat private student loans just like credit cards, auto 
loans, and mortgages in bankruptcies. Do you think it's unfair 
that student loan debt is treated differently than most other 
forms of debt in bankruptcy, and what effect does this have on 
students who default?
    Ms. Asher. I certainly do think it's unfair that private 
student loans are treated like unpaid criminal fines rather 
than like very similar forms of consumer debt like credit 
cards. We don't say that a credit card is financial aid when 
you use it to pay for tuition and books and neither are private 
student loans.
    We strongly support the Senate and House efforts to restore 
fair treatment to private student loans in bankruptcy, 
especially because these loans can follow you not just to, but 
past, the grave. Very few have even a discharge provision in 
the case of the borrower's death.
    Senator Franken. I'm going to take the chairman up on his 
8-minute offer.
    For all of you: At the last hearing we learned that all 15 
of the schools investigated by the GAO deceived students they 
were trying to recruit. Ms. Bittel, that's what you're talking 
about and, Ms. Johnson, that's what you're talking about, 
right? You were deceived?
    Ms. Johnson. Yes.
    Senator Franken. So isn't it our job, I would think, on our 
committee and our job as Senators to uncover deception so that 
when the invisible hand is operating it isn't an invisible hand 
with a card up its sleeve? I think so, and I think that's why 
these hearings are important.
    Now, let me speak also to my colleague's point on 
graduation rates. Ms. Asher, are these statistics self-
    Ms. Asher. Graduation rates are collected based on a pretty 
narrow definition of what counts. So these are Federal 
statistics based on what are called first-time, full-time 
students, and only count those who go all the way through at 
the same school after starting for the first time in college as 
a full-time student. As we all know, there are lots and lots of 
ways of going to college. Increasingly, people are attending in 
other ways.
    They also don't capture transfer students, which are an 
important part of what we hope people are accomplishing when 
    Senator Franken. Let me get to this, though, because a lot 
of this is self-reporting.
    Ms. Asher. The job placement rates are self-reported and 
that is a particular concern, as previous hearings have noted, 
as well as a number of investigations, including one in 
    Senator Franken. OK, because when people are self-reporting 
you've kind of got to trust them.
    Ms. Johnson, you graduated, right, or are going to 
    Ms. Johnson. No, I'm halfway through my program.
    Senator Franken. You're halfway through your program.
    Ms. Johnson. Yes.
    Senator Franken. But you were deceived, right?
    Ms. Johnson. Yes.
    Senator Franken. And as a result, you just--what you were 
told was that you'd be able to go to school and then do your 
clinical work--that's the part you're doing now--you'd be able 
to do it at home?
    Ms. Johnson. Yes.
    Senator Franken. And be with your kids?
    Ms. Johnson. Yes.
    Senator Franken. And it turned out that wasn't the case at 
    Ms. Johnson. No, that's not the case.
    Senator Franken. Do you feel you have any recourse because 
of this? You obviously don't because it's a whole rigmarole 
that would cost a lot of money and involve lawyers.
    Ms. Johnson. Yes.
    Senator Franken. And you obviously are in no position to do 
    Ms. Johnson. No.
    Senator Franken. I'm over my time, so thank you.
    Thank you all for testifying, and I wish we had someone 
from the industry who could be speaking before us today, and 
I'm sure we will be talking about other parts of the higher 
education industry.
    The Chairman. Thank you, Senator.
    I just would state that, in regards to our service members 
and what's happening there, our staff is looking into that and 
that will certainly be a part of a future hearing that we are 
already working on right now.
    Senator Casey was next, but he had to leave. He'll be back 
momentarily. So we'll turn to Senator Merkley.

                      Statement of Senator Merkley

    Senator Merkley. Thank you very much, all of you, for your 
    I want to throw a couple things out there just to see if 
any of you have had experience with it or have insight on it. 
The first is that we have had folks testify who were in 
programs, or a specific woman who was in a program, that was 
unaccredited. So when she went out to get a job she couldn't 
figure out why her particular degree didn't allow her to get a 
job. Finally someone took her aside and said, Well, your 
program wasn't accredited. It turned out she could have paid 
far less at a community college for an accredited program.
    Should student loans be extended to programs that are 
    Ms. Asher. This is a problem that is actually surfacing 
quite a bit, of people who are pressured to enroll in school, 
told the school is accredited, and then only later find out, 
sometimes after completion, that the program is not accredited, 
which means they're not in that case qualified to take the 
licensing exam or work in the field.
    That's why it's important to qualify the importance of 
graduation rates. Aside from the quality of the information and 
the scope that it captures of actual students in the field, it 
also may not mean that someone gets the benefit of the 
credential they've acquired.
    Senator Merkley. So should we short-circuit that on the 
front end by not allowing student loans for a program that's 
    Ms. Asher. Certainly there's a need for greater examination 
of how programs qualify for Federal student aid. Some of that 
is happening in a regulatory process under way now at the 
Department of Education, and these are really important 
questions that need to be examined further.
    Senator Merkley. Anyone else want to comment on that?
    Ms. Bittel. Yes, sir. I would say that they absolutely 
should be accredited before receiving funds. Otherwise, what 
recourse do the students have to find jobs? It's just outright 
    Senator Merkley. A second question I wanted to explore was, 
it's my understanding that sometimes the commitment that one 
makes when one signs up isn't just for a single term or a 
single semester, but often for multiple semesters, so that if a 
student attends, if you will, the first 13 days or 3 weeks the 
operator of a school can claim the funds for a full year even 
if somebody drops out after a couple weeks.
    Have you run into that? Are you familiar with that? Do you 
have any thoughts on that?
    Ms. Bittel. It's my understanding, sir, that that does 
happen and that there is a certain time limit within, as long 
as the student stays within the school for that time limit, the 
schools are permitted to keep the Pell grants, and that there 
have been pressures to keep people for that 1 more day, knowing 
full well that then the money would be owed. But I can't speak 
to that directly. I have not had personal experience. I've just 
received letters from students who have told me of such, and 
admissions people who have told me of such.
    Ms. Asher. It's certainly a problem that so many students 
are withdrawing, often because they've begun to recognize the 
lack of value in the training they're being offered, while the 
school can still retain the full value of their Federal aid.
    Just to address your previous question, certainly we should 
be questioning the eligibility of unaccredited programs for 
Federal student aid.
    Senator Merkley. So it sounds like there is nothing I'm 
missing in terms of why someone who only goes a couple weeks, 
in other words drops out during the first semester, why should 
a college get the value, if you will, of being able to take 
multiple semesters' worth of Pell grants if they're not 
providing multiple semesters' worth of education? Am I missing 
anything on this question?
    [No response.]
    No, OK.
    Thank you very much, Mr. Chairman.
    The Chairman. You get an extra 3 minutes if you'd like.
    Senator Merkley. You know what, why don't I defer to other 
folks who have questions.
    The Chairman. I took 8. I said I'd give everybody else 8 
minutes since I had an opening statement and nobody else did.
    Senator Merkley. I'll defer, but I may have a few more when 
we conclude.
    The Chairman. All right.
    Senator Merkley. Thanks.
    The Chairman. Senator McCain.

                      Statement of Senator McCain

    Senator McCain. Well, thank you, Mr. Chairman. I'm sorry I 
had to leave. There's another hearing on the Energy and Natural 
Resources Committee that I had to attend.
    You know, there's an individual that I've gotten to know 
over the years. We've done battle on many occasions. I have the 
highest respect and regard for him. His name is Lanny Davis and 
Lanny Davis is involved in this issue. In fact, I think he's an 
advocate for the ``nasty'' for-profit Americans. ``For-
profit,'' that alone I can see offends some on this committee.
    But I think I'd like to just make some comments from Lanny 
Davis' piece that appeared in the well-known conservative blog, 
the HuffPost:

          ``Suppose that a conservative Republican 
        administration in the middle of high unemployment and 
        economic slowdown proposed new regulations that would 
        most hurt lower income people and minority groups and 
        the for-profit colleges and universities that serve 
        them. Can you imagine the cries of outrage from liberal 
        critics condemning hard-hearted Republicans targeting 
        the most vulnerable young people in our society? Yet 
        that's exactly what the Department of Education's 
        proposed `Gainful Employment' Regulations would likely 
        do. They are almost exclusively aimed at for-profit 
        private colleges, which are predominantly comprised of 
        lower income and minority students.
          ``Let's be careful about characterizing, as some 
        liberals have done, those schools catering to such 
        vulnerable at-risk students with open admission 
        policies as `bad actors', whereas the most selective, 
        elitist Harvards and Stanfords, with less student loan 
        defaults, are deemed `good actors'. That has the 
        uncomfortable look and feel of disparate class and 
        racial treatment--which should make liberals very 
          ``So how do you explain the paradox that, in fact, 
        these proposed regulations are being proposed by a 
        progressive Democratic administration and it's 
        strongest proponents are liberal members of Congress? 

    It goes on to say there are ``three explanations, one less 
meritorious than the other.'' I won't go through all of those.

          ``First is a simple misunderstanding of the facts.''
          ``Second is a classic example of overly broad 
        regulations confirming the law of unintended 

    And the third explanation,

          ``A classic example of ideology trumping facts, the 
        instinctive negative reaction of many liberals to the 
        word `profit' when associated with providing education. 
        This seems uncomfortably similar to opposition by most 
        liberals to private charter schools''

    Which I have experienced myself--within urban public school 
districts, opposition that seems increasingly paradoxical as 
more and more inner city parents supported having the choice of 
charter schools for their children.

          ``The fact is, it's precisely the profit motive that 
        causes for-profits to offer more flexible, consumer-
        responsive schedules and courses, such as night 
        classes, online courses, and new curricula that are 
        directly responsive to recent changes in the job 

    On one of the most rare occasions in my long political 
career, I find myself in complete agreement with Lanny Davis.
    That's really what this is all about: Let's get the for-
profits. Of course there needs to be action taken to stop the 
abuses that the chairman ad nauseam continues to point out. So 
we need to fix the problems. We need to make sure that there 
are no abuses both in recruiting and also in all of the other 
areas that has been pointed out in the GAO report.
    But to kill off the for-profit institutions because of 
abuses and problems that exist--we'd be literally doing away 
with every branch--with every department of the Federal 
Government, because I've sat in hearing after hearing of abuses 
and misapplication and fraud and abuse, one of them as short a 
time ago as yesterday.
    So I regret that this debate sort of exemplifies the really 
sharp divisions between our two parties and our two 
philosophies of government. Hopefully, maybe in January it 
seems pretty clear that maybe we will have a different agenda 
for this committee and the U.S. Senate.
    I thank you, Mr. Chairman.
    Senator Franken. Go ahead, Mr. Chairman.
    The Chairman. It's now my time.
    Senator McCain. It's great to be with you.
    The Chairman. From listening to this----
    Senator Franken. I would love to ask the Senator a 
    The Chairman. Oh, I don't think he'd respond.
    Senator Franken. I'm wondering if he can hear me.
    Can I just say something? Or I know you'd like to, so 
you're the chairman.
    The Chairman. No, no, no, no.
    I never anticipated that this would devolve into a 
political issue between Republicans and Democrats. Never in my 
wildest dreams did I think that. I cleared things with the 
Ranking Member before. We talked about this.
    But I must respond to the Senator from Arizona. Is he 
implying politically that if the Republicans take over the 
Senate, that they won't do anything about the for-profit 
sector; they can just continue to go on like they're doing; 
that there's nothing wrong? I hope that's not the case. I think 
there's enough here that we do need to do something. Something 
needs to be done. We just can't continue to go on.
    I'm not here to tell you exactly what needs to be done, 
because we haven't finished all of our investigations yet. 
That's why I've had a deliberate policy of not saying we need 
to do this or do that. I'm trying to get information and data.
    I issued a report this morning, which I just put into the 
record. This is a report based upon information that we have 
gotten from the for-profit schools themselves. But it just begs 
to be looked at when you see the tremendous growth. When one 
college in 2005 had 320 students and today has 65,000 students, 
you've got to ask what's happening. And when you see the 
tremendous growth in Pell grants and student loans going to 
this sector, you have to ask about the business model itself 
and the systemic nature of this.
    Are there bad actors? Yes, but are good actors being sucked 
into a vortex of a bad business system--a system that 
encourages people to go after student loans and Pell grants to 
maximize profits? I don't mind profits. The profit motive's 
fine. But over 90 percent of profits comes from the taxpayers, 
which is money that goes to the poor students. We have enough 
evidence that many of these schools are going out looking at 
the poor students because they get the maximum amount of Pell 
grants and the maximum amount of student loans.
    So I have a problem when taxpayer money's coming to poor 
students, poor students turn it over to a for-profit 
institution, they don't get the supporting services they need 
and the help they need, they drop out, they've got the debt, 
the shareholders and others in the business have the profits, 
and the taxpayer's out the money.
    This is the business model, and this is what we're trying 
to get our hands on and trying to figure out what it is that we 
need to do to straighten it out.
    I'm sure Mr. Davis is a good lawyer, and he represents the 
for-profit industry. Fine. And there are a lot of them around 
this town, I can tell you that. Many of my friends that I have 
been friends with for a long time represent that industry, and 
that's their right to do so. Everyone is entitled to a good 
    But I think our responsibility is twofold: one, to look at 
what's happening to the lowest income students in this country, 
what's happening to their lives; and then our obligation to 
protect taxpayers, what's happening to the taxpayers' money? 
And we let the shoe fall where it may.
    We'll continue on with our hearings, and at some point we 
will have recommendations for doing something about this. I am 
not going to say any more about it in a political nature. If my 
friend from Arizona wants to do it in a political nature, 
that's his right to do so. But I'm not going to do it. I'm 
going to do it in the nature of our obligations as lawmakers 
here and representing both taxpayers and low-income students to 
make sure that they get value, that both the taxpayers and the 
students get value for the dollar that they're putting into the 
    Well, I've got about 3 more minutes left of my 8 minutes. I 
wanted to ask Ms. Johnson. You've come all the way here from 
Iowa. I wanted to ask you this. I understand that you were 
trying to go to Marshalltown Community College to do your 
nursing program there, to finish up there; is that correct?
    Ms. Johnson. Yes. Once I found out that I wasn't going to 
be able to finish or do my clinicals at home, I tried to 
transfer to a community college which is about 15 minutes away 
from my home. The reason why I hadn't gone there in the first 
place was because I was told that it would take me longer 
because I would have to do my prerequisites; at Kaplan I 
wouldn't have to do that.
    So balancing everything out, I thought by going to Kaplan 
and doing the commute in the beginning and being able to do my 
clinicals at home toward the end of my program, it would all 
balance out.
    The Chairman. Well, what's happened? Why don't you 
    Ms. Johnson. I went ahead and I applied at the Marshalltown 
Community College, was accepted for the fall program, had 
everything lined up, except they didn't have a copy of my 
official transcript. So I asked Kaplan to transfer them. They 
said they couldn't because it showed that I owed money still.
    The Chairman. So Kaplan will not transfer your transcript 
to Marshalltown Community College, where you can go, because 
you owe Kaplan some money?
    Ms. Johnson. Yes.
    The Chairman. How much money do you owe Kaplan, do you 
    Ms. Johnson. It was like $877.
    The Chairman. You owe Kaplan $877?
    Ms. Johnson. Yes.
    The Chairman. And they will not transfer your transcript to 
Marshalltown Community College so you could transfer there?
    Ms. Johnson. No.
    The Chairman. That shocks my conscience. I am sorry, my 
friends. That shocks my conscience.
    Dr. Mitchem, you wanted to weigh in on this.
    Mr. Mitchem. Mr. Chairman, we've found that again and again 
as we talk with our colleagues across the country, where 
students wanted to get out of that system, wanted to go to a 
community college or to a 4-year institution, and couldn't 
because they owed a balance with the proprietary and thus they 
couldn't get the transcript, and so they were stuck. This is 
the pattern.
    The Chairman. Ms. Bittel, did you have something on this?
    Ms. Bittel. Yes, sir. In our diploma programs, the diploma 
programs are set up in 15 classes. Financial aid will only pay 
for two classes at a time. So there's always one class left 
over, and that means that they owe the money. They're going to 
have to pay that money out of their own pocket because 
financial aid won't pay for that last class.
    Therefore, that leaves them with a balance. So if they do 
choose to go on from the diploma program, there's nowhere they 
can go. It's very commonplace to not give transcripts if 
money's owed, no matter how small.
    The Chairman. Are you aware of this, Ms. Asher?
    Ms. Asher. I'm learning of the specific practice today, but 
I can also say that there's a bigger problem, even if you can 
get your transcript transferred, of whether or not your credits 
will transfer. Unfortunately, in many cases they will not.
    The Chairman. Well, at the first hearing we had a student 
whose credits wouldn't transfer; they wouldn't accept the 
credits that she had gotten, and she had completed the course. 
But this is one that I find shocking. Transferring could get 
you to a community college 15 minutes from your home, so you 
could complete your program.
    Ms. Johnson. Yes. They also said that if I--but it looks 
like if I continue and finish the program at Kaplan, I won't 
owe anything because I'll be taking out more loans.
    The Chairman. Say that again?
    Ms. Johnson. If I finish the program----
    The Chairman. At Kaplan?
    Ms. Johnson [continuing]. At Kaplan, then they said I won't 
owe anything. But in reality it's because I'll be taking out 
more loans.
    The Chairman. Well, you won't owe any money to Kaplan, but 
you'll owe money on borrowed student loans.
    Ms. Johnson. Right, right. But that's how they explained it 
to me, that I'll have zero balance in the end.
    The Chairman. Ms. Johnson, do you sometimes feel like 
you're just caught in a web and you just can't get out of it?
    Ms. Johnson. You know, I guess it just sort of came to a 
head. You know, I feel like I got stuck. I don't know how I'm 
supposed to continue on at this point.
    The Chairman. Thank you.
    Dr. Mitchem, I haven't had much of a chance and my time is 
out again, but in my next round I want to engage and talk with 
you about the TRIO programs and the need for low-income 
students who don't have the kind of resources that--you 
mentioned before the inequity between their bargaining 
positions, but the kind of support services, supporting things 
that low-income students need to be able to succeed in college. 
I would like to explore that with you, but I'll do that on my 
next round.
    Now we come to Senator Casey.

                       Statement of Senator Casey

    Senator Casey. Mr. Chairman, thank you. Sorry I had to run 
out and come back. I'm grateful that you called this hearing. I 
know it's a difficult day when we've adjourned yesterday.
    I want to thank our witnesses for being here. Let me just 
say preliminarily three things, and I think it's important to 
make at least these three points. When we're approaching this 
topic--and there's a heated debate here, there's no question 
about that. You can feel it here, you can feel it in the 
audience, you can feel it in all the public comment and the 
news stories. But I think we've got to keep our eye on the two 
most important groups, at least in my judgment. No. 1 are 
taxpayers and No. 2 are students. After that, it just doesn't--
no other group rises to that level.
    When I look at the report that the chairman and his staff 
and others have worked on, one line among many, but there's one 
line that really jumped off the page. It's on page 7, talking 
about something we often say, public officials say it, but we 
need to be reminded of and actually put it into practice, and 
that's ``to ensure that taxpayer dollars are being spent 
effectively on educating the students attending for-profit 
    That's critically important. I don't think that that 
priority is somehow reasonably balanced with some other 
priority. That priority is singular and has to be the 
obligation that undergirds that priority has to be met, no 
matter what, just like it does for any other program.
    The second group of Americans we're deeply concerned about 
here are students, what result do they get, what happened to 
them along the way, do they have an adequate education, are 
they able to pay their loans back, are they able to move on in 
life in a way that's productive?
    Usually when you get some degree or some advancement in 
higher education it's a source of happiness and fulfillment. It 
shouldn't be in any way a terrible burden and a problem.
    So that's point No. 1. Point No. 2, the report itself that 
we're just reviewing now in the last couple of hours really, is 
critically important. That's why we need witnesses to help to 
amplify and to explain a lot of these issues.
    And point No. 3, I'd say that it's critically important--I 
think the chairman has tried to do this from the very 
beginning, as we discussed months ago in these hearings. He's 
worked very hard and I think others have worked very hard not 
to paint with a broad brush in either side of this debate, to 
be very specific and factual. Every allegation, every charge, 
has to be backed up with facts. That's the only way that we can 
reasonably arrive at truth or as close to the truth that we 
    So part of that is asking questions, and obviously in this 
hearing it's important that we have a chance to ask questions 
of people that have been in this field a long time.
    I wanted to start with Dr. Mitchem. In your prepared 
testimony, I'm not sure--because I know you had to summarize, 
but I wanted to read from your prepared testimony the first 
page, which I thought were two important questions. The first 
question you asked was: ``Do the current laws and regulations 
governing Federal student assistance, particularly student 
loans, sufficiently protect low-income students vis-a-vis for-
profit schools?'' That was question No. 1, a very critical 
    The second question, related thereto, was: ``Are low-income 
students adequately protected from assuming inappropriate loan 
debt to attend for-profit schools?'' You said that the answer 
to both of those questions was a resounding no. And I know 
you've answered this in one way or another, but I want to go 
back to it just on those specific questions.
    Why is your answer a resounding ``no'' to both of those?
    Mr. Mitchem. Well, if we look at the experience, if we look 
at the record, there is absolutely no indication that low-
income students who have enrolled on proprietary schools have 
gotten any sort of protections. If you look at the loan 
burdens, if you look at the success rates, it's clear that 
they're wide open to all sorts of abuses. There's no evidence 
that these students are getting quality treatment. It's not a 
quality opportunity. They're not graduating at the rates that 
they should. When they do graduate, they don't necessarily have 
the skills that are requisite to get the employment that is 
necessary, particularly the employment that's necessary to 
overcome the massive amounts of debt that they often incur 
because the price differentials between proprietary schools and 
comparable education in community colleges, independent 
colleges, and public colleges are so vastly different.
    So we've got to remember that the Federal Government is an 
enabler here. We're the ones that, with taxpayers' dollars, 
we're providing the loan money. We're providing the Pell grant 
money. We're creating the situation. These people find 
themselves kind of being pulled in this because they want to 
change their life circumstances and have the same opportunities 
that all of us enjoy. So there's this pull and we've created 
that situation. It's a positive situation. It's good. But also 
it's created these opportunities because we haven't regulated 
the industry or tweaked the program. I'm not an expert on 
financial aid or the administration of proprietaries or even 
nonproprietaries, but it's clear that something is wrong.
    As the chairman pointed out earlier, we've got to drill 
down, dig down, probe out, and fix the situation. It's an 
intolerable situation. These people are being exploited.
    Senator Casey. Is there any--just in terms of--maybe you 
don't have any today or maybe you could submit these for the 
record, but do you have just specific recommendations you could 
suggest that would help us?
    Mr. Mitchem. Well, I suppose we could start with what the 
administration has already proposed, which I recognize is 
controversial. But it seems to me they're moving in a direction 
to try to put more stringent requirements on the industry where 
there appears to be problems. It seems to me that's a rational 
response to the situation that we find ourselves in.
    There may be more that they could do. But again, I'm not an 
expert in that regard.
    Senator Casey. I know I only have a little time left and I 
won't get to all four of you. But Ms. Bittel, I want to thank 
you for being here today. I know that's a long trip from the 
corner of Pennsylvania you live in. That's a long ride.
    I wanted to ask you about, going back to those two basic 
questions that I asked about, or two basic points I made about 
taxpayers and students: What do you believe is the most 
important--or maybe it's more than one, but at least one or 
two--what are the most important facts that you think you can 
assert that are irrefutable that are most important to both 
taxpayers and students? Because you're obviously in a dispute 
here, and you've heard some of the debate here about some of 
your testimony. But as we try to put real facts on the table, I 
just want to get your sense of what are the most important 
facts you think we should know that focus intensively on both 
the priority for protecting students and the priority of making 
sure taxpayers' money is spent appropriately?
    Ms. Bittel. I think it's very important to spend taxpayers' 
money appropriately. I think the more appropriately and the 
more frugal we can be with that, the more we can provide to our 
children and our grandchildren. I think that it's not about 
eliminating for-profit. I could tell you--I could sit here and 
spend the afternoon and tell you about many good experiences 
that I've had. I've loved my jobs there, and I've worked with 
many people and I've helped many people. But I've also seen 
people who were not prepared for the program.
    I think it's more about price-gouging. I'm not sure if 
you're aware, but the bachelor's student at one of our colleges 
racks up almost $100,000 in debt. Now, my son went to Allegheny 
College of Meadville. He got his master's degree at the 
University of Pittsburgh. He's been in school for a long, long 
time, and he has nowhere near the debt that somebody who's 
getting out with an interior design degree from the Art 
Institute has.
    I think that it's a twofold thing. I think we need to give 
the taxpayers the best for their money. I don't think that the 
for-profits should be eliminated. I think they have a wonderful 
place. There are stay-at-home moms that can't go to school 
otherwise. There are many reasons to have for-profit colleges. 
I don't want to see them eliminated. I just don't think they're 
worth $100,000.
    Senator Casey. Mr. Chairman, thank you.
    [The prepared statement of Senator Casey follows:]

                  Prepared Statement of Senator Casey

    Mr. Chairman, thank you very much for holding this series 
of hearings to examine the Federal investment in the for-profit 
education sector. Congressional committees must provide 
oversight to ensure that tax dollars are spent lawfully, 
efficiently and effectively. Investigations like this are 
necessary, not for pointing fingers, but to gather information 
that will help us address concerns that have been raised about 
the use of taxpayer funds. As Senators, we're held accountable 
by the people back in our home States who pay taxes, so we need 
to look very closely at how the executive branch--in this case 
the Department of Education--is spending taxpayers' money.
    Mr. Chairman, I disagree with those who would suggest that 
you or any other Senator is attempting to take down an 
industry, or that in holding these hearings we are acting with 
some nefarious intent. The document request that this committee 
issued to 30 for-profit colleges has yielded an enormous amount 
of data, and we need to take our time in sorting through it. We 
need to look at what the data tells us, what might be missing, 
and think carefully about what policy changes to make based on 
any conclusions we draw. At the same time, we have to remember 
that there are over 3,000 career colleges in this country, many 
of which do a great job educating their students and helping 
them find jobs with good wages. I would also imagine that there 
are thousands of employees of for-profit schools, and that many 
of them are proud of the institutions for which they work and 
the positive results for the students they serve.
    But by collecting this information, Mr. Chairman, you have 
placed the emphasis on facts and hard data and I think that's 
extremely important. I hope that as we move forward, our focus 
will be on examining the Chairman's report and the underlying 
data, and that any allegations that are made are supported with 
solid, irrefutable evidence. We must continue to exercise our 
oversight role by taking a fair and balanced approach to this 
issue with the welfare of the taxpayers and the students as the 
central focus in these hearings.

    The Chairman. Thank you, Senator Casey.
    Senator Reed.

                       Statement of Senator Reed

    Senator Reed. Thank you very much, Mr. Chairman. I want to 
commend you because you have identified a significant issue, 
both the impact on the taxpayer and the impact on the people 
who we're trying to help, students, people all across this 
country. I think you're trying to look at appropriate practical 
responses to deal with the issue and, to Ms. Bittel's comment, 
to recognize the value that some institutions, for-profit or 
nonprofit, can provide, but not to provide sort of an unchecked 
cash flow without regards to the benefit of students. So thank 
you, Mr. Chairman, for that.
    Senator Casey said it very well. This is about taxpayers 
and it's about students.
    One question I would address to all of you is that--and I 
think you've probably responded to it in different ways 
throughout the morning. But can you just give me a sense of, 
when a student sees that Federal funds are attached, they can 
get Federal funds, does that raise assumptions or presumptions 
in their mind that this is a quality program? Otherwise, why 
would the Federal Government let them borrow money, et cetera? 
Ms. Asher, you might start. Does that generate sort of bad or 
good vibes? Can you comment?
    Ms. Asher. Gladly. Certainly we've seen in the marketing 
materials of many for-profit colleges and heard from many 
students that the apparent imprimatur of the Federal Government 
does encourage them to invest a great deal of trust in 
institutions that may or may not be acting in their best 
    Senator Reed. Ms. Bittel or Dr. Mitchem or Ms. Johnson, is 
that your sense? Or is it just peripheral?
    Mr. Mitchem. Not necessarily--am I on?
    Senator Reed. I've known you a long time. You don't need a 
    Mr. Mitchem. I don't need it, OK.
    Not necessarily. They don't necessarily assume or presume 
quality. They see opportunity. Quality can be a sophisticated 
perception, if you understand what I'm saying.
    Senator Reed. Ms. Bittel or Ms. Johnson?
    Ms. Bittel. Yes, sir, thank you. I would say that the 
instance where I would think that that would lead to credence 
or lend an aura that it is a good program is in instances where 
the programs themselves do not have accreditation, and then 
they get out of the program and they can go nowhere with a job. 
I would think that the student, the average student, would 
believe that if the government's giving me money for this then 
it must be a good program.
    Other than that, I don't know that there's that much of an 
    Senator Reed. Ms. Johnson, any comments?
    Ms. Johnson. I would like to say, when I went into this 
program I was a little skeptical. I thought that what I was 
buying was a quick deal. I didn't know for sure that I would be 
getting quality and I was willing to take that risk. Like I 
said, I was trying to balance out everything between family and 
home and my responsibilities.
    But now that I look back at the training that I've had, 
another big concern that I've had along the way is I don't 
believe that I've gotten quality education as far as nursing. 
Coming out and working into a medical field, I don't feel 
confident in working with people's lives. And I think about all 
the other students that they're putting out.
    For example, like the CPR training that I had, we were 
complete and within a matter of hours I'm certified, but I 
don't feel like I would know how to perform on someone.
    Senator Reed. Thank you for your testimony.
    Just a final question I could address to Ms. Asher 
specifically. We're very pleased that Brown University has 
produced such a talented and public-spirited person, so let me 
get in a plug for the home team.
    We have a proposal on the table and, as Dr. Mitchem said, 
it has generated controversy. But I think one of the values of 
what the chairman is doing is that we're looking for practical 
ways to maximize the benefit to students, for responsible 
behavior on all the participants, for-profit, not-for-profit. 
Are there any other approaches that you are thinking of and you 
might suggest to us to deal with this issue of making sure that 
we're funding quality education that leads to real 
opportunities, not simply to 4 or 5 years in school with no 
    Ms. Asher. Thank you for your question, and I'm a great fan 
of Providence, RI.
    This is a complex problem and, as I mentioned earlier, the 
regulatory process under way is taking on a very important 
piece of it. We and many other civil rights, student activists, 
and consumer groups, including my esteemed colleague Dr. 
Mitchem, have called for the rules to be strengthened in some 
areas to better protect students and taxpayers.
    But, as you may know, there are many different pieces of 
this puzzle, and these hearings are doing a wonderful job of 
starting to look into all of those pieces and to bring more 
data to bear. One issue that comes up is that there is 
sometimes a passing of the hat about oversight. States play a 
role, accreditors play a role, the Federal Government plays a 
role, but there are too many loopholes in that current 
    We also have problems with data quality, as we've 
discussed. Reporting of job placement information, for 
instance, is self-reported, not independently verified. 
Graduation rates are too narrow, and I believe that Congress in 
the HEOA required the Department of Education to do something 
it recently did, which was convene an expert panel to come up 
with some recommendations for graduation rates that might 
better capture what's happening in the field, including some of 
the churn that was described today.
    There are issues around the accreditation of programs, as 
well as schools, and also the other Federal dollars. VA and 
other money that's going to current active military as well as 
veterans, a very significant flow. There have been a number of 
stories and a recent hearing on that as well.
    So we need to be looking across the board.
    Senator Reed. Well, thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Reed.
    Now we go back to Senator Franken.
    Senator Franken. Thank you, Mr. Chairman.
    I just want to point out one thing here or a couple things. 
Lanny Davis is a paid lobbyist, as you mentioned, for profit 
schools. There's nothing wrong with that, but he wrote that 
piece that Senator McCain quoted as part of his job. He was 
paid to do that, and he represents Argosy University, the Art 
Institute, ATI Career Training Center, Beckfield College, 
Bluecliff College, Brown-Mackie. That's ``A'' and ``B,'' so you 
have some idea.
    The content of that was, that we're somehow elitists, that 
we're comparing these schools, which have a large low-income 
population and minority--and he actually said it--to Harvard, 
and that we're elitists. Are you an elitist, Dr. Mitchem?
    Mr. Mitchem. I don't think so. No, I don't think so.
    Senator Franken. And the people that are in TRIO are low-
income, right?
    Mr. Mitchem. They're low-income Americans, yes, sir.
    Senator Franken. And then this idea that we Democrats just 
don't like for-profit, I just love that. I worked in a for-
profit industry. In fact, I got criticized during my campaign 
for having made a lot of money. I did it because the entities I 
worked for made a profit because--in fact, the entertainment 
industry is one of the few industries in this country that 
actually has a positive balance of trade. I'm very proud of 
that industry.
    The Chairman. Agriculture.
    Senator Franken. Yes. As everyone knows, I was a for-profit 
soybean farmer, and comedian.
    So it's just irritating. I just find that irritating, that 
they throw up that stuff all the time.
    We are using the imprimatur of the Federal Government, as 
Ms. Asher said, and they do that to attract students. Staff at 
Hope Street and Lutheran Social Services, which runs homeless 
shelters in the Twin Cities, recently contacted my office. They 
expressed their concerns about for-profit colleges recruiting 
homeless youth who were struggling with mental health and drug 
issues, many of them not ready for college and who often go in 
and borrow, get money from the government, and end up dropping 
out only after amassing a mountain of debt.
    Ms. Bittel, how do the colleges get away with this practice 
when the Federal law requires--or anybody on this--requires 
that their students have a high school degree or pass a college 
readiness test?
    Ms. Bittel. Maybe it's because the fox is guarding the 
henhouse. The accreditation bodies are paid for by the 
colleges. I mean, who's checking these people?
    Senator Franken. So what we have is, this is again sort of 
agency capture, where, yes, the people who are guarding the 
henhouse are in the industry and being paid by people in the 
industry, and Lanny Davis is being paid by the industry to make 
these arguments that we get regurgitated here.
    During the last recess, I went to visit Walden, which is 
one of the oldest of these schools in Minnesota, in 
Minneapolis, a tremendous place. They've been in this for 40 
years, before there was an Internet. They do a lot of online 
stuff. And Lanny Davis is talking this thing about that these 
for-profits adapt to the way people work now. Most of their 
students are getting graduate degrees. Most of them are 
working, working as nurses or working as teachers, teachers who 
are becoming principals. They do a good job.
    I have nothing against for-profit. I have nothing against 
this industry, other than the bad actors. What we're trying to 
do here--and I would appreciate it if the other members would 
stay instead of making a comment, quoting a paid lobbyist, and 
then--with great umbrage, and then leaving. I don't think 
that's doing our jobs. I don't think our job is to sit here--
Ms. Bittel, you raised your hand.
    Ms. Bittel. Yes, sir. Personally, I'm quite offended. I've 
put my life on the line here.
    Senator Franken. Yes, you basically are a whistleblower and 
you're in danger of losing----
    Ms. Bittel. These people don't have the courtesy to listen 
to what I have to say?
    Senator Franken. Well, many of them do have other duties, 
I'm sure.
    Ms. Bittel. But some of them made a grandstand play and 
    Senator Franken. Or that. Well, again, we can't necessarily 
say whether it was one or both, one or the other or both.
    Anyway, so let's talk about this advertising, marketing. In 
the health care bill, I wrote a provision called the medical 
loss ratio. In this we say that insurance companies have to 
spend, if they do a large group plan, 85 percent of the 
premiums that they get in on actual health care, and that's 
part of the law. They can spend 15 percent on administrative 
costs, on profits, and on marketing.
    Is there any possibility here that--and anyone can talk, 
speak to this--that we can limit the amount of marketing? After 
all, it's Federal money. We're looking after the taxpayer here 
and that's what my friends on the other side who aren't here 
should read, because I know they'll go back and read the whole 
transcript of this. They should read--that's what we're talking 
about here, because we're talking about all these deficits and 
all this money that's going to these for-profits that--is there 
any way that we could write some regulation that you can only 
do so much on marketing and the rest has to go to actual 
education, a certain percentage?
    Any reaction to that? Ms. Bittel?
    Ms. Bittel. Sir, I would say that, rather than limiting 
marketing, you should focus on the education and require that a 
percentage of the dollars be spent on education. What's left 
can be spent on marketing.
    Senator Franken. That would be one way of achieving it.
    Ms. Asher.
    Ms. Asher. I think we need to look at the whole incentive 
structure right now and what is driving the large marketing 
expenditures, which is the ability to make a tremendous amount 
of money through Federal student aid. So it is one piece of a 
larger puzzle, and these hearings are bringing more and more 
information to bear on just the flow of funds from Federal 
sources and where that money's going.
    Senator Franken. Thank you.
    I've expended my time, Mr. Chairman. Thank you.
    The Chairman. Senator Casey.
    Senator Casey. I know we're running low on time. I just had 
one question for Ms. Asher.
    The Chairman. I'm sorry, Senator Casey. Would you just 
withhold 1 second, please?
    Senator Casey. Sure.
    The Chairman. I appreciate it.
    I just wanted to respond. Senator Franken was talking about 
profits and profit motives. I thought I'd put on the screen the 
profit margins that we found--it's in our report; and for some 
of the 16 companies that we analyzed, total profits amounted to 
$2.7 billion.
    But I just wanted to point out that they varied from 16 
percent to 37 percent profit margins. I think that's probably 
even better than your entertainment industry. I don't know. I 
don't know what it is. I have no idea.
    Senator Franken. ``The Titanic'' did better than that.
    The Chairman. I'm sorry, Senator Casey.
    Senator Casey. Sure.
    Ms. Asher, I just wanted to ask you, and I know you've 
provided a lot of both written testimony and answers to 
questions, as others have. But at the end of hearings like this 
sometimes if we get a chance in terms of wrapping up--and I 
know we could be here for hours to continue it, but I wanted to 
ask you, in light of the concern that all of us I think have 
about taxpayers and students primarily, and they're the top 
priority, but also the concern about not painting with a broad 
brush and pointing out bad actors versus those who are trying 
to do the right thing and have a good record to establish 
that--what would you recommend if you had three things that you 
think the U.S. Congress could do to mitigate or confront 
directly some of the problems that have been raised in the 
report, as well as in other places as well: the questions about 
debt and there's a lot of debate about that; the question about 
withdrawals, people leaving schools at high numbers.
    When you confront the most difficult problems here, what 
would you recommend as a series of steps we could take in terms 
of statutory or the administration maybe making regulatory 
    Ms. Asher. As I mentioned before, I think this is a very 
complex issue, with a lot of incentives that point in the wrong 
direction and that encourage the less scrupulous institutions 
to misuse Federal funds at great cost to both students and to 
    I did want to take a moment to point out just one example 
that I think is really notable in terms of how differently 
students may be served at similar types of institutions even 
within this sector. In San Bernadino, CA, there are two for-
profit campuses--one Everest College and one Concord Career 
College--about a mile away from each other. They serve a 
similar share, a majority share of Pell recipients, they're 
pretty similar in size, they offer very similar programs, in 
fact some identical programs. One, Everest College--they charge 
the same amount, within a thousand dollars. Everest College has 
a 31 percent Federal student loan default rate and Concord 
College has a 9 percent default rate. That tells us that 
there's a lot of room for improvement and for shifting 
incentives for colleges to focus more on outcomes for students.
    I'd be happy to work with you and members of the committee 
on developing any number of approaches.
    Senator Casey. And I'd ask you, and I know we have time to 
have our witnesses submit for the record, if you could sit down 
and try to do kind of a match, a problem and asserting facts 
that support the argument or assertion of a problem, and then 
next to that a corresponding action that the Congress can take. 
I think it would be very helpful for us in terms of guidance, 
because we don't want at the end of these hearings and this 
debate not to have asked your help and others, all of our 
witnesses today, as well as others who will appear and have 
appeared. We don't want to miss the chance of having specific 
recommendations to deal with specific factual scenarios that 
set forth a real problem.
    Thank you very much.
    The Chairman. Thank you. Thank you, Senator Casey.
    Dr. Mitchem, I said I wanted to have an interchange with 
you. Obviously, I know a great deal about your background and 
all that you've done in your lifetime. I wanted to focus again 
just a little bit more on low-income students who don't have 
the family resources, may have struggled to get through school, 
and when they enter school don't have the kind of support 
systems they may need to help them get through. And yet, when 
they sign up and they get recruited by a school and their 
courses are online and they have no supporting mechanisms to 
help them, how different is that than, say, a student who comes 
from a family that has resources, money, maybe the parents have 
gone to college or at least finished high school, they're 
middle income or upper middle income, and then that student is 
    The one thing I've always liked about the TRIO programs is 
that they gave that kind of support to kids that didn't have 
that at home. They've been pretty successful, I think, because 
they've gotten that.
    But in this area, they don't get that kind of help. They're 
sort of out there on their own. Would you talk about that with 
    Mr. Mitchem. Yes. First of all, we all need to understand 
there's a radical difference in educating and graduating a low-
income first-generation student than there is a middle-income 
student. That difference hasn't been sufficiently recognized, 
in my opinion, in terms of Federal policy.
    We have to understand that there are two sets of barriers. 
There are the financial barriers. Financial aid is absolutely 
essential. And there's also cultural, class, and academic 
barriers. Both of those issues or sets of issues have to be 
    One of the reasons we're having this conversation this 
morning, in my opinion, is that when we talk about the for-
profit sector they address the financial barriers, but they 
have not adequately addressed the supportive services barriers. 
What am I talking about when I talk about supportive services? 
I'm talking about you have to engage these students. You have 
to provide intensive counseling. You have to provide mentoring, 
you have to provide tutoring, you have to provide learning 
communities. There's a variety of tactics, services, and 
treatments that you have to put in play to work with this 
individual. You have to work with them in a holistic way.
    In other words, a supportive services program, if I may say 
so, is a surrogate parent. See, those of us who are not first 
generation, we got our supportive services from our parents. It 
was invisible and we didn't even recognize what was going on. 
Our confidence, our skills, our expectations, our aspirations. 
These students do not have those advantages, and so thus they 
get led into these traps and have problems and don't succeed.
    Our attainment rates, as you know, Mr. Chairman, are going 
down in our colleges and universities. Our President, thank 
God, is addressing these issues with his 2020 goals. Part of 
the reason for that is, while we've invested billions of 
dollars in Federal financial aid since we initiated the EOG 
program in 1965, we have not kept up in any kind of 
proportionate way in terms of supportive services.
    We know the record. We know, for example, that Pell grant 
recipients who do not receive supportive services do not 
graduate at the same rates as Pell grant recipients who do 
receive supportive services. We have not addressed those gaps.
    So again, you're seeing it in spades when you talk about 
proprietary colleges, and that's part of the reason we're here 
this morning.
    The Chairman. Let me follow up on that. We know there are 
millions of kids out there that have gone to these schools, 
they've dropped out, over 2 million in the last couple years, 
they have debt loads, some of them pretty significant. But we 
don't seem to know who they are and it's hard to find them. In 
our investigations, one thing kind of came through to me. I 
don't know how true it is, but we're going to try to get a 
handle on this. That is that many of these kids have signed up, 
they started taking an online course, they ran into problems, 
they didn't understand things, they didn't have the supportive 
mechanisms, they dropped out, and somehow they feel it's their 
fault. They feel it's their fault and so they're embarrassed by 
it. They don't want to come. They have a debt now and they 
think, well, other people made it through doing that and I 
didn't, so it's my fault.
    Mr. Mitchem. That's very common. Burton Clark, a scholar, 
wrote about that 30 years ago, the warehousing of these kids, 
where people blame themselves as opposed to recognizing that 
they were put in an untenable situation. And that's very, very 
unfortunate and very, very sad.
    The Chairman. Do you know, Ms. Johnson, do you know any of 
your fellow students that have been with you that have dropped 
out of school? Do you know any of your friends who have dropped 
out of the school?
    Ms. Johnson. In my program, I think we began with 22 girls 
and now we're down to maybe like 15.
    The Chairman. And that's just in what, in how many years, 
in how long a period of time?
    Ms. Johnson. Oh, that was just like 20 weeks.
    The Chairman. Oh, in 20 weeks?
    Ms. Johnson. Yes.
    The Chairman. Oh, in 20 weeks it went from 22 to 15. But 
obviously you wouldn't know what their debt load or anything 
    But that's why when I hear about that somehow we, Senator 
Franken and I and others, are somehow picking on poorer 
students by denying them this opportunity. We see that chart 
that was up there, ``Give Me a Chance,'' and we see all these 
full-page ads that somehow we're denying opportunity to these 
kids, when in fact what we're trying to do is to have a system 
whereby they have a better chance at having that success and 
what needs to be done to ensure that.
    So this is not any attempt by me, at least, I don't think, 
and neither Senator Franken, to pick on poor kids. That's where 
we came from. It's to try to figure out how we utilize the tax 
dollars, $24 billion a year through loans and Pell grants, how 
do we utilize that in the best possible way to ensure that low-
income kids have not only access and not only graduate, but 
that they have the supportive services--not only have access, 
but they have the supportive services that will get them 
through, and also not have a mountain of debt on their heads 
when they get through.
    As I pointed out in our report here, I pointed out there's 
one school that charged $13,000 or $15,000 for a course that 
the local community college charged $520 for. Well, the 
response on that, the rejoinder on that might be: Well, but the 
community college, they don't have room for everybody. Well, 
maybe if we put $25 billion into them they might have room for 
everybody. So maybe we're looking at it in the wrong light, 
that we need to do more to support those community colleges.
    But I just wanted to have that interchange with you on the 
supporting mechanisms, and that's what seems to be coming 
through all the time, and this idea that these students blame 
themselves for this.
    There is one other question, Dr. Mitchem, I wanted to ask 
you. Are there any differences, that you believe, between the 
smaller schools, maybe some of the smaller for-profit or maybe 
those that are even nonprofit, smaller for-profit schools, and 
the large publicly traded ones in terms of the level of student 
services? And I'm probably going to ask Ms. Asher if she has 
any information on that, too. Are there any differences between 
some of the smaller schools that are for-profit and the large 
publicly traded ones in terms of the level of student services? 
Do you have any knowledge of that?
    Mr. Mitchem. In terms of my limited view, I couldn't 
comment on that. I really don't know.
    The Chairman. I see.
    Ms. Asher, do you have any observation on that?
    Ms. Asher. I'm not familiar with any data that's collected 
that would help shed light on that question. But certainly 
there are wide variations in outcomes for students at all 
different types of schools within the sector.
    The Chairman. Ms. Bittel, I had another question I wanted 
to ask you and that had to do with the number of people.
    What does it mean that Career Services only sees about 
3,000 graduating students of 31,200 a year among 9 people? Is 
that right, you had nine people?
    Ms. Bittel. There are nine employees in the Career Services 
    The Chairman. Pardon?
    Ms. Bittel. There are nine Career Service advisers that 
service the entire student body of the Art Institute, the 
Argosy--Art Institute On Line, Argosy University On Line, and 
South University On Line.
    The Chairman. How many would that be?
    Ms. Bittel. Typically, there were five advisers that worked 
exclusively with the Art Institute. Typically, we would have 
approximately 50 to 60 students in each class. We were 
typically working with three classes at a time.
    The Chairman. Now, what does it mean that Career Services 
only sees about 3,000, as I understand it, out of 31,200, and 
they've got 9 people? Dr. Mitchem, what does this say to you, 
that you've only got so few people?
    Mr. Mitchem. Well, it's worse than the ratios we have in 
our worst public schools, where we don't have enough counselors 
to the number of students involved. I mean, it's an outrage. 
They're not getting any services.
    Ms. Bittel. I would have loved to have been able to do so 
much more for my grads. But there was no time. It was push them 
through, get the number, get the number, get the number. I 
heard that about 20 times a day: Get the number, get the 
number. Not, have you helped Sally Lou find a job in her field?
    The Chairman. What did it mean to have to make your 
numbers? What did that mean?
    Ms. Bittel. I was required to provide documentation that 
85.9 percent of all the graduates under my care were employed 
in field-related employment earning more than $30,000. I would 
ask you, sir, from an online art school in these times and in 
this economy and with this job market, do you honestly believe 
that that is achievable? That was my quota. That was my 
requirement, 85.9 percent in field-related jobs earning $30,000 
or more.
    The Chairman. I have one more thing. I understand the Art 
Institute has five career staff for the entire online program. 
Is that true?
    Ms. Bittel. That is correct.
    There are two for Argosy University, all of their grads; 
there are two Career Service advisers for all of the grads from 
South University.
    The Chairman. Again, I just have a question: How can so few 
people serve so many online students? How can they possibly do 
that. Do they work 24 hours a day?
    Ms. Bittel. No, we don't get overtime.
    The Chairman. Senator Franken, I've used up a lot of my 
time and I'd be glad to yield to you for any further questions. 
I have a couple more things that I wanted to get out.
    Senator Franken. No, but I thank you, Mr. Chairman, and I 
thank all the witnesses for your testimony. Ms. Johnson, I wish 
you the very best in what you do. I want to thank you all.
    The Chairman. Ms. Johnson, one last question. What upsets 
you the most about your experience and what do you want other 
current and prospective students, not just at Kaplan but others 
at all for-profit schools, what do you want them to know from 
your experience? What upsets you the most? What do you want 
other students that may be in your situation to know?
    Ms. Johnson. What upsets me the most was that I was lied 
to. As far as all for-profit schools, I can't speak for all of 
them because I don't know what goes on everywhere else. But 
there's been many things that I've seen at the school that I go 
to that I don't necessarily agree with. I have talked to people 
that are even staff there and I've brought up this complaint 
about being deceived, and it seems like what I hear is, yes, 
they'll tell you what you want to hear. I just think that needs 
to stop. I feel like it's almost like you're being sold a car, 
but getting a lemon.
    I don't know. I feel like that was my whole purpose in 
coming here--that's my hope, that they'll stop lying to people 
who are really trying to get somewhere in their life.
    The Chairman. Thank you.
    Ms. Bittel, I was informed of a situation that took place 
with your sister. Now, if you don't want to talk about that we 
don't have to talk about it. I was informed about it.
    Ms. Bittel. I'm fine with that. I would love to talk about 
    The Chairman. Will you tell us about that? I think that's 
interesting for the public record that we should know this.
    Ms. Bittel. First of all, I should tell you that my sister 
has had a very, very different experience than I in her time 
with EDMC. She works for South University as an admissions 
counselor and she has a great, great sense of responsibility to 
her students. She has a great deal of passion. She not only 
helps her students, but she helps everyone on the floor around 
her with any question, any help, anything that is needed. She 
works many, many, many hours.
    She has kept in touch with every one of the students that 
she's brought on board. She checks their grades. When their 
grades are slipping, she calls them up and yells at them and 
calls them to task and says, ``What's going on here? You're 
spending a lot of money; you need to get going on this. Come 
on, you can do better than that.''
    She embodies the best of online education, and I don't want 
to see online education go away. There's a lot of good in 
online education and she's a very big part of that.
    What happened to my sister was--they've made a great deal 
of press about how I refused to cooperate with them. Although, 
yes, I did refuse to give names. I did not feel that that was--
in my good conscience, I didn't want to point fingers at 
anyone. They have enough records to be able to tell who the bad 
actors were. They didn't need me.
    I had reported what I had reported an entire month ahead of 
time, and on the morning of my son's wedding at 7:13 a.m. they 
called--they sent me an email essentially demanding that I 
appear before them and answer their questions.
    The day prior to that----
    The Chairman. This was on the morning of your son's 
    Ms. Bittel. The morning of my son's wedding, 7:13 a.m., 
they expected that I should drive 100 miles to Pittsburgh, 
because I drive 100 miles a day to go to work. I live in a very 
rural area. I live in Acme, PA.
    It's very difficult to find work in that small town. There 
is not a town; it's just a post office.
    I'm sorry, I'm getting ahead of myself. They were trying to 
get information from my sister about me and what I had said. 
They had had an entire month to contact me. I had promised them 
that I would be completely available to them and would answer 
any questions that they wanted of me. And they waited until it 
became public knowledge that my letter had gotten out before 
they began to actually really do a true investigation.
    They took my sister off the floor. Now, my sister's very 
popular with her co-workers because they love her, because she 
helps them all the time. That's the type of person that she is. 
They seized her computer. They did this publicly, in front of 
everyone on the floor, humiliating her, making everyone think 
that she had done something wrong, put her under a gag order. 
She wasn't allowed to tell anyone or defend herself. She 
couldn't speak to anyone about this.
    They called her into a room. They held her there for more 
than 2 hours, and then sent her home on administrative leave, 
and she was gone for, I believe it was at least 2 days. I'm not 
sure if she went back to work Tuesday or Wednesday. So she was 
on administrative leave from Friday and Monday and perhaps even 
Tuesday. It might have been Tuesday that she returned to work.
    All the while, not telling the employees anything about 
this. All the while, everyone, her co-workers, her colleagues, 
think that she's done something wrong. And it's all because 
they're trying to get out of her what she knows about what I 
know: What did I tell her, what have we spoken about, did I 
give her any names of the people that I felt were the 
    I just found it to be an unconscionable situation, when I 
would have gladly given them everything but names at any point 
in time the prior month.
    So that's the ``not cooperating.''
    The Chairman. Well, Ms. Bittel, I just want to thank you 
very much for being here. I want the record to show that it was 
not this committee that released that letter, by the way. It 
did not come from here. We would not have made that public. It 
came from someplace else.
    I just want to thank you for that. I've been there. Forty 
years ago this summer, I blew the whistle on some government 
people and I got fired from my job, 40 years ago this summer. 
And I've got to tell you, a member of my own party, a high-
ranking Member of the House of Representatives of my own party 
said, ``Tom Harkin will never again work in the United States 
    The next summer, Bill Moorhead, a wonderful Congressman 
from Pennsylvania, wanted to hire me for something and he was 
stopped from doing so by members of my own party. So that was 
40 years ago, and here I am.
    Ms. Bittel. Well, I hope to live your example, sir, because 
at this point I do fear that I'll be blackballed from 
employment in the future.
    The Chairman. Well, if we can be of any help we'll try. I 
think people who come forward with honest information and stuff 
at the request of this committee should not be penalized in any 
way for responding to the legitimate, legal, ethical inquiries 
that we are making of people.
    Let me close this hearing by saying three things. First of 
all, thank all of our witnesses for being here. We'll leave the 
record open for 10 days.
    I wanted to point out three things again for the record and 
for the benefit of people here and those who may be watching. 
In 1991 our esteemed colleague Senator Sam Nunn of Georgia had 
a number of hearings similar to these, on this same issue of 
the for-profit colleges. Out of that came really three items 
that were changed. First, there was a rule, a law against no 
incentive payments for recruiting. Second, there was a 50 
percent rule that had applied to correspondence courses before, 
that was now applied to online courses--because there wasn't 
much online in 1991. The 50 percent rule said that 50 percent 
of students had to be campus-based and the other 50 percent 
could be online.
    Then there was an 85-15 rule that had originated back to 
the Korean War GI bill, but for for-profit schools it mandated 
that a for-profit school could only get 85 percent of its money 
from the government. The other 15 percent had to come from 
other resources.
    Well, those three things were put in the law as a way of 
stopping some of the abuses that were seen by Senator Nunn and 
that committee at that time. I was not on that committee.
    Well, guess what happened. The 85-15 rule was changed later 
on to 90-10. Then they could get 90 percent of their money from 
the Federal Government. And that, by the way, does not include 
GI bill benefits. That's not included in the 90 percent. So, we 
are finding out, that some of these schools have as high as 93, 
94 percent of their revenue coming from the Federal Government, 
when you include GI bill benefits into that. So that was 
    For the incentive pay for recruiting, the Department of 
Education promulgated rules in 2001, which they called ``safe 
harbors''--interesting phrase, ``safe harbors''--which 
basically did away with the rule, which opened it up for 
incentive payments for recruiting. That started in 2001.
    Then in 2005, in the Reconciliation Act of 2005--and again, 
if you're not an insider you don't know what a ``Reconciliation 
Act'' means. It means that we don't really get a vote on items 
in that. It's nondebatable, as they say. There were no votes on 
it. It was a big package. Slipped into that package was a 
removal of the 50 percent rule in 2005. So no longer did 50 
percent of your students have to be campus-based. They could 
all be online.
    We have data now, I think enough data to show that after 
that the amount of students going to these for-profit schools 
skyrocketed, not campus-based but online, because they didn't 
have to have 50 percent campus-based any longer.
    So I wanted to just point out a little bit of that history 
that transpired.
    The other thing I'm concerned about is that things have 
really gone awry. Now, no, I don't want to paint with a broad 
brush everyone. One of my colleagues over here said that, we're 
not painting with a broad brush, because there are some very 
good schools out there doing some good things. But what we see 
happening is that the system, the way it's set up, encourages 
people who may be good actors to become bad actors, to be 
sucked into this vortex.
    What do I mean by ``this vortex?'' It's this: Because of 
the easy availability of student loans and that the lower 
income you are the more you get, and because of what we've done 
to increase Pell grants--and maybe I'm to blame for that. We 
just changed the Higher Education Act to get rid of the 
guaranteed student loan program and moved to the direct loan 
program. We saved $65 billion over 10 years, and I insisted 
that that be put into Pell grants for poor kids.
    So we've got more Pell grants. So you have a system that 
says to someone who just wants to make a lot of profit: ``Well, 
gee, I can go out and recruit all these low-income kids, 
maximize the amount of Pell grants they get and the student 
loans they get. Now I can do GI bill, now I can do military,'' 
but that's for a later hearing. Imagine my surprise to find out 
that a semester is not really a semester; it can be, what, 15 
weeks, 12 weeks? It can be anything. How many?
    Ms. Bittel. Five.
    The Chairman. Five weeks?
    Ms. Bittel. Five and a half weeks.
    The Chairman. Five and a half weeks, that's a semester.
    Ms. Bittel. Well, it's a session.
    The Chairman. I can't hear you.
    Ms. Bittel. I'm sorry, sir. It's 5\1/2\-week sessions, 2 of 
them back to back. So you are learning 11 weeks' worth of 
material in 5\1/2\ weeks.
    The Chairman. Well, except the ``semesters'' are defined 
    Ms. Bittel. Right. But the classes, the class is really 
5\1/2\ weeks long.
    The Chairman. I understand that.
    So they get this money in, and if they don't provide 
supportive services to these students they drop out. What 
obligation does this institution have to that student? None. 
They've got their money, they made their profit, huge profits, 
and the student's gone.
    But the student has a huge debt hanging around his or her 
neck. And that's what really bothers--what bothers me is that 
we say we've gone after the bad actors, but the system has a 
problem that I'm looking at here, a systemic problem.
    Now, there may be people out there, and there are, who 
don't follow that. They aren't out there doing that. God bless 
them. That's wonderful. But the system invites abuse. It 
invites abusive practices, and that's what I'm concerned about.
    And they say they're for-profit. But if 90 percent or 94 
percent of their money is coming from the taxpayers, what's the 
profit? I think of profit as you make something and you go out 
and people voluntarily buy it or don't buy it, or you entertain 
somebody and they either go to your show or they don't. The 
profit motive is wonderful.
    But in this situation, where it all comes from the 
government through a very low-income student, passes through to 
an institution, and they're making, as my chart up there shows, 
immense profits, a lot more than the Standard and Poor 500 
index, which is around 6 percent--they're making 30 percent, 20 
percent, 19 percent, 16 percent profits.
    I mean, you really have to ask about the system itself that 
encourages that. It takes money from taxpayers, funnels it 
through poor kids, goes into the for-profit school, they pay 
the shareholders or, if it's privately held, they keep it 
themselves, and 2 million students who dropped out in the last 
couple years have a huge debt hanging around their necks. Now, 
that system cries out for some kind of a resolution, some kind 
of fixing.
    They figured out how to be profitable even when the 
students are not successful, and getting more money from the 
government. There is irrefutable evidence, irrefutable 
evidence, now that something has gone wrong with this industry, 
gone wrong. Now, I'm not saying everybody's bad in that 
industry. I'm just saying that the system has gone wrong.
    So I intend to continue this investigation to shine more 
sunlight on this sector of higher education. But I intend to 
look for solutions to make sure that students and taxpayers are 
protected, students and taxpayers are protected. I'll do 
everything in my power to avoid and try not to get sucked into 
some kind of a Democratic-
Republican debate on this. I mean, all of us are in politics 
and so when someone lobs a political argument at you the 
natural response from one of us is to have a political argument 
back. We can't go there. We just can't go there.
    We've got to look at this and, as I think Senator Casey 
said, drill down, or someone said, you've got to drill down. I 
think you said that, Dr. Mitchem, drill down and get the facts 
and get the data, so that we can make informed decisions as to 
what we want to do.
    I don't believe that we have learned enough at this point 
to draw a lot of conclusions. Some, yes, in which we see some 
conclusions that, well, obviously that the rate of profit 
margins has gone up precipitously. We know how many students 
are dropping out. At least we have a good handle on that. So we 
do see some things there. But I don't know exactly what needs 
to be done right now.
    But we've learned enough to tell everyone here that we will 
be exploring legislative changes. I can assure you this 
committee will explore legislative changes to get this system 
right again, so that our lowest income students are not put in 
the same position that Ms. Johnson is in--it just shouldn't be 
happening--and to make sure that we have the kind of supportive 
services, Dr. Mitchem, that these low-income students need to 
be successful.
    It's just not enough to say, ``Well, we're going to give 
you this money, we're going to loan you this money and we'll 
give you this Pell grant and you're on your own.'' That doesn't 
work. That doesn't work for low-income students. They need 
better support services than that.
    I'm sorry if some people feel that I'm saying this ad 
nauseam. I don't want to make anybody ill. I just want to make 
sure that people understand what's happening. And, as Dr. 
Mitchem said, we're going to drill down and get as much data 
and facts as we can. We will be having yet another hearing in 
early December. We don't have a date set yet, but we will have 
one more hearing in early December, and then looking at some 
time probably next year of coming up with some kind of 
legislative changes in this sector.
    So if there's nothing else to add, I thank you all very 
much for coming here. I thank you all for what you have been 
doing in all your ways. Ms. Johnson, again thank you for coming 
here from Iowa and for testifying, and I hope you get your 
    The committee will stand adjourned.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

       Response to Questions of Senator Harkin and Senator Enzi 
                        by Arnold Mitchem, Ph.D.
        Council for Opportunity in Education (COE),
                                      Washington, DC 20005,
                                                  October 20, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
428 Dirksen Senate Office Building,
Washington, DC 20510.

Hon. Michael B. Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
833 Hart Senate Office Building,
Washington, DC 20510.

    Dear Chairman Harkin and Senator Enzi: Thank you for the 
opportunity to provide testimony at the recent hearing entitled, ``The 
Federal Investment in For-Profit Education: Are Students Succeeding?'' 
as well as the chance to respond to the follow-up questions below. It 
is my intention--through both my previous testimony and my continuing 
work with Congress to advance the TRIO programs--to protect the rights 
and interests of low-income, first-generation students as well as 
learners with disabilities. I hope this stance is reflected in the 
responses below.
    Question 1. You have spent much of your career advocating on behalf 
of low-
income Americans. As I am sure you will agree, education is one of the 
best ways to improve an individual's earning potential. However, 
tuition and fees in all sectors of higher education have risen 
dramatically over the past 15 years at faster [rate] than the rate of 
inflation. At the same time, wages for young college grads, ages 25-34 
have remained relatively flat. Congress has responded by expanding 
Federal student aid programs, but tuition continues to rise. What 
should Congress be doing to address the rapidly rising cost of higher 
    Answer 1. My understanding is that one of the primary drivers of 
increased college costs is reduced support of public colleges and 
universities at the State and local levels. Given the very difficult 
financial outlook for so many of our States, it is unrealistic to 
assume a turnaround in this reality in the near term. In light of this, 
I believe Congress must focus on assuring that the taxpayers and the 
students are getting an adequate return on institutional and public 
investments in access.

    Question 2. Secretary Duncan recently made the following remarks 
about for-
profit schools:

          ``For profit institutions play a vital role in training young 
        people and adults for jobs and for profits will continue to 
        help families secure a better future for themselves. They are 
        helping America meet the President's 2020 goal and helping us 
        meet the growing demand for skills that our public institutions 
        cannot begin to meet alone, especially in these economically 
        challenging times.''

    Given the need identified by the Secretary, how do we eliminate the 
bad actors while ensuring that the good actors can fulfill this needed 
    Answer 2. The implementation of rules on gainful employment and 
incentive compensation is a necessary start to ensuring the bad actors 
do not receive Federal funds to target underrepresented students. As to 
the question of what would constitute the most appropriate scope for 
the regulations, I defer to my colleagues representing non-profit 
public and private institutions. However, I do wish to underscore that 
the regulations do not seek simply to target for-profit institutions, 
casting all as bad actors. Rather, the rules explicitly target those 
institutions that fail to prepare its students for the marketplace and, 
subsequently, enable them to repay their educational loans.
    As I stated in my testimony on September 30, I am not criticizing 
all of the for-profit industry. I agree with the Senators on the 
committee who stated that there are many worthy for-profit institutions 
across the country that provide excellent educational opportunities to 
their students. However, as a lifelong advocate and President of the 
only national organization whose mission is to protect and advance the 
educational attainment of first-generation and low-income students and 
students with disabilities, I believe that it is critical that the 
government regulate this industry to protect students against those bad 
    By hosting this series of hearings and commissioning reports such 
as Emerging Risk?: An Overview of Growth, Spending, Student Debt and 
Unanswered Questions in For-Profit Higher Education and The Return on 
the Federal Investment in For-Profit Education: Debt Without a Diploma, 
this committee is taking the vital first steps to eliminating the bad 
actors within the for-profit sector. It is my hope that, as indicated 
by Chairman Harkin at the September 30 hearing, the committee will 
continue its investigation and achieve an appropriate legislative 

    Question 3. During the hearing, you discussed how many students are 
unable to obtain a copy of their transcript due to unpaid accounts with 
a school. This is a standard practice at many public and non-profit 
institutions of higher education. What other recourse do schools have 
to collect unpaid account balances? What policy recommendations do you 
have to address this situation?
    Answer 3. I appreciate the opportunity to expand further upon this 
issue so as to better reflect the testimonies of the students the 
Council for Opportunity (COE) represents. As you state, many 
institutions make it a practice to withhold transcripts or other 
documents in instances where students have outstanding balances. Yet, 
unlike its non-profit counterparts, it appears that many for-profit 
institutions impose rules whereby a student cannot simply sign up for a 
single course. In consulting with low-income students who had 
previously been enrolled in for-profit institutions, the same theme 
emerged again and again. Simply, many for-profit institutions require 
students to register for a set of courses for an entire term. If 
students dropped out of even one course, which they often did as they 
arrived to the institution ill-prepared, they lost credit for the 
entire academic term. Once coupled with the high cost of for-profit 
schooling and students' inability to pay, it is easy to see how low-
income students at for-profit institutions experience more difficulties 
in obtaining their academic records.

    Question 4. In your written statement, you argue that for-profit 
institutions need to be subjected to greater accountability. As you 
know, I have been a long time supporter of such accountability in the 
TRIO program. The Wyoming TRIO program is a model of what I believe 
needs to be required of the entire TRIO program. It has done a 
remarkable job in providing data and tracking outcomes for its 
students. Given that the TRIO program is federally funded, do you 
believe greater accountability for outcomes should be required of TRIO 
program? If not, why?
    Answer 4. The TRIO programs in Wyoming do, indeed, have a wonderful 
track record. Central Wyoming College's Upward Bound program can boast 
of a 95 percent high school graduation rate. The Student Support 
Services program at Laramie County Community College has a retention 
rate of 83 percent, which far exceeds the institution's retention rate 
for low-income students (51 percent). Meanwhile, 78 percent of students 
who participate in the McNair Postbaccalaureate Achievement Program at 
the University of Wyoming enroll in graduate degree programs. 
Thankfully, such successes are not unique to Wyoming as TRIO programs 
across the country continue to promote student access and success. This 
is evidenced by the data provided by TRIO programs each year to the 
Department of Education.
    Each TRIO grant recipient is required to submit data annually to 
the Department of Education, outlining its progress in meeting the 
goals set forth in its application. This data is then factored into the 
grantee's score upon reapplication for continuing grant funds; thus, 
accountability measures are built into the TRIO grant process. 
Additionally, the Department of Education has embarked on numerous 
studies of TRIO programs and their effectiveness.\1\ To directly 
address the heart of your question, however, COE strongly supports 
accountability within all federally funded programs. Such measures 
protect not only the students we serve, but the public dollars 
entrusted to our program. As such, the research arm of COE--the Pell 
Institute for the Study of Opportunity in Higher Education--partnered 
with the Pathways to College Network to produce a free Evaluation 
Toolkit to enable individual TRIO programs to use data more effectively 
to gauge their progress and identify key ``best practices'' that 
support greater student outcomes.\2\
    \1\ See, e.g., Bradford, C., Muraskin, L, Cahalan, M., & Rak, R. 
(1997). National study of Student Support Services: Third-year 
longitudinal study of results and program implementation study update. 
Washington, DC: U.S. Department of Education; Constantine, J.M., 
Seftor, N.S., Martin, E.S., Silva, T., & Myers, D. (2006). A study of 
the effect of the Talent Search program on secondary and postsecondary 
outcomes in Florida, Indiana, and Texas: Final report from phase II of 
the national evaluation. Washington, DC: U.S. Department of Education; 
and Olsen, R., Seftor, N., Silva, T., Myers, D., DesRoches, D., & 
Young, J. (2008). Upward Bound Math-Science: Program description and 
interim impacts. Princeton, NJ: Mathematica Policy Research, Inc.
    \2\ The Evaluation Toolkit may be viewed online at http://

    Question 5. Does the Council for Opportunity in Education have any 
ongoing relationship(s) with hedge funds seeking to short sell for-
profit schools equities or individuals or organizations suing for-
profit schools?
    Answer 5. No. COE does not have any ongoing relationships with any 
hedge funds seeking to short sell for-profit schools equities or 
individuals or organizations suing for-profit schools.

    Question 6. Does COE believe that financial literacy is important? 
Should efforts be made to improve financial literacy in elementary and 
secondary education?
    Answer 6. COE recognizes the importance of financial literacy for 
first-generation and low-income families. In fact, one of COE's 
priorities is the training of TRIO personnel on various aspects of 
financial aid and financial literacy so that they can better prepare 
their participants for making informed financial decisions about 
college and beyond. For the last several years, the Council has 
provided such training at sites across the country. Most recently, we 
applied for and received funding from the Department of Education to 
continue to conduct these national trainings.
    Additionally, as a result of the recent work of this committee in 
reauthorizing the Higher Education Act of 1965, financial literacy is 
now an even more integral part of the work of TRIO. HEOA explicitly 
incorporates a financial literacy component into each of the TRIO 
programs. Ultimately, we believe that improving the financial literacy 
of our students will lead more low-income students and families to 
better assess college options and make smarter decisions about the best 
fit for them. Such learning will also allow them to maintain an 
understanding of the financial aid process, loan repayment, and general 
money management.

    I hope that the committee finds these responses to be insightful 
and instructive in its efforts to prevent abuses by for-profit 
institutions in their dealings with students. I look forward to 
continuing to work with the committee to ensure that low-income, first-
generation students and students with disabilities are well able to 
achieve their educational pursuits.
                                            Arnold Mitchem,
        Response to Questions of Senator Enzi by Kathleen Bittel
                                   Kathleen Bittel,
                                            Acme, PA 15610,
                                                  October 20, 2010.
Hon. Tom Harkin,
Hon. Michael Enzi,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510-6300.

    Dear Senators Harkin and Enzi: Thank you for the opportunity to 
continue to assist with your investigation. Following, you will find my 
responses to Senator Enzi's questions posed in your letter of October 
13, 2010. I have answered these questions honestly, and to the best of 
my ability. I do not profess to be an expert in the field of education 
reform such as those who sat on either side of me at the September 30, 
2010 hearing. I certainly hope you asked some of these questions of my 
esteemed panel members, as I am certain their expertise in some of 
these areas far outweighs mine.
    In that regard, I note that a number of Senator Enzi's questions 
seemed to presume such an expertise and/or a familiarity with it; 
similarly, some questions seemed to call for a more purposeful, 
scholarly type analysis. While I will do my best to answer based upon 
what I have seen and experienced, let me reiterate that my testimony 
was based solely upon my honest observations and a deep, fundamental 
respect for the decency, dignity and sincerity of those who aspire to 
better themselves and struggle constantly to do so. In the course of my 
experiences, I did not anticipate the need to make any particular, 
itemized or systematic recount of my work history, nor to make a 
comparative study of these experiences relative to any research 
existing on the matter; rather I sought only to relay a common sense, 
intuitive summary of my daily experiences--the tenor and tones of which 
were unmistakable and pervasive, if not calculated, to lead to certain 
outcomes that, too frequently, were bad for both the students and the 
American taxpayer. Under the circumstances, Senator Enzi, I trust that 
you have asked these questions honestly and in that same sense of 
respect and decency--i.e. to seek the input and opinion of a concerned 
citizen, and not to demean my answers or to mischaracterize them later 
for any admitted lack of a more specific expertise.
    Likewise Senator Enzi, and contrary to your tone at the hearing, 
neither my intent nor my participation thus far should be fairly 
characterized as uncooperative. Nor do I deserve any cheap and 
incurious or evasive dismissal as a disgruntled employee. Rather, you 
should consider the difficulties that I have endured to come forward.
    I had spent the previous 3 years working in an environment where it 
was getting harder and harder to do an honest day's work with each day 
passing. The things I was being asked to do were going beyond what my 
moral principals felt were right. But I desperately needed that 
paycheck. I don't have money to invest in the stock market; I'm 
struggling to put gas in my 1999 VW Beetle to make the almost 100-mile 
daily commute to work! But my conscience would not allow me to walk 
away from the so many desperate individuals I came to know while in my 
employ at EDMC. Students with great debt and minimum wage jobs--if they 
had a job at all--were being pushed aside in deference to falsifying 
numbers. I could not live with myself if I did not speak out to try to 
affect change. I went to my employer in good faith, with no results.
    My decision to then reach out to the Senate subcommittee was a 
difficult one for me to make. I had to be prepared to lose everything I 
own because my testimony was likely to put me among the ranks of my 
unemployed graduates along with many, many, many others of my fellow 
Americans. Additionally, I know that the big money corporations have a 
big stake in for-profit education. My employer via the stock market is 
Goldman Sachs. Their history and reputation precedes them. I must 
consider all possibilities that might occur should I speak on a 
national level about the abuses I have witnessed and felt, particularly 
when my adversary will be such a Goliath in the industry as Goldman 
Sachs and EDMC.
    I was very anxious about coming before you on September 30, 2010. 
It is my heartfelt belief that I am risking everything to reveal to you 
the wrong-doings I have personally witnessed. I was not expecting to be 
so disrespected by the very few Republican representatives who bothered 
to show up to the hearing. I certainly could never have anticipated 
that you and your cronies would leave the room in a huff without having 
the courtesy to listen to what I came to say. This is not a Republican 
vs. Democrat issue!
    This issue will affect every American in the future if reform is 
not enforced! If one is not bothered by the idea of America's most 
vulnerable citizens being preyed upon for a multi-billion dollar tap 
into the Federal Financial Aid to Students monies, then everyone should 
be bothered by the idea that we will all be paying more taxes in the 
future to repay monies that unemployed graduates cannot!
    These schools are worse than payday loans and predatory lenders. 
They take our most vulnerable population--the poor and the desperate--
they use as hard a sell as bill collectors do when collecting, and lure 
people with a promise of the most important thing to these people--a 
decent job--and then back it up with bogus statistics. Many of the 
graduates are unprepared and maybe ill-suited for the rigors of the 
professions even assuming there ARE jobs. It is simply not fair to 
mislead these people into thinking they have the aptitude and/or 
talents for their dream jobs, and taking their money is the biggest con 
of all.
    As your investigation has already exhibited, these schools sucker 
students in with promises and lies, many fail, and now they still have 
no decent job, and no future, and a debt that will never go away. It is 
as, or more immoral than predatory lenders and akin to a lottery scam. 
If we can get over the immorality, we are left with another, and 
different problem, and that is the abuse and waste of Federal money 
needed for really educating people to obtain good jobs. There is only 
so much to go around (and getting less every day). If there is to be a 
future for the entire system, the loans need to be paid back.
    This has been difficult for me to stand strong and speak up for my 
voice to be heard, and yet, as frightened and as lonely as the effort 
leaves me, I cannot, nor should you, lose sight of the basic matter of 
decency that is at issue here.
    Indeed, please keep in mind as you read my responses, that I am 
representative of the average American. I am grateful for and honored 
by the opportunity to speak for others who cannot, for after all, the 
opinion of our citizenry is still the foundation of this great country. 
I am ``Jane Q. Public.'' Although not an expert in the field, I did 
witness, and was subjected to what I believe to be abuses in one for-
profit education corporation. That is the scope of my expertise. I came 
forward simply to provide you with the knowledge of what I had 
experienced so that you could take these alleged abuses into careful 
consideration while deliberating on what is in the best interest of 
students and the taxpayers who will foot the bill if students default 
on their loans. I don't have a vendetta against for-profit education. I 
simply want to see it regulated to eliminate the abuses I witnessed or 
to at least temper the rampant, systemic self-interest that, in my 
opinion, has outstripped its basic and decent goals. Whether by intent 
or merely opportunistic indifference, the system now is far too open to 
the abuse of those who rightfully dare to dream; what is at stake is 
not just the taxpayer's money, however, but the beliefs and the 
perspectives and, therefore, the inspiration of our youth and their 
ability to carry us all forward. My hope was only to identify the 
aspects of the problem that I am familiar with, so that a responsive 
and responsible Legislature would leave politics and ideology aside to 
openly consider that matter in conjunction with the experts and act 
    By asking these questions of me, you have afforded me the 
opportunity to provide common sense answers from the common citizen's 
perspective. Senator Enzi, since you have asked this of me, it is my 
expectation that you will give my responses more respect than you did 
my testimony.
                                           Kathleen Bittel.
    You alleged that I was ``critical of the number of staff Argosy and 
the Art Institute had devoted to career planning and placement'' and 
posed the following questions to me:

    Question 1. How many staff do you believe should have been assigned 
to career planning and placement?
    Answer 1. As many as it takes to do an adequate and honest job! In 
my experience there were approximately 1,600 employees bringing new 
students into the programs, and 9 employees dealing with the end 
results, with each class getting larger than the last. It does not take 
rocket science to understand the deficiency in that poor ratio.
    Additionally, these staff should be receiving a level of 
compensation commensurate with the service they are performing, at the 
very least a salary comparable to some of the top enrollment staff. If 
a college or university, regardless of whether they are for-profit, 
public, or private, is going to use these statistics as a marketing 
tool, then they should actually be providing the service to all who 
request it, and also should be paying those who provide this service 
with a living wage. It is simple common sense.

    Question 2. On average, how many staff are assigned to career 
planning and placement at other Pennsylvania public colleges and 
    Answer 2. I never professed to be an expert on public colleges and 
universities. I can only speak with truth, from the perspective in 
which I have lived. I have no knowledge of the statistics of 
Pennsylvania public colleges and universities as I've never had a need 
to. I believe there are many others, with far more expertise than I, 
with whom you could consult for that data.

    Question 3. What steps can be taken to encourage schools to have a 
sufficient number of career planning and placement staff to meet the 
needs of their students?
    Answer 3. There is only one step that matters at this point, and 
that is Federal Legislation! By granting the authority to the 
Department of Education to oversee these schools, uniform guidelines 
can be developed and enforced. I am aghast that the DOE does not 
already have this power and authority over for-profit schools! Why was 
that allowed to happen?
    You stated that I ``suggested that schools should be required to 
spend a minimum percentage of their revenue on education'' and posed 
the following questions:

    Question 4a. How much do you feel should be spent on education, and 
    Answer 4a. I'm not going to pretend to be an expert business and 
education analyst and provide you with statistics and percentages to 
back up my opinion. You have far better qualified experts at your 
fingertips with whom you can consult for those types of details. What I 
can offer you, about my feelings pertaining to the amount of money 
being spent on the ``education'' that is being delivered in many of 
these online programs, whatever it is . . . it is not enough. I speak 
from my own experience.
    I did not have the opportunity to attend college right out of high 
school, my father told me point blank (in 1968) that he ``would never 
waste money on educating a female, as all [we] were good for was 
getting married and having babies.'' So I did just that. I married my 
high school sweetheart, moved to the country, bore three children, and 
we lived happily ever after . . . until my husband was diagnosed with 
testicular cancer. Fearing the worst, I scrambled to achieve a higher 
education so that I could make a living wage to support my children if 
I had to do so alone. I earned 83 credits before my husband died. As my 
children were then approaching the college age, my education took a 
hiatus in deference to finding money for theirs.
    When I accepted the initial job as ``The Assistant Director of 
Admissions'' I was thrilled that EDMC offered free tuition to all of 
their programs. I saw it as a great avenue to complete my baccalaureate 
as I had been studying psychology at the University of Pittsburgh, and 
Argosy University was also known as ``The American School for 
Professional Psychology.'' I enrolled in classes the minute I was 
qualified to do so (an employee must have worked for 6 months to 
qualify for a tuition grant). Excited as I was to begin, I was quickly 
disappointed in the quality of the ``education'' that was being offered 
in the bachelor's program.
    In one of my classes, things started out fine and for 4 weeks the 
lessons went well. But in weeks 5, 6, and 7 the lessons became 
disjointed from the syllabus. It seemed as though the programmer had 
worked on the design of the class, diligently completing 4 weeks of 
curriculum, was then suddenly told the deadline was moved up to 
``tomorrow''. Suddenly nothing matched up. I would spend hours 
contemplating the reading assignment, only to discover that the 
homework assignment was on a completely different topic. Worse than 
that, the topic of the homework assignment was never discussed anywhere 
within the assigned textbook, nor was it addressed in the online 
reading assignment! The last 3 weeks of that class was nothing more 
than an exercise in frustration.
    Within the final weeks of this class there was a lesson on the DSM-
IV. For the uninitiated, the DSM-IV is essentially ``the bible'' of 
psychological study: the ultimate and most important resource. I knew 
of its significance from my studies at the University of Pittsburgh. I 
was mortified when I clicked on the link ``to learn more about the DSM-
IV'' and the link took me to Wikipedia! Now, I don't mean to disparage 
Wikipedia as that site has many useful purposes, but if I am not 
allowed to quote Wikipedia in my homework assignments, then why should 
that be considered to be an acceptable link to the most important 
resource a psychology student has? Particularly when the price tag on 
the ``education'' rivals that of Harvard?
    Trust me, for 2 years I reported this gross deficiency to everyone 
who would listen, and there were many, like you Senator Enzi, who did 
not. From the ``content alert'' function within the lesson to the 
Director of Student Services (my boss), I gave them the course number 
and specific lesson; no one cared. I checked that ``classroom'' shortly 
before I took my leave of absence and, at that time, there had been no 
changes made, including the link to Wikipedia.
    The final blow to pursuing the completion of my degree in Argosy 
University's Bachelor's program came when my academic counselor 
scheduled me to take a ``Statistics 2'' class (they were not titled 
that way) prior to my taking ``Statistics 1''. The classes were 
categorized as math classes, therefore I did not understand, nor was I 
advised, as to the significance of the level I had entered into. I 
taught myself and held my own until the onset of week 5, when I knew I 
was lost. I contacted the newly hired facilitator who was responsible 
for the class, only to have him explain to me the concept of a 
``nominal number''. That was the lesson from week 1! I knew then that 
if I were ever to complete my bachelor's degree in psychology, I was 
going back to the University of Pittsburgh to do so. It was then that I 
switched schools and pursued my passions in Web site design and 
photography at the Art Institute of Pittsburgh ground campus.
    You asked me how I feel about how much is enough to invest in the 
actual product that is being delivered at such an exorbitant price. 
Common sense would say, enough to make the transaction beneficial to 
both parties entering into it. Nobody likes to be ripped off! It is my 
opinion, based on my experience in the online classroom in Argosy 
University's Bachelor of Science in Psychology program that even I, one 
who paid zero dollars in tuition but did invest a large chunk of time 
in my life, did not get what I paid for within this ``educational'' 
system. I feel ripped off even though I did not spend a dime.
    Although I cannot offer you an exact figure as to how much more is 
needed, I can attest that from my experience, that not enough is being 
delivered for the price being charged. I did not see a focus on the 
quality of the education being delivered. Nor did I see adequate 
resolution of student problems and issues (including mine). But the 
worst of all transgressions perpetrated upon the student graduates is 
the complete disregard as to whether they are actually using the skills 
they paid so dearly to learn in a field-related job.
    How much is enough? Whatever amount is needed to provide an 
education commensurate with the price being charged and to fulfill 
promises made at the time of admission. It is simple common sense.

    Question 4b. Should this be required only of for-profits, or all 
institutions of higher education? Why?
    Answer 4b. Absolutely this should be across the board! My opinion 
is that you start with the for-profits, because they are the most 
strife with abuse, and then you build a roadmap to reform for the 
others. One step at a time! Why? Because I have spent the last 8 years 
trying to enable my three children to complete their higher education. 
Higher education was not an option in our household. I forced my 
children into continuing their educations, because I believed that it 
was their best option to fully contribute to our society. My son 
completed his baccalaureate with honors at Allegheny College of 
Meadville, his MFA at the University of Pittsburgh (on a full 
scholarship); my middle daughter completed her baccalaureate with 
honors, at California University of Pennsylvania, and continued on to 
receive a 4.0 in her completion of the Master's of Education--
Instructional Leadership program at Argosy University (on a full 
scholarship). My youngest daughter is a Junior at Penn State 
University, University Park. My point would be, I saddled my children 
with a huge debt to achieve this. I could not afford to pay their 
tuition; I'm struggling to survive on the paltry wages paid to a career 
services advisor at EDMC. If my children did not have access to the 
Federal financial aid system, they would not have been able to reach 
their full potential through education! I fear that our Federal 
financial aid system will follow the path of the mortgage industry and 
that my grandchildren will not have access to the same benefits as 
their parents.
    I definitely believe that my children have been overcharged for 
many of the services they received. I would like to see reform on the 
whole sector. I have no doubt that there are abuses in every college, 
public and private. I, as a taxpayer, call upon you, Senator Enzi to 
pay attention, find them, and fix them!

    Question 5. During the hearing, you responded to a question about 
recruiting violations posed by Senator Franken. In your response you 
suggested that accrediting bodies are not doing enough to combat 
inappropriate behavior at for-profit institutions. Please elaborate on 
this statement and describe specific instances from your own 
experiences at Argosy University and the Art Institute where 
accrediting agencies failed to fulfill their legal obligations.
    Answer 5. I worked for almost 3 years within EDMC-OHE, in several 
different departments. I never once saw a compliance team from the 
accrediting body checking up on what we were doing. I can only speak to 
what I experienced. From my experience, I saw no evidence that the 
accrediting bodies were fulfilling their legal obligations to monitor 
in any way.

    Question 6. You indicated that you have had many good experiences 
with for-
profit schools. Please describe several of these experiences.
    Answer 6. I had one really good online class at Argosy University 
in Forensic Psychology. The teacher was top-notch and experienced in 
her field. In addition, her husband is a police officer. I thoroughly 
enjoyed the high quality exchange in the classroom, and learned much.
    My other examples would all lie within the ground campus at the Art 
Institute of Pittsburgh. My admissions officer is someone I would count 
as a friend, as I would most of whom I met while there. We have 
conversed via email many times since my enrollment, helping one another 
in many ways. My financial aid officer answered my every need 
instantaneously and thoroughly. My academic advisor was not only 
helpful, but fun to talk with. My teachers were top notch. They went 
out of their way to give us what one termed as ``our money's worth.'' I 
once got a response to a question at 2 a.m. on a Sunday morning! I have 
had a wonderful experience on campus in Pittsburgh. I learned much and 
had fun doing it.

    Question 7. Please describe the process you followed as a career 
services advisor to report job placements, including the review process 
by managers.
    Answer 7. First, you must understand the hierarchy. I reported to 
two supervisors who both reported to the head of the department. My 
immediate supervisor monitored everything I did, to the point of 
micromanagement. This person made constant ``suggestions'' as to how to 
convert the graduate into a statistic. I followed, as best I could in 
good conscience, the suggestions, and when it was deemed to be 
``enough'' as per the opinion of my immediate supervisor, it was then 
submitted to the next level supervisor for acceptance. This second 
level supervisor was the ``gatekeeper.'' Because this person had to 
sign their name in acceptance, and more importantly, because this 
person is also an honest individual, it was tough for me to ``sell'' 
placements that I did not in my heart believe were worthy of the status 
of a genuine job placement, but I was forced to try many times.
    Next, you must understand my personality through which I dealt 
within this environment. I am an inherently honest person, I have never 
been any good at lying. I largely gave that up as a teenager, the truth 
is so much easier to remember. Occasionally, life presents us with 
situations where it is impossible not to lie, (Does this outfit make me 
look fat?) but even then I stutter and stumble for words, so for the 
balance of my life I have always sought the truthful path. I can be a 
great salesman if I believe in the product, but the minute I am 
disillusioned, I'm done. I could not defend these questionable 
submissions to the second level supervisor because I never believed 
they should count as placements in the first place. I was merely 
following directions imposed upon me. So when things were questioned, I 
backed off rather than to try to lie. But, it might surprise you to 
know, that not everyone in this world is so concerned with the truth 
and that some actually find it quite easy to lie! Those individuals had 
their stories and documentation strategically specific before they got 
to the gatekeeper and when questioned, had no difficulty in looking her 
straight in the eye and saying whatever was needed to get the 
submission approved.
    The third level of review was at the corporate level. We had 
quarterly closeouts when the placements were tallied into statistics 
for the students who had graduated 6 months prior. We ``closed out'' 
their files and put them away in a common filing cabinet, regardless of 
their true employment status. On this day ``specialists'' from the 
corporate level asked many questions about the placements. The day of 
closeout was pure hell for some, as we were held accountable for the 
graduates we had ``placed''. I was not often asked many questions on 
those days as my submissions were solid. But I did, at times, watch 
some coworkers scramble all day long to answer a multitude of 

    Question 8. Did you ever have submissions regarding student job 
placements rejected or questioned by your supervisors at EDMC? Without 
disclosing identifying information about individual students, please 
describe why any of your submissions were rejected by EDMC management.
    Answer 8. I did submit several students for approval, against my 
wishes, but always at the direction and insistence of my immediate 
supervisor. I have had approvals withheld pending more information. One 
such student, a Residential Planning Diploma graduate, worked as a 
package handler on an assembly line earning minimum wage. The student 
had provided an unsolicited suggestion to his employer advising how to 
redesign the flow of their production to save costs. The graduate 
stated that his redesign saved his company 30% in costs by this new 
work-flow. Although the graduate was employed at the time of 
graduation, he had subsequently quit the job when he was not 
compensated nor recognized by the company for his volunteered 
    At the time of submission, the graduate was unemployed and looking 
for work. I was instructed to submit the graduate as employed in his 
field, relating the volunteer redesign as a field-related task. It did 
not matter that the graduate was no longer employed in any way, as he 
had worked at least 1 day following graduation so he could be counted 
as employed. The submission was rejected at the second level. I was 
told to go back and research the Web site of the former company of the 
graduate, and to find proof that the job description for a package 
handler included a requirement for space planning skills and then it 
would be accepted.

    Question 9. Please provide any copies of company policies or other 
documents to substantiate the claims made in your written and oral 
    Answer 9. Actions speak louder than words. Senator Enzi, if you 
think for a minute that any of these pressures were voiced via the 
written word then you are naive as to how Corporate America really 
works. I did not take a leave of absence from my employer with the 
intention of testifying before the Senate. I did not stockpile 
information prior to leaving, in anticipation of your follow up 
questions. Any documentation that I may or may not have, I am certain, 
would be considered proprietary in nature by my employer. I went, in 
good faith, upon the words of John Kline in a recent ``All Company 
Meeting,'' and reported the wrong-doing I experienced to my Human 
Resources Department. John Kline, president of EDMC-OHE, stated over 
and over again in that meeting, ``If it doesn't feel good, then you 
shouldn't be doing it.'' I trusted he was sincere in his words and 
believed when I took my leave that the company would take care of the 
    In my exit interview with the director of Human Resources, I 
provided answers to all questions except that I declined to provide 
names. It is my belief that since they can track our every keystroke 
and monitor our every call, that if they looked, they could easily find 
the transgressions and the transgressors. Common sense says that all it 
would take would be a phone call to each graduate to confirm the 
information in the documentation. If each advisor had an average of 50 
students in their care, and there are 9 advisors, that would be 
approximately 450 calls. EDMC expects their admissions staff to make 
400 phone calls a day . . . what's so hard about 450?
    Let the guilty parties be found by the proof in their files. The 
identity of the coworker who taught me how to cheat is widely known to 
my supervisors, as well as, to the department head. I had reported the 
misconduct immediately upon it being shown to me early in my time in 
that department; at that time I did reveal the name of the perpetrator. 
Based on conversations I have had over the years, many people within 
the management at EDMC know the identity of this person, and have known 
for years.
    I did provide documentation to the director of Human Resources, but 
said documentation includes personal information pertaining to the 
students. I would prefer if you obtain this documentation directly from 
EDMC, or obtain their permission for me to release it to you. I do not 
believe it would be proper of me to release this personal information 
about students without a directive from my employer.
    It was not until 3 weeks following my whistle-blowing to the 
director of Human Resources at EDMC that I contemplated contacting the 
Senate subcommittee. The window of opportunity to speak to the 
subcommittee was rapidly closing. I saw no evidence that my claim was 
being taken seriously by EDMC.
    I had not received any follow up calls or questions from my 
employer and the most egregious and well-known perpetrator of these 
questionable tactics was, to the best of my knowledge, still employed 
there. I felt a moral obligation to speak from my heart about my 
personal experiences. So I reached out to you for help. But Senator 
Enzi, you refused to listen to me! Consequently, I must question your 
true motivation for your sudden interest in what I have to say now. 
However, since you have asked the questions, it is now incumbent upon 
me to give you my honest answers.
    Finally, to address the only time that I refused to cooperate with 
EDMC: after no attempt had been made to contact me with follow up 
questions for more than a month, I received an email from the director 
of Human Resources at 7:13 a.m. on the morning of my son's wedding. I 
was essentially instructed to submit myself for questioning over the 
weekend, ``Monday at latest.'' At that time, 268 of my closest family 
and friends were traveling from all over the country to a remote little 
meadow on a mountaintop, where we experienced one of the greatest days 
of our lives. Pardon me if EDMC's lack of planning did not constitute 
an emergency on my part! Too little, too late. They had their chance 
and they, like you, did not listen to what I had to say.

    Question 10. Are you aware that EDMC has an anonymous hotline to 
report suspected conduct?
    Answer 10. I am only vaguely aware of the existence of said 
hotline. In all honesty, the only time I remember hearing of its 
existence was in the context of office gossip about an alleged sexual 
misconduct. I thought it was used for personal issues such as sexual 
misconduct and never pursued further information about it. My employer 
may or may not have sent emails and/or posted Web sites, but if they 
did, it was in a manner that was not noticed by me. I was too busy 
trying to find time to actually help my graduates, I didn't have time 
to read all of their many promotional emails. I thought I was doing the 
right thing by following the chain of command upwards to the Human 
Resources director.

    Question 11. Did you ever use that hotline?
    Answer 11. No, as per reasons stated above.

    Question 12a. You quoted me as saying, ``More focus should be put 
into researching and developing programs in those sectors where jobs 
will be needed in the future, and the training should be being 
developed in those areas and not the `easy sell passion fields' ''--
Kathleen Bittel
    Please describe what fields and programs you believe will be needed 
in the future and the basis of your conclusion.
    Answer 12a. Again, let me remind you that I am not here to provide 
expert testimony on any of these points. Since you've asked for my 
opinion, then I can only address your questions through what I saw and 
learned while employed at EDMC. My job entailed searching the job 
markets for ever-changing demographics, nationwide. I have done so for 
approximately 18 months. Although I generally searched for specific 
art-related jobs, oftentimes my graduates lived in remote areas so I 
researched all jobs in a wide radius of their zip codes. I noticed many 
trends in a variety of cities by repeated searching of the job 
    I saw many genuine job opportunities that remained posted for many 
weeks. I would look curiously at those ads to see what the employers 
were looking for because I was puzzled as to why, in this economy and 
jobless rate, were they not finding a qualified candidate? I noticed a 
pattern in these unfilled job openings, they all required a very 
specific training, one that apparently was not commonly out there, 
certainly nothing my schools were offering.
    I am not an expert in this field. I do not have a crystal ball to 
tell you what the trends of the future might be, but I can tell you 
this . . . if you truly want to know what is needed in future 
education, look at what is being asked for in the genuine job 
opportunities being posted. If you isolate every genuine job posting 
that has been posted for longer than 2-3 weeks and investigate what 
they are looking for, compile your data, then you'll have your answer.

    Question 12b. Please describe what you mean by ``easy sell passion 
fields'' and the basis of your conclusions that they will not be needed 
in the future.
    Answer 12b. You need to understand the true nature of Artists to 
understand a passion field. I have a passion for photography and Web 
site design. I chose to spend an exorbitant amount of time pursuing 
further education at the Art Institute because I so desired to know 
more about these fields. Will I ever make any money in either of these 
fields? Probably not, but I wanted the knowledge anyway, and I had free 
tuition through my employer. I had a passion for it. It is important to 
note, where I spent excessive time, the students who are in these 
programs are spending excessive time and money.
    America is blessed with many talented and passionate people. One 
can be very passionate about their art, but that does not necessarily 
equate into true talent in the field. The Arts have never been an easy 
cash flow stream in America. One must be truly talented to rise to the 
level of a good income. I would never conclude that any area of the 
Arts would not be needed in the future! In fact, I would call out to 
America to embrace our artistic talent and support them to eliminate 
the ``starving artist'' syndrome that is so prevalent in this arena!
    What I mean by ``easy sell'' is that there are no portfolio 
requirements for admission to the Art Institutes. In a traditional art 
school, one must prove via a portfolio of their work, that they have 
the talent and ability to complete the program prior to admission. From 
my perspective, it seems to me that all one needs is a pulse and the 
ability to tap into the Federal Financial Aid system to be admitted to 
the Art Institute Online. It is easy to sell something that is 
passionately desired by someone. Artists are passionate people. They 
dream of being able to do something with their art. These programs are 
selling dreams and not the reality of how difficult it is to find 
gainful employment in the Arts. These programs are over saturating 
these markets with minimally talented artists by these sales tactics. 
Moreover, when these students complete their degree, it has been my 
experience that the graduates are not truly helped to find employment 
that is, in fact, within their field of study.
    Case in point: update on the situation of ``the Toys R Us kid.'' 
Since my leave from the department, it has been suggested to him by the 
Career Services Department at EDMC that he apply at Target or Best Buy 
for a job. I wasn't aware that either of those firms included a video 
game design department in their corporate structure. This individual is 
a talented artist, one of the best I have seen in my time in Career 
Services. He is now struggling to repay his Federal loans and is making 
regular payments on them from his $8.30 an hour job.
    Allow me to digress for a moment to point out that I had 
erroneously reported $8.90 per hour as his wage, when it is actually 
$8.30 per hour. He has been with this company for at least 8 years!
    To continue on my point: he reports that the private loan 
company(ies) is/are now hounding him with collection calls for their 
money. He has no more to give them. He was advised by them, that all he 
needed was a letter on the Art Institute letterhead stating that they 
were working with him to find a job and they could arrange a temporary 
forbearance for him until he found one. Despite repeated phone calls 
and emails, the Career Services Department at EDMC has yet to comply 
with his simple request.

    Question 12c. What available Department of Labor and Department of 
Education resources, including data bases, have you used to help 
address this concern?
    Answer 12c. Is this a trick question? Senator Enzi, don't you get 
it? I am Jane Q. Public who has come forward to voice my concerns about 
the abuses I have seen and felt within this corrupt system. What would 
make you think that it is incumbent upon me to research Department of 
Labor and Department of Education resources to find a solution to this 
debacle? Is that not YOUR job?
    I call upon you, Senator Enzi, to do the job your constituents 
entrusted you with! I would extend that challenge to your cronies, 
Senators Burr and McCain, who were equally disrespectful of my 
testimony. From a private citizen's point of view your ridiculous 
political posturing is boring and enraging at the same time. No wonder 
so many Americans tune out instead of paying attention to the important 
issues that will ultimately affect them deeply! Instead of vehemently 
protecting the for-profit industry without looking at the evidence, 
should you not be evaluating every piece of evidence within your reach 
to come to a responsible conclusion? Is it not your sworn duty to 
protect American citizens from the predatory practices of mega-
corporations? Particularly if there exists a possibility that these 
predatory practices could indeed cause the eventual collapse of our 
Federal Financial Aid for Students program and subsequently cause 
higher taxes to be imposed upon the American taxpayer? Do you sincerely 
believe that these activities should be allowed to continue unchecked? 
Have you taken the time to understand the issues at hand?
    Senators Enzi, Burr, and McCain, have you contacted students and 
graduates in your home States of Wyoming, North Carolina, and Arizona 
to listen to their opinions on this topic? Aren't they the people you 
are sworn to represent? It would appear, in my experience, that your 
actions and words speak loudly as to whom you truly represent. In your 
defense, ``you guys'' have given citizenship privileges to these mega-
corporations, so perhaps these are the only ``citizens'' of concern to 
you now?
    It is my hope and belief that many Americans are giving my 
observations more attention and respect than you, Senators Enzi, Burr, 
and McCain, have done in the past, therefore I call to them in this 
public message for a restoration of sanity in America. Am I the only 
one who thinks it is insane for any human being, much less an elected 
official entrusted with our representation, to coldly turn their backs 
on the reality that countless numbers of lives have been forever 
changed for the worse by these predatory practices?
    Your previous histrionics as exhibited in the hearing held 
September 30, 2010 have left me less than confident that you will 
genuinely consider any of my continued testimony. Therefore, since you 
have opened the door for me to speak, on the record, to the American 
citizens whom I stand strong to represent, I choose to now speak 
directly to my fellow citizens:
    Pay attention, America! Although I represent many of you in my 
quest for a solution to these immoral practices being perpetrated upon 
our most vulnerable citizens, the rest of you need to speak up! Pay 
attention to these issues that will most definitely affect you and your 
loved ones in the future! Call your representatives in the Congress and 
Senate and tell them what you think! All of their phone numbers are 
posted on the Internet; it only takes a simple phone call to make a 
    America! Don't simply vote Republican or Democrat this November! 
Pay attention to what the candidates are actually doing with their 
opportunity to represent you! Vote based on whether or not you believe 
the person is capable of truly doing good for our society, not based on 
the commercials and advertisements you are being bombarded with . . . 
most of those are nothing more than smear campaigns and political 
posturing regardless of the political party paying for the ad. It is 
time we interject some common sense, common citizen wisdom into the 
leadership of our country!
    Speak up, America! Rally for Sanity in America! Not everyone can 
travel to Washington, DC on October 30, but I'm pretty sure that most 
of us can make a phone call. Gandhi said, ``We must be the change we 
wish to see in the world.'' Be that change!
    In closing, I would like to thank Senator Harkin for facilitating 
the delivery of Senator Enzi's questions, and for his trust in me that 
I am indeed all that I profess. I would most sincerely like to thank 
Senator Enzi for giving me the opportunity to share my common sense 
opinions for solutions to the problems at hand. If Senator Enzi feels 
the need to consult with me again in the future, I would welcome any 
questions he may have for me. Contrary to the malicious innuendos being 
made about my willingness to cooperate, I have never denied any 
reasonable request. I would like for that to be duly noted as a matter 
of public record.
                                           Kathleen Bittel.
         Response to Questions of Senator Enzi by Lauren Asher
        The Institute for College Access & Success,
                                         Oakland, CA 94612,
                                                  October 27, 2010.
Hon. Tom Harkin, Chairman,
Hon. Mike Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington DC, 20210.

    Dear Senator Harkin and Senator Enzi: Thank you once again for the 
opportunity to testify last month on the high debt and default levels 
for students who attend for-profit colleges, and the need for greater 
oversight of the for-profit education industry to protect the 
substantial interests of both students and taxpayers.
    Please find attached my responses to Senator Enzi's written 
questions, for inclusion in the record. I have also submitted them 
electronically to Terri Roney and Christopher Eyler, per your request.
    I look forward to answering any other questions you may have.
                                              Lauren Asher.
    Question 1. Your written testimony discusses at length the burden 
of student loan debt. Over the past 15 years, tuition and fees in all 
sectors of higher education have increased far faster than inflation. 
Congress has responded by increasing Federal loan limits and the 
maximum Pell grant. However, tuition and fees continue to rise and 
students are forced to take on increasingly more debt. Expanding 
Federal student aid is not the solution to college affordability. 
Therefore, what other steps can Congress take to address the rising 
cost of higher education?
    Answer 1. While college sticker price tuition and fees have been 
rising faster than inflation for some time, Federal student aid as well 
as other sources of student financial assistance from States and 
colleges can and do help many students and families afford college. The 
College Board has found that, on average, net prices have risen much 
more slowly than sticker prices, especially for lower income students 
at public and private nonprofit colleges.\1\ Research has found that 
grant aid supports college participation, and that increases in Federal 
grant aid do not lead to increases in college costs.\2\ However, 
experts have raised concerns about the effectiveness of Federal student 
loans and the impact of higher Federal student loan limits on college 
    \1\ See Figures 8 and 9 in The College Board, ``Trends in College 
Pricing 2009,'' October 2009, http://trends.collegeboard.org/files/
    \2\ ``The Effectiveness of Financial Aid in Improving College 
Enrollment: Lessons for Policy,'' by Bridget Terry Long, Harvard 
Graduate School of Education, NBER, and NCPR, January 2008. Available 
at http://gseacademic.harvard.edu/- longbr/Long_-
_Effectiveness_of_Aid_-_Lesson_for_Policy_(1-08).pdf. ``Costs, Prices 
and Affordability: A Background Paper for the Secretary's Commission on 
the Future of Higher Education,'' by Jane V. Wellman, 2006. Available 
at http://www2.ed.gov/about/bdscomm/list/hiedfuture/reports/
wellman.pdf. And ``A Crucial Safety Net,'' by Patrick M. Callan, 
president of the National Center for Public Policy and Higher 
Education. Published in the New York Times, February 3, 2010 and 
available at http://roomfordebate.blogs.nytimes.com/2010/02/03/rising-
    \3\ ``The Effectiveness of Financial Aid in Improving College 
Enrollment: Lessons for Policy'', by Bridget Terry Long, Harvard 
Graduate School of Education, NBER, and NCPR, January 2008. Available 
at http://gseacademic.harvard.edu/- - longbr/Long_-
_Effectiveness_of_Aid_-_Lessons_for_Policy_(1-08).pdf. ``Class 
Differences,'' by Arthur Hauptman. Published in the New York Times, 
February 3, 2010. Available at http://roomfordebate.blogs.nytimes.com/
    About three quarters of all undergraduate students in the United 
States attend public colleges and universities, where changes in 
tuition are driven primarily by State budgets.\4\ In addition, both 
State and college financial aid programs and policies can affect what 
students actually pay. As shown by our most recent annual report on 
student debt levels, there is very wide variation in the average debt 
of 4-year college graduates from State to State and college to college, 
even among schools with similar sticker prices.\5\
    \4\ Kane, Thomas, Peter Orzag and David Gunter, ``Spending: The 
Role of Medicaid and the Business Cycle,'' The Urban-Brookings Tax 
Policy Center Discussion Paper #11,The Urban Institute, May 2003, 
http://www.urban.org/UploadedPDF/310787_TPC_DP11.pdf. Percentage of 
undergraduates at public institutions from calculations by The 
Institute for College Access & Success on data from U.S. Department of 
Education, National Center for Education Statistics (NCES), Integrated 
Postsecondary Education Data System (IPEDS), http://nces.ed.gov.ipeds.
    \5\ ``Student Debt and the Class of 2009,'' Project on Student 
Debt, The Institute for College Access & Success, October 2010. 
Available online at http://projectonstudentdebt.org/files/pub/
    To help keep college within reach for families of modest means, 
need-based grant aid is essential. Even after the recent historic 
increase, which has helped millions of students enroll and stay in 
college during these tough times, the maximum Federal Pell grant covers 
only about 35 percent of the average cost of attending a public 4-year 
college. Congress should preserve and build on the Pell grant increases 
enacted earlier this year, and also consider ways to encourage States 
and colleges to help increase the total amount of need-based aid 
available to low- and moderate-income students. The share of State 
grant dollars that are distributed based on financial need has been 
declining for more than 20 years.\6\ Even at public colleges, less than 
half of all grants to their own students go to meet financial need.\7\ 
Congress should also be wary of proposals to increase Federal student 
loan limits, since, as noted above, such steps may actually contribute 
to price increases.
    \6\ Trends in Student Aid 2009. The College Board. 2009. Available 
online at http://www.trends-collegeboard.com/student_aid/.
    \7\ Ibid.
    Making college-level data on costs and student debt more 
accessible, comparable, and transparent would not only help students 
and families make more informed choices, but also help researchers and 
policymakers identify both promising and worrisome trends and 
practices. Some colleges, particularly in the for-profit sector, do not 
even disclose prices on their Web site. Congress should ensure that all 
colleges disclose the cost of attendance for each of their programs in 
a prominent, clear, and conspicuous manner, and in a format that is 
easily comparable across institutions. In addition, as noted above, 
there are lots of colleges that are more affordable than their sticker 
prices indicate. It should not be so hard for students and families to 
find out what it might cost someone like them to attend a particular 
college, and to make apples-to-apples comparisons with likely costs and 
debt at other schools. As part of the Higher Education Opportunity Act, 
Congress required colleges to disclose campus averages for net price 
and to provide net price calculators for students to get individualized 
estimates. The calculators become mandatory in October 2011, and they 
are required to provide prospective students with a clear estimate of 
what costs they would still have to cover--through work, savings, or 
loans--after subtracting likely grant aid from the full cost of 
attendance. However, there are already signs that some schools and 
calculator developers are emphasizing a different definition of net 
cost or ``out-of-pocket cost,'' which deceptively emphasizes the cost 
to the student after work study and various types of loans.\8\ Congress 
should send a strong signal about the purpose of the net price 
calculators and ensure that they are working as intended.
    \8\ ``A First Look at Net Price Data,'' by Matt Reed, Institute for 
College Access & Success. Available at http://views.ticas.org/2010/08/
    Congress should also support the Federal collection and 
dissemination of student debt data at the college level, including 
information on both Federal and nonFederal student loans. The only 
college-level data currently available for cumulative student debt are 
from privately conducted, voluntary, unverified surveys. Please see our 
report reference above, Student Debt and the Class of 2009, for 
specific recommendations for improving the amount and quality of 
student debt information available to the public and policymakers.

    Question 2. Congress enacted a number of changes in the Higher 
Education Opportunity Act to address many of the problems you raise in 
your testimony. What additional changes would you suggest to address 
those problems?
    Answer 2. As noted in my testimony, the Higher Education 
Opportunity Act (HEOA) substantially weakened the 90-10 rule for title 
IV student aid. It allowed for-profit schools to immediately count 
institutional loans towards their minimum required 10 percent of non-
Federal revenues, rather than counting them as they are repaid; allowed 
schools to count some Federal title IV aid on the non-Federal side of 
the ledger; and eased penalties for proprietary institutions that fail 
to comply with the 90-10 rule. To provide a more meaningful measure of 
defaults and increase college accountability for student outcomes, the 
HEOA did increase the time period covered by Federal student loan 
cohort default rates from 2 to 3 years after borrowers enter repayment. 
However, this improved measure does not go into effect until 2014.
    To better protect students and taxpayers from undue risk and 
unacceptable practices in the for-profit sector, such as those 
uncovered by the U.S. Government Accountability Office and in this 
series of oversight hearings, the Department of Education should 
swiftly finalize and fully enforce rules restoring the statutory ban on 
incentive compensation and implementing a strong definition of gainful 
employment for career education programs, as supported by a broad range 
of student, consumer, higher education and civil rights 
organizations.\9\ Policymakers should also quickly move forward on 
three additional fronts to help increase accountability for 
institutions and outcomes for students and taxpayers. One is to improve 
the quality and consistency of Federal data on student outcomes, 
including graduation, completion, and job placement for career 
education program. Another is to improve the accreditation and State 
oversight of for-profit colleges, including reducing conflicts of 
interest in accreditation and the ease with which colleges can acquire 
another college's accredited status; addressing the problem of 
accredited schools offering unaccredited programs (as discussed in 
hearings and in my testimony); and ensuring that States have adequate 
and sufficiently independent mechanisms in place to both catch and 
prevent fraud and abuse. Finally, Congress should better align Federal 
funding and incentives with desired student outcomes, by either 
strengthening the 90-10 Rule or putting a stronger and more effective 
mechanism in its place to protect both students and taxpayers.
    \9\ See http://protectstudentsandtaxpayers.org/?page_id=215 for a 
list of organizations that have called for a strong gainful employment 

    Question 3. Debt, default and low completion is a problem for many 
students attending traditional institutions of higher education. Why 
shouldn't the Department's proposed Gainful Employment rule also be 
applied to all institutions of higher education?
    Answer 3. The Department's proposed Gainful Employment rule does, 
in fact, apply to public and non-profit colleges. Federal law specifies 
which career education and training programs are required to ``prepare 
students for gainful employment in a recognized occupation'' in order 
to participate in Federal student aid programs. Covered programs 
include most for-profit programs and all public and non-profit programs 
of less than 2 years. According to the Department of Education, the 
majority of covered programs are at public colleges, and the rule 
applies to more public colleges than for-profit colleges.

    Question 4. The Department of Education received 90,000 comments on 
its proposed Gainful Employment rule. The National Black Chamber of 
Commerce recently ran the following ad in the Washington Post and Roll 
Call (chart). In it, they project that the Department of Education's 
proposed Gainful Employment rule would result in 400,000 students 
leaving postsecondary education each year. Many of the traditional 
institutions of higher education have stated that they do not have the 
capacity to handle a higher volume of students. What other options are 
available to students who now currently attend for-profit programs?
    Answer 4. The projection that 400,000 students would leave 
postsecondary education because the rule comes from a study 
commissioned and paid for by Corinthian Colleges, a for-profit college 
company which opposes the proposed rule. The study's projection is 
based in large part on its assumption that ``capacity will often not 
exist to absorb . . . the displaced students'' in the for-profit 
college sector.\10\ However, this assumption is inconsistent with the 
industry's well-documented ability to rapidly expand its capacity, and 
the fact that most for-profit programs would remain eligible for 
Federal funding. The proposed regulation is designed to create 
incentives for schools offering low-quality or over-priced programs to 
improve them and/or expand programs that are better preparing students 
to repay their loans.
    \10\ The Parthenon Group, ``Assessment of Missouri Estimate of 
Impact,'' September 9, 2010, p. 7, and ``Parthenon Perspective on 
Missouri Gainful Employment Estimates,'' September 2010.
    The Department of Education's Notice of Proposed Rulemaking (NPRM) 
projects that between 16,000 and 32,000 students would not continue 
their postsecondary education. \11\ A recent study by Education Sector, 
an independent non-profit think tank, concluded that the proposed 
gainful employment rule would likely force even fewer programs to close 
(4 percent) than the NPRM projects.\12\ In addition, these estimates 
may overstate the impact of the proposed rule since colleges will have 
time to improve their programs before the rule goes into effect.
    \11\ Notice of Proposed Rulemaking, Federal Register, Vol. 75, No. 
142, July 26, 2010, page 43632.
    \12\ ``Are You Gainfully Employed? Setting Standards for For-Profit 
Degrees,'' Education Sector, September 2010.
    We and a large coalition of advocates for college access, civil 
rights, students and consumers believe that a strong definition of 
gainful employment is one of the best ways to increase student access 
to quality, affordable education and training. That is why more than 40 
organizations, including the U.S. Student Association, Council for 
Opportunity in Education, NAACP, Rainbow PUSH Coalition, National 
Council of La Raza and LULAC, have called on the Administration to 
issue a strong regulation and/or submitted comments in support of a 
strong regulation.

    Question 5. You indicated that there are great limitations in how 
the Federal Government collects graduation rates. What are those 
limitations? How can the Federal Government better capture the true 
number of students completing their course of study?
    Answer 5. As currently collected and reported, official graduation 
rates capture outcomes for only a portion of students who enroll at a 
given college. These graduation rates include only full-time students 
who are new to postsecondary education, are identified by the 
institution to be seeking a degree or certificate, and, for most 
colleges in the country, first enrolled in the fall term of the 
academic year. That means that students who enroll part-time, are 
transfer or re-entry students, or even first enrolled in the spring 
term are generally excluded. An additional limitation of the current 
rates is that they are self-reported by institutions.
    Congress highlighted the need for more robust graduation data in 
the Higher Education Opportunity Act. As required by Section 485 of the 
HEOA, the Secretary of Education has created an expert Committee on 
Measures of Student Success to develop recommendations on how to better 
document student outcomes at 2-year colleges.\13\
    \13\ For details about the Committee on Measures of Student 
Success, see http://www2.ed.gov/about/bdscomm/list/acmss.html#charter.
    More comprehensive means of tracking outcomes could include looking 
at different points along a continuum to gauge students' educational 
trajectories. For instance, all students who enroll in a college in a 
given year are either still enrolled at the end of the year or have 
left the institution due to graduation, transferring to another 
institution, or dropping out. Looking at the outcomes of students who 
left the college at some point within a given time period, such as an 
academic year--as opposed to still being enrolled at the end of the 
year--would provide a better sense of how many students left the 
college with a credential in hand and how many left empty-handed.

    Question 6. During the hearing, you raised the issue of transfer of 
credit. This is a problem throughout higher education. What can be done 
to encourage transfer of credit between institutions?
    Answer 6. While we are not experts on transfer of credit issues, we 
recognize that eliminating unnecessary course duplication through 
appropriate recognition of previous academic work would allow transfer 
students to graduate sooner and reduce costs and risks for both 
students and taxpayers. While this issue is relevant to students at all 
types of institutions, there is reason to believe that it may be more 
problematic for students who seek to transfer from for-profit to public 
or non-profit colleges. For example, many for-profit colleges are 
nationally, not regionally, accredited, and credits from nationally 
accredited institutions are much less likely to be accepted for 
transfer. For recommendations about what can be done to improve the 
transferability of credit, we recommend contacting the American 
Association of Collegiate Registrars and Admissions Officers.

    Question 7. Does TICAS have any ongoing relationship(s) with hedge 
funds seeking to short sell for-profit schools equities or individuals 
or organizations suing for-profit schools? Please describe those 
    Answer 7. A wide range of organizations and individuals interested 
in student financial aid policies and practices regularly contact 
TICAS, including advocates for students, consumers, civil rights and 
college access, colleges, reporters, lenders, and researchers and 
professionals in academia, at think tanks and in the for-profit sector. 
TICAS has no financial interest or affiliation with any hedge funds or 
individuals or organizations suing for-profit schools.

    Question 8. Did TICAS receive a copy of the Department of 
Education's Notice of Proposed Rulemaking on Gainful Employment before 
it was published in the Federal Register and/or released to the public? 
Please describe the sources.
    Answer 8. No, we did not obtain a copy of the Notice of Proposed 
Rulemaking on gainful employment before it was posted on the 
Department's public Web site on Friday, July 23, 2010.

    Question 9. Does TICAS participate in a ``Gainful Employment 
Coalition?'' If so, please explain the goals of the coalition and 
provide a list of members of the coalition and their affiliations with 
companies or organizations.
    Answer 9. TICAS is part of a broad coalition of advocates for 
students, consumers, higher education, civil rights and college access 
that support long overdue steps to enforce Federal law requiring career 
education programs to prepare students for gainful employment in a 
recognized occupation. All of the coalition letters urging the 
Administration to take prompt action to protect students and taxpayers 
from career education programs that over-promise and under-deliver are 
posted on www.
ProtectStudentsandTaxpayers.org. The organizations that created this 
Web site and the partner organizations are also listed on the Web site.

    Question 10. Does TICAS believe Income-Based Repayment Programs are 
beneficial to students? Should use of the IBR program count against the 
student, the program or the school in any way if used by students?
    Answer 10. TICAS is among the strongest supporters the Income-Based 
Repayment Program (IBR), having led the coalition that developed the 
Plan for Fair Loan Payments on which IBR was modeled. We would 
therefore be the first to object to any proposal that would discourage 
students from enrolling in IBR. The proposed gainful employment rule's 
repayment rate does not do that, as many if not most students in IBR 
will be paying down their loans. The proposed rule would, however, 
discourage schools from loading students with debts they cannot repay. 
It would also help discourage schools from pushing borrowers to go into 
forbearance or to consolidate when it is not in the student's interest 
to do so.
    The gainful employment rule's repayment rate measures the extent to 
which former students are successfully paying down their loan 
principal. It appropriately counts loans in IBR whose principal is 
being paid down as being repaid, but not loans in IBR whose loan 
balances are increasing after they leave the school. If the gainful 
employment repayment rate measure automatically counted all borrowers 
in IBR as repaying their loans, then bad-actor schools saddling 
students with excessive debt would merely have to get their students in 
IBR and their programs would be guaranteed to remain fully eligible for 
Federal funding.
    IBR is intended to be a safeguard for borrowers, not a shelter for 
schools, just as mortgage insurance is intended to protect homeowners, 
not to enable builders to build dangerous, substandard homes.
 Iowa Chapter--Mid-America Educational Opportunity 
                    Program Personnel (IA--MAEOPP),
                                         Calamar, IA 52132,
                                                 September 8, 2010.

    Dear Senator Harkin: On behalf of the Board of the Directors of the 
Iowa Chapter of the Mid-America Association of Education Program 
Personnel (MAEOPP), I write in strong support of the op-ed authored by 
you in the September 3, 2010, Washington Post, ``A fairer deal for 
college students.'' As the only higher education organization in Iowa 
with the mission to bring together into a work and study community 
those persons who have an active interest in or who are professionally 
involved in broadening accessibility to success in formal postsecondary 
education for students from low-income and minority backgrounds and 
those who are the first in their family to attend college, the IA--
MAEOPP association commends you for supporting necessary steps to 
ensure that disadvantaged students are protected from accruing 
unmanageable debt and a lack of employment opportunities upon 
    As you state in your opinion piece, career colleges and the for-
profit higher education sector target low-income and first-generation 
students to attend their schools--promising flexible hours and a job-
friendly curriculum. However, as we have seen time and time again, many 
students enter these institutions without guidance on financial aid and 
are subject to unsavory and unfair recruiting tactics. These students 
start their higher education dreams with high aspirations and under 
false pretenses. Unfortunately, many of them are left with no viable 
career options and mountains of debt.
    The Federal TRIO programs assist students in making sound financial 
decisions--from college selection to financial literacy, FAFSA 
completion, and financial aid awareness. However, today TRIO programs 
in Iowa serve more than 1,300 fewer students than in fiscal year 2005 
and that number continues to grow. Yet, as President Obama and his 
administration continue to emphasize, a college degree is now more 
important than ever. While setting necessary and important safeguards 
over career colleges and the for-profit sector through measures like 
gainful employment is commendable, it cannot solve the problem alone. 
Programs like TRIO must be expanded so students who enter into 
certificate and degree programs at colleges and universities in all 
sectors are able to make educated and informed decisions.
    On behalf of all of Iowa's low-income students and families, the 
TRIO programs throughout Iowa thank you and your staff for taking the 
necessary steps to prevent abuse and fraud in the for-profit higher 
education sector and protecting students as they enter into and 
complete their postsecondary education. We look forward to working with 
you on means to further promote educational access and achievement for 
low-income and first-generation students in TRIO Iowa and beyond.
                                        Katherine Whitsitt,
                                             President, IA--MAEOPP.
        Council for Opportunity in Education (COE),
                                      Washington, DC 20005,
                                                 September 9, 2010.
Ms. Jessica Finkel,
U.S. Department of Education,
1990 K Street, NW, Room 8301,
Washington, DC 20006-8502.

Re: Docket ID ED-2010-0PE-0012; Program Integrity: Gainful Employment

    Dear Ms. Finkel: On behalf of the Board of the Directors of the 
Council for Opportunity in Education (COE), I write in response to the 
recent safeguards issued by the Department of Education on the for-
profit sector to protect low-income and first-generation students and 
learners with disabilities. As the only higher education organization 
with the mission to advance and defend the idea of equal opportunity in 
postsecondary education, COE commends Secretary Duncan and the U.S. 
Department of Education for proposing necessary steps to ensure that 
disadvantaged students are protected from accruing unmanageable debt 
and a dearth of employment opportunities upon receipt of their 
certificates or degrees.
    Career colleges and the for-profit higher education sector target 
low-income and first-generation students to attend their schools--
promising flexible hours and a job-friendly curriculum. However, as we 
have seen time and time again, many students enter these institutions 
without guidance on financial aid and are subject to unsavory and 
unfair recruiting tactics. These students start their higher education 
dreams with high aspirations and under false pretenses. Unfortunately, 
many of them are left with no viable career options and mountains of 
    The data on for-profit institutions and the cost of tuition and 
default rates is extremely alarming as it relates to low-income 
students. According to a recent study by the College Board, in the 
2009-10 academic year, the average for-profit institution charged 
$14,174 in tuition and fees and the average community college charged 
only $2,544. In addition, recent data provided by the Department of 
Education showed that 93 of the 100 postsecondary institutions with a 
default rate of 30 percent or more in 2006 and 2007 were for-profit 
institutions--the same institutions targeting disadvantaged students 
without the knowledge and support system to make sound decisions.
    While setting necessary and important safeguards for career 
colleges and the for-profit sector through measures like gainful 
employment is commendable, that alone cannot solve the problem. 
Programs like TRIO's Talent Search and Education Opportunity Centers 
are necessary to ensure that students are making sound decisions 
regarding higher education. These programs provide financial aid 
counseling where participants receive information about college 
admissions requirements, scholarships, FAFSA completion and various 
student financial aid programs.
    On behalf of all low-income students and families, COE thanks the 
Department of Education for taking the necessary steps to prevent abuse 
and fraud in the for-profit higher education sector and protecting 
students as they enter in and complete their postsecondary education. I 
look forward to working with this Administration on means to further 
promote educational access and achievement for low-income and first-
generation students in TRIO and beyond.
                                            Arnold Mitchem,

           Education Management Corporation (EDMC),
                                                September 29, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC 20510.

Hon. Michael B. Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
835 Hart Senate Office Building,
Washington, DC 20510.

    Dear Chairman Harkin and Ranking Member Enzi: Education Management 
Corporation (EDMC) recently learned of the testimony before the Senate 
Health, Education, Labor, and Pensions (HELP) Committee of a current 
employee of our organization, Ms. Kathleen Bittel. Permit me the 
opportunity to provide the committee a fuller context in an effort to 
ensure a fair portrayal of the facts, prior to the hearing on Thursday.
    One of the most important responsibilities of our institutions is 
to help our graduates find productive and rewarding work in their 
fields following graduation. Across the Company, EDMC has over 300 
employees who are dedicated to helping our graduates find the jobs they 
have worked and studied hard to qualify for, and who are also 
responsible for ensuring that the Company accurately and fairly reports 
its success at job placement for the benefit of current and prospective 
    Ms. Bittel is a Career Services Advisor currently on leave, at her 
request, from EDMC Online Higher Education. She has raised issues 
concerning the general conduct of co-workers and the Company. 
Specifically, she has alleged that the Company pressured career 
services staff to improperly report placement statistics and included 
several unspecified examples of alleged improper conduct.
    Ms. Bittel initially made her allegations in August, immediately 
prior to going on leave. Upon learning of the allegations, EDMC, 
consistent with Company policy, conducted a full internal 
investigation. Ms. Bittel refused to provide specific information about 
her allegations despite being informed that the failure to do so would 
hinder the investigation. The internal investigation found no support 
for Ms. Bittel's claims of undue pressure placed upon Career Services 
Advisors at EDMC Online Higher Education to meet placement goals or 
falsely verify graduates' employment was related to their field of 
    We subsequently received from a member of the media a copy of the 
letter Ms. Bittel sent to the HELP Committee, and promptly undertook a 
second investigation led by Jones Day, outside counsel to the Company. 
Thus far, the team assembled by Jones Day has spent hundreds of hours 
interviewing over 20 employees, including all of Ms. Bittel's fellow 
Career Services Advisors and supervisors at EDMC Online Higher 
Education, and reviewing documents in an attempt to determine the 
veracity of the information set forth in the letter. We again reached 
out to Ms. Bittel and implored her to meet with us only to see her 
respond by again refusing to provide specifics or meet with us. Though 
again hampered by the lack of specifics due to Ms. Bittel's refusal to 
cooperate, the continuing investigation by Jones Day has likewise found 
no support for the claims that the Company has pressured employees to 
violate placement policies and procedures.
    Precisely to avoid instances such as those Ms. Bittel alleges, EDMC 
has long utilized a process designed to ensure the accurate collection 
and reporting of graduate employment statistics. This process serves as 
a series of checks and balances to safeguard against an employee's 
ability to report inaccurate data and includes the following steps:

     Placement documentation is obtained by a Career Services 
Advisor directly from an employer or a graduate whenever possible;
     A department supervisor is responsible for checking the 
accuracy of all information entered by Career Services;
     Advisors and confirming that verifications are documented;
     All unusual salary fluctuations and certain waivers from 
placement are independently reviewed by our corporate staff;
     Our corporate staff performs a separate review of all data 
prior to records being finalized, including a review of whether the 
employment listed for each graduate is related to his or her field of 

    In fact, Ms. Bittel's own career services placement portfolio 
revealed instances of job placements she submitted that were identified 
by her supervisors to be of a questionable nature. This data was 
captured through our standard operating processes, investigated, and 
ultimately rejected by supervisors through the course of routine 
reviews. We have provided copies of our career placement policies to 
the HELP Committee's staff in connection with our response to the 
committee's document request.
    Based on our investigations, we believe that Ms. Bittel's 
allegations are unfair to the tens of thousands of men and women 
working to serve students across the country as part of the EDMC 
family. They are particularly troubling in light of her consistent 
refusal to provide to the Company, or our outside counsel, basic 
details necessary to confirm their veracity. As an organization that 
strives to achieve the highest ethical standards, we recognize the 
vital role played by each of our employees. While we are disappointed 
that Ms. Bittel has chosen to make non-specific allegations in an 
increasingly public way, please be assured that we take seriously our 
commitment to work with graduates to assist them in finding employment 
and we will not tolerate employees falsifying career placement data.
    We are committed to thoroughly scrutinizing and taking action 
regarding any inappropriate conduct at any level within the Company. We 
have an anonymous reporting hotline in place to enable employees to 
report suspected misconduct without any fear of retribution. Employees 
found to have violated our Code of Business Ethics and Conduct are 
subject to disciplinary action up to and including termination. We 
fully support efforts to eliminate deceptive practices in higher 
education and remain committed to ensuring that appropriate safeguards 
are in place to ensure that those who may be responsible for purposely 
misrepresenting facts are held accountable. We continually seek to 
improve all aspects of our operations, including our marketing, 
admissions, and career services activities.
    Thank you for your fair consideration of our position on this 
matter as the committee commences hearings on our sector of higher 
education. We look forward to continuing to work with you in good faith 
for the benefit of students.
                                            Todd S. Nelson,
                                           Chief Executive Officer.
           Education Management Corporation (EDMC),
                                                September 30, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC 20510.

Hon. Michael B. Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
835 Hart Senate Office Building,
Washington, DC 20510.

    Dear Chairman Harkin and Senator Enzi: Yesterday, I sent to you a 
letter that conveyed Education Management Corporation's (``EDMC'') 
position concerning the expected testimony of one of our employees, 
Kathleen Bittel, at today's hearing. Since that time we have been given 
a copy of the written testimony submitted by Ms. Bittel. Having 
reviewed that testimony, I believe it is important to focus the 
committee on two aspects of her testimony.
    At the outset, it is important to recognize that the company's 
career services personnel work very hard at assisting graduates in 
obtaining employment in what is currently a very challenging 
marketplace. In fact, as Ms. Bittel points out, we expect our employees 
in career services to produce results for our graduates. We make no 
apologies for holding our employees to high standards. We are proud of 
their success in assisting graduates of our institutions.
    Those high standards, however, are coupled with policies and 
procedures designed to prevent from being reflected in our placement 
statistics the kind of behavior Ms. Bittel identifies. One glaring 
omission from Ms. Bittel's testimony is her failure to discuss EDMC's 
policies and procedures for verifying and approving job placement 
statistics, including the multiple levels of review designed to ensure 
accuracy in reporting that data, which I discussed in my earlier 
letter. We believe these controls work well in practice, and have led 
us to reject what we believe to be improper submissions, including some 
made by Ms. Bittel. Importantly, Ms. Bittel's proposed testimony, while 
alleging that our reporting of graduate results is ``rife with abuse,'' 
identifies no specific instance in which any of the examples she cites 
ended up in our publicly reported data. Thank you again for your fair 
consideration of our position on this matter.
            Sincerely yours,
                                            Todd S. Nelson,
                                           Chief Executive Officer.
           Education Management Corporation (EDMC),
                                                   October 8, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
428 Dirksen Senate Office Building,
Washington, DC 20510.

Hon. Michael B. Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
833 Hart Senate Office Building,
Washington, DC 20510.

    Dear Senators: Thank you for your consideration of my September 29 
and 30, 2010 letters to the committee on behalf of Education Management 
Corporation (EDMC), and for their inclusion in the committee's official 
record. I appreciate your willingness to consider the facts included in 
those letters as the committee heard testimony on private sector higher 
education and, more specifically, testimony from an EDMC employee. I 
respectfully submit this additional communication for entry into the 
official committee record in response to the September 30, 2010 
hearing, ``The Federal Investment in For-Profit Education: Are Students 
    EDMC continues to express its sincere interest in working with 
Congress and the U.S. Department of Education (the ``Department'') to 
develop meaningful solutions to our Nation's higher education 
challenges. We remain profoundly concerned that the Department's 
proposed gainful employment regulations are flawed, lack sufficient 
support, and reflect misguided policy. Likewise, we respectfully 
suggest that the series of hearings held by the committee have provided 
an incomplete view of the higher education landscape and the quality 
and caliber of education proprietary institutions deliver, and have 
failed to further our shared goal of addressing mounting student debt 
and strengthening higher education in America.
    I am particularly concerned with certain specific assertions made 
during the September 30 hearing, both in testimony and as part of the 
committee's report, ``The Return on the Federal Investment in For-
Profit Education: Debt Without a Diploma.'' The following facts--
contained in this letter and the attached key data charts--should help 
provide clarification in order to complete the official record.
                          edmc career services
    On September 30, the committee received testimony that EDMC employs 
only nine full-time Career Services advisors for tens of thousands of 
graduates. In fact, across our education systems, EDMC employs more 
than 250 full-time career services advisors, with 10 advisors dedicated 
exclusively to graduates of its online higher education programs.
    An online higher education career service advisor's average 
``active'' caseload is 55 graduates per quarter, but at any point in 
time a portion of online graduates assigned to each advisor are already 
employed in their field, or not actively seeking employment. Graduates 
may be active military; seeking further education; unable to work due 
to medical difficulties; international students; stay at home parents; 
or employed in an unrelated profession and simply chose to obtain a 
degree outside of their area of expertise. Consequently, we believe the 
typical active caseload of online higher education graduates is 
appropriate. We also note that a significant number of programs offered 
by EDMC schools are relatively new and that we will increase the number 
of career service advisors as the number of graduates from the programs 
        ``fast growing schools'' and ``fast departing students''
    This section of the September 30, 2010 committee report does not 
take into account the underlying reason for the growth of our sector: 
proprietary schools provide greater access, more flexibility, better 
course options, superior technology, and a greater career focus than do 
many public and private not-for-profit colleges and universities. In a 
challenging global economy, today's students and working adults must 
acquire career skills they need to gain a competitive advantage over 
their counterparts. Proprietary schools have the proven ability to 
respond more quickly to marketplace needs and workforce demands than do 
its traditional school peers. This, too, has contributed to rapid 
growth in our sector.
    In assessing students at proprietary institutions who do not finish 
their studies, the committee report fails to note that student drop-out 
rates can vary significantly by student profile. Older students and 
those with fewer financial resources often have other responsibilities 
that require them to take breaks during their pursuit of an education. 
In addition, many traditional-aged students choose not to take any 
coursework during the summer term. Based on the committee's methodology 
for calculating drop-out rates, such students would be counted as 
having dropped out, when in reality they are simply not taking courses 
for several months, with many continuing their education in a future 
term. In fact, over the last 5-year period, students who initially 
enrolled in EDMC schools and stopped taking courses for a period of 
time represented nearly 30 percent of all ``drop-outs,'' which explains 
why graduation rates are higher than the rates implied by the 
committee's calculation. Finally, when comparing similar student 
profiles, retention rates at proprietary institutions are similar to 
those at public and not-for-profit institutions. According to the 
Department's Integrated Postsecondary Education Data System, in 2008, 
for all degree-granting institutions with more than 40 percent of 
students receiving Pell grants, the full-time retention rate was 57 
percent at proprietary institutions, as compared to 60 percent at 
public and 61 percent at not-for-profit institutions.
                     ``large and growing profits''
    The committee report overlooks the fact that, unlike their 
traditional, not-for-profit peers, proprietary colleges and 
universities incur significant State and Federal tax liabilities. 
During calendar year 2009, the 13 largest publicly traded postsecondary 
institutions paid more than $1.2 billion in taxes. Moreover, the report 
also fails to consider taxpayer subsidies, Federal, State, and local 
grants, appropriations, and contracts received by traditional, not-for-
profit institutions. Excluding title IV funding, government bodies 
contributed $150 billion in taxpayer funds to these institutions during 
fiscal year 2008, with over one-third coming from the Federal 
    \1\ U.S. Department of Education, NCES 2010-152, April 2010, Table 
    Furthermore, it should be noted that EDMC invests significantly in 
capital projects, spending $175 million on capital improvements during 
our most recent fiscal year ending June 30, 2010. EDMC has invested 
more than $1 billion in capital projects over the last 10 years, 
expanding facilities to meet demand, investing in higher capital-
intensive programs such as culinary arts, building an online 
infrastructure to expand access to quality education, and investing in 
our facilities and technology to provide students a productive, 
learning environment. We are extremely proud of our investment in the 
student experience.
   ``growing dependence on financial aid'' and ``rapidly increasing 
                           federal dollars''
    The committee report acknowledged, but did not fully address, the 
impact of the demographic profile of large numbers of students 
enrolling in proprietary institutions. Because our schools often serve 
non-traditional students--men and women whose demographic profile, 
family income, and work situations pose obstacles to earning a college 
degree--students in our sector's schools appear to receive a 
disproportionate amount of financial aid when compared with their peers 
at traditional schools.
    A closer examination of the facts shows that while our students--
who tend to be lower income--receive a higher aggregate amount of 
Federal aid, our sector's student outcomes are quite similar to those 
of traditional, not-for-profit schools when comparing similar student 
populations. For 4-year, degree-granting institutions like EDMC (with 
40 percent or more of their student population receiving Pell grants), 
our graduation rate of 41 percent is in line with those at both not-
for-profit and other proprietary institutions and well above the 33 
percent rate at public schools. Likewise, proprietary schools also 
report similar student loan default rates as the overall postsecondary 
education industry when factoring in similar student populations. For 
4-year, degree-granting institutions with 40 percent or more of their 
student population receiving Pell grants, EDMC's cohort default rate of 
7.3 percent is better than the averages reported across all sectors of 
post-secondary education.
    As noted in the report, there have been rapid and dramatic 
increases in the amount of title IV aid awarded to students attending 
proprietary schools. These increases are not related to changes in 
business practices by proprietary schools over the past several years, 
nor are they related to changes in the practices of traditional public 
or not-for-profit schools. Rather, the increases reflect substantial 
increases in the availability title IV aid together with the 
demographics of the students we serve, the collapse of the private 
credit markets and the associated narrowing of private student lending, 
and a deteriorating economy that includes tremendous job losses and 
reductions in or elimination of State grant aid.
    The factors giving rise to increased amounts of title IV aid 
awarded to students at proprietary schools have affected students at 
traditional schools as well. For example, the University of Georgia 
recently reported that its number of Pell grant recipients this year 
grew to 5,322 students, which is a 52 percent increase over the 2 years 
from the 2007-8 academic year. [Testimony of Bonnie C. Joerschke, 
Director, Office of Student Financial Aid, University of Georgia to the 
Advisory Committee on Student Financial Assistance, June 25, 2010]. The 
historic increases in title IV aid adopted by recent congressional 
actions grew Pell grants and student loan funding for students across 
all of higher education, not just the proprietary sector.
    The increases in Federal title IV aid have been championed by many 
members of the Senate HELP Committee, and rightfully so, because a 
priority of the Higher Education Act is ``to prepare students from low-
income families for postsecondary education'' [20 U.S.C. Section 
1070(a)(4)]. These increases, however, are related to the students we 
serve, not to our business model, and apply across all of higher 
education, not just the proprietary sector.
    In closing, I sincerely appreciate the committee's consideration of 
the information EDMC has offered to date, and for its close examination 
of the data and information contained in this letter. As EDMC has 
consistently conveyed to the committee and to the Department, we remain 
committed to doing what is right for the benefit of our students. We 
stand ready to assist in the development of policies that accomplish 
shared goals on behalf of all of our Nation's students. In doing so, 
however, we ask that the committee fully examine facts from across all 
of higher education, not just the small portion represented by 
proprietary schools, and in doing so, disaggregate the data examined so 
that both alleged problems and proposed solutions are examined through 
a lens that can help in addressing the root of the problems. 
Establishing regulations or legislation based on an incomplete view of 
the higher education landscape will only lead to unintended 
consequences and further barriers to a college degree for those 
students who need improved access the most.
            Sincerely yours,
                                            Todd S. Nelson,
                                           Chief Executive Officer,
                                  Education Management Corporation.


                                 Kaplan University,
                                    Cedar Rapids, IA 52404,
                                                  October 12, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
428 Senate Dirksen Office Building,
Washington, DC 20510.

    Dear Chairman Harkin: Kaplan University--Cedar Rapids (KU--Cedar 
Rapids) is committed to ensuring that students who enroll in our 
programs are provided with every opportunity for success. I was 
therefore concerned when I heard, for the first time in connection with 
your recent hearing, that KU--Cedar Rapids student Danielle Johnson 
plans on dropping out of her Practical Nursing program.
    My administrators and instructors take extraordinary steps to help 
our students succeed in and out of the classroom. This level of 
dedication has led to a 92 percent placement rate and 65 percent 
graduation rate in the Practical Nursing program. In fact, 80 percent 
of Ms. Johnson's classmates with whom she started her program are 
successfully progressing toward graduation.
    Practical Nursing is an intensive program that requires a high 
level of student dedication. In addition to classroom studies, 
Practical Nursing students attend hands-on clinical rotations at 
hospitals and care centers. These locations are pre-set instructional 
sites. Clinical rotations are taught to multiple students at the same 
time by KU--Cedar Rapids instructors as part of the students' overall 
course schedule. This is different from an externship where an 
individual student, with campus oversight and approval, works in a job-
related to his/her program for class credit. Occasionally, students are 
able to set up externships with a facility or an office that is close 
to their home.
    Ms. Johnson originally enrolled in the Medical Assisting (MA) 
program before deciding to switch to the Practical Nursing program. The 
MA program requires externships. During her MA enrollment process, she 
was made aware of the possibility of setting up a MA externship near 
her home in Tama, IA. However, when she changed programs, she was 
informed correctly that she would have to complete a Practical Nursing 
clinical rotation at the pre-set clinical instruction sites. Ms. 
Johnson, like all students in the program, underwent 2 days of 
orientation before starting the Practical Nursing program during which 
she was informed in detail about the program's requirements including 
the expectations and locations of the school's 14 clinical sites. 
Furthermore, she was made aware of her clinical rotation location 
during the first term and attended a clinical rotation orientation 
describing the requirements of the sites to which she was to be sent.
    At no time during these orientations did Ms. Johnson question 
whether she could attend a clinical site at her home in Tama, IA. When, 
weeks later during her first clinical rotation, Ms. Johnson inquired 
about the possibility, she was told clearly that, like all other 
students, she would need to attend the approved clinical sites to which 
she was assigned. It is apparent that Ms. Johnson is confusing what she 
was correctly told about MA externship sites with the clear 
requirements of the Practical Nursing clinical instruction sites.
    Ms. Johnson's decision to drop out of her program is especially 
disappointing because her instructors and academic advisors have worked 
diligently to help her be successful. They have provided additional 
tutoring and even offered textbooks on tape to help her study during 
her commute.
    When I learned as a result of your hearing that, despite these 
efforts, Ms. Johnson wished to transfer to another school, I 
immediately searched our records and found that Ms. Johnson had not 
officially requested her transcript from the KU--Cedar Rapids campus. 
Due to the Federal student privacy laws, KU--Cedar Rapids is unable to 
release student transcripts without a written request and student 
release. It is true that our general policy is not to release official 
transcripts until a student's balance is fully paid (a policy identical 
to, for example, that at the University of Iowa,\1\ Drake University 
\2\ and Iowa State University \3\) However, due to her personal 
difficulties, of course we will provide the transcript to Ms. Johnson 
as soon as she requests it. I have sent Ms. Johnson a copy of the 
necessary request and release.
    \1\ http://www.uiowa.edu/ubill/common_questions/answers.html.
    \2\ http://www.drake.edu/accounts/.
    \3\ http://www. public.iastate.edu/registrar/info/transcpt.html.
    Mr. Chairman, I am proud of KU--Cedar Rapids' programs and the 
success our graduates have enjoyed. Since 2006, we have graduated 300 
students from the Practical Nursing program. Over 90 percent of these 
graduates have gone on to successful nursing careers across Iowa at 
institutions such as University of Iowa Hospitals and Clinics, Mercy 
Medical Center and Clinics, and St. Luke's Hospital and Clinics. These 
professional former KU students are serving their communities by 
improving people's lives. While I am saddened that Ms. Johnson is 
choosing to leave prior to achieving her goals, I remain committed to 
working with all of our students to help them to learn, graduate, and 
obtain rewarding careers.
                                   Susan Spivey, President,
                                   Kaplan University--Cedar Rapids.
                                       U.S. Senate,
        Committee on Health, Education, Labor, and 
                                 Washington, DC 20510-6300,
                                                  October 26, 2010.
Ms. Susan Spivey, President,
Kaplan University, Cedar Rapids,
3165 Edgewood Park, SW,
Cedar Rapids, IA 52404.

    Dear President Spivey: This letter is to notify you that your 
letter of October 12, 2010 with regard to Danielle Johnson a student at 
Kaplan Cedar Rapids and a witness at the Senate HELP Committee hearing 
of September 30, ``The Federal Investment in Education: Are Students 
Succeeding?'' has been included in the hearing record.
    However, I would note that the facts in your letter differ from 
previous explanations and interpretations provided to staff, and indeed 
the explanation in the letter that Ms. Johnson must have confused 
information she received about the Medical Assisting program's 
externship sites with the Practical Nursing program's clinical 
instruction sites is not one that was previously provided.
    Ms. Johnson's testimony is unequivocal on this point, and I believe 
it is clear that she was misled during the recruiting and enrollment 
process. Moreover, the misinformation she received caused her to borrow 
loans and enroll in a program that did not best suit her needs.
    The letter also states that Ms. Johnson never officially requested 
her transcript when she decided in May 2010 that she wanted to transfer 
to another institution. As she makes clear in her letter to you, the 
registrar's office told her that they would not send a copy of her 
transcript until she paid her balance, so she never officially 
requested it. Since the hearing, my office has received two additional 
inquiries from other students at Kaplan Iowa campuses who have also 
been told they cannot obtain transcripts until they have cleared 
similar balances.
    I look forward to working together to improve the outcomes of 
students attending Kaplan University including its five Iowa campuses 
and to ensure that students in Iowa and across the country have the 
opportunity and support they need to be successful.
                                                Tom Harkin,

    [Whereupon, at 12:44 p.m., the hearing was adjourned.]