[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
  THE GAINFUL EMPLOYMENT REGULATION: LIMITING JOB GROWTH AND STUDENT 
                                 CHOICE

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

                             JOINT HEARING

                               before the

                  SUBCOMMITTEE ON REGULATORY AFFAIRS,
               STIMULUS OVERSIGHT AND GOVERNMENT SPENDING

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                                and the

                    SUBCOMMITTEE ON HIGHER EDUCATION
                         AND WORKFORCE TRAINING

                                 of the

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 8, 2011

                               __________

                           Serial No. 112-77

              Committee on Oversight and Government Reform

                           Serial No. 112-32

                Committee on Education and the Workforce

                               __________

   Printed for the use of the Committees on Oversight and Government 
                 Reform and Education and the Workforce


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform



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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

    Subcommittee on National Security, Homeland Defense and Foreign 
                               Operations

                     JASON CHAFFETZ, Utah, Chairman
RAUL R. LABRADOR, Idaho, Vice        JOHN F. TIERNEY, Massachusetts, 
    Chairman                             Ranking Minority Member
DAN BURTON, Indiana                  BRUCE L. BRALEY, Iowa
JOHN L. MICA, Florida                PETER WELCH, Vermont
TODD RUSSELL PLATTS, Pennsylvania    JOHN A. YARMUTH, Kentucky
MICHAEL R. TURNER, Ohio              STEPHEN F. LYNCH, Massachusetts
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
BLAKE FARENTHOLD, Texas

                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Dale E. Kildee, Michigan
Judy Biggert, Illinois               Donald M. Payne, New Jersey
Todd Russell Platts, Pennsylvania    Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Bob Goodlatte, Virginia              Lynn C. Woolsey, California
Duncan Hunter, California            Ruben Hinojosa, Texas
David P. Roe, Tennessee              Carolyn McCarthy, New York
Glenn Thompson, Pennsylvania         John F. Tierney, Massachusetts
Tim Walberg, Michigan                Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee          David Wu, Oregon
Richard L. Hanna, New York           Rush D. Holt, New Jersey
Todd Rokita, Indiana                 Susan A. Davis, California
Larry Bucshon, Indiana               Raul M. Grijalva, Arizona
Trey Gowdy, South Carolina           Timothy H. Bishop, New York
Lou Barletta, Pennsylvania           David Loebsack, Iowa
Kristi L. Noem, South Dakota         Mazie K. Hirono, Hawaii
Martha Roby, Alabama
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania

                      Barrett Karr, Staff Director
                 Jody Calemine, Minority Staff Director

        SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE TRAINING

               VIRGINIA FOXX, North Carolina, Chairwoman

John Kline, Minnesota                Ruben Hinojosa, Texas
Thomas E. Petri, Wisconsin             Ranking Minority Member
Howard P. ``Buck'' McKeon,           John F. Tierney, Massachusetts
    California                       David Wu, Oregon
Judy Biggert, Illinois               Timothy H. Bishop, New York
Todd Russell Platts, Pennsylvania    Robert E. Andrews, New Jersey
David P. Roe, Tennessee              Susan A. Davis, California
Glenn Thompson, Pennsylvania         Raul M. Grijalva, Arizona
Richard L. Hanna, New York           David Loebsack, Iowa
Larry Bucshon, Indiana               George Miller, California
Lou Barletta, Pennsylvania
Joseph J. Heck, Nevada


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 8, 2011.....................................     1
Statement of:
    Cortes, Dario A., president, Berkeley College; Karla 
      Carpenter, graduate of Herzing University; Anthony 
      Carnevale, director, Center on Education and Workforce, 
      Georgetown University; and Harry C. Alford, president and 
      CEO, National Black Chamber of Commerce....................    26
        Alford, Harry C..........................................    49
        Carnevale, Anthony.......................................    41
        Carpenter, Karla.........................................    34
        Cortes, Dario A..........................................    26
Letters, statements, etc., submitted for the record by:
    Alford, Harry C., president and CEO, National Black Chamber 
      of Commerce, prepared statement of.........................    51
    Carnevale, Anthony, director, Center on Education and 
      Workforce, Georgetown University, prepared statement of....    43
    Carpenter, Karla, graduate of Herzing University, prepared 
      statement of...............................................    36
    Cortes, Dario A., president, Berkeley College, prepared 
      statement of...............................................    29
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland:
        Letter dated February 3, 2011............................     7
        Prepared statement of....................................    17
        Prepared statement of Ms. Issa...........................    13
    Foxx, Hon. Virginia, a Representative in Congress from the 
      State of North Carolina, prepared statement of.............     4
    Hastings, Hon. Alcee L., a Representative in Congress from 
      the State of Florida, prepared statement of................    76
    Hinojosa, Hon. Ruben, a Representative in Congress from the 
      State of Texas, prepared statement of......................    24
    Waters, Hon. Maxine, a Representative in Congress from the 
      State of California, list of program integrity negotiators.    82


  THE GAINFUL EMPLOYMENT REGULATION: LIMITING JOB GROWTH AND STUDENT 
                                 CHOICE

                              ----------                              


                          FRIDAY, JULY 8, 2011

        House of Representatives, Subcommittee on 
            Regulatory Affairs, Stimulus Oversight and 
            Government Spending, Committee on Oversight and 
            Government Reform, joint with the Subcommittee 
            on Higher Education and Workforce Training, 
            Committee on Education and the Workforce,
                                                    Washington, DC.
    The subcommittees met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Jim Jordan 
(chairman of the Subcommittee on Regulatory Affairs, Stimulus 
Oversight and Government Spending) presiding.
    Present from Subcommittee on Regulatory Affairs, Stimulus 
Oversight and Government Spending: Representatives Jordan, 
Buerkle, Labrador, Kucinich, Speier, and Braley.
    Present from Subcommittee on Higher Education and Workforce 
Training: Representatives Foxx, Petri, Biggert, Platts, Roe, 
Hanna, Ross, Hinojosa, Tierney, Wu, Bishop, Andrews, Davis of 
California, and Miller.
    Also present from Subcommittee on Regulatory Affairs, 
Stimulus Oversight and Government Spending: Representatives 
Meehan, Davis of Illinois, Towns, Hastings, and Waters.
    Also present from Subcommittee on Higher Education and 
Workforce Training: Representative McCarthy.
    Staff present from Subcommittee on Regulatory Affairs, 
Stimulus Oversight and Government Spending: Ali Ahmad, deputy 
press secretary; Robert Borden, general counsel; Lawrence J. 
Brady, staff director; Sharon Casey, senior assistant clerk; 
John Cuaderes, deputy staff director; Gwen D'Luzansky, 
assistant clerk; Adam P. Fromm, director of Member liaison and 
floor operations; Linda Good, chief clerk; Christopher Hixon, 
deputy chief counsel, oversight; Justin LoFranco, press 
assistant; Mark D. Marin, senior professional staff member; 
Kristina M. Moore, senior counsel; Laura L. Rush, deputy chief 
clerk; Matthew Tallmer, staff investigator; Sharon Meredith 
Utz, research analyst; Becca Watkins, deputy press secretary; 
Peter Warren, policy director; Ronald Allen and Kevin Corbin, 
minority staff assistants; Jaron Bourke, minority director of 
administration; Ashley Etienne, minority director of 
communications; Jennifer Hoffman, minority press secretary; 
Carla Hultberg, minority chief clerk; Leah Perry, minority 
chief investigative counsel; Dave Rapallo, minority staff 
director; and Cecelia Thomas, minority counsel/deputy clerk.
    Staff present from Subcommittee on Higher Education and 
Workforce Training: Jennifer Allen, press secretary; Katherine 
Bathgate, press assistant/new media coordinator; Casey Buboltz, 
coalitions and Member services coordinator; Heather Couri, 
deputy of education and human services policy; Lindsay Fryer, 
professional staff member; Amy Raaf Jones, education policy 
counsel and senior advisor; Brian Melnyk, legislative 
assistant; Krisann Pearce, general counsel; Linda Stevens, 
chief clerk/assistant to the general counsel; Alissa 
Strawcutter, deputy clerk; Aaron Albright, minority 
communications director for labor; Ahlgren Kate, minority 
investigative counsel; Tylease Alli, minority clerk; Daniel 
Brown, minority junior legislative assistant; Jody Calemine, 
minority staff director; Megan O'Reilly, minority general 
counsel; Julie Peller, minority deputy staff director; and 
Melissa Salmanowitz, minority communications director for 
education.
    Mr. Jordan. The joint hearing will come to order, and I 
want to thank our witnesses and guests today. Unfortunately, I 
have to leave and get to a meeting in the Whip's office, but we 
are going to be in the able hands of the gentlelady from North 
Carolina, Ms. Foxx. So she will take over, but I guess I 
officially had to hit the gavel. So again I apologize, but we 
are looking for to a great hearing, and I will turn things over 
to Ms. Foxx.
    Ms. Foxx [presiding]. Thank you, Chairman Jordan. There are 
a lot of things going on around here today and people are going 
to be moving in and out, as I am sure most of you know.
    The committee will come to order. I want to welcome 
everyone here today. I appreciate the opportunity to hold a 
joint hearing with the Oversight and Government Reform 
Subcommittee on Regulatory Affairs, Stimulus Oversight and 
Government Spending. And I would like to thank all of our 
witnesses and guests for joining us today.
    Supporting freedom of choice in higher education should be 
a priority for all Members of Congress. Postsecondary education 
opens doors for greater job opportunities and the chance for a 
more stable career path, both of which are critical for 
Americans struggling to make ends meet and support their 
families in this tough economy. Unfortunately, the 
administration's efforts to impose the widely criticized 
gainful employment regulation on proprietary colleges could 
severely limit education and job training opportunities for 
millions of students and inhibit local economic development in 
communities across the country.
    Proprietary colleges are unique institutions with the 
flexibility to offer courses in formats that meet the demands 
of the student population and in subjects based on the needs of 
the local community. The majority of students attending a 
proprietary institution are what we commonly refer to as 
``nontraditional students,'' meaning they are not attending 
college right after graduating from high school. In fact, 48 
percent of students enrolled in a 2-year proprietary program 
and 72 percent of 4-year program students are 25 years of age 
or older. Many of these students have families, full-time jobs, 
or seek job training for career opportunities in a new field. 
The option to take courses in the evenings, on the weekends, at 
an accelerated pace, or even online, can be a valuable 
alternative for students who may otherwise be unable to pursue 
postsecondary education.
    Proprietary colleges serve several fast-growing industry 
sectors, including the computer data processing and health care 
fields. From 2008 to 2009, for example, 79 percent of the 
allied health and medical assisting work force and 11 percent 
of nurses were educated at proprietary colleges. Students who 
choose to attend proprietary institutions often benefit from 
the institution's close working relationship with local 
business owners and hiring managers, which helps the schools 
better develop programs that meet the needs of the local work 
force.
    In a hearing held by the Education and the Workforce 
Committee earlier this year, a hiring supervisor with Orbital 
Sciences Corp. in Arizona praised a local proprietary 
institution's efforts to gain input from business leaders that 
would better prepare students to compete in the job market, 
``Private postsecondary educational institutions actively 
practice continuous improvement through the use of industry 
advisory committees,'' the witness said. ``These advisory 
committees allow industry leaders the opportunity to provide 
constructive feedback and recommendations for curriculum 
enhancement based on graduate performance in the industry. This 
approach has an immediate benefit for employers, as new 
graduates enter the industry armed with the skills and 
knowledge to solve real issues in the workplace.''
    The reams of red tape in reporting requirements established 
by the Department of Education's gainful employment regulation 
could make it more difficult for proprietary schools to create 
the career training programs valued by local businesses. In 
turn, this could force businesses to outsource job 
opportunities to find skilled candidates or even relocate to 
another part of the country. The new unemployment numbers 
released by the Department of Labor this morning show private 
sector job growth remains sluggish. More than 14 million 
Americans are out of work and the unemployment rate continues 
to hover above 9 percent. Our economy added only 18,000 jobs in 
June. That is simply unacceptable.
    It is absolutely critical that Congress do everything in 
its power to rein in harmful regulations that hamper economic 
growth and job creation, and we must start by putting an end to 
the misguided gainful employment regulation.
    I hope today's hearing will shed additional light on the 
serious ramifications that this regulation could have on 
students, employers, job creation in the economy as a whole. I 
look forward to our witness testimony.
    I would now like to recognize Mr. Cummings from Maryland 
for his opening statement.
    [The prepared statement of Hon. Virginia Foxx follows:]

    [GRAPHIC] [TIFF OMITTED] T1822.001
    
    [GRAPHIC] [TIFF OMITTED] T1822.002
    
    Mr. Cummings. Thank you very much, Madam Chairlady.
    There is one principle we should all be able to agree on 
today: our Nation's young adults deserve the best education 
they can get and scarce taxpayer dollars should be used to 
maximize their opportunities to ensure that they receive 
quality instruction and to prepare them to become successful 
members of our Nation's work force.
    This hearing should not be about protecting jobs at for-
profit schools. It should be about creating millions of jobs 
for American students who are striving to better themselves and 
our society.
    Unfortunately, the record of for-profit schools raises 
significant concerns. Generally, students at for-profit schools 
are less likely to graduate, less likely to find a job, more 
likely to have higher debts, and more likely to default on 
those debts than students at public and private nonprofit 
schools. In addition, low-income and minority students, who 
make up a substantial part of the student body at for-profit 
schools, are three times more likely to borrow Federal student 
loans, four times more likely to borrow private loans, and less 
than half as likely to graduate than the same groups of 
students at nonprofit schools. For this reason, nearly every 
major civil rights group in the country, including the NAACP, 
La Raza, LCCR, MALDEF, and others have expressed serious 
concerns about this problem.
    Madam Chairlady, I ask unanimous consent to enter into the 
record a letter sent on February 3rd from 17 major civil rights 
and consumer protection groups relating to this issue and a 
statement from Wade Anderson of the LCCR. I ask unanimous 
consent to have those placed into the record.
    Ms. Foxx. Without objection.
    [The information referred to follows:]

    [GRAPHIC] [TIFF OMITTED] T1822.003
    
    [GRAPHIC] [TIFF OMITTED] T1822.004
    
    [GRAPHIC] [TIFF OMITTED] T1822.005
    
    [GRAPHIC] [TIFF OMITTED] T1822.006
    
    Mr. Cummings. Thank you, Madam Chair.
    I want to make clear that I fully support the educational 
mission of for-profit schools. I have attended numerous 
graduation ceremonies, actually spoke at three graduation 
ceremonies in Baltimore recently. I have met personally with 
their CEOs and presidents, and I have seen the gleaming faces 
of graduates holding diplomas in their hands.
    My concerns relate to whether U.S. taxpayers are fueling an 
incentive structure that encourages for-profit schools to use 
Federal student loans to pay their CEOs exorbitant salaries, to 
pay their shareholders lucrative dividends, and to plow 
millions of dollars into recruitment and marketing campaigns, 
all while spending less on education and job placement programs 
that would actually help students fulfill their dreams.
    For example, the CEO of Strayer Education made more than 
$40 million last year, many times more than the highest paid 
president of a private nonprofit university, and Strayer spent 
more than $100 million on marketing for admissions. In the 2008 
and 2009 school year, Strayer received 77 percent of its 
revenue from hard paid Federal dollars, taxpayer dollars. 
Despite these numbers, Strayer's 6-year graduation rate is just 
14 percent, compared to 55 percent for public schools and 65 
percent for nonprofit schools. Strayer's loan repayment rate is 
25 percent less than half that of public and nonprofit schools, 
and I would venture to guess that there is no member of these 
subcommittees or committee, if you were running a firm, would 
stand for that, that kind of effectiveness.
    A bipartisan coalition of 10 State attorneys general have 
now launched an investigation into deceptive marketing 
practices and misrepresentations by for-profit schools. The 
attorney general of Kentucky, Jack Conway, who was leading the 
probe said, ``I want to make sure these institutions are as 
interested in educating their students as they are in 
collecting Federal loan money. I want to make sure that 
students aren't being misled and left owing tens of thousands 
of dollars in student loans for credits that don't transfer or 
a degree that will not benefit them.''
    Consider the story of Yasmine Issa, a 24-year-old mother of 
twin 3-year-olds who recently divorced. In a written statement 
submitted for today's hearing, she describes her experience at 
Sanford-Brown Institute in White Plains, New York. She said 
this, ``The school's recruiters did not know much or give much 
detail about the program. It seemed like they were just trained 
to be very aggressive and sell the seat for the program, which 
would cost me a little over $32,000. They said I would not have 
a hard time finding a job and that career services at the 
school would be dedicated to helping me find a job. The 
recruiters kept calling me and told me that the seats for the 
program were filling fast and I needed to hurry up and sign up 
for the program.''
    After successfully completing the program, Ms. Issa tried 
for months to find a job. Only then did she discover that the 
program was not accredited and she was unable to become 
certified for her ultrasound degree. As she explained in her 
statement, ``I continued to search for a job. This time I 
visited a hospital in New Jersey. The supervising ultrasound 
tech informed me that if I had attended an accredited school I 
would be able to sit for the registry exam immediately after 
graduation. This was the first time I found out that Sanford-
Brown Institute did not offer an accredited ultrasound 
program.''
    I ask unanimous consent to enter Ms. Issa's statement into 
the record, Madam Chairlady.
    Ms. Foxx. Without objection.
    [The information referred to follows:]

    [GRAPHIC] [TIFF OMITTED] T1822.007
    
    [GRAPHIC] [TIFF OMITTED] T1822.008
    
    [GRAPHIC] [TIFF OMITTED] T1822.009
    
    Mr. Cummings. Our committee has responsibility to determine 
whether taxpayer dollars are being spent effectively and 
efficiently, or are being abused. If billions of dollars in 
student loans could be used to help increase graduation rates 
and employment placement after graduation, rather than 
enriching CEOs and corporate shareholders, our job is to 
examine the best ways to do just that.
    I commend the Department of Education for developing the 
gainful employment rule in an open manner and, in addition to 
this comment period, the Department held six public hearings 
and hundreds of meetings with stockholders.
    With that, Madam Chair, I see my time has run out. 
Therefore, I yield back and would submit my statement.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

[GRAPHIC] [TIFF OMITTED] T1822.010

[GRAPHIC] [TIFF OMITTED] T1822.011

[GRAPHIC] [TIFF OMITTED] T1822.012

    Ms. Foxx. Thank you, Mr. Cummings.
    I now recognize Vice Chairman Ann Marie Buerkle.
    Ms. Buerkle. Thank you, Madam Chairman.
    Earlier this week, Americans across this great Nation came 
together to celebrate Independence Day and the many 
opportunities that this great Nation offers to its people. For 
generations, citizens of this country have strived to obtain 
the American dream.
    However, the persistence of this great recession and 
chronically high levels of unemployment have led many Americans 
to lose confidence in this dream. Just this morning we learned 
that the unemployment rate actually rose to 9.2 percent. One of 
the contributors to the economic morass are the layers of 
bureaucratic red tape and the onerous regulations that stifle 
entrepreneurial activity and suppress the private sector to 
create jobs.
    As part of the committee's commitment to promote job 
creation, today's hearing continues our ongoing examination of 
Federal regulations, regulations that are preventing millions 
of American businesses from creating jobs and putting Americans 
back to work, contrary to the American dream.
    Sometimes the testimony received by this committee is 
unsettling; sometimes it is disturbing. For example, in 
February a small business owner from Ohio was asked, would you 
do it all over again, knowing what the regulatory environment 
is today in this country? His response was disturbing and it 
was heartbreaking: No, sir, I would not. But he is not alone. 
Every hearing brings in more Americans who are frustrated, 
discouraged, and believe that the American Government is 
actually working against them, failing their success rather 
than supporting their efforts to help expand the U.S. economy 
and create jobs.
    Today's hearing will explore an issue that we first learned 
about in February 2011, the Department of Education's gainful 
employment regulation. The regulation is targeted at for-profit 
institutions of higher learning, such as the University of 
Phoenix and Strayer University, to name just two well-known 
schools. These schools provide opportunities for Americans who 
may be the first in their family and to high-risk students, in 
other words, those whose previous collegiate experiences were 
interrupted by family responsibilities, military obligations, 
financial crisis, or perhaps some who were simply not ready to 
persevere as younger students. Additionally, many of their 
programs are designed to fit lifestyles of nontraditional 
students, like working moms, or economically displaced 
individuals who seek to gain new skills so that they can pursue 
a second career.
    In addition to the opportunities that these institutions 
provide to many of our fellow Americans, there is some evidence 
that some bad actors have left some students with unaffordable 
debts and poor employment prospects. In response to these 
concerns, the Department of Education announced final gainful 
employment regulations on June 2, 2011.
    As the committee has reviewed this regulation, it has heard 
from many students, employers, and universities that it will 
hurt both reputable as well as problematic programs equally, 
eliminating postsecondary options for many students.
    As a general matter, institutions of higher learning offer 
important opportunities to Americans seeking to expand their 
skills and earn postsecondary degrees and certificates. The 
unemployment rate for Americans with a Bachelor's degree or 
higher is 4.5 percent less, that is less, than half of the 
national rate of 9.2 percent. Of the 18 million undergraduate 
students in fall of 2009, 9 percent, or 1.62 million, attended 
for-profit institutions, for them, as will the other students 
obtaining a Bachelor's degree, a proven way to combat 
unemployment and to obtain the American dream that so many 
Americans strive for.
    However, according to one study, the gainful employment 
rule will cause 1.2 to 2 million students to decline to enter 
postsecondary schooling over the next decade. This includes 
700,000 to 1.3 million female students, 200,000 to 360,000 
Black students, and 200,000 to 330,000 Hispanic students. In 
addition to eliminating educational choice, Americans employed 
by for-profit institutions may be impacted if their employer is 
forced to eliminate programs or if it experiences shift in 
enrollment. The uncertainty of how this regulation will affect 
for-profit schools may also affect new program development, 
investment and infrastructure, and, worse yet, hiring.
    Concern for these regulations has been bipartisan. House 
Minority Leader Nancy Pelosi voted, along with distinguished 
former chairman of this committee, Ed Towns, and a majority of 
members of the House, to block the Obama administration from 
implementing the regulations. The administration, however, 
ignored the concerns and moved forward with finalizing the 
rules.
    Today we will hear from the most directly impacted by the 
gainful employment regulations: students, schools, and the 
business community who all rely on for-profit institutions for 
educational opportunities. The testimony we will hear today 
will help us examine how these regulations will impact job 
creation as we attempt to foster an economic recovery that puts 
Americans back to work.
    I yield back. Thank you, Ms. Chairman.
    Ms. Foxx. Thank you very much.
    I now recognize the distinguished member of the 
Subcommittee on Higher Education and Workforce Training, the 
gentleman from Texas, Mr. Hinojosa, for his opening statement.
    Mr. Hinojosa. Madam Chair, I am going to request unanimous 
consent that Representatives Alcee Hastings, Maxine Waters, Ed 
Towns, and Danny Davis be permitted to participate in this 
hearing and ask questions of the witnesses. Also include 
Caroline McCarthy.
    Ms. Foxx. We welcome our distinguished colleagues to the 
hearing today.
    Mr. Hinojosa. Thank you.
    Chairman Jordan, Ranking Member Kucinich, and Chairwoman 
Foxx, as ranking member of the Subcommittee on Higher Education 
and Workforce Training, I strongly support the Department of 
Education's final rule on gainful employment for a number of 
reasons.
    First of all, as members of these two committees, we have a 
tremendous responsibility to exercise oversight and ensure that 
these taxpayer dollars are spent wisely and in the best 
interest of students and taxpayers.
    During my 15-year tenure in Congress, I have fought 
vigorously to expand accessibility and affordability in higher 
education by working with my colleagues to increase the maximum 
Pell Grant award to $5,550 and provide our students access to 
affordable student loans.
    These investments in Federal financial aid support 
President Obama's college completion goals and increase 
America's global competitiveness and are indeed necessary to 
educate and graduate greater numbers of students in our 
Nation's colleges and universities.
    At the same time, the Federal Government must be assured 
that students and taxpayers are receiving an adequate return on 
their investment, particularly in the sectors of higher 
education. that are growing rapidly and rely heavily on Title 
IV funds.
    In 2008-2009, for-profit institutions enrolled 
approximately 12 percent of all the students enrolled in Title 
IV institutions. In 2010, the Department of Education awarded 
$9.2 billion in Pell Grants to for-profit colleges, or 25 
percent of the total Pell Grants awarded, and $27.2 billion in 
student loans, representing 26 percent of all student loans 
awarded to students enrolled in for-profit institutions. 
Importantly, approximately 15 percent of for-profit 
institutions derive between 85 and 90 percent of their total 
revenue from Title IV funds.
    We know that students at for-profit institutions are more 
likely to borrow. According to the Education Trust, 97 percent 
of students attending the 2-year for-profit schools took out 
student loans in 2007-2008, compared to just 14 percent of 
students attending public community colleges.
    Students who attended for-profit colleges are also more 
likely to default than students who attended nonprofit schools. 
Whereas 10.8 percent of the 2008 cohort who attended public 
colleges defaulted on loans within 3 years, the default rate 
for students attending for-profit institutions was 25 percent.
    In today's hearing, some of my colleagues may argue that 
the gainful employment regulation limits educational 
opportunity for low-income and minority students. Ladies and 
gentlemen, this is simply not the case. I find these assertions 
troubling and misleading.
    To be clear, this rule is fair, targeted, and promotes a 
rehabilitative approach by giving underperforming programs 3 
years to improve before removing eligibility for student aid. 
The rule targets the worst actors, who I believe are 2 percent, 
who fail to improve student outcomes and incentivizes programs 
to make improvements, lower default rates, and increase 
graduation rates.
    It is important to note that the gainful employment rule 
applies to 55,000 programs, which includes 37,000 programs at 
public institutions, 5,000 at private, nonprofit institutions, 
and 13,000 at for-profit institutions.
    I also want to underscore that the rule does not harm 
minority and low-income students. Instead, the rule helps low-
income and minority students access higher quality programs 
that increase their employment prospects.
    What is more, the U.S. Department of Education estimates 
that only 2 percent of all the programs would ultimately lose 
eligibility under the rule. In fact, programs lose eligibility 
only after failing each metric three times within a 4-year 
period, and no program could be ruled ineligible for Title IV 
funds until the year 2015.
    In closing, I want to say that we must put students and 
taxpayers before company profits. There is no doubt that Pell 
Grant scholarships and affordable student loans expand 
educational opportunity and help our students prepare for 
family sustaining jobs, careers, and life. The final gainful 
employment rule protects the integrity of these vital Federal 
financial aid programs, particularly in the for-profit sector.
    With that, I yield back.
    [The prepared statement of Hon. Hon. Ruben Hinojosa 
follows:]

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[GRAPHIC] [TIFF OMITTED] T1822.014

    Ms. Foxx. Thank you very much, Mr. Hinojosa.
    Members may have 14 days to submit opening statements and 
extraneous material for the record.
    We will now welcome testimony from our witnesses, and I 
will take just a couple of minutes to introduce our 
distinguished witnesses today.
    Dr. Dario A. Cortes is the president of Berkeley College, 
Ms. Karla Carpenter is a graduate of Herzing University, Dr. 
Anthony Carnevale is the director of the Center of Education 
and Workforce at Georgetown University, and Mr. Harry C. Alford 
is the president and CEO of the National Black Chamber of 
Commerce.
    Pursuant to Oversight Committee's rules, all witnesses will 
be sworn in before they testify, and I would like to ask the 
witnesses if they now would rise and raise your right hands.
    [Witnesses sworn.]
    Ms. Foxx. Let the record reflect that the witnesses 
answered in the affirmative. Thank you very much. Please be 
seated.
    We know that we are going to be called for votes very, very 
shortly. In fact, we thought it would be by now, but I am going 
to make a couple more comments, and I think if it is okay with 
the other members of the committee, we will go ahead to 
recognize Dr. Cortes and then we will break to go vote.
    So I would like to recognize Dr. Cortes for 5 minutes. I 
hope you see the lights in front of you. When it turns to 
orange you have 1 minute left; when it turns to red, your time 
is up. And we would appreciate your staying as close as 
possible to the 5-minutes. Thank you very much.

  STATEMENTS OF DARIO A. CORTES, PRESIDENT, BERKELEY COLLEGE; 
   KARLA CARPENTER, GRADUATE OF HERZING UNIVERSITY; ANTHONY 
    CARNEVALE, DIRECTOR, CENTER ON EDUCATION AND WORKFORCE, 
GEORGETOWN UNIVERSITY; AND HARRY C. ALFORD, PRESIDENT AND CEO, 
               NATIONAL BLACK CHAMBER OF COMMERCE

                  STATEMENT OF DARIO A. CORTES

    Mr. Cortes. Good morning, Chairman Jordan, Chairwoman Foxx, 
Chairman Issa, Chairman Kline, Ranking Member Kucinich, Ranking 
Member Hinojosa, Ranking Member Cummings, Ranking Member 
Miller, and other distinguished members of the respective 
committees. A special greeting also to Berkeley College Members 
of Congress, Rob Andrews, Caroline McCarthy, and Ed Towns, to 
whom I sincerely thank for their leadership and support for 
private sector education.
    My name is Dr. Dario Cortes. I am privileged to serve as 
the president of Berkeley College. I applaud you for holding 
this joint hearing and appreciate the invitation to share our 
perspective on the impact of the new Federal gainful employment 
regulation on our colleges, communities, family owned 
businesses, and jobs in the New York and New Jersey region.
    Fully accredited and family owned and operated, Berkeley 
College has four New York and four New Jersey campuses and 
Berkeley College online. We have serious concerns about the 
final Federal rule. On the surface, the question of how it will 
affect our students, faculty, and campuses and programs seems 
quite clear, but the answer is quite the opposite. The honest 
response, however, is we just don't know. The honest and in 
spite of the changes included in the final version of the rule 
is institutions will essentially be navigating a minefield 
blindfolded and using an updated map.
    Before I elaborate on the rule, I would like to provide you 
with a snap shop of Berkeley College. This year we celebrate 80 
years. Since our founding in 1931, during the Great Depression, 
Berkeley College has been a leader in business education. We 
now have enrollment of nearly 9,000 students, including more 
than 800 international students in our Baccalaureate and 
Associate degree programs. Our student demographic is comprised 
of 31 percent Hispanic, 29 percent African-American, 17 percent 
White, 4 percent Asian, and 19 percent other.
    Our female enrollment is 68 percent and 46 percent of our 
students are over the age of 23. Berkeley College's offerings 
are more than 20 career fields, including health sciences, 
information systems, business administration, accounting, 
criminal justice, and fashion marketing, among others. Our 
professors bring a rich array of real world experience to the 
classroom and, additionally, 50 percent of our faculty members 
hold doctoral degrees in their own field.
    I was appointed president of Berkeley College in July 2008. 
Prior to accepting this position at the college, I served in 
senior roles at the Fashion Institute of Technology, Fairleigh 
Dickinson University in New Jersey, University of Maryland at 
College Park, Johns Hopkins University, North Carolina State 
University, and University of Wisconsin at Madison. The 
opportunity to serve both at traditional and private sector 
institutions has really, truly opened my eyes to the positive 
impacts that our sector and our college has on our students, 
many of whom may not have been able to pursue the college dream 
otherwise.
    As Berkeley College has evolved over the past 80 years, we 
have cultivated relationships with our business communities. We 
strongly believe that it is essential for students to gain work 
experience while acquiring their degrees, and this is why the 
internship experience is a graduation requirement at Berkeley. 
We have student success philosophy. This is evident through our 
many programs and initiatives which are aimed at encouraging 
financial literacy, reducing student debt, and increasing 
retention and graduation rates, and providing scholarships and 
grants.
    Turning to the new Federal gainful employment rule, I have 
three major concerns. First, we believe that the gainful 
employment rule will create uncertainty and unnecessary 
confusion about the status of our programs under the rule not 
only for students, for the school, leaving the Federal 
Government the only entity completely in the know about the 
full impact of the rule. Specifically, the initial data the 
Department of Education will provide to schools will measure 
the loan repayment histories of students who graduated or 
entered the loan repayment so long ago, we question whether 
that information is even accurate. Further, the Department's 
proposed alternative data collection means are impractical, as 
most States do not have the appropriate data collection 
infrastructure in place and most institutions like ours, family 
owned schools, do not have the staff or the capability to 
conduct the required service.
    Second, there remains a lack of clarity regarding the debt-
to-income calculation and institutions' ability to exclude 
costs outside of tuition fees such as living expenses.
    Finally, and third, the rule will impose significant undue 
regulatory burdens. This would only result in diverting 
precious college resources away from the core mission of 
teaching and learning and educating our students in favor of 
gathering and maintaining volumes of data to report to 
Washington, none which measure the quality of our institution, 
our programs, or the satisfaction of our students.
    I appreciate the opportunity to address the joint 
subcommittee today and I would be happy to answer any questions 
following my testimony. Thank you very much.
    [The prepared statement of Mr. Cortes follows:]

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    Ms. Foxx. Thank you, Dr. Cortes. I forgot to mention that 
the entire written statement will be made a part of the record.
    Ms. Carpenter, you are recognized for 5 minutes.

                  STATEMENT OF KARLA CARPENTER

    Ms. Carpenter. Chairwoman Foxx and Ranking Member Hinojosa 
and Chairman Jordan and Ranking Member Kucinich and other 
distinguished subcommittee members, thank you for holding this 
joint hearing and for the opportunity to share my educational 
story with you.
    A special greeting to Congressman Petri, a member of the 
Education and Workforce Committee. Thank you for your 
continuing support for students and graduate of career 
colleges. We greatly appreciate it.
    My name is Karla Hammer Carpenter. I am a mother of boys 
ages 15 and 18. I am a 2007 graduate of Herzing University in 
Madison, WI, and now, thanks to my education, I am employed in 
my chosen field of work. I work as a program manager for Quest 
Software, a California-based multinational company that 
develops, sells, and supports enterprise level software for 
public and private sector businesses all across the globe. I 
have been employed at Quest Software since finishing my one and 
a half year of studies to attain my Associate's degree in 
computer networking from Herzing University 4 years ago. My 
degree has proven to be of high value to me and to my employer.
    Prior to starting my family and being out of the paid 
workforce for 14 years, I spent the 10 years after high school 
working without a college degree. After high school and through 
my early twenties, I briefly attended Luther College in 
Decorah, Iowa, the University of Wisconsin-Madison, UW 
Extension School-Baraboo, and Madison Area Technical College. 
After several shifts in my academic focus, I entered the work 
force full-time without a postsecondary degree.
    During a portion of that time, I worked at an emerging 
manufacturing company not far from Madison; you may have heard 
of it, Trek Bicycle Corp. I gave that job up to stay home with 
my children when I started my family. But after 14 years at 
home and removed from the rigors of formal academic study and 
technological changes in the workplace, I found myself forced 
to return to work to support my two boys after the end of my 
marriage.
    The last five and a half year journey from housewife duties 
to my current software management responsibilities has not been 
without great effort. Given the nature of the technological 
shift timed against my absence from the work force, it clearly 
necessitated that I return to college in order to be 
marketable.
    When I decided to return to school, I knew that I needed to 
select the correct college environment that I could afford that 
would mesh well with my existing life. The local community 
colleges had considerable wait lists, could not guarantee me 
availability of my preferred programs, or, most importantly, 
class times.
    Without question, Herzing University offered me the best 
daily schedule via block programming, the best program options 
for viable employment with highly desirable skills in the local 
marketplace, the best graduation time line, incredible faculty 
accessibility and career services, and the best total value of 
any program or school I investigated in the area. I met the 
admissions requirements for every school in the area, but I did 
not think these other schools met my requirements, except for 
Herzing University.
    By participating in this hearing, I would like to give an 
additional voice to many who are seeking educational options to 
better their lives and contribute more fully to our economy and 
society. I attended classes and partnered on projects with many 
students who had little to no family support, financially or 
emotionally, as first generation college attendees, many armed 
services veterans and enlisted soldiers on leave, and many 
various minority members of society who all felt that Herzing 
University was a special and caring environment where faculty 
and staff were invested in helping each and every student 
attain their educational goals.
    While enrolled, my fellow students and I often joked, as we 
learned more about each other, shared our reasons for attending 
school, and disclosing our dreams for our futures, that we 
seemed to be in the ``Hallowed Halls of Second Starts.''
    Just as business practices have changed over the years to 
accommodate global, more technologically advanced business 
operations, so too our schools must adapt in equal measure on 
the educational front. But education policy changes should not 
impact student choice, and I worry about the negative impact 
that the gainful employment rule will have on future students 
who are currently my sons' ages and younger, and other 
returning adult students in the work force currently. My fear 
is that fewer, not more, students will fulfill our national 
educational vision of more Americans obtaining a higher level 
of postsecondary training.
    As a final note, as a returning adult student, I represent 
an important and growing demographic of students that our 
educational institutions will need to serve in order to best 
fulfill our national goals for postsecondary education and work 
force development.
    Six years ago it was I who stood at a crossroads in my 
professional life as I contemplated going back to college. Many 
more prospective students will soon face this same crossroad. I 
only hope that others have the opportunity to attend a college 
as fine as my alma mater, Herzing University. I hope they can 
attend a school of their true choice that meets their needs 
perfectly, just as Herzing University did for me.
    Thank you, and I stand ready to answer your questions that 
you may have.
    [The prepared statement of Ms. Carpenter follows:]

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    Ms. Foxx. Thank you very much, Ms. Carpenter.
    Ladies and gentlemen of the committee, we have 12 minutes 
left in the votes, so if it is okay with you, we will go with 
Mr. Carnevale and then we will take a break to go vote and we 
will come back. We will save the best for the last, Mr. Alford. 
Okay?
    Mr. Carnevale, you are now recognized for 5 minutes.

                 STATEMENT OF ANTHONY CARNEVALE

    Mr. Carnevale. Thank you, Madam Chairwoman, Mr. Chairman, 
ranking members, and esteemed members of the subcommittees. I 
think it is important to say at the outset that I think many 
people, there are some, I suppose, are engaged in this issue 
who don't believe that for-profit institutions make a huge 
contribution to the individuals who attend them or that, in my 
view, at least, they make a huge contribution to American 
higher education. They have offered models that are quicker, 
more tightly tied to labor market value; models that, in light 
of their scheduling, as Ms. Carpenter points out, and their 
structure, are much more friendly to non-traditional students.
    Having said that, I think it is important to note that 
there are some serious problems here, and in that regard I 
think the administration's response with the rulemaking has 
been appropriate, and I think, actually, fairly deliberate and 
accommodating in this particular case.
    We find in all of our research, and we are not alone as 
economists at Georgetown who find this, that there has been a 
fundamental change in the relationship between higher education 
and the economy; not just in the United States, but in the 
world, largely since the end of the 1980-1981 recession, where, 
once we finally tamed inflation by putting lots of people out 
of work, we then turned technology loose and essentially 
restructured the American economy somewhat dramatically over 
the next 20 years. Ms. Carpenter's experience, I think, 
reflects that. The economy we all worked in in the 1980's is 
not the same one that existed by 1995.
    And what happened as a result of that was that automation, 
the simplest force let loose, was able to automate the 
repetitive tasks in every job, and what remained were the jobs 
that included non-repetitive tasks. Those tasks bundled 
together made up new kinds of jobs, sometimes altogether new 
jobs, but changed the jobs that already existed. A mechanic who 
used to repair a car needed mechanical skills. Now they need 
electro-mechanical skills and an understanding of computer 
operations to repair a car. Any of you who have faced that 
awful moment, or at least of my vintage, I remember as a boy, 
if I could open up the hood of a car, I could fix it. A year or 
two ago I faced a broke down car, opened the hood and finally 
turned away in disgust; I had no idea what was going on in 
there.
    So that fundamental shift has raised the value of 
postsecondary education, and we have been under-producing 
postsecondary education ever since 1983-1984. The evidence of 
that is plain. The earnings returns to postsecondary education 
and training relative to high school have risen from 30 percent 
to 84 percent, although this is cloaked over more and more in 
this recession, where the return has dropped down to 74 percent 
higher than a high school degree. But the bottom line here is 
that in the United States and in most advanced economies, if 
you are going to go anywhere after high school, you have to get 
some postsecondary education or training first.
    And the second change that I think is of great note here 
and makes this ruling sensible is that the relationship between 
the texture of education is changed as it relates to the 
economy, and what I mean by that is it doesn't matter so much 
anymore which degree you get, whether you get a certificate, an 
industry-based certificate, a BA, a graduate degree.
    What matters more and more is what you take, not the 
degree. Still true that, on average, if you get a BA you will 
make more than a person with a certificate. But if you get a 
certificate in engineering, you will make more than almost 40 
percent of BAs. There is a vast shift in the relationship 
between education and the economy. It is no longer just the 
preferred way to join the middle class, it is becoming the only 
way.
    So there are still some high school jobs left, but there 
are only about one of those for every 15 people who get no 
education and training after high school, and those jobs pay 
about $35,000 a year. With experience and promotion, you can go 
to $45,000 or $50,000 in some of those jobs, but most of them 
not so. And those are the jobs that are being eliminated or the 
education requirements are increasing.
    So it becomes important that we focus on the programs, not 
the degrees. And programs have wildly different earnings 
returns, even at the BA level. If you go get a degree in 
petroleum engineering, you will make $120,000 a year, if you 
become a high school counselor, you will make, on average over 
40 years, about $30,000 a year. There is a difference there of 
almost $2 million. So it matters. We need to have much better 
information on the relationship between programs and earnings, 
and that, in the end, is what this set of regulations begins to 
do.
    I think in the end these regulations are exactly of the 
right sort. They are regulations that will make markets work 
better. Information is what makes markets work better. The 
collapse in the financial community was in large measure due to 
the fact that we had no information. Bankers didn't know any 
better who they were loaning money to than they knew the people 
who printed the money. So the postsecondary system, people, I 
think, students, parents, and legislators, have a right to know 
what the earnings returns are to higher education programs, 
especially now when public resources are so precious. We are at 
least $30 billion low if we intend to meet the President's goal 
of becoming the number one Nation in the world in postsecondary 
attainment.
    Ms. Foxx. Mr. Carnevale, thank you very much.
    Mr. Carnevale. Thank you.
    [The prepared statement of Mr. Carnevale follows:]

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    Ms. Foxx. Ladies and gentlemen, I think we should go vote, 
and then I would urge you to come back immediately after the 
last vote and we will continue the hearing.
    Thank you all very much, and I am sorry to have this 
recess, but we need to go vote. Thank you.
    [Recess.]
    Ms. Foxx. We want to thank everyone for their patience in 
the delay that we had because of votes. We appreciate your 
coming back today. And I like to reward people being on time 
and doing what they are supposed to do, so I think we will go 
ahead and ask Mr. Alford if he now would present his 5 minute 
testimony. Thank you, Mr. Alford.

                  STATEMENT OF HARRY C. ALFORD

    Mr. Alford. Thank you, Madam Chair. Committee Chairs and 
distinguished members of this joint subcommittee, thank you for 
allowing me to testify today. I am president and CEO of the 
National Black Chamber of Commerce, which represents the 
fastest growing segment of American small business, Black-owned 
businesses.
    At the inception of the NBCC in 1993, there were 300,000 
Black-owned businesses doing $33 billion in annual sales. Today 
there are more than 1.9 million Black-owned businesses doing 
over $138 billion in annual sales. This fantastic growth leads 
to a growing demand for a larger educated workforce.
    But a study by Stanford University shows unemployment among 
all teenagers at 24.2 percent; among Black teenagers, 
regardless of gender, the rate is 41.6 percent; but among Black 
teenage males the rate is a very dangerous 45.5 percent. Nearly 
half of that population is unemployed. The percentage of these 
young people who will be enrolling at the University of 
Southern California, Ohio State, etc., will be very small, 
indeed. The best alternative is proprietary schools.
    The above is made all the more crucial when you look at the 
educational access. The Bureau of Labor Statistics data shows 
that Americans with less than a high school diploma have an 
unemployment rate of 14.7 percent; those with a high school 
diploma, 9.5 percent; those with Associate degree or 
certificate, 8 percent; and those with a Bachelor's degree, 4.5 
percent. We can reach but one conclusion. It should be the 
primary goal of the Federal Government to provide as many young 
minority Americans as broad a range of educational 
opportunities as possible.
    Why is the Department of Education targeting for-profit 
schools with a vengeance that will harm a certain segment of 
our population? The gainful employment rule is a job killer. 
Incredibly, proprietary schools serve 52 percent of these high-
risk students, while nonprofit schools serve only 9 percent and 
public schools serve a paltry 6 percent. Furthermore, 49 
percent of the students enrolled at for-profit institutions are 
low-income, as opposed to just 18 percent; at public schools, 
also 50 percent of the students attending for-profit colleges 
are minority students, compared to just 34 percent at public 
schools.
    So the problem at hand is that minority students are 
already at a great disadvantage. And now the Department of 
Education has made it worse by shutting down a major path to 
education and jobs. The Department of Education has drifted 
over into a lane reserved for the Congress of the United 
States, making laws. That the department has created this rule 
is harmful enough. The process was definitely flawed, if not 
corrupted. We want to draw your attention to questions that beg 
your intervention.
    We know that secret meetings took place between department 
officials and Wall Street short-sellers that were placing heavy 
bets against the share prices of for-profit schools. What was 
going on?
    We know that the department assembled a covert group of 
allies, including former employers of department staff, short-
sellers and competitors of the for-profit industry, and that 
they traded secret information against the code of the 
rulemaking process. The question is what was going on?
    We also know that department officials elicited negative 
information about for-profit colleges from the secret cabal, 
and the information was provided even when it was deceptively 
collected. What was going on?
    We know that the department relied heavily on a now 
discredited GAO reported, but never withdrew this report from 
their process of consideration. What was going on?
    We know that the department assembled a biased rulemaking 
committed composed of a 16 to 1 ratio, meaning that there was 
no opportunity for the industry and the minority students they 
represent to have a fair voice in the proceedings. What was 
going on?
    We know that the department was intent on punishing 
proprietary colleges from the very beginning, even while 
America's higher education challenges confront every type of 
institution. So what is the joint subcommittee going to do to 
address student debt, academic performance, and occupational 
preparation at every college in our Nation?
    In conclusion, the gainful employment rule is now the law 
of the land and will have grave consequences on hundreds of 
thousands of minority students. We want to remind everyone that 
to qualify to public assistance programs, proprietary schools 
must meet exactly the same academic standards set by the same 
accreditation agencies as Harvard or Penn State. The fact is 
that the opponents of proprietary schools are really trying to 
mask the same concerns that all colleges share, such as student 
debt, academic performance, and occupational preparation.
    The Black employers that I represent hope you will work 
together to find solutions to these vexing challenges, rather 
than make a scapegoat out of for-profit schools. The biased and 
corrupt process which produced this rule should be reversed 
through the Congressional Review Act or some other means.
    Thank you, and I look forward to your questions and 
discussions. I yield 8 seconds.
    [The prepared statement of Mr. Alford follows:]

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    Ms. Foxx. You get the star, the gold star for not going 
over your time today, Mr. Alford. Thank you very much for your 
comments and, again, we appreciate your patience in waiting for 
us, and we are very happy that Mr. Kucinich has joined us.
    I just want to make a couple comments, brief comments, and 
then I am going to ask a couple of questions. Then we will take 
turns, as members of the committee, asking questions of the 
panel members.
    I first want to read a statement that was in the letter 
from Congressman Towns, who asked us to have this hearing 
because I think it fits well into a comment that I would like 
to make based on Mr. Carnevale's comments. In Mr. Towns' 
letter, he says, ``Mr. Chairman, I know there is good faith 
disagreement as to whether the GE regulations, as written, are 
right or wrong, needed or not needed. But there is one 
principle on which we all should be in agreement, and that is a 
rulemaking that allows non-elected government officials to 
establish policy and have the force of law must be fair, 
unbiased, and transparent.'' And then he asks that we have this 
hearing as soon as possible.
    Mr. Carnevale, I was very interested. I am a person who has 
had some experience in higher education and I was very 
interested in your comments about the need to focus on programs 
and not degrees. I have long agreed with that. I very much 
agree, I think even more so, that we should focus on skills, 
and not necessarily on degrees. I don't agree with you that 
regulations make markets work better, necessarily, but I do 
think that having information is very important, which is a big 
point that you made.
    And it seems to me that if that is true for one sector of 
higher education, it is true for all sectors of higher 
education; that we need students to have accurate information 
about the return on their spending or their investment. I don't 
think government makes investments, but people make 
investments; they make investments in money and in time. 
Therefore, I think you made a great case for the fact that if 
we are going to have regulations like these, they should 
certainly apply to everyone. So I appreciate very much the 
comments that you made.
    I would like to ask Dr. Cortes a question. As you know, the 
Department of Education recently made a number of changes to 
the final gainful employment regulation. Do these modifications 
allay your fears that the regulations are going to negatively 
impact students attending proprietary colleges?
    Mr. Cortes. Chairwoman Foxx, I do believe that even with 
the redefined rules, the rule itself is complex, difficult to 
manage from both ends, from our institutional ability to carry 
the task of identifying and to getting the data correctly. I 
think it is also very difficult from the Federal side to really 
be able to coordinate the ability to gather all the data and 
then having a matrix that allows them to determine and make 
decisions for institutions without having all the dots 
connected.
    So I do believe that the rule, although it is more flexible 
than it was in the original, it still doesn't have the 
transparency, it doesn't have the connection that is needed for 
us in the trenches, as educators, to be able to spend, as I 
said earlier, significant amount of time gathering data and our 
concern about teaching and learning and providing the education 
that we need to our students.
    We had taken significant amount of time at Berkeley College 
alone to try to gather the details that we need by July 1st to 
be able to comply with some of the rules that just came down, 
so I think institutions in our sector in particular have been 
affected by this significant and targeted way in that not all 
the institutions are treated equally, that this GE rule is only 
applied to the for-profit institutions. I think it is unfair 
and not equitable.
    Ms. Foxx. Do you want to say anything more about the Social 
Security Administration data that the department plans to use? 
I mean, you touched on it in your comments. And we only have 
about 30 seconds, so let me let you keep that in mind.
    Mr. Cortes. Absolutely. I think not only the privacy of the 
data and the confidentiality of Social Security information, 
but again, as I said earlier, I don't see how that data base, 
along with the information that is being required, is going to 
be able to be managed in a way that will maximize the ability 
to make choices by the Federal Government to our institution's 
welfare and well-being.
    Ms. Foxx. Thank you very much.
    Mr. Kucinich, I would like to recognize you for 5 minutes.
    Mr. Kucinich. I thank my friend, the gentlelady, the Chair.
    I want to speak about the high default rates at for-profit 
institutions. Staff, could you put up display chart number two, 
if it is available? Thank you.
    According to the February 2011 data released by the 
Department of Education, defaulters from for-profit colleges 
disproportionately account for 48 percent of student loan 
defaults across all higher education sectors. It is also true 
that 64 percent of the students at for-profit colleges are low-
income minority students. Since these students are over-
represented at for-profit schools, they make up the majority of 
the default rates caused by for-profit institutions.
    Now, Dr. Carnevale, some for-profit colleges have argued 
that their high default rate is due to the fact that they 
disproportionately serve low-income minority students who are 
more likely to have financial stresses, and there is an 
assertion that that is the reason why you end up with so many 
defaults. But I am just wondering if a more accurate 
description of defaults is that low-income minority students at 
these for-profit colleges are more likely to default because 
for-profit colleges have tuition costs that are, in some 
instances, eight times greater than nonprofit public colleges 
and thereby put those minority students who attend them in 
greater jeopardy just because of the sheer amount of expense 
and debt that they have to incur.
    I would like your response to that.
    Mr. Carnevale. The social science on this is interesting 
and somewhat surprising, frankly, to me. We ran these numbers 
and expected to find, as we did, that there is a 
disproportionate affect on minorities and low-income students. 
But when you run statistical tests to figure out what the cause 
is, what comes through very clearly, and, again, it surprised 
me, was that the cost and the low wage rate is the principal 
determinant of default. There does seem to be, in some ways, 
when data----
    Mr. Kucinich. You want to explain that? When you say cost 
and the low wage rate, what do you mean?
    Mr. Carnevale. That is, the reason people aren't paying the 
money back is they aren't making enough money to do it, which I 
know is, in some sense, logical, but you never expect that in 
social science. So it was really very striking in the numbers. 
That is, the fact that people don't repay is because they can't 
repay, and----
    Mr. Kucinich. But let's look at another variable here, 
which is a dependent variable, because when you look at the 
fact of the cost that nonprofit colleges have for an education, 
there is multiples of that cost, as opposed to other colleges. 
Wouldn't you agree with that?
    Mr. Carnevale. Oh, sure. But one of the things that----
    Mr. Kucinich. You may not making enough money, but the 
mountain you have to climb of debt is much larger if you are 
going to a for-profit college.
    Mr. Carnevale. Yes. And the size of the debt does appear to 
have a direct relationship on repayment; that is, people are 
intimidated by the debt, I guess is the way to say it.
    Mr. Kucinich. But let's not miss the connection. The size 
of the debt comes from the amount of money that people are 
charged for their education.
    Mr Carnevale. Yes. This is part of this whole discussion 
that really is sort of a couple horizons away. We are talking 
about, in the end, in the short haul, whether the programs are 
worth it. But then there is a question that we haven't really 
addressed yet, is should the programs be least cost. That is, 
you can get two programs that are essentially the same thing; 
one in a community college will end up costing you eight grand 
or nine grand, and a for-profit college cost you multiples of 
that. Should the government be concerned about the cost 
differential? That really doesn't come up much in this debate.
    Mr. Kucinich. Well, it is coming up now.
    Mr. Carnevale. Yes, you have brought it up.
    Mr. Kucinich. And I think that this committee is the proper 
forum for us to determine whether or not the low-income 
minority students who are experiencing these high rate of 
defaults are in a situation where they are boxed in by the 
extraordinary cost at for-profit colleges, because when you are 
coming from an inner city background, that is where I came 
from, I can tell you that going to college is like a dream and 
people will do anything to do it, including, Madam Chair, 
taking on extraordinary expenses and getting over their heads 
and sometimes putting themselves in a position where they are 
in debt for the next 10, 15 years of their life. But the 
default rate, how do we deal with that?
    I want to thank the Chair for her indulgence in giving me 
some extra time here. Thanks.
    Ms. Foxx. Thank you, Mr. Kucinich.
    Mr. Petri.
    Mr. Petri. Thank you very much, Madam Chairman, and thank 
all the panelists for the effort that you made to be here today 
and to prepare your testimony.
    I had a couple questions of Ms. Carpenter. First, I 
wondered if I could give you an opportunity if you had any 
reaction to the points made by your fellow panelists, I would 
be interested in hearing them.
    Ms. Carpenter. Thank you very much, Congressman Petri. I do 
have some impressions. As a layperson, a parent, a graduate, 
clearly, I am thrilled that there is more public discourse on 
the topic of educational reform as a whole. I think it is a 
vital vehicle by which Americans of all socioeconomic sectors 
in our society can use to attain their personal pursuit of the 
American dream.
    And given my experience in reentering the workforce in a 
dramatically changed economic environment, transitioning from 
an industrial-aged society, of a more nationally oriented 
business economy to one that is far more global, more 
technologically advanced, clearly, we are living in times of 
transition and, once again, as I stated in my testimony, we are 
now faced, as a Nation, in addressing the appropriate responses 
in the educational forum to meet the demands and needs of our 
society and our economy. So thanks to all of you for giving 
very important consideration to what the best reform would be.
    Beyond that statement, I would really defer to other people 
who are more professionally invested in the process to speak 
specifically to the issue of what is before us for the gainful 
employment regulation. I am not as well informed as others on 
the panel who have given testimony, but clearly they have 
important input for the panel.
    Mr. Petri. When we met and you participated in a little 
different panel in Madison, WI, you indicated that probably 
because of your training at Herzing, but mainly because of your 
work with an international company where you are dealing with 
hiring and evaluating possible employees or current employees 
all over the world in high tech areas, your company was working 
computer programming and the like, you said people--it was sort 
of a cry from the heart, if I remember, that people better 
start waking up as to what is really going on and not be too 
self-indulgent and assume that we will just continue in the 
future as it has been in the past. I wonder if you could expand 
that.
    You and other employers who operate not just in the United 
States, but in other countries, have a perspective we ought to 
be learning more about because you are dealing with young 
people who are looking for jobs, doing essentially the same 
thing but whether they are from India or China or Africa or 
Europe. What is your perspective on how well we are doing or 
whether that assessment is accurate, that we are a little self-
indulgent here?
    Ms. Carpenter. There are certain skill sets that are in 
severe shortage within the tech sector in which I work, so, 
yes, we do work with people in multiple countries in providing 
the research and development work that is necessary for my 
company, Quest Software, which is a publicly traded company on 
the NASDAQ based in Orange County, California. For them to be 
able to hire enough qualified employees, we do employ people 
from all over the globe.
    I personally work on a research and development group that 
writes enterprise level software. I have coworkers who reside 
in Russia, China, New Zealand that I meet with weekly, 
sometimes daily, depending on where we are at in the 
development cycle. Many of these individuals are working for an 
American corporation speaking in a second language, English is 
our predominant language of the business, layered on top of the 
very technical skills they have acquired.
    It is critical that Americans wake up to realize that in 
order to be successful in business, you will most likely be 
doing business with people as coworkers from all over the 
globe. Therefore, our skill set in language skills, cultural 
sensitivity skills, as well as the technical background, is 
really critical for success. And how do we attain those things 
but through our educational institutions in providing the 
curriculum and programs that are adept to train our work force 
and still lead the Nation in our economic and workforce 
development.
    Thank you.
    Ms. Foxx. Thank you, Mr. Petri.
    Mr. Cummings.
    Mr. Cummings. Thank you very much.
    I would like to thank our witnesses for being here today. 
Your testimony has been extremely helpful. The thing that I, 
Ms. Carpenter, as I listened to you, first of all, we are very 
proud of you and what you have accomplished. You are not the 
person who we are most concerned about because you have done 
well. It is the ones that don't make it. There is a description 
in the Bible, Jeremiah 15:9, that says, ``Her sun set while it 
was still day,'' meaning that there are people who have 
opportunities and they still have life, but something happens 
in their life that causes their dreams to die. Those are the 
people that we are concerned about. Their sun set while it is 
still day.
    On that note, Mr. Carnevale, when I look, it says both the 
Senate Health Committee and the Education Trust have reported 
that for-profit colleges often have tuition rates much higher 
than those of local colleges. These for-profit tuitions can be 
as much as five times that of local community or 4-year public 
colleges. If a student chose to attend Berkeley, Dr. Cortes, a 
for-profit institution, to obtain a 2-year Associate degree, it 
would cost her about $41,400 in tuition fees. However, if that 
same student chose to go to the City University of New York 
Community College in Manhattan, it would cost her $6,496 over 
the 2-year period for the same degree.
    I want to go to you, Dr. Cortes, then I want to come back 
to you, Dr. Carnevale. Dr. Cortes, what justifies Berkeley's 
tuition costing nearly $35,000 more than a public community 
college?
    Mr. Cortes. Thank you, Congressman Cummings, for the 
question. Absolutely, I think the value of a Berkeley education 
consists of small classes, faculty who are practitioners in the 
field, students who have the ability to get a required 
internship as part of the requirement for graduation, the 
ability to be placed in the job, faculty, as I said earlier, 
that are faculty doctorally trained, the ability to have small 
groups of students working together in order to engage in their 
graduation. But more important I think is the ability for 
institutions like ours in the private sector is about capacity. 
It is really to look at what President Obama has indicated 
that----
    Mr. Cummings. And what do you do for retention? Do you use 
any of that money that you make for retention?
    Mr. Cortes. Absolutely. We invest over $37 million back 
institutionally to assist students through scholarships and 
grants to subsidize the additional money that they don't have, 
besides what they get from Pell or TAP in New York or TAG in 
New Jersey. So we do invest significantly not only in our own 
income going back to the students, because we know they need 
it. The average salary----
    Mr. Cummings. But is that what most of these schools do?
    Mr. Cortes. Well, I can only speak for my school.
    Mr. Cummings. Right. And that is part of the problem. I 
understand that and I appreciate that.
    Mr. Cortes. Sure.
    Mr. Cummings. But, Dr. Cortes, you describe much of your 
student population as being at-risk, is that right?
    Mr. Cortes. Absolutely. The majority of our students need 
significant remedial work. We instituted, for instance, this 
coming year, a bridge program that will allow students to take 
courses for a period of about 5 weeks. We don't charge any 
tuition, it is almost like a trial period. We allow the 
students to make sure that they don't get into loans, that they 
are not paying tuition.
    Mr. Cummings. But 51 percent of your students take on 
riskier loans, do they not?
    Mr. Cortes. I am sorry?
    Mr. Cummings. Fifty-one percent of your students take on 
riskier loans, is that not correct?
    Mr. Cortes. Well, I don't know if they are riskier; they 
take loans. But the difference between what they cannot afford 
between Federal and State aid and the $37 million that we give, 
that is what the students need to----
    Mr. Cummings. Dr. Cortes, you understand what I am saying, 
don't you?
    Mr. Cortes. Sure I do.
    Mr. Cummings. You understand that we are concerned about 
people whose dreams are taken away and then they leave school 
with two bags, one with nothing in it and the other with debt 
marked all over it. And then their dreams are not deferred, but 
they are killed. You understand that, right?
    Mr. Cortes. I understand that.
    Mr. Cummings. And there are a whole lot of them. So I hear 
people talk about minority students and how they feel so happy 
about all these opportunities, but for every one that graduates 
there are seven or eight that have fallen by the wayside, in 
many instances never to return to college. Never. That is 
criminal. Criminal.
    Mr. Cortes. Absolutely. I am a product of a public school 
New York City education and I am a product of a community 
college, so I can speak from real life experience. I do believe 
that what we do in our sector, we take students who are so much 
at risk, we are able to get students to a point of graduation.
    I will give you an example. In the great city of Newark, 
New Jersey, where the high school dropout rates are over 50 
percent, if we can get four students out of ten to graduate 
from that great city of Newark, we are doing a tremendous 
service to the city of Newark because those four students, 
without Berkeley in that vicinity, in that local area, will not 
be going to college because they cannot go to a community 
college, they are not going to the private institutions or the 
public because of capacity.
    Mr. Cummings. Thank you, Madam Chair. And the other six are 
left in debt.
    Mr. Cortes. No, they are not.
    Mr. Cummings. Well, what happens with them?
    Mr. Cortes. They are not. They either--they did not 
continue. They have to go back to work. Many of them have to 
exist by working.
    Mr. Cummings. So the debt is extinguished?
    Mr. Cortes. No. Many of the students who enter will be able 
to complete. If I give the example of the four that graduated, 
the other six are able to come back and return and finish their 
degree if they are able to come back.
    Mr. Cummings. Thank you, Madam Chair.
    Ms. Foxx. Thank you, Mr. Cummings.
    Mr. Meehan.
    Mr. Meehan. Thank you, Madam Chairman, and thank you for 
the opportunity to participate in this hearing today on this. I 
think we all share the concern of trying to assure that the 
funds that are forwarded to the students are repaid, but I am 
struggling with the issue here in which we are treating the 
for-profit institutions in one way and we aren't really 
analyzing the same effect in the not-for-profit institutions.
    I, for one, have benefited from a number of college 
students who are volunteering to work in my office because they 
can't find jobs, and yet they are tens of thousands of dollars 
in debt. So if we are going to use a standard, I am struggling 
with the regulation. We have now come up with rules and we are 
going to determine, we are going to hold people accountable to 
a standard.
    Mr. Carnevale, I know you have discussed this a little bit 
and tried to look at this issue. Is it fair for us to hold the 
not-for-profit institutions in a different category than the 
for-profit if we are making these analyses on a year-by-year 
basis, first, and then, second, a lot of kids come out, they 
struggle for a year or two, then they get that first job. 
Should we be doing this the next year or should we be waiting 3 
or 4 years to make this calculation?
    Mr. Carnevale. The regulation essentially gives the 
institutions 4 years, so it extends over a fairly lengthy 
period of time, and the calculation in terms of loan repayment 
allows 10 years for AA and some college, 15 for a BA, and 20 
for selected programs like dental programs and so on. So in 
that sense it is not, I think especially the amended regulation 
here, the way to think about this, truthfully, is the brunt of 
this is aimed at program improvement. The penalty part of this 
is very marginal, frankly; it is only 2 percent of the total, 
it is capped at 5. This is essentially a device for moving 
programs toward higher labor market value, is in the end what 
it is.
    The other point raised by Mr. Cummings is that it is true, 
the institutions get three strikes on this; the students just 
get one. That is, if you end up with a huge debt, first of all, 
whether you are default or not, you are not likely to return to 
school, and they don't, we know that. And that relates directly 
to the size of the loan and the wages that the program 
leveraged that allows them to pay it back. So it matters which 
program it was and then the other difficulty for the students 
is you only get one bite at the apple, because you can't go 
back and get more debt to go to school.
    Mr. Meehan. Mr. Alford, would you respond to this, because 
I think I have experienced, as I have visited institutions 
across the range, from community colleges to my universities, 
too, some of the schools and the for-profit schools. Many of 
the students in the for-profit schools are nontraditional 
students.
    In fact, this is one of the real opportunities they have 
where somebody is reaching back to them and saying I am going 
to give you a chance; I am going to give you a skill that you 
can then take and find a way to gain employment in a very 
difficult market. And what I am concerned about is the 
potential that this higher standard may lead to a situation 
where those kinds of schools will say, fine, we are going to 
now stop reaching back to that student who is the least 
traditional, who is the toughest reach, because that is the 
most likely to fail; let's just go find the safe middle.
    Mr. Alford. Cherry pick.
    Mr. Meehan. So would you please tell me what your 
perspective is on that?
    Mr. Alford. Yes. I think it would have a devastating 
consequence on the people I represent or businesses who try to 
hire people from these communities. There are two big problems 
with my constituents. One is management trainees. Our most 
successful businesses scour this Nation looking for good 
educated Black talent. Second is labor, the lower level; drugs. 
Can't pass a drug test. And that is a requirement for any 
insurance policy. So those are the two major problems.
    And one thing that is unfair too, sir, private for-profit 
schools have a higher tuition because they don't have Uncle Sam 
and the State government and local governments giving them 
subsidies, tax-funded money. It is unfair to have a graph that 
shows all this high tuition, but they don't charge that much. 
If you put the tax subsidies in there, they would probably be 
more expensive than the for-profit schools. Playing with 
numbers.
    Mr. Meehan. Thank you for making that point, Mr. Alford.
    Madam Chairman, my time has expired. Thank you.
    Ms. Foxx. Thank you, Mr. Meehan.
    Mr. Braley.
    Mr. Braley. I would like to make it clear at the outset 
that the entire focus of every conversation we should be having 
about higher education is whether students are achieving 
progress toward a degree at a reasonable rate and whether the 
Federal dollars being invested in any of these institutions 
meets the expectations of taxpayers who are providing that 
assistance, whether that is a for-profit college, a nonprofit 
college, a private college, or a public institution.
    My nephew has attended a for-profit college, got a degree 
and is working in a job that he loves. And the question is not 
whether there have been substantial successes at for-profit 
colleges, because, Ms. Carpenter, your very presence here shows 
that there have been. The question in this environment that all 
of us work in is whether or not for-profit colleges are 
providing the type of results for the investment we are making 
in them. So let's talk for a moment about that.
    My good friend, Senator Tom Harken, has been doing a lot of 
analysis of this issue on his Senate Help Committee, and as a 
part of the exhaustive study that his committee has done, there 
are some troubling findings. One of them is that 63.4 percent 
of Associate degree students at publicly traded for-public 
schools and 58 percent of Bachelor degree students at these 
schools drop out within a year, and that almost every single 
one of those students, more than half a million in 1 year, are 
left with substantial debt, and that a 4-month stay at a for-
profit school can leave a student with $4,000 to $11,000 in 
debt.
    Now, these are the facts. Even though for-profit students 
make up only 10 percent of all higher education students, the 
schools receive 25 percent of Federal student aid. Even more 
alarming is the fact I mentioned earlier, that 48 percent of 
all student loan defaults come from students who attend for-
profit colleges, and in many States that rate is greater than 
50 percent.
    Mr. Carnevale, are you familiar with the data that I just 
cited? Do you believe that the sector that we are here talking 
about today, which has done good things by your own testimony, 
is doing a good job at being stewards of Federal tax dollars 
given those results?
    Mr. Carnevale. I think the evidence that is, when you get 
passed the anecdotal evidence, and there is anecdotal evidence 
on both sides, that is, there are wonderful stories, we heard 
Ms. Carpenter today, and there are awful stories, the data, 
which is more comprehensive, says quite clearly that there is 
an issue here with public funds. That is, government doesn't 
want to buy planes that don't fly and in this case, since the 
promise is an education program that will get you a job at a 
sufficient wage to pay back the cost, in this case there is a 
very substantial share of programs that simply don't do that, 
and those are highly concentrated in for-profit institutions at 
the certificate and AA level, frankly.
    Mr. Braley. Well, and one of the other disturbing things 
that came out of those findings in the Harken committee's 
investigation was that there were schools who were getting a 
large number of online students, which is great in terms of 
dealing with changing demands of students pursuing higher 
education, but they had 1,700 recruiters working for those 
schools and one placement officer. Do you find that troubling?
    Mr. Carnevale. I know from relationships with particular 
for-profit institutions that naturally where they see growth in 
demand, i.e., when the military benefits went up in the past 
few years, there was a huge increase in recruiters for military 
personnel to move to for-profit colleges. In the end, my bias 
about that is if, in the end, they get a good education, a good 
job, I don't care. But there is an issue here that they don't.
    And I must say another thing that no one speaks to here 
today, but should be spoken to, is I went through college on 
the GI bill, so did my two brothers. They are not included in 
this regulation, and one of the dangers in this is if, because 
it is a private market oriented institution, it will take its 
profits where it can. That is the way it is supposed to work. 
So if we shut down, using the current regulation, a lot of the 
expansion in these programs that don't pay among the regular 
population, there is a risk here that there will be a shift to 
the military, and personally I have a problem with that.
    Mr. Braley. Thank you.
    Ms. Carpenter, you mentioned you worked at Trek Bicycle Co. 
in Waterloo, WI, and I am from Waterloo, Iowa. You also 
mentioned the Decorah connection with Luther College. One of 
the things that is concerning to me is that the very school you 
attended and obviously got a great education, you are doing 
great things and I commend you for that, but Herzing had a 
dropout rate of 53 percent for Associate degree students and 48 
percent of Bachelor degrees within the first year. Were you 
aware of that phenomena while you were a student on campus, and 
what would be your explanation for why those dropout rates were 
so high?
    Ms. Carpenter. On my campus in Madison, WI and within my 
degree program, I find those numbers not to sync up with my 
personal experience. Very few students, if any, dropped out of 
my Associate's degree program. As a matter of fact, I only 
had----
    Mr. Braley. These were Herzing's own figures provided to 
the Senate Health Committee. So I am just asking you whether 
that was something that you were aware of when you were--
obviously it was not.
    Ms. Carpenter. No, not within my degree program and for the 
group of students that I graduated with. That was not my 
experience.
    Mr. Braley. And one of the other disturbing things about 
Herzing's Web site is there is a link on it to tuition, and 
instead of talking about the actual cost of attending Herzing, 
it says, ``Unfortunately, a simple comparison of tuition price 
won't give you enough information to compare the true cost of 
attending school.'' Is it at all bothersome to you that your 
alma mater would not be willing to give students who are 
considering enrolling there an opportunity to make comparisons 
of the various costs of attending Herzing as opposed to some 
other school?
    Ms. Carpenter. I don't believe that Herzing withheld that 
information; they certainly would encourage you to come in and 
speak with an admissions counselor so that they could clearly 
identify the value for the tuition that you do pay. I was 
absolutely well aware, as a consumer, what the cost would be. 
One of the reasons that Herzing was a true value to me is that 
within my testimony I had mentioned I attained an Associate's 
degree within a year and a half time, as opposed to the 
traditional 2 years, based on block programming, based on the 
availability of course work.
    So I think that Herzing is doing a very intelligent job of 
allowing themselves the opportunity on a one-on-one basis to 
sit down with prospective students and explain how their 
program is differentiated, how they are different, differently 
situated and valued, and giving potential students, prospective 
students all of the facts to know what will my education at 
Herzing cost in comparison to other options, other institutions 
for the same types of pursuits, same types of degree programs.
    And the onus is on the individual consumer shopping for 
their own education, and I think it is an advantage, as I 
mentioned, that Herzing gives the opportunity to encourage 
their students to come in and talk about that one-on-one and 
not rely on face value information on a Web site that doesn't 
tell the whole story.
    Mr. Braley. Thank you.
    Ms. Foxx. Ms. Carpenter, thank you very much.
    Mr. Braley, you get the prize for going over the farthest.
    Mrs. Biggert.
    Mrs. Biggert. Thank you, Madam Chairman, and I thank the 
witnesses for being here and your patience while we had those 
pesky votes, which seem to have taken an awfully long time. 
Thank you.
    My question will start with Dr. Cortes. I have gone out to 
visit several of the schools and gotten some information, but 
when this first came up we were talking about why doesn't 
disclosure work; why, if you want to know how a program works 
in a school, for example, one of the schools that I went to, 
and I don't have the numbers exactly, but they were all over 90 
percent, and this was their school of nursing, and 92 percent 
of all those enrolled graduated, 96 percent of them passed the 
certification test, and 99 to 100 percent of those that had 
passed the certification found jobs.
    Now, this seems to me that this then gives a student or a 
consumer choice on where they want to go in looking at the 
programs, rather than looking at the debt to income in 
determining whether there is value to students. Is this 
something that you would see that would work or are there other 
things besides the way that the gainful employment has been 
described, and is there something else that you think would 
work?
    Mr. Cortes. Thank you, Madam Biggert. I do agree, I think 
it is all about, to a certain extent, consumer protection that 
we are looking at. If you look at Berkeley College today on our 
Web site, not only you will get the full tuition clearly 
stated, we have every single indicator of graduation rates, 
debt-to-default rates, we have by degree, each degree, the 
level of graduation. We believe that transparency is very 
important in our sector. We make clear that we have a code of 
conduct that talks about not only academic excellence and 
student success, but then we put that information very clearly 
that everybody can look and they can compare cost.
    For instance, in the State of New Jersey, for example, we 
have the lowest tuition increases of any of the institutions in 
the State of New Jersey and, in fact, we have one of the lowest 
tuitions of all the private institutions in New Jersey, which 
include, of course, Princeton and other private institutions. 
We have the lowest tuition rates. So we do very clearly look at 
making sure that our students get the information they need to 
make----
    Mrs. Biggert. One of the things that really impressed me, 
too, at these schools is how they worked with the local 
businesses so that they were able to find jobs for the 
students. The colleges had a rapport with these businesses. 
Could you address that?
    Mr. Cortes. Yes, absolutely. We work very closely with the 
industry and the advisory from the corporate sector. Every 
degree has an advisory board, so that means that for fashion, 
management, for accounting or finance or marketing we work very 
closely with the business community for two reasons: we want 
input to make sure our curriculum is up to date, that we look 
at the changes in the global economy to make sure that we are 
training our students to get into the marketplace.
    But more important, we are making connections with them in 
order for our students to get the internships that I mentioned 
earlier and also for the ability to get them placed once they 
graduate. As an example, someone mentioned that there was only 
one career placement professional at some institutions. We have 
over 20 career placement professionals making sure that our 
students from the beginning, from their freshman experience all 
the way up to their senior year, get the level of advice and 
counsel to make sure----
    Mrs. Biggert. Thank you. Now I would just like to ask, 
before my time, Mr. Alford, would you comment on this?
    Mr. Alford. Yes, ma'am. I think our biggest concern, 
National Black Chamber of Commerce, is the whole process of 
this and the singling out of for-profit schools. In a nutshell, 
what we want is a fair and transparent process. As I learned in 
the military, leadership 101 is fair and impartial treatment 
for all, and I think some are getting less evaluation, an 
unequal evaluation, if I may use that term, than others, and it 
is quite clear.
    Community colleges have a lesser graduation rate than for-
profit schools, but you don't hear talk about that. I heard 
talk about the Senate hearing that quoted the false GAO report 
even after it was divulged that it was false. So it is not the 
process that I think makes this country great.
    Mrs. Biggert. Thank you.
    Mr. Alford. I hope I answered your----
    Mrs. Biggert. I agree with you.
    I yield back.
    Ms. Foxx. Thank you very much.
    Mr. Miller.
    Mr. Miller. Thank you very much for holding this hearing, 
Madam Chair, and I want to thank the witnesses for testifying.
    Mr. Carnevale, I think you sort of set the stage when you 
talked about the changes in the economy and in the workplace 
and in the requirements that have taken, both up and down, in 
terms of where you would get your degree and certificates and 
the rest of that, and that is why many of us have been very 
strong supporters of the for-profit sector in higher education 
and believe that they do fill a need for many students, 
certainly adult students as they originally start off, people 
who have to work full-time and also try to secure an education 
to acquire new skills or a new job, or what have you that they 
saw on the horizon.
    But sort of like the old saying, friends don't let friends 
drive drunk, I have a lot of concern about a sector that I have 
been an advocate for for a very long time in my 37 years on the 
committee, that we have some outliers here that are giving real 
heartache to the American taxpayer. And you can keep saying, 
not you, Mr. Carnevale, but the panel and other Members can 
keep saying that somehow this only applies to for-profit.
    It doesn't only apply to for-profits. Of the 55,000 
programs, as Mr. Hinojosa pointed out, 37,000 are in public 
institutions and 5,000 are for non-profit and 13,000 for-
profit. And for the public institutions, they are there because 
this is the first President that raised issues about the 
completion rates of 2-year institutions, which are abysmal. 
They are outrageous. But the suggestion that somehow this is 
just targeted for for-profit. I was one of those who went to 
the administration and said that their original ruling was 
wrong, but the point is this is the question.
    Then members of the panel suggested that this high standard 
will force people to leave the field or to cut out 
nontraditional students. This high standard is that 35 percent 
of your former students are successfully repaying the principal 
on their Federal loans in their third and fourth year after 
they leave the school.
    What if you were a used car dealer and you went to the bank 
and said I want to borrow money, but 70 percent of my customers 
are going to default? I don't think you would get a loan from 
the bank for your used car business. But if you are in this 
business, 70 percent of your customers might default and you 
are okay for the taxpayer to put up the money. And you only 
have to meet that in 1 out of 3 years; 1 out of 3 years. And 
there is no penalty until you really screw up. And this is a 
burden that apparently this industry just can't suffer.
    We are talking about maybe 2 percent of the programs that 
are going to be implicated here, and I suggest, as I had 
suggested to the industry, you might want to look internally 
and think that you have some outliers here that you should have 
dealt with within the various associations here. This is not 
whether we support for-profit schools or we don't, because all 
of us have had experiences in our own community, in our 
families, of their successes. This is about what is going on 
with respect to the taxpayer.
    Mr. Alford, you asked about what is going on with the 
Department and how they came about this rule. I would just say, 
anecdotally, we have an investigation going on about what 
happened with short sellers now with the Inspector General's 
Office. I would say if the Congress had listened to the short 
sellers prior to the financial collapse, maybe this Nation 
would be in a different place today.
    But I want to ask what is going on with an institution that 
says that they are going to double the volume of their private 
student loans, as Corinthian College did, to $240 million and 
they expect 55 percent of their private loan dollars to end up 
in default. And their default rate on Federal student loans 
doubled between 2005 and 2009 to 21 percent, and they recently 
told their investors that they are going to manage their 
default rate by pushing borrowers most likely to default into 
deferments, forbearance, and income-based repayment. I want to 
know what is going on there.
    I want to know when Bridgepoint Education buys a college 
and takes the amount of money spent on education from $5,000 to 
$700 per student, I know there are great savings on the 
Internet, but at the end of that process 64 percent of their 
Bachelor degree and 85 percent of their Associate degree 
students are withdrawing from that institution.
    What is going on? Because when they withdraw they have 
already given over part of their Pell, they have already given 
over part of their student loans; their accounts are running 
down. I want to know what is going on when that same 
institution then, which gets 86 percent of its money from the 
Federal taxpayers, has 30 percent profit and 30 percent on 
marketing.
    I want to know what is going on at the ATI Career Institute 
in Texas when the State work board found that 300 of their 
employee graduates had no jobs at all and 427 graduates were 
not employed as the Institute reported they were, and the State 
cut off all of their WIA funding, but they are still eligible 
for Pell Grants and for student loans. I want to know what is 
going on.
    I want to know when the repayment rate for four out of five 
of the profit schools receiving the most Pell Grants and the GI 
bill is 37 and 31 percent. I want to know what is going on.
    It is not a question of whether I support private schools, 
for-profit schools or not. We sit on this side of the dais on 
behalf of the taxpayers who are on that side of the dais, and 
that is why we have these inquiries and that is why we have a 
rule that probably does not much more than develop a lot of 
information. And I think it will cause some people swimming at 
the bottom of the pool to swim a little faster to try to stay 
off the bottom. But I think that is a minimum, that is a 
minimum that we can ask as Members of Congress on behalf of the 
taxpayers.
    Madam Chairman, if I just might say, I would just say this. 
We also want to ask what is going on when Indiana, Illinois, 
and California and Florida have joined to look at for-profit 
institutions there. Indiana's attorney general is asking 
questions about institutions; Florida is investigating eight 
institutions who violated their unfair business practices; 
Iowa, student default rates; Kentucky, job placement 
recruitment practices; Massachusetts, recruitment practices and 
student loan practices.
    Ms. Foxx. Mr. Miller, as you know----
    Mr. Miller. There is an obligation----
    Ms. Foxx. As you know,----
    Mr. Miller [continuing]. Very generous with the time and I 
appreciate it.
    Ms. Foxx [continuing]. You can put whatever your comments 
are in the record.
    Dr. Roe.
    Mr. Miller. I have seen the record; it doesn't do so well.
    Mr. Roe. Thank you.
    Mr. Miller. But I appreciate the offer.
    Mr. Roe. I think I won't give a speech; I will try to ask 
some questions.
    I spent 24 years in school, not including kindergarten, so 
I basically overdosed on school, and all in the public school 
system; not in the private, not in the for-profit. Dr. 
Carnevale makes a great point: the whole purpose is to get an 
education and hopefully find gainful employment once you leave 
that institution that will pay.
    If the argument is here that it is too expensive to go to 
school, I couldn't argue with that more. I served as a 
foundation board president at the college where I attended and 
helped to raise money to help educate people that were lower 
income, as I was when I went to college.
    But to give you an example, if the gainful employment rule 
is to be applied to everybody, I looked at Georgetown, a great 
university, just before I came here. Forty-one thousand dollars 
is the tuition and $58,000 to go there for a year. If you get a 
job teaching school somewhere after that is over, you can never 
pay that back. If you are a police officer in Johnson City, TN, 
where I am from, you could never pay that back.
    I had a medical student's dad call me the other day and 
said Dr. Roe, he said, my son has $212,000 in student loans and 
he is starting his residency and he will make about $30,000 a 
year. Just the interest on his student loan is $1,200 a month, 
just the interest. He didn't have anything left to eat after 
that. So it is not just for-profit universities; it is 
everybody school is too expensive. And I couldn't agree with 
Dr. Carnevale, he makes great points. You should go to the 
school to get a job to pay for something.
    The other thing I think that is a little misleading, having 
been a foundation board president, is that when you compare the 
for-profits, the bricks and mortar are not calculated in those 
tuition fees. All those multi-million dollar buildings, as Mr. 
Alford pointed out, that is not amortized into that cost. So it 
is in the private tuition, it is amortized in the cost. Could 
you point that out? You made a great point a minute ago, that 
you are not really comparing apples to apples. Do you agree 
with that?
    Mr. Alford. Absolutely, sir.
    Mr. Roe. I think that----
    Mr. Alford. I envision Ohio State, my alma mater, 
University of Wisconsin, just humongous, all paid for by 
taxpayers.
    Mr. Roe. And Ms. Carpenter made a point of some students, 
and many of them are not traditional students, in a much 
smaller classroom setting. Your average freshman class at Ohio 
State or University of Tennessee in freshman English is 200 to 
500 students sometimes watching a video screen. I have a 
problem with that.
    And it is true, when you get into a smaller classroom 
setting, it is going to cost more money to do that, and I 
think, Ms. Carpenter, you made a tremendous point: information 
is key. So you can go in and make an informed consumer choice. 
That is what I did when I went. My choice was I didn't have the 
bus money out of town, so I knew where I was going to go to 
school, but it was an informed choice. And I think that is what 
you did, you made a very informed choice about what your needs 
were. Obviously, you were not an 18-year-old, as I was, 17, 
when you started college; you had a little more of an idea 
about what you needed to do; I didn't.
    And graduation rates, Mr. Miller makes a tremendous point 
on that, is that if you look in our own State of Tennessee, 
where you get a Hope Scholarship to go to college, to junior 
college, to community college, or to a 4-year school, 50 
percent of our students in 2 years don't qualify after that, 
they lose their Hope Scholarship because they are not 
succeeding academically.
    I think if we are going to do this gainful employment rule, 
everybody should have to do the gainful employment rule. If you 
are going to set standards, and there is no question there 
probably are some bad actors out there that are not living up 
and doing what they need to do, but everybody ought to have the 
same standards in this country. Mr. Alford made that, and thank 
you for your service to our country, by the way. Everybody 
ought to have to apply the same rules. If you are going to do 
that, then private schools should, public schools should, and 
for-profit schools should.
    Dr. Cortes, would you comment on that?
    Mr. Cortes. Yes, I do agree with you, Congressman. As you 
know, not all for-profit institutions are alike. Do you know, 
for example, that there are only 94 regionally accredited for-
profit institutions in this country and Puerto Rico? That is an 
example of the differences. Berkeley College is a bricks and 
mortar; we own our buildings; we pay taxes, local, Federal, and 
State. We invest back into our community and to our technology.
    When you look at our sector, we led the sector in 
technology in distance learning. Not all our students--most 
people assume that for-profits are all online colleges. They 
are not. Colleges like ours are 80 years changing lives in the 
States of New York and New Jersey, and there are many family 
owned businesses that are for-profit that put a significant 
amount of money in the economic development of the region.
    In your folders you have a report that we put together. In 
New York, Berkeley College, and in New Jersey we have invested 
in economic development over $223 million in a given year, both 
about economic support to the economy, jobs, student 
expenditures, building, construction. Those are the impacts 
that the private sector institutions are offering and also 
offers access and choice for students.
    As you did when you chose your institution, the students 
come to us because they see the flexibility, they see the 
quality of many of our institutions, and they see the ability 
to get degrees that they cannot have in other places. In the 
State of New Jersey, for example, there are only two 
institutions that offer fashion merchandise degrees and we are 
one of them. So they can't go to the public institutions 
because they are full; then they come to us and we do a very 
good job.
    Ms. Foxx. Thank you.
    Mr. Roe. Madam Chairman, I want to thank the panel for 
sticking around for our votes. I really appreciate you all 
doing that, indulging us. And thank you, you have been a great 
panel.
    I yield back.
    Ms. Foxx. Thank you, Dr. Roe.
    Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Madam Chairman. 
I also want to thank the witnesses for being here.
    It seems to me that we are holding a hearing in search of a 
problem that is not being addressed, and I say that only 
because the rules that have been promulgated, that have been 
issued seem to be fair, seem to be balanced, provides 
opportunity for correction, and I was one of those individuals 
who urged the Department, as they were having discussions and 
looking at making new rules, to try and make sure that they 
took into consideration the needs of all the institutions 
because I represent a large number of for-profit institutions 
of higher learning. I also represent a large number of public 
institutions of higher learning. So I want everybody to be 
treated fairly.
    As a matter of fact, the philosopher Camus is supposed to 
have said one time that I love my country, but I also love 
justice. So I love every opportunity that we can find for 
access to higher education for our citizens.
    But I also love transparency. I love factual information. I 
love serious analysis. I love good counseling and information 
that will help lead individuals to the kind of choices that 
will not only improve the quality of their lives, but will give 
them the resources to pay back whatever it is that they owe.
    Dr. Cortes, let me ask you. As you know, the continuing 
resolution that the House leadership offered sought to cut Pell 
Grants for over a million students by approximately $845 per 
student. Some Republicans have recently described Pell Grants 
disparagingly, as a welfare handout, and highlighted it as in 
need of substantial funding cut. How important are Pell Grants 
to your students? And would a loss or reduction in Pell Grants 
harm access to higher education for your students and those who 
attend your education?
    Mr. Cortes. Thank you for the question, Congressman Davis. 
Absolutely, I think the loss of any funds for the students that 
we serve is going to impact their ability to access and to 
persist in college graduation. I will give you an example. Many 
of our students sometimes, in the middle of the year, come to 
us for additional funding that we can provide as institutional 
aid in order to pay their books, in order to get transportation 
to school, in order for them to pay their rent in their homes. 
We are talking about students, which I mentioned earlier, with 
an average family income of somewhere around $25,000.
    Mr. Davis of Illinois. So it would be harmful to your 
students.
    Mr. Cortes. Very harmful, extremely harmful.
    Mr. Davis of Illinois. Thank you. Let me move on because my 
time is about to expire.
    Mr. Alford, let me ask you. I have had a great time working 
with you and the National Black Chamber of Commerce. I have a 
great deal of affinity for the work that you do and for your 
organization, and I thank you for it.
    Mr. Alford. Thank you, sir.
    Mr. Davis of Illinois. I was struck by your testimony, 
though, at one point, where you suggest that for-profit schools 
are the ones that truly are serving low income and minority 
students. So I ask what about the HBCUs, what about the HSIs, 
what about the PBIs? What about these minority-serving 
institutions that are public, are not for-profit and do a great 
job?
    Mr. Alford. Yes, and I support them, and they are at 
capacity. University of Wisconsin, when I graduated in 1970, 
its enrollment was 3 percent Black. Today, 2011, its enrollment 
is 3 percent Black. University of California system, each 
semester they have fewer and fewer Blacks matriculating at 
those schools. So HBCUs, yes, sir, but they are a small 
percentage of the potential we have to educate our people. The 
largest HBCU, Howard University is 11,000. You get from 
Southern at 10,000, Texas Southern at 10,000, then you are down 
to four digits in any of those schools. They couldn't house a 
population of 40 million whose children need a higher 
education.
    Mr. Davis of Illinois. I would certainly agree with that 
and indicate that they still have capacity, though, that is 
unmet. But let me thank you for your answer and thank you for 
participating.
    And I yield back, Madam Chairman.
    Mr. Alford. Thank you, sir, as always.
    Ms. Foxx. Thank you, Mr. Davis.
    Now I would like to recognize Mr. Towns.
    Mr. Towns. Thank you very much, Madam Chair. Let me also 
thank you for holding this hearing. I really appreciate you 
moving forward with it. And I want to thank the witnesses for 
being here and to say that I know that it has been a long day 
and it has been a tough day for many of us in terms of 
conflicts, but the point is that I am happy that you are here.
    Let me just say, as I listen to some of my colleagues, I am 
sort of wondering are they thinking about the economic 
situation that we face across the board. The top universities 
in this country have people that are now unemployed because of 
the fact there are just no jobs, and I think that sometimes 
when we look at things we sort of forget about that. When you 
look at the top universities, people coming out, no jobs, and 
then we look at the situation that we discuss in terms of 
gainful employment, and then we sort of ignore the fact that 
there is going to be some problems there when it comes to jobs 
as well.
    Let me start by saying I support a fair, balanced process. 
I really do. And, of course, I support a fair, balanced process 
and I support a good government and I support educational 
choice. But I do not support poor quality institutions. I do 
not support predatory practices. And I do not support a 
regulatory process that is not transparent.
    I believe that the Department's rules leave many bad actors 
still capable of harming students. I also believe that the 
Department's rules may adversely impact many quality programs 
and, in turn, hinder educational choice for minorities. First, 
in the family college attendees and economic disadvantaged 
students, but I also think there are some other areas that we 
need to look into.
    When you look at some of these athletic programs, and it is 
known that there was one university that went for 10 years and 
did not graduate one basketball player. I mean, nobody wants to 
talk about those kinds of things. I mean, let's look at the 
real issues of education, if we are serious, across the board, 
rather than just sort of looking at one thing and picking on it 
and staying with it.
    I am also not certain that the process which the Department 
came to the rule was entirely fair and balanced. I am not 
convinced of that. I heard some of my colleagues saying it was 
fair and balanced. I am not sure of that. There are a number of 
aspects that are currently undergoing review by the IG of the 
Department, and until we have the final report how can we say? 
We won't be able to say it. I don't see it until we get that 
information. So I am just sort of cautioning my colleagues.
    Mr. Alford, let me just sort of raise this with you very 
quickly. I share your concerns regarding the disproportionate 
impact that this regulation will have on minority students, as 
well as your concern regarding the process by which the 
regulation was crafted. I agree with many of my colleagues here 
today that there are numerous good things being done by career 
colleges, though I also agree that there are a few bad actors 
in the mix. Some are citing examples of questionable 
recruitment practices, and I have heard all of that, and low 
retention rates. However, we need to look at that also with the 
economic situation. If you are in school and then you have an 
economic crisis in the family, what are you going to do? You 
are going to drop out.
    So I think that sometimes we just look at these things and 
we sort of look at them with tunnel vision, and I don't think 
we can do that. I think that we need to look and highlight in 
terms of a lot of people that as a result of these institutions 
have been able to go on and live a very decent and make a major 
contribution to many people, and I think we should not forget 
that.
    So, Mr. Alford, what do you suggest that we do, real 
quickly?
    Mr. Alford. I think we need to go back and review this in a 
fair, transparent process, one that is open. I think when a 
short seller writes an article, subprime goes to college, and 
he is talking about the gainful employment rule, how they are 
going to make this happen and they are going to make big money, 
I think something is wrong with that. And that same individual 
can go into the inner circle of a Federal agency and talk to 
executives of a Federal agency and make suggestions? Talking 
about Mr. Eiseman. It stinks and something should be done about 
that, I think. I think we need to go back and punt and 
reevaluate this.
    Mr. Towns. My time has run out, Madam Chair, and I would 
like to just ask unanimous consent that the statement by Mr. 
Alcee Hastings from the State of Florida be included in the 
record.
    Ms. Foxx. Without objection. Thank you, Mr. Towns.
    Mr. Towns. Yield back.
    [The information referred to follows:]

    [GRAPHIC] [TIFF OMITTED] T1822.037
    
    Ms. Foxx. Mr. Bishop.
    Mr. Bishop. Thank you, Madam Chair. I appreciate you 
holding the hearing, and I apologize for arriving so late. 
Another committee I was on had a markup. But this is an issue 
that I am very interested in.
    Let me start. Ms. Carpenter, I read your testimony. I found 
it very moving, and I congratulate you and Herzing University 
on doing such a good job. There was one particular statement 
that you made that I just want to highlight. You say ``my 
Associate's degree from Herzing University has proven to be of 
high value to me and my employer. My employment history with 
Quest Software is but one example that proves that fact.''
    I know you know this, but I think it is important to say 
for the record that if such a statement could be made, even in 
much more modest form, by your fellow graduates, Herzing 
University or any other university that graduates students who 
can say that have absolutely nothing to fear from this 
regulation. Nothing. So congratulations. I am glad your 
experience went well. And what this regulation is designed to 
deal with, as Mr. Miller said, are the outliers, not those who 
are doing the work of providing access to a higher education 
and to help people get the American dream. And I am glad you 
are on your path to the American dream.
    I want to pick up on where Mr. Miller's questioning was. 
This regulation, in my view, and I was one who urged the 
Department to withdraw the first pass at this; I felt that it 
was an unfair regulation and I, frankly, applaud the Department 
for going back and having several iterations of this. I won't 
engage you, Mr. Alford, on whether or not the process was 
transparent, but I think reviewing 90,000 comments, I think 
that is something that is not to be taken lightly.
    But here is the environment in which we are in. This 
regulation says that if 35 percent of an institution's former 
students in years 3 and 4 of their repayment status make at 
least one payment, that is an institution that is satisfying 
the gainful employment regulation. I find it impossible to 
believe that someone can consider that regulation to be an 
onerous or arbitrary or unfair regulation. And let me put it in 
the context that we are in.
    Here is the context that we are in. The budget resolution 
that passed the House of Representatives, if it were to ever 
take on the force of law, let us hope it does not, would cut 
the Pell Grant maximum to $3,000, from $5,550 to $3,000. If we 
don't act, we will have no Perkins Loan Program come 2014. H.R. 
1, which, frankly, thankfully, will never take on the force of 
law, eliminated SEOG. So here is the Republican vision of Title 
IV, Student Financial Aid Programs: no Perkins, no SEOG, a 
$3,000 Pell Grant maximum, and work study at its current level. 
That is the Republican vision; that is what they voted for.
    Now, I ask you, in that context how long do you think the 
Federal Government will be willing to guarantee $90 billion a 
year of student loans if in years 3 and 4 we consider it 
onerous, impossible to achieve of a 65 percent default rate in 
years 3 and 4? I would suggest to you that the underpinning of 
the finances of the for-profit sector and, frankly, every other 
sector, which is the guaranteed student loan program, we are 
not going to be able to count on that guaranteed student loan 
program if we are looking at that level of default. And yet 
that is in fact what this regulation contemplates.
    So I would urge anyone who is taking the position that this 
is somehow excessive, to assess it in that context, because I 
think all of us have the same goal here, which is to see to it 
that students of modest means get a chance to go to college. I 
am a former college administrator; I am a former financial aid 
director. I have spent my entire adult life dealing with the 
issues of access and affordability; they mean a great deal to 
me.
    And I am very fearful that if we are not careful, careful 
stewards of taxpayer money, then that money is going to go 
away. So I view this regulation, frankly, as a modest means of 
the Congress and the administration discharging its 
responsibility to be careful stewards of taxpayer money. So I 
just would ask you to look at it in that context.
    Let me then go--I am sorry, my time has expired, Madam 
Chair, and I appreciate your indulgence. Thank you.
    Ms. Foxx. I want to thank you, Mr. Bishop.
    I will point out to you a note that Congressman Roe has 
just handed to me, that points out that in 2006 the amount 
spent on Pell Grants was $12.4 billion, and the amount 
scheduled to be spent on Pell Grants for 2012 is $49 billion.
    Mr. Bishop. Would the gentlelady yield?
    Ms. Foxx. Let me go on to the next--I am just putting out a 
fact there to you.
    Mr. Bishop. I was going to put that fact in context.
    Ms. Foxx. Okay. If I could, let me recognize Congresswoman 
Speier. I would like to finish this up no later than 2, if at 
all possible.
    Ms. Speier. Madam Chair, thank you very much, and I want to 
thank all of the witnesses who are here. Again, we all 
apologize for the frantic pace that we operate under; it 
doesn't make a lot of sense from time to time.
    I think this is a very important hearing, but I have to 
tell you at the outset I think what the Department of Education 
has recommended is embarrassingly small. I would challenge any 
of my colleagues to go back to their districts and say to their 
constituents that we are funding many for-profit colleges at 90 
percent. Now, mind you, if we are funding you at 90 percent, 
you are government schools. The University of California is a 
public institution and the funding from the State is less than 
20 percent.
    But you are for-profit schools and 90 percent of your 
money, in some cases, is coming from the Federal Government. 
And I might also point out that in one of the colleges that was 
highlighted, Bridgepoint Education, 29 percent of their 
spending in 2010 was for marketing and 30 percent was for 
profit. So only 40 percent of the money at that institution was 
spent on students. I would challenge any of us to go back to 
our districts and say this is good government.
    This committee is about dealing with waste, and I would 
suggest to you, as Mr. Bishop did earlier, that if you can't 
make this--I mean, this is embarrassingly low as a standard, 
and if you can't make these standards, then you shouldn't be in 
business because, frankly, you are government-operated 
institutions, you are funded by the government; and if you 
can't make these very modest standards, then you shouldn't be 
in business.
    Now, here is where my concern is. This reminds me of the 
financial meltdown. This reminds me of subprime loans. This 
reminds me of the same institutions that targeted low-income 
people for subprime loans to get into loans they shouldn't get 
into, and then they went belly up and the country went belly 
up. One of the institutions has said that it is looking at 
student profiles for recruitment; welfare moms with kids, 
pregnant women, recently divorced, low self-esteem, vocational 
rehabilitation, experienced a recent death, physically and 
mentally abused, drug rehab, fired or laid off. That is the 
target populations that some of these institutions, these for-
profit institutions, are seeking candidates from.
    Now, my concern is since these actual standards don't apply 
to the military, to veterans, guess what is going to happen. We 
are going to have some outliers, I am not suggesting that you 
are, but some outliers going out and targeting our veterans. 
And we have already had cases. Frontline recently did an 
evaluation and actually said to a Marine sergeant, who was 
enrolled at the Art Institute, told the recruiter they suffered 
from PTSD, was insured, that the college had special tutoring 
programs for veterans, and he later flunked out of his 
photography degree program for being unable to finish the work 
and receiving no help from the college. Former Marine Wade 
Cutler and Guardsman Brad Seliga, also in the Frontline report, 
who were hired by Ashford University specifically to recruit 
fellow veterans, both of whom quit in disgust with the ways 
veterans were being suckered out of their GI bill benefits.
    Now, my question to Mr. Carnevale, do you think that we are 
going to see an engagement by these for-profits to focus on 
veterans because they are not going to be subject to these 
modest standards that are being suggested by the Department of 
Education?
    Mr. Carnevale. Well, I don't want to make this a character 
assault on people who run these institutions, but I used to run 
for-profit operations and I can tell you I would; that is, I 
would go after the populations where the money was and the 
regulation wasn't. In the end, I have no problem with that.
    My problem would be what is the outcome, unless we start 
judging these things by the outcome. It is good that for-
profits chase after abused women. If they serve them, that is 
fine. And that is what I think this regulation does, it demands 
that we use outcome standards to judge the use of public funds 
efficiently. And if we don't start looking at efficiency in 
postsecondary education, there is going to be no more equity, 
because we can't afford it.
    Ms. Speier. Thank you, Mr. Carnevale. I might also point 
out that the University of Phoenix received over $84 million in 
post-GI bill benefits and it increased its recruiters to the 
military from 91 in 2003 to over 452. So I am putting word out 
to all the for-profits. I am going to watch what happens to the 
profiles of veterans in your programs because we need to 
protect them, and we are not going to have them waste their 
great GI bill benefits on institutions that don't deliver.
    I yield back.
    Ms. Foxx. Thank you, Ms. Speier, and you, of course, can 
put anything in the record that you would like.
    Ms. Waters.
    Ms. Waters. Thank you very much, Madam Chair. I am very 
appreciative for you allowing me to take part in this hearing 
today. I have a long history dealing with private postsecondary 
private schools. I come from the California State legislature, 
where I created a whole body of law relative to private 
postsecondaries and private schools based on my experiences in 
South Los Angeles.
    I ran job training programs there and I watched the 
recruitment methods, I watched the kind of messaging that was 
done by many of these private postsecondary institutions and 
private colleges, where they raised the hopes and dreams of a 
lot of poor people who certainly did not realize any careers or 
real jobs from the Pell Grant money that they allowed to be 
spent in these institutions, and it was disheartening, and that 
is why I spent so many years on this.
    I do believe that this potential scandal is going to be 
bigger than the subprime housing meltdown scandal, where many 
of our homeowners were tricked into mortgages and loans that 
resulted in foreclosures. I have, over the years, involved 
myself with any number of these institutions, Corinthian, ITT, 
Kaplan, on and on and on, and the record is replete with what 
they have done. I take particularly exception to this messaging 
that talks about how well you are doing for minorities and how, 
if you are not offering opportunities for minorities, they are 
not going to be able to be educated or to have careers or jobs.
    I think, Mr. Alford, you stated that gainful employment 
regulations will harm minority students. But students attending 
these institutions are already being exploited. Students at 
for-profit institutions represent 12 percent of all higher 
education students, 26 percent of all student loans, and 46 
percent of all student loan dollars in default. How would you 
propose that we protect these students from being saddled with 
debt and low prospects for job opportunities? And how is it 
that these very, very mild conditions of gainful employment 
that was just described by Ms. Speier is going to harm the 
private school industry? Mr. Alford.
    Mr. Alford. I have a lot of relatives that have grown up in 
your district and those who received education, many from for-
profit schools, are doing well, raising families, and living 
prosperous lives. Those relatives of mine around 73rd and 
Hoover and going further into South Central, who did not 
receive education, are either dead, in jail, or on welfare. 
Education is the key. So I don't think hurting an opportunity, 
a vehicle to educate someone is a productive thing to do.
    Ms. Waters. I don't know what you just said. I was 
listening for some facts. I thank you for sharing with me that 
little vignette about what happened in your family.
    Mr. Alford. It was real, ma'am. It is real.
    Ms. Waters. But you have no facts, so it does not resignate 
at all.
    I want to ask a little bit--well, I have something here. I 
understand there has been a lot of talk about the rulemaking 
process. I would like to submit the list of program integrity 
negotiators for the record. The negotiated rulemaking included 
several different types of stakeholders, all of whom stood to 
be impacted by the rule.
    The following communities of interest were represented: 
students, consumer advocacy organizations, 2-year public 
institutions, 4-year public institutions, private nonprofit 
institutions, private for-profit institutions, college 
presidents, admissions officers, business officers, financial 
aid administrators, regional accreditators, national 
accreditors, work force development officers, lending community 
representatives, test publishers, and State higher education 
officials.
    I would like to submit that to the record.
    Ms. Foxx. Without objection, Ms. Waters.
    [The information referred to follows:]

    [GRAPHIC] [TIFF OMITTED] T1822.038
    
    Ms. Foxx. And I will point out to you that your time is up.
    Ms. Waters. Thank you very much. I appreciate the 
opportunity. I am sorry I was not, Madam Chair, to get into all 
of this discussion about short-selling, because I really do 
want to reveal something about what has taken place in that 
whole area.
    I yield back the balance of my time.
    Ms. Foxx. Feel free to put other pieces in the record.
    We have all done our best to express our appreciation to 
the members of the panel for the disjointed hearing that we had 
today. We appreciate your being with us on a Friday afternoon. 
Some of you came from long distances and we understand the 
hassle of coming here to Washington any time, but particularly 
when you come from long distances. I don't know if you are 
going to try to get away on a Friday afternoon, but we do want 
to thank you very much for coming and hope you will return 
sometime under a little more relaxed situation.
    With that, the committee stands adjourned.
    [Whereupon, at 1:50 p.m., the subcommittees were 
adjourned.]

                                 
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