    [Senate Hearing 114-530]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-530

        A REVIEW OF THE DEPARTMENT OF EDUCATION AND STUDENT ACHIEVEMENT

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

                                    HEARING

                                   before the

                                  COMMITTEE ON
                   HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 30, 2015

                                   __________

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

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            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                        RON JOHNSON, Wisconsin Chairman
    JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
    ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
    RAND PAUL, Kentucky                  JON TESTER, Montana
    JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
    MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
    KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
    JONI ERNST, Iowa                     GARY C. PETERS, Michigan
    BEN SASSE, Nebraska

                        Keith B. Ashdown, Staff Director
                       Satya P. Thallam, Chief Economist
                  Gabrielle A. Batkin, Minority Staff Director
               John P. Kilvington, Minority Deputy Staff Director
            Deirdre G. Armstrong, Minority Professional Staff Member
        Michael Santora, Legislative Assistant, Office of Senator Carper
                         Laura W. Kilbride, Chief Clerk
                       Lauren M. Corcoran, Hearing Clerk

                                C O N T E N T S

                                     ------
    Opening statements:
                                                                       Page
        Senator Johnson..............................................     1
        Senator Carper...............................................     3
        Senator Ernst................................................    17
        Senator McCaskill............................................    19
        Senator Lankford.............................................    23
        Senator Ayotte...............................................    26
    Prepared statements:
        Senator Johnson..............................................    49
        Senator Carper...............................................    51

                                    WITNESS
                         Wednesday, September 30, 2015

    Richard K. Vedder, Ph.D., Director, Center for College
      Affordability and Productivity.................................     6
    Kevin Carey, Director, Education Policy Program, New America.....     8
    Hon. Theodore R. Mitchell, Under Secretary, U.S. Department of
      Education......................................................    31

                         Alphabetical List of Witnesses

    Carey, Kevin:
        Testimony....................................................     8
        Prepared statement...........................................    65
    Mitchell, Hon. Theodore R.:
        Testimony....................................................    31
        Prepared statement...........................................    70
    Vedder, Richard K.:
        Testimony....................................................     6
        Prepared statement...........................................    53

                                    APPENDIX

    Responses to post-hearing questions submitted for the Record:
        Dr. Vedder...................................................    79
        Mr. Carey....................................................    80
        Hon. Mitchell................................................    81

        A REVIEW OF THE DEPARTMENT OF EDUCATION AND STUDENT ACHIEVEMENT

                                  ----------

                         WEDNESDAY, SEPTEMBER 30, 2015

                                         U.S. Senate,
                               Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 9:35 a.m., in
    room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson,
    Chairman of the Committee, presiding.
        Present: Senators Johnson, Lankford, Ayotte, Ernst, Sasse,
    Carper, McCaskill, and Peters.

                 OPENING STATEMENT OF CHAIRMAN JOHNSON

        Chairman Johnson. Good morning. This hearing is called to
    order. I want to thank the witnesses for appearing today and
    taking the time to come here as well as for taking the time to
    prepare some very thoughtful testimony.
        The concept of this hearing really is the first in a series
    of what I would like this Committee to do, which is basically
    take a look at all the departments of the government, very
    similar to the way a business looks at the different divisions
    or departments, and kind of basically do a budget review
    process, laying out this is how much this department has spent
    since its inception, or we will figure out a particular
    timeframe; what are the stated goals of the department or
    agency; what are the metrics that prove whether those goals
    have been met; and then, finally, what are some of the intended
    or unintended consequences of department actions. So we are
    going to try and attempt to do that today for the Department of
    Education (ED).
        I will say that over the last couple of weeks, as we
    prepared for this hearing, it was frustrating trying to get the
    information. For example, I kept asking my staff, because I saw
    a graph that showed student loan debt at about $95 billion
    about 20 years ago, growing to about $1.3 trillion, but the
    only graph we could come up with reliable information only had
    about 10 years' worth of data from about some $300 billion up
    to about 1.15. And we did find out from the Federal Reserve
    Bank (FRB) of New York that they get the data, but they get it
    from the Department of Education. They do not view it as
    reliable information. It is frustrating to actually get uniform
    information on some of the questions I was asking.
        Just to kind of run through the basic facts, since 1980,
    when the Department was established, it spent about $1.5
    trillion of taxpayer money. Divided by 35 years, that is an
    average of about $43 billion per year. In fiscal year (FY)
    2015, the appropriated amount of money was about $87 billion. I
    think the question that this Committee is asking and that I
    think taxpayers need to ask, the American taxpayers, is: Are we
    getting our money's worth out of it?
        The metrics we ought to be looking at is what has happened
    since 1980 in terms of test scores. Have we improved the
    performance in K-12 and postsecondary education? We will take a
    look at those. If there has been improvements, it has been
    pretty negligible.
        The other important metric is how good are we at through
    our education system matching educational outcomes to the
    requirements of employers and really to societal needs. Are we
    doing a good job preparing our children for the job market and
    for other societal functions? Evidence proves that there is an
    awful lot of problems in terms of that.
        I was really involved in Oshkosh, before I became a U.S.
    Senator, not only as a manufacturer but volunteering in the
    education system in Oshkosh. One of the things we did within
    the Catholic school system was initiate a program we called the
    ``Academic Excellence Initiative.'' And the tag line of it was:
    ``How do you teach more? How do you teach better? How do you
    teach easier?'' So more, better, easier. Basically educational
    productivity.
        I remember at the time--quite a few years ago--I typed into
    my Yahoo! search ``educational productivity,'' and I got zero
    results. I do not think I misspelled it. But it is a concept
    that is--certainly productivity--it is table stakes in terms of
    the private sector and business. You have to improve
    productivity if you are going to succeed in education. It is
    really not something that people think about a whole lot,
    unfortunately, and that is part of the problem.
        I was part of the focus group for the Oshkosh area school
    district, and they were going through their budget, and I was,
    kind of the skunk in the room as they were talking about how it
    costs about $10,000 per student, and they were just coming
    under all kinds of pressure, which I understand. It is not an
    easy task. But I just asked the question, ``Well, if you give
    me $10,000 and give me 20 students, that is $200,000. I think
    as a business guy I could do a pretty good job of educating 20
    kids for two hundred grand.''
        Now, that is only $10,000. I think the national average for

    K-12 is higher than that. We see some jurisdictions--Baltimore,
    Washington, D.C., I think it is closer to $25,000. So $25,000
    times 20 students, that is half a million dollars. Are we
    getting our money's worth?
        Now, that is not all, Federal money. Most of that is State
    and local. I think those are the kind of questions we have to
    ask, those common-sense--this is what we are spending. What
    kind of output are we getting?
        College, by the way--and, again, it depends on what you are
    looking at. For ease of math, let us take $20,000 per year,
    cost of college, times 20 students. That is $400,000. Again,
    give me 20 kids, $400,000, I think I can give them a first-
    class education.
        So that is a key question we have to ask: Are we getting
    the bang for the buck? We are spending an enormous amount on
    education, and I am not convinced that we are getting the
    proper results.
        One question I have, as I started looking into this, is,
    the cost of college has exploded. Depending on what numbers you
    look at, somewhere since the mid-1960s to 1970s, the cost of
    college has increased somewhere between 2.5 and 2.8 times the
    rate of inflation. Now, think of that. What is different about
    what colleges and universities spend their money on that their
    costs--tuition, room, board--would increase 2.5 to 2.8 times
    the rate of inflation? That is a legitimate question to ask.
        Then my final question is: Student debt has exploded in
    this country. Again, I started out, about $95 billion, $100
    billion 20 years ago, now about $1.3 trillion in total. About 7
    percent of our national debt. Now, is that a good thing, $1.3
    trillion? And why is that? How is that related to the explosion
    in the cost of college.
        We have some pretty good witnesses here that will address
    that, and the second panel with the representative from the
    Department of Education. Hopefully we can get some answers to
    those questions, or at least point us in the direction for
    where we need to ask additional questions and get some
    additional data.
        With that, I will turn it over to our Ranking Member,
    Senator Carper.

                  OPENING STATEMENT OF SENATOR CARPER

        Senator Carper. Thanks, Mr. Chairman.
        To our witnesses, welcome. For those of you who came all
    the way from Athens, Ohio, a special warm welcome. That comes
    from a Buckeye, an Ohio State guy. Happy to see you, Dr.
    Vedder. George Voinovich, one of our former colleagues, former
    Governor of Ohio, spends a fair amount of his time there. I
    think he was an undergraduate and went to law school at Ohio
    State. But he is one of our favorites here. We miss him every
    day. But it is great to see you. We welcome you warmly.
        Mr. Carey, I do not think we have met before, but we are
    happy you are here and very much look forward to your
    testimony, as well as that on our second panel of Ted Mitchell,
    Under Secretary of the U.S. Department of Education.
        As it turns out, these are issues that I am hugely
    interested in. I said to our Chairman, we have a working group
    working on international tax reform in the Finance Committee
    that I am a part of, and we are meeting literally at the same
    time. And I want to be here, and I want to be there. We have
    not figured out how to do cloning yet, and when we do, I will
    be able to be in two places at once. But I will be in and out,
    and it is not because I am not interested, but it is trying to
    do--and we are all busy, so it is trying to do that.
        Let me just say that the role of government is diverse. We
    are responsible for any number of things--homeland security,
    defense around the world--any number of things--the environment
    and so forth.
        One of the things that we are responsible for is creating a
    nurturing environment for job creation and job preservation. A
    nurturing environment for job creation and job preservation.
        I was born in West Virginia. My grandfathers made their
    living off the strength of their backs. My sister and I and our
    siblings make a living more out of the strengths of our minds.
    We do manual labor sometimes, but not like my grandfather, my
    grandparents did. And it is important that we have strong minds
    and that we start early on.
        I like to focus on what works and do more of that. I was
    privileged to be Governor of Delaware for 8 years and Chairman
    of the National Governors Association (NGA). I also chaired
    something in the NGA called the ``Center for Best Practices,''
    and what we focused on was find out what works and do more of
    that. And among the things we found out what works in raising
    student achievement is making sure that parents understand and
    are prepared to be parents and to be a partner with their sons'
    and daughters' teachers and educators. We focused on early
    childhood development, very early childhood, 2, 3, 4, 5 years
    of age, fully funded Head Start. George Voinovich and I were
    the first Governors to fully fund Head Start in our States
    using State money to supplement the Federal money, which was
    inadequate.
        Another key is having teachers who are good at what they
    do, know their subjects, love kids, love to teach, and that is
    critically important, and the way we train them and prepare
    them to work in any wide range of classrooms and schools and
    different kind of demographics.
        Another key is enlightened, capable school leadership. You
    show me a school that has a lousy principal, and I will show
    you a school that is not going to do too well. Show me a school
    that has a great principal, and I will show you a school that
    is on the way up. And the same is true of other school leaders
    within school districts.
        I think another key is having rigorous academic standards,
    what we expect kids to know and be able to do. And we are not
    smart enough--as smart as my colleagues and I are, we are not
    smart enough to figure out what kids ought to know and be able
    to do. But in our State, we just reached out to the private
    sector and we reached out to colleges and universities and
    said, ``What should kids know and be able to do in math and
    science and English and social studies? '' And we urged and
    encouraged our schools to align the curriculum with the
    academic subjects and then measure progress from time to time.
        I believe extra learning time is critically important.
    Senator Lankford over here, from Oklahoma, Senator Lankford may
    be able to learn faster than I am. I can still learn. I just
    might need more time. So what we do is in my State we try to
    provide extra learning time for those of us who need that extra
    time.
        There is any number of ways to raise student achievement,
    and those are some of them.
        I just want to say on the postsecondary side there is a lot
    we could talk about there. It has changed a lot. When I was a
    naval flight officer (NFO), my squadron's home station was near
    Menlo Park, California, Moffett Field Naval Air Station, when
    we were not overseas. And I think the tuition at the University
    of California colleges was free. It was essentially free in the
    late 1960s, early 1970s. That has changed enormously. Our
    youngest boy grew up in public schools in Delaware, but he went
    to William and Mary, a public school in Virginia, and we paid--
    I do not know--$45,000 a year to help send him there. The State
    support dried up in Virginia and States across the country. And
    one of the reasons why the Feds have stepped in to help a
    little bit is because the States have really drawn back.
        The other thing, I think we are starting to witness a sea
    change in the way we teach postsecondary, and a lot of that
    involves the Internet and distance learning. Some of it is done
    very well; some of it is not done well at all. And what we have
    to do is we go through this period of time to figure out what
    works and do more of that.
        The last thing I will say is this: I spent 23 years of my
    life, 5 on active duty in a hot war in Southeast Asia, another
    18 right up to the end of the cold war as a naval flight
    officer. And my dad, my parents, my grandparents, they were
    like World War II vets and Korean War veterans and so forth. In
    1952, we found that the GI bill was being squandered in some
    cases with money that went to enroll people in for-profit
    colleges or postsecondary training. We created a law that was
    called ``85-15,'' and the law that at least 15 percent of those
    enrolled under the GI bill at for-profit schools had to be non-
    veterans. If the school could not attract at least 15 percent
    of their students from non-veteran sources, they were not going
    to get the GI bill students.
        We changed that in 1992, and we changed it from enrollees
    to the standard of revenue, so that at least 15 percent of a
    school's revenues had to be from non-Federal sources. But it
    was only Title IV stuff. Only Title IV stuff. And now what
    happens is we have
    for-profit colleges and universities where 100 percent of the
    revenues--100 percent of the revenues--are coming from the
    Federal Government. That is not a good situation. It is
    something that we need to change, and my hope is that we will.
        I could go a lot longer, but my time has expired, and I
    thank you for your patience. Thanks and welcome again.
        Chairman Johnson. Thank you, Senator Carper.
        It is the tradition of this Committee to swear in
    witnesses, so if you would both rise and raise your right hand?
    Do you swear the testimony you will give before this Committee
    will be the truth, the whole truth, and nothing but the truth,
    so help you, God?
        Dr. Vedder. Yes.
        Mr. Carey. Yes.
        Chairman Johnson. Please be seated.
        Our first witness is Dr. Richard Vedder. Dr. Vedder is the
    Edwin and Ruth Kennedy Distinguished Professor of Economics at
    Ohio University, an adjunct scholar at the American Enterprise
    Institute, and Director of the Center for College Affordability
    and Productivity. I like that word. He has written several
    books and over 200 articles on economics and public policy. Dr.
    Vedder.

    TESTIMONY OF RICHARD K. VEDDER, PH.D.,\1\ DIRECTOR, CENTER FOR
                 COLLEGE AFFORDABILITY AND PRODUCTIVITY

        Dr. Vedder. Thank you, Chairman Johnson and Members of the
    Committee. My oral remarks, by the way, today are extended in a
    statement that I submitted for the record.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Dr. Vedder appears in the Appendix on
    page 53.
    ---------------------------------------------------------------------------
        In assessing the impact of the Department of Education on
    universities, I think some historical perspective is in order.
    Looking at higher education from 1950 to 1980, before we had a
    higher education department, enrollment quintupled, going from
    2.4 million to 12 million. Whereas, in 1950, barely 6 percent
    of Americans over 25 had at least 4 years of college, by 1980
    that proportion had nearly tripled to 17 percent.
        College ceased to be mainly for the elite well before we
    had a Department of Education or massive Federal student loan
    and grant programs. Indeed, the rise in the proportion of adult
    college graduates is by some measures even less today in the
    era of the Department of Education than in the preceding
    period.
        Or look at research. From 1972 to 1979, right before the
    Education Department was created, 40 percent of the Nobel
    Prizes awarded were to Americans or persons associated with
    American universities. Americans dominated the world of
    research long before the Department of Education existed.
        So what are the unique strengths of American higher
    education? The 50 States have pursued different approaches to
    educational excellence, and the diversity of choices has made
    American universities I think more creative and competitive.
        California, for example, pioneered an extraordinarily
    comprehensive three-tiered system, the elite research-oriented
    University of California that Senator Carper talked about just
    a minute ago, an affordable State university system and many
    junior colleges.
        By contrast, New Hampshire, with lower taxes and a rich
    tradition of private education, also has a high proportion of
    college graduates, but with an altogether different but still
    effective approach.
        I think this contrasts somewhat with the blandness of much
    of European higher education where centralized ministries of
    education stifle diversity and intercollegiate competition. Our
    Department of Education's quest for uniformity inevitably, I
    think, dilutes somewhat the diversity our Federal system
    provides.
        While America still maintains its research dominance and
    the abundance of foreign students suggests we still have a
    superb international reputation, there are many disturbing
    signs. Let me mention six.
        First, in the 40 years prior to the Department's creation,
    American tuition fees, adjusting for inflation, rose roughly
    one percent a year. In the last 35 years, the rate of tuition
    increase has more than doubled, to about 3 percent a year. I
    think this is largely a function of a dysfunctional Federal
    student financial assistance program.
        Second, a smaller proportion of recent college graduates
    are coming from the bottom quartile of the income distribution
    now than at the time of the creation of the Department of
    Education.
        Third, studies by Arum and Roksa and others suggest
    graduating seniors today have only slightly better critical
    reading and writing skills than freshmen, but get far higher
    grades than in the era before the Department of Education. I am
    in my 51st year of teaching, by the way, at a university.
    Literacy of college graduates is declining by some measures.
    Students spend less than 30 hours a week on their studies
    compared with 40 hours around 1950.
        Fourth, the accreditation system overseen by the Department
    is a disaster. It provides almost no useful information to
    consumers, does little to eliminate poor-quality schools.
    Accreditation promotes anticompetitive behavior, increases
    barriers to useful innovation, and is rife with conflicts of
    interest.
        Fifth, some regulatory efforts of the Department are
    intrusive and sometimes even violate basic American principles
    of due process. The Department's Office for Civil Rights
    Regulation on the college handling of sexual harassment cases,
    for example, has almost certainly led to unjust Kafka-esque
    treatment of some of the accused, resulting in condemnation
    from persons from all over the political spectrum, from, the
    Harvard law faculty, for example. The Free Application for
    Federal Student Aid (FAFSA) form required for student aid is
    byzantine in its complexity, keeping many low-income persons
    from even seeking financial assistance.
        Sixth, not only do over 40 percent of those entering
    college not graduate within 6 years, nearly half of the
    graduates become underemployed, taking jobs historically filled
    by high school graduates, the point that Senator Johnson
    alluded to in his opening remarks.
        Thus, I doubt on the whole that the Department of Education
    has improved the American higher education environment. In
    1979, the bill creating the Department cleared the House
    Education Committee on a 20-19 vote and was opposed not only by
    most Republicans and seven Democrats on that Committee, but
    also by the New York Times, the Washington Post, the AFL-CIO,
    and leading Democratic intellectuals like Senator Daniel
    Patrick Moynihan. The modern history of higher education
    suggests to me that this opposition was probably largely
    justified.
        In conclusion, the data has been mentioned informally and
    formally as a problem. One service the Department should
    provide is good information to students and policymakers. Even
    here it has often floundered, only recently finally issuing its
    College Scorecard--which I like very much, by the way--but
    which left out, some colleges--even left out colleges like
    Hillsdale, Grove City, Patrick Henry, and Christendom. And we
    have several other problems associated. Pell grant data, I have
    challenged the Department for years to tell us what percentage
    of college graduates on Pell grants graduate in 6 years, and
    they have had data problems. But, in short, the overall record
    in my mind is somewhat mediocre.
        Thank you very much.
        Chairman Johnson. Thank you, Dr. Vedder.
        Our next witness is Kevin Carey. Mr. Carey directs the
    Education Policy Program at the New America Foundation here in
    Washington, D.C. He is a contributing writer for The Chronicle
    of Higher Education and edits the annual Washington Monthly
    College Guide. Mr. Carey.

        TESTIMONY OF KEVIN CAREY,\1\ DIRECTOR, EDUCATION POLICY
                          PROGRAM, NEW AMERICA

        Mr. Carey. Thank you, Chairman Johnson, Ranking Member
    Carper, and Members of the Committee, on behalf of New America.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Carey appears in the Appendix on
    page 65.
    ---------------------------------------------------------------------------
        Why has college become so expensive? Unlike Dr. Vedder, I
    would not put primary blame on the existence or actions of the
    U.S. Department of Education. Certainly over the last 8 to 10
    years, much of the expense of higher education has been driven
    by disinvestment at the State level. States have reacted to the
    2008 recession. They have disproportionately cut funding for
    public universities, and many public universities have
    increased tuition as a result.
        I do acknowledge, however, that is an incomplete answer to
    this question. It does not take into account increasing prices
    among private colleges, and it is the case that over the long
    term, colleges have increased tuition in good times, in bad
    times, and more or less all times in between. And in the end, I
    think they did that mostly because they wanted to and because
    they were able to.
        It is not a mystery why colleges would want to raise
    tuition. All institutions like to have more money. The real
    question is why were they able to. Why were colleges able to
    increase tuition at the rate that Dr. Vedder described? And I
    think we could just start with some basic math.
        If we go back to 1972, which was really the founding of the
    modern system of Federal financial aid, there were roughly
    1,400 public 2- and 4-year colleges in the United States, and
    there were about 9 million college students.
        Since then, we have increased the number of public colleges
    by about 11 percent and increased the number of students by 111
    percent. So we have many more students competing for spots in
    the same number of institutions, at the same time that we have
    experienced seismic changes in the nature of the American labor
    market. The blue-collar economy collapsed in many regions. So
    even as population increased, more students were driven into
    higher education, but we had only the same number of
    institutions in order to educate them. So supply and demand,
    much more demand for a service that became much more valuable,
    and the same number of institutions giving them much more
    pricing power in the higher education market.
        A good question is: Why didn't new institutions spring up
    to meet that demand? I agree with Dr. Vedder that accreditation
    has a lot to do with that. To legally offer college degrees and
    receive Federal financial aid, colleges must have
    accreditation. The accreditation process is managed by
    associations of existing colleges. Standards for accreditation
    are based on how existing colleges operate--the kinds of people
    they hire, the degrees they offer, the way they manage their
    libraries, departments, and programs.
        Accreditation defines away the possibility of radical
    innovation and productivity increases in higher education.
    Imagine if, back in 2007, the Apple corporation had to get
    permission from a trade association of existing mobile phone
    manufacturers in order to sell the iPhone. That is how higher
    education works today.
        Colleges are also subject to little or no market discipline
    when it comes to their core mission of teaching undergraduates.
    There is very little information about how much students learn
    at individual colleges, and as a result, the market for higher
    education is not driven by the basic value proposition of
    benefits weighed against costs.
        Instead, colleges compete with one another for status,
    based on expensive things that have little to do with student
    learning, such as intercollegiate athletics, research prowess,
    Olympic-caliber gymnasiums, and luxury dormitories.
        College administrators do not sit down every year and
    determine how much it costs to provide students with a high-
    quality education and set tuition accordingly. Instead, they
    sit down every year and determine the largest tuition increase
    that the private market and the political economy can bear and
    then charge that much and spend the money on the things they
    care about. And, increasingly, it seems the things that they
    care about are themselves. The ranks of college administration
    have grown over time. The ratio of administrators to students
    has increased, at the same time that the percentage of classes
    taught by tenured professors has declined. Many more classes
    are taught by adjunct professors now, not tenured professors.
        Higher education has also, uniquely among major
    information-centered industries, avoided almost entirely the
    disruptive pressures of information technology (IT). Today,
    most colleges offer some form of hybrid or fully online
    classes, and millions of students are enrolled. Yet colleges
    charge the same tuition for these classes as for in-person
    classes, even though online classes are much less expensive to
    provide at scale.
        What, if anything, can the U.S. Congress do about this?
        I think many Federal lawmakers are appropriately cautious
    about interfering with an industry that has long been seen as a
    global leader and which has traditionally been the
    responsibility of State governments and private markets.
        However, I would argue there are some important things that
    only the Federal Government can do. And now that the U.S.
    Department of Education is the single biggest financier of
    higher education, providing $165 billion a year in grants and
    Federal loans, the question is really not whether there will be
    a strong Federal role in higher education. There is one. The
    question is whether that role will continue to be limited to
    providing blank checks to organizations that are steadily
    pricing the middle class out of higher education, and thus the
    American dream.
        The Federal Government should not tell colleges how to
    teach. It can, however, expand the definition of who gets to be
    a college and help consumers make better choices about which
    colleges to attend.
        Yet during the last reauthorization of the Higher Education
    Act, in 2008, language was included at the behest of industry
    lobbyists that actually prevents the U.S. Department of
    Education from modernizing its information system and providing
    information to students who are most likely to move among
    different colleges during their careers. This shields colleges
    from accountability, and I believe that provision should be
    repealed.
        The Federal Government should also expand its longstanding
    commitment to university-based research to include more
    research about universities. We spend billions of dollars to
    develop cutting-edge technologies and virtually nothing to
    evaluate the effectiveness of a hugely subsidized industry that
    is crucial to our Nation's future economic and civic
    prosperity.
        Finally, we should create more room for higher education
    innovation by allowing entrepreneurs to compete on a level
    financial playing field with established colleges. In the long
    run, the higher education cost problem cannot be solved with
    price controls and public subsidies alone. We also need greater
    productivity--I also like that word--through the creation of
    new organizations built from the ground up with the growing
    capacities of information technology in mind.
        That does not mean ignoring consumer protection. Many
    students have been defrauded by organizations in recent years.
    But this is really not a matter of too much regulation or too
    little regulation but the wrong kind of regulation. All of the
    worst colleges were operating inside of the accreditation
    system and taking advantage of that system's inattention to
    student learning.
        Instead, the Federal Government should experiment with
    giving public, nonprofit, and for-profit organizations that may
    look nothing like traditional colleges equal access to Federal
    funds, in exchange for being held rigorously accountable for
    outcomes defined not by government bureaucrats but by employers
    and members of the academy.
        Without such changes, colleges will continue to increase
    tuition, because they want to, and because they can.
        Chairman Johnson. Thank you, Mr. Carey. Let me go right to
    you. You opened up talking about the reduction in State support
    of public institutions, which, no doubt about it, that
    contributes. Do you have a dollar figure on that in terms of
    how much has been withdrawn? Because that does not affect--and
    I think your testimony stated this, too. It does not affect the
    tuition rise in private institutions, correct?
        Mr. Carey. So there was a substantial disinvestment--I
    would like to go back and give you the exact numbers. There was
    an absolute decline in funding in the years after the
    recession. Some States have begun to fill that gap in, but many
    States have not.
        Chairman Johnson. That does not explain the rise in cost of
    tuition and the cost of college in private institutions.
        Mr. Carey. It does not, no.
        Chairman Johnson. Do you have a relative increase in
    tuition and the cost of college between private and public?
        Mr. Carey. They have been roughly comparable. They are
    starting from different baselines, so a percentage basis and an
    absolute basis, not the same. Public institutions have probably
    increased their tuition more since the recession, but private
    institutions were charging more to begin with.
        Chairman Johnson. OK. It certainly describes the price
    pressure on public institutions, but it does not at all--
    something else is at play with private institutions, and,
    again, you are talking about the supply and demand ratio.
        Mr. Carey. Yes.
        Chairman Johnson. So I think it is pretty stark. The supply
    has gone up about 14 percent, and the demand has gone up 111
    percent. That is going to put pricing pressure on any system.
    Then your conclusion was because of the accreditation process
    you have certainly limited--you have barriers to entry to
    increase the supply.
        Mr. Carey. Yes,
        Senator Carper. Before you answer, could I just ask--we
    started a vote, I believe, and we are about 11 minutes into the
    vote. Do you want me to run and vote and----
        Chairman Johnson. Sure.
        Senator Carper. Then we will play tag team. This is how we
    do it here.
        Chairman Johnson. Are you familiar with the study from the
    Federal Reserve Bank of New York that is really kind of
    studying the increase in colleges, college costs?
        Mr. Carey. Yes.
        Chairman Johnson. So their conclusion, as best as I can
    interpret it, is that for every dollar that the Federal
    Government has poured into higher education, tuition has
    increased 65 cents. You are familiar with that conclusion?
        Mr. Carey. There is an active debate among academic
    economists about the relationship between public--Federal
    subsidies and prices. I think broadly speaking there probably
    is one, but it varies quite a bit, depending on which part of
    the industry and the sector we are talking about, public versus
    private, for-profit versus nonprofit, elite versus non-elite.
        Chairman Johnson. I will acknowledge it is complex. Let me
    just throw out some numbers here for you, because I was
    intrigued by that result, again, looking for why is college so
    much more unaffordable. We all want access to higher education,
    but if you make it unaffordable, you actually decrease access.
        So I took a look at since 1970 how much money the Federal
    Government has poured into higher education, and it totals
    about $2.1 trillion in total. That is in grants and student
    loans. If you take 65 percent of that, that is about $1.37
    trillion. Now, is it a mere coincidence that the outstanding
    student loan debt is about $1.3 trillion? I am asking--and,
    again, I am an accountant. I am taking a look at these things.
    It seems like possibly the Federal Government poured $2.1
    trillion into higher education. Those institutions obviously
    sucked that money up, again, felt pretty unrestrained in terms
    of tuition increases and who is left holding the bag is our
    young people with $1.3 trillion of student loans.
        Mr. Carey. During that time there has been a substantial
    increase in the number of people going to and graduating from
    college, and so part of that money I think was spent providing
    that access and giving primarily lower-income people access to
    higher education who would not have had it otherwise----
        Chairman Johnson. Which, of course, we all agree with that
    goal. But, Dr. Vedder, you were talking about since the
    Department of Education the percentage of lower-income
    individuals actually going into college or getting degrees has
    actually leveled off or declined slightly.
        Dr. Vedder. That is correct, as I read the evidence. And
    that goes back, by the way, to about 1970 or 1972 when Mr.
    Carey was talking about. And the numbers that come to mind is,
    I think, roughly 12 percent of recent graduates in 1970 or even
    1980 were from the bottom quartile of the income distribution.
    Now it is about 10 percent.
        So my take on that, since you are interested in this,
    Senator, is that the rise in tuition fees and everything that
    has accompanied the student loan phenomenon and Pell grants, et
    cetera, has pushed sticker prices up so much, it has caused
    low-income people disproportionately to just say, ``College is
    too expensive for me.'' Now, that may be wrong. It may be
    incorrect.
        And then we also say, ``Oh, by the way, you want to go? You
    got to fill out this 120-question questionnaire that is worse
    than the income tax form to fill out.'' That scares away low-
    income people disproportionately to upper-income people who can
    figure out a way to get around that or have their accountant
    fill out the form.
        So I think the great goal of these programs from day one--
    Senator Pell and all of them--let us provide greater access.
    And, there are many other--Kevin will point out there are many
    other things going on at the same time. The income
    distributions are changing, everything else is going on. But I
    cannot see how these programs can be viewed as a success in
    providing access. I just simply do not see it.
        Chairman Johnson. Let me state we all share the same goal.
    Education has value, and we all want every American to have the
    opportunity to access education so they have the tools to lead
    a successful and productive life. That is a goal. We have to
    really take a look at how much money the Federal Government has
    expended, what type of mandates, what type of control do they
    put over the system, when prior to the Department of Education,
    according to Dr. Vedder's testimony, things certainly were not
    worse; if anything, potentially a little bit better; and we had
    a State-run system that was actually working pretty well.
        I would kind of like you to address just that basic premise
    from Dr. Vedder's testimony, Mr. Carey.
        Mr. Carey. Well, the----
        Chairman Johnson. In other words, do you think there has
    been a marked improvement in terms of higher education based
    on--since the Department was stood up?
        Mr. Carey. Dr. Vedder cited some, I think, correct and very
    worrisome statistics about the amount that students are
    learning in higher education. There are international
    comparisons that are, frankly, just as grim. I think that we
    have succeeded as a Nation both at the State--because of a
    combination of both State and Federal programs providing more
    access to higher education for people who could not afford to
    have it otherwise. It is why we have one of the highest
    percentages of people with a bachelor's degree in the world,
    although other countries have been catching up with us. So in
    that sense, I think the programs have been a success.
        What we have not done is design programs that provide
    incentives for institutions to restrain their tuition and to
    focus on student learning at the same time.
        Chairman Johnson. The marketplace provides those types of
    restraints. I am not sure government control has ever proved
    successful at restraining prices.
        I do want to talk about what I think is quite troubling.
    There was a Northeastern University study a couple of years ago
    that came out and said that of recent college graduates, close
    to 50 percent are either unemployed or underemployed--in other
    words, with a job that required little or no college education
    whatsoever. The Federal Reserve Bank of New York just came out
    with a similar study saying about 44 percent. Dr. Vedder, you
    were talking about that in your testimony.
        Dr. Vedder. I have done one of those studies too. If you
    want one, I will give you another one.
        Chairman Johnson. So your conclusion is, and why?
        Dr. Vedder. Well, there are different sources of data, and
    there are different--what is the skill requirements for a given
    job? There are honest differences of opinion, and I think
    legitimate in some cases, about what is required. But there is
    no question we have credential inflation in the United States.
    We now have baristas who have college degrees; 15 to 20 percent
    of taxi drivers now have college degrees; in 1970, less than 1
    percent. We have 115,000 janitors with bachelor's degrees in
    2010, according to the census data. So we have huge increases
    in people. You can make a decent case that we are overinvested
    in higher education, that we are putting too many resources
    into getting people to get formalized 4-year degrees. Now, that
    is not necessarily to say they should not be getting something,
    some sort of training. Maybe more of them should go to welding
    school. Welders make more money than anthropologists. And
    maybe, you could make a case that we are misinvesting our money
    or even overinvesting our money, because guidance counselors
    tell everyone, ``You have to go to college.'' President Obama
    tells us we want to increase the proportion with degrees. The
    Lumina Foundation--that is what they are all telling us. But
    what is happening to the graduates? How is it helping society?
    And now a bar owner can advertise, ``I will only accept
    applications from college graduates for a bar tender's job.''
    You do not need a bachelor's degree to mix drinks. One in
    chemistry might help for some of the more exotic drinks, I
    suppose. But you do not really need a degree. So we have added
    this on.
        And, of course, there is another dimension to college, and
    there is a socialization dimension to college. There is also a
    notion that college is more than about vocational things. It is
    about developing virtue and so forth. But I do not even see the
    evidence there that there has been an enormous improvement,
    say, in civic virtue, civility, these other things that
    allegedly college graduates have.
        I am in my 51st year of teaching. I am leaving here early,
    and I demanded you move the hearing up to 9:30 so I can get
    back to students. I am on the firing line still at age 74--and
    not getting paid for it, by the way--because I think it is a
    calling. It is an important calling. But I do think we have
    been terribly inefficient. I agree with everything Kevin said,
    virtually everything he said. All these barriers we put up to
    new forms of innovation are there, all the failure to use the
    Internet. Teaching is the only profession, with the possible
    exception of prostitution, in which there has been absolutely
    no productivity advance in the 2,400 years since Aristotle
    taught Socrates, and Aristotle, too, taught the youth of
    Athens. So we have not taken advantage of technology. We have
    conflicts of interest--Kevin talked about this; I talked about
    this--in the way we decide who can enter the field. The supply
    constraints that he mentioned and that you picked up on are
    partly predicated on that. That is something that although they
    are technically done by a private accrediting association, the
    Department has a very strong role to play in, and I think I
    would agree with Mr. Carey that that is an area we ought to----
        Chairman Johnson. I can certainly attest to the fact,
    because I have gone all around the State of Wisconsin for the
    last 4\1/2\ years and visited manufacturing sites, and I come
    from a manufacturing background myself, somebody who has had a
    very difficult time for the last 20, 25 years hiring people for
    manufacturing. There is not one manufacturing plant I visited
    in Wisconsin that can hire enough people. Not one. So there is
    demand. Those are good-paying jobs as well as oftentimes those
    manufacturers will pay for education so our kids do not have to
    put themselves into what is on average--and, by the way, is
    this a correct figure, about $29,000 on average is what
    students are leaving college with?
        Mr. Carey. Among those who borrow, yes.
        Dr. Vedder. Yes, among those borrowing.
        Chairman Johnson. I really want to hone in on this: 40 to
    50 percent of recent college graduates that are either
    unemployed or employed in positions that require no college
    education whatsoever. How much of that is due to the fact that
    the degree programs are not matching what employers are looking
    for? On the one hand, if you need welders, you need
    manufacturers, You are already potentially overeducating people
    and causing them to go into debt. The way I always refer to it,
    the fill-in-the-blank studies degrees, again, have value,
    higher thinking, liberal arts, I am not denigrating that, but
    in terms of the evaluation or the metric of matching outcomes
    with employer and societal needs, how are we doing along those
    lines? I would like to hear your thoughts on that, Mr. Carey.
        Mr. Carey. Well, the skills requirements for job categories
    have changed a lot over time, so, manufacturing used to be a
    semi-skilled job, but now it requires a lot of advanced
    training. You have to understand----
        Chairman Johnson. Just hang on here.
        Mr. Carey. Yes.
        [Pause.]
        Chairman Johnson. I am getting close to the end of the
    vote. I was hoping somebody would come back to keep this thing
    going, but I may have to put this in recess for a while, or a
    pause. What is the proper term?
        [Pause.]
        A pause? OK. Let me go vote. When somebody else comes in,
    they can start asking the questions. Thanks.
        Mr. Carey. Thank you, Mr. Chairman.
        [Recess.]
        Senator Carper [Presiding.] Well, thanks for waiting. We do
    this all the time, trying to keep things moving, and we
    appreciate your bearing with us.
        Thank you both for being here. Fifty-one years, that is
    extraordinary. Extraordinary. We thank you for all of those. If
    you ever see George Voinovich, give him my best.
        Dr. Vedder. I see him frequently, and he is a great public
    servant, and he is a great graduate of my university.
        Senator Carper. There you go. But I want to start and, Dr.
    Vedder, I am going to ask you a question. One of the questions
    I like to ask of witnesses, I am always looking for common
    ground. Always looking for common ground. And I thought you
    both said a lot of things that were important, correct, and I
    want to ask you, Dr. Vedder, to sort of like--not spell check
    but some of the things that Mr. Carey said, especially toward
    the end of his testimony, that I just want to ask you to react
    to some of what he said. He said basically we write out a blank
    check, and we do not ask for much in terms of results. Would
    you just kind of react to that for us, please?
        Dr. Vedder. Yes. I very much agreed with almost everything
    that Mr. Carey said. We were not carbon copies of one another
    because he picked up on other things that I did not.
        Senator Carper. One of the things that I do not think you
    agreed on is the role of the Federal Government funding, Pell
    grants and so forth, you all do not agree that is----
        Dr. Vedder. Well, I think we might have some differences
    of----
        Senator Carper. But where do you agree, especially with the
    things----
        Dr. Vedder. First of all, on the information side, that is
    one area where we agree. There is a lot of things that go on in
    education. We know appallingly little about what kids actually
    learn during the course of their college years, and if we do
    know any more, we have some generalized national information.
    We do not know the difference between the learning at the
    University of Delaware vis-a-vis the Iowa State University,
    since Senator Ernst just walked in the room. And we do not
    know. Do the kids at Iowa State learn more during the course of
    their years in college than the students at the University of
    Delaware? We have no--that is a fairly fundamental question. We
    do not know the answer to that. And getting the answer is
    difficult. It is not easy, and there is some disagreement, how
    do you measure learning and so forth.
        But we are in the business of grading students all the
    time. We are evaluating students all the time. Why can't we get
    better assessments of what the colleges are doing? And I think
    Kevin and I in general are in agreement with that.
        The area of accreditation, both of us hit pretty hard on
    this, that we do not think--I should not speak for Mr. Carey,
    but I think we would both very strongly agree that the
    accreditation system, while it has a legitimate purpose for
    certain, is not working as well as it should. Does it really
    weed out the bad schools? No. Is there a conflict of interest
    inherent in it? When the colleges themselves more or less
    regulate themselves, and to get accredited, you have to do what
    the other colleges do more or less, with some modification.
        Senator Carper. I am going to ask you to wrap up because I
    do not have a lot of time. Just finish your sentence and then I
    am going to come back to Mr. Carey. Go ahead.
        Dr. Vedder. Yes, the last thing I would say, along with
    him, the incentive systems within the academy to be efficient
    and to be productive are very, very limited.
        Senator Carper. OK. Thanks for that.
        Mr. Carey, if we take nothing away from your testimony
    today, take nothing away but maybe two or three points,
    including some of the stuff you said at the end, just hammer it
    home, please.
        Mr. Carey. Sure. The Federal Government I think has an
    appropriate role in providing information about higher
    education to consumers. It is a national market, and so really
    it is the only body that can provide consistent data. In fact,
    just a couple of weeks ago, the Department of Education
    released earnings and loan repayment data for the very first
    time about every college and university in America. Very
    interesting information, some of it quite disturbing. Actually,
    a number of institutions where many graduates earn no more than
    high school graduates do; many institutions where very few
    students are able to repay their loans on time. I think that is
    an appropriate role.
        Senator Carper. And when you look at it, is there an
    inordinate--for those students who are unable to pay their--
    graduate with a degree, or maybe without a degree, if they are
    unable to pay their loans on time, in terms of like public
    schools, private schools, for-profits, is there any
    differentiation there that you are aware of?
        Mr. Carey. Certainly the loan repayment rates are worse in
    the for-profit industry.
        Senator Carper. Why do you suppose that is? And it is not
    just by a little bit.
        Mr. Carey. Sure. There are, I think, a significant number
    of for-profit colleges that, first of all, they enroll--
    because, as you had said earlier, many are almost entirely
    dependent on the Federal financial aid system for revenue, they
    enroll students who are eligible for financial aid who are, by
    definition, lower-income students. So they enroll students who
    have very little money. They charge prices that are much more
    expensive, often, than public institutions or even private
    nonprofit institutions. And some of them--not all, but I think
    a significant number--are offering degrees that
    do not have a lot of value in the job market. So students just
    cannot--they do not get paid enough to pay their loans back.
        Senator Carper. OK. We have this law on the books that I
    mentioned before--it used to be 85-15; it goes back like sixty-
    some years--where scam artists, for-profit schools were taking
    advantage of the GIs and the GI bill, and we established the
    85-15 rule that said 15 percent of enrollees in a for-profit
    school have to be not paid for by the Federal Government. And
    then we upgraded that, I think 85 percent of the--15 percent of
    the revenue of these for-profits had to come from non-Federal
    sources. And then we made that 90-10 so that 10 percent of a
    for-profit school's revenues had to come from, non-Federal
    sources. But then we find out that there is a loophole that
    allows the schools to take students on the GI bill, take
    students that are on active duty, and that does not count
    against the 90 percent. So some schools have 100 percent of
    their moneys coming from Federal sources. What should we do
    about that?
        Mr. Carey. I believe it is a loophole. I believe some
    colleges actively recruit members of the military because every
    dollar of the GI bill counts in the 10 percent. So if you get
    $1 in military--in GI bill money, you can go and get $9 more
    from the regular Title IV system. I think it has led to abuses.
    I think it contravenes the spirit of the 90-10 and previously
    85-15 rule, which says that colleges ought to be able to
    convince someone to pay their own money for college, and if
    they do not, it says something, I think, that we ought to take
    a look at. So I think it is a loophole. I think it should be
    closed.
        Senator Carper. Thanks so much.
        I think, Senator Ernst, you are next. He asked for you to
    defend Iowa State.
        Mr. Carey. I am also an Ohio State graduate.

                   OPENING STATEMENT OF SENATOR ERNST

        Senator Ernst. Well, fantastic. We could go around and
    around all day, couldn't we?
        Thank you, Senator Carper, very much. Gentlemen, thank you
    for being here today.
        First, I want to just talk a little bit about financial
    literacy of those students that are going into higher
    education. When I was back at Iowa State University, I had a
    great friend who was receiving a Federal student loan. He had
    gotten his loan check in the mail, and in our conversation, he
    stated, ``Oh, I am so glad I got my check today. Now I can pay
    my girlfriend's rent.'' I was confused. I did not think that is
    what the Federal student loan program was for.
        So, anyway, I think there are a lot of--and I do not want
    to call them abuses. I just do not know that students are
    adequately prepared when they get those Federal student loan
    dollars. Maybe they should know that this is for books and
    tuition and your own use toward higher education.
        But just for both of you gentlemen, in your opinion, how
    can we improve the ways that we are educating those that are
    receiving these loans or those that are potential borrowers
    about the risks of overborrowing, which is oftentimes what
    happens, or using borrowed funds inappropriately? How can we do
    better in that area? Any thoughts?
        Dr. Vedder. Well, it is an information problem, and the
    College Scoreboard which was recently put out is a step in the
    right direction. It tells for each college the amount of
    borrowing that students are doing. It says what percent have
    even failed to make a single dollar payment on their loan. Some
    of that provides information to students in general,
    particularly in terms of selecting a college. I have often
    thought--my wife is a high school guidance counselor in a low-
    income area and pushed very hard for years to get more and more
    kids to go to college. I think that is an admirable thing to
    do. But I think sometimes we give unrealistic information to
    students. We do not tell students that 40 percent of the people
    that enter college do not graduate in 5, 6 years. We do not
    tell them the risks. We tell them the benefits. You will earn
    an extra $1 million over a lifetime, which is what it says on
    the Department of Education website today, if you go on and
    look at it right now. I can show it.
        Senator Ernst. Wow.
        Dr. Vedder. You earn $1 million more if you go to college.
    ``Oh, gosh, I want to earn $1 million more.'' It does not say
    there is a 40-percent probability based on national evidence
    you will not get through college in 6 years, not 4. It does not
    even--the colleges do not tell you, ``You are not going to
    graduate in four. There is a 40-percent chance you will
    graduate in four, but a third of the kids who graduate take
    five or six. It does not tell you that. They do not tell you
    that stuff.
        The colleges provide a rosy scenario, and it is the duty of
    others, I think, to provide information, including the magazine
    rankings. I do the rankings for Forbes magazine for colleges
    and universities. I think we provide a little bit of a service
    in that way.
        But I think the risks associated with going to college are
    understated. The benefits are overstated. And as a consequence,
    we get people whose expectations are dashed at the end. They go
    to school for a few years. Either they do not graduate, or they
    do graduate, or they graduate and then get a job working at
    Starbucks or Walmart, and they are having a heck of a time
    paying back, and they are living in---Arum and Roksa in their
    second book said 24 percent of recent graduates, 2 years, live
    in the base--well, I am not sure they live in the basement of
    their parents. They live in their parents' house. Sixty percent
    are still receiving financial aid from their parents 2 years
    after graduation. And that is not the way it is supposed to be.
    When you go to college, you do not expect to be relying on your
    parents after you graduate.
        Senator Ernst. Right, and I do think that we see a lot of
    that.
        Mr. Carey, do you have any thoughts?
        Mr. Carey. Yes, Senator Ernst. There is kind of a push and
    pull between making the Federal aid system kind of bureaucratic
    and rule-bound in a way that would constrain how students spend
    their money and making it open enough and giving students
    choices, and they might not all make the right choices. So I
    think that is kind of a tradeoff we have to wrestle with.
        One thing we could do, right now colleges bear none of the
    risk of students defaulting on their loans, because they get
    the money up front. As we found out recently, there are
    hundreds of institutions where 5 or 7 years after graduation
    the majority of students have, as Dr. Vedder said, paid none of
    their loans back, they have either defaulted or they are only
    paying interest or they are sitting out there, the colleges
    have almost no risk at all. And so some people have proposed--
    and I think this is a good idea--to have colleges share in some
    of the downside risk of the loan program where, if their
    graduates default on the loans, they would be responsible for
    some percentage of that money. That might give colleges
    incentives to provide better counseling to students and make
    sure that they spend their money wisely, borrow enough money
    but not too much money.
        Senator Ernst. Certainly something to think about. I think
    financial literacy, whether it is part of the orientation
    process or even in high school, whether it is guidance
    counselors, some way we just have to instruct those young
    people that, proper use of those funds and this is for your
    education. But I think we can also--whoever that ``we'' might
    be, but a better understanding of also the programs that are
    offered through colleges or universities and what their outcome
    is with employment, hey, philosophy sounds great, but, what
    kind of job are you going to get in philosophy or world history
    or, civilization? I do not know.
        So there needs to be a realistic expectation on the part of
    those students what degree program they go into and then what
    the outcome of that degree will be. Maybe even a scale of this
    is what on average people in your field will make once they
    have secured employment, I think that is maybe perhaps helpful
    as well.
        Any closing thoughts?
        Mr. Carey. Well, I would just note that, only 2\1/2\ weeks
    ago, the Department of Education for the very first time
    published information about what the average earnings are of
    students who graduated from an individual college and the 10th
    percentile, 25th, 90th percentile, earnings for men, earnings
    for women. So we do now have the ability by matching
    information from the Federal student financial aid system with
    information from the Internal Revenue Service (IRS) to provide
    that kind of information to students. So we will have to see
    and train guidance counselors to use that, to provide that as
    students make choices.
        Senator Ernst. Very good. Thank you, gentlemen. I
    appreciate it.
        Thank you, Mr. Chairman.
        Chairman Johnson [Presiding.] Thank you, Senator Ernst.
        On a side note, and this is a very unscientific study, but
    my own focus group, every time I have asked a student who is in
    debt, I ask them, ``Did anybody ever--high school counselor,
    college counselor, financial counselor--talk about paying this
    loan back? '' And it will change now, and I am saying this
    publicly. To date, the answer has always been, ``No, nobody
    ever talked to me about it,'' which-- again, that is the kind
    of counseling we have to give.
        But, anyway, Senator McCaskill?

                 OPENING STATEMENT OF SENATOR MCCASKILL

        Senator McCaskill. Do either of you believe we should
    eliminate the Department of Education?
        Dr. Vedder. I think a case could be made to do that. I
    think higher education in America is no better today, maybe
    marginally worse than it was 34 years ago.
        Senator McCaskill. OK.
        Mr. Carey. I do not believe.
        Senator McCaskill. OK. The vast majority of the funding in
    the Department of Education goes to three programs: the Pell
    grants, funding for special education needs in K-12, and grants
    to local State school systems. Of those programs, should all
    three of them be eliminated, Dr. Vedder, if we eliminate the
    Department of----
        Dr. Vedder. I did not talk about program elimination. First
    of all, the hearing is on higher education. I do not favor the
    elimination of Pell grants. The other two programs are not
    higher----
        Senator McCaskill. And where should they be administrated
    if the Department of Education is gone?
        Dr. Vedder. First of all, I do want to eliminate some of
    the student loan programs.
        Senator McCaskill. OK.
        Dr. Vedder. I do. I want to be on record on that.
        Senator McCaskill. All right. Less than 10 percent of the
    education funding in this country comes from the Federal
    Government, and a huge amount of the money that is going into
    higher education, of course, or student loans, which even
    though many of them are not paid back, the majority of them are
    paid back. And in the process, these kids are getting a college
    education. Even less of the management decisions are being made
    at the Federal level. I would guess that the management
    decisions in higher education are being made, what would you
    estimate, 95 percent at the local level?
        Dr. Vedder. Well, I do not know how you define management
    decisions.
        Senator McCaskill. Well, we are not deciding to raise
    tuition, Dr. Vedder. The Federal Government is not.
        Dr. Vedder. What do you suppose, Senator, why do you
    suppose tuitions have gone up 3 percent faster than the rate of
    inflation? Why do you suppose----
        Senator McCaskill. Well, we have not even talked about
    tenure.
        Dr. Vedder [continuing]. Textbook prices are going up more
    than the prices of other books?
        Senator McCaskill. We have not even----
        Dr. Vedder. It is the financial aid system, Senator.
        Senator McCaskill. OK. So I understand that there is an
    argument and there is a huge debate about whether or not, as
    Mr. Carey indicated, a huge debate among accomplished
    economists about what is the driving cost. I guess the point I
    am trying to make is the Federal Government has such a small
    role in the policies and the financing of higher education, and
    if higher education is doing such a bad job, isn't that an
    indictment on the State and local and for-profit institutions
    as opposed to the Federal Government?
        Dr. Vedder. It is an indictment on the entire system. The
    Federal Government is only part of it. But I would not agree--
    --
        Senator McCaskill. A small part of it.
        Dr. Vedder. I would not agree with your characterization.
    $180 billion, $160 billion is sloshing around in student loans
    every year, and Pell grants, et cetera. That is not a minor
    part of a $400, $500 billion industry. Admittedly, it is loans.
    And you say, well, we do not count that because those are going
    to be paid back someday. But it has a disproportionate impact
    on what goes on.
        When the Department of Education tells colleges and
    universities what standards they will use on Judiciary hearings
    on sexual assault, for example, that is an interference by the
    Federal Government on local decisions.
        Perhaps you understated the role that the Federal
    Government plays----
        Senator McCaskill. Let us talk about sexual assault. My
    office did the first----
        Dr. Vedder. I am against it, by the way.
        Senator McCaskill. We all are. And it probably is not
    humorous. For the first time in decades, we did a statistically
    valid survey of colleges and universities in this country last
    year. If you have not had a chance to read it, I would
    recommend it to you. I would certainly recommend that you look
    at the underlying methodology because I think you will be
    impressed that the underlying methodology was--I made sure it
    was bulletproof, as a former auditor. Understand now that any
    complaint of sexual assault on a college campus is supposed to
    be investigated. Forty percent of the higher education
    institutions in this country said on that survey that they had
    not done a single investigation in sexual assault in 5 years.
        Do you believe, Dr. Vedder, that that is an accurate
    reflection of whether or not there was any sexual assault going
    on on those campuses?
        Dr. Vedder. I suspect there is a shameful lack of
    reporting. I suspect you are absolutely----
        Senator McCaskill. Or a shameful lack of acknowledgment by
    the universities that they have a problem.
        Dr. Vedder. Universities like to hide problems. They like
    to hide bad publicity, and this is an area which is
    particularly true. I am sure you are correct.
        Senator McCaskill. And one in five admitted that their
    athletic departments had a role in adjudicating these cases
    against their athletes.
        Dr. Vedder. I believe that, and I think there is a scandal
    in intercollegiate athletics, too.
        Senator McCaskill. So my question is: Do you believe that
    Title IX was good in terms of equality for women in terms of
    sporting opportunities? That Federal law, do you believe that--
    --
        Dr. Vedder. I think it is probably a good thing. I have no
    problem with it.
        Senator McCaskill. That that was a good Federal role?
        Dr. Vedder. Yes, sure.
        Senator McCaskill. OK. But you do not believe that there
    should be a Federal role in giving young women an opportunity
    or young men an opportunity to tell the university when there
    is an environment on their campus that is unsafe?
        Dr. Vedder. I raised in my testimony, which you were
    probably voting at the time, or whatever----
        Senator McCaskill. I read your testimony.
        Dr. Vedder. We use standards in sexual assault cases--and
    this is not my area--I am an economist. This is not my area of
    expertise. But we use preponderance of evidence standards,
    which 28 members of the Harvard Law School, who are not
    particularly known as being hidebound conservatives, said it
    was inappropriate to be used, and----
        Senator McCaskill. By the way, I am a conservative on this
    topic because I believe that preponderance of the evidence is
    completely appropriate when the only punishment they can
    possibly get is leaving the campus. We are not talking about
    depriving somebody of their liberty. We are not talking about
    incarcerating them. We are not talking about them having to
    register as a sex offender. We are not talking about them
    having something hang over their head for the rest of their
    lives in terms of being charged with a crime. We are talking
    about most of the time they are getting book reports or being
    suspended for 3 weeks. The worst that could happen under Title
    IX is that they have to leave the campus. Now, do you not
    believe that under those circumstances the safety of the
    campus, if it is a preponderance of the evidence, that is
    not--I think this is a conservative position, not a liberal
    position. I think the liberal position is let us make sure that
    we give every benefit of the doubt to people who have been
    accused of raping women on campus?
        Dr. Vedder. I think that cases of this kind should be
    referred to the courts in the judiciary, to the prosecutor's
    office, and that crimes of sexual assault are crimes, and
    crimes should be handled by police. And I do think that often
    campuses hide this. I think it is shameful. I agree with you,
    Senator, on that.
        Senator McCaskill. Well, perhaps----
        Dr. Vedder. There are a lot of things going on in campuses
    that are shameful. The interesting issue, though, is how should
    these things--should they be settled from D.C. or should they
    be settled at the State level? And I think that there are
    honest differences of opinion.
        Senator McCaskill. I think there are honest differences of
    opinion, and I know I am out of time, but I will close. Mr.
    Carey, one of the things our legislation will do that some of
    us are cosponsors of the legislation--Senator Ayotte is one of
    the cosponsors--is it would provide a climate survey that would
    allow an apples-to-apples comparison of how students feel about
    how safe they are on these campuses, which goes to your point
    about consumer education. Right now, the Clery statistics,
    nobody has any idea what they are. They do not know how to get
    to them. They are not being done in a way that even allows a
    comparison campus to campus. And I think unfortunately right
    now too many parents are looking and seeing schools that do not
    have any investigations, thinking, oh, that must be a safe
    place, when in reality it is just the opposite.
        So I am assuming the climate surveys that would allow
    something like the Scorecard in terms of earning capability and
    graduation rates would be something that you think would be an
    appropriate Federal role?
        Mr. Carey. I do, yes.
        Senator McCaskill. Thank you.
        Thank you, Mr. Chairman.
        Chairman Johnson. Thank you, Senator McCaskill. I think
    that information gathering and publication process is something
    we can all agree on. I really do. Senator Lankford.

                 OPENING STATEMENT OF SENATOR LANKFORD

        Senator Lankford. Thank you for the conversation. Let me
    switch over to the accreditation conversation that had started
    earlier as well, and I want to give you a chance to spend some
    additional time on that.
        Accreditation is one of those key areas where basically
    other campuses that--or other schools limit the innovation of
    other campuses, and my concern is: How do we actually encourage
    more innovation rather than limit innovation? What are
    recommendations and ideas that you have? And what role can we
    have in the accreditation process?
        I am one of those folks that believes we have the greatest
    educational system for higher education in the world. The envy
    of the world still is here, and one of the worst things that we
    can do is to get increased Federal involvement to something
    that is going well. But when there are clear areas that are not
    going well, like limiting innovation, we need to find a way to
    be able to engage in that.
        So, Mr. Carey, you started this conversation. Dr. Vedder,
    you also engaged in this as well. What are ways that we can
    actually improve the accreditation process to make sure that we
    encourage innovation rather than stifle it?
        Mr. Carey. I would recommend experimenting in a controlled
    fashion with alternatives to traditional accreditation that
    would allow either for-profit or nonprofit organizations that
    want to take an innovative approach to higher education, that
    may not be whole colleges and whole degree programs, and give
    them a shot, as long as they are willing to be held accountable
    for outcomes, which, frankly, the current accreditation system
    does not have.
        For example, like right now, Massachusetts Institute of
    Technology (MIT) and Harvard have created a nonprofit
    organization called ``edX'' that offers free online classes
    that are taught by MIT and Harvard professors. You can
    basically take the entire MIT freshman curriculum, extremely
    high quality classes online, same classes, same exams--I have
    taken one of these classes---take the tests, get a certificate
    from them. But what you cannot do is then use that for college
    credit because the nonprofit consortium is not an accredited
    college. I think that is crazy. You can get college credit and
    pay a lot of money and give your Pell grant to the sketchiest,
    worst college, for-profit or nonprofit--and there are both in
    this country--but you cannot go and get credit for a Harvard or
    an MIT class that is taught by the greatest professors in the
    world. That is an accreditation problem, and it is because the
    accreditation system does not know what to do with the
    nonprofit----
        Senator Lankford. Right. So I am back to the same issue. We
    see rising costs in higher education. We see these innovative
    models that are out there that can dramatically drop the cost
    line. And one of the biggest issues we have is an increased
    number of individuals wanting to get into college, which is
    good, but then increasing costs for every one of those, and
    they can get away with it because everyone is pushing these
    students toward college. Good to do that, but we cannot get the
    innovation. Typically when you have rising costs, you have--
    competition floods into the market, and you have innovation
    that occurs, and there are other models. To say if you want to
    spend $100,000 to go to college, there is a place to do that.
    But if you do not want to do that, there is also a way to be
    able to get it done for $10,000. Right now I believe that the
    accreditation models are stifling that.
        So my question is: How do we fix it? I know it is there.
    What are the ideas on how to actually fix that?
        Mr. Carey. Because accreditation matters most in the way
    that it grants eligibility to the Federal financial aid
    system--that is far and away the most important thing about
    it--I think we should experiment with other ways to access the
    Federal financial aid system that are, again, rooted in
    evidence of student learning and not rooted in you are like all
    the colleges that came before you.
        Senator Lankford. Dr. Vedder.
        Dr. Vedder. I would agree 100 percent with Mr. Carey on
    that. Colleges, you have to remember, are packaging devices.
    You get a piece of paper at the end after you have taken 45
    courses, or whatever the number is for a bachelor's degree, and
    in a sense colleges have a monopoly on providing education
    while the person is at the university, pretty much. They can
    transfer in and out a little bit of credit. Even there, there
    are some obstacles.
        So coming up with allowing an individual provider of
    courses as opposed to degrees, to get those courses in effect
    accredited in some fashion, given--be anointed as being OK to
    get Federal aid for would be a huge step forward. The massive
    open online courses (MOOCs), the so-called massively open
    online courses, what everyone said would be a great success,
    have been sort of in some people's minds a bit of a
    disappointment, not because they are a bad idea or the quality
    is bad, but because the obstacles of turning learning, real
    learning into something that can be certificated and proven as
    learning is very difficult.
        In that area in particular, I think there is, room for--why
    don't we accredit courses rather than universities? Why doesn't
    a person that has 45 courses from 20 different universities be
    able to get a degree if there are a few other minor issues
    associated with it, but why not in principle can't that happen?
        Senator Lankford. Right.
        Dr. Vedder. And so I am in complete agreement with Mr.
    Carey.
        Senator Lankford. So the question obviously on that is the
    who. Who does that accreditation? Who actually examines that
    course? Who signs off on it, sets the standards? We have
    accrediting agencies now for universities. Universities are not
    going to accept every other course that is out there. They will
    not accept other things that are accredited, and even then they
    will evaluate whether it is going to work on their degree. Who
    does that type of accreditation? How would that work?
        Mr. Carey. My recommendation would be that it either come
    from business and industry, because many higher education
    classes are explicit--programs are explicitly designed to lead
    to skills and outcomes in the professions and in industry, or
    the academy. So we should not ask the U.S. Department of
    Education to decide what a good calculus class is.
        Senator Lankford. Right.
        Mr. Carey. We should ask mathematicians in our universities
    who very much know what a good calculus class is. We can tell,
    as Dr. Vedder said earlier, who is learning math and who is
    not. They should decide what the standards are. And we should
    allow anyone who can prove that they can through maybe very
    different methods bring people up to those skills to compete on
    a level financial playing field in the context of Federal aid.
        Senator Lankford. OK. Dr. Vedder, any comments on the who?
        Dr. Vedder. No. I completely agree with Dr. Carey.
        I would say this: I have been yelling at the U.S. Chamber
    of Commerce and other business groups, ``Why don't you get into
    the business of accreditation? Just declare yourself an
    accreditor.'' Businesses will listen to what other businesses
    say perhaps. I do not know if it is the U.S. Chamber or the
    National Association of Manufacturers or National Federation of
    Independent Business (NFIB). Why aren't they getting in the
    business of saying what is acceptable to them in terms of
    placing people? And I think perhaps we ought to encourage more
    militant--greater discussions with the business community about
    doing this and picking up on Mr. Carey's point.
        Senator Lankford. I would tell you, the State of Oklahoma
    years ago invested at a very high level in our career and
    vocational education, and the business community is very, very
    engaged in making sure that that actually lines up with the
    skills that they need to be able to hire. And the Oklahoma
    model for career tech has been extremely successful and is a
    very unique model around the country. So that is actually
    possible on it. My challenge would be if we are fighting with
    the inevitable cost, we cannot have the Federal Government say
    we are just going to continue to pay the same amount for these
    courses that are online that may cost a fraction of the amount.
    If the goal is to be able to provide that student the
    opportunity to be able to get a degree, maybe $5,000, $6,000
    for a college degree they can do mostly online with high-level
    classes, when Federal dollars start rushing into that, the
    costs of the online courses are going to skyrocket, and it
    should not be that way. So we have to be able to find a way
    that the Federal Government is not the engagement on that, but
    we have true competition in the process with the accreditation.
    So I would appreciate the ongoing conversation on this in the
    days ahead.
        Thank you. I yield back.
        Chairman Johnson. Thank you, Senator Lankford.
        Before we move off this point, if I could interrupt on
    Senator Ayotte's time here, isn't it true that the Federal
    Government decides who the accreditation agencies are for any
    university that is going to get Federal Pell grants and student
    loans?
        Mr. Carey. Yes.
        Dr. Vedder. That is correct.
        Chairman Johnson. It is not like somebody can just--they
    have to get federally approved to be an accreditor of that. So
    the Federal Government controls that process, right?
        Dr. Vedder. Yes.
        Mr. Carey. Yes.
        Chairman Johnson. And in terms of innovation, the
    marketplace is the greatest innovator, so, Mr. Carey, you
    talked about the accreditation process limiting additional
    supply. We have a 14-percent increase in supply, 111-percent
    increase in demand in this thing. What else is limiting the
    supply? Do you really view that as the primary factor limiting
    the increase in supply of colleges and universities and
    courses?
        Mr. Carey. I do think that a consequence of our investments
    in Federal aid, which I very much support and think were
    important, they unleveled the financial playing field. So if
    you are a competitor, students can bring a $5,500 voucher to
    pay for their classes, and you are not in that system and you
    are $5,500 behind, that is such a disadvantage that I think
    nobody even wants to try to come in and compete.
        There are a few places now, we see in like coding
    academies, for example, very high demand, very high skill areas
    where actually there are new organizations that are existing
    outside the aid system. But that is for jobs that pay $90,000 a
    year, and they cannot get enough people.
        Chairman Johnson. Limiting the supply is really tied to the
    Federal Government control over the accreditation process and
    the financing, the student loans and the grants, is your
    conclusion.
        Mr. Carey. Yes.
        Dr. Vedder. Yes.
        Chairman Johnson. OK. Senator Ayotte.

                  OPENING STATEMENT OF SENATOR AYOTTE

        Senator Ayotte. Thank you. I wanted to ask about a related
    topic to what Senator Lankford just asked about. And as we look
    at our education system, one of the experiences that I have is
    when I travel around New Hampshire, I hear from employers
    directly, many of them in the manufacturing field, that they
    have many unfilled positions, and they are very good paying
    positions, frankly, much better paying positions than many of
    our 4-year graduates are able to get when they get out of
    college. And we have a disconnect right now between our
    employment needs and our opportunities that we are seeing with
    some resurgence in manufacturing, and it is advanced
    manufacturing. People sort of have this outdated view of
    manufacturing that is in this dirty factory. These are very
    technical jobs. They require obviously an understanding of how
    to use computers. They require some basic mathematics and
    engineering understanding. But they do not necessarily require
    a 4-year degree.
        So I wanted to get your thoughts on, Senator Kaine and I
    actually have a bill, both of you, that would allow you the
    flexibility, if you need your Pell grant, to take a short-term
    skills program, a Career and Technical Education (CTE) program,
    a training program, say you are going to go to a community
    college or let us say you want to go to a welding program or
    whatever it is, because there are a lot of opportunities for
    good-paying jobs, and it goes back to this issue of
    transparency. We need to tell our young people, too, that here
    is where there are jobs and here is what the average pay is
    here so that they know when they are taking out a college loan,
    what the implications of that are, but also what are the
    opportunities for me to earn in the long term, and where are
    the jobs available?
        So I wanted to get your thought on this idea of--I know we
    are talking about higher education today, and one of the big
    gaps we have in higher education is Science, Technology,
    Engineering and Math (STEM) overall, but it is also beyond just
    the traditional 4-year degree. I want to get both of your
    thoughts on how do we provide people bigger opportunities here
    in looking at higher education in a broader, more flexible
    sense.
        Dr. Vedder. I completely agree with everything you said,
    Senator. Indeed, while you were out of the room, I spoke some
    to the very issue you mention. First of all, colleges and
    universities are organized in medieval ways. They are in
    departments, the history department and this department and
    that department. They are not quick, nimble, and fast. They are
    bureaucratic. They are not able to see the changes going on.
    They do not have the market incentives to see that changes are
    coming.
        Apple brought this out last week. This is the 6S. They sold
    3 million last Friday. You can be sure Samsung and others are
    working day and night to come up. That does not exist in higher
    ed, so we have to facilitate what you are talking about in
    different ways.
        One way is to extend Federal aid, where Federal aid goes--
    --
        Senator Ayotte. Give you flexibility in how you use----
        Dr. Vedder. Yes, exactly. Maybe we ought to use the word
    ``postsecondary'' instead of ``higher ed.'' And if you want to
    go to welding school with that money, my view is go to welding
    school, if that is what is best for you. Welders make more
    money, for every education dollar spent on welding. It is a
    heck of a lot better----
        Senator Ayotte. If you want to talk value, if you have a
    good welder, I mean, you could write your ticket.
        Dr. Vedder. Yes, I mean, welders or plumbers are golden.
        Senator Ayotte. Yes, I know. They are golden.
        Dr. Vedder. Yes, absolutely.
        Mr. Carey. Thank you, Senator. I also agree with what you
    said. I think in many ways our higher education system
    discriminates against programs that are designed to provide
    people with skills that lead to good jobs. We tend to relegate
    those to the less resourced part----
        Senator Ayotte. And, also, I think we have kind of
    developed a bad attitude that is not right in terms of those
    jobs, that these are very important, productive jobs for our
    country.
        Mr. Carey. One of the problem we have is it is very
    difficult if you say you went to a community college and got a
    2-year degree that leads to employment, it is very difficult to
    transfer those credits and get a bachelor's degree if, say, you
    want to move up into management, and often management jobs you
    need a bachelor's degree or even a master's degree. Those
    things we can change. And, also, to pick up a little bit----
        Senator Ayotte. We should change that, absolutely.
        Mr. Carey. Absolutely.
        Senator Ayotte. You should be able to use that and have
    transferability to go on to that next step in your career.
        Mr. Carey. I agree with that, and to respond a little bit
    to something related to what Senator Lankford said earlier, we
    do not have to make a full Pell grant available for every
    program. We do, but we do not have to.
        Senator Ayotte. Right.
        Mr. Carey. You could imagine saying, what we really want
    are lower-cost programs, and so in exchange for the flexibility
    to try something new and not be like a regular accredited
    college, you only get half a Pell grant, and see what happens,
    see who responds to that.
        Senator Ayotte. I also like this idea--you mentioned it--of
    skin in the game for the colleges and universities and higher
    education, because that I think would focus them more on
    informing people, letting the students know what all of their
    options are, and, for example, that they do not have to take
    out the full amount of the loan if they have other sources. The
    fact that if they had some skin in the game on repayment
    themselves, they would also, I think, be giving people stronger
    counseling and advice on what is available, and obviously that
    is going to go back into the high schools.
        So how do you see us doing that, the skin in the game? I
    know there is a bill here, which I am supportive of, that has
    been introduced in the Senate, but what thoughts do you have on
    the policy end that we could make sure that we get the higher
    education institutions in this, too?
        Mr. Carey. I think it is relatively straightforward from a
    policy standpoint. I think it is mostly a political issue. I
    imagine you will get a lot of phone calls from college
    presidents here and elsewhere----
        Senator Ayotte. I probably will after this hearing, right?
        Mr. Carey [continuing]. Who for obvious reasons would
    rather keep the system they have now.
        Dr. Vedder. Yes, the problem is overcoming the higher
    education lobby. It is a political issue. I mean, there is no
    question it should happen. There is no question that if
    colleges are giving advice that is distorted or wrong, they
    should pay a price for that if there are negative consequences.
    It is simple.
        But you try to get by Terry Hartle of the American--I will
    name names--the American Council on Education or other
    lobbyists. He is a fine man, by the way, but he will kill you
    on this issue, or try to. And so it is a political issue.
        Senator Ayotte. It would not be the first time that we have
    all faced those kinds of issues, right? But I think what you
    are hearing from all of us is a real desire to understand how
    we can give our students an opportunity to pursue with
    knowledge what they want to pursue and have the nimbleness
    within our system to give those opportunities, because the
    system now, with the way that prices are rising, you can get to
    a point where it is just how do we sustain this, and that is
    going to be a real issue for all of us. So I appreciate your
    both being here.
        Chairman Johnson. Senator Ayotte, I appreciate your line of
    questioning here. Coming from a manufacturing background
    myself, also volunteering in education, right before I ran for
    the U.S. Senate, the initiative of our Partners Education
    Council was really next step after high school. How do we
    provide students and their parents all the information on all
    their options after high school? One of the main points I kept
    talking about, is we have to stop denigrating the trades. All
    work has value. There is no first-or second-class way of
    realizing your full human potential. Here is the good news in
    manufacturing, I had the same comment in Wisconsin. There is
    not one manufacturing company that I have visited that can hire
    enough people, and for a number of reasons----
        Senator Ayotte. I agree.
        Chairman Johnson [continuing]. Partly because we tell all
    of our kids, ``You have to get a 4-year degree,'' and thereby
    imply that manufacturing is a lesser way of realizing your full
    human potential.
        The good news is with apprenticeship programs through
    unions, and manufacturers are paying for education. Happy to
    work with you on a Pell grant initiative, but we need to let
    our kids know that there is such a shortage of welders and
    manufacturing jobs available. Most manufacturers, my own
    company as well, we paid for technical college. We paid for
    full degrees for those individuals working for us.
        There is no option here: going into manufacturing, having
    manufacturing companies pay for education. You end up with a
    degree and zero debt. We just do not tell our kids that those
    options are really available.
        Senator Ayotte. And this goes to the guidance counselor
    issue in high school, too.
        Chairman Johnson. Yes. We were trying to get this ingrained
    in our comprehensive counseling model, starting in eighth grade
    into tenth, getting that information out there. The good news
    is that requires no Federal Government involvement whatsoever
    providing that information. Individuals at the local school
    level can provide that information and start opening up
    students' and parents' minds to all their option. I appreciate
    the line of questioning.
        We do like to give our witnesses a chance to make some
    closing comments before we seat the next panel, I will start
    with you, Dr. Vedder.
        Dr. Vedder. Yes, well, thank you. Higher ed is an unusual
    industry. It does not have the incentives, it does not have the
    market discipline, it does not have the forces of innovation.
    Institutions like tenure can stifle initiative as well.
    Resources, too many resources are going into non-academic
    pursuits in recent years. Mr. Carey mentioned the explosion of
    administrative staff as a good example of this. So there is
    serious need of reform.
        The issue partly is where does the reform start from. Does
    it start here in Washington at the State level? Maybe it takes
    a little at both levels. I would concede that. We need to
    change incentive systems. Skin in the game is a great idea. Why
    don't you do something, a little something on skin in the game?
    Why don't you do a little experimentation on new approaches to
    learning, such as Mr. Carey suggested? I think this would be a
    good start. It is not the end of the story, but it is a good
    start.
        And if you do not mind, Senator, in a minute I am going to
    have to go teach a class, which I am doing in Ohio, so I am
    still in the trenches on the other end of this, so if you do
    not mind, I will----
        Chairman Johnson. We appreciate your chosen vocation. I
    also appreciated your discussion of certification versus
    degrees. I think that is another thing that we ought to be
    exploring. You are excused.
        Dr. Vedder. Thank you.
        Chairman Johnson. Mr. Carey, I want to give you a chance
    for a closing comment, but because Dr. Vedder mentioned it, you
    talked about the explosion of the ratio of administration
    staff. You can maybe just answer that question in terms of what
    stat you have on that and then make your closing comment.
        Mr. Carey. Thank you, Mr. Chairman. I believe that strong
    public support for higher education is crucial for the Nation's
    future civic and economic prosperity, and I do believe the
    Federal Government has a role to play. I think if we look in
    history, from the 1865 Morrill Land-Grant Act to the GI bill,
    our measure to support for research funding, Federal investment
    in higher education that respects the diversity of the market
    and the autonomy of States, these have been wise choices.
        I do think, however, that we are at a point where we lack
    innovation, we lack productivity. Our institutions have become
    somewhat decadent, frankly, and not focused enough on providing
    value to students, providing value to taxpayers, and focusing
    on student learning. I think there are some very
    straightforward actually Federal statistics that the Department
    of Education has gathered that show growing ranks of higher
    education administration and, as I said, fewer tenured
    professors, less money spent on instruction. I think that is a
    symptom of this larger problem. I think it is a symptom of the
    lack of innovation. And so my recommendation is that the
    Federal Government has an opportunity to, again, not run our
    colleges and universities, but serve as a catalyst for
    innovation by linking the aid that it provides to new markets
    and new providers of higher learning.
        Chairman Johnson. Well, again, thank you, Mr. Carey, for
    your time, your testimony, and your answers to our questions.
    With that, we will excuse you.
        Mr. Carey. Thank you, Mr. Chairman.
        Chairman Johnson. We will ask Secretary Mitchell to come up
    for the second panel.
        [Pause.]
        That was a quick changeover. I appreciate it.
        Welcome, Secretary Mitchell. Again, we have a tradition of
    swearing in witnesses, so if you will please rise and raise
    your right hand. Do you swear the testimony you will give
    before this Committee will be the truth, the whole truth, and
    nothing but the truth, so help you, God?
        Mr. Mitchell. I do, sir.
        Chairman Johnson. Please be seated.
        Mr. Mitchell. Thank you.
        Chairman Johnson. The witness on our second panel is Mr.
    Ted Mitchell. He is the Under Secretary of Education, a
    position he has held since May 2014. He oversees policies,
    programs, and activities related to postsecondary education,
    adult career and technical education, Federal student aid, and
    other initiatives. He has previously been Chief Executive
    Officer (CEO) of the NewSchools Venture Fund, president of the
    California State Board of Education, president of Occidental
    College, and professor and department chair at Dartmouth
    College. Under Secretary Theodore Mitchell.

       TESTIMONY OF THE HONORABLE THEODORE R. MITCHELL,\1\ UNDER
                SECRETARY, U.S. DEPARTMENT OF EDUCATION

        Mr. Mitchell. Thank you, Mr. Chairman and Members of the
    Committee, for inviting me here this morning. And before I
    begin, Mr. Chairman, I would like to make two apologies.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Hon. Mitchell appears in the Appendix
    on page 00.
    ---------------------------------------------------------------------------
        The first apology is that if we have been less than
    responsive in your requests for information, that is not
    something that I want.
        Chairman Johnson. No. Not at all. No need to apologize
    whatsoever. It is just like anything in the Federal Government,
    it is hard to get information that I do not have questions on.
        Mr. Mitchell. We like to be user friendly.
        Chairman Johnson. Yes, OK. No apology necessary.
        Mr. Mitchell. The second apology is for the confusion about
    the two panels this morning. I apologize. But I am also
    grateful for the opportunity to engage with the panel directly,
    so thank you for your understanding.
        I appreciate the opportunity to testify today on the
    Department's goals for higher education. As I think you all
    know, we have been working diligently to achieve a stronger,
    more prosperous America, as you have, with the goal of
    reclaiming our place as the Nation with the highest proportion
    of college graduates in the world.
        As an agency, we have established a goal of increasing
    college completion by improving access, affordability, and
    student outcomes.
        A generation ago, America led the world in the proportion
    of adults 25 to 34 who are college graduates; today, we are
    12th. But by 2020, George Washington University estimates that
    65 percent of job openings will require some postsecondary
    education or training. Today, therefore, a great education is
    not just what every parent wants for his or her child. It is a
    necessity for individual financial security and national
    financial security in a globally competitive economy. And,
    moreover, it is important, critical, for the health of our
    democracy.
        Whether it is a 2-year or a 4-year degree, a certificate,
    or a career and technical training program, some form of
    quality postsecondary education is the gateway to opportunity
    and the middle class, and our objective is in administration.
        We cannot have substantial economic mobility in this
    country without equal opportunity to get a high-quality
    education. Since 2009, the administration has worked with
    Congress to increase Pell grants by more than $1,000 a year. We
    have also worked with Congress to create the American
    Opportunity Tax Credit. By increasing direct support to low-
    income students, we are making it easier for students to
    achieve their college dreams and our national interest.
        We have significantly simplified the Free Application for
    Federal Student Aid. Today, students and families on average
    fill out the FAFSA in about 20 minutes. And starting in October
    2016, students and families will be able to apply for financial
    aid just as the college application gets under way rather than
    have to wait until January.
        Students filling out the FAFSA will be able to
    electronically retrieve tax information filed for an earlier
    (prior) year. This will mean a reduction in the number of
    applicants who need to estimate their income or taxes paid,
    only to have to correct their application later. This will also
    result in a significant burden reduction for institutions.
        As you have heard, the Department released a new College
    Scorecard, which focuses on a few key critical measures of
    institutional performance to provide students and their
    families with critical information about cost and student
    outcomes. While no single measure is perfect, we believe the
    Scorecard will help drive the conversation forward on access,
    affordability, and student outcomes and create a kind of public
    accountability for institutions that has been lacking.
        At the back end of the college-going process is a part of
    the administration's call for the student borrower bill of
    rights. The Departments of Education and Treasury are working
    together to determine the feasibility of developing, for
    example, improvements in the recertification process for
    borrowers and income-driven repayment plans and, more
    generally, improvements in loan servicing.
        Our Federal Student Aid Office has initiated targeted email
    campaigns, for example, to borrowers regarding available
    repayment options and has moved to an incentive-based pricing
    structure for Federal loan servicers to ensure accountability,
    to provide more effective borrower counseling, and outreach to
    the borrower community.
        We have proposed to address the affordability issue through
    America's College Promise, sponsored by two members of this
    Committee, a proposed grant program for States to make
    community college, both technical training and transfer
    programs, free for responsible students, enabling them to earn
    a certificate or an associate's degree without paying tuition
    and fees. In return, States must continue their investment and
    community colleges must adopt innovative practices and improve
    student outcomes. But as you have heard, between 2009 and 2014,
    47 States cut their higher education per student spending by an
    average of 13 percent. Over the past 25 years, State per
    student spending is down 25 percent after adjusting for
    inflation. And this matters most, Mr. Chairman, because 72
    percent of undergraduate students enroll in public institutions
    across the country. That is an example of what we believe as an
    administration that everybody has their part to play. The
    Federal Government has their part to play, States have their
    part to play, and certainly, as the previous witnesses
    discussed, institutions have a role to play in cutting costs
    and increasing quality.
        Our Department is using Federal dollars to seed new
    approaches at the institutional level to help with this
    innovation problem and to build a stronger body of evidence
    about what works and to help to scale those innovations.
        The good news is that our efforts have begun to move the
    needle. As you know, our high school graduation rate is at its
    highest point in history. Enrollments in college are growing
    among minority and first-generation college students. And so we
    are pleased to say that our quarterly Administration Priority
    Goal report to you confirms that we are on track to meet our
    goal for increasing the proportion of adults obtaining a
    postsecondary degree.
        At the Federal level, we view all of our efforts to improve
    college access, affordability, quality, and completion through
    the lens of transparency, accountability, and innovation.
        Thank you again for the opportunity to speak with you today
    about the administration's goals for higher education. I would
    be happy to engage in a conversation, answer questions, and
    hear comments, Mr. Chairman.
        Chairman Johnson. Thank you, Mr. Secretary.
        Let us start right with affordability because I think that
    is a huge----
        Mr. Mitchell. Yes.
        Chairman Johnson. That is the problem. I have seen
    different numbers, pointing to the fact that the cost of one
    year of college has increased somewhere 2.5 to 2.8 times the
    rate of inflation from the 1960s to the 1970s to the present
    day. Is that in line with what you see as well? Are those
    pretty accurate figures?
        Mr. Mitchell. So we think that--yes is the short answer. We
    believe that college price and college cost have risen. We know
    that they have risen greater than the inflation rate. We are
    quite concerned about that. We are concerned that it is
    stifling access to students and families who look at a sticker
    price and say, ``I cannot afford that,'' even if perhaps they
    can. We hope the College Scorecard will help them with that.
    And we are quite concerned that the incentives continue to be
    misaligned, which is why I think the Secretary was so clear in
    his speech in July that we need to refocus the system on
    outcome.
        Chairman Johnson. I am looking at what has caused that. Mr.
    Carey certainly talked about--and you reference that as
    well--there has been a reduction in State aid to the public
    institutions, so that explains part of that. But it does not
    explain why private institutions, and I do not think it
    explains all of the increase in the cost of college at public
    institutions as well. I thought Mr. Carey's testimony was
    pretty stark when he talked about the mismatch between supply
    and demand, how the demand for college has increased at 111
    percent but the supply has only increased about 14 percent. His
    theory, his explanation, was the fact that the accreditation
    agencies really are a barrier to entry for additional
    entrants--in other words, increasing the supply, increasing
    innovation, when you have a competitive marketplace--I
    participated in it for 30-some years. I would have loved to
    have been a monopoly, but because of competition, my prices
    were definitely constrained, as well as my quality was higher
    and so was customer service. So competition really works.
        What is your theory as to why the supply has only increased
    at 14 percent but the demand has increased 111 percent?
    Generally in a marketplace, supply would definitely catch up,
    particularly after decades, with the demand.
        Mr. Mitchell. So I think that there has been historically a
    mismatch between supply and demand. I think that in a classic
    economic sense, the barriers to entry to new providers have
    been high. Accreditation is a part of that. So has been our
    model of what a college is, and I think the good news is that
    we are moving--Senator, at your point, we are moving away from
    a place where we believe that every college has to be made of
    brick, have a lot of ivy, have a football stadium. And so there
    are diverse models that are emerging.
        Chairman Johnson. With the Federal Government controlling
    the accreditation process and also the financing process--and
    those are completely related--we are not going to have to kind
    of break that monopoly and figure out a different model in
    terms of accreditation, possibly certification? Our previous
    witnesses were talking about certifying courses versus
    necessarily accrediting a degree. Just kind of speak to those
    innovations.
        Mr. Mitchell. Sure. So, again, we have, Senator, as the
    Secretary said in his July speech--and I have often spoken
    about the need to reform accreditation. The irony in the
    accreditation process is that it is both too rigid, standing in
    the way of innovation, and too flexible, accrediting
    institutions whose student outcomes are deplorable. And so we
    need to find a new balance there, and we are eager to take up
    that challenge and working on a set of proposals for Congress
    that will help us do that.
        In many ways, the accreditation approval process is
    controlled by a governing statute and governing legislation, so
    we will need your help. We will need your help to be able to
    focus more rigorously on student outcomes. We will need your
    help to be able to take Pell grants and make the delivery of
    Pell more flexible, to Senator Ayotte's point. And in between
    now and then, working with Congress, we have developed a series
    of experimental programs about new ways of delivering Pell, new
    ways of thinking about program delivery. But I want to agree
    with you straight down the line that the accreditation process
    needs to be changed. It needs to be both more rigorous around
    student outcome and more flexible around innovation.
        Chairman Johnson. OK. When you look at the history, about
    20 years ago the outstanding level of student loan debt was
    about $100 billion. Now it is around $1.3 trillion, depending
    on which figures you are looking at. That is really concerning
    to me. Do you view that as a metric of success? Obviously,
    those student loans have certainly made college accessible, but
    as the Federal Reserve Bank of New York States, for every
    dollar that goes in, about 65 cents--it has increased tuition
    about 65 cents, so a 65-percent increase. Aren't we just
    ballooning--with the limited supply, the price of college and
    as a result our students, our young people are left with this
    debt burden as they enter their productive life? It is an
    enormous challenge for them.
        Mr. Mitchell. It is an enormous challenge for them. The
    good news is that the data shows that a college education--
    whether it is a certificate or a 2-year degree or a 4-year
    degree--is the best investment an individual can make, and we
    feel strongly it is the best investment that a nation can make.
    So that $1.3 trillion investment we have made is an investment
    in individual students' livelihoods, and it is an investment in
    our economic future. We need those young people to get the
    skills that will put them into the right manufacturing jobs or
    put them into the right computer science environment or the
    right business entrepreneurship program. So we see that as an
    investment that is going to pay dividends to individuals and
    will be responsible for continued economic growth in America.
        In terms of the debt burden to students, I think that this
    is why we have been so tightly focused on creating new
    repayment options for students so that perhaps in those early
    years, when they are not settled in a career, they are able to
    be in an income-based repayment program that will allow them to
    make payments against their student loan, but not the kind of
    payments that will cripple their participation in the----
        Chairman Johnson. That is kind of putting a Band-aid over
    the problem. I just want your comment on these studies that
    show that 40 to 50 percent of recent college graduates are
    either unemployed or really employed in a position that really
    requires no college education at all. How concerned are you
    about that? What is your explanation for that?
        Mr. Mitchell. So I think that we need to put some
    periodicity to that, that those recent college graduates have
    entered the labor market in one of the most challenging periods
    of the last 100 years. We see that beginning to even out in
    positive ways, but we also believe--and you made this point in
    your opening remarks, Mr. Chairman. We also believe that there
    has been a mismatch between a general one-size-fits-all higher
    education program and an economy that demands very
    differentiated skills and knowledge. So that is why we are very
    pleased to be supporting and looking at programs that are
    shorter in duration, programs that are competency-based, that
    directly link what students are learning to the needs of
    employers, and most powerfully, in community colleges, where
    those community colleges can see the needs of the local labor
    market and develop programs that reach out and are able to
    touch--make the bridge between what a student is learning and
    what an employer needs.
        Chairman Johnson. OK. Well, thank you, Mr. Secretary.
    Senator McCaskill.
        Senator McCaskill. Yes, thank you, Mr. Secretary, for being
    here.
        Mr. Mitchell. Thank you, Senator.
        Senator McCaskill. I am going to start with student loan
    servicer allotments. We now have metrics that show that the
    not-for-profits are doing a better job of collecting on their
    loans than the for-profits. For example, Nelnet received 13
    percent of the new loans and has a repayment rate of 64
    percent, while MOHELA, one of the not-for-profits, has a 92-
    percent repayment rate, but they only have 6 percent of the
    loan allotment.
        I am trying to figure out where this 25-percent cap on the
    allocation of loans for not-for-profits came from. You all did
    that on your own. What in the world would have been the
    motivation to arbitrarily decide that the not-for-profits were
    only going to get one-fourth of the loan servicing agreements?
        Mr. Mitchell. So as we moved from the previous system to
    direct student loans and a multiple-servicer platform, we
    wanted to make sure that the various different servicers had an
    opportunity to integrate with our system to be able to show
    what they could do and then for us to be able to move and
    recompete with everybody on a level playing field. And we
    believe that the not-for-profit servicers have fully integrated
    into our system or systems. We believe that they are connected
    with their borrowers in important ways. And we look forward to
    seeing them compete on a level playing field when we----
        Senator McCaskill. So we are going to make news today? We
    are dropping the 75-percent cap?
        Mr. Mitchell. No. When we recompete the contract at the end
    of 2016.
        Senator McCaskill. So we have to go for another year and a
    half arbitrarily? Why don't you just drop the cap now and open
    it up for new loans? I mean, they are better at it.
        Mr. Mitchell. We think that the system that we have is
    going to work through the end of the year, and I misspoke.
    January 2016 is when we----
        Senator McCaskill. Oh, OK. Just the end of the year. So
    what you are saying is there will no longer be an arbitrary cap
    between nonprofits and profits as of next year?
        Mr. Mitchell. I cannot say that definitively, but I can say
    that we are looking at the process of recompeting the contract
    in----
        Senator McCaskill. OK. Well, I am anxious to know when you
    can say it definitively, because I do not get it. I do not get
    why there would be--this should all be on metrics. You have a
    track record now. We should be giving the loans to the ones who
    are doing the best job of collecting the loans, period.
        Mr. Mitchell. And that is why we have moved the
    compensation structure for the servicers to one that absolutely
    rewards that kind of success.
        Senator McCaskill. OK. Where does one go when they have
    been abused or mistreated by their servicer?
        Mr. Mitchell. One goes to the student loan ombudsman, and
    that is a short-term solution for us because, as the
    President's memorandum that announced the student borrower bill
    of rights indicated, we will be working on a brand-new
    complaint--are working on a brand-new complaint system that
    will be better integrated than the ombudsman program is,
    modeled on the Consumer Financial Protection Bureau (CFPBs)
    system, and we anticipate having that up and running next July.
        Senator McCaskill. OK. Could I get data on how many
    complaints you all are getting through the ombudsman?
        Mr. Mitchell. Sure.
        Senator McCaskill. I am hearing horror stories, I mean just
    unbelievable horror stories.
        Mr. Mitchell. Sure.
        Senator McCaskill. The payment changes, and then the
    servicer takes out the new payment but continues to take out
    the old payment, after being continually recontacted. And
    imagine how that wreaks havoc on someone's life, that all of a
    sudden they have X amount of income a month, and the loan
    servicer is taking double the payment out, and they cannot get
    them to stop.
        Mr. Mitchell. Right. So we hope that those are aberrations.
    We would like to know each and every instance of that if we do
    not already.
        Senator McCaskill. Well, I am asking people to submit their
    horror stories to my office, so I am thinking we will have a
    nice list for you.
        Mr. Mitchell. Well, great. If you could send those to us,
    we----
        Senator McCaskill. Because I just think it is really
    frustrating, when someone is trying to do the right thing and
    pay, to have incompetence greet them.
        Mr. Mitchell. May I add to that? Just yesterday, we issued
    a statement with CFPB and the Department of the Treasury on
    student loan servicing standards, and we by that want to both
    signal and say----
        Senator McCaskill. Does CFPB have jurisdiction over these
    servicers?
        Mr. Mitchell. No, they do not.
        Senator McCaskill. Who does?
        Mr. Mitchell. We do.
        Senator McCaskill. Just you?
        Mr. Mitchell. Yes.
        Senator McCaskill. OK. So you are asking them for help on
    how to do it?
        Mr. Mitchell. CFPB has jurisdiction if they violate the
    regulations of the Consumer Financial Protection Bureau or
    consumer law.
        Senator McCaskill. Well, the horror stories I am hearing, I
    can guarantee you they are violating the laws of consumer
    protection.
        Mr. Mitchell. Then we need to hear this.
        Senator McCaskill. Yes, because, a credit card could never
    get away with doing what these servicers are doing to these
    young people. These are mostly kids in their 20s that have
    gotten out of school and are trying to manage their loan
    payment along with all the other budget needs in their lives,
    and it is hard when they cannot get anybody to help them.
        Mr. Mitchell. We want that to not be the case. We want to
    be able to help them.
        Senator McCaskill. OK. On campus sexual assault, one of the
    things we have looked at, when the Department of Education
    determines that a school has grossly mismanaged their safety
    responsibility on their campus, under the current law the only
    penalty available to the Department of Education is to take
    away their Title IV funding; in other words, require that that
    university no longer participate in any student loans. I know
    the answer to this question, but I am going to ask it
    rhetorically anyway. Has that ever happened?
        Mr. Mitchell. It has not.
        Senator McCaskill. And, of course, it has not. This is like
    me saying to my kids, ``If you do that again, I am never going
    to speak to you.'' I mean, my kids know better. They know I can
    love them unconditionally, and as mad as I might be, I am going
    to speak to them again. No college or university in the world
    believes you are going to penalize all the innocent students on
    that campus by removing their ability to get student loans. So
    isn't that a meaningless penalty?
        Mr. Mitchell. Our experience has been different, Senator,
    and we would not measure our success by the number of
    institutions we have eliminated from the Title IV program, but
    instead by the real creativity, real bravery, and real honesty
    that has come about in the settlements that we have secured
    with institutions.
        Senator McCaskill. But, ultimately, these settlements take
    years, Secretary. I mean, I am very familiar with the
    settlements you have been in. I am very familiar with the long
    list of institutions you are investigating. I am very familiar
    with the inefficiencies that are embedded in your current
    system, and I know you guys are worried about not holding on to
    that system. But in my experience, a deterrent only works if it
    is a realistic penalty. And they may be entering into
    negotiations because of the press associated with the problems
    on their campuses, as nothing is more difficult for a
    university than publicly being chastised for not protecting
    young people from sexual assault. But I do not think it is
    because of a threat of a penalty, because none of them take it
    seriously in terms of it actually being imposed. Don't you
    understand that it might be even more efficient and these
    negotiations might even go more quickly if there was some kind
    of interim penalty in the form of a fine that might be imposed?
        Mr. Mitchell. And as you know, have been in discussion
    about interim penalties. That is something that we are quite--
    we are open to discussing. We do feel very strongly, as you do,
    that we as a Federal Government need to protect the civil
    rights of people on campus by insisting that institutions
    protect young men and women from assault. We feel very strongly
    that this has been an underreported problem, an underprosecuted
    issue, and we are very, very proud of our enforcement efforts
    to be able to bring these issues to light and to use the tools
    that we do have at our disposal to create real change on
    college campuses.
        Senator McCaskill. Well, I appreciate that, and I
    appreciate how hard your agency has worked with us in crafting
    the legislation. Thank you, Secretary.
        Mr. Mitchell. Thank you, Senator.
        Chairman Johnson. Thank you, Senator McCaskill. Senator
    Lankford.
        Senator Lankford. Thank you. Mr. Secretary, thank you as
    well for being here.
        Let me follow-up on what Senator McCaskill was talking
    about as well on the not-for-profit loan servicers. It is my
    understanding that in September, just a few weeks ago, there
    was a one percent increase from 25 percent for not-for-profits
    to 26 percent for not-for-profits. Is that correct?
        Mr. Mitchell. I do not know that specifically.
        Senator Lankford. Well, it was announced on September 1st
    that there was a one percent increase. What I wanted was
    clarity. Does that start next year? Is that this increase or
    this possibility for 2016 that it will go from 25 to 26
    percent? Or is that current right now?
        Mr. Mitchell. That starts right away.
        Senator Lankford. So that is right away. So then there will
    be another reevaluation for 2016, starting in January 2016, for
    these not-for-profit loan servicers.
        Mr. Mitchell. And to be clear, 2016 will be a recompete for
    the broad arc of our servicing contracts, yes.
        Senator Lankford. OK. And that would begin in 2017? Or when
    would that begin then?
        Mr. Mitchell. It would begin before 2017. We will do it as
    quickly as we can. We will open the contracting process, and
    the vicissitudes of the Federal contracting process.
        Senator Lankford. I do.
        Mr. Mitchell. We will move as quickly as we can.
        Senator Lankford. Which makes it important that this
    decision is made as fast as possible on this percentage,
    because, again, I go back to the metrics. The metrics are
    clearly in favor of the not-for-profit loan servicers, and we
    are still trying to figure out how the decision was made, even,
    that 25 percent, and then the decision was remade to say, no,
    it will be 26 percent. Is there any evidence that we can get of
    the process of making the decision to go
    from--to set it at 25 percent in the first place, and then to
    say, no, 26 is a better number, 26 percent. How was that
    decision made?
        Mr. Mitchell. So I am not familiar with the move from 25 to
    26. I will find out. But, overall, I need to say that we are
    content with the rough allocation that we have now, and we will
    continue that allocation through to the recompete process.
        Senator Lankford. I would say there are a lot of folks that
    are not content with that allocation. That makes it very
    difficult for not-for-profits to have such a small portion. It
    is not sustainable in their business model to be able to
    actually do that, and the concern is that in long term those
    folks will just be driven out. And those folks have very good
    metrics.
        Let me move on to another process-type question, and that
    is, guidance. What is your process in making a decision when
    you are discussing whether you are going to do a guidance
    document or regulation? Is there a written-out process that you
    have in place to say if all of these things or even if one of
    these things is true, then that needs to be a regulation?
        Mr. Mitchell. So we are guided by the Office of Management
    and Budget (OMB) bulletins and by our own Office of General
    Counsel (OGC), and the bright line, as I believe my colleague
    Amy McIntosh told you last week, is that for us if there is a
    statement that we want to make, a statement, or an area we
    believe needs to be investigated and where we need consultation
    with the field that will result in having the force of law, we
    believe that at that point we are bound to enter into
    rulemaking.
        Senator Lankford. All right. Clearly, the bright line is if
    it is binding, then that is a regulation.
        Mr. Mitchell. That is right.
        Senator Lankford. The challenge that I hear over and over
    again from institutions of higher education is they have a
    tremendous number of guidance documents that are coming to
    them, and they do not feel the freedom to be able to come back
    to Education, the Department of Ed., and say this smells a lot
    like a regulation to me because this is also where a stream of
    funding comes from, and so they feel like they have to take it,
    where other entities, obviously private businesses, they get a
    guidance document come down, they file lawsuits, and they
    challenge and they push back on it. Institutions of higher
    education are actually leaning back and saying, ``I do not feel
    the freedom to be able to challenge this for fear that we will
    also have other things.''
        Now, I am sure your answer is, ``They should not be afraid
    of us. We are their friends.'' But I would tell you they are
    very concerned not only the way the regulations are coming out
    but the frequency of those regulations, and the pure cumulative
    result of that is they are drowning in guidance documents--and
    ``Dear Colleague'' letters is actually how they are coming from
    you--and the sheer number of ``Dear Colleague'' letters, they
    feel like they cannot challenge.
        Mr. Mitchell. So let me say that I hear the same things
    when I talk to my colleagues in higher education, and in each
    of those conversations, I do try to reiterate what Amy said
    last week and I will say again. Our guidance does not hold the
    force of law, and our recommendations and illustrations of the
    ways in which we are interpreting the statute and the
    regulations, so we are happy, in fact, to continue in
    conversations with institutions of higher education----
        Senator Lankford. The hope is that this can be an ongoing
    dialog, because they feel like the ``Dear Colleague'' letter
    shows up, and they did not have input, unlike a regulation
    where they have the opportunity to be able to write in and say
    when you do this, make sure you consider this. The ``Dear
    Colleague'' letter shows up, and they assume someone had input,
    but they were not in the clique group that got to have the
    input on it. So that is a bigger issue that we need to deal
    with.
        You mentioned about accreditation earlier, and the Chairman
    has brought this up in his line of questioning about
    accreditation, which is incredibly important to us. We want to
    have greater innovation in accreditation. You had said that
    there are some recommendations and proposals that you all are
    in the process of putting together to bring to us. When should
    we expect those proposals?
        Mr. Mitchell. By the end of the year.
        Senator Lankford. By the end of this year?
        Mr. Mitchell. Yes, sir.
        Senator Lankford. OK, great. Will that come to this
    Committee, to the HELP Committee? Where will that come?
        Mr. Mitchell. We are still figuring out exactly how--the
    shape of those recommendations, and so the recommendations will
    determine the----
        Senator Lankford. OK. Well, please include us in that, at
    least with a carbon copy. How about that?
        Mr. Mitchell. Of course.
        Senator Lankford. Because we are obviously very interested
    in this as well, and this is a long-term issue for us.
        You also mentioned about student outcomes and trying to
    measure that. Can you give me an idea of some of the metrics
    that you are able to put together to be able to measure student
    outcomes?
        Mr. Mitchell. Well, I think--I want to go back to the
    basics. The Federal Government is not and should not be in the
    position of determining for 7,000 institutions of higher
    education what their outcomes are.
        Senator Lankford. Right.
        Mr. Mitchell. The diversity of American higher education,
    the varied missions of our institutions are all critical to the
    health of higher education in the country. So rather than
    stipulating either specific outcomes or levels against those
    outcome measures, we would like accreditors to be much more
    serious than they are about asking institutions how they are
    measuring their outcomes and hold them accountable to----
        Senator Lankford. To their own metrics.
        Mr. Mitchell. To those metrics. But I would suggest, as we
    have looked at the use patterns of the College Scorecard,
    graduation rates, employment rates, repayment of student debt
    rates are things that are very interesting to students and
    families.
        Senator Lankford. Right. It seems to be the repayment of
    loans ends up being the biggest issue because obviously there
    is the Federal exposure there with the tremendous number of
    student loans that are federally backed student loans. So that
    seems to be the primary issue, which drives me back to the
    conversation that we have: Is the focus about trying to get
    greater student loans and greater student repayment? Or is it
    about getting greater innovations so college does not cost so
    much? And it feels like on this side--and you can tell me how I
    am wrong on this--has been how do we get more loans, more Pell
    grants, more emphasis out there, and then make sure that we are
    holding these schools accountable so they land jobs so they can
    repay the loans that we did, rather than saying how do we back
    up and create more innovation so college does not cost so
    stinking much and many of our middle-class families back up
    immediately and say, ``There is no chance I can ever get there,
    no matter how many loans,'' or, ``I do not want to have a
    $100,000 loan at the end of it.''
        Mr. Mitchell. Yes.
        Senator Lankford. So it looks like we are pushing in the
    wrong area. We are pushing on banks, calling banks predatory
    and putting all kinds of new regulations on banks on campus. We
    are pushing on loan servicers. We are pushing on all these
    other areas rather than pushing the accreditation side. And how
    do we create more innovation so we have less expensive options
    for people?
        Mr. Mitchell. Got it.
        Senator Lankford. So tell me where I am wrong.
        Mr. Mitchell. I do not think that those are mutually
    exclusive. I think that we have to protect against the downside
    risk on the loan side, and I think that that is why we need to
    continue to do all we can on financial literacy, that issue
    that has come up, to help people understand how best to manage
    their own loan portfolio.
        We need to be sure that we are holding institutions
    accountable to giving people the education that they need to
    make a living and pay back those loans. That is why our gainful
    employment regulation is so important.
        We need to make sure that there are a variety of repayment
    plans and that our servicers are doing a great job of helping
    borrowers pick the right plan for them. That is all at the back
    end.
        On the front end, we are and must continue to support
    innovation. The good news--and I think it differs a little bit
    from what you--my view differs a little bit from what you have
    heard this morning--is that there is tremendous innovation
    afoot, even in the existing infrastructure. Arizona State just
    announced a partnership with edX that Kevin mentioned to
    provide a complete freshman year online. Southern New Hampshire
    University has created a subsidiary called ``College for
    America'' that offers one year of college for $2,500, part
    online, part in-person. Georgia Tech has a $7,000 master's
    program in engineering. These are examples of intense
    innovation under way to create opportunities, pathways for
    students.
        While I am on that point, each of those institutions is not
    only looking at creating pathways for traditional 18-to 24-
    year-old students. These programs--the partial online programs,
    the
    competency-based degree programs, the cafeteria approach
    programs--they are particularly designed to meet the needs of
    working moms, returning veterans, fully employed workers, or
    workers who have been displaced. Those turn out to be the new
    majority students in American higher education.
        So we are doing all we can to support those innovation
    efforts. One of our great programs is the First in the World
    Program where we provide grant support: innovation grant
    support to institutions that want to create better access and
    opportunity, better completion rates for first-generation and
    underrepresented students. And so we are able to seed that
    innovation through funds that you provide.
        Unfortunately, Congress has suggested zeroing out that
    program. We think that that would be a tragedy. It would cutoff
    innovation at its very bud.
        Senator Lankford. Well, we look forward to getting a chance
    to see the recommendations. Will all these issues come up in
    this January report that is coming to us?
        Mr. Mitchell. We are likely to engage with you in the
    budget process, we are likely to engage with you in the
    reauthorization process, and we are likely to engage with you
    in specific pieces as well.
        Senator Lankford. OK. I yield back.
        Chairman Johnson. Senator Peters.
        Senator Peters. Thank you, Mr. Chairman, and thank you,
    Secretary Mitchell, for being here.
        Mr. Mitchell. Senator, thank you.
        Senator Peters. I actually want to continue on some of the
    themes from Senator Lankford in innovation, making sure that
    folks have the opportunity to afford education, to get into
    education, and particularly for some of the students who I
    think have not been the focus of many in the educational
    community when it comes to having access to higher ed.
        Earlier this week, I visited Cody High School in Detroit,
    and the Cody Rouge community there in Detroit is really working
    very hard to reinvent how we think about high school and what
    school offers. In fact, as I was there, I learned that many of
    the Cody students, when they graduate from high school, have
    the certifications necessary to be an Emergency Medical
    Technician (EMT), to get into firefighter training or be
    firefighter certified, to really have a first step up on their
    postsecondary careers.
        And, similarly, as you are well aware, dual and concurrent
    enrollment in early college programs has been proven to
    increase access to higher education and dramatically help the
    affordability of education as well. So if we are able to
    shorten the time that it takes for someone to get a degree by
    being in a concurrent enrollment in high school, that is a good
    thing. It will also help with the transition for someone,
    particularly first-generation folks where they get an
    introduction into that transition out of high school and into a
    postsecondary situation. Although it seems like we have focused
    a great deal on advanced placement, and we have international
    baccalaureate programs to help students, which are all
    wonderful things to do, I think you need to have a fairer
    playing field for other folks who may not--that may not fit an
    advanced placement (AP) program and an international
    baccalaureate, and yet they need postsecondary education
    training and concurrent enrollments to do that.
        So if you could expand a little bit on what the Department
    of Education is doing for concurrent enrollment, how can we
    expand that? Are there ways that Congress can help you in this
    mission? Because I see it firsthand every day in my State and
    how they can transform young lives who might otherwise be left
    behind.
        Mr. Mitchell. Sure. Thank you, Senator. We completely agree
    with you about the efficacy of dual enrollment and early
    college programs. We think in both of the ways you suggest--
    one, accumulating college credit and, two, accumulating
    cultural knowledge about college and just being able to see
    yourself in a college environment--is critically important to
    low-income and first-generation students. So we have been big
    supporters of dual enrollment, concurrent enrollment, and early
    college high school--in fact, to the point that in 2013 we
    launched and had in our budget the High School Redesign
    Initiative to encourage high schools to develop, if they had
    not, or expand, if they had, dual enrollment in early college
    programs.
        Similarly, in our Race to the Top program, a number of
    States came forward with very aggressive plans that we
    supported to move forward dual enrollment in early college
    programs.
        In the last several years, we have paid attention to early
    college and dual enrollment through our College Opportunity
    Summits where we have called together colleges and, in the last
    year, colleges and high schools and community colleges within a
    region to talk about how they are going to commit to developing
    pathways through their system. And so the good news is that we
    have dozens of commitments on the books from high schools,
    community colleges, and 4-year colleges to build on and expand
    their dual enrollment programs.
        The tools that we have are limited at the moment, but I
    think that Senator Ayotte mentioned using Pell in different
    ways or in short-term training programs. And in a similar vein,
    I think that your help in making early Pell available to
    students enrolled in dual enrollment or early college high
    school programs would be an example of a way that Congress
    could act to put dollars behind what is, again, a very
    efficacious program for students.
        Senator Peters. Would the use of grants, as well, help some
    of these high schools and colleges be able to develop these
    programs? I assume there are some resources necessary. Federal
    grants would be helpful, I assume.
        Mr. Mitchell. If we could put together a grant program to
    support that, that would be great. The other thing that you
    know well from your State is that even in advance of America's
    College Promise, when communities are coming together to build
    their own Promise programs, Kalamazoo being the oldest and
    grandest of all of them and the best evaluated, oftentimes
    those programs lash up private support to provide funding for
    dual enrollment and early college high school, too. So I think
    that this is a case of all of the above.
        Senator Peters. And when you mention Kalamazoo and others,
    the strength of public-private partnerships, particularly when
    it comes to this issue, I think is clearly demonstrated work
    and are necessary if we are going to address this issue.
        Mr. Mitchell. Exactly.
        Senator Peters. Thank you so much for your testimony.
        Mr. Mitchell. Thanks for your support.
        Chairman Johnson. Senator Carper.
        Senator Carper. Thank you.
        Mr. Mitchell. Ranking Member, may I say thank you? Before
    you begin, thank you for inviting me today.
        Senator Carper. We are happy you are here. Thanks so much
    for coming, Ted.
        First of all, let me just say, you were here--I know you
    were here for the first panel, and I thank you for sitting in
    and listening. One of our witnesses--in fact, our second
    witness--spoke near the end of his testimony, and he went
    through--it was Mr. Carey. At the end of his testimony, he went
    through, I thought, a really interesting, almost like a
    checklist of things that we could do to get better results.
    Would you react to anything that he said that you thought was
    especially sound advice?
        Mr. Mitchell. I think that what----
        Senator Carper. A lot of what he said rang true to me, and
    I think to my colleagues.
        Mr. Mitchell. It did to me as well, and it rang true to me
    not only in this role but in my previous roles as a campus
    administrator.
        I think most salient, though, is his injunction for us to
    experiment within boundaries.
        Senator Carper. Experiment?
        Mr. Mitchell. Experiment within boundaries.
        Senator Carper. OK.
        Mr. Mitchell. I think that it is very important that we do
    embrace the world of change in higher education around us, the
    radically different delivery modes that are now available, the
    short-term/long-term blended learning, online learning. I think
    it is time for us to do some strategic innovation, to measure
    what works, to then create policy that supports what works, to
    scale that around the country. I think that that is an
    obligation that we have as a government, and it is one of the
    things that I think really only we as the Federal Government
    can do because we are the gate holders to Federal financial
    aid, which is how this market gets built.
        Senator Carper. OK.
        Mr. Mitchell. I will--if I can?
        Senator Carper. Yes.
        Mr. Mitchell. I think that the one place where I would urge
    some caution on Kevin's checklist is regarding an overreliance
    on the growth of the number of administrators as an example of
    bloat in higher education. When I go around the country and
    when I look at the most successful programs in terms of
    providing opportunity to first-generation college students,
    minority students, and low-income students, there are programs
    that invest rather heavily in student support, and so I would
    not want us to mix that up with what I do agree is an
    overgrowth of other administrative categories.
        Senator Carper. Good. Sometimes in this hearing room I
    quote Albert Einstein, who said famously, ``In adversity lies
    opportunity.'' And there is a lot of adversity here. We talked
    about some of the heartache and challenges that we face. But
    there is also opportunity here. And one of the things that my
    wife and I do whenever close friends or relatives have a baby,
    we send them a baby cup for the baby which is inscribed and a
    handwritten note to the baby, and I am going to start changing
    the note and urge the baby to open up a 529 at birth and urge
    the parents to solicit, whenever somebody is looking to make a
    donation or buy a gift for their child, birthday, Christmas,
    whatever it might be, think about just--forget about--make it
    easy, just make a donation to the 529. I know some folks who do
    this. You probably do, too. It is a very, very smart thing to
    do.
        In our State and I am sure in other States as well, we have
    schools that try to think about ways to save money and offset
    the costs of higher ed, but schools offer advanced placement
    courses, and we are trying very hard to get more kids in
    advanced placement courses. Not every college or university
    with take APs, or will do well in the advanced placement test,
    but a bunch will, and that is a way to help reduce the cost of
    going to college. One of our students, one of our children was
    able to pretty well knock out the first year of funding because
    of doing well on advanced placement tests.
        Delaware State University, a historically black college and
    university in Dover, Delaware, started up a new high school
    last year, grades 9 and 10--eventually it will be 10, 11, grade

    12--and the great thing about the--they call it their ``early
    college high school'' at Delaware State University--is students
    can earn credit and be able--up to 2 years of college credit
    while they are in high school, from Delaware State University
    and from other universities as well.
        We have in our State something called the Student
    Excellence Equals Degree program (SEED), whereby the folks can
    go literally, if they do reasonably well academically in high
    school, they can go to Delaware Technical Community College, a
    2-year community college, pretty much free. And the
    administration has called for doing that as part of their
    national initiative.
        We have a really good vo-tech high school in southern
    Delaware called Sussex Tech, and they have partnered with
    Widener University so that as students go through Sussex Tech,
    do well, they can transfer earned credit to go to Widener
    should they choose to do that.
        Senator Johnson and I and our colleagues have the
    opportunity to nominate kids to go to all the military
    academies, the service academies. We do that every year. I was
    a Reserve Officers Training Corps (ROTC) guy at Ohio State, and
    we have all kinds of ROTCs where people can get help.
        When I was Governor of Delaware, we really strengthened the
    ability of the National Guard to pay tuition for folks that
    volunteered to serve in the National Guard. One of my sons did
    a pretty good job on his own, going out and finding scholarship
    money. Somehow if we can encourage people to do that and make
    it easy, not harder, that is helpful.
        I worked a couple jobs. My guess is Senator Johnson worked
    jobs, and probably a lot of us worked--or you worked jobs in
    college, certainly in high school and in college as well. The
    best job I ever had was in college. I was a pots and pans man.
    I ran the Hobart dishwashing machine in the Delta Gamma
    sorority house. The best job I ever had.
        There are all kinds of things that we can do. We can apply
    for Pell grants. We can serve in the military. And the great
    thing about the GI bill, the post-9/11 GI bill--we just sent
    off 300 men and women in the Delaware National Guard to
    Afghanistan a month ago, and I told them all when they were
    leaving at the departure ceremony, I said, ``When you come
    back, most of you will be eligible for the GI bill. It pays
    your full tuition to go to college to any public school pretty
    much in the country. If you do not use it, your spouse can. If
    your spouse does not use it, your dependent children can.'' And
    that is a great--a lot of families are just leaving that money
    on the table because they are not aware of the benefit or they
    are not taking advantage of it. So there is a lot we can do.
        As my time runs out, I want to come back to a concern, a
    longstanding concern--it goes back 60-some years--about for-
    profit colleges and universities. Some of them do a great job,
    and some of them do not. It goes back to 1952 when the 85-15
    rule was first established that I talked about. And today we
    have created under the 90-10 rule a loophole which allows a
    private college or university really to realize all the
    revenues from the Federal Government, which I do not think is
    healthy. It does not harness market forces. The reason why we
    had the 90-10 rules was to try to harness market forces so we
    did not have to have all this accreditation and rules and so
    forth, and regulations. Markets, market forces, would actually
    help make sure that if schools, private colleges and
    universities were not doing a good job, then, we would learn
    from that, and the kids would not go to those schools.
        What should we do about the 90-10 rule? What should we do
    out it?
        Mr. Mitchell. Thanks, Senator, and I want to come back to
    one of the themes in your remarks a moment ago, but first on
    90-10, we think 90-10 is wrong. We think the loophole is wrong.
    We want to fix it. We are grateful for your work with your
    colleagues to move us in that direction.
        We believe that it is appropriate to have a threshold for
    Federal dollars, but that that should include all Federal
    dollars.
        We think that one of the ways that the market distortion
    that you talk about has acted is by putting a bull's eye on the
    back of veterans' backpacks, and we think that there have been
    different kinds of bull's eyes on their backs for too long and
    they need to get great information about which programs are
    going to serve them well, and they need not to be targeted by
    unscrupulous for-profit institutions who simply want the GI
    bill money. We think that that is wrong for the country. We
    think it is a tragedy for our veterans. We need to do better.
        Senator Carper. Amen. Thank you.
        Mr. Mitchell. Thank you.
        Chairman Johnson. Thank you, Senator Carper.
        By the way, that is an experience we share. I started my
    taxpaying working career as a dishwasher in Walgreen's grill.
    Learned to tolerate heat on your hands, right?
        We will give you an opportunity to just make a closing
    comment here. I did want to pick up on a point that Senator
    Carper was alluding to with AP classes. I have certainly seen
    that with my own kids and a lot of their friends. A lot of
    these kids are starting college, sometimes with a year's worth
    of college credit, and yet I have seen reports--this is what I
    really want to get to in terms of metrics--where on average it
    is taking students right now 5\1/2\, almost 6 years to complete
    a 4-year degree. Is that, similar to the metrics you are
    seeing? Can you provide any kind of explanation for that? Then
    you can go right into any kind of closing comment you would
    like to make.
        Mr. Mitchell. Sure. Fair enough. So I think that this goes
    back to the comments that I was making about the new normal
    college student. The new normal college student is balancing
    work, perhaps family, other obligations, and so it is generally
    taking them longer. The pure 18- to 22-year-olds who are
    starting college continue to finish in the 4-to 5-year range at
    about the same rate. The growth at the other tail is largely
    working adults.
        That does not mean we should not worry about it. I think it
    is why we need to invest more and innovate more in programs
    that reach students where they are and take them to where they
    need to be. And that is where the University of Wisconsin's
    flex program, for example, is such a shining light for us.
        Let me wrap up by saying a couple of things.
        First of all, as I said at the outset, we continue to
    believe that a college education, whether it is a 4-year
    degree, a 2-year degree, or a certificate in a technical field,
    is the best investment an individual can make and the best
    investment that we can make as a Nation.
        There is a lot that we can improve about higher education,
    and there is a lot we can improve about the delivery and the
    oversight of higher education. In America, we are always
    looking to improve. We are always looking for what is that
    thing that we can fix. And today's conversation has been a
    great opportunity to engage in just that prototypically
    American dialog.
        For me, I have never been more excited about the future of
    American higher education. I am excited by the diversity of the
    students who are coming to the doors of colleges and
    universities looking to improve their lives, looking to live
    out the American dream. I am excited by the institutions that
    are responding to the challenges of innovation and that are
    providing opportunities for those students. And I am excited by
    the opportunity to work together with this Congress in the time
    that we have left to take the next steps to building an
    innovative, creative, accountable, and high-quality education
    so that access, affordability, and quality come to life every
    day in the lives of students in our colleges.
        Senator, thank you for the opportunity.
        Chairman Johnson. Well, thank you, Secretary Mitchell, for
    your testimony and answers to our questions.
        With that, the hearing record will remain open for 15 days
    until October 15th at 5 p.m. for the submission of statements
    and questions for the record.
        This hearing is adjourned.
        [Whereupon, at 11:58 a.m., the Committee was adjourned.]

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