[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:]
      
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    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.


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