[Senate Hearing 112-852]
[From the U.S. Government Publishing Office]
S. Hrg. 112-852
IMPROVING FOR-PROFIT HIGHER EDUCATION: A ROUNDTABLE DISCUSSION OF
POLICY SOLUTIONS
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
ON
EXAMINING IMPROVING FOR-PROFIT HIGHER EDUCATION, FOCUSING ON A
ROUNDTABLE DISCUSSION OF POLICY SOLUTIONS
__________
JULY 21, 2011
__________
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
TOM HARKIN, Iowa, Chairman
BARBARA A. MIKULSKI, Maryland MICHAEL B. ENZI, Wyoming
JEFF BINGAMAN, New Mexico LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington RICHARD BURR, North Carolina
BERNARD SANDERS (I), Vermont JOHNNY ISAKSON, Georgia
ROBERT P. CASEY, JR., Pennsylvania RAND PAUL, Kentucky
KAY R. HAGAN, North Carolina ORRIN G. HATCH, Utah
JEFF MERKLEY, Oregon JOHN McCAIN, Arizona
AL FRANKEN, Minnesota PAT ROBERTS, Kansas
MICHAEL F. BENNET, Colorado LISA MURKOWSKI, Alaska
SHELDON WHITEHOUSE, Rhode Island MARK KIRK, Illinois
RICHARD BLUMENTHAL, Connecticut
Daniel Smith, Staff Director
Pamela Smith, Deputy Staff Director
Frank Macchiarola, Republican Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
STATEMENTS
THURSDAY, JULY 21, 2011
Page
Committee Members
Harkin, Hon. Tom, Chairman, Committee on Health, Education,
Labor, and Pensions, opening statement......................... 1
Franken, Hon. Al, a U.S. Senator from the State of Minnesota..... 22
Hagan, Hon. Kay R., a U.S. Senator from the State of North
Carolina....................................................... 26
Blumenthal, Hon. Richard, a U.S. Senator from the State of
Connecticut.................................................... 39
Witnesses
Cruz, Jose, Vice President, Higher Education Policy and Practice
at the Education Trust, Non-Profit Advocacy Organization,
Washington, DC................................................. 5
Prepared statement........................................... 6
Batson, Hayes, President and CEO, Regency Beauty Institute,
Brooklyn Park, NY.............................................. 9
Prepared statement........................................... 11
Hamburger, Daniel, President and CEO, DeVry, Inc., Downers Grove,
IL............................................................. 12
Prepared statement........................................... 13
Bob Shireman, California Competes, San Francisco, CA............. 19
Petraeus, Holly K., Director, Office of Servicemember Affairs,
Consumer Financial Protection Bureau, Washington, DC........... 21
Nassirian, Barmak, Associate Executive Director, American
Association of Collegiate Registrars and Admissions Officers,
Washington, DC................................................. 28
Prepared statement........................................... 30
Barr, Michael, Professor, University of Michigan Law School, Ann
Arbor, MI...................................................... 35
ADDITIONAL MATERIAL
Response to question of Senator Enzi Jose Cruz................... 66
Response to questions of Senator Merkley by:
Hayes Batson................................................. 66
Jose Cruz.................................................... 69
Daniel Hamburger............................................. 71
Barmak Nassirian............................................. 72
Holly Petraeus............................................... 74
Robert Shireman.............................................. 74
Letter to Senator Harkin from DeVry, Inc......................... 75
(iii)
IMPROVING FOR-PROFIT HIGHER
EDUCATION: A ROUNDTABLE DISCUSSION
OF POLICY SOLUTIONS
----------
THURSDAY, JULY 21, 2011
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 2:04 p.m. in Room
216, Hart Senate Office Building, Hon. Tom Harkin, chairman of
the committee, presiding.
Present: Senators Harkin, Hagan, Merkley, Franken,
Blumenthal, and Enzi.
Opening Statement of Senator Harkin
The Chairman. Thank you all for being here. The Health,
Education, Labor, and Pensions committee will please come to
order.
Higher education yields enormous returns, both for students
and for our country. That's why, over the past 5 years,
Congress has expanded its investment in Pell grants and student
loans. Just over a year ago, this committee began to examine
for-profit colleges because of the tremendous growth of
students and financial aid dollars going to these schools,
combined with disturbing reports about whether the schools were
providing the promised education.
Higher education faces many challenges in the coming years,
including capacity, cost, and accountability. All of America's
colleges and universities must adapt to effectively meet the
needs of an ever-changing global economy. In this environment,
the for-profit sector has an important role to play. But to do
so, for-profit education must work for students, not just for
shareholders.
Today's hearing will focus on what must be done to protect
and get full benefit from the Federal investment in this
sector. Before I turn to our distinguished panel, let me
briefly outline some of the problems that have been documented
by this committee in five hearings, three reports, and
thousands of documents reviewed.
As a sector, the for-profit schools enroll about 10 percent
of students, yet they receive 25 percent of all Federal aid,
about $30 billion last year, and that number is growing every
year, and growing rapidly. The first and most urgent problem
that I see is poor student outcomes. For-profit colleges ask
their students to borrow a great deal of money to pay high
tuition but do not have a really good track record of
completion and student loan repayment.
Our committee has documented that the majority of students
attending for-profit schools are leaving in less than a year.
Unfortunately, this trend is not isolated. Over 1 million
students last year attended for-profit schools that have
withdrawal rates between 62 percent and 84 percent in their
associate degree programs, in their 2-year programs. That means
62 to 84 percent dropped out in the first year.
And because nearly all students borrowed to pay the cost of
tuition, those who withdraw do so financially worse off. For-
profit students now account for almost half of all the student
loan defaults in the country, even though they are only 10
percent of the students in higher education.
These outcomes are clearly unacceptable and they're at the
heart of this committee's concerns with this sector's
performance. The current regulatory scheme does little to
ensure that schools have an incentive to give priority to
student services like tutoring, remediation, job placement,
services that may help more students to graduate and get jobs
and pay back their loans.
We now know that the for-profit schools with the highest
withdrawal rates spend enormous amounts on marketing and
profit, in some cases more than half of their revenue, with
little left over for these kinds of support services. One
school employs 8,137 recruiters but has no job placement staff
at all. Another school has a ratio of 1,770 student recruiters
to one student job placement staffer.
No one, no one underestimates the challenges of educating
students who may have struggled in prior educational settings
or who have been poorly prepared by the K-12 system. Lack of
academic preparation and financial aid are the major barriers
to access and success. However, for-profit colleges expressly
target their marketing and recruitment efforts at this
population of students, students who have struggled in prior
settings or who have been poorly prepared by the K-12 system,
who may be from an environment where studying was not the norm.
So if a school is going to recruit these students, capture
their financial aid, then that school should have an obligation
to serve the students' often exceptional academic needs.
Twenty years ago, Senator Sam Nunn chaired a series of
hearings focusing on these very same problems. Those hearings
led to concrete policy changes that helped to protect students
and taxpayers. While some policies have been rolled back or
picked apart over the years, several are still on the books.
So here we are today revisiting many of the same issues
Congress has been grappling with for decades. And why are we
doing this? Because I believe it's our job to both safeguard
Federal investments and to help make sure that we have an
educated populace, that we have the kind of students that are
going to meet the job needs that we have in the future.
At this point, there should be no question about how the
for-profit higher education sector differs from other
industries. Eighty-six percent of the public companies'
revenues come straight from Federal student aid. That's the
taxpayers. In some cases, it's 90 percent, or even more.
That's what our job is, to make sure that our taxpayer
moneys are well invested and that we have good outcomes for
students.
Now I'd like to introduce our distinguished panel of
officials and experts, including two leaders from the industry
who share an admirable commitment to improving for-profit
education to ensure it is able to meet its promise. I want to
note for the record that we reached out to a number of schools
to see if they would join us for a constructive public
dialogue. This is not a hearing. This is a public dialogue and
a roundtable discussion. We asked a number of for-profit
schools to join us. Most turned us down. They all turned us
down except for the CEOs of DeVry and Regency, institutions
that are leaders in two important segments of for-profit higher
education leading the way today.
So let me introduce our roundtable participants in no
particular order. It's just the way they are here. Maybe it's
in the same order that it comes across here.
First I'd like to introduce Michael Barr, currently a
professor at University of Michigan Law School and a senior
fellow at the Center for American Progress and the Brookings
Institution. Mr. Barr is an expert on consumer protection
issues and financial regulation and will help lead the
discussion on the challenges facing low-
income borrowers.
Next is Mr. Hayes Batson, president and CEO of Regency
Beauty Institute, headquartered in Brooklyn Park, MN.
It's not near Lake Woebegone, is it, by any chance? Only us
from the Midwest know that joke anyway.
Since 2002, Mr. Batson has expanded Regency to a system of
over 62 campuses in 16 States. He is here to discuss the
challenges the for-profit sector faces and potential solutions
based on his leadership role at Regency.
Dr. Jose Cruz is the vice president for Higher Education
Policy and Practice at the Education Trust. Dr. Cruz is a
former vice president of the University of Puerto Rico System,
where he was responsible for admissions, financial aid, and
student life programs. He is here today to talk about the
challenges that low-income and minority students face, and
solutions Congress should consider to make sure they receive
high-quality educational opportunities.
We have Mr. Daniel Hamburger, president and CEO of DeVry,
Inc., based in Downers Grove, Illinois. He has played a
leadership role at DeVry since 2002, becoming CEO in 2006. Mr.
Hamburger is here to discuss how we can work together to
maximize student achievement and meet our workforce needs. From
reading his testimony last night, he will discuss how we can
develop a policy framework that will cultivate graduate success
from his perspective as a leader of an international higher
education corporation.
We have Mr. Barmak Nassirian, associate executive director
of the American Association of Collegiate Registrars and
Admissions Officers, an organization he's been with for 20
years. Mr. Nassirian is an expert on the higher education
system of accountability known as the ``triad''--accreditation,
State authorization, and Federal oversight--and is here to help
us discuss how Congress should consider to improve the
oversight of that triad.
Next we have Mrs. Holly Petraeus, who, as of today, is the
director of the Office of Servicemember Affairs at the Consumer
Financial Protection Bureau, where she will work to protect
military personnel and their families from predatory lending
activities. Previously, Mrs. Petraeus served as director of the
Better Business Bureau's Military Line program, a partnership
with the Department of Defense Financial Readiness Campaign.
Based on her advocacy for military families, Mrs. Petraeus will
offer her unique perspective on for-profit colleges and discuss
ways Congress can ensure that military personnel and their
families receive high-quality educational opportunities.
And finally we have Mr. Bob Shireman. Mr. Shireman is
currently starting a group called California Competes, which
will promote public support for higher education. He previously
served as deputy undersecretary at the U.S. Department of
Education, where he led efforts to reform the Federal student
loan system, strengthen consumer protections, and draw
attention to college completion. Before joining the
Administration, Mr. Shireman held a variety of positions,
including the president of the Institute for College Access and
Success, a senior fellow at the Aspen Institute, and program
director at the James Irvine Foundation. Mr. Shireman will
offer his perspective as an expert on higher education costs
and financing.
Now, I'd like to begin what I hope will be a spirited,
fruitful discussion. I am assured that we will be joined by
some Senators later. I just left a caucus in which the White
House was present and in which obviously there was a lot of
debate and discussion going on the debt ceiling right now. So
they will probably be tied up in that for a few more minutes,
but they will be here shortly.
I want this to be a roundtable discussion. Some of you had
statements prepared. They will be submitted in their entirety
to the record.
It's not a formal type of hearing. I'd like to kick it off
with some questions, and then we'll go around and discuss
things and get perspectives.
I'd like to make two points on the discussion, on the
guidelines. If you want to make a statement, respond at length
or to give a perspective on what somebody has said, or ask a
question, I ask you to take your nameplate and turn it on its
edge. That way I'll know it and I'll have my staff keep track,
so I can see who did it first, second, third, that kind of
thing.
If you have an interjection that you would like to make to
what somebody is saying that is very short, a clarification
perhaps or something, if you hold up your finger, I will try to
interrupt the person who is speaking and go to that person for
a very short interjection, not for a long speech. If you want
to give something lengthy, do that. If it's a short, wait a
minute, I want to ask this or I want to point this out, it's
very short, a minute or two, fine. Just give me this, because a
lot of times I like that format. I've done this before. Because
if you wait, then you lose the dynamic of what was being
discussed at that point in time.
Let me start with four questions. First, what constitutes
student success? What constitutes student success at a for-
profit college, and what does a successful for-profit college
look like?
Second, what should students know when they're considering
a for-profit school? Is disclosure sufficient?
Third, should we have tougher standards for schools? Who
should hold them accountable? Are voluntary standards enough?
Fourth, are there other ways to realign incentives for
better performance?
And since I said the key thing for this committee is
outcomes, I'm going to start with Mr. Cruz, just to get it
going. Our investigation has peeled back the curtain on
outcomes in the for-profit sector. First, what are the outcomes
that we ought to be concerned about? What should we expect from
colleges in terms of performance? What should a high-performing
for-profit sector look like?
Let's start talking about this. What constitutes student
success? Is it just completion? What is it? What is the
outcome?
Mr. Cruz, I started with you because this is your second
appearance. You're the only one here who has been here before.
And at the time, you leaned upon your background knowing about
what students need, especially minority students, low-income,
the kind of students I talked about that go to for-profit
schools.
What are the outcomes that we ought to be concerned about?
STATEMENT OF JOSE CRUZ, VICE PRESIDENT, HIGHER EDUCATION POLICY
AND PRACTICE AT THE EDUCATION TRUST, WASHINGTON, DC
Mr. Cruz. Thank you very much, Mr. Chairman, for the work
you have done to unveil the inner workings of the for-profit
sector, for convening this panel and giving us the opportunity
to weigh in on such an important issue.
As to the question of concerns, what should concern us
regarding the for-profit sector and the outcomes of those
students, I would say that you stated it very well in your
opening statement. We should be concerned about the general
state of affairs around for-profit education.
Here's a sector, as you pointed out, that has grown
significantly during the past 10 years. It has grown by 236
percent, a sector where 15 publicly traded companies control 60
percent of the student enrollments.
The Chairman. Fifteen percent----
Mr. Cruz. Fifteen publicly traded companies that control 60
percent of the enrollments in the sector.
The Chairman. Did you say 60 or 50?
Mr. Cruz. Sixty.
The Chairman. Sixty.
Mr. Cruz. Six-zero. And a sector and some players within
that group that have experienced even higher rates of growth. A
case in point, Bridgepoint, Inc., which was recently discussed
in one of your hearings, that within a 6-year period
accomplished an outstanding 23,000 percent increase in
enrollments. And it's also a sector where some of the players
are able to generate operating profit margins that exceed those
of industry giants like Hewlett Packard and Apple. So those
things in and of themselves are good. There's nothing wrong
with them, except that in terms of the concerns that we should
have, the success of their students does not seem to be as well
aligned in terms of generally speaking in the sector to the
success of the stockholders of these companies.
So that's the state of affairs today. It is what it is. We
need to find ways to move forward, which I think is the purpose
of this roundtable today.
What does a successful for-profit sector look like? I would
say that a successful for-profit sector is one that embraces
the strategic context in which they're immersed, in which the
country is immersed, and it's a strategic context whereby we
have determined that economic competitiveness is the name of
the game, that we have reached consensus that the only way to
be economically competitive is if we once again lead the world
in educational attainment, and that in order to do that, the
workforce projections facing the United States, we need to take
care of the students that have traditionally been underserved,
because these are the students that, because of demographic
shifts in America, will be able to take us to once again lead
the world in educational attainment and continue to be
competitive economically.
To the extent that we can create policies that will allow
the sector to align the incentives and the projections to the
projections and needs of the country, I think that we might be
able to get to a place where the for-profit sector is high
performing, if you will.
Otherwise, if we can't do that, then I think it's important
to remember that public dollars are scarce. And if for-profit
education expects us to continue to out-source our higher
educational needs to them, they need to demonstrate the
particular ability to educate the students that need it the
most. If they do so, that's great; and if they don't, then
maybe we need to rethink whether or not we are better off
investing our scarce funding to strengthen public institutions
to provide what ultimately, given our collective aspirations,
is a public good.
The concern is the general state of affairs today. A
successful for-profit sector is one that embraces the country's
needs, as well as their stockholders' needs, and the direction
in which we should take policy is one that would look at the
trajectory of success for these institutions in terms of the
trajectory of success of their students.
The Chairman. Thank you very much.
[The prepared statement of Jose Cruz follows:]
Prepared Statement of Jose Cruz
The Education Trust has contributed to the national discussion
about for-profit colleges and has closely followed the investigation,
led by the U.S. Senate Health, Education, Labor, and Pensions (HELP)
Committee, into the sector's professional performance and practices. As
a research and advocacy organization that promotes high academic
achievement for all students--pre-kindergarten through college--we are
deeply troubled by the sector's aggressive and questionable marketing
and recruitment practices, low student retention and student outcomes,
high cost and student debt burden, and soaring default rates, all of
which have been uncovered during these proceedings.
Our November 2010 report, ``Subprime Opportunity,'' examined the
graduation rates and debt burdens incurred by students who entrust
their futures to for-profit college companies. Our examination revealed
that, too often, for-profit institutions enroll students in high-cost
degree programs that saddle the most vulnerable ones with more debt
than they can reasonably manage to pay off, even if they do manage to
graduate.
Our March 2011 Senate testimony before the HELP committee stressed
that for-profit college companies demand new attention and a new
approach to regulation, that oversight is badly needed for an industry
that makes billions from taxpayer subsidies, and that inaction is
certainly not an option.
Today, we present a six-element framework to improve for-profit
education in America to ensure students get the education that they are
promised, and that taxpayers make a worthwhile investment. The
framework requires:
1. For-profit colleges, Federal and State regulators, accrediting
bodies, and advocacy organizations to embrace the country's economic
competitiveness as the strategic context in which all higher education
sectors operate.
2. Policymakers to address the misguided K-12 and higher education
policies and practices that have led to the disparities that gave rise
to the current state of for-profit college education.
3. Policymakers and for-profit colleges to level the playing field
by eliminating the most toxic academic programs, and by strengthening
consumer information and protections.
4. Policymakers to incentivize investments in student success and
controlling the student debt burden.
5. Policymakers, regulators and accrediting bodies to contain risk
by implementing effective quality controls, and by strongly enforcing
the corresponding laws and regulations.
6. Policymakers to encourage disruptive innovations in the for-
profit college sector--innovations that will transform the dismal
student outcomes that currently plague the sector and cause the most
harm to the most vulnerable students who, because of demographic
shifts, could in fact contribute the most toward our collective
aspirations.
We can't meet the workforce demands of tomorrow unless we clean up
the for-profit college sector today.
A brief description of the framework is presented below. Details
will be provided during the roundtable discussion.
embrace strategic context
Educational Attainment Goals: If we are going to meet the
President's goal to be first in the world in college degree completion
by 2020, we need all college degree completion by 2020, we need all
sectors of higher education to be contributors to degree attainment.
Workforce Projections: Competing in the international economy is
more difficult every day. In order to prepare our country for the
workforce demands of the future, we must educate our students today. By
2018, 63 percent of jobs will require a postsecondary degree, and 22
million new college degrees will be needed to meet workforce demands.
If we continue on our current path, we will have a degree shortfall of
3 million postsecondary credentials. At a time when the world is
demanding more of students--higher degrees, more sophisticated
knowledge--we cannot expect less of the institutions that seek to
educate them.
Demographic Shifts: Low-income students make up 44 percent of the
elementary and secondary student population. The more than 49 million
students in public schools in 2009 represented a 13 percent increase
over the number enrolled in 1994. That enrollment jump is due in large
measure to increased numbers of students of color--African-American
student enrollment increased 15 percent, Latino enrollment increased 91
percent and Asian-American enrollment increased 57 percent. On the
other hand, there are actually six fewer white students enrolled than
in 1994. Given these demographic shifts, we must get better at offering
equitable educational opportunity to students of all backgrounds.
State of For-Profit Education: For-profit colleges rake in a high
level of Federal dollars relative to the number of students they serve.
While they enroll only 12 percent of the Nation's college students,
they consume 24 percent of all Federal student-loan dollars. And their
proportion of loan defaults is even higher: For-profits produce 43
percent of all defaults on Federal loans.
invest in prevention
Address Misguided Policies: Low-income students and students of
color are doing their part to advance America's goal to become the best
educated country in the world: Some 86 percent of African-American and
80 percent of Hispanic high school seniors plan to attend college. This
is remarkable, given that these students are clustered in K-12 schools
where the Nation spends less, expects less, teaches them less, and
assigns them our least qualified teachers. Unfortunately, traditional
institutions of higher education are not responding with the increased
levels of access and opportunities for success that these students
deserve. This reality, coupled with billions of dollars in Federal
subsidies and lax regulations, has created a formidable market for the
for-profit college sector--a market whose growth seems impervious to
lackluster student outcomes.
The problem is not the ``for-profit'' nature of these colleges, it
is that their returns are a function of sustained failure, rather than
student success: failure of the K-12 system to prepare all students for
college and career; and failure of public and private nonprofit
colleges to provide access and success for low-income students and
students of color. Any attempt to improve for-profit education must
include a rethinking of the misguided K-12 and higher ed policies that
have fueled the sector's growth to a ``too-big-to-fail'' status.
K-12 Policies and Practices: No Child Left Behind (NCLB) has
revealed many uncomfortable truths about our Nation's schools. It has
laid bare painful and damaging achievement gaps. It has exposed too
much mediocrity. And it made plain that adequate preparation for
success beyond high school is not a corollary of meeting the
``proficient'' level of student performance. As we reauthorize NCLB, we
need to raise our sights. That means new and higher standards; new and
higher quality assessments; new and better ways to measure teacher
impacts on student learning, and new, richer supports for teachers.
Higher Ed Policies and Practices: Poor and working-class students
trying to pay for a college education already face a perfect storm:
Tuition is skyrocketing, Pell's purchasing power is dropping, and
precious financial-aid dollars are shifting away from them and toward
more affluent students who would attend college regardless of whether
they got financial aid. Currently, public 4-year institutions spend
about the same amount in grant aid on low-income students as they do on
wealthy ones. As a result, a typical low-income student has to finance
an amount equivalent to about 72 percent of his or her family's annual
income to attend college. These practices need immediate attention and
action: we need cost-saving strategies in our colleges and universities
and a redirection of institutional aid toward students who actually
need it to attend.
level the playing field
Eliminate Toxic Choices: For-profit colleges need to deliver on the
promise of opportunity they have made to students and taxpayers alike,
earning their profits through innovation in educational delivery,
rather than through under-investment in student success. In the absence
of strong gainful employment regulations and the spirit of meaningful
and sincere reform efforts, for-profit institutions should step up,
review their program offerings, and eliminate those that are not
serving a workforce need or graduating students with job prospects that
will allow them to payback their student loan debt and to sustain their
families.
Strengthen Consumer Information and Protections: Design a more
complete method to calculate graduation and placement rates and require
institutions to publish them in obvious places on their Web sites. What
students care about is whether they will graduate and what the
difference will be between their pre-enrollment earnings and what they
earn postgraduation. This information needs to get into students'
hands, not lie buried on a Web site. And it needs to be available in an
intuitive and standardized format which allows for comparison among
institutions.
Strengthen laws around overly aggressive marketing and
advertising--it's hard for students to sift out legitimate information
from the excess of ads and marketing material they receive and there is
little to no recourse for students that are taken in by misleading
advertising. Furthermore, take a close look at how some for-profit
colleges offer and manage their own private loans to students. The
opportunities for conflicts of interest and perverse incentives are too
numerous and too dangerous to ignore.
nudge for-profits toward success
Completion Incentives: Students who leave college without a
credential are more likely to be delinquent or default on their loans.
Recent research shows that more than half of students who left without
a credential became either delinquent or defaulted on their loans. So,
we need strategies to incentivize institutions toward student success,
and to hold them accountable for that success--both in terms of college
completion and loan repayment. And, you could explore risk-sharing
models around student borrowing and loan debt so that both students and
institutions have some ``skin in the game.''
contain risks
Quality Controls: Accreditors and States need to carry their
weight. The transfer of accreditation with a change of ownership should
be banned. Institutions should not be allowed to offer programs that
require specialized accreditation for licensure purposes unless they
have the required specialized accreditation. And accrediting bodies
should certainly be measuring student success. States simply need to
start regulating beyond the absolute minimum, which is what many do
today.
Strong Enforcement: It's not enough to put new laws, standards, and
regulations in place. The Federal Government, States, and accrediting
agencies have to commit to enforcing them as well.
encourage disruption
Transformative Change: At least one major for-profit college
company needs to step forward and commit to increasing its success
rates and lowering its students' debt levels through a concrete and
persuasive goal. A challenge needs to come from within the sector that
it's not acceptable to just admit students--institutions must also be
committed to the success of each student they admit. Public university
systems in the Ed Trust/NASH Access to Success Initiative have set the
goal of increasing the number of degrees in their States, and halving
access and success gaps for low-income and underrepresented students of
color by 2015. These systems also have committed to publicly reporting
their progress. Why shouldn't institutions in the for-profit college
sector do the same?
The Chairman. Mr. Batson, what metrics do you use? I've
looked at your schools. You have high completion rates. What
metrics do you use to measure student success at your colleges?
Is it job placement? Is it income earning? What is it? What do
you use to measure your success?
STATEMENT OF HAYES BATSON, PRESIDENT AND CEO, REGENCY BEAUTY
INSTITUTE, BROOKLYN PARK, MN
Mr. Batson. If I could, what I'd like to do is provide just
a little bit of background.
The Chairman. Sure.
Mr. Batson. Because we're somewhat different in that we
operate not only as a vocational school, but because we're
focused on beauty, we're a clock-hour school rather than a
credit-hour school. And what that means is that we're regulated
fairly differently by the triad, and in a much more robust way
by our States and by the accreditors than many other
institutions.
We've learned some things through this interaction with the
States and the accreditors that we think have been helpful to
us and may be helpful more broadly in higher education.
Our students come to us with many different dreams and
goals. If I ask students what they hope to do, the answers
range from I want to own my own salon someday to I want to
provide a better life for my babies than I had. And so we're
all about helping our students achieve their career and their
life goals.
The way we do that is by focusing on four things while our
students are with us.
First we focus on attendance. We know minute to minute who
is there and who is not, and we intervene very quickly if we
see attendance starting to diminish because that's one of the
biggest issues and the biggest challenge for our students, is
just overcoming the life issues, the transportation issues, the
health issues, the childcare issues that they need to get to
school every day. So we've put a lot of focus there, and I'll
talk about that later.
No. 2, we focus on completion. Students come to us because
they want a career in the beauty industry. They've known this
in most cases since they were little children. I can't tell you
how many students--when I've said how did you know you want to
get into this--said I did my doll's hair when I was 6 and I
knew, or I've been doing my friends' hair for my whole life, or
my grandmother asked me to do her hair and I figured out that I
was really good at it.
And so in order to achieve that dream, they have to
complete. You cannot work in the beauty industry without a
license in all 50 States. So if a student drops out of the
program, they cannot work in our industry. So we take
completion extremely seriously.
The next thing we focus on is licensure. And every State
offers either and/or written and practical tests that the
students have to pass. And so we're very rigorous about trying
to prepare our students for those. We offer mock exams at three
different points in our program, which is 1\1/2\ academic
years, 1 calendar year.
And then finally we focus on placement. So that's the
fourth metric.
The Chairman. What is that?
Mr. Batson. Placement.
The Chairman. Placement.
Mr. Batson. Again, it's very clear, we run short programs.
They lead to real jobs, and----
The Chairman. Do you have placement officers in your
school?
Mr. Batson. We do, we do, and I'd be happy to provide more
color on that as we go through the hearing in terms of the
kinds of things we do, the amount of support we provide, the
number of people involved and so forth.
But those are our big four.
The Chairman. I'd like to know, if I could, Mr. Batson, the
ratio, like how many students you have. You have, what, 60,000
or something?
Mr. Batson. No. We have between 5,000 and 6,000 students,
depending on the time of year.
The Chairman. OK.
Mr. Batson. We operate fairly small campuses that are
located in major retail areas near where students live and
work, and there will typically be 50 to 100 students per
campus.
The Chairman. I see. How many placement officers would you
have for that many students?
Mr. Batson. Let me explain how we do placement.
The Chairman. OK.
Mr. Batson. Because we have two different types of people
involved in the process. We have student advisors who
coordinate the delivery of all services to our students while
they're with us, and those folks work with dedicated financing
advisors and dedicated career advisors in order to support the
students.
The way it works is we have about 24 or 25 of these student
advisors, and then we have 9 people who are specifically in
career placement. The advisors interface directly and regularly
at key milestone points with the students.
The Chairman. I see.
Mr. Batson. The career advisors are very, very focused on
building relationships with the employer community, getting
them in as guest speakers, running salon fairs, signing
students up on our free beauty jobs Web site that connects them
to the employment community. And so they work hand-in-hand with
the advisors to bring the salon community in and connect it
with the students.
The way we look at it is we have roughly 25 people in
student advising, about 30 to 40 in financial counseling. It
helps them with financial aid and any other issues that come
up. And then 8 to 10 who are more employer-facing in the
organization.
The Chairman. Very good. Thank you, Mr. Batson.
[The prepared statement of Mr. Batson follows:]
Prepared Statement of Hayes Batson
Good afternoon. I am Hayes Batson, Chairman and CEO of Regency
Beauty Institute. Thank you for the opportunity to participate in this
roundtable discussion aimed at improving higher education.
Regency is a Minnesota-based vocational education provider focused
on cosmetology. We are privately held, were founded more than 50 years
ago, and serve 6,000 students through 87 campuses in 20 States.
We differ from traditional educators in several key ways.
Our programs are offered on a clock-hour basis (rather
than credit hour) and lead to State licensure which is required to
practice as a cosmetologist in all 50 States.
States prescribe most major aspects of our programs
including length, attendance and time recording, faculty ratios and
training requirements, curriculum, and number of practical services by
type. In a number of States we track and report this data on a daily or
monthly basis.
Our students learn in a ``hands on'' manner by practicing
services on guests and mannequins in small, salon-like campuses located
in major retail areas.
We are accredited by the National Accrediting Commission of
Cosmetology Arts and Sciences which monitors many aspects of our
educational program and requires us to meet minimum student outcome
thresholds in areas such as graduation (50 percent), licensure (60
percent), and placement (70 percent). At a Federal level we are subject
to the same laws and regulations that apply to other proprietary higher
education institutions participating in title IV.
I am concerned about the sustainability of our current higher
education system. There are undoubtedly cases of misinformation and
abuse in proprietary schools, and the HELP Committee's work has brought
these to light. I believe these issues are addressable through sound
policy and enforcement and look forward to working on solutions. In
addition, there are major structural issues in higher education around
quality, cost and access that must be tackled, and I hope we will have
an opportunity to discuss those today. For example, since the economic
downturn began in 2008 our student mix has shifted towards independent,
Pell eligible students who report more life obstacles and lower incomes
prior to entering school. These students need education to build
successful careers and lives, but experience challenges that affect
their success rates. We must crack the code to success for these
students.
Educational success requires a partnership between the school, the
student and the student's parent, spouse, or other supporters. Schools
should be accountable to students and taxpayers. We are facing huge
Federal deficits, a stagnant economy, and growing pressure to
demonstrate a return on our public investment in education. Now is the
time to reform our current regulatory system to create a healthy long-
term higher education environment for students, taxpayers and quality
schools.
There are countless regulations in place today but many are
indirect, ineffective or unevenly enforced attempts at ensuring that
students get a quality education at a good value. We envision the
creation of a new regulatory framework based on: (1) program cost and
benefit information--right stuff, right format, right place; (2)
verification--internal controls, auditors, accreditors, D Ed; and (3)
thresholds for title IV participation--completion, licensure and
placement. This framework should replace not supplement the current
patchwork of regulation, be applicable to all of higher education
within a reasonable timeline, and consider implications on access and
success rates of economically disadvantaged students. It could be
supplemented with program lending limits that prevent students from
over-borrowing in the first place by linking borrowing levels to the
typical wages prevailing in the field served by the program.
We recognize that a re-design of the regulatory framework will be
difficult and will require all participants in the higher education
process to work outside their comfort zones. For our part, we need to
be willing to make changes in the way we design and deliver education.
However, we believe the collective interests of students, taxpayers and
quality schools will be served by taking the steps outlined here, and
we are committed to supporting the process going forward. Thank you
again for the opportunity to share our views.
The Chairman. We'll go from a school that is--excuse my
expression--narrowly defined--I mean, you have one thing that
you teach--to one that's bigger and broader. DeVry is a much
bigger school, much broader based. I was thinking about your
metrics that you were using, Mr. Batson, attendance, I'm sure,
through their completion. Licensure doesn't, I don't think,
affects DeVry much, but placement obviously.
Mr. Hamburger, going to a bigger school then, what are your
metrics, and how do you look at student outcomes and how
they're being reported?
STATEMENT OF DANIEL HAMBURGER, PRESIDENT AND CEO, DeVRY, INC.,
DOWNERS GROVE, IL
Mr. Hamburger. Absolutely. Thank you again, Mr. Chairman,
for the opportunity to focus on solutions. They say timing is
everything. I think your timing is impeccable. It's a great
time to be looking forward to that.
And to your question of what does student success look
like, what does a good private sector college look like, it's
pretty similar to the answer I'd give what does any good
college or university, whether public sector or private sector
or independent, look like, and I think it's three things.
You've covered some of them already. Hayes has talked about the
metrics of outcomes.
So No. 1, is outcomes. And in that, I would highlight five,
some that overlap.
First category, do the students learn? So, metrics of
learning.
No. 2, do they graduate? Do they complete? So we've talked
about that.
No. 3, do they achieve the outcome they set out for, which
could be a career objective or admission to a graduate school?
No. 4, licensure. And, yes, we do have programs that lead
to licensure; for example, nursing. The Chamberlain College of
Nursing we talked about does lead to licensure.
The Chairman. You have a big nursing school.
Mr. Hamburger. Yes, we do. So that's clearly, I think, a
relevant metric.
And then No. 5, are they repaying their loans? That's a
relevant metric.
Those would be the five outcomes of metrics in category one
of what a successful college or university looks like.
Second category, then, would be does the college or
university hold to standards of practice? And we've outlined in
our written submission a number of standards of practice, from
disclosure, and not just disclosure buried somewhere in the Web
site but active disclosure where you have to make sure you
proactively give the information, even in written form as well
as Web site form, to a student; and training and best
practices. So that would be the second category.
And then third, I would submit, a successful college or
university is one that gives something back. So does it
contribute to its community? And one example of that from the
DeVry family of schools is the DeVry University Advantage
Academy where, for the last 8 years in Chicago and the last 5
or 6 in Columbus, OH, we've run a dual-enrollment early college
high school in partnership with the school districts where high
school students take high school courses and college courses
from DeVry University professors and then complete both a high
school diploma and a college associate degree, at no cost. And
so I think giving back to the community would be the third
category.
The Chairman. Very good.
[The prepared statement of Mr. Hamburger follows:]
Prepared Statement of Daniel Hamburger
On behalf of the students, faculty and administration of the DeVry
family of postsecondary institutions including the Carrington Colleges,
Chamberlain College of Nursing, Ross University, and DeVry University,
thank you for the opportunity to participate in this roundtable
discussion focused on how the higher education community can continue
to work together to maximize student achievement and economic and
global competitiveness.
The time is right for coming together to identify solutions. As we
collectively work to address how we all can improve and serve students
better, we need to look to the future and focus on the policy framework
that will cultivate graduate success. We believe that for the Nation to
achieve measurable improvements in student and institutional
performance, we must do so collegially with stakeholders across higher
education. To that end, we remain at the ready to work toward solutions
by developing meaningful metrics and improving accountability and
transparency in higher education.
Education is the key to our Nation's economic success. As President
Obama noted recently at a Jobs Council meeting,
``We're going to have to up our game when it comes to how we
train people for the jobs that actually exist, and design
credentialing training programs, apprenticeship programs, so
that people know if they complete this work, they are prepared
to work at an Intel or GE.''
Two companies, I might add, that are in the top five employers of
DeVry University graduates over the past 5 years.
Individuals lacking post-secondary educational attainment are at a
significant disadvantage in the modern economy. According to
Georgetown's Center on Education and the Workforce, in 1973, only 28
percent of U.S. jobs required a college education. By 2008, that number
had increased to 59 percent. What this data shows is a new economy that
is less about muscle and more about brains. College education, now more
than ever, is critical to the well-being of our workforce and Nation's
economic future. Private-sector education is part of that solution; we
look forward to DeVry's family of schools continuing to play a critical
role in meeting our Nation's future education needs.
about devry
The DeVry family of institutions has a long history of serving
students: DeVry University was founded in 1931 in Chicago and just
celebrated its 80th anniversary; Chamberlain College of Nursing was
founded in 1889, our Carrington Colleges were founded in 1967 and 1975
respectively, and Ross University Schools of Medicine and Veterinary
Medicine in 1978 and 1982 respectively. Our institutions are accredited
by regional and national accrediting bodies, including the Higher
Learning Commission of the North Central Association of Colleges and
Schools (HLC), the Accrediting Commission for Community and Junior
Colleges of the Western Association of Schools and Colleges (WASC), and
the Accrediting Council for Independent Colleges and Schools (ACICS).
In addition, many of our programs are programmatically accredited by
specialized accrediting bodies, recognized by the U.S. Department of
Education. We have graduated hundreds of thousands of students in
programs ranging from medical assisting to family physician. We
currently serve over 120,000
degree-seeking students and have alumni and students in every State.
Our commitment to student academic and career success is the
superstructure that brings value to our students and the communities
that we serve. That commitment is demonstrated in our efforts to
continuously improve the quality of institutional programs and
services, such as Carrington College's practice of reviewing each
student's progress each week on an individual basis. Or DVU's use of
student success coaches to monitor and advise students in the early
terms of study, recognized by the Pell Institute as a promising
practice to support high-risk students. Or our Keller Graduate School's
partnership with CareerBuilder to provide personalized career services
for its graduates.
Our organizational philosophy can be summed up as, ``Quality leads
to growth.'' We stick to that philosophy in everything we do. When we
acquired Ross University School of Medicine, one of our first actions
was to increase admissions and academic progression standards and
cutting our enrollment. We believed that the short-term loss of revenue
would bring long-term gains in student outcomes. The same was true in
our acquisition of Chamberlain College of Nursing. Chamberlain was a
quality nursing college, but small and underfunded. We invested in the
college, purchasing state-of-the-art patient simulators and upgrading
student support services. Chamberlain students have a 90 percent pass
rate on their NCLEX exams, an indicator of quality outcomes.
private sector colleges
I point out these successes because it is important to recognize
the private sector's strength in issues like capacity, access,
innovation, and quality. The private sector has not grown by accident.
It has grown to meet a vast unmet need for more education.
When States are cutting enrollments at their public colleges and
universities because of State budget issues, private-sector colleges
are adding more seats at lower cost to taxpayers--in fact, they pay
taxes. At a time when we must educate more non-traditional students to
meet our educational attainment goals, many of those students choose
private-sector colleges. And when innovative educational models are
called for, the private sector helped create online and blended
approaches that have transformed how students are educated.
But still, some have asked how private-sector or proprietary
institutions are appropriately motivated to provide a quality education
to our students. Some go further and assert that private-sector
colleges simply cannot produce quality academic programs; that their
incentives are de facto incompatible with serving students. What we
know in practice is that a firm commitment to academic quality and
student support services produces student success. Like any public-
sector or independent college (or any business for that matter), if we
serve our students well, they will succeed, they will pass their
boards, and hospitals and Fortune 100 companies will hire them. DeVry
University is celebrating its 80th anniversary this year because it
made those commitments to its students.
Quality academics are the primary focus of any institution of
higher education. DeVry uses a multifaceted approach to assist our
students and graduates, combining innovative academic methodologies
with focused support services.
technology
DeVry uses innovative technology to improve and maximize student
engagement. There are those that have expressed concerns about online
learning in this regard. We believe that regardless of delivery
modality student engagement is the key. Onsite, online and a
combination of the two is what it takes to educate all of our students.
We were one of the early leaders in the development of ``blended
learning,'' the mix of these two learning modalities. A May 2009
Department of Education meta-analysis of effectiveness studies of
online, face-to-face and blended learning concluded that blended
learning offers a larger advantage to students than do either 100
percent face-to-face or online courses. We believe our emphasis on a
blended approach most effectively meets the needs of our students.
academic support
Chamberlain College of Nursing's Center for Academic Success (CAS)
provides students with an opportunity to enlist the services of peer
and professional tutors for assistance with course content in both
nursing and general education courses. Tutors provide resources for
academic support, advice on how to study and insight into particular
classes and instructors. The Center also holds study sessions covering
subjects like chemistry, microbiology, critical care nursing,
pharmacology and algebra.
The Center also provides an online tutoring service called
SMARTHINKING that provides pre-licensure students with tutoring support
in a variety of different subjects. Tutoring resources are accessible
24 hours a day, 7 days a week, so that students can get help whenever
it is most convenient. This service also allows students to access
archived tutoring sessions for future reference.
student support services
DeVry University's Student Central model provides centralized
locations staffed with ``success teams.'' Teams include a student
success coach (academic advisor) and a student finance consultant.
Students are given course direction to make certain that they are
taking the courses they need to graduate along with a means to map out
their academic studies from one term to the next. The student finance
consultant provides financial literacy tools and guidance to help
students navigate the financial aid process, which can be very
difficult for students who are the first in their family to go to
college.
Students may visit their success coach or consultant at will:
additionally, new and first-time college goers receive more intrusive
engagement given a general lack of familiarity with the college
experience. The success team is also in constant contact with faculty
and other academic staff to help coordinate a student's experience.
If a student needs help, we want to know early and often so they
can stay on track. We look at a variety of metrics to see how the
student is progressing including persistence rates, credit hour load
and student satisfaction. Any one of these indicators can give an early
warning that a student may be experiencing difficulty, allowing our
success teams to reach out and help.
The Pell Institute recently released a qualitative study on DeVry
University's support services for low-income, first-generation students
and said, ``What is most promising about these categories is the
calculated investment that DeVry University has made to weave together
the practices, and how they continue to develop and refine these
practices to better support their students . . .''
DeVry University and Chamberlain also offer a service called
ASPIRE. ASPIRE is a special program that provides all enrolled students
direct and confidential access to counseling professionals who can help
them stay focused on their goals during difficult times. This
complimentary service is accessible 24 hours a day, 7 days a week, to
help address any issues of a personal, family, financial or legal
nature affecting students.
career services
Our goal is that our graduates gain the academic knowledge and
workforce skills to launch their careers. The student support and
career services process begins the first time we meet a prospective
student and goes on even after the student graduates--through lifetime
career service guidance.
Keller Graduate School of Management, a part of DeVry University,
launched a first-of-its-kind, personalized career services program for
its graduate students in conjunction with CareerBuilder, the global
leader in human capital solutions. Through the Keller Career Services
program, students have access to a dedicated team of career experts--
strategists, writers and coaches--for a high-level, personalized
approach to career development.
Eligible Keller students are individually assigned a Career
Strategist to mentor them through an intense 90-day career search that
encompasses assisting with establishing goals and expectations to
customizing a personalized job search strategy. Additionally, these
students have access to a certified career coach for mentorship on
topics like interviewing techniques, career path planning, networking
and workplace etiquette. Additionally, a CareerBuilder professional
writer assists Keller students in the creation of career-related
materials, such as keyword-rich resumes and cover letters to help
Keller students stand out among job applicants.
potential solutions
Over the course of the past 13 months, the committee has held a
number of hearings focused on private-sector education. Throughout the
course of the Senate hearings and public debate on the value of private
sector provided education, different perspectives have been heard
regarding the performance and value of higher educational institutions.
Assessments of performance are typically made through one's own
proprietary lens and, as a result, have led to vastly different
perspectives of performance and value. However, there is common ground
among all parties in two areas--the current metrics used to evaluate
institutional performance are insufficient, and the opportunity exists
to improve institutional programs and services. It is therefore
reasonable that we begin seeking solutions on these common grounds, and
we propose a policy framework comprising two pillars:
1. Metrics of accountability
2. Standards of best practices
metrics of accountability
In developing proposed metrics, we suggest the following design
principles:
1. The metrics should be easily and clearly understood by
educators, policymakers and the public. The number of metrics should be
limited in order to minimize the occurrence of ``competing'' outcomes.
2. Metrics should represent a final outcome as opposed to an
interim measurement of performance. For instance, they should measure
completion rate instead of retention rate or repayment rate instead of
delinquency rate.
3. Metrics should be relevant to the level of education. In
general, it is not relevant to apply the same test to a certificate
program and a graduate-level program.
4. Metrics should be risk-adjusted to the students schools serve,
and should be used to measure results amongst institutions that serve
similar populations.
5. Metrics should apply to all institutions: public-sector,
private-sector, and independent.
6. Metrics should be used to ``flag'' questionable performance,
facilitating regulators' enforcement actions.
There are five areas of measurement that are almost universally
applicable within higher education:
1. What did students learn;
2. Did students successfully complete their program;
3. Did they achieve the education or career objective which they
sought from their education;
4. Did they gain eligibility for their chosen profession; and
5. Are they repaying their student loans?
These are commonly measured and used to gauge performance and
progress towards institutional goals. The following discussion
illustrates ways in which the design principles can be applied to
develop metrics to meet the goals for better transparency and
accountability.
what did students learn?
Measurement of Learning Outcomes can be taken at both the
coursework and program levels. Tests such as the Collegiate Assessment
of Academic Proficiency (CAAP), the Collegiate Learning Assessment
(CLA) and the ETS Proficiency Profile all seek to measure the
development of knowledge and analytical and communication skills across
a span of time and coursework. Though imperfect, these tests can be
used to reflect the differential amount of learning attained from the
1st through the 4th years of study as well as the overall absolute
amount of knowledge gained at an institution as compared to peer
institutions or a national standard. Similarly, measurements of
analytical, quantitative and verbal abilities are taken with graduate
school admissions tests (GMAT, GRE, etc.) and could be applied to
program and institutional graduates. Metrics of learning outcomes are
used in other settings, including in the United States in K-12
education, and in Brazil in postsecondary. In Brazil, every
institution, regardless of public- or private-sector status, is
measured by the performance of its graduates on learning assessment
exams.
did students successfully complete their program?
In measuring completion rate, it is important that we compare
``apples with apples.'' We propose a system whereby all students are
counted, and completion metrics are viewed in the context of the
student population being served. As referenced above, the predominant
metric for completion rates currently omits many students from
measurement. For example, the measurement does not count a student who
enrolls for 1 year, then transfers with credits to another institution
and successfully completes a certificate or degree as a ``success'' for
the initial institution. Likewise, institutional completion rates
should be viewed in comparison with other institutions that serve a
similar student population, taking into account current Education
Department risk factors. Finally, completion measurements could include
completion rate for all enrollments (including transfers, part-time and
starting dates outside the fall term), on-time completion rates
(students completing program within an institutionally defined and
disclosed normal period of enrollment) or a progress rate (successful
completion of courses attempted within the past year).
did they achieve the education or career objective which they sought
from their education?
Metrics that provide an accurate reflection of program graduates'
employment or acceptance to graduate schools are helpful in evaluating
institutional quality. In developing employment metrics we can learn
from the experience of national accreditors, who for many years have
mandated collection of employment outcomes. It is critical that these
measurements be applicable to the scope of the program. Whereas a
Diagnostic Medical Imaging certificate may be a prerequisite to
employment in the field, there are many programs (such as a graduate
program in Computer Information Systems) that augment students'
knowledge and skills allowing them to continue and advance in fields in
which they are already employed.
did they gain eligibility for their chosen profession?
For programs in fields where licensure is required, this metric
presents a clear, objective measure of institutional accountability.
Licensure passage rates are available in programs ranging from
cosmetology certificate programs, to nursing, to post-baccalaureate
professional programs.
are they repaying their student loans?
Repayment or default rates have been used as a proxy of
institutional or program quality. A cohort-based default rate provides
greater transparency into the potential impact on individual students,
whereas a dollar-weighted default rate provides greater transparency
into the taxpayer's risk with a particular school's participation in
the loan programs. Whereas the use of a default rate is consistent with
design principle #2, the Department's recent development of a loan
repayment rate represents an interim measurement and is imprecise in
actually measuring borrowers' status in meeting repayment obligations.
Current measurement of cohort default rates is similarly imprecise in
that it fails to accurately account for loans whose default is delayed
through the use of deferments and forbearances. We propose the
development of dollar-weighted, risk-adjusted repayment in conformance
with design principle #3 (did students achieve the education or career
objective which they sought from their education) to meet our standards
for transparency and accountability.
standards of best practices
The second area of common ground is the opportunity all
institutions have to improve programs and services to students. This
opportunity becomes even greater as education opportunity is extended
to larger populations to meet future workforce needs and the
President's 2020 goals. The following summarizes the standards and
practices which can serve to protect both students and taxpayers.
1. Prospective students should have sufficient information provided
to them to make sound decisions regarding their education alternatives
and career and financial implications of their decisions.
2. Schools should provide all prospective students with information
regarding employment outlook, costs and financing for their programs of
study prior to any students' incurrence of a financial obligation. Such
information should include:
a. Accreditation of institution and program, including graduates'
qualification for licensure in associated occupations;
b. Graduation rate of students entering the program;
c. Employment rate (in field of study) of graduates;
d. Licensure pass rates of graduates;
e. Total tuition and fees of the program;
f. Information from the Bureau of Labor Statistics on outlook of
occupations associated with the program of study, including number of
new jobs forecasted in these occupations and median earnings associated
with those occupations;
g. Median debt incurred by graduates of the program; and
h. Cohort default rate of students graduating or withdrawing from
the program.
3. To protect students from well-intentioned, but poorly understood
decisions, institutions should adopt a trial policy which provides some
financial protection for at-risk students. A model for such a policy
might provide that:
a. First-time students (first time in any postsecondary education)
may withdraw during the first 14 days of enrollment with a 100 percent
refund of tuition and fees and institution-provided room and board. All
loan funds will be returned to the lending source. Grant funds will
only be retained to cover unpaid costs associated with unreturned books
and equipment.
b. Students repeating failed remedial or developmental coursework
will not be assessed tuition for that coursework.
4. Progress reports should be provided at regular intervals to
students to enhance their ability to manage their education. A model
for such reporting may include:
a. Progress towards degree or certificate, including number of
credits earned to date and remaining number of credits needed to
complete the program;
b. Cumulative grade point average;
c. Total tuition and fees assessed to date for studies within the
current program;
d. Total debt incurred to date toward studies within the current
program, including name and contact information for each loan-holder
and the principal amount disbursed from each; and
e. Prospective students should have access to professionally
trained staff who will serve them in a knowledgeable and ethical
manner. This may include the following:
i. All recruiting and financial aid staff will be required to
complete compliance training at least once per year. Such
training may include, but not be limited to, regulatory
requirements and restrictions related to:
1. Misrepresentation;
2. Compensation;
3. Institutional eligibility for title IV assistance;
4. Program eligibility for title IV assistance;
5. Student financial assistance eligibility; and
6. Student financial assistance programs, including
specifically, requirements and repayment obligations of student
lending programs.
5. Institutions of higher education should continually assess their
effectiveness. A model for assuring this assessment is captured would
provide that:
a. Institutions will collect input from students, alumni and
employers to assess the effectiveness of their programs in meeting
educational and posteducational objectives.
i. Students will be, no less than annually, surveyed
regarding effectiveness of faculty instruction and
institution's support for student success.
ii. Alumni will be, no less than tri-annually, surveyed
regarding the success of the educational program in preparing
them for careers in their fields of study.
iii. Employers will be, no less than tri-annually, surveyed
regarding the sufficiency of the preparation and skills of
graduates of the institution.
iv. Survey results will be published and made available to
prospective and current students.
6. Ideally, all institutions would voluntarily ascribe to improving
these types of practices. Compliance with each can be assured by
including these activities in the institution's annual compliance audit
requirements for Federal Student Assistance program eligibility. As a
publicly held organization, DeVry embraced Sarbanes-Oxley when it was
enacted and we believe the time is right for a similar model to be
considered in the context of higher education.
conclusion
President Obama recognizes the significant challenges we face, and
has set ambitious, yet achievable goals. He said:
``To get there, we have to realize that in today's global,
competitive economy, the best jobs and newest industries will
take root in the countries with the most skilled workers, the
strongest commitment to research and technology, and the
fastest ways to move people, goods, and information. To win the
future, America needs to out-educate, out-innovate, and out-
build the rest of the world.''
Given the difficult budget choices facing State legislatures,
public colleges and universities cannot meet our capacity needs alone.
As education researcher Sandy Baum has noted,
``Many for-profit institutions provide students with
opportunities not available to them at public colleges. We do
need a wide variety of programs and institutions to serve at-
risk students if we are going to achieve our goals for
increased educational attainment.''
DeVry's Chairman, Dr. Harold Shapiro, also recognizes this need for
a broad spectrum of educational opportunities. He has a unique
perspective on higher education, having been president of one of the
leading public-sector schools, the University of Michigan, one of the
leading independent schools, Princeton University, and now a leading
private-sector institution.
He says:
``. . . one of the strengths of the American system of higher
education is its diversity of choice. Public-sector, private-
sector, independent universities, community colleges--they all
serve different niches in higher education, and there is
strength in this variety.''
We have an educational infrastructure second to none: world-leading
research universities, liberal arts colleges, a dynamic and far-
reaching community college system and a growing and vibrant private
sector.
Private-sector institutions are demonstrating the vital role they
play by serving a growing percentage of non-traditional students
enrolled in higher education--the very students we need in order to
reach our college attainment goals.
As Secretary Duncan said at DeVry's policy forum held in May 2010,
``For-profit institutions play a vital role in training your
people and adults for jobs and for-profits will continue to
help families secure a better future. They are helping America
meet the President's 2020 goal and helping us meet the growing
demand for skills that our public institutions cannot begin to
meet alone, especially in these economically challenging
times.''
Solutions-oriented discussions are the right start. DeVry looks
forward to working together with policymakers and our colleagues in
higher education to regain our edge in an increasingly competitive
global economy.
The Chairman. Bob Shireman, let's stay on this for just a
little bit longer. Again, we look at Federal aid, Pell grants
come through this committee and on my appropriations committee.
I've got to find $11 billion this year to fill the Pell grant
gap, $11 billion. I don't know where I'm going to find it.
A lot of the Pell grants are going to for-profit schools.
We know that. It's increasing. And again, I wouldn't mind that,
as long as the students are achieving and getting outcomes.
But how do you see this in terms of what's happening with
our Pell grants, and how do we make sure that we're getting the
best use of those dollars? That's something we grapple with
here.
STATEMENT OF BOB SHIREMAN, CALIFORNIA COMPETES,
SAN FRANCISCO, CA
Mr. Shireman. Yes, it is something that I have grappled
with, and I think some very important steps have already been
taken in that regard.
I find that the potential for what for-profit colleges can
deliver to be very compelling. And I think back to 2\1/2\ years
ago when I was on the Obama-Biden transition team and we were
meeting with all kinds of groups, and that included groups of
representatives of for-profit colleges. And here we were in the
beginnings of the recession, and they were talking about
connecting with industry and being innovative, responding to
student needs and what industry really needs, and being nimble
in terms of being able to be responsive, and those are all of
the kinds of things that I think we should look for in all of
our colleges, and I think a good case can be made that there's
the real potential for that to be faster and better in for-
profit colleges.
What we found, unfortunately, was that when we started
looking at the numbers, it didn't match up. The reality wasn't
close enough to the rhetoric for comfort, and I think that's
what you've been seeing now. The need for some kind of
indicators to use in regulation.
I think we also need to think about how students think
about their options, and this issue of disclosure is really
important because while I agree that disclosure is important,
there's an issue of timing and context.
Too often, a disclosure is something that happens when a
purchase decision has essentially already happened and someone
is given a 3-page form, little print, and it says, ``oh, one
more thing, you have to sign this.'' And it ends up
accomplishing nothing in terms of them really thinking about
the purchase that they are making. Really, all it ends up doing
is it becomes a document in court later where the school can
say, ``look, we told them their credits might not transfer.''
What we need to think about is how do we get that kind of
disclosure happening from a neutral party much earlier in the
process, because the information that a student needs is
information just when they're starting to think about I maybe
want to improve my skills, I maybe want to go back to school,
and they need to be thinking about questions like: do I have
the time to go full-time; what are my options that are part-
time; or do I want it to be a situation where I can meet other
people, so it can be a ground campus as opposed to an online
campus, and then becoming aware of things like default rates,
graduation rates, placement, is licensure an issue for the
careers that they might be interested in.
Unfortunately, now when people have these thoughts about
college, they go on the Internet, and the next thing you know
they're on the phone with someone who is not an advisor. They
are a recruiter trying to get someone to sign up for that
school, and they'll end up getting that worthless disclosure
statement later, trying to figure out how we get human contact
with low-income students, veterans, etc, who are beginning to
think about I want to figure out what's going to be a good
college match for me.
The Chairman. So you're saying put disclosure more up
front.
Mr. Shireman. Put disclosure more up front, but not by the
schools. Some other neutral--and I don't know if that's taking
our 1-800-FOR-FEDAID phone folks who exist now and----
The Chairman. No, I've seen different disclosures. I looked
at DeVry's disclosure, for example. It's pretty comprehensive.
There's a lot of stuff there. I've looked at other schools'
disclosures, and there is not much there. And so I got to
thinking should there be some kind of comparative, some kind of
comparisons somewhere in there? One school has a lot of
disclosure, another school has just a few little things in
there and you can't really get through the haze.
Mr. Shireman. Yes, comparison is critical, because you
can't know what--is 50 percent good or bad in terms of
placement, graduation, etc.
The Chairman. Mrs. Petraeus, I want to get to you because a
couple of years ago, 3 years ago Congress passed the Webb bill,
as we call it, which really we all supported because we thought
it was a good thing to do, which allowed us to get more Federal
aid to military personnel who were active duty, who had served
I believe it was 90 days at least in a theater of war, in Iraq
or Afghanistan. And so we opened up aid to military personnel,
active duty, and their families, which we all thought was a
good thing to do. I still think it's a good thing to do.
But what we found was in the intervening couple of years,
more and more of the for-profit colleges really going and
recruiting military people. If you look at the graph--and I
don't have it now, but in our previous hearings I showed it--
how much more of the military money now was flowing into the
for-profit schools.
Tell me from your experience, do you think military people
are getting the kind of disclosures or information they need to
make a wise choice on a for-profit school?
STATEMENT OF HOLLY K. PETRAEUS, DIRECTOR, OFFICE OF
SERVICEMEMBER AFFAIRS, CONSUMER FINANCIAL PROTECTION BUREAU,
WASHINGTON, DC
Mrs. Petraeus. I will say that I really first became aware
of this issue when I read an article about somebody who
certainly did not get that disclosure. It was an article in
Business Week in January 2010 that said U.S. Marine Corporal
James Long knows he's enrolled at Ashford University; he just
can't remember what course he's taking.
He was a veteran, a Marine with traumatic brain injury who
had been recruited by a recruiter who had come to the Wounded
Warrior Battalion at Camp LeJeune, NC, where he was staying
during his convalescence and signed him up for classes that
obviously he was not capable of taking advantage of.
So I think it's a wonderful benefit that was passed, and
certainly there are many military families who are very
grateful for the opportunity to transfer those benefits in some
cases to their family members. But an unintended consequence of
the fact that the 90/10 rule, where the military G.I. bill and
tuition assistance benefits are not counted in the 90 percent
title IV education funds but in the 10 percent--
The Chairman. Right.
Mrs. Petraeus. It's made them a target for very aggressive
recruiting, because for every one G.I. bill or tuition
assistance recipient that you can recruit, you can get nine
other students in your title IV category. So unfortunately, I
think military folks at this point are seen like a dollar sign
wearing a uniform for many recruiters in the for-profit model.
They're seen as cash that enables them to sell more of their
product, and that's unfortunate.
You talked about what constitutes student success, and to
me success would be a military student that comes out of it
with a degree that they can use for gainful employment to
become a productive member of the economy after they obtain
that degree. There was a great success story after World War
II. That generation of veterans came home, went to college on
the G.I. bill, and really became the engine that drove our
economy to the success that it achieved, and that's what I
would love to see happen today.
Unfortunately, I think the way things are configured right
now, folks are being aggressively recruited into programs that
are not necessarily ones that are designed for them to succeed.
And when they're on active duty with tuition assistance, they
do have to do that through an education counselor at their
military installation, so they do get some help evaluating
programs.
But the G.I. bill, there really isn't that assistance.
There's very little comparison shopping to be done, and the
Consumer Financial Protection Bureau is all about being able to
comparison shop for credit cards, for mortgages, and I say it
should be for student loans as well.
There should be an understandable piece of paper where you
can look at what does it cost, what are the gainful employment
or licensure rates coming out of it, what are the graduation
and retention rates, can I transfer my credits, what is the
accreditation, is it regional, is it national, will it be
accepted. All of those things, I think, are something that, in
order for military people to get the most out of this very
generous benefit, they should be able to see up front.
The Chairman. And I know you made this point, but I think
it's worth repeating and emphasizing, and that is that once a
G.I. has used up their G.I. bill or used up these benefits,
they never get them again.
Mrs. Petraeus. No. It's done. So if they have squandered
them basically on a program that turns out not to be accepted
anywhere, not to be transferrable if they didn't finish the
degree, basically they've got a whole lot of nothing, and they
have to start from scratch and pay for it themselves.
The Chairman. Thank you.
For the Senator who just showed up, we're having a
roundtable discussion. It's not a hearing as such. I want to
get people engaged. We just started this.
The first topic that I threw out there was outcomes and how
we measure outcomes and what the different schools do to look
at the outcomes and what students should know before they sign
up.
I've said anybody that wants to interject, put their sign
up, and Senator Franken put his sign up.
Statement of Senator Franken
Senator Franken. Thank you, Mr. Chairman. Thank you for
having this roundtable.
Mrs. Petraeus, thank you for coming to my office the other
day. I was very taken with you and what we talked about, and so
I want to follow up with the chairman on this.
This guy who was recruited at Camp LeJeune with TBI, how
many recruiters do some of these for-profit colleges have as
compared to how many guidance counselors they have at the
school itself? What would the ratio be? Would it be a couple of
guidance counselors for every recruiter, maybe 10 guidance
counselors for every recruiter, something like that?
Mrs. Petraeus. The Chairman named a couple of them that are
egregious examples, and I certainly have one, which was 78,000
students, 1,700 recruiters, 1 full-time employee tasked with
job placement. That's probably the most egregious.
Senator Franken. So they have 1,700 recruiters, and they
have 1 person serving to give career advice?
Mrs. Petraeus. Yes.
Senator Franken. OK. That person must be very good, though.
[Laughter.]
Mrs. Petraeus. I suspect you probably go straight to
voicemail with that individual.
Senator Franken. Now, we talked about the 90/10 rule, and
that's very important as far as I can tell, and you made the
point that since guys on the G.I. bill, on the new G.I. bill
count in the 10 instead of the 90, even though the 90 is
Federal aid, it seems like the G.I. bill would qualify as
Federal aid, and as a result these guys sort of are a walking
dollar sign to some of these schools that have a lot of
recruiters.
Do you think that changing that rule might be, like, a
swell idea? I mean reclassifying our veterans so that they're
not a target.
Mrs. Petraeus. Certainly I think removing them from that
equation could help them not be the focus of this kind of
recruiting. I'm not sure what would be the best way to work it,
if it would be move them into the 90 percent or just take them
out of the equation altogether and just not count the G.I. bill
and tuition assistance in that 90/10. I will leave it to
legislators and their staffs to figure out what might work the
best. But I think as long as they're in that 10 percent, they
are going to be aggressively recruited.
Senator Franken. And you talked--and I can open this up a
little wider to anyone who cares to jump in because it's a
roundtable, or square more, really.
You were talking about veterans who come out and use all of
their G.I. bill. But don't they, in fact, often on top of that,
get other loans, and aren't they then, in addition to in many
cases wasting their G.I. bill and coming out with nothing, but
also put in a position where they owe a great deal of money,
and that this is money that--and this again is open to
everyone--this is a debt that can't be gotten rid of when you
go into bankruptcy? This is a debt that you'll take for life,
and we've had other witnesses testify on this issue.
And so I'm sitting here as a Senator and I'm thinking, OK,
I'm trying to get our debt down. That's a very important part
of our job right now, is getting a handle on our deficits and
on our national debt. And for me to see these G.I. bills and
the Pell grants going to very, very expensive schools that
aren't really doing their job--and I thank Mr. Batson for being
here because Regency does a great job; and I thank you, Mr.
Hamburger, for being here from DeVry.
So I'm seeing both Federal money, as far as I'm concerned,
the taxpayers' money being wasted when we're in this tremendous
budget difficulty, and then seeing lives really put into
difficult straits. And worse than that, seeing veterans, men
and women who have put themselves on the line and see them
taken advantage of, and it really makes my blood boil, I must
say.
What I kind of want to know is--this doesn't just happen to
veterans, it happens to many people--how widespread is this
that people go to these for-profit schools? Because we've had
testimony, and I suppose you could say, ``well, that's just a
couple, a few people who that's happened to.'' How widespread
is this, for those who have been studying the industry? How
widespread is that, and if it is widespread, what can we do to
prevent that, and why don't the DeVrys and the Regencys of this
world, the very good actors or the kind of good actors, why
don't they get in there and help us and police their own
industry--how could they help do that?
The Chairman. If I might just interject here, Senator
Franken, again, this is a roundtable discussion. I just want to
make the point that we had invited a number of for-profit
schools to come here to join us at this roundtable discussion,
and only two acceded to do so, and that's Mr. Hamburger from
DeVry and--
Senator Franken. Do you have any names of the ones who
didn't show up?
The Chairman. I don't know. My staff probably----
Senator Franken. You don't have to answer. I mean, it was
kind of just a joke to embarrass them. That's not a nice thing
to do. That's not very Minnesota, is it, Mr. Batson?
[Laughter.]
It's not a Minnesota nice thing to do.
Let's go back to the--Mr. Cruz seems to have a response.
Mr. Cruz. Senator Franken, I can speak to the numbers.
Students at for-profit colleges are more likely than others to
take out loans, significantly more likely. If you look at, for
example, students enrolled in 4-year institutions, 94 percent
of the students enrolled in for-profits take out Stafford
loans, and 46 percent also have to take, in addition to that,
private loans in order to meet their financial needs at these
schools.
When you look at the rates, the loan rates at private
nonprofits and publics, you see that it's between 25 percent
and 50 percent lower than those at for-profits.
Senator Franken. What did you say is lower? I'm sorry.
Mr. Cruz. Sure. If you look, for example, at public
institutions, the Stafford loan rates are 42 percent, which is
less than half.
Senator Franken. OK. But now I think the for-profit
industry will say, and rightly so, that they serve a different
population. So those figures aren't necessarily saying anything
bad about the for-profit industry. It just, in fact, might say
something good, that they're serving people who need their
services and who benefit by their services. And the for-
profit--I'm sure the great actors in the for-profit industry
also have a higher incidence of loans being taken than
certainly your public colleges, and maybe your private.
Now, they're more expensive, and then you've got to get to
what your default rates are and that sort of thing. But I
think----
Mr. Cruz. If I could just follow up real quickly.
Senator Franken. Yes. I'm sorry.
Mr. Cruz. When we also look at public and nonprofit
institutions that have similar types of students in terms of
their selectivity which they're admitting into the school,
their academic credentials, and also look at schools in these
sectors that also have similar students from the perspective of
socioeconomic, what percentage of their students are low-income
and receive Pell grants, we see that in the for-profit sector
the graduation rates and the loan default rates, the graduation
rates are much lower and the loan default rates are much higher
than these other institutions that take similar students.
There seems to be a lot of room for improvement when we
talk about this sector as a whole, but I'm sure that my
colleagues here can talk about----
Senator Franken. OK. I didn't let you complete your
thought, which was spoken to.
The Chairman. I'm going to ask Senator Hagan, who had her
sign up there for some time.
Senator Hagan, if you want to jump in here.
Again, Mr. Batson had a response. Was that to what was just
said, Mr. Batson? Go ahead.
Mr. Batson. It was. Senator Franken asked why schools
hadn't stepped forward and been part of the discussion and made
a better effort to participate in a way that would strengthen
the system over time. And I think one reason is that we just
haven't known how to do that. There's been a lot of discourse
on a lot of symptoms, and I think we need to start talking
about the root causes, and I believe we're beginning to get at
that today during the early parts of this discussion.
You asked what constitutes student success, and you heard
every panelist who spoke to the topic refer to student
outcomes.
The Chairman. That's right.
Mr. Batson. And so what we have to do is we have to set the
system up so that incentives are aligned for the students, the
taxpayers, and the schools around outcomes. And until we do
that, we're going to be chasing symptoms.
We live in a world where we've had bright-line outcome
requirements from our accreditor around completion, licensure,
and placement. We don't target our marketing at any particular
students. We take students who come to us. We have an incentive
if we're concerned, if we could identify that a student wasn't
going to succeed, to not match them in the program, because if
we fall below certain completion thresholds, we lose our
accreditation.
Everything we do is driven around completion. Everything we
think about during the admissions process, everything we think
about in terms of designing our curriculum, in terms of
designing our advising support, more than any other regulation,
it is the completion requirement through our accreditor that
drives our business, and it's the No. 1 thing we're focused on
here, 3 years into a recession, when there's pressure on our
students and pressure on those rates.
When you talk about 90/10, our 90/10 is 80 percent. And so
we haven't spent a lot of time focused on 90/10. We're focused
on completion. I guess what I would ask is if we--meaning
higher education as a whole, not just Regency, not just for-
profit--can produce good outcomes, and if there's a way to
measure those and report those, do you care how much funding
comes from the Federal Government? Or is it really about
funding students in schools that get good outcomes?
Senator Franken. It's, of course, the latter. I mean, we
care how much. I mean, at a certain point we talk about
economies. But my question is, is that you're a good actor.
There are other great actors in Minnesota. But what I'm saying
is there are bad actors, and that's exactly what we're trying
to do with the new gainful employment regulations that we're
trying to put in place. We're trying to measure outcome. We're
trying to measure outcome. And you take your outcomes seriously
because you want to get accreditation.
There are places these kids go to college and they don't
have accreditation when they get out. They are told they will,
or it's been ignored.
I'm sorry, Senator Hagan, but I just wanted to comment on
that, and I'll give up my time.
The Chairman. Thank you, Senator Franken.
And we'll go to Senator Hagan. Thank you.
Statement of Senator Hagan
Senator Hagan. Thank you, Mr. Chairman. I want to thank you
for holding this roundtable today and want to thank all of the
witnesses who have come here to share your thoughts and your
testimony with us.
I also want to thank Mrs. Petraeus for being here. We held
a roundtable type discussion at Ft. Bragg several months ago.
When I was in the State senate in North Carolina, I was very
involved in being sure that we removed predatory lending from
our military bases in North Carolina. It was critical. In Mrs.
Petraeus' new role, we had a great discussion with the soldiers
and the officers and different advocacy organizations on how to
help support our service members and their families across the
Nation from predatory lending. One of the many topics that did
come up was for-profit education.
You know, Mrs. Petraeus, it is my understanding that the
Department of Defense, as well as the individual installation
managers, manage lists of businesses offering questionable and
poor service to military families and members. I'm told that
this is called the black list. Several of these black list
discussions came up at the forums we held at Ft. Bragg.
Do you know if this list currently includes any educational
institutions?
Mrs. Petraeus. Not that I've seen. I think what you're
referring to is the list put out by what's called the Armed
Forces Disciplinary Control Board, and it's a list of
businesses that are considered either dangerous or prejudicial
to morale, discipline, and so forth. And often it could be
something like a bar with drug activity, or it could be and has
been, for instance, an auto dealer that's consistently ripping
off the troops. It gets put on this list, and when that
happens, no service member can go in there without basically
getting in serious trouble. So it's effectively putting it off
limits.
It is a thought, you know? If there is an educational
institution that is consistently doing very questionable
practices, for instance possibly lying to recruits, telling
them that the entire cost of school will be covered by their
G.I. bill and once they get enrolled they find out that's not
the case, which we've certainly heard about, that's one
possible avenue that it might be addressed locally by those
disciplinary control boards. But those are installation based,
and it would just cover that local area.
Senator Hagan. Thank you. I also think if there is a
predatory relationship with wounded warriors and enrolling them
in classes, that would certainly, to me, be something that
should be looked at in a much more in-depth situation.
Mrs. Petraeus. You know, the Department of Defense has
something called the DOD Rule on Commercial Solicitation which
does not allow folks to come onto installations under the guise
of doing financial education and sell financial products. And
one possibility also may be to try to control some of the
educational solicitation that goes on to be sure that the folks
who are on the base trying to recruit students are actually
vetted in some way before they come on and do that.
Senator Hagan. Thank you.
Mr. Hamburger, thank you for being here. I understand that
your school gets about the fourth highest amount of DOD and VA
tuition benefits, and I was just curious what you think of the
90/10 rule and whether or not DOD and VA benefits should be
included in that 90 percent.
Mr. Hamburger. Thank you, Senator. And specifically we're
talking about DeVry University.
Senator Hagan. Yes.
Mr. Hamburger. Which is the largest of the colleges that we
have. And just in contrast to some of the things that were said
earlier, maybe before you walked in, we're not just a Johnny-
come-lately here. DeVry University has been serving the
military proudly since World War II. Dr. Herman DeVry was
training the military on radar and electronics. We were one of
the first schools approved under the G.I. bill after World War
II, and of course that's one of the greatest pieces of
legislation arguably that we've ever had in this country.
And one of the interesting things is we gave the money to
the G.I., and then the G.I. could apply that to any accredited
school, not an unaccredited school. For sure, it has to be
quality, and I would agree that any college or university,
whether they're public sector or private sector or independent,
if they came on a base and were lying to students or
misrepresenting in any way or doing any of the things that have
been mentioned, they should be on that list and they should not
be allowed to be on that base.
Senator Hagan. How about the 90/10 rule?
Mr. Hamburger. In terms of the 90/10 rule, when I think of
the 90/10 rule, I go back to the purpose for which it was
intended. My understanding at least is it was an indication or
a proxy for, is this a quality program. And so the thinking, as
I understand it, was that a certain percentage of self-pay or
of corporate reimbursement, those kinds of things, would sort
of be a marker of quality.
One of the things that we talked about here at the
beginning part of the roundtable is, as we look toward
solutions, we're really looking for markers of outcomes. So if
the college has students who learn, who graduate, who are
employed or who go on to grad school, who are licensed in their
field, if they are repaying their loan, those are the markers
of quality.
So if the college is providing those kinds of outcomes,
then it's not as clear to me that the 90/10 rule is as relevant
as a quality marker. And the military reimbursement is in many
ways analogous to that corporate reimbursement. Many of our
students who--and, by the way, military students are very
important to us, but they're less than 5 percent of our
enrollments. We're not out doing crazy things here. But just as
many students, who have come to us from a corporation, have
told us is that one of the benefits that was attractive to them
in joining that corporation was the corporate reimbursement----
Senator Hagan. It seems to me that if the public really
understood that all of this is literally taxpayer money, then
they would feel differently about for-profit institutions. So
you disagree on the 90/10?
Mr. Hamburger. I'm sorry. Which part of it?
Senator Hagan. That's fine. I mean, on the 90/10, on the
fact that the military should not go into----
Mr. Hamburger. It also seems more like that corporate
reimbursement category. It's a benefit.
Senator Hagan. OK.
The Chairman. I think, Senator Hagan, you've hit on
something, and Mrs. Petraeus has also, that we've been looking
at closely here. I think you just hit the point. This is all
taxpayer money.
Now, the 90/10 rule is in the Higher Education Act, which
is under the jurisdiction of this committee. The DOD is not
under that jurisdiction, so they've never been subject to the
90/10 rule. I think one of the things that we're looking at is
to correlate with the armed services committees, bringing that
into that fold. It's all taxpayer dollars. And so why shouldn't
it be all the same, treated the same? I think that was the
point you were making. Instead, there's this kind of bifurcated
type system.
Again, I open it up for anybody that has any views on that
at all.
Mr. Nassirian. Thank you.
STATEMENT OF BARMAK NASSIRIAN, ASSOCIATE EXECUTIVE DIRECTOR,
AMERICAN ASSOCIATION OF COLLEGIATE REGISRTARS AND ADMISSIONS
OFFICERS, WASHINGTON, DC
Mr. Nassirian. Mr. Chairman, thank you. I'll try to be very
brief.
On the 90/10, it's important to understand that the basic
purpose of 90/10 was to prove market viability. It's not so
much a matter of assessing quality but understanding that if
somebody is selling a product for which there is only one
customer, you really ought to take a second look at the
processes by which that customer decides to be the only
purchaser of that product.
So when you push 90 cents on the dollar onto the title IV
programs, you are already, in my view, in very dicey territory.
Why is it that nobody seems to want to reach into their own
pockets and put 10 cents on the dollar down?
When you commingle other Federal resources, you now are
running the risk of essentially fully funding what purports to
be a private sector operation, a private sector college or
university, which kind of reminds me of Dancing with the Stars.
It's not really dancing, it's not really stars.
[Laughter.]
It's not really private sector, and it's not really a
college or university at that point. You are at this point
dealing with what ought to be the subcontractor that is
evaluated on terms other than the ability to go out there and
pitch.
And part of the problem, by the way, is it would be one
thing if the DOD exercised its own separate judgment. It would
be one thing if the VA exercised its own separate gatekeeping.
But guess what? They all defer to title IV. So, de facto,
you've created a very powerful incentive now for entities that
are already pushing the envelope and are on the verge of losing
eligibility for title IV because they're at 90 cents on the
dollar to now exert additional effort to go out there and
recruit some service members under the active duty tuition
assistance programs, or recruit as many veterans as possible,
for two reasons now.
One, because their money is green, so that's extra
revenues. But additionally, that money becomes a gateway to
title IV funding. So in my view, active duty and veterans are
actually sort of exposed to extra jeopardy here.
Also I want to make one point here. There is no--because of
the title of the hearing at least, from my point of view in
terms of what the committee has done, there's really no
hostility whatsoever to the profit motive, right? I mean, the
profit motive is what makes this country work. This building
was built, I hope, by a for-profit builder, the automobiles we
drive. We don't want things to be all manufactured by the
government, I assume.
But envision this, envision a parallel. Look at our
construction industry. Would you rather have building codes and
very intrusive inspections and very severe penalties if
somebody undersizes the beams in the construction of the
building? Or would you rather have the honor system and
disclosures? I mean, I'd much rather have a system in which I
know there is a very specific framework that buildings don't
collapse on people's heads. And you know what? When it comes to
higher education, candidly, the for-profit sector, because it's
been basically completely unregulated or very ineffectively
regulated, is now essentially on the honor system. And guess
what? Buildings are collapsing on people's heads every day.
The Chairman. I think Mr. Hamburger wanted to respond to
that.
Mr. Hamburger. Yes, just quickly. I like the analogy
because those regulations are outcomes driven, does the
building fit the purpose for which it was intended, is it safe
and so forth? And likewise, if you had a college that was
producing students who learned and they graduated and they're
employed and they're repaying their loans, and they had 91
percent from Federal funds, versus--isn't it the outcomes that
we really care about? And as we work in this roundtable on
solutions, that's just our view as we focus on solutions based
on outcomes.
Mr. Nassirian. But----
The Chairman. Go ahead, Mr. Nassirian.
Mr. Nassirian [continuing]. Very briefly, the problem is we
have terrible outcomes and a complete lack of oversight. So
you've got to give me one or the other. Either give me good
outcomes and tell me ``leave me be, I'm doing such a great
job''--but that's not the case.
Mr. Hamburger. Outcomes and enforcement. Shut them down. If
you don't get the outcome----
Mr. Nassirian. We need both. But really, when you get into
the guts of title IV gatekeeping, I'll make this statement----
The Chairman. I'm sorry. Say that again, Mr. Nassirian.
Mr. Nassirian. When you get into the guts of title IV
gatekeeping mechanisms, once you really wrap your head around
what's going on here, you really begin to understand, the
lunatics are in charge of the asylum. There is nobody empowered
by law--this is not a flaw, this is a feature, right? Because
they wrote the law. That the stakeholders run the show, and
none of the authorities are actually empowered to question
horrific outcomes that are going on on a daily basis. I mean,
evidence of it is piling up, and yet we seem powerless to do
anything because we have these tomes of regulatory language
that do nothing.
[The prepared statement of Mr. Nassirian follows:]
Prepared Statement of Barmak Nassirian
Summary--Policy Options for Improving Program Integrity
accreditation
Impose conflict of interest rules to prevent regulated
entities (schools) from controlling their regulators.
End regulatory arbitrage and forum-shopping.
Mandate minimal financial and administrative
qualifications for accrediting bodies.
Create financial incentives for accreditors to keep bad
actors out.
Tie accreditation to verifiable outcomes where
practicable.
Require proper due diligence practices by accrediting
bodies.
End practice of buying and selling accreditation.
state authorization
Maintain a minimalist State authorization requirement only
for those schools that receive significant amounts of State funding.
Articulate substantive criteria for State authorization of
schools that receive insufficient funding from the State.
Impose multi-state approval requirements only above a
certain threshold of presence in a given State.
federal certification
Modify the 90/10 Rule by capping the maximum amount of all
title IV, VA, and DOD tuition assistance funds to no more than 85
percent of total revenues. Prevent gaming by excluding from the 15
percent all institutional aid including private label loans facilitated
or guaranteed by institutions.
Track defaulted loans for the life of the loan and update
cohort default rates no matter when defaults occur.
Create risk-sharing for high margin schools and their
insiders, and create joint and several liability for defaults that
occur in the out-years.
Tie Federal certification to specific licensure rates
where available.
Weed out deceptive and abusive practices. Stop the
proliferation of fake or misleading programs and degrees.
Hold institutions accountable for the claims and
representations they make in their advertising and recruitment efforts.
Re-examine the elimination of the ``50 percent rule'' and
consider reinstatement.
______
Chairman Harkin, Ranking Member Enzi, and members of the committee,
my name is Barmak Nassirian and I am associate executive director with
the American Association of Collegiate Registrars and Admissions
Officers. I appreciate the opportunity to participate in this
discussion of institutional eligibility for participation in Federal
student aid programs authorized in Title IV of the Higher Education Act
of 1965, as amended. The Senate HELP Committee's oversight
investigation of the for-profit sector during the past year has
demonstrated significant shortcomings and failures in the current
Federal gatekeeping framework. I hope that this brief summary of my
views on some of the underlying defects in the current title IV
institutional eligibility triad system might be useful to the committee
in its deliberations about how to improve outcomes for students and the
taxpayers.
AACRAO is a non-profit association of more than 2,500 institutions
of higher education and some 10,000 campus enrollment services
officials. Our members play a central role in protecting and
maintaining the academic integrity of their institutions as admissions
gatekeepers and as enforcers of the institutional academic policies on
the basis of which academic credits and credentials are earned. As key
stakeholders on behalf of their own institutions, they also have a
systemic interest in the academic integrity of other institutions
because they rely on credits and credentials granted by high schools
and previously attended colleges and universities.
Over the course of the past decade, our members have become
increasingly alarmed by a dramatic rise in the number of diploma
mills--from fake ``high schools'' to phony ``doctoral'' institutions--
and the proliferation of applications based on fraudulent and
questionable credentials. The constant battle against ever more
sophisticated fraud and abuse now occupies a major aspect of our
members' professional responsibilities.
While the detection of document fraud and identification of
outright diploma mills are difficult enough tasks, a third and more
systemic threat to academic integrity has emerged in the form of
questionable schools that have managed to establish eligibility for
participation in Federal student aid as collegiate institutions. These
institutions often combine multiple indications of potential trouble,
such as high-attrition/low-graduation rates, non-transferability of
academic credits to other institutions, low licensure pass-rates for
programs in licensed professions, low job-placement rates for their
vocational programs, high-debt/low-income characteristics for the vast
majority of their students, high default-rates, and very high levels of
dependence on Federal dollars. The ability of subpar and often
predatory institutions to game the Federal gatekeeping triad (i.e.,
non-governmental accreditation, State licensure and Federal
certification) undermines public support for Federal student aid
programs and devalues all academic credentials, even those that have
been earned at legitimate institutions.
To successfully establish eligibility for participation in Federal
student aid, institutions must be accredited by an accrediting body
that is recognized by the U.S. Secretary of Education; they must be
licensed by the State(s) in which they operate; and they must be deemed
eligible and certified to participate in Federal student aid programs
by the Department of Education. While this triad is procedurally
difficult, burdensome and expensive to navigate, structural
shortcomings in every one of its three layers allow for abusive and
fraudulent operations to get through. Given the enormous sums of
Federal funding that are available for the taking upon establishing
full eligibility, it should come as no surprise that there has been no
shortage of investment capital to pay for upfront expenses of breaching
the system. Over the course of the past decade, and particularly since
2006, when all limitations on distance education delivery by the for-
profit sector were lifted, numerous new ``institutions'' have cropped
up on the Internet and many established institutions have seen
enrollment growth figures, along with title IV utilization rates, that
are difficult to reconcile with genuine academic quality and even a
modest probability of reasonable outcomes for their students or the
taxpayers who foot the bills.
accreditation
In offering the following critique of accreditation as it is
currently configured, I should emphasize my own strong commitment to
institutional autonomy and the American tradition of political non-
interference in the academic affairs of colleges and universities. I
certainly agree with those observers who believe that our current
practices in accreditation are so abstract, so subjective, so
procedural and so self-referential as to border on being substantively
meaningless in assuring institutional quality or integrity. Just about
the only worse way of doing things would be to adopt governmental
recognition as an alternative.
I should also explicitly acknowledge that quality assurance through
peer-review has been a historically successful model by which
institutions that are truly interested in maintaining high standards
can continually improve. The problem we face is that the quality
assurance scheme, that once worked magnificently well, has failed to
keep pace with the transformational changes in the industry it is
supposed to oversee, and that it is increasingly reduced to a vestigial
structure with little relevance or effect.
Conditioning eligibility for Federal funding on accreditation is at
the root of most, if not all, of the latter's present shortcomings.
Accreditation worked best when it was entirely voluntary and non-
governmental. The very act of tying eligibility for Federal financial
aid to accreditation created powerful incentives that altered
accreditation as it had existed until then. With billions of Federal
funding at stake, accreditation has to be able to competently confront
well-funded or well-connected operations that only pay lip service to
the historical orthodoxies of institutional mission, self-evaluation,
and peer review. It does an abysmal job of it today for a number of
fairly obvious reasons.
First, accreditation is dominated by the very entities that it is
supposed to oversee. Not only is the National Advisory Committee on
Institutional Quality and Integrity (NACIQI) disproportionately
composed of officials from institutions, accrediting bodies themselves
and their association are also dominated by and financially dependent
on institutions. Rarely do regulated entities have such overt and
overwhelming control of their regulators. A clear legislative solution
here would be to require appropriate conflict of interest rules to
exclude individuals with fiduciary obligations to or financial
interests in any regulated entity from positions or appointments that
influence the Federal recognition process. Such individuals should also
be legislatively barred from serving as officers or employees of any
Secretarially-recognized accrediting body. Legislation could also
mandate broader representation in all tiers of accreditation by other
significant stakeholders.
Second, accrediting bodies often have insufficient resources to
play the role that they are assigned. Some of the smaller accrediting
bodies have budgets so small that they appear to be little more than
sham operations. Clearer guidelines on factors of administrative
capability and financial responsibility are desperately needed to
ensure that accrediting bodies have resources commensurable with the
resources of the institutions that they approve and the Federal dollars
they put at risk. In addition, rules should require all accreditors to
have visible and accessible consumer complaint, fact collection, and
due diligence processes, and require institutions to explicitly refer
to these processes every time they invoke or advertise their
accreditation status.
Third, our current system is biased in favor of erring on the side
of granting, rather than denying, accreditation. Accrediting bodies
have strong financial, political, and legal incentives to approve even
the most questionable applicants. This is a function of the previous
two attributes, and it is given additional impetus by the fact that
there are no substantive adverse consequences for accreditors with a
history of bad judgment. A legislative remedy here would be to impose
requirements and liabilities similar to those imposed on auditors of
accrediting bodies. The threshold for any liability should be
calibrated in a manner that would impose penalties only on accreditors
that display systemic poor judgment or a purpose of evasion. Another
mechanism to create meaningful consequences for accrediting bodies
would be to use cohort default rates much in the same way as they are
used for institutions, and previously, lenders and guarantors.
Fourth, Secretarially-recognized accrediting bodies should be
prohibited from engaging in accrediting activities outside the scope of
their recognition, particularly with regard to foreign institutions. In
our work on diploma mills at AACRAO, we have come across instances of
troubling behavior by Secretarially-recognized accrediting bodies
overseas, and have been concerned as well with some Secretarially-
recognized entities' activities vis-a-vis high schools.
Fifth, accrediting standards need to be more explicitly tied to
verifiable outcomes where practicable. The abstract and highly
subjective review process historically associated with accreditation is
laughably inappropriate for some fields. The self-evaluation/peer-
review process, for example, would be a far less reliable and more
complex measure of the quality of a truck driving school than the
percentage of its students who pass the licensure exam. Where direct
outcomes measures may not be available, reasonable proxies can often be
put in place to ensure program integrity.
Sixth, accrediting standards should be appropriately tied to the
incentives, internal structure, and capabilities of the institutions
being accredited. Self-evaluation and deference to institutional
academic judgment, for example, make perfect sense in settings where
tenured faculty are in control of the curriculum through shared
governance, but make no sense at all in settings where a group of
business-minded executives determine academic policy and hand it to at-
will instructors to execute.
Seventh, do away with referencing infinitely variable institutional
missions as a significant determinant of a pass-fail accreditation
system, and develop a more meaningful classification of institutions to
codify judgments about institutional quality. Our current scheme is, on
its face, counter-intuitive because of its grouping of clearly
dissimilar institutions together. When confronted by the public's
puzzlement at how some of the finest and some of the worst institutions
in the land enjoy the same accreditation status--a feature that the
latter often trumpet in their advertising--accreditation insiders refer
to the uniqueness of institutional missions as central to all judgments
about quality. This, in effect, means that we currently assess some
7,000 accredited institutions on a grading scale with 7,000 different
grades. A far simpler, more meaningful and more enforceable grading
system would be to recognize and explicate a more comprehensible set of
possible missions, and create an accreditation system that evaluates
institutions on the basis of the classification that they believe best
represents them.
Finally, put an end to the current practice of buying and selling
accreditation. Changes in ownership or control should trigger a new
accreditation application and review.
state authorization
The requirement for State authorization is a key component of the
title IV gatekeeping triad. The logic behind mandating State approval
was partially a function of the fact that, by far, the vast majority of
institutions--including private ones--issue degrees through a grant of
authority from their respective State governments. Equally as
important, States have long been primary providers of consumer
protection for their residents, and the State authorization requirement
further empowers them to enforce their rules in that capacity.
It should come as no surprise that the States vary tremendously in
how actively they have performed this important function. Some States
have implemented robust criteria for authorization and licensure, while
other States mandate little more than basic incorporation requirements.
There clearly are structural shortcomings with the current State
authorization mandate.
It is not unreasonable to rely on the States when they have some of
their own funds at risk, which they do with all public and many private
institutions. But it is important to realize that in too many cases,
because the States have none of their own resources at risk, they have
no particular financial incentive to engage in meaningful oversight of
institutions operating within their borders. Indeed, propping up such
institutions solely to keep them operating may become a higher priority
for some States than ensuring good outcomes or protecting students,
particularly if the students in question happen to be out-of-state
students enrolled through distance education. The committee may wish to
examine the following policy recommendations to improve the State
authorization requirement of the triad.
First, the current minimalist State authorization requirement
should be maintained only for institutions that receive significant
amounts of State funding. On the theory that in such cases, the State
already has a powerful incentive to conduct oversight, Federal law
should continue to rely on State approval without additional micro-
management. Furthermore, the committee may wish to explore the idea of
a State reciprocity arrangement under which institutions receiving
significant funding from any State would be allowed to provide distance
education in all States without multistate approvals, provided that
they don't exceed certain ratios in revenues or enrollments outside
their own State.
Second, for those institutions that the States are deemed to have
insufficient financial incentives of their own to properly regulate,
Federal law could provide several options. The committee may wish to
spell out additional substantive requirements for State authorization
in legislation for this subset, or it could delegate additional
oversight responsibility to the Department of Education. Under either
arrangement, this leg of the triad should primarily focus on
traditional consumer protection activities to prevent predatory
practices and waste, fraud and abuse.
Third, to minimize unnecessary duplication of effort and costs,
multistate approvals should only be required for institutions that
cross a threshold of presence in each State. Institutions that have
already received appropriate approval from one State under any of the
provisions discussed above should be required to obtain additional
approvals in other States only if they enroll a sufficiently large
number of students in those States.
federal certification and program participation agreement
Like the other components of the title IV gatekeeping triad,
Federal certification and the execution of a program participation
agreement involve primarily procedural requirements on institutions. It
is fair to describe the current Federal regulatory approach as focusing
on the means, but not the ends. There are extensive regulations on
administrative capability and financial responsibility, but no concrete
definition of good outcomes for students or the taxpayers. In short,
the current Federal framework fails to provide the most basic assurance
that institutional interests align with the interests of the students
that they enroll or the interests of the taxpayers who finance the
system. The committee may wish to explore the following policy
recommendations for an altogether new Federal oversight system that
ties institutional eligibility to specific protections and outcomes for
students and the taxpayers.
First, ensure market viability of participating institutions by
restricting inappropriate reliance on Federal funding by schools. A
number of key policymakers have, for example, proposed changing the
current ``90/10 Rule'' by limiting the total amount of Federal funds
received through title IV, VA educational benefits, and the DOD tuition
assistance program to no more than 85 percent of each institution's
total revenues for any given year. The rule should prevent the current
gaming of the system by excluding all institutional aid including any
private-label loans that have been made or are held by an entity that
has had an origination relationship or any business arrangement with
the school. Such a change would certainly be appropriate and it would
ensure that no institution becomes exclusively dependent on Federal
funds.
Second, expand the current definition of cohort default rates to
more accurately capture all defaults. It is odd and counterintuitive
that defaults that occur outside the official window don't ``count''
against the institutions where the loans were disbursed. Just as
borrowers and taxpayers are stuck with defaults whenever they occur,
schools should likewise have all defaults associated with them counted
accurately, no matter when they occur.
Third, vest institutions in good outcomes through meaningful risk-
sharing as an intermediate-sanction alternative to simple loss of
eligibility. This is particularly necessary for institutions that
generate egregiously large margins, because their internal incentives
and rewards are tied to quarterly statements, while current Federal
metrics for each quarter's enrollments are measured in years. If
management is paid on the basis of last quarter's financials, in other
words, it may be willing to engage in risky behavior with disastrous
outcomes that only register 5 years down the road. The committee may
wish to explore a mechanism to impose joint and several liability for a
portion of actual defaults on institutions and insiders associated with
each cohort of borrowers.
Fourth, simplify and rationalize the Federal certification process
where possible by linking eligibility to specific outcomes.
Specifically, for programs that lead to licensure, programmatic
eligibility should certainly be tied to licensure rates.
Fifth, to avoid gaming of the licensure system by schools, the
certification process should weed out deceptive and abusive practices
by schools offering phony programs that are intended to confuse
students. The committee has already heard testimony from a victim who
did not realize she would not even be eligible to sit for the licensure
exam because of her program's lack of proper programmatic
accreditation. There are numerous examples of misleading and deceptive
programs, odd and misleading degrees and major fields, all of which are
designed to justify the high costs of such programs by confusing
students into thinking that they would get jobs that the programs
simply did not prepare them for.
Sixth, the Federal certification process should ensure the veracity
of career placement, representations about salaries, and other claims
made by institutions in their advertising and recruitment efforts. This
committee's groundbreaking investigation of how institutional
recruiters lied to prospective students should not have taken the
Department of Education by surprise. Institutions and, more
specifically, their management should be held responsible for
misrepresentations and deceptive practices. The committee may wish to
examine some of the provisions of the Sarbanes-Oxley Act with regard to
how upper management may be incentivized to ensure proper
organizational behavior.
Finally, it is important to realize that much of the feeding frenzy
associated with the new participants in title IV is a direct result of
the elimination of the ``50 percent'' rule in 2006. Prior to the
enactment of the Budget Reconciliation Act of 2005, for-profit
providers would not be eligible to participate in title IV if more than
50 percent of their enrollments or 50 percent of their courses were
entirely distance-based. It was the removal of that provision that
created the gold-rush for Federal dollars that the committee has
documented. I should emphasize that the issue here is not so much that
distance education itself is suspect, but that fraud has always been
easier to carry out and harder to detect from afar. The committee may
wish to examine the wisdom of the social experiment that Congress
embarked on in 2006 when it eliminated this important safeguard for
students and taxpayers without any hearings or any evidence for its
necessity. In light of the already massive evidence of abuse and
outright fraud, it would not be unreasonable to reinstate some variant
of the original rule.
Mr. Chairman, I thank you for your distinguished history of
leadership on higher education issues, and stand ready to assist the
committee in its efforts to protect students, taxpayers, and the
integrity of Federal student aid programs.
The Chairman. OK. Can I play off of that just one second?
Mr. Barr has his hand up, and this is kind of an area of his he
might want to weigh in on.
It seems to me that when we looked at the for-profit sector
here, and that's what we're talking about today, for-profit
schools, in the last several years, have been some of the best
performers in the market, on a margin basis, in this country.
But their financial success seems divorced from student
success. So you can make tremendous profits and have all these
students flunking out and leaving.
So in contrast to a typical corporation, the corporation
that provides a product or a service, if the product or service
doesn't work, the company is going down. But in this case, we
see schools that have started up recently, within the last 5 or
6 years, they start with almost nothing and they have many
thousands of students now, and their outcomes are terrible, and
their dropout rate is 80-some percent in the first year, and
yet they keep making more money.
So how do we address this? How do we couple a performance
in the marketplace--this is a marketplace for for-profit
schools--couple that with whether or not their students are
succeeding? Am I making any sense on that?
STATEMENT OF MICHAEL BARR, PROFESSOR, UNIVERSITY OF MICHIGAN
LAW SCHOOL, ANN ARBOR, MI
Mr. Barr. Absolutely. The discussion that has preceded this
I think indicated that most of the panelists, or perhaps all of
the panelists are committed to the idea that there should be
metrics that are used to assess success of the schools, and
that there should be consequences if the schools fail to meet
those metrics. I think those are essential because right now
the incentives are only loosely aligned with outcomes for
students, and you see that in the figures that you cited.
You see it also, I think, underlying the basic problem in
default rates on the private loans. If private loans are
generated in order to meet the 90/10 rule, you are going to get
outcomes that you don't like to see. You're going to see very,
very high default rates because, on net, the incentive facing
the firm is to continue to pursue those loans.
I should say, just that, I very much agree with the point
that Director Petraeus was making before, that there is
something I think particularly horrific about the targeting of
military members and their family for this kind of activity,
and it's similarly the kind of targeting that we have seen in
other aspects of consumer finance, payday lending, refund
anticipation lending, auto title lending, sub-prime mortgage
lending, that military members and their family are often
particularly vulnerable to those kinds of appeals that can be
quite harmful to them, that can be harmful to their families,
and can undermine security interests because our military
members who get into financial trouble can't pass their
security clearances. So it's quite a widespread problem in the
consumer finance market.
I think the interesting thing to me, and I'm not a
specialist in the education field in this way, the interesting
thing to me is those incentives are there already. On top of
that, in the context of the 90/10 rule and the way that the
military benefits are counted in that rule, you have an
additional incentive to go after these kinds of military
families in the way that has been described, and to me that's
just completely inexcusable to treat our military families in
that way.
So I think that ought to be a special area of focus and
protection, as it has been elsewhere in consumer finance. It
needs to be part of the consumer education facing our troops
and their families. But there also need to be disclosures and
protections, special protections for those military families
who are quite open to that kind of abusive tactic.
The Chairman. I'll recognize Mr. Batson, and then I'll go
to Senator Franken.
Mr. Batson. I recognize that we're going to discuss ways to
align incentives later in the meeting, but I think it's
pertinent now, and I'd like to respond to a couple of things
that Barmak and Michael raised.
First, Barmak indicated that we don't have a lot of
regulation, and I'd like to point out that we actually do have
an enormous amount of regulation. Now, I'll acknowledge that
much of it is procedural, but it is complicated, it costs
money, it takes time, it pulls us off of where we should be
focused, which is on student outcomes.
The States dictate every aspect of our program, how many
hours, the size of our facility, how many square feet, how we
use every hour of that curriculum, how many haircuts a student
has to complete before they can get licensed, how many of those
haircuts have to be on a human versus a mannequin. I could go
on and on and on. In fact, they dictate whether or not we give
students breaks, how long they are, whether the breaks can be
taken inside or outside of the building, and they have officers
that come to the back of the buildings and check to see whether
the students are outside, and come inside to see whether
they're clocked in or out. That specific example comes from
Texas.
So we have an enormous amount of State regulation. We have
a significant amount of regulation through our accrediting
agency. We submit outcomes every year. Those outcomes are
verified. We have a lot of Federal regulation.
We calculate seven different completion rates between our
accreditor and the Department of Education. I find it difficult
from day to day to tell you what our completion rate is, and I
guarantee you, from a consumer's perspective, it's impossible.
So what we have, to build on what Michael raised, is a
situation where we don't have a sensible regulatory system that
has aligned all the incentives around student success, but we
do have an enormous amount of regulation.
And so what we'd like to talk about later in the day is how
to introduce a new, better, three-level framework built around
disclosures, auditing, and thresholds that aligns the incentive
and goes after the root of the problem rather than chasing the
symptoms. Because as we sit here, I know it's very hard for me,
it's probably hard for Daniel to respond to all of the
different piecemeal parts of this, but I think we have a pretty
clear view, and my sense, just from reading Daniel's testimony,
is that DeVry has a pretty clear view of how we could have a
good system that really is student success focused, and I hope
we have a chance to talk more about that later today.
Thank you, Mr. Chairman.
Senator Franken. Well, I think later in the day is here,
and I think that we know, we've identified in the hearings that
we've heard what many of the problems are. You say that you
have regulations from your accreditors. We've had testimony
from kids, from students who went to schools that had no
accreditation, and they paid a lot of money to go to a course,
and then when they finish the course they find out it's not
accredited.
So what I want to find out from you is what kind of
regulation we should have. Later in the day is here. It's 3:15,
3:20. We're going to 4:00. This is later in the day.
Now, let me ask you specifically about the gainful
employment regulations, which seem to be saying are students
graduating, are they paying off their loans, are they in
default, and what do you think of them, these specific
regulations that we're talking about? They seem actually pretty
lax to me, and I'll ask Mr. Nassirian, because you nodded, and
I like that, when somebody nods at what I say.
[Laughter.]
Mr. Nassirian. Senator Franken, the gainful employment,
430--by the way, my colleague is correct. There is an enormous
amount of regulatory language. Sadly, as you point out, it
doesn't do anything. That's the challenge. The over-regulation
is actually a feature of this system. The regs are there so
that the industry can claim to be--why are you picking on us?
We're one of the most regulated businesses in the country,
except for one thing: We do what we want to do at the end if we
have enough smart lawyers and enough consultants.
Apropos gainful employment, 437 pages of contorted language
in which the administration essentially backed out of the path
that it was embarked on. I have an 11-page transcript I'd be
happy to share with you of a publicly traded company CEO's
description of how they were realigning their practices
essentially to evade the regs. And when you read the logic, you
learn the lesson, which is procedural regs are not going to do
the trick.
What you want to do is you want to have very meaningful
requirements that tie the outcomes for students and the
taxpayers to the outcomes for company management and
shareholders, and until you do that--and remember, this isn't
the act of walking after the product. See, that's easy, because
you can assess the product. You're given a physical object.
This is an experience. It's years. It's the out-years that
sort of register the outcome. So you want to have a mechanism
by which you have some assurances on the front end. But most
importantly, that there is essentially a disgorgement of ill-
gotten gains post facto if it turns out that the outcomes were
not so good for the people who footed the bill.
The Chairman. Mr. Shireman, I see you have your card up.
You want to respond to that?
Mr. Shireman. Thank you. I think that the--I'm pleased to
hear today discussion about major incompletion, aiming for
completion, incentives for completion. I see the gainful
employment regulations. They were weakened in the face of a lot
of opposition. They are a very important first step toward
actually having some measures of outcomes of are people
repaying their loans, is their debt ridiculous given their
earnings after college. Those are the kinds of things that have
been coming up today in terms of are people being employed, was
the cost reasonable given the kind of employment that they
might be getting.
So I think whether it's a matter of strengthening those
regulations or looking for or taking those kinds of measures
and using them in ways that can provide incentives for colleges
to aim for getting students enrolled in programs where they can
be successful given their background and interests, and in
programs that are likely to lead to getting a job where they
can repay their loans if they've taken out loans, those are the
right kinds of outcomes to be focused on. The question is not
just about figuring out how to eliminate schools but how do we
get all of the schools driving toward those kinds of outcomes.
The Chairman. Can I restate my question from earlier again,
throw it out there again? Some of these schools are making
tremendous profit margins, tremendous profit margins, even
though their performance is very poor. So there's nothing tied
in there. I mean, I would say the better your students are
performing, the more profits you ought to make. If your
students are dropping out, it ought to come down. But you're
getting 90 percent, or more in some cases, of your money from
the Federal Government, it doesn't make any difference.
Mr. Hamburger.
Mr. Hamburger. If I may, and also address Senator Franken's
direct question about the time is now. So what are the
solutions? And that, of course, is the point of today's
roundtable, is to talk about solutions, because we can talk all
day long about the problems, and we're all concerned about the
problems. But what are the solutions?
So we propose two pillars that we think the solution should
rest on, surrounded with enforcement of them. First is metrics
of outcomes, and the second are standards of practice. So in
terms of metrics of performance, and we've talked--we've all
had a lot of time to think about this over the past couple of
years, and we've talked with Bob, and we talked with the Gates
Foundation, Lumina, and it always seems to come back to these
five fundamental metrics.
No. 1, do the students learn? And there's a lot of
universities that don't want to measure learning, but we think
you should.
No. 2, do the students graduate? Did they complete? And we
heard Mr. Batson talk about that.
No. 3, did they achieve the objective they set out? Which
could be employment typically is what we're talking about. It
could also be admission to graduate school. That might be the
educational objective they had.
No. 4, did they achieve licensure for nursing or
cosmetology or other programs where there's licensure involved
in working in your profession?
Senator Franken, to your point, it is absolutely
unacceptable if there's a school that does not give their
graduate the opportunity to sit for licensure. That's the
specific example you mentioned.
Senator Franken. Well, those schools exist, and there are a
lot of them, and they're very successful.
Mr. Hamburger. And that is unacceptable. So we completely
share the concern, and that should be taken up.
And then No. 5, did they repay their loans?
So those would be the five categories of metrics, and these
would be enforced, and we do applaud the additional resources
that you've given the Department of Education to enforce the
rules.
At the same time, we think that there should be standards
of practice. So disclosure, we talked a lot about enhanced
disclosure. That's very important, and the right kind of
disclosure, and not just a disclosure to decide but aggressive
and intrusive disclosure, if you will, so that we know the
student got it and they couldn't have missed it.
Standards for training and ensuring continuous improvement
for the admissions recruiters, for the financial aid
professionals and so forth, and they're all further outlined in
my written submission.
So those two pillars of metrics, outcomes metrics and
standards of practice, surrounded and backed up with
enforcement from the police, the Department of Education, would
be our suggested framework for moving forward to solutions.
The Chairman. Thank you very much.
No one else is jumping in?
Senator Blumenthal.
Statement of Senator Blumenthal
Senator Blumenthal. Thank you. I've read through your
suggestions, your specific suggestions in your testimony on
best practices and so forth, Mr. Hamburger, and I guess I have
two areas of questions.
First to Mrs. Petraeus. Are there specific measures, either
standards of accountability or best practices, that you would
say should be adapted or framed for members of the armed
services or veterans so as to make them more effective for
them? Do they have special sorts of areas of need that should
be targeted, so to speak? I'm not articulating it well, but
obviously they're in different situations. They're more
isolated, in a sense. They're coming back to the civilian world
or newly in the civilian world, or even possibly suffering from
invisible wounds, whether it's post traumatic stress or
traumatic brain injury. Obviously, this system has to be
adapted to their needs.
So I wonder if you could comment on those rules or metrics
that Mr. Hamburger is suggesting with a view to the situation
of veterans.
Mrs. Petraeus. I think you're right that they do have
specific and sometimes unique needs, and I will say that the
for-profits were quick to recognize some of that, and part of
the reason that a lot of the military signed up for them,
especially on active duty, is because they did provide
education online that was easily accessible to military even
when they were deployed, and did give them the flexibility to
kind of take the classes when they could take them. Before,
that was a real barrier for the military, who were trying to
take a course at the base where they were assigned, because
they could never finish it. They would be sent to the field,
they would deploy, and they would just have to give it up. So
that is a unique need.
What's interesting, I think, is once they get out of the
military, online education probably is not such a good thing
for them because I think the veterans, as you said, with
special needs, often it's better for them to be on a campus
where they actually are interacting with people and they have
the chance to have hopefully a student support network there,
both among other students and hopefully from someone on the
staff as well. And obviously the one college we talked about
that only had one support person for 78,000 students, that
would not work out.
The metrics again would be the military has a very high
rate of dropping out of these classes, signing up and not
completing them. For the person who recruits them, as long as
they get them through the first week of class and sort of past
the point when they can be counted, then there's not that much
interest in did they finish. So I think, again, a measure has
to be, do they actually finish the coursework, are they able to
succeed at it. When they were recruited, was any consideration
given to whether or not they could actually do the work?
With somebody with traumatic brain injury, there may be a
point when they shouldn't be accepted into a college. A private
college, a public college, or a nonprofit, would have more
rigorous acceptance standards where they would not sign you up
if they thought you couldn't succeed.
So will they get through the coursework? Will they actually
achieve that degree? If they move or decide to go elsewhere,
will those credits--will they be able to transfer them? Will
anybody else accept them?
And then I think the most important thing we can do for the
military is really enable them to have a good idea of what
they're signing up for and to be able to evaluate it. And right
now, we were talking earlier, the Veterans Administration,
nobody is really telling them, especially the G.I. bill, giving
them a very good assessment of the quality of the programs
they're signing up for.
If you look on the VA Web site, it's very minimal. It tells
you, yes, you can use your G.I. bill here, and here's sort of
the maximum you can use, but there's absolutely no comparison
in terms of it costs this much versus another school, and
here's the graduation rate, and all the other things. So I
think something I would really like to see is much more clarity
up front so somebody can compare and see what they're about to
spend their precious G.I. bill money on.
Senator Blumenthal. In the military, there is the
Transition Assistance Program, the TAP program, which is
generally provided on the eve of the return to civilian life,
and the military is moving toward providing it again or
repeating it, or making it available at points down the road.
And maybe what you're suggesting is that as part of that
program some counseling on these educational options would be
appropriate.
Mrs. Petraeus. I think it could be very helpful, yes. The
transition program, they're working hard to make it more
effective. It certainly helps if the military person gets
engaged before the last minute, when they're about to sign out
of the military. But if you give them the opportunity a little
bit later to come back and revisit, that might help. I don't
know how much of a logistical nightmare that would be since
they're no longer really part of the active service. They're a
veteran.
The sad truth is I think a lot of them are signing up based
on advertisements and word of mouth, and I actually saw
something in the Military Times newspaper recently which was an
insert, a magazine that basically listed the 50 most popular
colleges for military. And most popular literally was just
based on how many military were enrolled in them. So there was
no other measure there. But if they wrap themselves in the flag
and they try to say that they cater to the military, they may
get picked for that reason without any real serious evaluation
of what they can provide.
Senator Blumenthal. To go back to Mr. Hamburger, in your
last comment you used a word that I think is very, very
important, and that is ``enforce.'' And no matter how good
these rules, they have to be enforced vigorously and fairly.
So I would invite comments about how the system should be
changed to improve the enforcement of these rules.
Mr. Hamburger. Sure, and others may want to comment as
well. It looks like they do.
Part of the reason it's so important, and we've all seen
the struggle, it's so difficult to come up with a set of
metrics that will apply to everything from a certificate in
cosmetology to a bachelor's in nursing to a degree in
psychology, a postdoctorate degree.
A certain amount of human judgment in the enforcement, I
think, allows for the kinds of metrics that we've suggested to
be taken in context and to be used as a flag for poor
performance and not necessarily as a sort of automated on/off
switch. And so the human judgment that comes with enforcement I
think can supplement that.
I think the other thing is the enforcement needs to be, in
our view, applied across all sectors of higher education. We
need to protect students who attend public-sector, private-
sector, and independent colleges.
The Chairman. Mr. Barr.
Mr. Barr. I think that enforcement of these, whatever the
rules are, is absolutely critical, and it obviously faces the
challenges of budget resources in tough times. But I do think
that there are steps that can and ought to be taken that are
similar to the kinds of steps that you would expect in any
environment in which consumers are potentially put at risk
financially.
So the same kinds of steps you would expect for a consumer
finance company or for a bank or for a mortgage lender, you can
put those in place with respect to at least the financial side
of what the schools are doing.
And so in particular, requirements with respect to what the
schools themselves can do as the first line of defense. I think
that the kinds of things in particular that Mr. Batson
mentioned briefly are really important, compliance, internal
compliance, internal controls, internal audits, internal tests
of whether procedures are being followed, measures using
mystery shoppers, mystery student shoppers to make sure that
rules are being followed.
Internal rules about compensation and how recruiters,
marketers, or others that interact with students are
compensated makes a big difference in how they perform. And I
think one of the steps that I know the Department of Education
is embarking on, I guess effectively now, is changing the basic
structure of compensation for recruitment. I think that's
really important as one of the tools here.
But those kinds of internal measures need themselves to be
enforced on. So you can't just leave it to the schools to do
what they think makes the most sense in terms of enforcement
and auditing. There need to be rules about internal controls,
and those rules about internal controls need themselves to be
supervised and audited and checked.
There's also an additional level, which is what either the
Department of Education or the new Consumer Financial
Protection Bureau can do to supervise and enforce for
compliance with existing rules, for example on the Truth in
Lending Act with respect to disclosure, improving disclosure
with respect to loans to potential students in this context,
making the disclosures better to use for the students.
So we've talked a little bit about the comparability, the
comparison issue on the panel. One of the key things is making
it so that it's very easy for students to compare across loan
products. You can do that using technology, machine readable
format for disclosures that could improve significantly on what
groundwork has been laid.
So that's all to say that it really is absolutely critical
when you're thinking about enforcement to think about it at the
level of the firm, the level of incentives, the level of
auditing of those incentives, and then at the final level of
supervision or enforcement by the Federal Government or State
agencies.
Senator Blumenthal. What about using the whistleblower
concept, the ``qui tam'' concept which, in effect, creates
private enforcement, in some cases maybe a larger deterrent to
wrongdoing?
Mr. Barr. I think whistleblower statutes in general and in
this case are an important supplementary tool. They can help
highlight individual instances of wrongdoing. But if you really
want to get at the heart of what's going on, you need to set up
a system that is designed to produce the outcomes you want and
then rely on these other mechanisms to supplement that. So I
think whistleblowing is really just an adjunct, an additional
tool to uncover problems.
Senator Blumenthal. Thank you.
The Chairman. Mr. Batson.
Mr. Batson. I'd like to provide just a little bit more
context on the framework we envision in order to answer your
question about enforcement.
I found it very helpful to understand Mr. Hamburger's
framework, and we support much or all of what's in that
framework and feel like it's very similar to ours.
What we envision is a three-level framework, and the first
is built on disclosures around cost and affordability and
potential benefits and returns, and those disclosures include
things like total price, student debt, typical debt-to-income
ratios. They include information on typical benefits and
returns like completion rates, placement rates, licensure pass
rates, graduate incomes for fields that the program typically
serves.
What we need to do is make sure that schools are measuring
and disclosing all of those things not only accurately but on
an apples-to-apples basis so that students can compare across
schools, public sector, private sector, different types of
programs. Somebody might want to compare what the dynamics or
returns are on a cosmetology diploma versus a 4-year nursing
program. There's no reason why they shouldn't be able to do
that.
So we think there is a common set of disclosures. We think
we can take all the stuff that we measure and report now and
take the best of in a few categories that are really meaningful
to students and parents, and put it out there in the right
formats and the right places in an understandable way. Then we
think we could build on a couple of things we already have in
place to ensure the accuracy of that.
We have an auditing process. We have to submit two audits
to the Department of Education every year, a financial
statement audit and a compliance audit. We think that there
ought to be separation between the firms that are performing
those two audits. There ought to be certification around the
firms that are performing those compliance audits. It's my
understanding that you can go get a few hours of training from
the Department and go perform a compliance audit, and over the
years we've seen unbelievable variation in the quality of those
auditors and their ability to detect problems.
We think that from an accreditation perspective there are
opportunities to have some basic standards around how you
measure outcomes and how you verify those outcomes, and that
would give me comfort that we're all operating on a level
playing field and that students who are looking at schools are
getting accurate information across the board.
Then you've got to figure out what to do when schools
misreport that information, what kind of sanctions are there
going to be. I think that fundamentally there's three levels
there, too. First, there's public disclosure of the errors that
are made. So every year we gather this information, we report
it. If issues have been found, we flag it. We say last year
when the school reported their outcomes, they missed, or they
missed badly, use these with caution. If it's a more egregious
offense, I think we're talking about fines. If it's a very
egregious offense, it could lead to loss of accreditation or
loss of title IV eligibility.
So I think there are some very simple ways that we could
take the enormous complexity that exists in our system today
and boil it down to one page, so to speak, change some of the
ways we enforce things, and end up with a much better alignment
of incentives between schools, students, and taxpayers, and I'm
hearing a lot of ideas in this room about how to do that, and
would love to have a further discussion on that at some point
in the future. So, thank you.
The Chairman. Mr. Batson, let me say that was just about as
lucid a response as I've ever heard in any of our meetings.
Mr. Batson. Thank you, Mr. Chairman.
The Chairman. Now you're getting to it.
Senator Franken. How long have you been in the Senate?
The Chairman. That's what I say, that's one of the most
lucid responses I've heard in 35 years.
Senator Franken. Thirty-five years.
The Chairman. Thirty-five.
Senator Franken. OK. Thank you.
[Laughter.]
Mr. Batson. Thank you, Mr. Chairman.
The Chairman. Because I had read your testimony last night,
and you had given a brief outline, but you didn't go into it in
depth like you did here. I look forward to working with you on
that, and if you can help us with what you just outlined there
and flesh it out a little bit more, I think you have really
given us something to think about.
Of course, now I would, again, go over to the other for-
profit school here. Yes, go ahead.
Mr. Batson. Did I earn the right to ask that we ultimately
apply it to all of higher ed for the benefit of students and
taxpayers?
The Chairman. Absolutely right. Now, I haven't gotten there
yet, but----
Mr. Batson. Thank you, Mr. Chairman.
The Chairman [continuing]. Believe me, that's right. These
ought to be comparisons across the board.
Senator Franken. Junior highs, too.
The Chairman. What's that?
Mr. Batson. Junior highs, too.
The Chairman. I didn't hear.
Senator Franken. I said junior highs, too. I'm sorry.
The Chairman. Would you set minimum standards for
performance, Mr. Batson? If you don't know right now, think
about it.
Mr. Batson. I really appreciate that, because I think a lot
of thought needs to be put into that.
The Chairman. Yes.
Mr. Batson. I think we would have to do it in a way that
makes sure that we set the quality standards where they need to
be, and at the same time minimize any damage to access. When we
look at our data, we do have certain student segments that
succeed at very different rates statistically. And so I think
we have to be very thoughtful in designing a system that does
require peak performance, and at the same time acknowledges
that if we set the bar too high, we're going to force a lot of
people out of the education system.
I think the first step is to get all of this information
defined, out there, to really understand where we stand today
across higher ed, and then over time I think we have to
continue to innovate and to ratchet up standards so that we get
better and better and better and get a higher return on our
education investment.
The Chairman. Any observations, thoughts, on what Mr.
Batson just said, anybody? We'll start here, right here, and
then Mr. Shireman.
Mr. Shireman. This point about some minimum level, some
minimum standards is important to consider, because if there is
a hard line, it has to be very low. If there's not a hard line,
then it's unenforceable. And Mr. Hamburger had an interesting
point, which was human judgment.
From my experience at the Department of Education, when
there's human judgment involved where a career employee has to
make a decision, well, this is beyond the sleazy line in my
judgment, inevitably they get overruled either because the
lawyers say, you know what, we'll never succeed in court on
that, or because the Department folks agree, yes, this is
really, really sleazy. They take it, they go to the school and
say there's some really questionable stuff going on, and next
thing you know a Senator is calling the Secretary of Education
and saying one of our schools in my State is being abused, and
then the Department of Education backs away.
So it becomes unenforceable if it's not a hard line, but if
we have a hard line, it ends up being really low level. So
figuring out how to get those incentives to push for the high
levels of success, that's going to be a critical part of what
we aim for.
The Chairman. If you had to pick or choose, which would you
choose, a hard line at a lower level, or----
Mr. Shireman. I think having a hard line is critical to
enforcement----
The Chairman. But that's lower----
Mr. Shireman [continuing]. And then having something that
creates a zone that schools would prefer to stay out of because
it doesn't look good. So maybe some of the mystery shopper
stuff that we're talking about.
Maybe it's about getting that information out there so that
you've got a transcript of a conversation that is kind of
questionable, it's something that's available. Students aren't
going to see it, but advisors are going to see it. It will get
out there among college admissions advisors. The VA will see
it. The folks who do State oversight will see it and they'll
say, hmm, there's some questionable stuff going on at this
school, and it's happening more than once.
I would get more information out there. The Department of
Education has emails for everyone who has applied for financial
aid. The Department of Education could survey folks about their
experience in schools and could make that information
available.
The Chairman. Mr. Barr.
Mr. Barr. Just briefly, I think it doesn't need to be an
on/off switch. It doesn't need to be a hard line or a soft
line. You can have essentially graduated penalties. So the
worse the performance of the school, the more dinged they get
in the title IV program, or the more fines they get and so on.
And they'll internalize those costs, and they'll try and get
better performance.
The Chairman. Mr. Cruz, and then Mr. Hamburger.
Mr. Cruz. I'd just like to touch briefly on three issues
that have been discussed in these last few minutes: disclosure,
accreditation, and minimum standards for performance.
In terms of disclosure, we have heard about the importance
of context, the timing of when the students get the
disclosures, the clarity and the comparability of those
disclosures. I would add another element, which is relevance.
The disclosures cannot be ratios and more ratios and so forth.
They should be relevant to what the students need to know and
want to know. Things like for a student like me, that looks
like me, that has this economic, socioeconomic status, that has
these family responsibilities, how long is it going to take me
to graduate? What is the placement rate? How much can I expect
to earn? How much am I going to expect to earn above what I
currently earn after you take away the loans and whatnot that I
need to incur in order to study?
Those are the issues that need to come through in those
disclosures because, as a matter of fact, in a recent
conversation with a good colleague, she said the problem is
that middle income and upper income students, they get access
to information when they want to go to college and further
their careers, but low-income students and students of color,
what they get access to is infomercials. So we need to find a
way to make sure that this information is presented in a way
that is relevant to them.
In terms of accreditation, many of the comments by Mr.
Batson I totally agree with, but that is what accreditation is
supposed to do now, and we know that it's not effective at
doing it. So that's another conversation that we need to look
into and at a previous hearing we discussed.
In terms of the standards for performance, I think that one
way to deal with this notion of the hard lines and the regents
and whatnot is to think of the necessity that we have right now
to eliminate the most toxic programs. We have to have a hard
line as soon as possible to eliminate the programs that should
not be in place because of the danger, the clear and present
danger that they present to students.
And then with the remaining programs we should look not
necessarily at the hard lines but at how they evolve over time,
because we know that if this country wants to once again lead
the world in educational attainment, we need for-profits,
nonprofits, and public institutions to improve over time. They
have to do better than they're doing now. So having static
standards that say whether or not in a given year you graduated
more than 40 or 50 percent of your students is not going to get
us there. We have to see if there's a trajectory for success.
If an institution, if DeVry is in this position right now
in terms of graduation rates and loan default rates, where are
they going to be in 2020? Can they articulate a projection for
the American public in the same way that they articulate
projections in terms of earnings to their stockholders,
projections that we can hold them accountable to?
I think that's an important way that we can think about
standards for performance.
And finally, to remember that our colleagues here today
from the for-profit sector are very gracious in being here, and
I like a lot of what I'm hearing. But the fact is that just
yesterday the Association of Public Sector Colleges and
Universities filed a lawsuit to not allow enforcement of the
gainful employment regulations which, as we have discussed, are
very weak to begin with; and that they also a couple of days
earlier appealed a Federal judge's decision upholding two other
regulations which bar deception in college recruiting and ban
commissions for college recruiters.
So I think that we might be accompanied here today by very
good outliers in the for-profit sector, but we have to
recognize the difficulty of doing something about what's going
on in this area.
Mr. Hamburger. I appreciate the tradeoff that Mr. Shireman
has outlined about setting a hard rule or you're out. It's
tough to set that really high because there are so many
exceptions and so many considerations involved in the tradeoff
with enforcement. And I think part of the solution is Mr.
Barr's suggestion of graduated enforcement. I think there's
precedent for that.
Also there's precedent for using human judgment. The
Department uses something called the financial responsibility
ratio that says the institution, to remain eligible for the
student financial aid system, has to show that it's financially
viable; including, by the way, the fact that it has to show
that it's profitable, which is interesting.
We've asked how does that apply, and the Department has
told us they use it as a flag. So if an institution violates
the ratio, it's not just an off switch. They actually work with
the college or university, give us a plan, show us how you're
going to improve and get back to that. And if you can't show us
that, yes, we have the right to throw you out, but we can apply
human judgment as well. So I think there's precedent for that,
although I do appreciate the challenge.
Senator Franken. May I ask----
The Chairman. Yes.
Senator Franken. It's just a question of Director Petraeus.
Mr. Barr noted earlier about some of the financial products
that were targeted to members of the armed services and
veterans in sort of a predatory way, and Congress did respond
in some ways to that. I'm wondering if there's some kind of
parallel suggestion that you might have on how Congress can
respond to this targeting of service members and veterans in
the for-profit college sphere.
Mrs. Petraeus. You're right that they did successfully
address the issue of payday loans, which was a real scourge
around military installations back in the early 2000s, and
ultimately ended up in the Talon amendment, which capped payday
loans, auto title loans, and tax refund anticipation loans at
36 percent for active duty military and their dependents. That
is a success story.
I don't think I'm ready today to recommend any specific
measures along those lines, but it's certainly something I'd
like to go back and think about and talk with you further.
Senator Franken. Great. Thank you. Thank you very much.
Mr. Nassirian. Senator, may I?
The Chairman. Yes. I had Mr. Barr, and then I'll go--did
you have just an intercession on that one point?
Mr. Nassirian. Yes.
The Chairman. Go ahead.
Mr. Nassirian. With regard to one specific, concrete step,
I participated in DOD's worldwide education conference last
year, and one of the most stunning things I noticed was the
extent of wining and dining of military advisors and DOD
education advisors by schools. The four restaurants in the
lobby of the hotel were basically shut down one evening, one
per publicly traded for-profit, and with open bar and open
menu.
I think those are some fairly easy conflict of interest
rules that ought to be in place because service members should
be receiving disinterested advice from their advisors, and
advisors should not be influenced by those kinds of behaviors.
Also admission of recruiters on bases, big problem, because
they're coming in in the guise of counseling, but it's so clear
to anybody who cares to take even a 5-second look that this is
essentially recruiting going on.
Mr. Barr. Just to pick up on that same theme, I do think
that we've seen in other contexts, in the context of life
insurance, of mortgage lending, of payday lending, refund
anticipation lending, the same kind of problem of the
blurriness of the line between trusted advisor and agent of the
financial firm, and I think that that's a difficult one the
military needs to address. Director Petraeus' office, working
with the DOD, can do a lot on that.
I would also note, I said this quickly in passing but I
want to be clear about it, that Congress also responded to this
particular problem by making sure that the Consumer Financial
Protection Bureau had jurisdiction over private student
lending, and that will be I think an important new way in which
enforcement occurs with respect to marketing, brokering, sales
practices and disclosure. So it is an additional tool that is
now available in this realm.
The Chairman. Anything else?
Senator Franken. Thank you all very much. I, unfortunately,
have to leave. Thank you.
Mr. Shireman. Thank you, Senator.
The Chairman. I have one other thing on outcomes. We
covered the first two. I said what constitutes student success,
what should students know. We've gone over that, disclosure,
and on outcomes, having these hard lines or not. I want to move
on to something else.
But before I do, I want to get to one kind of specific in
terms of these outcomes. The investigations that we had showed
retention rates at well below 50 percent, some even 40 percent
or less in some of the large for-profit schools. I checked with
the community colleges in Iowa, in my State, and the retention
rate was about 60 percent. Some of the for-profits were less
than 40 percent.
What should reasonable expectations be for student
performance, given that we know that the target for recruiting
are low-
income and minority students? That's basically the bulk of who
is being targeted, recruited. I don't know about targeted, but
recruited.
So what should be a reasonable expectation for retention
rates for that group? Should it be 60 percent; 50 percent? What
should we be happy with; 45 percent? Again, our investigations
showed through documents that we got that there was a lot of
churning going on, a lot of churning of students, so I don't
know.
Mr. Hamburger, take a shot at it.
Mr. Hamburger. Since nobody is jumping in on this, maybe I
can at least get it started and get some ideas to flow.
When you think about graduation rate, of course, like all
these outcome measures, I think it's very important that we
look at it in context of the others. We could all have 100
percent graduation rate tomorrow, pass everybody.
The Chairman. Sure.
Mr. Hamburger. But clearly that's not desired, and we would
never do that. We will never sacrifice academic quality in
order to raise graduation rates.
The Chairman. Right.
Mr. Hamburger. But if you use the system of outcomes that's
been described here in a balanced way, there's the idea of a
balanced scorecard, if you're familiar with that concept from
other industries, if you think about graduation rate with
employment or graduate school admission together, then you've
set up a balance, because on the one hand I could have very
high employment rates. I just don't graduate anybody but the
very, very best and I have 100 percent employment. On the other
hand, I could have 100 percent graduation rate but I would have
very bad employment, right?
So I have the two together, you set up a natural tension
and a natural dynamic that encourages improvement over time.
The Chairman. But so many of these students are dropping
out in the first year or so. They're borrowing the money. They
get the Pell grants. The school gets the Pell grants. They get
the loans, and then the student drops out in the first year.
Mr. Hamburger. Well, we know the average, across the
country, I think at the 4-year level, is under 50 percent, and
that's everybody from Harvard to the least selective school.
And at the 2-year school, it's about 20 percent in the
community colleges.
The Chairman. But when I looked at the community colleges
in Iowa, they said their retention rate was about 60 percent.
So they've got 40 percent dropping out in the first 2 years.
Mr. Hamburger. Oh, I'm sorry. OK. You were talking about
retention. I was talking about graduation rate.
The Chairman. No, I'm just talking about retention.
Mr. Hamburger. OK, 1-year retention.
The Chairman. Keeping students in. They're signed up,
they're taking the course, they drop out. Again, getting back
to what we talked about before, and that is support services,
keeping students, I'm trying to see is there a metric that we
should be thinking about in retention. What should the
retention rate be?
Now, I said community college was 60 percent. I think that
seems kind of low, too, the difference being that the kids who
drop out of community colleges don't have much debt. They
haven't borrowed a lot of money. So they leave and they don't
have a lot of debt. But those who have borrowed money, gone to
a private for-profit school, they drop out, they've got a lot
of debt.
Mr. Hamburger. So here's an idea that we think is worth
studying, which is to take the Federal student aid system of
grants and loans--we have both grants and loans.
The Chairman. Right.
Mr. Hamburger. And without raising the total amount of
money, just re-allocate it. So shift the order of grants to be
earlier in the academic career, and loans later. That's an
intriguing idea, I think. That way, if you tried it and college
just wasn't for you as the student, you would have used more of
your grant but less of your loan. You'd have a lower debt to
deal with.
The Chairman. Mr. Nassirian doesn't seem to like that idea.
Mr. Nassirian. Yes, that's called front loading. By the
way, I generally seem to be disagreeing with my colleague. I'm
very heartened in hearing some very constructive proposals.
This isn't one of them, sadly.
[Laughter.]
The Chairman. It's an idea. We throw ideas out, then we see
what happens.
Mr. Nassirian. What you end up doing is essentially
rewarding institutions that capture as many warm bodies on the
front end no matter how they do in terms of graduating them. So
front loading is not--
Mr. Hamburger. In isolation, yes. But it would have to be
married with the outcomes measures that we talked about. But
that's a fair point.
Mr. Nassirian. I take the point, but the Chairman made--I
think the Chairman answered his own question. There is no
natural, God-given correct number for retention. Here in
America, we would like to give second and third chances to our
citizens, so we don't want to exclude anybody from attending
college on the theory that they may drop out. They may drop
out, they may not drop out. So we want to have a system that
gives people opportunity and access.
The problem really comes in when, for those who don't make
it, we leave them worse off because they're saddled with
crushing debt and really nothing to show for it.
So the trick is to make sure that there are penalties
associated with generating too many dropouts.
Mr. Shireman. One helpful suggestion in Mr. Hamburger's
testimony was the kind of free trial notion, and I think this
development where some colleges are saying you can come in and
try out this program, because that's one of the benefits of
community colleges, is there isn't that downside of ending up
in debt. So if a college has a low retention rate because
they're giving people a free trial, that's not necessarily a
bad thing.
The Chairman. But in our investigation, we've seen schools
that basically do a lot of work, expend a lot of effort to keep
students in for 60 percent of the term, because once you get
past the 60 percent of the term, you can drop out and the
school keeps the Pell grants and the loans. Wouldn't they just
be gaming the system, too? So if you get a free trial, sure
they'll keep you in. They'll give you support and stuff. Then
after you've passed that point in time, well, if you have to
leave, you have to leave; sorry.
Mr. Shireman. Maybe this is something where you need to use
that indicator to then bring about more investigation.
The Chairman. Mrs. Petraeus.
Mrs. Petraeus. I was just thinking, listening to this,
there is an interesting difference between military tuition
assistance and the G.I. bill. With tuition assistance, as we
were briefed just recently, they pay by the credit hour and
they don't pay until the course is completed. So it's a
completely different system of payment than----
The Chairman. They don't pay it until the course is
completed.
Mrs. Petraeus. Yes. That's the reimbursement system, as you
put it. It's a different system. Something to think about. It's
a different way to pay.
The Chairman. Mr. Cruz.
Mr. Cruz. On the question of what should the retention look
like, I think that most of the discussion has revolved around
the students, but what institutions do matter. And so one
possible way of looking at this problem is to see how well an
institution is performing in terms of retention when we look at
its peer institutions, those institutions that serve similar
students. Are they under-
performing? Are they right where they should be? And are they
over-performing?
But we know that in America right now, and again I keep
stressing that if we want to get to where we want to be in
educational attainment, it's not about being where we should be
with respect to our peers right now because everybody is not
doing as good a job as they should be.
So we would have to marry the notion of how well an
institution is doing with respect to its peers to how well it's
growing its overall retention and graduation rates over time,
and in doing so how well it's closing the gaps between the
different groups of students they serve, because they may be
graduating high-income students at a much higher rate than low-
income students. And again, given all demographic shifts, that
would not serve the country well. So there has to be some form
of combining that.
The Chairman. You just gave me an idea. I don't know if
it's any good. Maybe, Mr. Hamburger, this is another idea that
I'll throw out and get shot down, but----
[Laughter.]
Mr. Hamburger. That's what we're here for. It's a
roundtable discussion.
The Chairman. We're working right now on the
reauthorization of the Elementary and Secondary Education Act,
No Child Left Behind. We're spending a lot of time working on
it. And one of the things that No Child Left Behind did and
which kind of opened our eyes as to what was going on was what
we call disaggregation of data according to income groups and
according to ethnic backgrounds, and that provided us a real
window to look at just what was happening to minority students,
and especially in what we call the achievement gap schools,
where we found that right here in Fairfax County, high-income
grade schools, both my kids went to school there, they look all
really well and good, but there's a subgroup down there not
doing very well at all, and they just kind of forgot about
them. Well, we started disaggregating the data and found out
there were some real problems there.
So I'm just wondering, do we need to have some kind of
disaggregation of that kind of data from the for-profit
schools? Who are these students? I don't know that we've ever
seen that kind of disaggregation of information.
Mr. Hamburger. I think that could be very helpful data. And
again, I think that data would be useful to look at students
who are attending public sector and independent schools as
well.
The Chairman. When Mr. Cruz mentioned that I said, well,
you know, maybe some of your higher-income students who are
going to the for-profit schools, they're graduating, but some
of the ones down here aren't graduating. We need to know that,
I think.
Mr. Nassirian.
Mr. Nassirian. Mr. Chairman, you're going to find out there
are very few high-income students attending for-profit schools.
The Chairman. I understand.
Mr. Nassirian. In fact, that is the problem. I mean, in
candor, we need to recognize we have, de facto, created a
system of separate but allegedly equal. You have created a
system in which the for-profit sector is overwhelmingly
dominated by extremely low-
income students, and that ought to be of concern. Why is there
such a separation? Why don't middle-income families send enough
of their children to these institutions?
And apropos of consumer protection and some of the
suggestions that have been made, it's very critical to
understand there is a conundrum here, and that conundrum has to
do with the fact that to the extent there are bad actors, and
there are lots of them, in my judgment, that the de facto fraud
is not in the sort of wrapper financial practices that they
engage in. The de facto fraud is at the heart of the
enterprise. They're not teaching people.
It's not just that they package them with predatory
private-label loans, it's not just that they're capturing G.I.
benefits or active duty DOD tuition assistance money. It's the
fundamental problem that they're not actually teaching
anything, that the credential is meaningless. It has been
validated by an accreditor who ought to have known better. It
has been rubber stamped by a State that ought to have known
better.
The Chairman. Mr. Nassirian, I hate to interrupt, but I'm
not known as a big defender of the for-profit schools,
obviously, but some of the kids who do go online and attend
for-profit schools do very well.
Mr. Nassirian. Some do.
The Chairman. They do finish.
Mr. Nassirian. Some do.
The Chairman. And they do succeed.
Mr. Nassirian. Some do.
The Chairman. There are some out there.
Mr. Nassirian. Oh, sure, there are some; not enough. If
half of all defaulters in a peer cohort----
The Chairman. I think that's what we're trying to get at.
Mr. Nassirian [continuing]. Are coming out of 10 percent of
your enrollments, on its face there is a statistical problem.
It's not to say nobody succeeds. Some do. By far, too few, in
my opinion. It seems to me the numbers don't support----
The Chairman. Well, I agree with that. I agree far too few.
Mr. Shireman.
Mr. Shireman. I think it's helpful to look back at the
original G.I. bill 85/15 rule, which was the precursor to the
90/10 that we have.
The Chairman. Right.
Mr. Shireman. And when you look at what the reasons were
for creating it, they were to have some independent evaluation
that this is something that someone would buy if not for having
the G.I. bill, and that the price was reasonable, and they
wanted to make sure that veterans were--that the G.I. bill was
providing access to higher education and access to the same
kind of higher education that other people in America had.
I think it would be worth the committee's while to go look
back at the design of 85/15 originally and build on that design
in terms of looking at how can we encourage programs that are
not just aimed at bringing in low-income students and veterans,
but how can we have programs that appeal to all income
backgrounds, people who can self-pay.
And this will actually help to get at the excess profit
issue that you mentioned, because if programs have an incentive
to bring in self-pay students who are either paying for
themselves or have an employer who want them to take that
program, they will need to focus on making sure it's a high-
quality program and/or that they reduce their price, and both
of those things will help to eat into the excessive profit
margins, to the benefit of students and taxpayers.
The Chairman. Thank you very much, Mr. Shireman.
Mr. Batson.
Mr. Batson. I'd like to respond to Mr. Nassirian's comment
that all of the students attending the for-profits are low
income. When we looked at cosmetology, and we did a quick
survey of Minnesota, we found that most of the people entering
the cosmetology industry are being educated in the private
sector. We think it's about 90 percent based on the data we
could get from community colleges.
And so this isn't a case of low-income students choosing a
private sector school and higher income students choosing a
public sector option. We believe that our population is
reflective of all of the people who want to start a career in
cosmetology.
Now, if you look at the Bureau of Labor Statistics, it says
that the median wage is about $12 an hour. If you look at our
own studies, it's about $15 to $20 because tips are not fully
captured accurately.
So if you look at the types of folks who are going to go
into an important service industry, a $50 billion salon
industry, you've got 800,000 people employed in that in what I
believe are good service jobs when you compare it to the other
45 percent of our workforce that are in service jobs that are
often minimum wage.
I would hate to see us think that somehow only the segments
of the population that are low income are choosing the
proprietary sector, because that's just not what we see. I
think people are choosing a field based on what they know,
their family history, their incomes. Some fields are higher
income than others, but I really want to be careful that we
don't have a perception that somehow we're picking off low-
income students, because we're taking all comers.
In terms of the thresholds, I really think that we do have
to get serious about figuring out what the minimum standards
are and what the zones look like, and I like Mr. Shireman's
recommendation earlier in the meeting. I really think this is
an empirical question.
We've got to set a floor below which it's just
unacceptable, there's not enough of a return on the investment.
But at the same time we've got to gather the data across all
the schools and the segments, and we've got to understand
really where are we today with different student segments, with
different programs. And then we've got to take an approach like
Mr. Cruz described. We've got to be realistic about that. We
can't set the standards where we wish they were, right?
Otherwise we're not going to have higher education. We're going
to fall further behind the rest of the world. But we can't be
satisfied with where they are today.
And so I think the ideas that Mr. Shireman, Mr. Hamburger
and Mr. Cruz put out are right on on that topic.
The Chairman. Thank you very much.
Mr. Cruz, you had something to add to this?
Mr. Cruz. Yes. So I'm a big believer in prevention, and
today we've been talking about how to improve the for-profit
education sector through policy. But when we're talking about
the gaps, the Chairman mentioned the K-12 sector. So I would
like to just point out that another way in which we can improve
the for-profit education sector is through policy, with policy
that will influence the K-12 space so that the students that
today find themselves with no other options than for-profit
education will be in a position to actually aspire to and
qualify for and be admitted into institutions in the other
sectors. That would move the for-profit sector to have a
product that would be more broadly attractive to students.
And through the reauthorization of the No Child Left Behind
Act, there's an opportunity there to close those gaps and
provide the students that are traditionally underserved with
more options.
The other area where we can work on policy to improve the
for-profit education sector indirectly is by looking at the
higher ed policies and practices of today where, for example,
we're at a moment in time when we're talking about possible
deep cuts to the Pell grant program, where States are
disinvesting from need-based grant aid and shifting it to
money-based grant aid, and where public institutions spend
nearly the same amount of money on their highest income
students as they do on their lowest income students.
So what can be done at the Federal, State, and
institutional level from the other sectors, the nonprofit and
the public, in order to make it more possible that the students
of today who have no other option but the for-profit sector can
actually have choices?
The Chairman. I said I wanted to move. I think we seem to
have some broad agreement here today on the need for clear
outcomes and better disclosure. I want to talk a little bit
now, if I could, and I'm going to start with Mr. Nassirian on
this, what role should the Department of Education, States, and
accreditors play in holding schools to certain standards,
certain standards of quality and performance? What is the role
of that triad there? We have the Federal, States, and
accreditors.
Mr. Nassirian. That is the triad that has historically
conducted gatekeeping for title IV. Obviously, this committee's
own investigation should indicate that we have room for
improvement presumably on all fronts.
The Chairman. Actually, on accreditation, if I might
interrupt----
Mr. Nassirian. The problem with accreditation, frankly, is
that it has become a kind of a vestigial practice that made a
lot of sense 40, 50, 100 years ago, and that we are not
sufficiently taking account of the changes that have
eviscerated it. It made a lot of sense when education was a
vocation and a calling that you went into because you really
cared about it, as opposed to a lucrative business, to say that
institutions ought to conduct self-studies and then share those
studies with outside experts to see if they're doing a good
job; and when you had, of course, faculty who were tenured, who
were on the inside, who actually devised a curriculum and who
were the only people who could touch the curriculum.
Now you have an arrangement in which higher education can
be extremely lucrative, where executives who are primarily
businessmen as opposed to educators design academic policy and
configure curriculum, and actually go all the way down to
assignment of credit hours, which no sitting college president
in the traditional sector would dare touch. That is not
something that the president would want to be involved in.
That's the academic senate's job. And guess what? They don't
work for the president. They all have tenure, and their primary
commitment is to the field of mathematics and their standing in
chemistry, and they're not going to assign eight credits to a
course that, in their judgment, is worth only three.
Accreditation really needs significant reform. I am a big
believer in keeping it nongovernmental and private, because we
certainly don't want to have politics get into the business of
what is ethics, what is biology. As you know, there are various
political views on these topics. We think the faculty ought to
be in charge of that.
But the problem with accreditation is that insiders
dominate it. I mean, would you feel safe on the road if you
knew that GM, Ford and Chrysler were the three authorities that
devised car safety standards? I don't think any of us would
feel safe. We would want to talk to them. They certainly ought
to be part of the conversation. But I think we need an
independent authority to arbitrate the claims of consumer
advocates and car manufacturers and other stakeholders.
The process we have today is just so overwhelmingly
dominated in every way, in terms of resources, in terms of how
the system is financed, in terms of who does the accreditation,
in terms of who sets the criteria, that you have essentially
delegated what is a very important public oversight function to
not only the private sector, but the private sector with a
direct stake in the outcome.
Accreditation needs to be significantly overhauled, very
much along the lines, by the way, I think my colleagues would
agree. And in fact, I think Mr. Batson is onto something
primarily because his field is so well-defined that there isn't
a huge amount of debate about whether somebody is eligible to
become a cosmetologist, to become a barber. It's a licensed
activity, and there is sort of a black line marker that you
either cross or you don't.
We need accreditors to be better incentivized very much in
the same way as auditors are, right? I mean, one of the
problems we have is that accreditors can rubber stamp
applications of even the most questionable institution and even
have horrific things happen, and they can just go on to rubber
stamp another application, many times from the very same people
who brought you the previous disaster.
I have some very concrete ideas. There are some conflict of
interest rules that the committee should insist on, and
obviously there ought to be a system of graduated penalties. I
really believe in that, because if the only option is to
withdraw recognition, you have set a very high bar for the
Secretary.
The Chairman. Any other thoughts on accreditation? I must
say openly that when we started looking at this, I always
thought, well, a school is accredited; that's good. They got
accreditation from some entity that was separate and apart.
Imagine my surprise when I found out that the accreditors are
paid by the schools they accredit.
Part of my other life is being on the agriculture
committee, and for years I have fought against, for example,
having our meat inspection paid for by the packers. It should
be paid for by us. I don't want them paid by the very people
that they're inspecting. So far we've kept it that way.
But I don't know how to--on this accreditation. Does
anybody have any thoughts on that? But since we're looking at
this how do we have better standards for our for-profit
schools, and who is going to hold them accountable for these
standards, will it be these accreditors or some other entity? I
just don't know what role accreditation plays in this, in
ensuring quality, for example, ensuring quality in these
schools.
We have examples of accreditors accrediting--well, let me
get to another point. Right now, you can buy a school that's
been accredited, and you get the accreditation. Well, should
you deserve that accreditation or not? If you just buy a school
and you buy their accreditation, shouldn't there be some
performance standards that you should have to meet or something
before you get that accreditation? I don't know.
Mr. Nassirian. Mr. Chairman, taxicab medallions can't be
sold as easily as accreditation is sold.
The Chairman. What?
Mr. Nassirian. Taxicab medallions, to buy a taxicab
medallion, you need to have a hacker's license. It's really
bizarre that a change of control, which is what we're talking
about, doesn't trigger a new accreditation requirement.
I actually have submitted in my written statement a
proposal that the particular issue you raise is, frankly, an
easy one. The practice of buying and selling accreditation
ought to come to an end. That should not be sanctioned, because
by definition your accredited status is a consequence of the
previous management of the place. When a new management team
comes in and buys the place, on what basis can you conceivably
extend that status when you realize whatever it was that
maintained that status is now gone and a new team is in town
with different priorities and different previous behaviors?
The Chairman. Any other thoughts on that, Mr. Hamburger?
Mr. Hamburger. We should point out that accreditors can and
do deny accreditation upon a change of control. A recent
example was Dana College in Nebraska where the Higher Learning
Commission of the North Central Association did not approve the
change of control accreditation, and the college closed down,
100-year-old Lutheran college in----
The Chairman. Yes, Dana.
Mr. Hamburger [continuing]. In Nebraska. You might be
familiar with it. It's not too far away from Iowa.
The Chairman. I know where it is. It's across the bridge. I
know exactly where it is.
Mr. Hamburger. So, they do. I think there's a little bit of
a slight exaggeration there. But the point remains, whether
it's the same as taxicabs or it's not, this is about solutions,
and I think we actually agree that the solution would be that
on a change of control, the accreditor does, as they can,
evaluate the school that's in question. And certainly the
Department of Education has to approve any change of control.
Mr. Nassirian. Again, the burden is--it's not to prove that
accreditors can't deny, it's that they have historically. I can
cite examples even involving DeVry of a takeover of a
traditional institution run a certain way, with a handover of
that accredited status to a new management team that is just
markedly different. This isn't to say they're worse
necessarily, but they're different than the management team
that earned that accreditation status.
I think the burden is on the side that says accreditation
ought to be transferrable.
Mr. Hamburger. OK, Barmak, I'll give you an example of
that. We acquired the Chamberlain College of Nursing in 2005.
It was founded in 1889. And so, yes, we are different. We
weren't around in 1889, so it is a new management. And what did
we do? We invested in student support services. We cleaned up
the dorms, got the asbestos out of the dorms, bought all new
computers, invested millions in patient simulators that cost
$100,000 apiece. The students now pass the NCLECs--that's the
nursing boards--at an over 90 percent rate. That's a change of
control.
I don't want to get into blanket statements here. We do
need to apply human judgment, back to my earlier point. There
are times when the change of control and a new management team
is perfectly appropriate.
The Chairman. Well, two last things. We're getting late. To
me this is vitally important, this discussion we're having,
because we're trying to get to a point where we can see what do
we need to do, and I'll follow up with that in a minute.
But right now, one thing that's kind of bedeviled us in
looking at this is that, as we point out, broadly speaking
across the sector, 86 percent of the revenues come from
taxpayer dollars; some more, some less, but that's the average.
Most of that is not spent on education.
What's the rationale for allowing schools to use unchecked
amounts of taxpayer dollars, over $250 million each year at
some schools, to market and in some instances market
deceptively? We've talked about that.
Should for-profit companies be able to use non-Federal
revenue sources for this purpose? Should there be, again, a
disaggregation there? How much should be used for marketing and
for profit, and how much should be used for educational
support? Getting back to educational support services. Any
thoughts on that?
Mr. Batson. I apologize. I just wanted to make one comment
in response to Mr. Nassirian's comment about not allowing
accreditation to continue on change of ownership. I think that
that is impossible and impractical in the real world, and I
think we have to manage it in other ways.
I wouldn't be in this business if that were the case. I can
tell you that I've bought a couple of small schools from owners
who were ready to retire. They would have spent 20 years
building up their schools and had no value, because it takes 2
to 3 years to get accreditation from scratch, and if they've
built a revenue stream over many years, you've basically
destroyed all the value of their business.
I really think that the answer is not a loss of
accreditation on change of ownership. It's really making sure
that these other kinds of standards that we've talked about
today are in place. If you had these circuit breakers, as Mr.
Shireman was talking about, you wouldn't have these issues. The
circuit breaker would trip before you got hyper growth with low
quality after an acquisition.
I feel passionate about this because in our industry we
have lots of small schools, and I know what a hardship that
would be for all of those owners across our sector if they
couldn't do that.
The Chairman. Mr. Nassirian.
Mr. Nassirian. Sorry, Mr. Chairman. I wanted to clarify
what I meant by change of control was not the change of
control, regulatory change of control language you're referring
to. It was the conversion of nonprofits to for-profits or for-
profits back to nonprofit status. Obviously, a business by
definition can change owners. That's not objectionable. At
least I understand it's a for-profit activity. It's when you
see those red flags of a Lutheran college that suddenly goes
for-profit. And increasingly, by the way, we're seeing the flip
side of it now, for-profit colleges that suddenly declare a
charitable calling and become nonprofits.
Mr. Batson. Thank you for the clarification. That's
completely different than the circumstances that we're
operating in.
The Chairman. Should we be looking at how much Federal
money is being used by for-profit schools for marketing?
Mr. Nassirian. Yes.
The Chairman. And if money is fungible, how do you do that?
Mr. Nassirian. Mr. Chairman, I looked at the advertising
and recruitment budgets of eight of them, eight publicly traded
ones, about a couple of years ago, and it really was stunning
to me because it was so clear that we're looking at something
in excess of $2 billion, with a B, a year of Federal money. I
mean, it's one thing for somebody to spend $2 billion selling a
product they developed in infomercials on late-night TV with
their own money. That's for them to decide. But if a sector is
almost 86 percent dependent on Federal funding and it's
spending $3 billion on advertising, there really is an issue
there.
Yes, money is fungible. But in some cases, I do think some
measure of responsibility can be mandated in Federal law, that
Federal financial aid money should not go into advertising,
lobbying, those kinds of things that should only be done with
truly private funds. So at least let's cap it so that they
don't exceed their non-Federal resources for that.
The Chairman. Mr. Shireman.
Mr. Shireman. Perhaps this is one of those areas where it
would be useful to have a trigger and then have something that
goes into effect, so a trigger at some percentage of Federal
funds as their revenue, and then it triggers something like--
and it may be useful to think about this not as a limit on
marketing, because then you've got the problems of redefining
categories, but instead maybe it's something like if the bulk
of their revenues are from Federal funds, then the amount that
they're charging can't be more than, let's say, double what
they're spending on instruction, something that gets at
something that's more definable and auditable. Something in
that area might be a way of handling that issue.
The Chairman. My staff just said we looked at 15 public
companies, and 86 percent--it was $3.7 billion, so there were
$3.2 billion in Federal dollars at these 15 companies were
being used just for marketing.
Oh. I'm sorry, Mr. Hamburger.
Mr. Hamburger. On marketing, we certainly understand the
concern. Any type of misrepresentation, inappropriate
marketing, or even aggressive marketing, especially of a
program that does not deliver value, is certainly of concern,
and there's the point. The key to the solution I think goes
back to the academic and educational outcomes. Do the students
learn? Do they graduate? Are they employed? Are they repaying
their loans? Are they getting licensure?
I would think that we want a college that does those things
to tell the world about it, which is marketing, and we would
want them doing a lot of activities. I understand the concern,
but we need to be careful about managing inputs rather than
outputs, because when we get into the inputs, there are a
number of categories, especially in the Federal cost category
system that we have--in your office we talked about how at
DeVry we visit a million high school students a year, including
young women, encouraging them to go into science, technology,
engineering and math, STEM programs. In the definition, that's
considered marketing. But that's part of our outreach.
On the other hand, college sports, football teams,
basketball teams--and let's remember that public sector
schools, the vast bulk of their revenue also is taxpayer
funded--that's not considered marketing.
We're into these measures of inputs rather than measures of
outputs. So I would suggest, again with our focus on solutions,
that we focus on a solution that's output measures, and if the
college is doing a good job, that's the test.
The Chairman. I have to think about that and how much
Federal dollars are being used for marketing. Boy, I have to
think about that one, especially when there's so much--when
there's more--when out of every dollar for some of these for-
profit schools, like maybe as high as 60 to 70 cents is for
marketing and profit, and 30 to 40 cents is for education. That
seems to be an imbalance to me. No?
Mr. Hamburger. No, I would agree with you. I haven't seen
that. That's a ratio that I'm not familiar with--
The Chairman. I'm not talking about yours. I'm talking
about some of these others we've looked at.
Mr. Hamburger. OK. But I do know that when I drive to
work--I've got a long commute every day--the billboards are one
after another for public sector State schools, for
independents, the vast majority. There's a lot of marketing
going on among all sectors. All colleges have to market.
Mr. Nassirian. The difference is that there isn't the same
sort of disproportionate--
The Chairman. I asked my staff, I remember, we looked at
how much the private, nonprofit, and community colleges were
spending. It's about 3 percent on advertising, on marketing.
Mr. Nassirian. And also, the revenue sources are different.
The challenge here is you have a sector that is overly
dependent on one set of programs, that is over-advertising, and
that is associated with generally dissatisfactory outcomes.
That's the holy triangle of unhappy Federal spending.
It seems to me I don't disagree that in a perfect world you
would key everything off of outcomes. The challenge here is the
billions of dollars of revenues that go into the sector, the
billions of dollars of advertising with which they pull those
revenues into the sector are all front loaded, and the outcomes
in question are years out, so it's very hard to measure.
The Chairman. I'm going to try to bring this to a close,
but if somebody has----
Mr. Batson. I was just going to comment briefly. This issue
doesn't really affect us because cosmetology students generally
know very early that they want to be in the field, and so
there's a finite universe, and they know how to find us.
But from a practical perspective, it feels like this would
be very difficult to do. I mean, I can't think of a clean way
to put some sort of a bright line marketing restriction in
place. And I've got to believe that if we get the alignment of
incentives right and we have outcomes measures, that it will be
completely unsustainable for a school to spend 60 or 70 percent
on marketing and profit and have outcomes that aren't going to
trip these circuit breakers that Mr. Shireman and others have
talked about.
I agree that it's an issue today, and it needs to be
addressed. I'm just wondering if we can't get at it, at the
root of it rather than at the symptom level.
The Chairman. Before we close I'd like to go down the panel
for any last thoughts. As I said at the beginning, I wanted to
have a general discussion. I think we had a pretty good
discussion on outcomes, disclosure standards, incentives and I
just wondered if anybody had any last thoughts, maybe something
we haven't even brought up or discussed yet that you might want
to say before we leave here.
Yes, Mr. Barr.
Mr. Barr. Thank you, Chairman Harkin. The conversation
today I think has been incredibly productive, and it's just
been so richly benefited by the presence of two leaders in the
private sector field.
I think one of the challenges in this sector, as it is in
many other sectors of regulation, is trying to improve the
regulatory environment for what you think of as high-road
players in the industry, the players who are trying to set the
highest standards and to achieve them, because the competitive
pressures that these institutions face from players who have
lower standards is so strong, the incentives are so hard in
that environment, and you've seen this in mortgages, in
finance, in derivatives that I know you've dealt with a lot, in
credit card markets.
And unless you can set those standards and enforce them in
a level playing field sort of way, the kind of institutions
that we have here before us today can't really compete without
being pushed into that lower standard environment.
The Chairman. Anybody else? Mr. Batson.
Mr. Batson. I think we've had a rich discussion on how to
move to a new, more effective outcome-based regulatory
framework that includes a combination of disclosures,
enforcement, and circuit breakers. And as I think through this
system, I think we have to be mindful that there's one group of
constituents not at the table, and it's smaller schools.
So I think a lot of these controls, secret shopping
programs, the things that big schools are going to be able to
set up very effectively and self-monitor, we've got to be
thoughtful about how these are going to work within and for the
smaller schools who aren't at this table, and we've got to be
sure that we make this framework simple enough and transparent
enough that you don't need huge amounts of people on your staff
in order to manage it.
The Chairman. Any other final thoughts? Mr. Cruz--I'll just
go down the line.
Mr. Cruz. I appreciate the opportunity to be here today. I
would say that as we move forward in thinking about the policy
decisions, as I mentioned before, if they're for improving for-
profit colleges, we also need to look at the conditions that
create the niche for the for-profit colleges to exist in the
first place, and that's about inequity in access to good
schools in the K-12 system, and also inequities in the way that
nonprofit and public institutions manage their institutional
financial aid, and the way that States are diverting funds from
those that need it the most to those that need it least.
Then when looking at how to manage all these different
policy proposals that have been presented here today, know that
in the case of for-profit education there's this iron triangle,
if you will. In the nonprofit and the public sector, the iron
triangle refers to the fact that it's difficult to get access,
affordability and quality at the same time. Well, we know that
in the for-profit sector, access is there. By definition, it
can be there; it's provided. But the other two items remain,
which is the question around quality and the question around
affordability, in this case affordability to the students.
The third point that replaces access is profitability. So
profitability is going to be at odds with access--I'm sorry,
with affordability and quality. So how do we develop the
incentives and the enforcement to compel the institutions to
make sure that that balance is reached for the benefit of the
students?
The Chairman. Thank you.
Mr. Hamburger. Thank you again, Mr. Chairman. We appreciate
the opportunity to focus on solutions. The time is right to
move forward on that. And our focus is on solutions to the
issues here, as well as solutions to the big question, which is
how do we educate more Americans for jobs, right? And how do we
create a competitive workforce for our country when we have
statistics like we're going to be a million nurses short by the
end of this decade, yet collectively we're turning away 100,000
qualified applicants because there is not the capacity to
educate them.
In that environment, to achieve those goals we're going to
need the capacity from all three sectors, from the private
sector, the public sector, and the independents. We do thank
you for your acknowledgement that the private sector plays an
important role, adding capacity and opportunity, and actually
we're doing so at a lower cost to taxpayers when you do the
math. The private sector can do so with quality outcomes, as
we've talked about, and offering access to nontraditional and
underserved students, and the private sector has been the
source of a lot of the innovation in higher education.
We are part of the solution. We want to work together on
solutions, and our summary focuses on outcomes and holding
universities to a set of best practices. So metrics of
accountability and standards of practice. Those are our two
pillars that we've included in our written statement.
We look forward to working together, can't wait to follow
up. We've got some big goals to go achieve together.
The Chairman. Thank you very much, Mr. Hamburger. Thank
you.
Mr. Nassirian.
Mr. Nassirian. Mr. Chairman, I just want to thank you for
the entire series of hearings. I was around when the Nunn
hearings sort of exposed the rampant problems within title IV,
and I vividly remember the extent to which the committee of
jurisdiction actually resisted suggestions that problems
existed that needed to be very honestly and forthrightly
addressed.
So I just want to thank you on behalf of people who don't
generally have access to you that this is important work that
this committee has done. It's been very thankless work. It
could have easily been avoided and swept under the rug, and I
think it is enormously important that this committee, and
particularly in your person, because you simultaneously carry
the burden of funding these programs as well. So I think it is
tremendous, and I just want to thank you for the entire series
of hearings.
The Chairman. I appreciate your input into our debate and
discussion on this, and for your statement, and for being here
today, Mr. Nassirian.
Mrs. Petraeus.
Mrs. Petraeus. Mr. Chairman, I can't claim to be the expert
on education that many of the people who are at the table are
today, but I will say that what I can claim to be an expert on
is military families. And Congress has acted to give our
military personnel, and now their spouses as well, a very
generous education benefit system, and I'm very grateful for
that.
I appreciate you taking the next step, which is to see that
that education money is well spent for them, and that they get
good results from it. And on our very first day of official
activity, I'm very happy to be here representing the CFPB and
to say that we look forward to working with you on this
problem.
The Chairman. Thank you, Mrs. Petraeus.
Mr. Shireman.
Mr. Shireman. Mr. Chairman, thank you so much for holding
this hearing and for your involvement in this issue over time.
I think it has from the beginning been--there have been
attempts to portray it in the same way that people tried to
portray me, as just going after a sector because it was making
a profit. But the reality is there has been a problem, there
are issues, and there are solutions, and it's great to be here
in a conversation about solutions going forward, because as my
old boss, Senator Paul Simon used to say, we can do better.
The Chairman. He was a great friend of mine. Well, thank
you very much, Mr. Shireman.
Thank you all for being here today and taking a lot of your
time to be here and to share with us.
I would say I hope that as we proceed on, that my staff, my
professional staff could be in touch with you as we move ahead
and start to develop some prospective pathways in which we're
going to go, and develop some of these things. Mr. Batson
especially, I want you to get me all that you just said that I
don't remember, but it sounded pretty good to me. And Mr.
Hamburger, you can also be very helpful in how we move ahead on
this. All of you can. You all have different aspects of this.
Mrs. Petraeus, I can tell you that just in the last few
weeks or so, most of the talk has been about the deficit and
the debt. Obviously, that's the big issue around here. But I
can tell you not just a few but quite a few Senators on both
sides of the aisle have come up to me to talk to me about this
90/10. So I think that's one thing that we're really going to
be focused on in the short term in that regard. There's other
aspects of the military also in terms of recruitment and how
that is being done in accordance with what Mr. Barr was saying
in terms of the payday loans and things like that, that some of
our military people have been subjected to. So we're going to
be looking at that, too.
How do we incentivize schools and their investors not to
value growth in the absence of good outcomes? How do we ensure
that investors look at more than just enrollment growth? Again,
someone mentioned about the balance, the balance between profit
and quality. As I've said many times, there's a role I believe
for capacity. We need a lot of different people out there that
we don't have the capacity for, and this is where for-profit
schools can help a great deal, and we need it in a short span
of time. You mentioned nursing just being one of those.
How do we balance the profitability sector of that? And
I've said more than once today that I'm going to be still
looking at this and how do we connect profitability with good
products, good outcomes, rather than you get a lot more profit
if you just get the poorest students who get the most Pell
grants and the most student loans, and whether they stay with
you or not is not that big a factor.
There's got to be something to do with profitability and
also outcomes, and how do you get investors to look at that? I
don't have the answer to that question. I have the question,
but I don't have the answer.
There are a lot of other things in terms of existing
regulations. I have to thank Mr. Batson, who has been quite
right in this. There's a lot of nitpicking regulations that
drive people nuts, but not the overall that really ensures good
outcomes and good standards for schools.
This committee is committed to looking at this sector and
seeing what we can do to help it improve. If there is a--and I
am dismayed. I will say this publicly. I am dismayed that the
association for the for-profits filed lawsuit on the gainful
employment rule. It almost seems to me that there are some in
this sector, not all--I'm not about to paint everybody with any
broad brushes. But there are some in this sector that, quite
frankly, don't want us to change anything. They're quite happy
with the way it is right now. They're making great profits, and
they're not being held accountable.
If there are schools out there that feel that way, I'm
sorry. I think there are other good schools out there that are
really trying to do the right thing, and I don't want the good
schools sucked into a vortex of--what should I say?--lower
expectations and a race to the bottom kind of thing, where you
can still make big profits but you don't have to do anything
and have good outcomes. I have a sense, having been at this now
for about 18 months, that it is a kind of a vortex, that
sometimes good schools get caught into this. If I'm going to
compete and somebody is taking my students away from me, and
they're doing all of these bad things, well, maybe I've got to
do it too to get my share of those students.
So I don't want this race to the bottom. I'd rather have
them competing on who has the best outcomes, the best
performance, the best standards, that kind of thing, and not
get sucked into this vortex of being dragged down because
somebody else is competing with you and they aren't abiding by
those standards and those outcomes.
So I must say to this sector that we are going to look at
making changes, and I want them to be meaningful. I'm not out
to put anybody out of business or anything like that, but I
want this sector to be able to do what you said, Mr. Hamburger.
We've got a capacity problem out there, and we've got to meet
this capacity problem.
And again, and I'll just say this forthrightly. I think
that maybe some of the profitability margins of some of these
companies are going to have to shrink because they're going to
have to put more money into student supports, and they're going
to have to put more into helping these low-income students that
don't have that good background.
If that's who they're going to recruit, I want to see some
support out there for it. And that may eat a little bit into
the profit margins. I don't want to take away all their
profits, but it may eat into it a little bit. OK, fine, but I
want to see better outcomes.
So anyway, this is what we're looking at, and I look
forward to continuing our conversation with schools, groups,
individuals who want to play a constructive role in this, who
want to play a constructive, forward-looking role in moving
this ahead so that we can meet the goal of making sure that our
students are well-educated for the future jobs.
I just saw a graph today between the demand and the supply
of students. Since about 1980, the demand has gone up and the
supply is going down, and we're just not getting well-educated
people in our country.
So help us out, all of you here. Help us in our thinking.
Help us in where we've got to go. Just don't come to this
committee and say nothing needs to be done, we're fine the way
it is, leave us alone. That's not going to get very far with
this committee.
So with that in mind, I thank you all very much. You've
been very constructive. Again, I hope we can continue to work
with each one of you in moving ahead on trying to make this a
better sector for all. Thank you very much.
The committee will stand adjourned.
We'll leave the record open for 10 days, and witnesses and
others may submit statements for the record or supplemental
statements.
The hearing is adjourned.
[Additional materials follow.]
ADDITIONAL MATERIAL
Reponse to Question of Senator Enzi by Jose Cruz
Question. Since January 20, 2008, have you been employed by the
Department of Education or the Obama administration in any capacity?
Have you worked for the Administration on a contractual basis during
this time? If so, please explain the nature and scope of the work
performed--as well as any compensation provided. Please also provide
the committee with copies of any consulting contracts.
Answer. Since January 20, 2008 I have not been employed by the
Department of Education or the Obama administration in any capacity. I
have not worked for the Administration on a contractual basis during
this time, but in April 2009 I did serve on a review panel for the
National Science Foundation's Centers for Research Excellence in
Science and Technology (CREST). In accordance with standard NSF
procedures, the Foundation covered the cost of my round-trip airfare
(coach class) and provided me with a travel reimbursement of $280 and a
meeting reimbursement of $480 a day. The review panel lasted 2 days.
These reinforcements covered the cost of my hotel, ground travel in DC,
and meals for the duration of the review panel.
Response to Questions of Senator Merkley by Hayes Batson
An issue which has been brought to the forefront at several of the
HELP Committee hearings is programmatic or ``specialized''
accreditation, and who is responsible for informing a student about a
particular program's status.
There is no doubt that a contributing factor to the failure of some
students to complete their education and in many cases having high
default rates is that they find out too late that the program they are
enrolled in doesn't have the necessary specialized or programmatic
accreditation. However, it is important to point out that programmatic
accreditation is not available for many academic programs, including
many online programs.
On May 20, I sent a letter to the Department of Education urging
that they consider review of the false certification regulations as
part of the upcoming negotiated rulemaking process. It is my view that
expanding the false certification discharge provisions of the Higher
Education Act would protect students from incurring student loan debt
for enrolling in programs that are title IV-eligible and accredited by
a primary accrediting agency, but that are not recognized by a
programmatic accrediting body. This would encourage institutions to
correctly represent their programs from the outset, rather than force
students like Yasmine Issa (who testified at the June 24, 2011 HELP
Committee hearing) to try and decipher through the complicated maze of
institutional vs. programmatic accreditation or find out too late that
the program they are enrolled in doesn't have programmatic
accreditation, if available.
The Department has issued new regulations on misrepresentation,
however these rules provide no relief for the borrower/retroactive
relief for someone in Yasmine's situation.
Question 1. I would like to ask the panelists for their thoughts on
this issue, including the need for schools to clearly communicate the
accreditation status of individual programs to potential students
before they enroll, and whether taxpayers should be subsidizing
programs that do not have the requisite programmatic accreditation.
Answer 1. We believe the Senator has raised some excellent
questions about how we can ensure that students have meaningful access
to the information that is most critical to them when they decide where
to attend school. We agree that students must have meaningful
information about what benefits they should expect to obtain from
completion of any given program, including whether the program is
likely to lead to employment. However, we have concerns that students
are unable to effectively use the information already provided to
them--due primarily to how many disclosures are required but also due
to inconsistencies in how disclosed data is collected, verified and
reported. We believe the most relevant data for students includes
information on the percentage of graduates from a program that get jobs
in the field(s) associated with the program. More students will make
smart choices about enrolling in programs if we have uniform
disclosures of placement rates and these disclosures are not lost in a
sea of other data that is difficult to interpret.
Specifically with respect to accreditation, the current complexity
in the accreditation system is a formidable barrier to providing clear,
consistent and meaningful disclosures about accreditation that enable
students to make informed choices. One reason is that there are two
types of accreditation (institutional and programmatic) and
accreditation, including programmatic accreditation, is not uniformly
related to a student's ability to obtain State-required licensure or
certification to work in a field across States and professions.
Similarly, the degree to which employers will require completion of an
accredited program as a job condition varies by profession and by
geography. Additionally, specific program accreditation may be either a
pathway or a requirement to sit for examinations by nongovernmental
groups that certify proficiency in a vocational field.
Because there is significant variability in the strength of the
link between programmatic accreditation and employment, we believe that
accreditation status is not a good proxy for employability, which is
what students really want to understand. Accordingly, we favor uniform
disclosures of placement rates, which speak directly to employability,
rather than accreditation as a proxy. One exception to this
recommendation is applicable in circumstances where programmatic
accreditation is an absolute prerequisite for getting a license that is
needed to work in the State where the student is taking the program. In
such a case, we recommend that schools be required to provide a clear
warning of this gap to the student during the admissions process.
A look at one vocational field helps to illustrate the variety of
the relationships between accreditation and each of: eligibility to
administer title IV funds; minimum qualifications for State licensure;
minimum qualifications for industry certification; and jobs. Our
understanding of these relationships follows.
title iv eligibility
In the field of dental assisting the Commission on Dental
Accrediting (CODA), an affiliate of the American Dental Association
(ADA), accredits dental assisting programs. CODA is a ``specialized''
or programmatic accreditor and accreditation of a program by CODA does
not authorize the school offering the program to administer title IV
funds on behalf of students--such a school must have institutional
accreditation. A school could be institutionally accredited by ACICS,
for example, and may or may not have CODA accreditation for its dental
assisting program. In either case, it has established eligibility for
title IV funding.
qualifications for state licensure
State requirements for dental assistants vary widely. The attached
document is an effort by the Dental Assisting National Board, Inc.
(DANB), a non-profit national credentialing organization in the dental
assisting field, to map the various State dental assistant credentials
to the DANB credentials. The complexity of the credentialing system at
the State level and the existence of a parallel national credentialing
system exacerbate confusion about the meaning of accreditation in
dental assisting programs.
At the State level and in many States (one example is Ohio) there
are no State licensing requirements. Many other States have no
educational or licensing prerequisites for entry-level dental assisting
jobs but draw a distinction between a dental assistant that performs
routine support tasks and one that performs ``expanded'' functions and/
or dental assistants that take x rays. For example, Michigan does not
require licensure for dental assisting but requires that Registered
Dental Assistants (who perform expanded functions) become registered
with a State agency. To qualify for registration, an applicant must
have graduated from a CODA accredited program and must pass a State-
administered examination. (However, Michigan is also currently
experimenting with programs that permit dental assistants to qualify
for the RDA exam through continuing education and job experience.)
Other States have similar requirements but instead of administering an
exam to applicants they rely on national credentialing examinations
offered by DANB. DANB is affiliated with the ADA and CODA.
qualifications for industry certification
DANB is a non-profit organization that identifies itself as the
national certification board for dental assistants. It offers
certification as a Certified Dental Assistant (CDA), Certified
Orthodontic Assistant (COA) and Certified Preventive Dental Assistant
(CPDA) to candidates who meet eligibility and examination requirements.
To obtain CDA status, an applicant must pass a Radiation Health and
Safety (RHS) exam, an Infection Control (ICE) exam and a General
Chairside (GC) exam. There are no eligibility requirements for the
first two exams. To qualify for the GC exam an applicant must have
graduated from a CODA accredited institution or meet work experience
requirements.
qualifications for jobs
Based on job listings posted on the Internet, it is our belief that
the marketplace does not demand completion of an accredited dental
assisting program as a job requirement. However, in some markets
employers favor (and in some cases strongly favor) a registration or
credential that may be more easily attained because of graduation from
a program that is not only institutionally accredited but also
programmatically accredited by a separate specialized accreditor. Thus
attending such a program may be a marketplace advantage. In addition,
in some States it is a requirement to achieve the status needed to
perform expanded functions or to take x rays.
Despite these complexities, and in addition to our above
recommendations, we believe that there may be additional ways to
reduce, to some degree, the complexities of the current accreditation
system and to provide more clarity about the value of an accreditation
status to students considering educational programs. While programmatic
accreditation does not apply to cosmetology and our students are
therefore not affected by the dynamics described herein, we would
welcome the opportunity to participate in discussions of steps that may
advance these goals.
Question 2. I would also like to learn what your thoughts are on
the role that State licensing boards must play in ensuring that program
quality is clearly defined and communicated to schools, students, and
State regulators.
Answer 2. In our industry it is common for State cosmetology boards
to perform the task of licensing and monitoring both practitioners in
the industry and schools training these practitioners. As outlined in
my remarks during the roundtable, these boards heavily regulate many
aspects of our program in an effort to ensure that minimum standards of
various types are met. Generally speaking, however, State boards do not
have consumer disclosure requirements that relate to these standards.
We believe that consumer disclosure requirements should be focused at
the Federal, not the State, level to maximize the comparability of the
data disclosed across schools.
Question 3. The Department of Education recently released new
regulations on misrepresentation that require disclosure of
accreditation status of programs. My understanding is that the
regulations affect programs that lead to occupations that require
licensure or certification.
This committee has been concerned about reports that until now
students have not been getting such information. What recommendations
do you have for institutions and the Department as each works to
improve student access to such information?
Answer 3. As outlined in my remarks during the roundtable, we think
it is important to deliver information that should influence a
student's choice of school in a simple and consistent format and
location, across programs and across schools. So, clear definitions of
the information that is required is key, as is clear guidance on the
specific details of how and where to disclose that information. We
think these definitions and disclosure requirements should be outlined
in statute. In addition, if statutory requirements for the disclosure
of information do not cause schools to act in ways that are uniform, it
may be necessary for the Department to create forms that will be used
to present the information. This is the approach that the Department is
taking for the new gainful employment consumer disclosures. Based on
the disclosures that were made when the rule became effective on July
1, the release of the form will be a helpful step in moving toward
disclosures that students can actually compare. In addition, active
supervision and enforcement of the statutory requirements will be
required.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Response to Questions of Senator Merkley by Jose Cruz
An issue which has been brought to the forefront at several of the
HELP Committee hearings is programmatic or ``specialized''
accreditation, and who is responsible for informing a student about a
particular program's status.
There is no doubt that a contributing factor to the failure of some
students to complete their education and in many cases having high
default rates is that they find out too late that the program they are
enrolled in doesn't have the necessary specialized or programmatic
accreditation. However, it is important to point out that programmatic
accreditation is not available for many academic programs, including
many online programs.
On May 20, I sent a letter to the Department of Education urging
that they consider review of the false certification regulations as
part of the upcoming negotiated rulemaking process. It is my view that
expanding the false certification discharge provisions of the Higher
Education Act would protect students from incurring student loan debt
for enrolling in programs that are title IV-eligible and accredited by
a primary accrediting agency, but that are not recognized by a
programmatic accrediting body. This would encourage institutions to
correctly represent their programs from the outset, rather than force
students like Yasmine Issa (who testified at the June 24, 2011 HELP
Committee hearing) to try and decipher through the complicated maze of
institutional vs. programmatic accreditation or find out too late that
the program they are enrolled in doesn't have programmatic
accreditation, if available.
The Department has issued new regulations on misrepresentation,
however these rules provide no relief for the borrower/retroactive
relief for someone in Yasmine's situation.
Question 1. I would like to ask the panelists for their thoughts on
this issue, including the need for schools to clearly communicate the
accreditation status of individual programs to potential students
before they enroll, and whether taxpayers should be subsidizing
programs that do not have the requisite programmatic accreditation.
Answer 1. At the HELP Committee's roundtable, I presented a six-
element framework for improving for-profit education in America to
ensure students get the education that they are promised, and that
taxpayers make a worthwhile investment. The framework requires:
1. For-profit colleges, Federal and State regulators, accrediting
bodies, and advocacy organizations to embrace the country's economic
competitiveness as the strategic context in which all higher education
sectors operate.
2. Policymakers to address the misguided K-12 and higher education
policies and practices that have led to the disparities that gave rise
to the current state of for-profit college education.
3. Policymakers and for-profit colleges to level the playing field
by eliminating the most toxic academic programs, and by strengthening
consumer information and protections.
4. Policymakers to incentivize investments in student success and
controlling the student debt burden.
5. Policymakers, regulators and accrediting bodies to contain risk
by implementing effective quality controls, and by strongly enforcing
the corresponding laws and regulations.
6. Policymakers to encourage disruptive innovations in the for-
profit college sector--innovations that will transform the dismal
student outcomes that currently plague the sector and cause the most
harm to the most vulnerable students who, because of demographic
shifts, could in fact contribute the most toward our collective
aspirations.
To contain risks through effective quality controls requires that
accreditors and States carry their weight. The transfer of
accreditation with a change of ownership should be banned. Institutions
should not be allowed to offer programs that require specialized
accreditation for licensure purposes unless they have the required
specialized accreditation. If they do offer such programs, they
certainly should not be eligible for title IV financial aid. And
accreditors should certainly be measuring student success. States
simply need to start regulating beyond the absolute minimum, which is
what many do today.
Question 2. I would also like to learn what your thoughts are on
the role that State licensing boards must play in ensuring that program
quality is clearly defined and communicated to schools, students, and
State regulators.
Answer 2. Our higher education regulatory structure is built upon
three pillars: Federal regulation, State regulation, and accreditation.
These pillars were designed to distribute the load of the many forces
that put undesirable pressure on higher education institutions, to
mitigate any long-term damage to the structure itself. Most State
higher education agencies and licensing boards focus primarily on
ensuring that students receive accurate information about each
institution and its programs. If the State agencies do not fulfill this
role, or do so in a perfunctory manner then students do not receive
accurate information about the programs they are considering attending.
That, in turn, leads to students attending programs that do not meet
their needs or do not properly prepare them for the career path they
have selected. Hence, it is imperative that State higher education
agencies and the licensing boards maintain laser like focuses on
ensuring students have accurate information about both the quality of
programs as well as whether the programs satisfy the necessary
requirements for licensure in the State.
Further, State agencies should be encouraged not to approve
programs that require specialized accreditation for licensure purposes,
but which fail to obtain that accreditation.
Question 3. The Department of Education recently released new
regulations on misrepresentation that require disclosure of
accreditation status of programs. My understanding is that the
regulations affect programs that lead to occupations that require
licensure or certification.
This committee has been concerned about reports that until now
students have not been getting such information. What recommendations
do you have for institutions and the Department as each works to
improve student access to such information?
Answer 3. Institutions that offer un-accredited programs should be
required to display a clear, conspicuous warning on all recruitment,
admissions, and financial aid materials distributed to students, as
well as on their Web page. The Department should develop a standard,
eye-catching warning that must be prominently displayed and which all
institutions use--like warnings on other dangerous products, such as
cigarette cartons.
Further, accreditation status is not the only piece of information
that students need to make an informed decision. Students need to be
able to identify and easily compare information on data points such as
graduation rates, default rates, average debt, job placement rates, and
licensure pass rates. Again, the Department should develop a standard
template containing a few of these key pieces of information, and
institutions should be required to display this information on all
recruitment, admissions, and financial aid materials provided to
students. Currently, students need to dig through cumbersome Web sites
to locate this information, making it difficult to identify comparable
data points for different institutions. A standard set on information
that appears on all materials--just as credit card mailings contain
standard disclosures--could help students make more informed decisions.
Response to Questions of Senator Merkley by Daniel Hamburger
An issue which has been brought to the forefront at several of the
HELP Committee hearings is programmatic or ``specialized''
accreditation, and who is responsible for informing a student about a
particular program's status.
There is no doubt that a contributing factor to the failure of some
students to complete their education and in many cases having high
default rates is that they find out too late that the program they are
enrolled in doesn't have the necessary specialized or programmatic
accreditation. However, it is important to point out that programmatic
accreditation is not available for many academic programs, including
many online programs.
On May 20, I sent a letter to the Department of Education urging
that they consider review of the false certification regulations as
part of the upcoming negotiated rulemaking process. It is my view that
expanding the false certification discharge provisions of the Higher
Education Act would protect students from incurring student loan debt
for enrolling in programs that are title IV-eligible and accredited by
a primary accrediting agency, but that are not recognized by a
programmatic accrediting body. This would encourage institutions to
correctly represent their programs from the outset, rather than force
students like Yasmine Issa (who testified at the June 24, 2011 HELP
Committee hearing) to try and decipher through the complicated maze of
institutional vs. programmatic accreditation or find out too late that
the program they are enrolled in doesn't have programmatic
accreditation, if available.
The Department has issued new regulations on misrepresentation,
however these rules provide no relief for the borrower/retroactive
relief for someone in Yasmine's situation.
Question 1. I would like to ask the panelists for their thoughts on
this issue, including the need for schools to clearly communicate the
accreditation status of individual programs to potential students
before they enroll, and whether taxpayers should be subsidizing
programs that do not have the requisite programmatic accreditation.
Answer 1. We agree that schools should clearly communicate
programmatic accreditation status to prospective students, most
importantly when such accreditation affects eligibility for
professional licensure and employment opportunities. Schools should
also disclose any alternative paths to licensure or employment.
Taxpayers should expect that federally funded programs in higher
education disclose accreditation information in a transparent and
understandable manner.
Question 2. I would also like to learn what your thoughts are on
the role that State licensing boards must play in ensuring that program
quality is clearly defined and communicated to schools, students, and
State regulators.
Answer 2. State licensing boards play a critical oversight role in
postsecondary education. They publish minimum standards that
postsecondary institutions must meet to operate and grant degrees, and
conduct periodic assessments to ensure that minimum requirements
continue to be met. However, State higher education authorizing agency
requirements vary widely; many conduct a robust evaluation of
institutional policies and outcomes to determine that State academic
standards have been satisfied, while others perform less rigorous
evaluations or grant exemptions from licensure based upon an
institution's attainment of institutional accreditation. For this
reason, we believe the primary role of program quality assurance lies
with institutional and programmatic accreditors. The in-depth
accreditation process, along with program-specific accreditations,
provides assurance to both students and our State licensing agencies
that rigorous standards of quality have been met.
Question 3. The Department of Education recently released new
regulations on misrepresentation that require disclosure of
accreditation status of programs. My understanding is that the
regulations affect programs that lead to occupations that require
licensure or certification.
This committee has been concerned about reports that until now
students have not been getting such information. What recommendations
do you have for institutions and the Department as each works to
improve student access to such information?
Answer 3. The new rules require institutions to disclose
programmatic accreditation status for each of its programs, including
the fact that a non-accredited program has accreditation options
available. We understand the Department and consumer advocates'
concerns relative to programmatic accreditation. However, we believe
that merely disclosing programmatic accreditation status does not
sufficiently address the concerns. Students want to know if an
individual program prepares and qualifies them for entry into specific
fields of work. In many cases, licensure is a mandatory condition to
working in a specific field and programmatic accreditation may be a
condition for a program's graduates to qualify for licensure. In many
other cases, programmatic accreditation and licensure might enhance
employment prospects, but are not prerequisites for employment.
Students also want to know to what extent an institution's programs
qualifies them for prevailing jobs in their area. Students should be
informed in clear, direct language:
Whether licensure is required to enter employment in their
field of study;
If yes, does an institution's program qualify a student
for licensure without any further study;
If no, to what extent do non-licensed employment
opportunities exist in the geographical area in which they are
studying;
The licensure outcomes of a program's graduates, and;
The employment outcomes (rate, common position titles) of
a program's graduates.
Response to Questions of Senator Merkley by Barmak Nassirian
An issue which has been brought to the forefront at several of the
HELP Committee hearings is programmatic or ``specialized''
accreditation, and who is responsible for informing a student about a
particular program's status.
There is no doubt that a contributing factor to the failure of some
students to complete their education and in many cases having high
default rates is that they find out too late that the program they are
enrolled in doesn't have the necessary specialized or programmatic
accreditation. However, it is important to point out that programmatic
accreditation is not available for many academic programs, including
many online programs.
On May 20, I sent a letter to the Department of Education urging
that they consider review of the false certification regulations as
part of the upcoming negotiated rulemaking process. It is my view that
expanding the false certification discharge provisions of the Higher
Education Act would protect students from incurring student loan debt
for enrolling in programs that are title IV-eligible and accredited by
a primary accrediting agency, but that are not recognized by a
programmatic accrediting body. This would encourage institutions to
correctly represent their programs from the outset, rather than force
students like Yasmine Issa (who testified at the June 24, 2011 HELP
Committee hearing) to try and decipher through the complicated maze of
institutional vs. programmatic accreditation or find out too late that
the program they are enrolled in doesn't have programmatic
accreditation, if available.
The Department has issued new regulations on misrepresentation,
however these rules provide no relief for the borrower/retroactive
relief for someone in Yasmine's situation.
Question 1. I would like to ask the panelists for their thoughts on
this issue, including the need for schools to clearly communicate the
accreditation status of individual programs to potential students
before they enroll, and whether taxpayers should be subsidizing
programs that do not have the requisite programmatic accreditation.
Answer 1. Senator Merkley, I completely agree with your
observations on this issue. First, dead-end, toxic programs that lack
the programmatic or specialized accreditation required for licensure or
employment in the applicable field should simply not be eligible for
Federal financing. This fairly basic and commonsensical first-step
would ensure that, at the very least, all graduates of title IV-
eligible programs would have a theoretical chance of actual licensure
and employment in the profession that they (and the taxpayers) spent
thousands of dollars to be trained for.
Second, for those individuals, like Ms. Issa, who were misled into
programs that lack the necessary programmatic or specialized
accreditation, the false certification discharge would be a reasonable
remedy that the Department should provide. Providing this relief to
students should be combined with vigorous legal pursuit of the
operations that deceived them into enrolling in unaccredited programs.
Finally, even after ensuring that unaccredited programs are not
provided easy access to Federal financing, appropriate, plain-language,
standardized disclosures should be mandated for participating schools.
At a minimum, these disclosures should not only articulate all
applicable requirements for licensure and employment in the field in
question, but also the actual audited statistics for licensure pass-
rates and placement rates for the specific program in question.
Question 2. I would also like to learn what your thoughts are on
the role that State licensing boards must play in ensuring that program
quality is clearly defined and communicated to schools, students, and
State regulators.
State licensing boards should independently inform the public of
licensure requirements and statistical reports on pass rates of
applicants from various programs. This would enable prospective
students to evaluate various schools and programs on the basis of their
graduates' success. Schools should be required to include the address,
phone number and Web address of the appropriate licensing board in any
advertising for programs that may reasonably be perceived as training
students for careers that require the applicable licensure. This
mandate should be carefully constructed to include the many confusing
programs that are carefully designed to suggest future lucrative
professional employment in licensed professions, but that are only
simulacra of real fields intended to deceive applicants.
Question 3. The Department of Education recently released new
regulations on misrepresentation that require disclosure of
accreditation status of programs. My understanding is that the
regulations affect programs that lead to occupations that require
licensure or certification.
This committee has been concerned about reports that until now
students have not been getting such information. What recommendations
do you have for institutions and the Department as each works to
improve student access to such information?
Answer 3. The real challenge with these disclosures is to prevent
unscrupulous providers from confusing prospective students. As Ms.
Issa's case amply demonstrated, the school misled her (and continues to
mislead other cohorts of students to this day) into enrolling in a
dead-end unaccredited program by disclosing the (institutional)
accreditation it does have, rather than the (programmatic)
accreditation it doesn't have. As mentioned above, the best solution of
all would be to ensure that only fully accredited programs are eligible
for title IV financing in the first place. Short of that, the
accredited disclosure mandate should be crafted in a manner that forces
schools to disclose that certain programs do not, in fact, have the
programmatic or specialized accreditation needed for suggested or
cognate professions. Again, this mandate would need to be very broadly
applied not only to programs that are specifically advertised as
leading to a profession in a licensed career, but also to any programs
that are advertised or portrayed as leading to employment in a
confusingly similar unlicensed field.
Response to Questions of Senator Merkley by Holly K. Petraeus
Thank you for the opportunity to respond to your questions
regarding accreditation. Unlike others who participated in the
roundtable discussion on July 21, I cannot claim to be an expert on the
intricacies of higher education regulation. Moreover, the matters you
inquire about are largely outside the primary focus of the Consumer
Financial Protection Bureau (CFPB), as they do not relate directly to
consumer financial products or services. However, the three questions
you raise are critical to servicemembers and their families, and
related to their informed choice and use of student loans.
Your first question relates generally to accreditation and
communication of accreditation. Since joining the CFPB as the head of
the Office of Servicemember Affairs, I have heard from a number of
servicemembers concerning their disappointment and frustration with
certain educational institutions that recruit heavily in the military
community. Nearly all of these schools have some sort of accreditation,
and the servicemember thus assumes that a reliable and impartial third
party has validated the program's quality, only to find out later that
the program has serious deficiencies. These experiences have informed
my views on your first question. Although it's certainly important for
schools to communicate accreditation status to prospective students,
additional information (e.g., whether credits earned are transferable
to other institutions) can often help prospective students determine
whether or not a program is appropriate for them.
Regarding your second question on the role of State licensing
boards, my prior experiences also have informed my views. State
licensing boards can play an important role in communicating their
requirements for licensure. One step such entities could take that
would be particularly helpful to servicemembers would be to have
requirements for licensure prominently displayed on their Web sites,
together with information about what specific training programs are
accepted by that State licensing board. Such easily accessible and
clearly stated information is vitally necessary to military personnel
and their family members, who move continually across State lines and
may well be coming from a different State, or even overseas. (I am a
prime example, having moved 24 times during my husband's 37 years in
the Army!) Because of these geographical considerations, military
family members must do much of their research online. If the pertinent
information is not readily available, they may find out too late that
they have enrolled in a training program that does not qualify them to
take a particular State licensing exam.
Your third question--on the best way for students to receive
sufficient disclosure on accreditation status--is of particular
interest to the Consumer Financial Protection Bureau. Creating useful
disclosures (and not excessive fine print) is good for responsible
providers and good for consumers. This is a central goal of the CFPB,
and we are already working hard to achieve this goal in the realm of
consumer financial products and services. For example, we have already
engaged the public in our work to combine two complicated mortgage
disclosure forms into a single, simpler form that will both help
prospective homeowners make better decisions and reduce burden on
industry. While disclosures about a school's accreditation status and
related matters is not a topic within the CFPB's focus on consumer
financial products or services, I believe that useful, easy-to-
understand disclosures would provide value both to servicemembers and
to the student population writ large.
Thank you again for the opportunity to participate in the
roundtable discussion, and to provide this additional information. The
CFPB's Office of Servicemember Affairs and Office of Students will
continue to focus our efforts on ensuring that servicemembers and
students have the information they need to make smart choices about
consumer financial products and services, including the student loans
they use to pursue their dream of higher education.
Response to Questions of Senator Merkley by Robert Shireman
An issue which has been brought to the forefront at several of the
HELP Committee hearings is programmatic or ``specialized''
accreditation, and who is responsible for informing a student about a
particular program's status.
There is no doubt that a contributing factor to the failure of some
students to complete their education and in many cases having high
default rates is that they find out too late that the program they are
enrolled in doesn't have the necessary specialized or programmatic
accreditation. However, it is important to point out that programmatic
accreditation is not available for many academic programs, including
many online programs.
On May 20, I sent a letter to the Department of Education urging
that they consider review of the false certification regulations as
part of the upcoming negotiated rulemaking process. It is my view that
expanding the false certification discharge provisions of the Higher
Education Act would protect students from incurring student loan debt
for enrolling in programs that are title IV-eligible and accredited by
a primary accrediting agency, but that are not recognized by a
programmatic accrediting body. This would encourage institutions to
correctly represent their programs from the outset, rather than force
students like Yasmine Issa (who testified at the June 24, 2011 HELP
Committee hearing) to try and decipher through the complicated maze of
institutional vs. programmatic accreditation or find out too late that
the program they are enrolled in doesn't have programmatic
accreditation, if available.
The Department has issued new regulations on misrepresentation,
however these rules provide no relief for the borrower/retroactive
relief for someone in Yasmine's situation.
Questions 1. I would like to ask the panelists for their thoughts
on this issue, including the need for schools to clearly communicate
the accreditation status of individual programs to potential students
before they enroll, and whether taxpayers should be subsidizing
programs that do not have the requisite programmatic accreditation.
Answer 1. If a profession requires licensing, and a student is
entering a program aimed at that profession, then the school absolutely
has a responsibility to aggressively and prominently warn the student
if the program does not qualify the student to take the licensure
examination. However, I would be careful about going too far in having
the government highlight or endorse programmatic accreditation in other
situations. By definition, accreditation is always an effort to create
barriers of entry in a field, but it is only sometimes an important
element in ensuring quality. Putting government power behind
programmatic accreditation skews the market test of the value of the
accreditation, creating an excessive barrier-to-entry and/or leading to
an inadequate measure of quality.
______
DeVry, Inc.,
Downers Grove, IL,
August 4, 2011.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC 20510.
Dear Chairman Harkin: Thank you again for inviting me to
participate in the Senate Committee on Health, Education, Labor, and
Pensions forum on ``Improving For-Profit Higher Education: A Roundtable
Discussion of Policy Solutions.'' I believe we had a productive
discussion and made progress toward addressing issues facing higher
education.
I would like to elaborate on some of the topics addressed at the
forum, specifically comments on the percentage of government loans
taken out by private-sector college students, the perceived lack of
oversight of higher education, the 90/10 requirement, and DeVry's
marketing spend as a percentage of revenue, and the cost of a private-
sector education.
percentage of students taking out federal loans
During the roundtable, Mr. Cruz stated that ``94 percent of the
students enrolled in for-profits take out Stafford Loans.'' Students at
private-sector schools rely heavily on Federal student loans because
they are typically independent and have no family financial support. In
fact, I would argue that the sign of a good financial aid office at any
college or university is its ability to help students find the best
financing possible. Typically, that means Federal student loans and
grants. This is a positive benefit to students--both financially and
for their chances to graduate. One need only look at FAFSA completion
rates to see the positive impact on students.
Private-sector colleges and universities, including those at DeVry,
are typically very proficient at helping students complete their FAFSA
form. Financial aid expert Mark Kantrowitz states in his October 14,
2009 study, ``FAFSA Completion Rates by Level and Control of
Institution'' \1\ that 95.4 percent of students at ``for-profit''
colleges and universities complete their FAFSA form, compared to 71.7
percent and 52.1 percent of students at private non-profit and public
schools, respectively. We would be more than willing to share best
practices in this regard.
---------------------------------------------------------------------------
\1\ http://www.finaid.org/educators/20091014afsacompletion.pdf.
---------------------------------------------------------------------------
And Kantrowitz points out another, even more significant benefit to
these high FAFSA completion rates: they are directly correlated to
increased graduation rates. He states that if public colleges would
increase their FAFSA completion rate to the level of ``for-profit''
schools, ``public colleges could potentially increase 6-year graduation
rates by as much as 5.2 percent and Bachelor's degree attainment rates
by as much as 4.3 percent.'' \2\
---------------------------------------------------------------------------
\2\ Ibid.
---------------------------------------------------------------------------
That's an astonishing potential improvement in graduation rates for
what is purely an administrative, non-academic task. Kantrowitz goes on
to state that the increase in graduation rates would translate to an
increase in Associate's degrees ``by more than 200,000 per year and the
number of students graduating with Bachelor's degrees by more than
50,000 per year.'' \3\ Those numbers would go a long way toward helping
us reach the President's college attainment goals.
---------------------------------------------------------------------------
\3\ Ibid.
---------------------------------------------------------------------------
lack of oversight
Mr. Nassirian commented during our panel on a ``complete lack of
oversight'' of private-sector schools. On the contrary, private-sector
education is very highly regulated. In addition to the U.S. Department
of Education, State licensure agencies and accrediting bodies, the
sector is regulated by other Federal and State agencies including, for
DeVry, the SEC. The question is whether the regulation adequately
ensures that institutions are effectively delivering a quality product
and service that meets the student and taxpayer's expectations. This is
not a question just for the private sector, but for all of higher
education. In calling for an increase of 8.2 million college graduates,
the President is not just telling us to throw open our doors and add
more seats. He is telling us we need to first offer programs and
services that meet the needs of the un-enrolled, and second, do a
better job at seeing them through to graduation.
The Triad, consisting of the Department of Education, State
licensing entities and accrediting bodies, needs to work effectively
and cohesively to enable this expansion while at the same time being
able to better measure individual institutional performance towards
those goals. While none of these entities operates in a silo, they each
bring different strengths and responsibilities to the table. They each
must be accountable to increasing the level of execution of their own
responsibilities. For example, if it is the State's role to ensure that
institutions are responsive to student consumers, then they need to
have a rapid response process that assures complaints are not only
resolved for an individual student, but that the institution ``learns''
from the resolution and will advance its product and services as a
result. The Department currently has the authority to spearhead this
effort within its existing enforcement authority. It also has the
authority and resources to gather and report on meaningful qualitative
results.
Similarly, the Federal Negotiated Rulemaking process provides a
meaningful opportunity for community input and serves as an integral
part of engaging not only the Triad but the higher education community
at large. As members of this community, DeVry staff has served as
Federal trainers, chairmen of Department of Education (USED) task
forces, on the National Academy Foundation student aid research
projects, on USED focus groups to simplify student aid and the steering
committee of NCES's National Postsecondary Education Cooperative which
promotes better data for better decisionmaking. We have also
participated on boards and as members of associations including the
American Council of Education, The College Board, and the National
Association of Student Financial Aid Administrators and the National
Student Loan Clearinghouse. Most recently DeVry staff served as
negotiators in negotiated rulemaking and has provided recommended
regulatory language to USED aimed at strengthening student disclosures.
DeVry has and will continue to engage with members of Congress on ways
to improve educational opportunity and success for all students.
90/10
Several comments were offered during the roundtable relative to the
private sector's reliance on Federal funding, the 90/10 requirement,
the sufficiency of that requirement, and the historical purpose for
that requirement. As Mr. Shireman explained, the 90/10 requirement
(then 85/15) was established as a proxy for an independent valuation of
an institution's quality. That is, if 15 percent of an institution's
revenue was derived from some other source, the Federal Government
could rely on the derivation as an indicator that someone else had
``inspected'' the institution and found it of merit.
This requirement is problematic on two fronts. First, it has
outlived its usefulness. The use of a proxy makes sense only when the
use of actual data is either impossible or impractical. That is not the
case in measuring institutional quality. The need for a third party
validation of an institution's merit has been replaced with an ability
to measure institutional outcomes. At the time the law was enacted, we
were not able to measure outcomes on a mass and timely scale. The
development of standards and technology has enabled us to do so and we
should now replace the use of a proxy with the measurement of actual
outcomes as I proposed in my original submission.
The second problem with this requirement is that there is no
evidence that it actually relates to institutional quality. The 90/10
ratio is entirely based on inputs--that is, the financial condition of
the students an institution serves. Using this proxy, an unaccredited
institution would qualify as one of the top institutions in the
country. The maximum thresholds are also entirely arbitrary and
prejudicial in their application to only one sector. Indeed, many
public and independent institutions rely significantly on Federal
student aid and other forms of governmental (State) funding for payment
of tuition and fees. The different financial structures (for example,
only 30 percent of public 4-year operating revenues are derived from
tuition and fees) and limitations on what is counted towards the 90
percent requirement mask the comparability among institutions. DeVry
University provided more than $27 million in scholarships last year--
almost all of which met the needs of low-income students--that was not
included in the 10 percent calculation, despite an analogous scheme
that occurs within the discounting policies of many 4-year public and
independent institutions. We understand why this rule was initially
enacted, but believe it is time to move on to absolute measures of
quality--student outcomes.
department of defense tuition assistance and g.i. bill
I want to clarify a point offered during our session by Mrs.
Petraeus relating to the timing of funding for Tuition Assistance
(active duty) versus the G.I. Bill (VA). Mrs. Petraeus indicated that
there was likely greater incentive to enroll veterans versus active
duty students because institutions had to wait on the funding for
active duty students until the end of the term. While I am unaware of
the policies under which Mrs. Petraeus made her determination, I wanted
you to know that DeVry University generally receives funding for active
duty students before it receives funding for veterans. The processing
of enrollment certification records in order to fund students typically
takes until the 2d month for funding to be released to both the
institution and the veteran.
marketing
During the roundtable you noted that some private-sector schools
may spend ``60 to 70 cents'' out of every dollar on marketing and ``30
to 40 percent'' on education. While we cannot speak for other schools''
marketing expenditures, DeVry's marketing expenditures are much less
than the sector-wide statistics you cited.
DeVry Inc. advertising expenses represented 12.3 percent of total
revenues versus 45.8 percent for educational services. Advertising
expense represents about 14.6 percent and educational services
represent about 54.6 percent of total operating costs.
cost to taxpayers
There were several comments about the cost of private-sector
education to taxpayers, and I would like to elaborate on the answer I
provided at the forum.
Private-sector schools actually cost less than public or
independent institutions when one includes the cost to taxpayers.
Tuition at a school like DeVry University costs about $15,000 per
academic year. The average tuition of a 4-year public university is
about $7,000. However, public university tuition is highly subsidized
by taxpayers. Federal and State subsidies and grants add over $15,000
to that total, making the true cost for a public university tuition
over $22,000 (see chart below). One can more easily see this true cost
when comparing in-state v. out-of-state tuitions. For example, the
University of Illinois charges $13,000 for in-state tuition, $27,000
for out-of-state.
It is important to keep these numbers in mind when thinking of our
future educational capacity needs. The President has called for an
additional 8.2 million postsecondary degrees by 2020. Public sector
schools, constrained by State budget shortfalls, cannot meet that goal
alone. The private sector can add capacity without taxpayer subsidies
and at less cost than public or independent schools.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Thank you again for the opportunity to discuss ways in which we can
together improve higher education opportunities for our students. I
look forward to working with you and the rest of the committee as your
efforts continue this fall.
Sincerely,
Daniel Hamburger,
President and CEO, DeVry, Inc.
[Whereupon, at 4:57 p.m., the hearing was adjourned.]