    [Senate Hearing 114-619]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-619

     DEPARTMENT OF DEFENSE ACTIONS CONCERNING VOLUNTARY EDUCATION PROGRAMS

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

                                    HEARING

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               NOVEMBER 29, 2016

                                   __________

             Printed for the use of the Committee on Armed Services

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                          COMMITTEE ON ARMED SERVICES

      JOHN McCAIN, Arizona, Chairman     JACK REED, Rhode Island
    JAMES M. INHOFE, Oklahoma            BILL NELSON, Florida
    JEFF SESSIONS, Alabama               CLAIRE McCASKILL, Missouri
    ROGER F. WICKER, Mississippi         JOE MANCHIN III, West Virginia
    KELLY AYOTTE, New Hampshire          JEANNE SHAHEEN, New Hampshire
    DEB FISCHER, Nebraska                KIRSTEN E. GILLIBRAND, New York
    TOM COTTON, Arkansas                 RICHARD BLUMENTHAL, Connecticut
    MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
    JONI ERNST, Iowa                     MAZIE K. HIRONO, Hawaii
    THOM TILLIS, North Carolina          TIM KAINE, Virginia
    DAN SULLIVAN, Alaska                 ANGUS S. KING, JR., Maine
    MIKE LEE, Utah                       MARTIN HEINRICH, New Mexico
    LINDSEY GRAHAM, South Carolina
    TED CRUZ, Texas

                      Christian D. Brose, Staff Director
                     Elizabeth L. King, Minority Staff Director

                                      (ii)

                             C O N T E N T S

    _________________________________________________________________

                               november 29, 2016

                                                                       Page

    Department of Defense Actions Concerning Voluntary Education          1
      Programs.

    Levine, Honorable Peter K., Acting Under Secretary of Defense for    13
      Personnel and Readiness; Accompanied by Stephanie Barna,
      Performing the Duties of Principal Deputy Under Secretary of
      Defense for Personnel and Readiness, and Dawn Bilodeau, Chief,
      Voluntary Education Programs, Department of Defense.

    Questions for the Record.........................................    52

                                     (iii)

     DEPARTMENT OF DEFENSE ACTIONS CONCERNING VOLUNTARY EDUCATION PROGRAMS

                                  ----------

                           TUESDAY, NOVEMBER 29, 2016

                                           U.S. Senate,
                                   Committee on Armed Services,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:33 a.m. in Room
    SD-G50, Dirksen Senate Office Building, Senator John McCain
    (chairman) presiding.
        Committee members present: Senators McCain, Wicker, Ayotte,
    Fischer, Cotton, Rounds, Ernst, Tillis, Sullivan, Cruz, Reed,
    Nelson, McCaskill, Manchin, Shaheen, Gillibrand, Blumenthal,
    Donnelly, Hirono, Kaine, King, and Heinrich.

           OPENING STATEMENT OF SENATOR JOHN McCAIN, CHAIRMAN

        Chairman McCain. Good morning. Committee meets this morning
    to review the Department of Defense decision last year to put
    the University of Phoenix on probation, pending possible
    termination, with respect to its participation in its Voluntary
    Education Tuition Assistance Program, a program to allow Active
    Duty or members of the military to receive a quality education.
        I welcome our witnesses and appreciate their appearance
    before the committee: an old friend, Peter Levine, who is
    Acting Under Secretary of Defense for Personnel and Readiness;
    Stephanie Barna, Acting Principal Deputy Under Secretary of
    Defense for Personnel and Readiness; and Dawn Bilodeau, Chief
    of Voluntary Education for the Department of Defense.
        This hearing is about the how the Department of Defense,
    consistent with the Obama administration's ideological
    hostility to for-profit universities, under pressure from at
    least one Member of Congress, and having performed very little
    due diligence of its own, placed on probation a reputable and
    fully accredited for-profit university that provides valuable
    educational programs to thousands of military servicemembers.
    This probation decision, which constitutes nothing short of a
    gross abuse of power, resulted from a process that was
    fundamentally unfair and not supported by sufficient evidence.
    Indeed, the alleged violations that led to the probation
    decision were based on shifting guidance as well as reasons not
    substantially different than alleged violations by 15 other
    universities.
        While the probation decision was ultimately reversed, it
    was not before significant damage had already been done. The
    decision immediately impeded the University's ability to
    provide educational programs to the military community for the
    duration of the program. Countless veterans and Active Duty
    servicemembers were prevented from enrolling in University of
    Phoenix courses. Not surprisingly, this also did significant
    harm to the University's reputation and financial position.
        In 2009, before the administration's regulatory assault on
    the for-profit sector, the company's stock reportedly traded at
    $86.54 per share. Due to this targeted attack and prior to the
    release of the Reveal News hit piece, it was traded at around
    $16 per share, and reached a low of around $6 a share shortly
    after DOD's [Department of Defense] unfair probation decision.
    Had this probation decision not been overturned, thanks to the
    intervention of the Chairman of the Health, Education, Labor,
    and Pensions Committee, the Veterans Affairs Committee, and the
    Permanent Subcommittee on Investigations, among others, the
    University would have been driven into financial ruin.
    Terminating the University's participation in the Tuition
    Assistance Program, as I believe the DOD had intended all
    along, would have left over 9,000 servicemembers attending it
    without a school to complete their education, effectively
    extinguishing the time and effort they had already invested in
    pursuit of a degree. It would also have resulted in decisions
    by the Department of Veterans Affairs to prohibit the
    University from participating in the post-9/11 G.I. Bill and
    the Department of Education regarding title 4 funding. And that
    would have most certainly devastated the University, just as
    the administration did with ITT [International Telephone &
    Telegraph] Tech, in forcing it to close, or as it did with
    DeVry, forcing it to sell off its campuses.
        The purpose of this hearing, in short, is accountability,
    how such a misguided decision was made, the nontransparent and
    flawed ways in which it was made, and why it was made, and who
    was responsible. In this way, today's hearing is bigger than
    this one case, because if the University of Phoenix could be
    singled out in this flawed and suspect way, that suggests a
    deeper failing at the Department of Defense that requires the
    continued oversight of this committee.
        For the background of my colleagues, this committee
    learned, after the fact, of the Department's October 7th, 2015,
    decision to place the University of Phoenix on probation. The
    stated reason for the decision was unauthorized base access and
    the improper use of, quote, ``Challenge Coins.'' Shortly
    thereafter, I and other committee chairmen with jurisdictional
    interest in this case requested additional information on the
    decision, specifically the role played by the Department of
    Education's interagency task force that had been established to
    enforce the President's executive order on for-profit
    universities. What ensued was a meeting with these Senators and
    attended by representatives of some eight Federal agencies,
    including the Department of Defense, the Consumer Financial
    Protection Bureau, the Federal Trade Commission, the Securities
    and Exchange Commission, SEC [Securities and Exchange
    Commission], literally dozens of executive branch personnel.
    Rather than providing responses to our concerns, this meeting
    raised additional troubling questions about the
    administration's hostility toward for-profit education,
    including the Department of Defense--at the Department of
    Defense.
        For purposes of today's hearing, the relevant sequence of
    events begins on June 30th, 2015, when the Center for
    Investigative Reporting, a publication, published a report in
    Reveal News entitled, quote, ``The University of Phoenix
    Sidesteps Obama Order on Recruiting Veterans.'' Dawn Bilodeau,
    the DOD's Chief of Voluntary Education, who recommended the
    probation decision and drafted and signed the probation letter
    against the University, participated in that article,
    acknowledging that the Department was, quote, ``cracking down
    on questionable recruiting practices among for-profits.'' That
    same day, the Ranking Member of the Defense Appropriation
    Subcommittee, Senator Durbin, wrote Secretary of Defense Ashton
    Carter and urged the DOD, among other actions, to suspend the
    University from the DOD's voluntary education programs, to
    investigate and prosecute the University for its use of
    ``Challenge Coins,'' and to bar it from any further access to
    military bases. It appears that this letter was enough to
    propel the DOD into action, for, just 2 weeks later, Ms.
    Bilodeau reached out to military bases regarding the alleged
    access violations, stating that, quote, ``Congress has urged
    DOD to investigate the allegations cited in the Reveal
    article.''
        On July 15th, 2015, in a letter from then-Acting Under
    Secretary of Defense for Personnel and Readiness Brad Carson to
    Ranking Member Durbin, Mr. Carson, quote, ``confirmed that DOD
    was completing a full review of University of Phoenix's tuition
    assistance participation.'' This confirmation would serve as
    the basis for an increasingly hostile attack by Senator Durbin
    and others against the University.
        On October 22nd, 2015, I sent a letter to Secretary Carter,
    raising concerns about the decision to place the University of
    Phoenix on probation. This decision appeared to rely on
    questionable and overly technical interpretations of the
    Memorandum of Understanding [MOU] that governed the interaction
    of for-profit schools with the Department of Defense. It failed
    to acknowledge the corrective actions that the University had
    immediately taken, and it was based in part on allegations made
    by a news article and other agencies that had been neither
    initiated nor confirmed by the DOD.
        Following additional correspondence and several meetings
    with committee staff, the Department removed the University of
    Phoenix from probation in January 2016. I repeat. They removed
    the University of Phoenix from probation in January 2016. By
    then, however, major damage had already been done to the
    University and its mission. For this reason, I directed staff
    to investigate, among other things, the facts and circumstances
    that led to the Department of Defense's decision to put the
    University of Phoenix on probation, the rules, processes, and
    procedures in place at the DOD that govern its administration
    of the Tuition Assistance Program, and the interagency
    enforcement actions against for-profit educational
    institutions. The facts that have emerged suggest that the
    reasons that the DOD provided in support of its decision are
    demonstrably specious. Let us review some of these key facts in
    greater detail.
        First, in its October 2015 probation letter, the Department
    of Defense cited the allegations in the Reveal News article as
    a basis for apparent violations of the Memorandum of
    Understanding, specifically the University's alleged failure to
    obtain approval for base access from DOD educational advisors.
    This was wrong. The fact is, the University acted in good faith
    regarding base access by obtaining approval from base
    commanders prior to taking any action. The Department of
    Defense's concerns about base access appear to reflect overly
    technical violations of the MOU that should not have warranted
    adverse action.
        It's also a fact that, throughout the relevant period,
    there was considerable confusion among the military services
    and participating educational institutions about the
    requirements of the MOU on base access. This arose from a lack
    of a process at DOD to implement base access compliance rules
    by the services, themselves. In each instant of a perceived
    base access violation, the Department of Defense ultimately
    found that the base, itself, failed to comply with the MOU. So,
    again, in this broader context of confusion, singling out the
    University of Phoenix was unfair. And, while subsequent actions
    by the DOD to clarify proper compliance with the MOU may have
    been helpful to other universities, it did nothing for the
    University of Phoenix, which was already paying the price for
    actions that preceded this additional guidance, and was being
    held to a standard that was shifting.
        Second, in its letter explaining its decision to place the
    University of Phoenix on probation, the DOD cites, quote,
    ``transgression of Defense Department policies regarding use of
    its official seals and other trademark insignia relative to
    Challenge Coins.'' This, too, was an error. In that very same
    letter and in subsequent interviews with staff, Ms. Bilodeau
    stipulated that the University had already responded to these
    infractions with appropriate corrective action by the time the
    letter was sent, and that they were no longer a concern of the
    Department. Moreover, 15 other universities--nine public, five
    private, and one for-profit--were found to have violated the
    policies regarding the unauthorized use of Challenge Coins, but
    they were never placed on probation.
        Third, the Department cited civil investigative demands for
    documents by the Federal Trade Commission [FTC] and the
    California State Attorney General as reason for its probation
    decision on the University of Phoenix. This was completely
    erroneous. A mere request for documents is hardly evidence of
    misconduct. In fact, the fact--indeed, the fact is, the DOD
    never undertook its own independent review of the allegations
    raised by the FTC or California Attorney General
    investigations. Rather, it merely reviewed their document
    requests and accepted that they were sufficiently related to
    the University of Phoenix case to be cited as a basis for the
    probation decision. As of today, neither of these
    investigations have found any wrongdoing by the University.
        So, if the facts undercut the Department's own case against
    the University of Phoenix, why did this happen? It was
    certainly true that the Department lacked uniform guidance to
    govern its own interaction with for-profit universities and
    alleged violations of the Tuition Assistance Program. The
    Department also lacked clear lines of authority, supervision,
    and accountability, as well as sufficient processes to review
    allegations of violations of the MOU. These circumstances
    created an opportunity for an abuse of discretion, led to the
    inconsistent and unfair enforcement of the DOD's polices on
    institutions of higher education, and allowed for a single
    Member of Congress to improperly influence adverse action
    against a reputable institution of higher education.
        The facts of this case also raise troubling questions about
    the abuse of executive orders to enact an ideological agenda,
    the role of the Department of Education's unaccountable
    interagency task force in carrying out that agenda, and to what
    extent actions such as these usurp the legitimate role of the
    Congress. None of this should have ever been allowed to happen.
        The purpose of this hearing is to ensure that a similar
    abuse of authority never happens again or there is little
    reason to believe that the circumstances and events that led to
    the mistreatment of this one university could not be present or
    could not manifest themselves elsewhere in the Department of
    Defense.
        Finally, to our witnesses, I want to be clear. I do not
    take lightly requiring Civil Service employees who are not
    confirmed by this body to testify before this committee. This
    is necessary, however, because of the extraordinary
    circumstances of this particular case, but also what it
    represents more broadly: a gross abuse of power through a
    flawed and arbitrary process with insufficient accountability.
    Indeed, the Department came perilously close to extinguishing
    one of its own valuable partners in voluntary education
    programs and the higher education option chosen by thousands of
    nontraditional students, especially Active Duty servicemembers.
    I shudder to think how a similar lack of transparency and
    accountability could manifest itself in other vital DOD
    missions. I truly hope we will never see anything like this
    again at the Department of Defense. But, if we do, for as long
    as I am Chairman of this committee, there will be
    accountability.
        I look forward to hearing from the witnesses. And I thank
    them for their service to our Nation.
        Before I turn to the Ranking Member, Senator Reed, the
    committee has received statements from Senator Durbin and from
    Mr. Timothy B. Slottow, president of the University of Phoenix.
    Without objection, these statements will be made part of the
    record.
        [The prepared statement of Senator Richard J. Durbin
    follows:]

                Prepared Statement by Senator Richard J. Durbin
        Department of Defense (DOD) Voluntary Education programs, including
    the Tuition Assistance (TA) program, play a critical role in
    strengthening our military readiness and offering professional
    development opportunities to the men and women who serve. I have
    supported these programs in my role as Chairman and, now, Vice Chairman
    of the Senate Appropriations Subcommittee on Defense. in fiscal year
    2014, the Tuition Assistance program cost taxpayers $538 million.
        Given the importance of these programs to servicemembers and the
    substantial investment by taxpayers, it is vital that both Congress and
    Executive branch agencies exercise robust oversight of the institutions
    of higher education that participate and aggressively enforce federal
    laws, regulations, and other program requirements. As Chairman of the
    Defense Subcommittee, I held a hearing to examine these programs and
    shed light on widespread evidence that some institutions, mainly for-
    profit companies, were exploiting servicemembers to enrich themselves
    at the expense of federal taxpayers.
        On April 27, 2012, to protect servicemembers and veterans from
    these types of abuses, President Obama signed Executive Order 13607
    Establishing Principles of Excellence for Educational Institutions
    Serving Service Members, Veterans, Spouses, and Other Family Members.
    As a result of this Executive Order, the Department of Defense issued
    DODi 1322.25 and developed a Memorandum of Understanding (MOU) to be
    signed and adhered to by any institution of higher education
    participating in TA. While it could be strengthened further, the MOU
    provides for a number of important protections and disclosures for
    servicemembers and requirements of participating schools.
        Congress should expect the Department of Defense to uphold its
    responsibility to investigate possible violations of the MOU and other
    applicable federal laws and regulations and take appropriate
    enforcement action where violations are found. This was the case in
    June 2015, when an investigation by Aaron Glantz of the Center for
    Investigative Reporting (CIR) documented troubling recruiting and
    marketing tactics employed by the University of Phoenix, which in
    fiscal year (FY) 2014 was the fourth largest recipient of TA funds
    amounting to more than $20 million.
        Glantz found that University of Phoenix spent $250,000 over three
    years to sponsor 89 events at Fort Campbell with one concert featuring
    reality television personality ``Big Smo'' costing $25,000 alone.
    Across the country the company sponsored events on military bases
    including rock concerts, Super Bowl parties, father-daughter dances,
    Easter egg hunts, a chocolate festival, and even ``Brunch with Santa.''
    The events and sponsorships were a foot-in-the-door for the University
    of Phoenix--allowing the company and its recruiters access to
    servicemembers on military bases.
        In addition, according to Glantz, the University of Phoenix paid
    DOD to have its employees serve as the exclusive resume advisors at
    Hiring Our Heroes job fairs and workshops, many of which took place on
    military bases. A CIR hidden camera documented that all of the resume
    workshop materials, presentation slides, and sample ``successful''
    resumes were labeled with University of Phoenix marketing, and trainers
    (University of Phoenix employees) urged attendees to go to the
    University of Phoenix website for additional information. The
    investigation also revealed that the company used ``challenge coins''
    with DOD seals and logos to show its close relationship with the
    military.
        On October 7, 2015, DOD notified the University of Phoenix that
    ``In response to allegations published by the Center for Investigative
    Reporting on June 30, 2015 . . . the Department has conducted a review
    of the agreements between the University of Phoenix and the DOD, as
    reflected in the DOD MOU. This review revealed several violations of
    the DOD MOU attributed to the University of Phoenix.'' DOD's
    investigation also found that ``the frequency and scope of these
    previous violations of the DOD MOU is disconcerting.''
        In its letter to the company, DOD also noted with concern that the
    University of Phoenix was ``under review by both the Federal Trade
    Commission (FTC) and the California State Attorney General.'' DOD was
    right to be concerned by this. In fact, the company faces two separate
    investigations by the FTC--one related to deceptive marketing and
    advertising and a second related to safeguarding student and staff
    personal information. The company also faces investigations by at least
    three other state Attorneys General, the U.S. Securities and Exchange
    Commission, and the Department of Education Inspector General.
        As a result of its findings, the Department placed the company on
    probation and ``with a view to minimizing harm to students'' prohibited
    new TA enrollments and transfers as well as restricting the company's
    access to DOD installations. As part of its due process procedures, DOD
    gave the University of Phoenix 14 days to submit a response to be
    considered during a review of ``whether continued participation in the
    DOD TA program will be allowed and, if so, in what status, and whether
    further action, to include termination in accordance with paragraph
    6(f) of the University of Phoenix MOU with the DOD, is warranted.''
        I was pleased, that with these steps, the Department of Defense
    took seriously its obligation to protect servicemembers and taxpayers
    and to enforce its MOU with the University of Phoenix. But I was not
    alone. A number of veterans service and other organizations sent a
    letter to Secretary Carter on October 27 commending the Department for
    its actions ``to protect the integrity of the Tuition Assistance
    program and to protect servicemembers from deceptive recruiting
    practices'' in the case of University of Phoenix. Among the signers
    were the Air Force Sergeants Association, Association of the U.S. Navy,
    Blue Star Families, Iraq and Afghanistan Veterans of America, Paralyzed
    Veterans of America, Student Veterans of America, Veterans Education
    Success, Veterans for Common Sense, Veterans Student Loan Relief Fund,
    VetJobs, VetsFirst, and Vietnam Veterans of America.
        But the University of Phoenix is not the only for-profit education
    company that poses a risk to servicemembers and taxpayers. The high
    profile bankruptcies of Corinthian Colleges, Incorporated and ITT Tech
    were the end result of years of predatory and deceptive corporate
    practices that put profits above students. Their closures left tens of
    thousands of students, including servicemembers, in the lurch. But it
    hasn't stopped there. Other for-profit education companies
    participating in TA are accused of engaging in similar fraud and have
    closed or are on the brink of closure. With for-profit colleges closing
    due to fraudulent behavior at an alarming rate and such a large share
    of TA funds flowing to this industry (46 percent in fiscal year 2014),
    active oversight by the Department of Defense is more important than
    ever.
        Increasing DOD's obligation to engage in strong oversight and
    enforcement is the fact that federal law actually incentivizes for-
    profit colleges to target servicemembers and veterans. The 90/10 rule
    requires for-profit colleges to derive at least ten percent of their
    revenue from non-federal sources. Shockingly, a loophole in the law,
    allows companies to count Department of Defense and Department of
    Veterans Affairs (VA) education benefits as non-federal revenue. This
    encourages for-profit companies to aggressively target and recruit,
    even using false or deceptive information, servicemembers and veterans
    in order to line their pockets with more federal taxpayer dollars while
    still complying with the law.
        It means that many for-profit companies actually receive greater
    than 90 percent of their revenue directly from federal taxpayers.
    According to a 2013 analysis from the Department of Education obtained
    by the Center for Investigative Reporting, 133 for-profit colleges
    received more than 90 percent of their revenues from taxpayers when DOD
    and VA benefits were included in the calculation. I believe Congress
    must close this egregious loophole that puts our men and women in
    uniform in jeopardy and have authored the Protecting our Students and
    Taxpayers (POST) Act (S. 2272) to do so. I hope my colleagues in both
    parties will work with me on the common-sense measure.
        I thank the Ranking Member, Senator Jack Reed of Rhode Island, for
    submitting this testimony on my behalf. I thank Secretary Carter and
    the dedicated staff at the Department of Defense for their work to
    ensure the integrity of DOD Voluntary Education programs and to protect
    servicemembers from predatory companies that seek to exploit our brave
    men and women in uniform.

        [The prepared statement of Mr. Timothy P. Slottow follows:]

                    Prepared Statement by Timothy P. Slottow
        On behalf of the more than 1 million alumni, students, faculty and
    staff of the University of Phoenix, I offer the following statement to
    the United States Senate Committee on Armed Services in connection with
    its examination of Department of Defense Voluntary Education Programs.
        University of Phoenix holds a unique place in American higher
    education. Nearly 40 years ago, the University was founded to help
    individuals that had for too long been underserved and overlooked by
    traditional colleges and universities. Although so-called
    nontraditional students still face many challenges in obtaining a
    quality higher education in America, the nation has come a long way in
    its service to these students, in no small part because of the
    innovative leadership role the University of Phoenix has played. In
    2015, University of Phoenix taught a reported 214,500 students. More
    than half of them are first-generation college students determined to
    pave a new path to success in life through higher education. Most are
    working adults over 30 years old who juggle work responsibilities,
    including serving in the military, and care for dependents at home
    while attaining a degree--a milestone that not only changes their
    families, but future generations. Nearly half (46.4 percent) report as
    ethnic minorities, and 66 percent are female.
        As a regionally accredited, degree-granting academic institution,
    University of Phoenix proudly serves thousands of U.S. Service members
    and understands its obligation to provide quality degree and
    certificate programs that advance their personal and career aspirations
    and prepares them for future career and technical pursuits, both inside
    and outside of the Department of Defense.
        The value of University of Phoenix degrees is evidenced by the
    950,000 alumni who live in every region of the country and work in all
    sectors of today's job market. It is also directly related to the
    faculty practitioners who teach at the University--9,539 faculty have
    worked or are currently working for Fortune 1000 companies. The
    University faculty have an average 20.7 years of professional
    experience and have taught at the University for an average of 8.4
    years. The average class size is 14.2.
        University of Phoenix proudly issues an Academic Annual Report to
    publicly demonstrate its commitment to transparency and outline what
    independent third-party and internal tools are used to measure student
    learning, academic quality, affordability and the alignment of our
    academic programs and student learning goals to employers' needs in
    this country. \1\ The University's value is further demonstrated by the
    U.S. Department of Education College Scorecard, released in September
    2015. The first College Scorecard included data on 7,676 colleges and
    universities, including University of Phoenix, on a wide variety of
    criteria. In the Scorecard, University of Phoenix placed in the top 25
    among large institutions in salary after attending. \2\
    ---------------------------------------------------------------------------
        \1\ 2015 Academic Annual Report http://www.phoenix.edu/content/dam/
    altcloud/doc/about--uopx/academic-annual-report-2015.pdf.
        \2\ U.S. Department of Education, College Scorecard. (2015).
    MERGED2011--PP.csv. Retrieved September 15, 2015 from https://
    collegescorecard.ed.gov/ Note: Data for the University's main campus,
    as well as several other campuses, is not displayed on the 2016 College
    Scorecard due to changes in the IPEDS Unit ID's assigned by the
    Department of Education.
    ---------------------------------------------------------------------------
        Since its founding in 1976, not only has the University of Phoenix
    proudly served the military community, but it has demonstrated a
    longstanding commitment to policies, regulations, and statutory
    requirements that ensure active-duty and veteran students are well
    served and have the resources and protections necessary to maximize the
    return on their educational investment.
        On February 2, 2012, University of Phoenix joined with leading
    Veteran Serving Organizations in calling on President Barack Obama and
    the Congress to support new safeguards that would foster responsible
    decision-making and protect Service members and veterans who seek to
    use their educational benefits. The University called for mandating
    upfront educational counseling and developing a formal, integrated
    government-wide complaint tracking system. Ardent and effective
    advocacy on behalf of these enhancements designed to ``rein in bad
    actors across all sectors of higher education'' helped lead to the
    enactment of Public Law 112-249 (Improving Transparency of Education
    Opportunities for Veterans Act) and the President's Executive Order
    13607--Establishing Principles of Excellence for Educational
    Institutions Serving Service Members, Veterans, Spouses, and Other
    Family Members.
        Both the Executive Order 13607 and the new postsecondary education
    complaint system are integral parts of the Department of Defense
    Memorandum of Understanding outlining requirements related to
    participation in the Voluntary Education Programs. University of
    Phoenix supports each of these initiatives and has taken direct steps
    to advocate for enhancements and improvements that help students. In a
    June 29, 2012 letter expressing support for Executive Order 13607, the
    University wrote: ``We believe the student protections, systems and
    procedures we have in place can help inform the final framework and
    implementation guidelines of the President's Executive Order, including
    the Principles of Excellence. Our institutions' doors are wide open to
    the Secretaries of Defense, Veterans Affairs, and Education as the
    operational requirements are developed.''
        The vital role of Department of Defense Voluntary Education
    Programs in serving military personnel pursuing postsecondary education
    and training cannot be understated. The integrity and sustainability of
    the Tuition Assistance program must be prioritized and diligently
    maintained. We thank the Committee for its work in this regard and
    appreciate the steps taken by the Department of Defense to partner with
    us to improve operational processes in a manner that protects
    educational choices made by active-duty students and eliminates
    unnecessary complexity and confusion.
        Institutions of higher education, taxpayers and active-duty and
    veteran students themselves are best served when the rules are clear,
    fair and transparent. When there are shortcomings in this regard, they
    must be identified and immediately corrected in order to continue to
    meet the essential goals of Voluntary Education Programs to: (1) play a
    critical role in the recruitment of high-performing talent in the Armed
    Services; (2) enhance the preparedness of service members for 21st
    century warfare; and, (3) ensure successful service member transitions
    to civilian life where they become active and engaged citizens.
        We remain steadfast in our commitment to provide access to higher
    education opportunities that enable students to develop the knowledge
    and skills necessary to achieve their professional goals, improve the
    performance of their organizations, and provide leadership and service
    to their communities. We stand ready to work with the Committee, the
    Department of Defense and all higher education stakeholders to improve
    services to students and protect investments made by taxpayers.
        The committee has received a letter from Mr. Walter
    Ochenko, policy director of Veterans Education Success. Without
    objection, this letter and all other letters received on this
    matter through December 8th will be made part of the record.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman McCain. Senator Reed.

                     STATEMENT OF SENATOR JACK REED

        Senator Reed. Well, thank you very much, Mr. Chairman.
        And let me join you in thanking the witnesses for joining
    us today to provide testimony on the operation of voluntary
    education programs within the Department of Defense and the
    Department's efforts to protect servicemembers, veterans, and
    their families.
        I realize the Chairman's focus is on the University of
    Phoenix and the compliance issue that they have faced over the
    past 2 years, but I believe this hearing is especially
    important to highlight the Department's efforts across the
    board to ensure consistent and equitably applied standards are
    in place to protect servicemembers, veterans, and their
    families from abusive and deceptive marketing practices by any
    school, regardless of whether they are for-profit, private,
    not-for-profit, or public institutions. The University of
    Phoenix example is but one instance where the Department has
    acted to ensure educational institutions live up to the
    standards they agreed to in order to participate in the Tuition
    Assistance Program. Indeed, as the Department's response to
    Senator McCain's questions concerning the University of Phoenix
    has shown, these rules apply to all schools and are being
    enforced against all schools.
        The administration's goals in this area are worthy and
    should continue even as a new administration takes office. By
    Executive Order 13607, promulgated 2012, the administration
    seeks to ensure that Federal military and veterans educational
    benefits programs are providing servicemembers, veterans,
    spouses, and other family members with the information,
    support, and protections they deserve. The program does this by
    requiring participating schools to make a wider array of
    information available to prospective students by refraining
    from abusive and deceptive recruiting practices and providing
    highest-level academic programs and students or systems. And I
    think we can all agree that these are worthy goals.
        Underlying these issues is something else that I've pointed
    to repeatedly, and that's the so-called 90/10 rule. And this
    rule state that, for for-profit schools, they must derive at
    least 10 percent of their revenue from non-Federal student-aid
    sources. Paradoxically, DOD tuition assistance in VA [Veterans
    Administration] G.I. Bill programs count as non-Federal
    student-aid sources. And that means, for every dollar of TA
    [Tuition Assistance] or G.I. Bill funding for a for-profit
    school, they can acquire $90--$9 more in Federal student loans.
    And as Holly Petraeus has testified, that leaves a bulls eye
    too often on the backs of servicemembers, veterans, and their
    families, which explains why some for-profit educational
    institutions are desperate to enroll servicemembers, and also
    why the Department of Defense has to be on its guard.
        This 90/10 loophole provides a powerful incentive to
    recruit servicemembers and veterans, even to the exclusion of
    effective student support programs. As Ms. Petraeus testified
    in 2013, a school--and I will emphasize, not the University of
    Phoenix--was guilty of signing up servicemembers with brain
    injuries to educational programs that they did not need and
    without their full understanding, employed 1,700 recruiters--
    the school did--and only one full-time employee dedicated to
    helping students gain employment after completing their
    studies. This illustrates the perverse incentives the system
    has created and also, once again, the need for someone to be
    watching out for these veterans, their families, and their
    spouses.
        And I agree with Holly Petraeus, who has advocated that we
    should change this statutory loophole and support legislation
    to ensure that these DOD funds and VA funds are counted as
    Federal resources, not as private resources.
        But, we concede, in the collapse of Corinthian College and
    ITT, the need for stricter standards and greater transparency.
    Tens of thousands of students, including servicemembers and
    veterans, have been left in the lurch because of the failure of
    these schools. They've taken out loans or used their G.I. Bill
    benefits with little of anything to show for it. The
    administration's effort under the executive order are critical
    to preventing these problems and ensuring that military and
    veteran students can be confident that all institutions
    participating in DOD, TA, and VA education benefit programs
    adhere to reasonable quality standards and fair practices.
        I look forward to hearing from our witnesses about these
    programs, how we can strengthen these protections and ensure
    that we protect the men and women who have protected us.
        Thank you, Mr. Chairman.
        Chairman McCain. Thank you.
        We'll begin with you, Mr. Levine. Welcome back.

    STATEMENT OF HONORABLE PETER K. LEVINE, ACTING UNDER SECRETARY
        OF DEFENSE FOR PERSONNEL AND READINESS; ACCOMPANIED BY
      STEPHANIE BARNA, PERFORMING THE DUTIES OF PRINCIPAL DEPUTY
      UNDER SECRETARY OF DEFENSE FOR PERSONNEL AND READINESS, AND
    DAWN BILODEAU, CHIEF, VOLUNTARY EDUCATION PROGRAMS, DEPARTMENT
                               OF DEFENSE

        Mr. Levine. Thank you, Mr. Chairman, Senator Reed, members
    of the committee. It is a pleasure and an honor to appear
    before this committee.
        You have my written statement, so I'm not going to read
    from it, but there are a few points that I think would be
    helpful for me to make up front about the program and about the
    issues that we're--that we've been trying to deal with, the
    process we've been trying to deal with.
        As you know, I was not in P&R [Personnel and Readiness] at
    the time of the events that you're talking about with the
    University of Phoenix, with this program. The two Voluntary
    Education and Tuition Assistance Programs fall under P&R
    responsibility, and so those are now my programs. And Ms. Barna
    and Ms. Bilodeau work for me.
        The Voluntary Education and Tuition Assistance Programs are
    both incredibly valuable programs to the Department and, to my
    lights at least, incredibly vulnerable programs to abuse. I
    want to put that in perspective. These programs provide
    continuing education for 286,000 servicemembers. That makes
    those servicemembers better soldiers, airmen--sailors, airmen,
    and marines, and it helps them also to prepare for life after
    service. It is a particularly valuable program, because it's
    broadly open to Active Duty members, which means that, unlike
    some--many of our other continuing education programs and
    advanced education programs, this is available to enlisted
    members--broadly available to enlisted members so that,
    throughout the ranks of the service, many members can benefit
    from this, as opposed to some of our other programs, which tend
    mostly to benefit officers.
        At the same time, as valuable as this program is, we view
    this as a program that's potentially vulnerable to abuse. The
    reason, to my lights--there are several reasons for that. One
    is that this is a program that involves what I would call
    distributed decision making. We pay the bills, but
    servicemembers make the decisions. So, we don't have any
    central place, like with contracting, where we're monitoring
    what the decision is, making the decision, making the decision
    on a rational basis. We have 286,000 servicemembers who are in
    the program, plus others who may be considering it, each of
    whom is making a decision for him or herself.
        As we look at that, we see--and you see this in our
    prepared testimony--only 53,000 of the 286,000 servicemembers
    who are participating in the program--we have 286,000 members
    participating, only 53,000 receive certificates or degrees. So,
    that means that close to 80 percent of the participants in the
    program will not ultimately receive certificates or degrees
    from the program. Now, there are lots of reasons for that. That
    doesn't mean that that's abusive, per se, but it means that
    they're--because if takes--it's a hard thing to do--you've got
    a full-time job, you're on Active Duty; the Active Duty comes
    first. It can take many years to get a degree. But, it means
    that we have to be sensitive to the value proposition for our
    servicemembers. What are they getting out of this?
        At the end of the day, we--we also have a problem, as
    Senator Reed mentioned, with student loans. We have concern
    that, even though tuition is paid by DOD, we have some
    participants participating in education institutions that may
    be pressuring students to take loans, even where they don't
    need loans, because their tuition is being paid. We have some
    cases of bad debts and debt problems.
        But, the real vulnerability of the program, to me, is that
    it's outside of our wheelhouse as the Department of Defense.
    We're not an education--we're not experts in education, so we
    want to protect our servicemembers, but we're not the people
    who can figure out the value proposition. We have roughly 2,700
    educational institutions participating in the program. That
    includes very good educational institutions. They all have to
    be accredited, but we can't tell which ones are good and which
    ones are bad. We can't tell--and when we hear concerns about
    the value proposition, we're not well-positioned, because of
    our expertise, which is in defense not in education, to rank
    institutions and to provide our servicemembers with accurate
    and helpful information.
        The one interagency meeting that I participated in on this
    subject since I've been in P&R, I raised two issues. One was
    that we need to treat for-profits and nonprofits alike, that we
    can't distinguish and discriminate against anybody because
    they're for-profit; and the other is that we need help, and we
    need help in understanding which--how to rate and rank
    institutions, and to determine which ones are providing us good
    product and which ones aren't.
        In the absence of that kind of good information, we have
    chosen to rely on what I call surrogate measures or
    prophylactic measures to try to protect our servicemembers. And
    one of the key members that--one of the key measures that we
    use in that regard is the issue of marketing and base access. I
    would say, if I could--if I can give servicemembers really good
    information about who is providing a good product and who isn't
    providing good product--who isn't providing good product--I'd
    be a lot less concerned about base access and marketing. But,
    when I don't know, and I can't judge who's providing good
    product and who isn't, this is something that I fall back on
    and rely on, because, when I've got allegations out there about
    misrepresentation and deceptive actions and multiple
    unsolicited phone calls or emails or high-pressure recruitment
    tactics, false representation about degree programs, I want to
    hit--I want to try to nip that in the bud and hit it at the
    front end, rather than waiting until after there's an
    allegation and I go through some lengthy proof, if I can
    control it.
        So, this is something that took place before I was there,
    but we came up with an MOU which says, basically, ``If you want
    to have access to a base for marketing purposes, you have to
    come through your educational advisor on the base.'' And the
    educational advisor on the base is supposed to allow you to
    market only in controlled circumstances, like sanctioned
    education fairs. So, we have viewed direct marketing to our
    students as a negative. Now, we could take that as the right
    rule or the wrong rule, but it's--there's no question in my
    mind that is the rule, that we have told all the education
    institutions who are participating in this program, ``You have
    to sign an MOU if you're going to participate, and your MOU
    will provide that you're going to go through the education
    advisor for any access to the base.'' And we've told our
    education advisors, ``Don't approve access for the purpose of
    unlimited marketing. Marketing has to be in controlled
    circumstances, because we don't--we're not trusting of the kind
    of marketing that takes place in these programs.''
        So, that could be a bad rule, or it could be a good rule,
    but that is the rule. I can see, from an education
    institution's point of view, that you could look at that, and
    you've--say, ``Well, I'm providing a good product. I'm helping
    servicemembers. I'm putting them at in a better position to
    succeed, and I'm not telling them anything that's not true. And
    so, you telling me I had to go through an education advisor is
    a ticky-tack violation, it shouldn't count.'' That's great, and
    I understand and----
        Chairman McCain. No.
        Mr. Levine.--respect that.
        Chairman McCain. No, that's not the point. The point is, if
    the commanding officer who has responsibility for everything
    that happens on that base gives a permission that clearly is
    the responsibility of the commanding officer. That's the way
    the system works, Mr. Levine.
        Mr. Levine. I understand that, Mr. Chairman. But, the
    education institution signs an MOU saying that it will go
    through the education advisor, and that's the education----
        Chairman McCain. No matter what it says----
        Mr. Levine.--institution's obligation to do that.
        Chairman McCain.--we give the commanding officer the
    responsibility for what happens under his or her command. And
    that's the way the system works. And you should know that by
    now.
        Mr. Levine. I do know that. And I also know that, when we
    have a government wide rule of some kind, or a DOD-wide rule,
    whether it's contracting or something else, if I have a rule--
    --
        Chairman McCain. I don't care what the DOD----
        Mr. Levine. Yeah.
        Chairman McCain.--rule is, Mr. Levine. It's whether--the
    responsibility and authority rests with the commanding officer
    of an installation unless it is overridden by someone superior.
    The education officer is not superior.
        Please proceed, and wrap it up.
        Mr. Levine. So, from DOD's point of view, we don't know
    whether the institution is providing a good product or not, and
    we don't know whether----
        Chairman McCain. So, we placed them on probation without
    knowing it.
        Mr. Levine. We don't know whether they're providing good
    product or not, and we don't know whether they are accurate in
    their representations. We have chosen--but, what we do know is,
    if the institution isn't complying by its MOU, which provides,
    ``You will go to the education advisor,'' then the one thing
    that we do know, that they're being noncompliant, so we have
    reason to be concerned about whether they're being helpful in
    other areas.
        Let me turn to the process, because I'd like to talk to the
    process briefly, as well.
        I've looked at this since I came in. As I said, I wasn't a
    part of this. I think that I would say DOD complied with its
    own processes in how it went through this. There is no place
    where I can see where we violated law or regulation. Having
    said that, I think the process was crappy, Mr. Chairman. I
    don't think that we should have a process which doesn't provide
    advance notice to an institution before it's placed on
    probation. I think that that's a significant decision, which
    has a major impact on the private institution. And, as the
    Department of Defense, we should be more responsible than that,
    and we should have a process which provides advance notice and
    opportunity to respond. We didn't do that in that case. Our
    process didn't provide for it. But, it should have. And that
    was a bad process. And we have taken steps to fix that. We have
    to go through--before it's formal, we have to go through Notice
    in Public's Comment, but I've told my people that we're going
    to provide notice and an opportunity to respond in the future
    before we put anybody on probation.
        So, in terms of your concerns about the process, I share
    your concerns. I think there are things that we can improve.
    There are other places in our--in my statement where I've
    talked about things that we can and should improve in this
    regard.
        Let me just conclude quickly by saying a couple of words
    about the two witnesses to my left and to my right. As you've
    noted, Mr. Chairman, Dawn Bilodeau is a GS [General Schedule]-
    15. We don't normally have GS-15s testify at hearings. We have
    complied with your request in this case. She's agreed to
    appear. The reason we don't like to have GS-15s appear is
    because GS-15s don't set policy for the Department. When GS-15s
    act, they act pursuant to delegated authority from senior
    officials, and we remain responsible and accountable for their
    actions. Even if we didn't know about them, we would be
    responsible and accountable for those actions.
        In this case, Ms. Barna has testified--has informed you and
    will testify today, she did know and she did approve of Ms.
    Bilodeau's actions, and she accepts responsibility and
    accountability for what was done in this case.
        So, let me just conclude by saying a couple of words about
    Ms. Barna, who has been my Principal Deputy since I joined P&R,
    about 8 months ago. During that time, I have consistently
    relied on Ms. Barna. She--her hard work, knowledge, judgment,
    and integrity are unparalleled, in my view. From the time that
    she joined the Department of Defense as a JAG [Judge Advocate
    General] in 1989, I think that everybody has--who has worked
    with her understands that she has made the Department a better
    place. That includes staff of this committee. It includes me
    before I took this position. I cannot tell you how much I rely
    on Stephanie, and how much I trust her integrity and her work
    ethic to do the right thing. So, if she tells the committee why
    she took an action, I think you should take that to the bank.
    That's why she took the action, and not for any other reason.
        With that, I conclude my testimony, and we're--we'd be
    happy to answer any of your questions.
        Thank you, Mr. Chairman.
        [The joint prepared statement of Mr. Levine, Ms. Barna, and
    Ms. Bilodeau follows:]

    joint prepared statement by mr. peter levine, ms. stephanie barna, and
                               ms. dawn bilodeau
        Chairman McCain, Ranking Member Reed, and distinguished Members of
    the Committee, we appreciate the opportunity to appear before you to
    discuss the Department of Defense (DOD) Voluntary Education Program.
    Through 283 Education Centers operating at military installations
    around the world and on-line, the Department offers a full spectrum of
    education services and benefits to our Service members, including the
    opportunity to enroll in post-secondary education programs that can
    lead to industry-recognized credentials, and undergraduate and graduate
    degrees. Service members' costs to participate in these education
    programs may be reduced through appropriated fund financial support in
    the form of Tuition Assistance (TA).
        TA support often makes the difference between whether or not a
    Service member can afford to take a class. An eligible Service member
    may receive tuition assistance benefits of up to $250 per semester
    hour, up to a maximum of $4,500 per fiscal year. Last year, DOD paid
    more than $518 million in appropriated TA funding for qualifying
    military students.
        Together, the Voluntary Education Program and TA seek to facilitate
    quality learning and educational opportunities for military Service
    members, contributing to their enhanced readiness and mission
    accomplishment while in service--completing and enhancing their
    education prepares our Service members to be better soldiers, sailors,
    airmen, and marines, as well as to be better critical thinkers,
    analysts, problem-solvers, and leaders. Education also enhances the
    likelihood that a Service member will successfully transition to
    civilian life at the end of his or her term of service.
        Our military students face unique challenges. They attend school
    during off-duty hours and take courses in a part-time capacity. The
    military mission, deployments, and permanent changes of station often
    take precedence over Service members' academic coursework, and the
    rigors of military life frequently require Service members to take
    breaks of months or even years between courses. These challenges make
    on-line education a very appealing and useful model for many of our
    Service members--in fact, in fiscal year 2015, 85 percent of the
    courses taken through TA were conducted on-line. Also, because of these
    challenges, our Service members often complete a degree program only
    after many years of commitment to their studies and many never receive
    degrees at all.
        In fiscal year 2015, the last year for which complete data is
    currently available, approximately 286,000 Service members enrolled in
    more than 760,000 post-secondary courses using military TA, but only
    53,000 Service members earned degrees or other credentials.
        In overseeing the Voluntary Education and TA programs, we are
    guided by two core principles: a commitment to ensuring that our
    Service members are provided a diverse range of high-quality
    educational opportunities and good stewardship of the taxpayer dollars
    that comprise the TA account. The substantial appropriated fund dollars
    expended for the TA program, the wide diversity of educational
    institutions participating in the Voluntary Education and TA programs,
    the extended periods of time required and unconventional delivery
    mechanisms utilized, and the relatively low rate of successful
    completion with degrees or certificates, all give the Department reason
    to be concerned about the extent to which these two core principles are
    being met.
        These concerns have been enhanced, over time, by Service member
    complaints and published reports indicating that some participating
    institutions may have engaged in misrepresentation or deceptive
    actions, including multiple unsolicited phone calls or emails used as a
    high-pressure recruitment tactic, false representations about degree
    programs, misleading statements regarding accreditation, and promotion
    of costly private or institutional loans.
        In 2014, President Obama issued Executive Order 13607, Establishing
    Principles of Excellence for Educational Institutions Serving Service
    Members, Veterans, Spouses, and Other Family Members (commonly referred
    to as the ``Principles of Excellence''). The Principles of Excellence
    seek to prevent abusive and deceptive recruiting practices that target
    the beneficiaries of federal educational benefits, including DOD TA. In
    July 2014, DOD updated its policies governing the Voluntary Education
    Program and TA to incorporate the Principles of Excellence, as set
    forth in Department of Defense Instruction (DODI) 1322.25, Voluntary
    Education Programs. Effective September 5, 2014, any educational
    institution providing educational programs and to which appropriated TA
    funds are to be paid on behalf of an enrolled Service member student,
    must execute a new memorandum of understanding (MOU) with DOD.
    Consistent with the Principles of Excellence, the revised MOU requires
    educational institutions to provide meaningful information about the
    financial cost and quality of their programs so that military students
    can make informed decisions about where to attend school. The revised
    DOD MOU also requires that each participating educational institution
    be accredited by a body recognized by the Department of Education and
    increases protections for our Service members and their families by
    forbidding unfair, deceptive, and abusive recruiting practices,
    requiring high quality academic and student support services, and
    strengthening procedures for access by educational institutions to DOD
    installations. Currently, more than 2,700 main educational institutions
    have signed the DOD MOU; a number of other educational institutions
    elected to drop out of the TA program rather than sign the updated MOU.
        When educational institutions agree to participate in the DOD
    Voluntary Education and TA Programs, they agree to abide by the terms
    of the MOU and applicable DOD policy as set forth in DODI 1322.25. The
    MOU expressly provides that DOD may ``terminat[e] and suspend[] an MOU
    with an educational institution. . . at any time for failure to follow
    a term of this MOU'' (DODI 1322.25, Appendix to Enclosure 3, Template
    of DOD MOU Between Office of the USD(P&R) and Educational Institution,
    section 6f).
        In January 2014, DOD worked with other agencies to launch the new
    Postsecondary Education Complaint System (PECS) to enable appropriate
    officials to identify and address unfair, deceptive, and misleading
    practices that may contravene the Principles of Excellence. PECS is a
    centralized, online system that provides a vehicle by which Service
    members may report negative experiences with educational institutions.
    DOD reviews each such complaint and reaches out to the educational
    institution identified in the complaint for a response, which is
    provided to both the complainant and the Department. The Department
    endeavors to provide the complainant with updated information about his
    or her case until it is resolved. At the same time, the Department
    utilizes information received through PECS and from other sources
    (e.g., field reports, court cases, other federal agency referrals, and
    media reports) to evaluate the educational institutions that receive
    appropriated TA funds on behalf of our military students, ensure that
    our Service members are receiving the highest caliber education, and
    foster good stewardship of the taxpayer dollars that comprise the TA
    account. If an incoming report is determined to represent an issue of
    potential non-compliance with the provisions of the DOD MOU or the
    Principles of Excellence, the Department sends an email to the
    educational institution named in the report.
        The email typically includes details of the allegation, information
    about the potential impact if the allegation is substantiated, and
    provides an opportunity for the educational institution to respond in
    writing. If a violation is substantiated, the Department may take
    actions, depending on the severity, scope, number, and effect of the
    violation(s), that range from a written warning to a directed
    institutional compliance program review to termination of the DOD MOU.
        The Department takes very seriously its duty to oversee compliance
    by educational institutions with the standards set forth in the DOD
    MOU. To the greatest degree practicable, the Department follows the
    same review and enforcement processes for all complaints and
    allegations of non-compliance, and for all educational institutions
    that receive appropriated TA funds, without regard to the identity of
    the participating institution.
        While more can and has been done to clarify and enhance these
    policies, we believe that the University of Phoenix (UoP) probation was
    addressed in accordance with established policies and the Department's
    overrising requirement to protect both Service members and the
    taxpayers. UoP signed a revised MOU, which included UoP's promise to
    comply with all of the requirements associated with the Principles of
    Excellence, on August 28, 2014. Numerous alleged violations followed.
    In particular:
          Between January 2014 and June 30, 2015, there were 19
    Principles of Excellence-related PECS complaints filed against UoP--the
    most filed against any recipient of TA funding in that period. The
    allegations set forth in these complaints were wide ranging, addressing
    such matters as the quality of education provided, the transfer of
    academic credits, and tuition refund and collection issues. After
    initial compliance review, six of these complaints were not
    substantiated. The balance of the complaints was found to be valid.
          On June 11, 2015, the Chief of DOD Voluntary Education
    participated in a media interview to inform a PBS [Public Broadcasting
    Station] News Hour segment on the Department's implementation of the
    Principles of Excellence and was confronted with allegations that UoP
    had violated a DOD policy intended to prevent the appearance that DOD
    endorses or favors the programs and services offered by a particular
    institution over those of another by prohibiting the use of the
    Departments' official seals in their marketing, promotional, or other
    materials. UoP was also alleged to have engaged in other recruiting
    practices that were inconsistent with the MOU, including violations of
    the DOD policy regarding base access.
          On June 30, 2015, the Center for Investigative Reporting
    (CIR) published an article entitled, ``University of Phoenix sidesteps
    Obama order on recruiting veterans.'' The article cited several
    examples of marketing and recruiting efforts by UoP--paying for the
    sponsorships of briefings and events on several military installations
    without properly securing base access authorization--that, if true,
    would reflect clear violations of the DOD MOU. DOD confirmed with the
    Military Services that base access and recruiting and marketing
    violations had occurred at the identified installations, as alleged.
          In that same period, DOD became aware of ongoing
    inquiries by the Federal Trade Commission and the California State
    Attorney General into UoP recruiting and marketing practices involving
    military students.
        On the basis of these reports from multiple sources, the Department
    followed established procedures by informing UoP of the alleged MOU
    violations and requested that UoP take appropriate corrective actions,
    as it did with other educational institutions alleged to have violated
    their MOUs with DOD.
        Over a four month period beginning with the PBS interview on June
    11, 2015, the Department sent six emails to UoP notifying it of
    potential violations of the MOU regarding DOD's trademark policy and
    alleged violations of the installation access provisions. In contrast
    to other educational institutions that swiftly acknowledged their
    incidents of non-compliance and agreed to work with DOD to bring their
    activities back into compliance as quickly as possible, UoP responded
    to these emails without acknowledging error. While UoP promised to take
    corrective action with regard to the use of DOD seals, it continued to
    assert a right to utilize base access in a manner inconsistent with the
    terms of the MOU.
        For this reason, the Department determined that enforcement action
    was warranted. On October 7, 2015, UoP was notified that its MOU with
    DOD was being placed in a probationary status, which temporarily
    limited its access to bases and precluded UoP from using TA to enroll
    new students. The letter of probation also advised that while in a
    probationary status, UoP was authorized to ``teach out''--meaning that
    current UoP students who were receiving DOD TA would be permitted to
    complete courses already in progress and enroll in new courses deemed
    to be a part of the student's established education degree plan.
    Further, the probationary status of the UoP MOU did not preclude any
    military member from using funds other than TA to enroll in any UoP
    course.
        After the issuance of the probation letter, the Department
    endeavored to work with UoP leadership to bring UoP back into
    compliance and good standing. On October 21, 2015, UoP responded to the
    allegations set forth in the letter of probation with a 19-page letter,
    accompanied by multiple exhibits. Rather than undertaking to bring UoP
    into compliance with the MOU, the letter asserted that UoP could
    override DOD policy and MOU terms regarding base access through
    inconsistent agreements with base commanders. In addition, the UoP
    response letter described conduct that appeared to constitute
    additional violations of the MOU, including issues with UoP
    accreditation, infringement on DOD intellectual property on UoP
    websites and in marketing materials, and numerous additional agreements
    for installation access that did not comport with the MOU.
        On November 15, 2015, DOD appointed a member of the Senior
    Executive Service to work personally and directly with the UoP
    President to gather needed information and bring UoP back into
    compliance with the MOU. From that time forward, DOD and UoP were able
    to develop a more cooperative relationship. On January 15, 2016, the
    Department determined that sufficient corrective action had been taken
    and UoP was removed from probation, subject to enhanced DOD oversight
    for a period of one year. This action allowed UoP to resume the
    enrollment of new military students eligible for TA and access
    installations for purposes of participating in education-related
    activities, including commercial sponsorship.
        Since its removal from probation, UoP has continued to work
    cooperatively with DOD and, to the best of DOD's knowledge, has
    complied with the requirements of the MOU and the Principles of
    Excellence.
        The Department remains committed to ensuring educational
    institutions are good partners in the delivery of quality educational
    opportunities that allow servicemembers to realize their educational
    goals. An educational institution's commitment to abide by the DOD MOU
    is imperative to enabling viable DOD Voluntary Education and TA
    programs.
        At the same time, DOD is committed to the continuous improvement of
    all of its programs, and recognizes that clearer communications and
    more precise policies would likely have yielded a speedier and more
    satisfactory outcome in this case.
        First, DOD has initiated enhanced communication with educational
    institutions regarding trademark law and regulations and installation
    access policies and procedures with a view to preventing common
    violations. With DOD guidance, the Services have standardized and
    automated the installation access request process, rendering it more
    transparent, consistent, and timely. A standardized request form and
    submission process now applies to every military installation. For
    example, any educational institution that desires to participate in an
    activity on any DOD installation can submit its request for access
    online. The request is automatically routed to the responsible
    installation Education Advisor for review and action. DOD recently
    learned of assertions that some Educational Advisors were confused
    about their duties and responsibilities in the base access process and
    will consider generating a training module to address this potential
    knowledge deficit.
        Second, DOD is taking action to improve and update its policies and
    procedures for placing an educational institution in probationary
    status. The policy will provide for formal written notice of, and an
    opportunity to respond to, a proposed probation--not just to individual
    allegations of non-compliance with the DOD MOU or other Departmental
    concerns--before probation is imposed. The policy will make clear that
    probation is intended as an opportunity for remediation of non-
    compliance, and will clearly distinguish among the different statuses
    and processes associated with probation, suspension, and termination.
    The policy will prescribe a timeline for decisions and actions
    associated with the probation process, all with a view to ensuring
    transparency and expeditious action. Finally, the revised policy will
    expressly withhold to a level no lower than Assistant Secretary of
    Defense the authority to place an educational institution in a
    probationary status. The Department will invite the views of
    educational institutions and interested members of the public on these
    and other proposed changes to its policies and procedures.
        Finally, beginning in January 2017, DOD will implement a new and
    enhanced MOU compliance framework, led by an internationally recognized
    expert in audit, compliance, and quality assurance/quality control.
    Under this new compliance framework, DOD will institute an industry-
    consistent risk assessment, combined with random sampling, to
    dramatically expand the number of educational institutions subject to
    compliance audits each year, while at the same time vastly reducing the
    amount of input required from each school. Under the new model, all
    2,700 plus educational institutions that have signed an MOU to
    participate in the TA program will be assessed for risk against factors
    related to desired student and Departmental outcomes. These factors
    will be made public. Leveraging the services and expertise of its
    industry partner, DOD will annually conduct field surveys of roughly 10
    percent of all participating educational institutions. These field
    surveys will provide ``on the ground'' insights into the operations of
    these educational institutions, and will be supplemented by a review of
    the institution's web presence, self-assessments, after action
    reporting, and personal dialogue. This framework will expand DOD
    oversight to more schools, using standardized processes and criteria
    known, in advance, to all participating educational institutions.
    Although individual student complaints received via PECS will remain an
    integral part of the DOD oversight network, the new thirdparty
    compliance framework will enhance the Department's capabilities to
    gather facts and information and impartially enforce MOU compliance. We
    believe this new framework will prove an improvement over our current
    efforts, pursuant to which we are able to review less than 1 percent of
    educational institutions each year. The tenets of this new compliance
    framework will be detailed in a process document that will govern the
    Department's actions going forward.
        Also central to this framework is a revised communication plan and
    an online tutorial that will enable representatives of educational
    institutions to bring themselves current on the requirements of the DOD
    MOU and their responsibilities for fostering compliance with the
    Principles of Excellence. The tutorial will employ scenario-based
    learning strategies to educate users about common misconceptions and
    pitfalls and how best to avoid them. Communication circulars and the
    compliance tutorial will be available to employees of all MOU partner
    institutions in the coming weeks.
        The Department believes that the combination of these efforts will
    significantly improve its administration and oversight of the DOD
    Voluntary Education and TA programs. Our goal is to create a culture of
    compliance across all program stakeholders, such that participating
    educational institutions see the value in compliance with program
    requirements, and cascade that value across our military student
    population.
        We thank the Congress and the Members of this Committee for your
    continued support of our servicemembers and their families, especially
    in championing the services and benefits provided through the DOD
    Voluntary Education Program and TA. DOD is proud of our ongoing efforts
    to improve these programs with a view to providing our servicemembers
    with high quality educational opportunities and fulfilling our duty to
    serve as good stewards of the appropriated TA funding that facilitates
    these objectives.

        Chairman McCain. Thank you.
        Does Ms. Barna or Ms. Bilodeau have any opening statements
    they would like to make?
        Ms. Barna. I do not, sir.
        Ms. Bilodeau. No, sir.
        Chairman McCain. Thank you.
        Ms. Bilodeau and Ms. Barna, the reason why we have you here
    is because you made decisions. You made decisions that directly
    affected this entire situation for which we're having this
    hearing. And I agree with Mr. Levine that we don't usually do
    that, but we don't usually have people at a GS-15 level making
    decisions that have the profound effect that they did.
        Ms. Bilodeau, isn't it true that you participate in the
    nonpublic interagency task force targeting for-profit
    educational institutions, the aim of which is to, quote,
    ``coordinate their activities against for-profits''? Is that
    true?
        Ms. Bilodeau. Yes, sir.
        Chairman McCain. So, we have a nonpublic interagency task
    force that targets for-profit educational institutions, the aim
    of which is to coordinate their activities against for-profits.
    Nobody else, but against for-profits. And, through this task
    force, you share information and assist one another in the
    enforcement of Federal laws. Is that correct? Ms. Bilodeau?
        Ms. Barna. Well, sir, as Ms. Bilodeau's supervisor, would
    you mind if I interjected?
        Chairman McCain. Please go ahead.
        Ms. Barna. The Department does participate in the task
    force to which you've referenced. The Department has
    consistently raised within the members of the task force our
    objection to the name. The purpose of the task force is not to
    focus only on for-profit institutions, but rather on all
    institutions. And we've----
        Chairman McCain. Tell the----
        Ms. Barna.--made plain----
        Chairman McCain. Tell me----
        Ms. Barna.--our concern.
        Chairman McCain. Tell me another institution you have
    focused your attention on and placed on probation.
        Ms. Barna. I would have to ask Ms. Bilodeau for the other
    institutions. We have a number of them that we have placed on
    probation.
        Chairman McCain. Tell me one.
        Ms. Bilodeau. Globe University, Minnesota Business School,
    Heald College.
        Chairman McCain. In fact, you--Ms. Bilodeau, you emailed
    your interagency partners to notify them of the probation
    decision so these agencies could coordinate enforcement actions
    against the University.
        Ms. Bilodeau, you drafted the letter that informed the
    University that it was on, quote, ``probationary status.'' And,
    Ms. Barna, you approved that letter. Is that correct?
        Ms. Barna. I did, sir.
        Chairman McCain. But, first Ms. Bilodeau and then Ms.
    Barna, who at that time made the decision to place the
    University on probationary status?
        Ms. Barna. Sir, I made that decision.
        Chairman McCain. And who did you consult?
        Ms. Barna. I consulted with my team, not at the time the
    decision was made, but in advance, as we were inquiring into
    the various allegations that had been brought forth about the
    University of Phoenix.
        Chairman McCain. And what information was that?
        Ms. Barna. We had received a complaint initiated when Ms.
    Bilodeau interviewed with what we thought was the PBS News
    Hour. At that time, she was talking about the Department's
    efforts to implement the Principles of Excellence and to better
    govern our voluntary education programs. The interviewer
    brought forth a University of Phoenix Challenge Coin that also
    bore the departmental seals and asked Ms. Bilodeau whether or
    not she was aware of base access violations. Based upon that,
    we initiated an inquiry, as we always do. And Ms. Bilodeau
    began looking to the various services for information.
        Our ability to focus that inquiry was certainly forwarded
    by the Reveal News article on the 30th of June that we believe
    to have been authored by the very same person who interviewed
    Dawn for the PBS News Hour.
        Chairman McCain. So, there was a news story and a article,
    and you then acted to place the University of Phoenix on
    probation.
        Ms. Barna. I did act, sir, after 4 months of inquiry
    between the publication of the June 30th Reveal News article
    and the issuance of the letter of probation.
        Chairman McCain. And by the time you issued the letter of
    probation, they had discontinued the Challenge Coin and had, on
    numerous occasions, sought to consult with you, which was not
    agreed to by you.
        Ms. Barna. I'm sorry, could you please repeat that----
        Chairman McCain. It's a matter of----
        Ms. Barna.--last question?
        Chairman McCain.--record. It's a matter of record that the
    University of Phoenix made several efforts--and I have the
    communications--to consult with you about these allegations,
    and you refused to consult with them. In fact, quote, ``not at
    this time,'' I believe was your exact response.
        Ms. Barna. Sir, I can't speak for others, certainly, but I
    had no personal contact with the University of Phoenix or any
    of their agents, and have not had contact with them to this
    day.
        Chairman McCain. This--here's the letter, right here, July
    28, 2015, ``Dear Assistant Secretary Williams, As the president
    of the University, we write to respectfully request a meeting
    with you and your team to share and demonstrate what we have
    learned,'' et cetera.
        Ms. Barna. Oh. Yes, sir. Rosemary Williams was one of our
    Deputy Assistant Secretaries of Defense.
        Chairman McCain. So, you were unaware of this request to
    meet?
        Ms. Barna. Yes, sir, I was not aware of that request until
    I was informed of it in the University of Phoenix's 22 October
    response to the letter of probation.
        Chairman McCain. Aha. So, there's no communication between
    you and Deputy Assistant Secretary Williams.
        Ms. Barna. In fact, there is extensive communication.
        Chairman McCain. Well, then why weren't you aware of this
    letter and other attempts to outreach by the University of
    Phoenix?
        Ms. Barna. I can't----
        Chairman McCain. In other words----
        Ms. Barna.--explain that, Senator.
        Chairman McCain.--Ms. Barna, anybody who's going to take
    action such as you decided to take--and I don't believe,
    frankly, that it was you alone, but I can't prove it--at least
    you contact the people that you are placing on probation on the
    basis of a PBS News Hour and a article in a newspaper.
        Ms. Bilodeau and Ms. Barna, I understand there is no
    document, none, that reflects that approval for the decision
    was ever sought or granted. Is that correct?
        Ms. Barna. Sir, when the letter of probation that Ms.
    Bilodeau proposed to sign was sent to me, I reviewed it, I
    consulted with----
        Chairman McCain. Who sent it to you?
        Ms. Barna. It came to me from Mr. Ed Pratt, who was the
    Chief of Staff of the Office of the Deputy Assistant Secretary
    of Defense for Military and Community Family Policy.
        Chairman McCain. For--again, Ms. Bilodeau and Ms. Barna,
    who, at that time, made the decision to place the University
    on, quote, ``probationary status''? Who approved the letter?
        Ms. Barna. I did, sir.
        Chairman McCain. And that is your responsibility, and yours
    alone, to place a university on probationary status on the
    basis of the PBS television and a article in the--in some
    periodical, when the University of Phoenix had already taken
    action to correct it?
        Ms. Barna. Sir, it was my responsibility. Under the terms
    of the DODI, which I agree with Mr. Levine is unartfully
    drafted, the person acting as the----
        Chairman McCain. Was what, again? Inart-----
        Ms. Barna. The DODI is unartfully drafted. And that is
    the----
        Chairman McCain. An unartfully drafted periodical puts--
    literally puts a--an institution out of business. An in
    artfully drafted----
        Mr. Levine. The----
        Chairman McCain. I mean, it's incredible.
        Mr. Levine. Mr. Chairman, the DODI she's referring to is
    not the article. It's our Department of Defense Instruction.
    DODI is a--is an acronym there.
        Chairman McCain. Well, my time is long overdue, and I'll
    go--and I will ask the indulgence of my colleagues, but, on the
    Challenge Coins, they had corrected it before you had acted,
    and there was numerous attempts, including this one, to try to
    resolve these issues. And, by the way, the letter in response
    was from Rosemary Williams, the Deputy Assistant Secretary of
    Defense, Military Community and Family Policy, a fairly
    responsible individual. ``Dear Ms. Slottow''--those are the
    people from the University of Phoenix that wrote--``Thank you
    for your thoughtful letter. My sincere apologies for not
    responding in a more timely fashion. While I appreciate your
    desire to meet, I believe it is a bit premature at this time.''
    They refused to meet with them.
        Mr. Levine. What time was that, Mr. Chairman?
        Chairman McCain. That was in August 2015.
        Ms. Barna. Mr. Chairman, I believe that would have been the
    time that our inquiry was ongoing.
        Chairman McCain. Well, with an ongoing inquiry, you ought
    to be able to talk to the people that are being inquired about.
    Here's one on October 30th, 2015. Yeah. And so, on October
    30th, you made the decision, even though you had--your people
    or your superior had refused to meet with the University of
    Phoenix.
        Senator Reed.
        Senator Reed. Well, thank you very much, Mr. Chairman.
        Mr. Levine what form does this agreement take between the
    Phoenix University or any eligible institution and the
    Department of Defense? Is it a contract? Is it an agreement? Is
    it----
        Mr. Levine. It's a memorandum of understanding signed by
    the--both parties.
        Senator Reed. And--both parties--and within the memorandum
    of understanding, is it clear that those situations which
    triggered this notification to University of Phoenix would be
    inappropriate?
        Mr. Levine. The memorandum of understandings provides that
    educational students--educational institutions seeking access
    to a DOD installation, quote, ``will provide their request to
    the responsible education advisor, who will review and analyze
    those requests on behalf of the installation commander.''
        Senator Reed. So, in a case of access to installation, that
    was the--the memorandum clearly stated that they had to go
    through the education advisor.
        Mr. Levine. It did.
        Senator Reed. With the use of Challenge Coins, they were
    specifically prohibited from using these types of devices----
        Mr. Levine. Mr. Chairman, it's my understanding that was
    not in the MOU. It's----
        Senator Reed. Chairman--I'm the Ranking Member.
        Mr. Levine. I apologize.
        Senator Reed. Go ahead.
        Mr. Levine. Senator Reed.
        Senator Reed. Yeah.
        Mr. Levine. I apologize. It's my understanding that that
    was not in the MOU. It's a separate DOD policy that precludes
    the use of the DOD seal because of the risks that it will
    create the appearance of official sanction.
        Senator Reed. Now, since the--this situation developed, you
    have developed procedures in which someone who's being
    considered for probation is notified? Is that clear?
        Mr. Levine. The procedures that we have--that are outlined
    in my testimony, as I say, that we will--we are now using for
    anybody who comes before us but are not yet official, because
    we have to go through Notice of Public Comment--those
    procedures call for a notice the party, an opportunity to
    respond, and the decision to be made at the Assistant Secretary
    level so that we'll be clear there is not a GS-15 and it's--the
    person who signs the letter will be the person who's
    responsible and accountable.
        Senator Reed. How many schools have been placed on
    probation in similar circumstances, going back----
        Mr. Levine. So, there are two different categories of
    probation. And this--there are apparently--and I can turn to
    Ms. Barna or Ms. Bilodeau, but, as I understand it, there are a
    number of institutions that have been placed on probation when
    they have lost--they've lost their standing. They are no longer
    accredited or they're no longer qualified for the program.
    There are other institutions that are placed on probation in
    the nature of this, where we've identified problems that are
    correctable. And it's my understanding that there are four
    institutions that have been placed on probation in those
    circumstances.
        Senator Reed. Ultimately, the University of Phoenix was
    removed from the probation. And what caused that removal?
        Mr. Levine. What Ms. Barna tells me is that, after the
    communication difficulties that they were having with the
    University of Phoenix, she appointed an SES to be the--
    essentially, the full-time liaison to the University of
    Phoenix. And once that--this was about a month after the
    probation--once that person was appointed, the communications
    improved, and they were able to work through the problems and
    reach agreement as to how they were going to address them,
    going forward.
        Senator Reed. There seems to be, you know, an issue with
    respect to communications and discussions back and forth. The
    Chairman has suggested the letters--he has copies of letters
    that were sent to somebody in DOD. But, you're implying that
    there was not a direct line of communication between Ms. Barna
    and Phoenix to resolve these problems until months after the
    problems were discovered and the probation----
        Mr. Levine. Right.
        Senator Reed.--was imposed?
        Mr. Levine. It appears to me that there were significant
    communication problems here. I--and so, that's why I asked the
    Chairman when the letter was he was referring to. I have heard
    my staff talk about feeling that there were communication
    problems on the other side, where we would apparently send the
    University of Phoenix a notice of a complaint and ask for their
    response, and not get a response that we felt was responsive.
        I can't tell you the University of Phoenix was wrong in
    that case or that we were right. I can just tell you that it
    appears to me that there were significant communication
    problems here.
        Senator Reed. At the heart of all of this is the executive
    order and the implementation policies. I note that the
    statement of the president of the University of Phoenix, in his
    words, ``Both Executive Order 13607 and a new postsecondary
    compliant system are integral parts of the Department of
    Defense Memorandum of Understanding outlining requirements
    related to participation in the voluntary education programs.
    The University of Phoenix supports each of these initiatives
    and taking--directs us to advocate for enhancements,
    improvements that help students.'' So, apparently the
    University does support at least the overarching approach here.
    And I assume you're in communication with them to get their
    advice about how better to implement it. Is that fair?
        Ms. Barna. Sir, yes, our communications have improved
    dramatically. In fact, they go--they're doing very well in both
    directions. First, in the last several months particularly,
    Phoenix has really come back into the ranks, has called us to
    consult when there are questions, has appointed a new director
    of their military services department, and, in fact, called us
    to consult with that military director so that we could better
    inform him about the needs of the Department and our
    requirements under the MOU.
        So, we believe that the situation has actually had a very
    positive effect on the relationship between the Department of
    Defense and the University of Phoenix.
        Senator Reed. Thank you.
        Thank you, Mr. Chairman.
        Chairman McCain. Well, just to clear things up, you keep
    talking about communication difficulties. For the record, on
    July 28, the letter came from the University of Phoenix
    president asking--received notification of potential
    noncompliance. He asked for a meeting. The answer was--which
    was not provided initially to this committee, quote, ``I
    appreciate''--from--and, by the way, a copy of it to what is--
    was sent to Ms. Bilodeau--quote, ``While I appreciate your
    desire to meet, I believe it is a bit premature at this time. I
    do not want to close this communication without acknowledging
    your collective extensive service to our country through
    academic public service in uniform.'' The question is, is why
    the committee didn't receive this email in response to its
    request for documents.
        Senator Rounds.
        Senator Rounds. Thank you, Mr. Chairman.
        Ms. Bilodeau, I understand why Active Duty servicemembers
    view for-profit colleges as a convenient and accessible way to
    earn their degree while they're serving full-time. I also
    understand that there is an argument that some for-profit
    colleges prey on our servicemembers and offer education and
    degrees of questionable value. In your opinion as the chief of
    DOD's Voluntary Education Program, what role do you see for-
    profit colleges playing in DOD's strategic goals to educate our
    servicemembers?
        Mr. Levine. Senator, could I respond to that?
        Senator Rounds. You may.
        Mr. Levine. I would say that we are concerned, not about
    for---some for-profit colleges that may have improper conduct,
    but some educational institutions, whether they're for-profit
    or not-for-profit. I don't want to rule out the case of
    potential abuse for not-for-profits. We see both for-profits
    and not-for-profits as providing a valuable role here, and we
    want to--and we want them to comply with our policy. Obviously,
    we want them to provide quality products, but we don't believe
    that there's any inherent reason to believe that a nonprofit is
    providing a better product than a for-profit. We want a quality
    product.
        Senator Rounds. As a follow up, then--and I would direct
    it, then, to you, Mr. Secretary--and that is, Do you
    differentiate between services provided by a for-profit versus
    those provided by a not-for-profit?
        Mr. Levine. I do not, Senator. And the one--as I indicated
    earlier, in the one interagency meeting that I attended on this
    issue, that was the--that was one of the two major points I
    made, was that we don't, in the Department of Defense, want to
    distinguish between for-profits, not-for-profits. We want to
    distinguish between a good product and a bad product.
        Senator Rounds. Of the number of institutions that have
    been providing services--and I know that there's over 2700--
    you've indicated that there are four that have been placed on
    probation. How many of those are for-profit, and how many of
    them are not-for-profit?
        Ms. Bilodeau. I would have to check the status, the for-
    profit status. Phoenix is a for-profit. Heald College is a for-
    profit. I'm just not sure if Globe University, Minnesota
    Business School are nonprofit or for-profit, sir.
        Senator Rounds. In your review of their activities, do you
    differentiate? Are you aware of whether or not they're a for-
    profit or a not-for-profit when you review them?
        Ms. Bilodeau. When we pull their file, we do see that.
    However, the MOU is--does not--doesn't consider that. Everyone
    signs the same agreement. And so, the rules apply consistently,
    regardless of sector.
        Senator Rounds. It seems as though there--there most
    certainly seems to be a crossover between you're--in your
    position, serving in both the interagency task force on these
    for-profit operations versus your position here within DOD in
    reviewing and looking at the services being provided. Did--were
    the two connected? And I'm asking, Does it come with the job,
    or was it specifically requested? Was one before the other?
        Mr. Levine. Senator, it comes with the job. It's part of
    all of our jobs in the Department of Defense that, when we're
    called upon to--the Department of Defense is called upon to
    participate in an interagency task force, we look for people
    who serve in the line jobs that work on that. We don't have
    somebody--we can't afford to have somebody who's staffed just
    to working on an interagency task force of that kind.
        Senator Rounds. And so, the individual who was responsible
    for the voluntary educational programs in the Department of
    Defense is also the individual identified as being responsible
    on a task force specifically to investigate the for-profit
    organizations?
        Mr. Levine. So, the way--and I--maybe Ms. Barna could
    elaborate on this, but the way that it would typically work is
    that I, if I were the Under Secretary at the time, would be
    called upon to designate somebody who is expert in that area
    who could participate in an interagency task force. And I would
    have to look to where the expertise is in my organization.
        Senator Rounds. So, most certainly, then, there is a
    differentiation between the profits and the not-for-profits if
    you are also on a task force which is targeting the for-profit
    organizations. Most certainly there is a difference, and you
    identify and you separate them out.
        Mr. Levine. Well, as Ms. Barna indicated, we don't agree
    with the idea that this task force should be targeting for-
    profits. We believe that--and, as I indicated, when I
    participate in interagency meetings, my point has been----
        Senator Rounds. I--Mr. Secretary, I----
        Mr. Levine.--we don't want to differentiate.
        Senator Rounds.--I understand it. And I think what we're
    getting at is, is that, whether or not we agree with it, we're
    talking about, de factor, what has been occurring, and it seems
    to me that that is the basis for it. The Chairman's expressed
    concern, and seems to me that your suggestion that you believe
    that there are things that could be changed--and I hope you
    have the resources and the ears available to make those
    recommendations, but mostly certainly there seems to have been
    a connection between DOD and the interest in an interagency
    task force targeting for-profit institutions.
        Mr. Levine. So, Senator, I appreciate that, and what I
    would say is, I can't speak for what other agencies do. Within
    the Department of Defense, we work very hard to make sure that
    we do not distinguish on that basis and we don't target on that
    basis. I can't tell you what other agencies do.
        Chairman McCain. But----
        Senator Rounds. Thank you, Mr. Chairman.
        Chairman McCain. But we can know that, Senator, that there
    is a task force that is designed and in operation, without any
    authorization from Congress, that is targeting for-profit
    institutions. Facts are stubborn things.
        Before I turn to Senator Manchin, I'd like to welcome back
    to the committee the Senator from Virginia, and congratulate
    him on waging an honorable campaign of which he can be very
    proud.
        Senator Manchin. Hear, hear.
        Chairman McCain. And I'm probably the only person here who
    can relate.
        [Laughter.]
        Chairman McCain. I thank you, Senator Kaine, and welcome
    you back.
        Senator Manchin.
        Senator Manchin. Following up on what the Chairman just
    said, it's an executive order. If this executive order is
    rescinded, what does it do to y'all's operation? Because you're
    operating under an executive order, correct?
        Mr. Levine. We have a Department of Defense Instruction
    which establishes our policy. And we would have to look at the
    way that Department of Defense Instruction is drafted. And I
    don't know to what extent it incorporates by reference things
    that are in this executive order or whether it has its own
    independent standard that may be consistent with the executive
    order separately established. So----
        Senator Manchin. That would depend on whether----
        Mr. Levine. Yeah.
        Senator Manchin.--you would continue what you're doing----
        Mr. Levine. Sure.
        Senator Manchin.--or if you do it differently, or if you
    just abandon it.
        Mr. Levine. Sure. But, a new administration obviously would
    have the authority not only to reconsider the executive order,
    but also to reconsider the Department of Defense Instruction.
        Senator Manchin. Sure.
        Follow-up on that. You know, this has been going on for
    some time, and I have--I have one large institution in my State
    also, and we're watching everything very carefully. They
    believe they've been targeted also. Anybody in the private
    arena believes they've been targeted. But, when I see--you've--
    you all have hit some pretty lofty groups, here. Florida State
    University, Georgetown, University of Maryland, University of
    Miami, Xavier, Rutgers are in violation. These are all for-
    profits. Why--these are not-for-profits.
        Mr. Levine. Nonprofit.
        Senator Manchin. I'm sorry. And your for-profits, you had
    the two right now that you have under concern there that--I'm
    having a hard time understanding, unless you all are looking
    at, basically, a for-profit, have basically targeted the
    military and basically built their business model around the
    military and the money that comes from the G.I. Bill and
    different assistance that we give. Is that what targets that--
    is that what flags it for you all?
        Mr. Levine. So, Senator, I would say a nonprofit could do
    the same thing. You could have a nonprofit education
    institution that----
        Senator Manchin. But, all these are in violations----
        Mr. Levine. Sure.
        Senator Manchin.--Mr. Levine. I know that. They're all in--
    so, they've done something wrong.
        Mr. Levine. Right.
        Senator Manchin. But, basically, they have a wide scope of
    educating a lot of different people----
        Mr. Levine. Sure.
        Senator Manchin.--in different arenas. It seems like, for
    the for-profits, that basically that you all have homed in on
    are the ones are the ones that strictly have built their
    business around military. Is that correct? Would that be a fair
    evaluation?
        Ms. Barna?
        Ms. Barna. Sir, I believe it's probably just a matter of
    the overlapping of the facts. Those who do an extensive
    business with Federal education funding, either through the
    G.I. Bill run by the VA or through our Tuition Assistance
    Program, are likely to deal with a number of military. And so,
    I think it's just a matter of the fact that we're dealing with
    providing educational funds and opportunities to our
    servicemembers, and that is the population that, because they
    are nontraditional students, have found an educational home at
    places like AMU [American Military University] or the
    University of Phoenix.
        Senator Manchin. When you have them in violation of MOU,
    not-for-profit and for-profit, did they get the same type of
    punishment, if you will? Is it the same type of punishment
    adhered both to non- and--for-profit and nonprofit?
        Ms. Barna. Sir, in my view, I would not distinguish between
    the two in determining an appropriate action on allegations of
    infractions.
        Senator Manchin. So, the--some of the more prestigious--
    let's say Georgetown University--you're preventing them to have
    access to bases?
        Ms. Barna. I do not know if Georgetown has sought direct
    access to bases. I do not know whether we have received a
    complaint about Georgetown not complying with those criteria.
        Mr. Levine. But, when we----
        Senator Manchin. Where----
        Mr. Levine.--when we get a complaint, we would refer it
    to--we would refer it for the same kind of review. We would
    refer it back to the institution-----
        Senator Manchin. And they were in violation, correct?
        Mr. Levine.--whatever the institution was, and tell them
    that they're in violation----
        Senator Manchin. Yeah.
        Mr. Levine.--ask for their response, look into it in the
    same way.
        Senator Manchin. And I think what we're all concerned about
    is that, basically--did the nonprofits get put on violation--
    were they notified?
        Ms. Barna. Yes, sir.
        Senator Manchin. So, they were notified, but the
    nonprofits--I mean, the for-profits were not notified.
        Mr. Levine. So----
        Ms. Barna. No. All were notified, sir.
        Mr. Levine. Senator Manchin, if I could, I would
    distinguish between the individual allegations, which for-
    profits and nonprofits are notified of and given an opportunity
    to respond to, which is where I think we're a little bit
    better, and then the probation decision, which the non---which,
    in this case, University of Phoenix was not given advance
    notification of. So, I guess the theory in the Department at
    the time was, ``Well, you've been notified of each of these
    violations, and we don't like your responses, therefore we're
    going to put you on probation.'' As I've indicated, I don't
    think that's an adequate process.
        Senator Manchin. Right.
        Mr. Levine. I think if we don't like your responses----
        Senator Manchin. Were the non-for-profits--were they
    handled the same way? Were they put on probation?
        Mr. Levine. As Ms. Bilodeau indicated, there are a couple
    of institutions that have been put on probation, where she
    doesn't know whether they're for-profit or not-for-profit, out
    of the four, so that there are two for-profits that have been
    put on probation and two where she doesn't know. So, we'd have
    to check and see whether those are for-profits or non-for-
    profits. We just don't know at this point.
        Chairman McCain. Senator Tillis.
        Senator Tillis. Thank you, Mr. Chair.
        Thank you all for being here.
        I--Ms. Barna, I was just curious in--how long have you been
    in your current position?
        Ms. Barna. Well, sir, I have moved the--around the
    Department of Defense quite a bit. I've been with the Office of
    Personnel and Readiness since April of 2014. And it was in that
    position that I made the decision in October of 2015 regarding
    the University of Phoenix.
        Senator Tillis. And to me--I tend to share the sentiment of
    the Chair and my colleague Senator Rounds that there is a
    general sense that there's a targeting. The Interagency Task
    Force is one example of that. I'm not going to get into a
    debate with you all over whether or not your Department's
    targeted. But, do you know of any other example for a not-for-
    profit that has been put on probation before given notice ahead
    of time?
        Ms. Barna. Sir, again, I think it would be important, as
    Mr. Levine has done, to distinguish between notices of
    individual infractions.
        Senator Tillis. Yeah.
        Ms. Barna. When we receive information----
        Senator Tillis. Yeah.
        Ms. Barna.--one of the first----
        Senator Tillis. Yeah, I get that.
        Ms. Barna.--entities that we contact----
        Senator Tillis. I'm talking about--well, let me put it a
    different way. Can you think of any specific circumstance where
    a not-for-profit has been dealt with the way that University of
    Phoenix was when they ultimately received probation, the nature
    of the communications?
        Mr. Levine. So, Senator, as Ms. Bilodeau has indicated,
    there are--we believe there are four institutions that we've
    placed on probation in this type of circumstance. My
    presumption is that none of them received advance notice. My
    view is, they all should have received----
        Senator Tillis. Yeah.
        Mr. Levine.--advance notice.
        Senator Tillis. And, Mr. Levine, I think you referred to
    the process as ``crappy.'' And I think Ms. Barna may have said
    it was inartfully worded. What's changed since you've come in?
    I think you've said 8 months. What has changed to make it less
    likely that something like happened to University of Phoenix
    would occur again?
        Ms. Barna. Sir, as Mr. Levine indicated, any sort of formal
    procedures that we put out must go through the Federal
    Register's Notice and Comment. So, we are crafting revisions to
    procedures. But, in the meantime, we are going to employ those
    procedures, because we believe they give greater due process to
    the affected educational----
        Senator Tillis. Thank you.
        Ms. Barna, you mentioned that--I think, that the
    relationship with University of Phoenix has improved. And you
    mentioned, I believe, that they have hired someone who's--would
    you go back and repeat what steps they've taken that you think
    have improved the relationship with the Department?
        Ms. Barna. First, they have been much more open with us
    about coming forward when they have questions about the MOU and
    what they should do. And they do that in advance. And so, we
    have a very good two-way----
        Senator Tillis. Did you mention that they've hired somebody
    or put somebody in a position also? Was it you that mentioned
    that in your testimony?
        Ms. Barna. Yes, sir, I did. They've hired a Director of
    Military Services, particularly to address the growing
    population of military students. And they reached out to us and
    asked that we consult with that Director of Military Services
    to ensure that we set up good lines of communication there----
        Senator Tillis. Okay, thank you.
        Ms. Barna.--and that----
        Senator Tillis. Secretary Levine, you mentioned 200- and--
    was it 260-some-thousand people participating in the program?
        Mr. Levine. Yes, sir.
        Senator Tillis. And you said 80 percent of them go through
    programs, do not receive a certificate or a degree. Is there a
    split--are you referring to the for-profit, not-for-profit, or
    both?
        Mr. Levine. Both.
        Senator Tillis. Okay. Do you have any data that suggests
    that one is more successful with getting someone a degree or a
    certificate than the other?
        Mr. Levine. I do not.
        Senator Tillis. I think that would be very helpful in this
    discussion. I'd be interested in getting that from the
    Department, if we can, or if you could point us in the right
    direction.
        [The information referred to follows:]

    In fiscal year 2015,
       Private, For-Profit: 242 Schools; 114,400 TA Participants; 10,081 TA
    Graduates; 9 percent Military Students Graduate*
       Private, Non-Profit: 595 Schools; 68,167 TA Participants; 6,946 TA
    Graduates; 10 percent Military Students Graduate*
       Public: 1,247 Schools; 103,196 TA Participants; 7,644 TA Graduates;
    7 percent Military Students Graduate*
    *  Percentage of Military Students Graduate is an estimate obtained by
    dividing the number of TA Participants in the most recent year by the
    number of TA Graduates reported in that same year.

        Senator Tillis. But, let me get back to a basic--the reason
    I asked the question of Ms. Barna about hiring another
    employee--I'm from North Carolina. I would argue we've got one
    of the best university systems in the country. That university
    system has 17 institutions. It spends over $1 billion a year in
    regulatory compliance. And my guess is, some amount of that
    money is going to make sure that they don't get put on
    probation. When you add to that other institutions, like Duke,
    a good B-plan school down in North Carolina if you can't get
    into Chapel Hill----
        [Laughter.]
        Senator Tillis.--or Wake Forest, the regulatory burdens
    that are placed on these institutions as a result of the way
    that they're dealt with, the way that University of Phoenix was
    dealt with, increases cost and prevents us from putting more
    money into actually educating these folks at the--so that we
    can make sure we don't get placed on probation or we don't get
    deprived--or denied some sort of funding that we received in
    the past. The--this is just one symptom of a problem in the
    Federal agencies that relate to educations or institutions of
    higher learning that we've got to look at and regulate. We've
    got to get to a point to where we know that--whether it's for-
    profit or nonprofit, they're producing a good product and good
    outcomes. That should be done across the board, without regard
    to nonprofit or for-profit status. But, this heavy handed sort
    of interaction with these universities, as the University of
    Phoenix is just one example, is actually taking us further away
    from providing more resources for students to get those
    certificates and to get those diplomas. And I, for one, think
    that we should look at this process, a number of other ones
    across various Federal agencies, and ask whether or not they
    should exist in their current form, or at all.
        Thank you.
        Mr. Levine. Senator, if I could--Mr. Chairman, could I
    briefly respond to that?
        Chairman McCain. Yeah.
        Mr. Levine. I agree with you that we should be looking at
    regulatory burdens we impose across the board. The
    countervailing fact that we have here is, we're spending 600--
    500-600 million dollars a year, we have 250,000 servicemembers
    who are relying on this product, and we need to try to come up
    with some way of ensuring that they're getting their value out
    of it. I'm not going to tell you we've answered it in the best
    possible way, but we are, in good faith, trying to do that. And
    the rules that we impose--we're not trying to impose rules that
    are arbitrary or crazy or to make it--make your life miserable.
    We're trying to figure out a way that we can get to a solution
    where we can give our servicemembers assurance that they're
    getting their money's worth out of their products--or we're
    getting our money's worth out of the product.
        Chairman McCain. Senator Blumenthal.
        Senator Blumenthal. Thanks, Mr. Chairman. And I want to
    thank you, Mr. Chairman, for having this hearing, which gives
    us the opportunity to address a broader point that I think has
    been mentioned.
        The Ranking Member, Senator Reed, alluded to it in his
    remarks, namely that the 90/10 rule and the loophole that
    enables for-profit institutions to count VA and DOD educational
    benefits as non-Federal money, in effect, makes servicemen and
    women, and potentially veterans, more vulnerable. They are, as
    the Ranking Member said, in effect, people with targets on
    their back.
        Would you agree with that?
        Mr. Levine. Senator, we agree that--we share the concern--
    and it's not limited to for-profits, I'll be clear again--but,
    we share the concern that, given the way this program operates,
    there are some actors out there who may perceive our members as
    being dollar signs----
        Senator Blumenthal. Well, the----
        Mr. Levine.--rather than people.
        Senator Blumenthal.--the loophole applies to for-profit
    colleges, correct?
        Mr. Levine. You're the expert, not me. I'll take your word
    for it. I would not say that the question of financially
    benefiting from our Tuition Assistance Program and from the
    Student Loan Program is limited to for-profit institutions.
        Senator Blumenthal. And, in your judgment, are the
    recruitment abuses still ongoing?
        Mr. Levine. We don't have--we are doing what we can to
    control it. We don't have--we can't say that we've eliminated
    student--recruitment abuses, no.
        Senator Blumenthal. So, this is still a problem. And we
    need to grapple with this problem, because there are literally
    hundreds of millions of dollars in taxpayer money at stake,
    correct?
        Mr. Levine. Yes, sir.
        Senator Blumenthal. And, by the way, I know there's been a
    lot of criticism of the action with respect to the--to Phoenix,
    but, at the time, that action was commended by a group of
    veteran service organizations, was it not?
        Mr. Levine. Yes, sir.
        Senator Blumenthal. And, in fact, with the Chairman's
    permission, I'd like the October 27th letter entered into the
    record, Mr. Chairman, written by a number of the VSOs [Veterans
    Service Organization] at that time.
        Chairman McCain. By who?
        Mr. Levine. Veterans service organization.
        Chairman McCain. Without objection.
        Senator Blumenthal. Thank you.
        [The information referred to follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Blumenthal. The solution to a lot of this problem,
    then, would be closing that loophole, correct?
        Mr. Levine. Senator, that's not within the ambit of the
    Department of Defense. It's not our program. So, I listen to
    you and Senator Reed with sympathy, but it's not a--it's not an
    issue on which the Department of Defense currently has a
    position.
        Senator Blumenthal. Why not?
        Mr. Levine. Because it's the Department of Education that--
    and it's those departments that run that policy. So--
        Senator Blumenthal. But, American servicemen and--women are
    the ones who are walking around with targets on their back. And
    I don't mean that literally. I realize that hyperbole sometimes
    can get us in trouble, but they are, financially, targets.
        Mr. Levine. I understand what you're saying, and all I can
    tell you is, I'm not aware that Department of Defense has taken
    a position on that issue.
        Senator Blumenthal. Let me ask you, before my time
    expires--the University of Phoenix was put on probation in
    October 2015, correct?
        Mr. Levine. That's correct.
        Senator Blumenthal. And then it was removed from probation
    on January of 2016.
        Mr. Levine. That's my understanding, as well.
        Senator Blumenthal. What was the reason that it was removed
    from probation?
        Ms. Barna. Senator, I can speak to that. After months of
    working with the University of Phoenix, after numerous
    productions of documents on their part to show what they were
    actually doing with regard to their workforce, disclosing their
    internal practices, I felt confident that the University of
    Phoenix was both cognizant of the rules and most willing to
    comply, going forward. In addition to removing them from
    probation, however, I mandated that they be placed on a year of
    enhanced monitoring. And this is to ensure that our
    communication efforts in the year following the probationary
    period continued to be strong and very close and very
    collaborative.
        Senator Blumenthal. My time is about to expire. I just want
    to reiterate my strong feeling. I don't know how many of the
    committee members share it. But, we are the Armed Services
    Committee. We have a responsibility, I think, to assure that
    servicemen and women are not targeted, are not recruited as a
    result of abuses and other kinds of practices that exploit
    them. And I hope that the Department of Defense will take its
    responsibility, perhaps, seriously, as well, in this regard. I
    realize that education is not, to quote you, ``in your
    wheelhouse,'' but I think the welfare of our servicemen and
    women is.
        And I want to thank Holly Petraeus for her work in this
    area, and others who have been working in it. And I want to
    thank you, Mr. Levine, for your very forthright testimony, as
    well as your colleagues, today. Thank you.
        Thanks, Mr. Chairman.
        Mr. Levine. Thank you, Senator.
        Chairman McCain. Senator Ayotte.
        Senator Ayotte. Thank you, Chairman.
        I wanted to ask a question about--so, as I understand it, a
    total of 16 colleges and universities actually violated the use
    of Challenge Coins. And--but, yet none of them were put in the
    same status as University of Phoenix: suspended. Why is that?
    It seems--but, that University of Phoenix was singled out for a
    practice that many other colleges and universities were not
    treated the same, even though they made the same types of
    violations.
        Mr. Levine. Senator Ayotte, if you want more detail, Ms.
    Barna or Ms. Bilodeau could respond, but I believe that the
    answer is that we don't suspend or put anybody on probation
    because of a single violation. It's accumulation of a number of
    violations that lead to that remedy.
        So, I don't believe University of Phoenix would have been
    suspended for the Challenge Coins, alone.
        Senator Ayotte. But, it certainly was cited in the decision
    to----
        Mr. Levine. So, yes----
        Senator Ayotte.--suspend it.
        Mr. Levine.--there were other things cited. And I'd
    particularly point to the base access issue, which, to my
    lights, is more serious. I understand there were also a number
    of complaints about University of Phoenix--19, I think, of
    which 6 were found to be unsubstantiated, but 13 were found to
    be substantiated, which go to broader practices. So, there was
    a broader concern about University of Phoenix, with a number of
    exchanges of emails and letters about potential violations.
        Senator Ayotte. But, you can understand, when you hear Ms.
    Barna talk about having sat down with----
        Chairman McCain. If the Senator will indulge me just for a
    second. There was 13 complaints from an estimated 12,000
    military students who were attending.
        Senator Ayotte. So, 13 out of 12,000.
        Mr. Levine. Senator, the way I view it is a--yes, it's 13
    out of 12,000, but what we do with the complaint, and--what we
    should do with the complaint anyway--and again, I would turn to
    my colleagues here to talk about whether we did this in this
    case--but, what we should do with the complaint is look at it
    to see whether it reveals a practice. And if it reveals a
    practice, then it's a problem even though the complaint came
    from one individual.
        Senator Ayotte. But, in this case, just--as I understood
    the response of Ms. Barna to Senator Blumenthal is that there
    was a discussion with University of Phoenix. They produced
    documents. There was a back-and-forth that resulted from the
    date of October 2015, where they, without being notified, get
    the suspension and then, going forward to January of 2016, you
    take them off suspension because you've reviewed their
    practices and looked at their documents and felt it was
    appropriate to take them off. It seems like the total opposite
    approach toward how you would treat any institution under the
    circumstances of the fact that you would not engage in a
    discussion with them, that, even when the University reaches
    out, that you wouldn't sit down and have that in advance of
    doing something as dramatic as suspending them. And also, all
    the servicemembers that receive, obviously, education services
    from them, that puts them in a position where they're wondering
    about the education services that they're currently receiving,
    as well. So, we also have to think about the impact of the
    people that are being served, here.
        Mr. Levine. So, Senator, two things. First of all, with
    regard to each of those violations, with regard to each of
    those complaints, University of Phoenix was notified of it and
    given a--an opportunity to respond. So, there was some
    discussion before the probation. That's the first point.
        The second point is, I agree with you, they should have
    been notified, they should have had an opportunity to respond,
    there should have been discussions specifically of the
    probation before that took place.
        So, I don't agree that there was no discussion. There was
    discussion. But, I still don't think our process was right. I
    think our process should have provided for notice in advance,
    and I've made sure that it will provide for notice in advance
    in the future.
        Senator Ayotte. Where----
        Chairman McCain. Could I just interrupt again?
        Senator Ayotte. Sure.
        Chairman McCain. It's on the record. On July 28th, the
    president of the University asked to discuss this issue, and
    the response was, ``While I appreciate your desire to meet, I
    believe it is a bit premature at this time.'' They did not
    honor their request to meet on the issue.
        Mr. Levine. And, Mr. Chairman, I understand that, and
    certainly a request to meet should have been honored. But, I
    don't think that means there was no communication. There was
    communication.
        Senator Ayotte. Mr. Levine, the President's executive
    order, where is the status of the implementation of the
    specific tasks that are identified in the executive order? And
    what's the status now, going forward?
        Ms. Barna. Senator, the executive order has been
    implemented in our Department of Defense Instruction. The
    executive order is very aspirational. It speaks to our intent
    to eliminate unfair, misleading, or deceptive practices, to
    improve the requirements, to enhance the requirements for base
    access, particularly.
        And so, we have implemented that through the guidance that
    we have in our Department of Defense Instruction and in the
    Memorandum of Understanding that each educational institution
    signs with the Department of Defense.
        Senator Ayotte. Even though some of the MOU, for example,
    didn't incorporate issues as specific as a Coin, for example.
        Ms. Barna. So, we view the Coin as a deceptive or
    misleading marketing practice, in that it allows the recipient
    of the Coin, or it fosters in them a belief----
        Senator Ayotte. But, my only point is, that was not
    contained specifically with the MOU, correct? It was within the
    DODI?
        Ms. Barna. It's--it is not specifically in the MOU, and
    it's also not specifically in the DODI. It was the subject of
    numerous advisories that we put out to all institutions well in
    advance, that said, ``Look, we consider the use of these Coins
    to be misleading and inappropriate, and you must withdraw your
    use of them.''
        Mr. Levine. Senator, that's not just an issue that comes up
    in the context of this program. The use of DOD symbols for
    marketing purposes is something that we police up through the
    Office of General Counsel in other circumstances, as well.
        Senator Ayotte. It just strikes me as that there was a very
    lack of communication here in a way that has pretty significant
    implications.
        Mr. Levine. Again, I'm not going to disagree with you on
    that, because I--as I've said, I don't think the process was as
    it should be.
        Senator Ayotte. Thank you.
        Chairman McCain. Senator King.
        Senator King. Thank you, Mr. Chair.
        It seems to me we--this has been a very illuminating
    hearing. I appreciate it. And we have established, number one,
    a policy question, which is protecting the taxpayers and the
    students from abuse, no matter what the institution is. And let
    me ask a question directly.
        Mr. Levine, to your knowledge, was there any particular
    targeting of for-profit schools in this process?
        Mr. Levine. Not by the Department of Defense.
        Senator King. And so, your concern was simply the students,
    regardless of what the institution was.
        Mr. Levine. That's correct.
        Senator King. The--but, we've also identified a process
    problem, which you have acknowledged, that there was an
    investigation between these news reports and the probation, but
    not specific interaction with the University with regard to the
    likelihood of probation. Is that correct?
        Mr. Levine. That's correct.
        Senator King. And you've acknowledged--Ms. Barna, do you
    acknowledge that that was a process problem?
        Ms. Barna. I absolutely do. I agree with Mr. Levine in this
    regard, Senator.
        Senator King. And you talked about the conversations you
    had with the University after the probation, and that was
    what--University of Phoenix--and that was what led you to take
    them off probation. I would assert that that--those discussions
    should have taken place beforehand. And I take it you agree
    with that.
        Ms. Barna. I do, Senator.
        Senator King. Thank you, Mr. Chairman. I have no further
    questions.
        Chairman McCain. Senator Sullivan.
        Senator Sullivan. Thank you, Mr. Chair.
        I'd like to ask the panel--you know, the--13 complaints out
    of 12,000 seems--that's a 0.1 percent complaint rate--0.1
    percent. I'd like to broaden the discussion a little bit, for
    any and all of you. Why do you think servicemembers choose to
    attend universities, or participate in universities like the
    University of Phoenix? There's a lot of discussion, and I've
    seen it in the halls of Congress, about, you know, for-profit
    universities. Do you believe that our servicemen and women want
    to attend universities like this because of aggressive or
    predatory marketing, or is it more as--Ms. Bilodeau, you've
    been quoted as saying ``because of the convenience of its
    online classes, which allow servicemembers to continue their
    studies when they're deployed or in a new location or on Navy
    ships.'' What is it? Why do you think so many of our servicemen
    and women do this?
        Mr. Levine. Senator, I think that servicemen and women
    participate in these programs because they want to better
    themselves, they want the education they can get out of them,
    they want to--they want the opportunity that--for advancement
    both within the service and once they leave the service. I
    think that's the overwhelming reason why servicemembers
    participate. What we need to do, as a Department, is to make
    sure that, when they participate, they're getting a quality
    product, so they're getting what they--what they hope to get
    and what they aspire to get when they enter the program.
        Senator Sullivan. Well, in my experience, it's because of
    the convenience, but also because our servicemen and women want
    to better themselves. I was deployed on a U.S. Navy ship many
    years ago, and a lot of the servicemembers there were taking
    classes from a university called the Central Texas College. And
    they were doing it because the--you can't go to class when
    you're on a ship somewhere in the South China Sea, but you want
    to better themselves.
        So, I just think that a lot of the focus has been on this
    predatory aspect of certain--we certainly don't want abuse, but
    we also want to make sure that the servicemen and women who
    want to better themselves have that opportunity. It seems to me
    that universities like the University of Phoenix or others who
    are trying to provide that, we want to encourage that.
        Mr. Levine. Senator, we agree with you. I think that more
    than 80 percent of the education that goes through our
    Voluntary Education Program is online training. So, that is the
    predominant mechanism, because obviously that's what works for
    servicemembers who are as mobile as they are and have the
    demands that they do in their professional lives.
        Senator Sullivan. So, what would happen to the 12,000
    members who are participating in the University of Phoenix
    programs if that program were permanently terminated? What
    would happen to those men and women who are serving--or who are
    participating in that?
        Ms. Barna. Well, sir, first, when we put the University of
    Phoenix on probation, we did make it very plain to them, one,
    the mere fact that the University of Phoenix was on probation
    did not prohibit servicemembers from enrolling in Phoenix
    classes. It was simply that we were not going to use tuition
    assistance to subsidize their attendance. Furthermore, all
    students who were already enrolled in Phoenix academic programs
    would be allowed to continue to receive instruction. It was
    called--what we call ``teaching out.'' And so, Phoenix would be
    permitted to continue to teach, to continue to instruct all of
    the students that were currently enrolled through the end of
    their academic programs.
        The two constraints on Phoenix during the period of
    probation were that they could not enroll, under tuition
    assistance, new servicemembers; and, two, that their ability to
    access bases was further limited, such that only if they were
    actually coming on post to teach a class or to provide
    counseling to a student would they be authorized to access the
    base. Those were the two, sort of, results of the probationary
    decision.
        Senator Sullivan. Right. But, you didn't answer my
    question, which was, If the--if there was a DOD decision to
    permanently terminate, what would happen to the students?
        Mr. Levine. So, that's hypothetical, but I think that we
    could have presumably provided the same kind of phaseout that
    we've provided with the ability to teach out so that you could
    continue to instruct current students. We have had the
    problem--and some of it may be on us for putting people on--for
    terminating people, but also because of--we have had the
    problem of companies that have gone out of business and left
    our students in the lurch. Some of that is on them. Some of
    them may have--may be on us. I can't tell you for sure. But, we
    have had that problem. And students have been left in the
    lurch. That's one of the things that we see a need to try to
    protect our students from, frankly.
        Senator Sullivan. Let me just--I just want to echo the
    point that Senator Tillis made about over-regulation. For me, I
    think that the executive branch has been over-regulation--over-
    regulating whole swaths of the United States economy,
    university--to include universities. At what point--is there a
    point where too--where--is there such thing as too much
    regulation with regard to our educational system? And have we
    reached that point with regard to the Tuition Assistance
    Program? And if we haven't, what is that point? And I'm asking
    that, again, because--you know, my initial question was about
    access. I believe that our military members are accessing these
    kind of programs, not because of predatory practices, but
    because they want them, because they need them. At what point
    are we over-regulating this program to the degree that we're
    harming the people it's supposed to benefit?
        Mr. Levine. So, Senator, first, I agree with you that we
    always need to look at what we're doing, in terms of
    regulation, and figure out if there are more streamlined and
    less burdensome ways that we can do things. What I would say,
    though, is that this program is different from where we're
    regulating the private sector, as such, because this is a case
    where we're spending the taxpayers' dollars. It's our students,
    our dollars. So, we have a more direct interest than if we're
    just out there regulating somebody who's operating purely in
    the private sector. Just as when we're dealing with
    contractors, we need to figure out mechanisms that we can put
    in place so that we can ensure the taxpayers' money is well
    spent, we need to do that here. So, we have a little bit more
    of an interest than we do when it's a pure regulation in the
    private sector. Even having said that, you're right, we need to
    look at ourselves and make sure we're not over-regulating.
        Senator Sullivan. Thank you.
        Thank you, Mr. Chairman.
        Chairman McCain. Senator Heinrich.
        Senator Heinrich. Thank you, Chairman.
        One thing this committee ought to be able to agree on today
    is that there have been some abusive and predatory practices
    occurring against our men and women in the military. And,
    frankly, one thing that has been common to much of the
    questioning and testimony today from my colleagues is that
    whether they are for-profit or nonprofit, online or brick-and-
    mortar, educational institutions having exploited
    servicemembers is unacceptable. And we've seen some instances
    over the last few years where we've had outrageous tuition and
    fees for bachelor's degrees--60,000, 75,000 dollars--coupled
    with interest rates as high as 15 percent, as with Corinthian
    College. And I think those sorts of things ought to be just
    viewed as, frankly, unacceptable.
        But, I also want to go back to this issue of the 90/10
    rule. And I have to say I'm a bit flabbergasted that DOD does
    not have a position on whether the 90/10 loophole should be
    closed. I understand DOD is not going to have--is not going to
    weigh in on elementary education policy, but this specific
    loophole directly impacts your servicemembers and their
    livelihoods and their futures. So, Under Secretary Levine, I
    want to go back to this. Why on earth doesn't DOD have a policy
    position on this?
        Mr. Levine. Senator, what I'd say is, I'm part of an
    administration, and we don't take positions on legislation
    without coordinating through our legislation--through the
    administration. So, while what you're--what you and others have
    said about the 90/10 rule sounds reasonable to me, I'm just not
    in a position to say we approve of the legislation or we
    disapprove of legislation without going through a proper
    process within the administration.
        Senator Heinrich. Well, I would respectfully suggest going
    through that process.
        Mr. Levine. Yes, sir.
        Senator Heinrich. Ms. Barna, one of the things that Under
    Secretary Levine talked about was how the current system is
    sort of--it's driven by complaints from individual
    servicemembers, and that can be unwieldy. Can you talk a little
    bit about how there is this transition in place or in process
    moving from a servicemember complaint-based system to a risk-
    based compliance model designed to go into effect in 2017, and
    what that means, and how that might better detect and prevent,
    ahead of time, predatory actions against our servicemembers?
        Ms. Barna. Yes, Senator, thank you for the opportunity to
    talk about our third-party compliance system that we will be
    initiating in January of 2017. We will be using industry-based
    best practices, both to routinely inspect on a very transparent
    basis, based on very transparent criteria, many of our schools.
    And then we will also have spot-checks or risk-based
    assessments that will go on, in addition to these more routine
    inspections.
        Right now, based solely on servicemember complaints, based
    on complaints that we receive through the media, from others,
    we're able to address about 1 percent of our schools. We
    believe that our new third-party complaint compliance system
    will enable us to address 10 percent of our schools annually,
    and to do so on a much more fair, equitable, and in a much more
    transparent manner.
        Senator Heinrich. Well, I think everyone up here looks
    forward to seeing that, and hopefully it will meet the promise
    that you've sort of laid out.
        Going back to you, Under Secretary Levine, I want to just
    touch on something you brought up briefly about for-profit
    colleges that have gone out of businesses, and then we have
    Active Duty members who are left in the lurch. What policies
    does DOD have in place for members of the military when for-
    profit institutions go bankrupt? And are there any measures for
    recourse for those servicemembers when, halfway through a
    program, they--their institution is no longer in existence?
        Mr. Levine. I'm going to defer to Ms. Barna on that.
        Senator Heinrich. That would be fine.
        Ms. Barna. Sir, this is where we really rely on our
    educational counselors and educational advisors. Each
    servicemember, prior to receiving tuition assistance, is
    required to engage in some upfront planning to develop an
    educational plan, educational goals and objectives. And when we
    have a situation in which a school goes out of business, that's
    when our counselors really get to work, working with those
    individual servicemembers, trying to find them other
    educational options, perhaps also through online schools, but
    that will also meet the terms of their educational plan. So,
    these are cases in which we give our servicemembers direct and
    very personal assistance to try to find a way to continue their
    education without interruption.
        Senator Heinrich. Mr. Chairman, I believe my time's
    expired. Thank you very much.
        Chairman McCain. Before I turn to Senator Cruz, I
    appreciate all the comments and the corrections that need to be
    made. This hearing is about the gross and grave injustice that
    was committed on an educational institution, that harmed the
    economy, their ability to teach people, their ability to
    provide an education for veterans. And it was done by a GS-15,
    apparently, and no one else, that have done terrific and
    horrific and unacceptable damage. Even Mr. Levine has pointed
    out that this was a lousy process. And there were repeated
    attempts by this University to sit down and discuss and resolve
    issues such--so serious as a Challenge Coin or a patriotic
    event. And so, I don't want this committee to lose sight of
    what--the reason why I called this hearing is because this kind
    of abuse of power is something that I hope, in a new
    administration, will be totally unacceptable.
        Senator Cruz.
        Senator Cruz. Thank you, Mr. Chairman.
        Good morning. Thank you, to each of the witnesses, for
    being here this morning.
        Voluntary education programs serve as an important role in
    developing America's servicemembers while in uniform, and
    setting them up for success following a military career. In my
    home state of Texas, thousands of soldiers and sailors and
    airmen and marines utilize these key benefits across all 15 of
    our military installations. Those who wish to develop and
    further develop themselves personally and professionally should
    be afforded the opportunity to do so with the education
    benefits that they were promised by the Government. The Tuition
    Assistance Program is far too important to lack accountability
    and oversight within the Department of Defense. It is of utmost
    importance that we ensure that our men and women that serve
    have as many higher education opportunities as possible,
    whether they are offered by for-profit institutions or private
    or public nonprofit institutions.
        I guess the most important question that I would ask the
    witnesses here is a very simple one. What went wrong here? What
    happened that led to this decision being made in what appears,
    I think, to most, if not all, observers, in a rash and ill-
    considered manner?
        Mr. Levine. So, Senator, first of all, I didn't hear
    anything in your description of the program that I disagree
    with. I would affirm what you said about our responsibility to
    soldiers and the utility of this program. I think it's a
    vitally important program, and I think you described it
    accurately.
        In terms of what happened here, I divide it into two
    categories, one of which I--on one of which I agree with
    Senator McCain and on one of which I disagree with the
    Chairman, just to be honest about it.
        Senator Cruz. The latter is always perilous in this
    committee.
        [Laughter.]
        Mr. Levine. It is, and I understand that, sir.
        [Laughter.]
        Mr. Levine. I believe that there were some substantive
    violations on the part of the University of Phoenix, which Ms.
    Barna and Ms. Bilodeau were reacting to in good faith when they
    put the institution on probation. However, what--and in answer
    to your question, What went wrong?--I think that the process
    was, as I put it, ``crappy,'' as Senator Levin--as Senator
    McCain, the Chairman, put it----
        Senator Cruz. Now, is that a technical military term?
        [Laughter.]
        Mr. Levine. That was a technical military error on my
    behalf, in naming the Chairman, yes, sir.
        As--there were--the process was lousy. We did not give
    University of Phoenix advance notice that they were going to be
    put on probation, an opportunity to respond, so they were put
    in a position where they were already on probation and forced
    to respond in that status rather than being warned and having
    an opportunity to respond in advance. I don't believe that's
    the way we should treat institutions like that. If it created
    the damage that Senator McCain caused, that's on us, and we
    shouldn't have done it. So, that's what went wrong.
        Senator Cruz. Well, let me ask--I mean, aside from the
    fairness to one particular institution, I mean, what about the
    over 9,000 current servicemembers in the TA program that have
    made the decision to attend the University of Phoenix? I mean,
    what about them? What consideration was given to them? And----
        Mr. Levine. Ms. Barna has described how we took measures to
    protect them and ensure that they could continue to get the
    education, continue to work with University of Phoenix during
    the time that University was on probation. So, thought was
    given to that. I don't think that makes this a fair process. I
    think we should have given notice, and we should have given an
    opportunity to comment.
        Senator Cruz. Well, and I guess my point would be, if
    you've got over 9,000 servicemembers that have made the
    decision that they like what University of Phoenix is offering,
    and they think it's beneficial to them, personally,
    professionally, shouldn't they be entitled to make that
    decision? And what about the next servicemembers who might make
    that decision that were being told, ``That option's not going
    to be available to you''?
        Mr. Levine. So, I believe that our servicemembers go into
    this program because they want to better themselves. They go in
    for the right reasons. And--but, this is a program where we
    have 2700 education institutions involved in it. Some of them
    are better than others. And we, as the Department of Defense,
    don't really have good information on which ones are better
    than others. Some of them appear to have been engaging in
    inappropriate practices, and it's--we feel it's our obligation
    to protect our students and to protect the taxpayer from that.
    We need a better process to do that with, and we're going to
    work to improve our process.
        Senator Cruz. Well, thank you for your candor, in terms of
    the mistakes that were made, here. Thank you for being here.
    And let me suggest some principles, going forward, that may
    beneficial. And I would put right at the top of that list
    protecting freedom of choice of our servicemen and women, that
    they are in a position to make judgments about what's best for
    themselves and their careers. And there's certainly a
    legitimate role in preventing fraud and deception, but there's
    no--as I understand it, no serious allegations of that. But,
    short of that, I would just encourage you to protect servicemen
    and women's freedom of choice.
        Mr. Levine. Senator, I--and I appreciate that. I think we
    should. What I would like to be in a better position to do than
    I am is to provide servicemembers with advice as to quality of
    institution. We don't have that expertise. We don't have
    objective benchmarks. And we need to be better--we need to have
    better information that we can provide our servicemembers to
    inform the choices that they make. We shouldn't be making
    choices for them, but the more information, the better
    information we can provide them, the better off they'll be.
        Senator Cruz. Given the many challenges facing this country
    on the national security front, I'm not sure it should be a top
    priority of DOD to become an expert on educational institutions
    rather than simply entrusting individuals to make those
    determinations.
        Mr. Levine. So, Senator, I agree with you, it's not our--as
    I started out by saying, earlier today, that's not our
    wheelhouse, we're not the ones to do that. But, it would be
    helpful to us if those who are in that business would develop
    systems that would help us provide that information.
        Senator Cruz. Thank you.
        Chairman McCain. Senator Shaheen.
        Senator Shaheen. Thank you, Mr. Chairman.
        And recognizing your concern about the University of
    Phoenix, I do think it's important to point out that this
    hearing has gotten broader issues with respect to how
    servicemen and women choose continuing education, and that
    that's a good discussion for this committee to be having.
        And I was--as I was looking at the materials that were
    given to us, I noticed, in the statement from the president of
    the University of Phoenix, that he talks about his support and
    the University's support for Executive Order 13607, which, I
    think, most people who have asked questions on this committee
    have agreed is a good thing, that we want to ensure that men
    and women who are serving have access to higher education and
    are not preyed on by predatory practices. So, I do appreciate
    the president's comments in support of that executive order.
        And I have to say, I agree with Senator Blumenthal, and am
    a cosponsor of his legislation, that part of the problem here
    is the loophole, the 90/10 loophole, that encourages colleges,
    for-profit or not, to be able to benefit from targeting members
    of the military for additional education, and that we really
    need to change that and make everybody play by the same rules.
        Now, having said that, I want to follow up, Mr. Levine, on
    your statement about trying to make sure that servicemembers
    and veterans have the resources that they need to better make
    choices about educational institutions. And again, I think they
    should be able to determine where they want to go, as long as
    the educational institution complies with the requirements.
    But, it's important to make sure the information is available
    to them.
        So, I wonder--I don't know if this is for you or for Ms.
    Barna--what currently is being done to provide information to
    men and women who are serving, so that they can make informed
    decisions?
        Ms. Barna. Senator, one of the tools on which we rely and
    on which our servicemembers rely is an online tool called
    Tuition Assistance Decide, or TA Decide. A servicemember can go
    online at any time and view all manner of information about a
    particular academic institution. And all institutions are
    reflected. There's no distinction at all between for-profit or
    not-for-profit. Any institution that has signed an MOU is
    reflected. We pull information from other agencies. We pull
    graduation rates. We pull student loan rates. Again, all
    provided by other Federal agencies. But, all of that is
    available there for the servicemember to view, to sort through,
    to compare different institutions and find the one that best
    meets his or her needs. So, that's a tool that we've rolled out
    in the last 18 months. And we're very gratified by the usage
    that it's receiving, and believe it's a good first step in
    better informing our servicemember populations.
        Senator Shaheen. And is there someone--if somebody looking
    at that Web site has questions about material that's there or
    needs further guidance, is there somebody who they can go to?
    Do you suggest somebody in an institution, or is there somebody
    on base? My oldest granddaughter has been applying to colleges,
    and I have watched how overwhelming that process is. So, I
    think it's overwhelming, no matter what age we are, to get a
    lot of information and not necessarily be able to translate
    that in a way that is most effective for our lives.
        Mr. Levine. So, I believe we have----
        Senator Shaheen. Sometimes we need help.
        Mr. Levine.--I believe we have--what, is it 286 education
    assistance officers distributed around the world and around the
    Department. I can't tell you that that's any more satisfactory
    to a student than a high school guidance counselor, but it--but
    we try.
        Senator Shaheen. And how do people know about those people?
    One of the things that I've heard concerns about is not being
    aware of what information is available. So, what kind of
    outreach is done to make sure people are aware of that, or try
    and help them be more aware?
        Ms. Barna. So, ma'am, there are many things that are done
    to try to publicize the opportunity to consult with an
    education counselor, to visit the Education Assistance Center.
    They're usually located right in the heart of the installation
    garrisons. It's put--information is put out, briefings are put
    out at unit assemblies. Again, not advocating for or against a
    particular institution, but encouraging servicemembers who are
    interested in bettering themselves and in better preparing
    themselves for the ultimate transition back to civilian life,
    ``Come in to the Education Center, let's sit down, let's talk
    about your educational goals and see how we can assist you.''
        Senator Shaheen. Thank you all very much.
        Chairman McCain. Senator Kaine.
        Senator Kaine. Thank you, Mr. Chair. And, Mr. Chair, I
    appreciate the comments that you made earlier. You know, we
    talked a bit about this last week, so I have some unresolved
    emotions from the campaign, but the one that is very resolved
    is, this committee has really been the center of my work in the
    Senate in the 4 years I've been here, and I really have
    appreciated my relationships with my colleagues, and am glad to
    be back to take up this important matter. So, I appreciate you
    and Senator Reed and all my colleagues. And it's good to be
    back at work.
        A couple of items, just to tie----
        Chairman McCain. Thank you.
        Senator Kaine.--up some loose ends. Because of--a lot of
    this hearing is about the process of notification, I'm not
    exactly sure, Mr. Chair, what back-and-forth correspondence is
    in the record. I think it's important to have the communication
    between the University of Phoenix and DOD in the record on this
    hearing.
        I wanted to offer the October 7, 2015, letter, which was
    the Notice of Probation letter, but that wouldn't be
    sufficient. I'm assuming I can put this in the record, without
    objection. But, I hope maybe the staffs, together, would work
    on putting together the communication, beginning in June of
    probably 2015 all the way through the restoration after the
    probation period. I think that would be helpful, if we could--
    --
        Chairman McCain. Sure.
        Senator Kaine.--seek that to happen.
        Chairman McCain. Without objection. And the record will be
    made clear that efforts were made, on the part of the
    University of Phoenix, which were not received--which were not
    responded to in an affirmative fashion. And other influences
    clearly affected this decision, at least in the view of the
    Chairman. But, I thank you for that, and those communications
    will be made part of the record.
        [The information referred to follows:]

        The committee received 164 pages of communications between
    University of Phoenix (UofP) and the Department of Defense (DOD)
    through January 15, 2016 (the end of probation) requested at the
    Committee's hearing of November 29, 2016. This augments the nearly 700
    pages of documents previously provided in response to the Committee's
    request of August 17, 2016. Please note, many UofP communications
    attached are marked as proprietary and/or confidential. As such, it is
    recommended the Committee engage UofP before publicly releasing any of
    these. Though the Department is unaware of any additional
    communications from June 30, 2015 through January 15, 2016, between DOD
    and UofP regarding its Memorandum of Understanding, we will provide any
    additional responsive items if discovered.

        [The received communications will be retained in the
    committees files.]

        Senator Kaine. Second, just to clarify a factual point, the
    testimony of the witnesses were that four institutions have
    been put on probation. I think the testimony was that the
    University of Phoenix and Heald College are both for-profits,
    the other two were Globe University and the Minneapolis--
    Minnesota Business College. I checked both of those. They're
    both for-profits, as well. So--based on their own Web site
    information--so, the four that have been put on probation are
    all for-profits.
        I don't necessarily think that demonstrates a double
    standard. I mean, they're--this committee has shown concern in
    the past about for-profit institutions and whether servicemen
    and women, folks in Active Duty, are, you know, singled out
    even for deceptive treatment by them. I think the committee,
    for example, has adopted a Federal rule that limits interest
    rates on payday loans to Active Duty, that that is not a rule
    that applies to other American citizens, but it does apply to
    Active Duty military because of a concern that payday lenders
    were singularly focusing attention upon Active Duty military
    members. But, it is important to notice that the four
    institutions that have been put on probation are all for-profit
    institutions. And you can draw the conclusions that you want
    about that.
        Your opening testimony, Mr. Levine, ``This is not in our
    wheelhouse,'' you know, that really has struck me during the
    course of this hearing. You know, and I've wondered if you just
    took the entire amount we spend on this and just gave everybody
    a raise and said, you know, ``You can decide what education
    that you want to access if you do want to,'' whether that would
    be a better way to do that than to have a tuition assistance
    benefit program and then have the DOD--and it's not in the
    DOD's wheelhouse--try to determine what institutions can
    receive those funds.
        I'm going to give you a pet peeve of mine, and tell me if
    I'm wrong. Maybe it's been corrected. In Virginia, ordnance
    officers and ordnance specialists are trained at Fort Lee,
    which has a huge ordnance--I'm sorry--logistical specialists of
    all kinds--chefs, ordnance officers, heavy equipment operators.
    There is an ordnance school there. And I'm told, by members who
    go through the ordnance school, that they take metalworking and
    welding training, and yet the Military Tuition Assistance
    Benefit Program, as it currently exists--and I just looked at
    TA Decides, based on your testimony, Ms. Barna--would allow you
    to get tuition assistance to use at 2700 universities, but you
    couldn't get $300 to pass the American Welding Society
    certification exam out of a tuition assistance program. You
    could get 4,000, 5,000, thousands of dollars to go to a
    private, a public, or a for-profit college, but you couldn't
    get 300 bucks to pass the American Welding Society's
    certification exam, which, in terms of producing an outcome in
    the civilian workforce, a credential that would enable you to
    be hired almost immediately, would probably be preferable than
    virtually any other degree that you could get. We have been
    working to try to resolve that second-class treatment for
    career and technical education for some time. But, it--the
    gatekeeping function of an organization that acknowledges
    ``This is not our wheelhouse'' trying to decide what is a good
    educational program and what isn't, it seems to me that you can
    work awful hard on that, but it's still not going to be in your
    wheelhouse, and there will still be overinclusion of
    institutions that possibly shouldn't be included, and then
    underinclusion of institutions or training programs that
    should. And that's been an aspect of this hearing that I think
    has been really helpful. It's raised the question of what
    really is the DOD's expertise in this area. And I wonder if you
    have any comments about that.
        Mr. Levine. Well, it's an interesting problem that you pose
    there, Senator. We rely on institutions being accredited
    educational institutions. If we go beyond that, then the
    question is, What is our minimum baseline that we're going to
    go to? Because that's one of the few things we have to measure
    against.
        With regard to certificates, that's something that we are
    specifically concerned about, and we're working toward enabling
    servicemembers to get certificates. We're doing that through
    other programs. And so, it may be that the best answer to
    enable people to take the--to get the kind of training you're
    talking about without lowering our standards for the Tuition
    Assistance Program is to develop--an approach that is
    specifically tailored to that kind of certificate so that it
    doesn't mix apples and oranges and undermine both programs.
        Senator Kaine. Can I just make one last point, Mr. Chair?
        The--you used the word ``lowering our standards,'' and I
    just want to underline that and put a big spotlight on it. In
    Virginia, there is a marvelous career and technical program
    that trains shipbuilders at the shipyard in Newport News. It's
    been in existence since 1919. Individuals who go to that
    program, they get paid to go. They don't accumulate debt. They
    graduate in 3 years, and they move into a job that is well
    paid, doing something really patriotic for the country. But, we
    do not count them as having a higher education degree. The
    admission rate into the program is lower than getting into
    Harvard, but we do not count them as having a higher education
    degree.
        There has been, across Federal policy in the DOD and DOE
    [Department of Energy], a sense that career and technical
    education is a lowered standard, is a--some kind of a
    subjugated or second-class kind of education. And you can look
    at the way Pell Grants are administered or the way the military
    tuition assistance benefit is administered, and you'll see that
    notion, that career and technical training is second class. And
    yet, we have to bring in welders from foreign countries on
    specialty visas because we don't train enough in the country,
    and the living that they make is vastly better than what a lot
    of college graduates make.
        You know, this is a hearing about a very particular thing,
    and we'll fill the record up with the communication about the
    process and how it can be made better, but it also touches upon
    something much larger, which is, What is the definition of a
    first-class education or an accredited or approved education
    program? And the fact that we don't recognize technical
    certifications that will enable you to get a job anywhere in
    the United States as being of a high standard, but we pay
    thousands and thousands of dollars of public money for people
    to get degrees that, in some instances, may not be that
    helpful, in terms of either their military MOS [Military
    Occupational Specialty] or their post-military career, is just
    an example of the amount of reform that I think needs to----
        Mr. Levine. And, Senator, you're right. I certainly
    shouldn't have implied that those career and technical programs
    you're referring to are, in some way, worse or less important
    than the more traditional education programs. What I meant to
    say was, if we were to remove the accreditation requirement,
    then we would have to worry about what the other impacts of
    that might be.
        Chairman McCain. I want to thank the witnesses for
    appearing. And I know it is unusual for Ms. Barna and Ms.
    Bilodeau to be before this committee, but it's also the first
    time that I have seen decisions of this magnitude made at the
    level that they testified was their decision making which had
    such profound impact.
        Mr. Levine, I'd--you're an old friend of this committee. I
    thank you for your candor. I thank you for your continued
    service. And, believe it or not, from time to time, we miss
    you.
        [Laughter.]
        Mr. Levine. Thank you, Mr. Chairman.
        Chairman McCain. This hearing is adjourned.
        [Whereupon, at 11:29 a.m., the hearing was adjourned.]

        [Questions for the record with answers supplied follow:]

                  Questions Submitted by Senator Kelly Ayotte
                        transparency for service members
        Senator Ayotte. Secretary Levine, in your joint statement, you
    state that, ``Consistent with the Principles of Excellence, the revised
    [memorandum of understanding] requires educational institutions to
    provide meaningful information about the financial cost and quality of
    their programs so that military students can make informed decisions
    about where to attend school.''
        1. In addition to simply gathering this information, how is DOD
    proactively ensuring that this information is available to service
    members considering whether to enroll in courses at a particular
    school?
        Secretary Levine. Although the requirement to provide meaningful
    information about cost and quality rests with the Educational
    Institution (EI) in accordance with both the Principles of Excellence
    and the Department of Defense (DOD) voluntary education policies and
    agreements, DOD is actively engaged in ensuring such information is
    readily available to Service members who may be considering how to
    employ education benefits, such as Tuition Assistance (TA).
        To this end, DOD has developed two tools that help Service members
    review and explore much of the required information. A tool called TA
    DECIDE contains cost data, program offerings, enrollment numbers,
    student complaint data, and many other relevant data so that military
    students can review and make side-by-side comparisons of EI offerings
    as better informed consumers of higher education. TA DECIDE is
    publically available at: https://www.dodmou.com/TADECIDE/. Another
    tool, an interactive instructional course called ``Higher Education
    Preparation,'' helps Service members to make sense of the information
    that EIs present. The course is available on-demand through Joint
    Knowledge Online, and Service components may require a Service member
    to complete this course prior to receiving TA funding.
        Most importantly, the Department's employs an extensive force of
    professional education counselors who are trained and available to help
    Service members use these exceptional tools to explore educational
    choices that meet their individual needs. These tools, when considered
    together, enable a Service member to review and better understand
    information communicated by the EI, while at the same time enabling DOD
    to promote EI compliance with the Principles of Excellence.
                  low rate of degree or certificate completion
        Senator Ayotte. Secretary Levine, in your joint statement, you
    express concern regarding the ``relatively low rate of successful
    completion with degrees or certificates . . . ''
        2. For service members utilizing tuition assistance, what is the
    rate of successful completion with degrees or certificates? How do
    these rates vary based on rank and time in service?
        Secretary Levine. The Department tracks Tuition Assistance (TA)
    funded completions that include certificates, as well as associate,
    bachelor, and master's degrees. The table below provides participation
    and completion information for fiscal years 2014 and 2015. fiscal year
    2016 data is not yet available. It is important to note that the
    ``Completion Ratio'' column is simply the ratio of credentials reported
    by the educational institution as compared to TA participants for the
    given fiscal year, and not an actual cohort value reflective of the
    rate of completion.
        While Educational Institutions are required to report degree and
    certificate completions in accordance with Department voluntary
    education policies, aggregate completion information is not currently
    available by grade or time in service. However, the Department is
    proactively engaged in numerous efforts to improve the integrity,
    collection, storage, and reporting of TA program data across the
    voluntary education enterprise in the coming years. In early 2017, the
    Department will provide a report to Congress on tracking student
    outcomes for TA participants, which report will highlight some of these
    efforts.

    ----------------------------------------------------------------------------------------------------------------
                                                                 Degrees/Certificates
            Fiscal Year           Number of TA Participants            Reported*              Completion Ratio**
    ----------------------------------------------------------------------------------------------------------------
                         2014                      294,200                      46,166                      15.69%
    ----------------------------------------------------------------------------------------------------------------
                         2015                      285,763                      49,288                      17.25%
    ----------------------------------------------------------------------------------------------------------------
    *A record of the degrees or certificates reported by an Educational Institution as complete during the fiscal
      year.
    **The ratio of degrees/certificates reported to the number of TA participants during the fiscal year.

        3. Senator Ayotte. What is DOD doing to help a greater percentage
    of service members to complete their degree and certificate programs?
        Secretary Levine. The Department sponsors numerous efforts to
    assist Service members, and improve the likelihood that they achieve
    their degree or certificate completion goals. Chief among these efforts
    is a robust counseling program that helps Service members articulate
    educational goals, assess their readiness for academic engagement, and
    formulate a far-reaching plan for goal attainment and degree or
    certificate completion. Further, DOD policies require that Service
    members have a degree plan in place; TA funds can only be used for
    courses leading toward completion of that degree plan. The degree plan
    provides a roadmap for Service members to ``check off'' milestones
    toward credential attainment, avoid enrollment in unnecessary classes,
    and track successes.
        It is important to note that the Department of Defense (DOD)
    Tuition Assistance (TA) program was designed to support the off-duty
    education needs of Service members. As such, its goals, usage,
    processes, and outcomes are inherently different from programs used by
    civilian peers. Further, the demands of military service limit the
    amount of time that Service members can devote to off-duty education.
    For example, DOD's average program participant takes just three courses
    per year, and fewer than 5% take six or more classes in an entire year.
    Moreover, coursework is often accomplished in ``bursts'' wherein
    Service members take a semester or two of courses followed by a
    semester or more of time away from academics.
        Because of these exigencies, many Service members fulfill their
    enlistments and transition out of uniformed service before completing a
    degree or certificate. Thus, acquiring a degree or certificate often
    takes much more cumulative time than a Service member has available
    while on active duty.
        In response to these endemic constraints, DOD has devoted an entire
    focus area of our Voluntary Education Strategic Plan to student
    readiness and success. In the public sector, credential completion and
    persistence are often cited as key success metrics, whereas such
    measures may not represent key performance indicators for our military
    students using TA. For example, completing an associate's degree during
    off-duty time in a part-time capacity may take up to seven years for
    Service members using TA, compared to a two year completion rate for
    the traditional, full-time student. Further ``persistence,'' often
    defined as continued enrollment from one academic term or semester to
    the next, presents a unique challenge for our highly mobile and
    deployable force. Service members tend to enroll in coursework between
    deployments and as life circumstances allow.
        Course completion rates provide an alternate indicator of success.
    Course completions can be compared against a Service member's
    individualized degree plan as an accurate measure of satisfactory
    progress toward program completion. The DOD and the Service components
    actively monitor course completion rates, which consistently register
    above 90 percent.
              the postsecondary education complaint system (pecs)
        Senator Ayotte. Secretary Levine, in your joint statement, you
    discuss the Postsecondary Education Complaint System (PECS). As you
    note, this system provides service members a means to report negative
    experiences with educational institutions so that we can help service
    members, improve the education they receive, and identify bad actors.
        4. For every service member enrolling in post-secondary courses and
    utilizing tuition assistance, does DOD currently have a systematic
    method of notifying them that this complaint system exists, informing
    them how to use it, and encouraging them to do so if they encounter
    problems?
        Secretary Levine. The Department does not notify and inform every
    Service member of the Postsecondary Education Complaint System (PECS)
    during the Tuition Assistance (TA) enrollment process. However, the DOD
    does appropriately promote the availability and utility of PECS in the
    standard course of its voluntary education operations.
        The PECS landing page, available at: http://
    www.militaryonesource.mil/education-and-employment/higher-education-
    for-service-members?content--id=287986, provides Service members with
    detailed information about how to submit a complaint, examples of
    Principles of Excellence complaint types, and the ability to submit a
    complaint. Information about PECS and links to the PECS landing page
    are promoted and accessible across the voluntary education enterprise
    through Departmental and Service component websites, including Service
    component systems that support TA registration and management. Further,
    PECS information and links are available through all phases of the
    enrollment process, including pre-enrollment, during enrollment, and
    post enrollment.
        Additionally, Service members are introduced to PECS during the
    Department's ``Higher Education Preparation'' interactive instructional
    course, which helps Service members to navigate higher education
    information that equips them with the details they need to make school
    and program choices that meet their individual education and career
    goals. The course is available on-demand through Joint Knowledge Online
    and Service components may require Service members to complete this
    course prior to receiving TA funding.
        Should a Service member want to report a negative experience with
    an educational institution and not be able to locate the aforementioned
    resources and links on his or her own, the Department's professional
    education counselors are trained and available to assist them. These
    counselors can, and often do, help Service members locate the PECS
    landing page and walk them through the process of initiating a
    complaint.

        5. Senator Ayotte. Do the forms that a service member fills out to
    apply for tuition assistance include a section informing them about
    this complaint system that they could utilize?
        Secretary Levine. The Military Departments are responsible for
    administering the Tuition Assistance (TA) program, commensurate with
    all governing Federal statutes and rules, guidelines, policies, and
    regulations of the Department of Defense (DOD). Accordingly, the DOD
    has not prescribed a uniform set of application forms for the Military
    Departments to utilize for TA applications. But several of the Services
    do include appropriate information about the Postsecondary Education
    Complaint System (PECS) on their respective TA applications and forms.
    The Services also introduce information about PECS availability through
    their counseling support systems and materials and/or through their TA
    application systems and processes. In response to your question, the
    Department will suggest to the Military Departments that appropriate
    information about the PECS be included on their appropriate forms.
        DOD's response to Question #4 provides additional insight into
    PECS's information processes.

        6. Senator Ayotte. Can a service member considering whether to
    enroll at a certain educational institution view the complaints from
    current students at the respective institution and how the institution
    has addressed the complaint?
        Secretary Levine. No. Through the Department's Tuition Assistance
    (TA) DECIDE tool available at: https://www.dodmou.com/TADECIDE/, a
    Service member can review relevant educational institution data,
    including the number of student complaints, by category of complaint,
    for both the TA program and the Department of Veterans Affairs-
    administered GI Bill. This approach is consistent with the tenets of
    the Principles of Excellence and complaint information made available
    by other federal agencies such as the Department of Veterans Affairs.
    Further, the Department published a PECS summary report for fiscal
    years 2014 and 2015 that can be accessed at http://
    www.militaryonesource.mil/education-and-employment/higher-education-
    for-service-members?content--id=287986. Since PECS information is for
    official use only and protected in accordance with the Privacy Act, and
    Department Directives 5400.11 and 5400.11-R, a Service member does not
    have access to view either the specific details of complaints from
    current students or any response to such complaints provided by the
    educational institution.
                                   __________
                   Questions Submitted by Senator Joe Manchin
                        equal treatment for universities
        7. Senator Manchin. Is the Defense Department (DOD) treating
    equally all universities that have signed DOD's MOU? Please answer yes
    or no to each item, and explain each of your answers: a. In CONUS, has
    DOD allowed schools that teach a class on base to: meet with any
    student who is not taking a class with them, including their own online
    students if they have them, stay on base even when classes are not in
    session, and usually for 40 hours a week, and/or recruit students in
    either their on-ground and/or online programs while they are on base?
    b. OCONUS, has DOD: totally denied all schools base access to their
    students and any new students, except for four contract schools,
    granted base access to these four schools with the stated purpose that
    on-site counselors are needed, and/or required all new TA students to
    take courses from only these four schools?
        Secretary Levine and Ms. Barna. The Department of Defense (DOD)
    treats all educational institutions that have signed the DOD Voluntary
    Education Partnership Memorandum of Understanding (MOU) in a fair and
    equitable manner, consistent with the terms of the MOU. The
    requirements of DOD Instruction 1322.25, ``Voluntary Education
    Programs,'' intentionally increased protections for Service members and
    their families through an enhanced memorandum of understanding (MOU)
    with educational institutions. The initiative, part of DOD's
    implementation of the President's Executive Order 13607, ``Establishing
    Principles of Excellence for Educational Institutions Serving Service
    Members, Veterans, Spouses, and Other Family Members,'' Principles of
    Excellence, was designed to improve oversight of the educational
    programs offered to our Service members and their families, including
    DOD's Tuition Assistance Program. Specifically, Executive Order 13607
    instructed the Department to prevent abusive and deceptive recruiting
    practices and establish new uniform rules and strengthen existing
    procedures for access to military installations by education
    institutions.
        The Department is committed to providing appropriate and adequate
    access to military installations for the more than 2,700 educational
    institutions that have signed the MOU with DOD. However, DOD must also
    balance the capacity of the installation commander to accommodate
    requests within the context of the mission and the particular needs of
    the installation's population. Equally important, DOD continues to be
    concerned by the past practices of some educational institutions that
    used every installation access as an opportunity to recruit. While the
    educational institution may have been granted access for the purpose of
    advising students, the institution may also have engaged in unapproved
    advertising, marketing, and/or recruitment activities during the visit.
    Common examples include placement of unauthorized banners and signage,
    mass emails in advance of the visit, and same-day enrollments of new
    students resulting from visits that were authorized solely for the
    purpose of counseling existing students.
        a) No. Regardless of whether the military installation is located
    CONUS or OCONUS, the Department enters into installation-level
    agreements with educational institutions for the delivery of academic
    programs and services. Such agreements usually contain provisions for
    office space to staff and conduct operations consistent with the
    agreement. All educational institutions with a signed DOD Voluntary
    Education Partnership MOU are eligible to compete for these agreements.
    The selection of academic programs and services is based on an
    Installation Needs Assessment process, whereby local program needs are
    determined and an acquisition-like process ensues to determine vendor
    interest, solicit proposals, and select vendors. Educational
    institutions with installation-level agreements are allowed to conduct
    business in accordance with the terms of the agreement at locations/
    spaces prescribed. In the scenario provided in your question, an
    educational institution with an agreement to deliver classroom
    instruction on the installation would typically have assigned office
    space. The educational institution may meet with prospective students
    referred by education center staff, provide counseling to current
    students regardless of preferred delivery mode (online, classroom, or
    hybrid), and conduct office operations outside of instructional
    delivery and consistent with typical business hours of the
    installation. However, an installation-level agreement for academic
    programs and services would not permit educational institutions to
    engage in recruiting or advertising activities inconsistent with DODI
    1322.25. All educational institutions, including those with an
    installation-level agreement, must request and receive approval to
    participate in recruiting and advertising activities (i.e., education
    or career fair) on the military installation.
        b) Yes. The overseas environment presents unique challenges in
    terms of country clearances, Status of Forces Agreements/international
    agreement with the host nation(s), and the authority to operate on
    military bases, facilities, and areas that the host country has granted
    to the US military to use. Accordingly, DOD instructions 1322.29 and
    1322.19, ``Voluntary Education Programs in Overseas Areas,'' permit
    only contracted educational institutions access to overseas DOD
    installations (i.e., contracts cover Pacific, Europe and Contingency
    areas of operation). As stated previously, the acquisition of academic
    programs and services is based on a needs assessment and all
    educational institutions with a signed DOD Voluntary Education
    Partnership MOU are eligible to compete for these agreements.
    Currently, the Department has four contracted educational institutions
    supporting the Pacific Command, four contracted educational
    institutions supporting the European Command, and three contracted
    educational institutions supporting areas of responsibility in the
    Central Command and the Africa Command. In accordance with the
    provisions of the aforementioned policies and agreements, new Tuition
    Assistance participants are referred to one of the contracted
    educational institutions; recruiting, marketing, and advertising
    activities by the contracted educational institutions are restricted.
    Although physical access to overseas installations is permitted only by
    contracted educational institutions in accordance with the provisions
    of DOD policies and agreements, educational institutions may still
    ``access'' their students through a variety of means
    (telecommunications, in-person off the installation, virtual
    counseling, etc.).
                          tuition assistance benefits
        8. Senator Manchin. Is DOD finding that there are fewer service
    members using their earned TA benefits to get an education that would
    have allowed them to advance themselves while in the military and
    prepare for a more successful future? In your explanation, please
    provide the number of TA participants in each of the last 5 fiscal
    years (fiscal year 2016-fiscal year 2012), and the percentage change
    year over year.
        Secretary Levine and Ms. Barna. The table below provides five years
    of Tuition Assistance (TA) participation information for fiscal years
    2011-2015. fiscal year 2016 data is not yet available. The Department
    is aware of a slow decline in the number TA participants over the last
    several years; we believe that this decline may be explained by several
    contributing factors. First, the Principles of Excellence prescribed in
    2012 prompted the Department of Defense (DOD) to take a hard look at
    our data streams and collection processes. In that review, DOD found a
    number of opportunities to improve data definitions and standardize
    data formats. Thus, data integrity and reporting have improved
    significantly, with fiscal year 2014 and 2015 reports offering a much
    more accurate accounting of unique participants in the TA program.
        Additionally, the restructure of the force itself has likely
    impacted the number of TA participants. Force drawdowns may have
    affected the number of Service members who might participate in the TA
    program. Factors such as increased operational tempo, shortened but
    more frequent deployment cycles, and earlier focus on transition, may
    have also detracted from the pursuit of higher education endeavors
    during off-duty time. Further, the frequency of large, news-worthy
    events such as troop withdrawals/surges, budget battles, and government
    shutdowns may produce a ``wait and see'' effect on Service member
    willingness to initiate higher education during periods of uncertainty.
        Finally, DOD has revised its TA policies to better meet the needs
    of the DOD while retaining Service member access to quality educational
    opportunities. Each Military Department manages its TA program under a
    set of controls that has undergone revision as the Military Departments
    strive to maximize the balance between efficiency and effectiveness.
    For example, the Military Departments have promoted policies that
    enable a more capable force by requiring a Service member to learn his
    or her military occupation during the first part of enlistment, and
    before allowing the use of TA funds. Thus, it is important to note that
    the ``Percent Change From Prior Year'' column in the below chart does
    not consider the number of Service members eligible for TA as a
    proportion of TA participants.

    ----------------------------------------------------------------------------------------------------------------
                 Fiscal Year                    Number of TA Participants          Percent Change From Prior Year*
    ----------------------------------------------------------------------------------------------------------------
                             2011                               347,656                                   N/A
    ----------------------------------------------------------------------------------------------------------------
                             2012                               360,175                                +3.60%
    ----------------------------------------------------------------------------------------------------------------
                             2013                               332,997                                -7.55%
    ----------------------------------------------------------------------------------------------------------------
                             2014                               294,200                               -11.65%
    ----------------------------------------------------------------------------------------------------------------
                             2015                               285,763                                -2.87%
    ----------------------------------------------------------------------------------------------------------------
    *The percent change from the prior fiscal year does not consider the number of Service members eligible for TA
      as a proportion of TA participants.

                                     [all]