[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


               FOR-PROFIT COLLEGE CONVERSIONS: EXAMINING
            WAYS TO IMPROVE ACCOUNTABILITY AND PREVENT FRAUD

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON EDUCATION AND LABOR
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION
                               __________

             HEARING HELD IN WASHINGTON, DC, APRIL 20, 2021
                               __________

                            Serial No. 117-7
                               __________

      Printed for the use of the Committee on Education and Labor

                                     
               [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

                                     
          Available via: edlabor.house.gov or www.govinfo.gov

                               __________
                               
                   U.S. GOVERNMENT PUBLISHING OFFICE   
44-331 PDF                WASHINGTON : 2022

                    COMMITTEE ON EDUCATION AND LABOR

             ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

RAUL M. GRIJALVA, Arizona            VIRGINIA FOXX, North Carolina,
JOE COURTNEY, Connecticut              Ranking Member
GREGORIO KILILI CAMACHO SABLAN,      JOE WILSON, South Carolina
  Northern Mariana Islands           GLENN THOMPSON, Pennsylvania
FREDERICA S. WILSON, Florida         TIM WALBERG, Michigan
SUZANNE BONAMICI, Oregon             GLENN GROTHMAN, Wisconsin
MARK TAKANO, California              ELISE M. STEFANIK, New York
ALMA S. ADAMS, North Carolina        RICK W. ALLEN, Georgia
MARK De SAULNIER, California         JIM BANKS, Indiana
DONALD NORCROSS, New Jersey          JAMES COMER, Kentucky
PRAMILA JAYAPAL, Washington          RUSS FULCHER, Idaho
JOSEPH D. MORELLE, New York          FRED KELLER, Pennsylvania
SUSAN WILD, Pennsylvania             GREGORY F. MURPHY, North Carolina
LUCY Mc BATH, Georgia                MARIANNETTE MILLER-MEEKS, Iowa
JAHANA HAYES, Connecticut            BURGESS OWENS, Utah
ANDY LEVIN, Michigan                 BOB GOOD, Virginia
ILHAN OMAR, Minnesota                LISA C. Mc CLAIN, Michigan
HALEY M. STEVENS, Michigan           DIANA HARSHBARGER, Tennessee
TERESA LEGER FERNANDEZ, New Mexico   MARY E. MILLER, Illinois
MONDAIRE JONES, New York             VICTORIA SPARTZ, Indiana
KATHY E. MANNING, North Carolina     SCOTT FITZGERALD, Wisconsin
FRANK J. MRVAN, Indiana              MADISON CAWTHORN, North Carolina
JAMAAL BOWMAN, New York, Vice-Chair  MICHELLE STEEL, California
MARK POCAN, Wisconsin                JULIA LETLOW, Louisiana
JOAQUIN CASTRO, Texas                Vacancy
MIKIE SHERRILL, New Jersey
JOHN A. YARMUTH, Kentucky
ADRIANO ESPAILLAT, New York
KWEISI MFUME, Maryland

                   Veronique Pluviose, Staff Director
                  Cyrus Artz, Minority Staff Director
                                 ------                                

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on April 20, 2021...................................     1

Statement of Members:
    Scott, Hon. Robert C. ``Bobby'', Chairman, Committee on 
      Education and Labor........................................     1
        Prepared statement of....................................     7
    Foxx, Hon. Virginia, Ranking Member, Committee on Education 
      and Labor..................................................     8
        Prepared statement of....................................     9

Statement of Witnesses:
    Cao, Yan, JD, Fellow, The Century Foundation.................    12
        Prepared statement of....................................    14
    Emrey-Arras, Melissa, Director, Education, Workforce and 
      Income
      Security Issues, U.S. Government Accountability Office.....    50
        Prepared statement of....................................    52
    Galle, Brian , JD, LL.M., Professor of Law, Georgetown 
      University Law Center......................................    28
        Prepared statement of....................................    31
    Gillen, Andrew, Ph.D.., Senior Policy Analyst, Texas Public 
      Policy
      Foundation.................................................    44
        Prepared statement of....................................    46

Additional Submissions:
    Ranking Member Foxx:
        Report, ``Cheap for Whom?'', AEI Public Policy Research, 
          October 2011...........................................   124
        Charts, ``Executive Compensation at Public and Private 
          Colleges''.............................................   134
        Table, ``Spending by Function''..........................   135
        Graphics, ``The College Copmpletion Landscape''..........   137
        Chart, ``Federal Student Loan Three-Year Default Rate''..   141
        Article, ``Higher Education Has a Tax Problem and It's 
          Hurting Local Communities'', Time, April 7, 2021.......   142
    Adams, Hon. Alma S., a Representative in Congress from the 
      State of North Carolina:
        Letter submitted by NAICU dated April 16, 2021...........   149
    Questions submitted for the record by:
        Chairman Scott...........................................   151
        Ranking Member Foxx......................................   158
        Fitzgerald, Hon. Scott, a Representative in Congress from 
          the State of Wisconsin.................................   155
        Harshbarger, Hon. Diana, a Representative in Congress 
          from the State of Tennessee............................   155
    Responses to questions submitted for the record by:
        Ms. Cao..................................................   152
        Mr. Gillen...............................................   156
        Ms. Emrey-Arras..........................................   159

 
                    FOR-PROFIT COLLEGE CONVERSIONS:
                      EXAMINING WAYS TO IMPROVE
                  ACCOUNTABILITY AND PREVENT FRAUD

                              ----------                              


                        Tuesday, April 20, 2021

                  House of Representatives,
                          Committee on Education and Labor,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:19 a.m., via 
Zoom, Hon. Robert C. ``Bobby'' Scott (Chairman) presiding.
    Present: Representatives Scott, Grijalva, Courtney, Sablan, 
Wilson, Bonamici, Takano, Adams, DeSaulnier, Norcross, Wild, 
McBath, Hayes, Levin, Stevens, Jones, Manning, Mrvan, Bowman, 
Pocan, Castro, Sherrill, Yarmuth, Foxx, Walberg, Grothman, 
Stefanik, Allen, Fulcher, Keller, Murphy, Miller-Meeks, Good, 
Harshbarger, Spartz, Cawthorn, Steel, and Letlow.
    Staff present: Katie Berger, Professional Staff; Jessica 
Bowen, Professional Staff; Ilana Brunner, General Counsel; 
Christian Haines, General Counsel; Sheila Havenner, Director of 
Information Technology; Eli Hovland, Policy Associate; Ariel 
Jona, Policy Associate; Andre Lindsay, Policy Associate; Katie 
McClelland, Professional Staff; Max Moore, Staff Assistant; 
Mariah Mowbray, Clerk/Special Assistant to the Staff Director; 
Kayla Pennebecker, Staff Assistant; Veronique Pluviose, Staff 
Director; Benjamin Sinoff, Director of Education Oversight; 
Theresa Thompson, Professional Staff; Banyon Vassar, Deputy 
Director of Information Technology; Claire Viall, Professional 
Staff; Joshua Weisz, Minority Communications Director; Cyrus 
Artz, Minority Staff Director; Kelsey Avino, Minority 
Professional Staff Member; Courtney Butcher, Minority Director 
of Member Services and Coalitions; Amy Raaf Jones, Minority 
Director of Education and Human Resources Policy; Dean Johnson, 
Minority Legislative Assistant; Hannah Matesic, Minority 
Director of Operations; Audra McGeorge, Minority Communications 
Director; Carlton Norwood, Minority Press Secretary; Alex 
Ricci, Minority Professional Staff Member; Chance Russell, 
Minority Legislative Assistant; and Mandy Schaumburg, Minority 
Chief Counsel and Deputy Director of Education Policy.
    Chairman Scott. OK we're ready to begin and I'll count down 
from five and then we'll start. Five, four, three, two, one.
    Good morning. The Committee on Education and Labor will now 
come to order. Our first order of business this morning is to 
conduct committee business to approve new committee 
assignments.
    At this time, I'd like to welcome the Gentlelady from 
Louisiana's 5th Congressional District to the committee, Ms. 
Letlow. And we'd just like to begin by extending our 
condolences to you and your family on the passing of your 
husband, but I'm pleased that you've now joined the committee 
and we look forward to working with you on the committee.
    Does the Ranking Member wish to be recognized?
    Mrs. Foxx. I do Mr. Chairman.
    Chairman Scott. Gentlelady is recognized.
    Mrs. Foxx. Thank you, Mr. Chairman. I join all my 
colleagues in welcoming Representative Julia Letlow to the 
halls of Congress and to the Education and Labor Committee 
Republican team. It's been a difficult journey for Julia and 
her family as they continue to mourn the loss of Luke who 
tragically passed just days before he was to be sworn into 
office.
    But he's certainly looking down with pride today. As the 
first female Republican elected in Louisiana, Dr. Letlow joins 
a strong freshman class of Republican women and mothers. And I 
have no doubt she'll serve her constituents and her State with 
distinction.
    Dr. Letlow is a dedicated public servant who's worked in 
higher education for years, and we're overjoyed to welcome her 
with open arms to this committee. I'm eager to work alongside 
her in the days to come on behalf of America's students, 
workers, and job creators.
    I ask unanimous consent that Dr. Letlow of Louisiana be 
appointed to the Subcommittees on Higher Education and 
Workforce Investment and Early Childhood Elementary and 
Secondary Education.
    Chairman Scott. Is there any objection? Without objection 
so ordered. And if there's no further business before the 
committee the business portion of today's proceeding is 
concluded. And now we'll turn to today's committee hearing.
    Once again, the, The Committee on Education and Labor will 
come to order. Welcome everyone. The committee is meeting today 
to hear testimony on For-Profit College Conversations: 
Examining Ways to Improve Accountability and Prevent Fraud.
    This is an entirely remote hearing. All microphones will be 
kept muted as a general rule to avoid unnecessary background 
noise. Members and witnesses will be responsible for unmuting 
themselves when they are recognized to speak, or when they seek 
recognition.
    I have also asked Members to identify themselves before 
they speak. Members should keep their cameras on while in the 
proceeding. The Members shall be considered present in the 
proceeding when they are on camera and are visible on camera. 
They shall be considered as not present when they are not 
visible on camera.
    The only exception to this is if they're experiencing 
technical difficulty and inform committee staff of such 
difficulty. If any member experiences technical difficulties 
during the hearing, you should stay connected on the platform, 
make sure you are muted, and use your phone immediately to 
contact the committee's IT direct whose number was provided in 
advance.
    Should the Chair experience any technical difficulty or 
need to step away from the floor, he'll designate another 
majority member to assume the gavel in my absence. This is an 
entirely remote hearing and as such the committee hearing room 
is technically closed.
    Members who choose to sit with their individual devices in 
the hearing room must wear headphones to avoid feedback, 
echoes, and distortion for more than one person on the software 
platform sitting in the same room.
    Members are also expected to adhere to social distancing 
and safe healthcare guidelines, including the use of wearing 
masks, hand sanitizers, wiping down their areas both before and 
after their presence in the hearing room.
    In order to ensure that the committee's five-minute rule is 
adhered to, staff will be keeping track of time using the 
committee's field timer. The field timer will appear on its own 
thumbnail picture and will be named 001_timer. This time 
provides no one-minute remaining warning.
    The field timer will signal an audio when time is up. 
Members and witnesses are asked to wrap up promptly when their 
time has expired. A roll call is not necessary to establish a 
quorum in official proceedings conducted remotely or with 
remote participation.
    The committee has made it a practice whenever there is an 
official proceeding with remote participation, for the Clerk to 
call the roll to help make clear who is present at the start of 
the proceeding. Members should state their name before 
announcing that they are present.
    This helps the Clerk and also helps us watching the 
platform and the livestream who may be experiencing a few 
seconds delay. At this time, I ask the Clerk to call the roll.
    The Clerk. Chairman Scott?
    Chairman Scott. Chairman Scott is present.
    The Clerk. Mr. Grijalva?
    Mr. Grijalva. Raul Grijalva present.
    The Clerk. Mr. Courtney?
    Mr. Courtney. Courtney present.
    The Clerk. Mr. Sablan?
    [No response.]
    The Clerk. Ms. Wilson?
    Ms. Wilson. Ms. Wilson is present.
    The Clerk. Ms. Bonamici?
    Ms. Bonamici. Suzanne Bonamici is present.
    The Clerk. Mr. Takano?
    Mr. Takano. Takano is present.
    The Clerk. Ms. Adams?
    Ms. Adams. Alma Adams is present.
    The Clerk. Mr. DeSaulnier?
    [No response.]
    The Clerk. Mr. Norcross?
    [No response.]
    The Clerk. Ms. Jayapal?
    [No response.]
    The Clerk. Mr. Morelle?
    [No response.]
    The Clerk. Ms. Wild?
    Ms. Wild. Wild is present.
    The Clerk. Mrs. McBath?
    [No response.]
    The Clerk. Mrs. Hayes?
    [No response.]
    The Clerk. Mr. Levin?
    [No response.]
    The Clerk. Ms. Omar?
    [No response.]
    The Clerk. Ms. Stevens?
    Ms. Stevens. Stevens present.
    The Clerk. Ms. Leger Fernandez?
    [No response.]
    The Clerk. Mr. Jones?
    Mr. Jones. Jones is present.
    The Clerk. Ms. Manning?
    Ms. Manning. Manning is present.
    The Clerk. Mr. Mrvan?
    Mr. Mrvan. Mrvan is present.
    The Clerk. Mr. Bowman?
    [No response.]
    The Clerk. Mrs. McBath, I believe you're unmuted.
    Mrs. McBath. McBath is present, thank you.
    The Clerk. Mr. Pocan?
    Mr. Pocan. Mr. Pocan is here.
    The Clerk. Mr. Castro?
    [No response.]
    The Clerk. Ms. Sherrill?
    Ms. Sherrill. Sherrill's present.
    The Clerk. Mr. Yarmuth?
    Mr. Yarmuth. Yarmuth present.
    The Clerk. Mr. Espaillat?
    [No response.]
    The Clerk. Mr. Mfume?
    [No response.]
    The Clerk. Ranking Member Foxx? Mrs. Foxx you're unmuted, 
or you're muted, I'm sorry.
    Mrs. Foxx. Foxx is present.
    The Clerk. Thank you. Mr. Wilson?
    [No response.]
    The Clerk. Mr. Thompson?
    [No response.]
    The Clerk. Mr. Walberg?
    Mr. Walberg. Walberg is present.
    The Clerk. Mr. Grothman?
    Mr. Grothman. I'm present.
    The Clerk. Ms. Stefanik?
    [No response.]
    The Clerk. Mr. Allen?
    Mr. Allen. Allen present.
    The Clerk. Mr. Banks?
    [No response.]
    The Clerk. Mr. Comer?
    [No response.]
    The Clerk. Mr. Fulcher?
    Mr. Fulcher. Fulcher's present.
    The Clerk. Mr. Keller?
    [No response.]
    The Clerk. Mr. Murphy?
    [No response.]
    The Clerk. Mrs. Miller-Meeks?
    [No response.]
    The Clerk. Mr. Owens?
    [No response.]
    The Clerk. Mr. Good?
    Mr. Good. Good present.
    The Clerk. Mrs. McClain?
    [No response.]
    The Clerk. Mrs. Harshbarger?
    Mrs. Harshbarger. Harshbarger is present.
    The Clerk. Mrs. Miller?
    [No response.]
    The Clerk. Mrs. Spartz?
    [No response.]
    The Clerk. Mr. Fitzgerald?
    [No response.]
    The Clerk. Mr. Cawthorn?
    Mr. Cawthorn. Cawthorn is present.
    The Clerk. Mrs. Steel?
    Mrs. Steel. Steel present.
    The Clerk. Ms. Letlow?
    Ms. Letlow. Letlow is present.
    The Clerk. Thank you. Chairman Scott that concludes the 
roll call.
    Chairman Scott. Thank you, did anyone appear after the roll 
call that wants to be recorded as present?
    Mrs. Hayes. Mrs. Hayes Mr. Chair, I'm present.
    Chairman Scott. Thank you. Anyone else? Thank you. Pursuant 
to Committee Rule 8(c) opening statements are limited to the 
Chair and Ranking Member. This allows us to hear from our 
witnesses sooner and provides all Members with adequate time to 
ask questions.
    I recognize myself now for the purpose of making an opening 
statement.
    Today we're gathered to discuss the need for strong 
oversight to protect students and taxpayers from those for-
profit colleges that transition to non-profit institutions to 
trick students and regulators. Over the last 4 years this 
committee has had extensive discussions over the role of for-
profit colleges and our higher education system.
    This work continues to be guided by the clear evidence that 
some unscrupulous for-profit colleges frequently charge their 
students too much in tuition on delivering too little in 
education and opportunity.
    After a series of high-profile cases in which for-profit 
colleges cheated students and taxpayers out of billions of 
dollars, regulators and potential students have become more 
aware of the deceptive practices employed by bad actors in the 
for-profit sector.
    But rather than changing their behavior to comply with the 
accountability standards and repair the industry's reputation, 
some schools are opting to simply evade the for-profit 
accountability standards and are re-branding themselves as non-
profits.
    Three months ago, the Government Accountability Office, or 
the GAO, released a report identifying 59 for-profit colleges 
that converted to non-profit status over the past decade. A 
report found several examples of for-profit schools that sought 
to become non-profit in name only.
    In roughly a third of the conversions identified by the 
GAO, the for-profit colleges owners or officials, held 
leadership roles in the non-profit buyer. As a result of poor 
oversight by both the Department of Education and the Internal 
Revenue Service, these conversions sometimes took place without 
the necessary oversight to prevent self-dealing.
    In two instances the IRS approved the sale among for-profit 
insiders without essential information such as the planned 
purchase price, or the appraisal of the college's value. This 
has left the IRS staff with no way of knowing whether the price 
was improperly inflated.
    Emergence of covert for-profits has real consequences for 
students and taxpayers. For example, an independent analysis 
found that in 2011 Florida-based Keiser University attained 
non-profit status after the owner sold it to its own non-profit 
entity, Everglades College, in what appeared to be a 
significantly inflated price.
    To finance the sale the owner lent more than 300 million 
dollars to Everglades College in addition to claiming a massive 
tax-deductible donation. The resulting conversion allowed the 
owner to profit from the sale of his business and keep millions 
of dollars in tax breaks.
    During the same period, the university settled multiple 
investigations with law enforcement agencies for violating 
State and Federal consumer protection laws. We cannot allow 
these kinds of things to continue.
    As GAO found both the Department of Education and the IRS 
must do more to prevent fraud by properly vetting for profit to 
non-profit conversions. They must ensure that after the 
conversion the for-profit institutions uphold their obligations 
to put students first and not profits.
    The College Affordability Act, which the committee 
considered last year offers a clear foundation for legislative 
solutions to achieve these goals. A comprehensive bill included 
several provisions that established requirements an institution 
must meet to convert to non-profit status.
    These requirements include demonstrating that the asset it 
acquires from the former owners are not acquired at a value 
greater than its actual worth; and demonstrating that no member 
of its governing board receives any substantial economic 
benefit.
    Today we are grateful to be joined by expert witnesses who 
will help us discuss these solutions and other proposals that 
will ensure that for-profit college executives cannot take 
advantage of converting to non-profit institutions.
    This is a critical moment to take action as students 
recover from the pandemic and start or continue their pursuit 
of post-secondary education. We must ensure that students and 
taxpayers are protected from deceptive schemes that undermine 
the integrity of our higher education system.
    At this point, I am pleased to recognize the distinguished 
Ranking Member for the purpose of making her opening statement. 
Dr. Foxx.
    [The statement of Chairman Scott follows:]

        Statement of Hon. Robert C. ``Bobby'' Scott, Chairman, 
                    Committee on Education and Labor

    Today, we are gathered to discuss the need for stronger oversight 
to protect students and taxpayers from those for-profit colleges that 
transition to non-profit institutions to trick students and regulators.
    Over the last four years, this Committee has had extensive 
discussions over the role of for-profit colleges in our higher 
education system. This work continues to be guided by the clear 
evidence that some unscrupulous for-profit colleges frequently charge 
their students too much in tuition while delivering too little in 
education and opportunity.
    After a series of high-profile cases in which for-profit colleges 
cheated students and taxpayers out of billions of dollars, regulators 
and potential students have become more aware of the deceptive 
practices employed by bad actors in the for-profit sector.
    But rather than changing their behavior to comply with 
accountability standards and repair the industry's reputation, some 
schools are opting to simply evade for-profit accountability standards 
by rebranding themselves as non-profits.
    Three months ago, the Government Accountability Office, or GAO, 
released a report identifying 59 for-profit colleges that converted to 
non-profit status over the past decade.
    The report found several examples of for-profit schools that sought 
to become non-profit in name only. In roughly a third of conversions 
identified by GAO, the for-profit colleges? owners or officials held 
leadership roles in the non-profit buyer.
    As a result of poor oversight by both the Department of Education 
and the Internal Revenue Service, these conversions sometimes took 
place without the necessary oversight to prevent self-dealing.
    In two instances, the IRS approved a sale among for-profit insiders 
without essential information, such as the planned purchase price or 
appraisal of the college's value. This left IRS staff with no way of 
knowing whether the price was improperly inflated.
    The emergence of `covert for-profits' has real consequences for 
students and taxpayers.
    For example, an independent analysis found that, in 2011, Florida-
based Keiser University attained non-profit status after the owner sold 
it to his own non-profit entity, Everglades College, at what appeared 
to be a significantly inflated price. To finance this sale, the owner 
lent more than $300 million dollars to Everglades College in addition 
to claiming a massive tax-deductible donation. The resulting conversion 
allowed the owner to profit from the sale of his business and keep 
millions of dollars in tax breaks.
    During this same period, the university settled multiple 
investigations with law enforcement agencies for violating State and 
Federal consumer protection laws.
    We cannot allow these kinds of things to continue. As GAO found, 
both the Department of Education and IRS must do far more to prevent 
fraud by properly vetting for-profit to non-profit conversions. And 
they must ensure that, after the conversion, for-profit institutions 
uphold their obligations to put students first-- profits.
    The College Affordability Act, which the Committee considered last 
year, offers a clear foundation for legislative solutions to achieve 
these goals. The comprehensive bill included several provisions that 
established requirements an institution must meet to convert to 
nonprofit status. These requirements include demonstrating that the 
assets it acquires from former owners are not acquired at a value 
greater than its actual worth; and demonstrating that no member of its 
governing board receives any substantial economic benefit.
    Today, we are grateful to be joined by expert witnesses who will 
help us discuss these solutions and other proposals that will ensure 
that for-profit college executives cannot take advantage of converting 
to non-profit institutions.
    This is a critical moment to take action as students recover from 
the pandemic and start or continue their pursuit of post-secondary 
education. We must ensure students and taxpayers are protected from 
deceptive schemes that undermine the integrity of our higher education 
system.
    At this point, I am pleased to recognize the distinguished Ranking 
Member for the purpose of making her opening statement.
                                 ______
                                 
    Mrs. Foxx. Thank you, Mr. Chairman. Our education system is 
in crisis. High school graduation rates are declining, the 
Nation's skill gap is growing, COVID-19 pandemic policies have 
led to years-worth of learning loss, Federal student debt tops 
1.5 trillion dollars, college costs continue to skyrocket, 
campus free speech is under attack and China is infiltrating 
U.S. Campuses.
    All these issues are deserving of Congress's time and 
attention. So, you could imagine my surprise when I learned we 
were ignoring these important pressing topics to examine 
colleges transitioning from for-profit to non-profit status, 
which impacts roughly 0.1 percent of for-profit colleges per 
year, or approximately three schools a year.
    Three schools a year. In the past decade, only 35 such 
colleges transitioned to non-profit status. Whoopie. So, the 
millions of students wondering why Congress hasn't acted on 
campus free speech zones, Chinese Communist party censorship, 
and exorbitantly high tuition rates, I say look no further than 
this hearing today, and see where the democrat's priorities 
are.
    Democrats want to discuss the possibility of a narrow type 
of fraud in higher education. Specifically, the potential for 
some stakeholders to receive improper benefits when non-profit 
organization acquire for-profit colleges.
    Committee Republicans are against all fraud and abuse, no 
matter the tax status of the institution. That bears repeating. 
Committee Republicans are against all fraud and abuse no matter 
the tax status of the institution. Sadly, Democrats are more 
interested in chasing phantoms than they are working with 
republicans on issues that are actually important to students.
    Republicans will continue our work to improve the odds that 
students succeed after attending post-secondary education. But 
let's return to why democrats called this hearing. I'd like to 
make several important points about the Government 
Accountability Office (GAO) report Democrats will highlight, 
which investigated when for-profit colleges became non-profit 
entities.
    First, transitioning from for-profit to non-profit is 
completely legal. Second, if any of my Democrat colleagues read 
past the report's title, they would know two of the three GAO 
recommendations are outside the committee's jurisdiction. 
Additionally, the GAO report flagged that one-third of the 35 
proprietary institutions that became non-profits had insider 
involvement.
    While that term may sound nefarious, it's a far cry from 
real harm inflicted upon students which is where we should be 
focusing our efforts and attention. So, the obverse of one-
third of the institutions having insider involvement means two-
thirds did not.
    Today's hearing is just another example of Democrats trying 
to manufacture headlines to advance their partisan objectives, 
even if those policies limit student choice and freedom. As I 
repeatedly said oversight is a critical function of Congress, 
and we must protect use of taxpayer funds, a responsibility I 
take very seriously.
    But this hearing fails to address substantively the ways 
higher education fails students. President Obama presided over 
several of these transitions, but Democrats remained 
suspiciously quiet. Now we're coming off 4 years of President 
Trump whose Department of Education strengthened the 
bureaucratic review of this non-profit conversion process.
    We're fabricating a crisis to rally support for a socialist 
overhaul of our education system. It wasn't a pressing problem 
8 years ago, and with the GAO determining there's been no 
fraud, it is a pressing problem now. The Federal Government 
should not be in the business of picking winners and losers, 
yet Democrats are actively working to eliminate proprietary 
institutions.
    For a party that loves to talk about diversity in higher 
education, it is ironic they are attacking institutions that 
educate hundreds of thousands of minority students, veterans, 
older Americans, and single parents. The Higher Education Act 
is in desperate need of reform, so all colleges--not just those 
the democrats demonize, are held accountable and better serve 
students.
    When it comes to post-secondary education the question we 
should be asking is whether students are getting the education 
they need to be successful. Unfortunately, even before the 
pandemic disrupted schools, jobs, and families, polling 
suggested that 53 percent of recent college graduates are 
unemployed or underemployed. At the same time millions of jobs 
sit unfilled due to the skills gap, demanding more students 
obtain a skills-based education, which many proprietary 
institutions offer.
    Those are the issues facing students in higher education, 
not whether the president of a for-profit university kept his 
job while the university's tax status changed. While the 
purpose of today's hearing is questionable, I look forward to 
hearing from our witnesses and engaging in positive 
conversation.
    [The statement of Ranking Member Foxx follows:]

           Statement of Hon. Virginia Foxx, Ranking Member, 
                    Committee on Education and Labor

    Our education system is in crisis.
    High school graduation rates are declining, the Nation's skills gap 
is growing, COVID-19 pandemic polices have led to years' worth of 
learning loss, Federal student debt tops 1.5 trillion dollars, college 
costs continue to skyrocket, campus free speech is under attack, and 
China is infiltrating U.S. campuses.
    All these issues are deserving of Congress' time and attention, so 
you can imagine my surprise when I learned we were ignoring these 
important, pressing topics to examine colleges transitioning from for-
profit to non-profit status, which impacts roughly zero-point one 
percent of for-profit colleges per year, or approximately three schools 
a year. In the past decade only 35 such colleges transitioned to non-
profit status.
    So, to the millions of students wondering why Congress hasn't acted 
on campus free speech zones, Chinese Communist party censorship, and 
exorbitantly high tuition rates--I say look no further than this 
hearing today.
    Democrats want to discuss the possibility of a narrow type of fraud 
in higher education, specifically the potential for some stakeholders 
to receive improper benefits when non-profit organizations acquire for-
profit colleges. Committee Republicans are against all fraud and abuse 
no matter the tax status of the institution. Sadly, Democrats are more 
interested in chasing phantoms than they are working with Republicans 
on issues that are actually important to students. Republicans will 
continue our work to improve the odds that students succeed after 
attending postsecondary education.
    But let's return to why Democrats called this hearing. I'd like to 
make several important points about the Government Accountability 
Office (GAO) report Democrats will highlight, which investigated when 
for-profit colleges became non-profit entities.
    First, transitioning from for-profit to non-profit is completely 
legal. Second, if any of my Democrat colleagues read past the report's 
title, they would know two of the three GAO recommendations are outside 
this Committee's jurisdiction.
    Additionally, the GAO report flagged that one-third of the 35 
proprietary institutions that became non-profits had insider 
involvement. While that term may sound nefarious, it is a far cry from 
real harm inflicted upon students, which is where we should be focusing 
our efforts and attention.
    Today's hearing is just another example of Democrats trying to 
manufacture headlines to advance their partisan objectives, even if 
those policies limit student choice and freedom.
    As I have repeatedly said, oversight is a critical function of 
Congress, and we must protect the use of taxpayer funds--a 
responsibility I take very seriously. But this hearing fails to address 
substantively the ways higher education has failed students. President 
Obama presided over several of these transitions, but Democrats 
remained suspiciously quiet. Now that we are coming off four years of 
President Trump, whose Department of Education strengthened the 
bureaucratic review of this non-profit conversion process, we are 
fabricating a crisis to rally support for a socialist overhaul of our 
education system. It wasn't a pressing problem eight years ago and with 
the GAO determining there's been no fraud, it isn't a pressing problem 
now.
    The Federal Government should not be in the business of picking 
winners and losers. Yet Democrats are actively working to eliminate 
proprietary institutions. For a party that loves to talk about 
diversity in higher education, it is ironic they are attacking 
institutions that educate hundreds of thousands of minority students, 
veterans, older Americans, and single parents.
    The Higher Education Act is in desperate need of reform, so all 
colleges ? not just those Democrats demonize ? are held accountable and 
better serve students.
    When it comes to postsecondary education, the question we should be 
asking is whether students are getting the education they need to be 
successful.
    Unfortunately, even before the pandemic disrupted schools, jobs, 
and families, polling suggested 53 percent of recent college graduates 
are unemployed or underemployed. At the same time, millions of jobs sit 
unfilled due to the skills-gap, demanding more students obtain a 
skills-based education which many proprietary institutions offer.
    Those are the issues facing students and higher education, not 
whether the president of a for-profit university kept his job when the 
university's tax status changed.
    While the purpose of today's hearing is questionable, I look 
forward to hearing from our witnesses and engaging in productive 
conversation. I yield back.
                                 ______
                                 
    And Mr. Chairman before I yield back, I'd like to yield to 
Dr. Letlow for a very brief opening statement.
    Chairman Scott. The Gentlelady from Louisiana is 
recognized.
    Ms. Letlow. Good morning, Chairman Scott, Ranking Member 
Foxx, Members of the committee and witnesses. I'm honored to 
join this distinguished committee, and to have the opportunity 
to represent the teachers, professors, principals, 
administrators, and students of the 5th District of Louisiana.
    As a former higher education administrator, this committee 
holds a special place in my heart. I am pleased to be able to 
be on a committee that will help shape education and workforce 
policies for years to come. I firmly believe education is the 
key to success. We must do all we can to ensure our students 
have the opportunity to learn, grow, and find career 
opportunities that best suit their talents.
    We must pave the way for our children to be able to choose 
any route of education they wish to pursue, whether trade 
schools, community colleges, or universities. Utilizing public-
private partnerships for workforce education is paramount. 
Additionally, there are a unique set of challenges that our 
rural schools face, including access to broadband and teacher 
recruitment and retention.
    I look forward to working together to tackle these pressing 
issues. I'm excited to begin working with you all to better 
educational programs, and workforce opportunities for my 
constituents and individuals across the country. Thank you and 
I yield back my time.
    Ms. Foxx. Thank you for your indulgence, Mr. Chairman. I 
yield back.
    Chairman Scott. No problem. Thank you. Without objection 
all other Members who wish to insert a written statement into 
the record may do so by submitting them to the Committee Clerk 
electronically, in Microsoft Word format by 5 p.m. on May 4, 
2021.
    I will now introduce the witnesses. Yan Cao is a Senior 
Fellow at the Century Foundation where she works on higher 
education policy with a focus on expanding opportunity, 
reducing inequality, and ensuring fair outcomes for students.
    She previously worked as a Skadden Fellow at the Project on 
Predatory Student Lending at the Legal Services Center at 
Harvard Law School, representing students defrauded by for-
profit colleges, and as an attorney at South Brooklyn Legal 
Services, representing low-income families with predatory 
student loan debt. She received her bachelor's degree from 
Stanford, and a J.D. from New York University.
    Brian Galle is a Professor of Education at Georgetown 
University. His research and teaching interests include 
taxation, non-profit organizations, behavioral law and 
economics, federalism, and public finance economics. He 
practiced for 3 years as an attorney in the criminal appeals 
and tax enforcement policy section of the tax division at the 
U.S. Department of Justice.
    He's a graduate of Harvard College, received a J.D. from 
Columbia and an LL.M. from Georgetown.
    Andrew Gillen is the Senior Policy Analyst for the Texas 
Public Policy Foundation and an adjunct professor in economics 
at John Hopkins University. He's spent over a decade of non-
profit and philanthropic organizations researching ways to 
improve post-secondary education.
    Previous places of employment include the Charles Koch 
Foundation, the American Institutes for Research, American 
Council of Trustees and Alumni, the Center for College 
Affordability and Productivity. He also served on the U.S. 
Department of Education's Advisory Committee on Student 
Financial Assistance.
    He has a Ph.D. in economics from Florida State and a BA in 
business from Ohio University.
    Melissa Emrey-Arras is the Director of GAO's Education 
Workforce and Income Security Issues team. She oversees the 
GAO's higher education reports, has led studies examining 
issues ranging from for-profit college conversions to student 
loans.
    Before joining GAO in 2001 she worked in the private sector 
consulting company and conducted program evaluations for State 
and local governments. She has received a master's degree of 
public policy from Harvard's Kennedy School where she was 
awarded the Manuel C. Carballo prize for graduate research, and 
she also has a bachelor's degree from Swarthmore College.
    I appreciate all of the witnesses participating today and 
look forward to your testimony. Let me remind the witnesses 
that we've read your written statements and they will appear in 
full in the hearing record.
    Pursuant to Committee Rule 8(d) and the committee practice, 
each of you is asked to limit your oral presentation to a five-
minute summary of your written statement. Before you begin your 
testimony, please remember to unmute your microphone. During 
your testimony staff will be keeping track of time and the 
timer will sound when time is up.
    Please be attentive to the time and wrap up when your time 
is over and then re-mute your microphone. If you experience 
technical difficulties during your testimony, or later in the 
hearing, you should stay connected, make sure that you're 
muted, and use your telephone to immediately call the 
committee's IT director whose number was provided to you in 
advance.
    We will let the witnesses make their presentations before 
we move to member's questions. When answering a question please 
remember to unmute your microphone. Witnesses are aware of 
their responsibility to provide accurate information to the 
committee, and therefore we will proceed now with their 
testimony.
    We will first recognize Ms. Cao. Ms. Cao?

    STATEMENT OF YAN CAO, JD, FELLOW, THE CENTURY FOUNDATION

    Ms. Cao. Thank you, Chairman Scott, for the opportunity to 
testify today, and to Mr. Vassar for assistance with slides 
today. Before we dive into the complex conversations the GAO 
has described in its report, I want to start with the basics. 
How do you close the skills gap, expand opportunity, and 
provide a fighting chance to students who have suffered from 
chronic underinvestment in their prior education?
    Ask any high school principal and she'll tell you, ``Invest 
resources in students.'' With the Higher Education Act, 
Congress has made an enduring investment in student's higher 
education, but not all of those resources reach the students 
who need them the most. In the for-profit sector, taxpayer 
dollars earmarked for higher education can be extracted by 
insiders for personal gain.
    To understand why this matters, focus on the gap between 
the tuition dollars that students pay in, and the educational 
investments that students get out of institutions. Now at 
traditional non-profit schools, 100 percent of that difference 
must be reinvested toward education.
    At for-profit schools, the gap between high tuition and low 
educational spending can be extracted by insiders. This 
distinction between revenue extracting schools, and revenue 
reinvesting schools makes a huge impact on incentives, 
behaviors, and student outcomes.
    There are two paths for maximizing revenue--high tuition, 
and high-pressure recruitment. High tuition translates to more 
debt. At Keiser University a conversion described in the GAO 
report, every program has a median debt of $30,000.00 or 
higher. This is true for less than 5 percent of public college 
programs.
    High pressure recruitments leads to fraudulent tactics. 
Together, revenue extracting schools account for 99.7 percent 
of borrower defense claims that that have been identified by an 
institution. Once revenue extracting schools max out revenue, 
the other side of the equation is minimizing investment in 
students.
    For every one dollar of student tuition, for-profits 
average just 29 cents of student instruction. Some for-profit 
conversions are even worse. Grand Canyon University reports to 
spending 18 cents on instruction for every student tuition 
dollar. The same high-price, low-value formula that produces 
big profits for owners leads to drop-outs, loan defaults, and 
worthless degrees for students.
    In some cases, for-profit conversions produce outcomes that 
are even worse for students than those at traditional for-
profit schools. Congress and the Department of Education have 
taken steps to protect students from the heightened risks 
associated with revenue extracting institutions.
    For-profit colleges sometimes describe these sector-
specific regulations as an unfair additional burden, but this 
is disingenuous. Let's take an example. When for profit owners 
have withdrawn investments to the point of near collapse, 
regulations then limit further withdrawals of capital.
    This rule singles out for-profits for a simple reason, non-
profit owners can never withdraw capital. As the example 
illustrates, for-profit regulations are not added burden on 
revenue extracting institutions. Instead, they are guardrails 
for institutions that lack the non-profit sector's absolutely 
barrier against enrichment.
    Private institutions have two choices--either give up the 
revenue extraction power and reinvest 100 percent of resources 
in student education, or retain the revenue extraction power, 
but abide by student protection guardrails.
    For-profit conversations want to have their cake and eat it 
too. They want revenue extraction power without the guardrails. 
This combination presents the greatest risk to students and 
taxpayers. Students intuitively believe that non-profits will 
be safer than for-profit schools, but the revenue extracting 
for-profit conversions are in fact even more dangerous than 
for-profit schools that are subject to appropriate regulations 
like 90/10 or the Gainful Employment Rule.
    For-profit conversions are not just wolves in sheep's 
clothing, they are wolves that have sharpened their teeth and 
honed their claws while the shepherd is off minding other 
wolves. The good news is that the Department of Education 
already has the tools that it needs.
    To protect students the department must engage in its own 
review to root out schools with hidden revenue extraction 
plans. As we continue this discussion, I ask that you keep 
three students in mind.
    First, a student at school suddenly collapses because 
owners have withdrawn too much equity for the school to remain 
viable. Second, a student who owes more loan debt that she can 
ever repay because her school took her tuition, but grossly 
underinvested in her education.
    Third, a veteran who has learned not to trust the predatory 
school that recruits on base but does not know that the global 
campus with the public name is operated by the same company. 
These are the victims of for-profit conversions, and I urge you 
to ensure that they receive the full benefit of the investment 
and protections secured by the Higher Education Act. Thank you, 
and I look forward to answering your questions.
    [The prepared statement of Ms. Yan Cao follows:]

                     Prepared Statement of Yan Cao

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Scott. Thank you. Now we'll hear from Mr. Galle.

    STATEMENT OF BRIAN GALLE, JD, LL.M., PROFESSOR OF LAW, 
                GEORGETOWN UNIVERSITY LAW CENTER

    Mr. Galle. Thank you, Chairman Scott, and Members of the 
committee. My name is Brian Galle. I'm a Professor of Law at 
Georgetown. I'm here to discuss the efforts of a number of 
colleges which are operated for-profit, to get recognition from 
the education department as non-profit.
    I'm going to call these efforts conversion transactions. 
I'll tell you why I think these conversions are so concerning 
for students and taxpayers. The IRS and ED both have 
jurisdiction over schools that claim to be non-profits, so I'll 
explain why I think IRS hasn't been able to address my 
concerns, and I'll tell you what I think ED should do.
    First a little background. As you know, the Higher 
Education Act and ED's regulations treats schools differently 
if the school is operated for profit. The 90/10 Rule and 
gainful employment rules both regulate for-profits more 
carefully than other schools.
    So, what's the difference between a for-profit and non-
profit school? The answer is incentives. For-profits want to 
make money for their owners, non-profits can't. Legally being a 
non-profit means that an organization can't share its profits 
with anyone.
    A for-profit school is like a car salesman who works on 
commission. When you walk in, they want to sell you all the 
expensive options you don't really need, like the fake wood 
trim. There's evidence this difference in incentive matters. 
Researchers find that for-profit colleges are actually a worse 
deal than dropping out of school for some students.
    On average students at for-profits earn 11 percent less 
than similar students at non-profits or public schools, and 
they have more debt besides. Insured genuine non-profit status 
offers key protections for students. A traditional non-profit 
behaves differently than a school that's incentive to maximize 
revenue.
    Now what's troubling about conversion transactions? You 
have a school saying it's a non-profit, but it isn't acting 
like one. We'd all agree a cancer charity that spends 80 
percent of its revenues on fund-raising is not really a charity 
at all.
    Some of these converted for-profit colleges are like that. 
Their non-profit status is a disguise. Here's your typical 
transaction. Mr. Investor sells the school that Charity Z which 
he also founded, in exchange for an 800-million-dollar IOU. 
Every year Charity Z has to pay him 50 million dollars or so in 
interest.
    It's important to realize what that massive payment back to 
Mr. Investor means for the new non-profit school. Before the 
conversion School A has 50 million in net revenues, all of 
which it was paying to Mr. Investor. After the conversion, 
Charity Z still needs 50 million dollars in net revenue just to 
pay to Mr. Investor.
    In short, Charity Z is a prisoner of its debts. To be able 
to pay it has to be continuing to operate the school exactly 
the way it was run before, to maximize net revenue. It's like 
if you wanted to retire but you have a big mortgage, so you're 
stuck working until you can pay it off.
    The new non-profit's rule is in the exact same position. 
It's calling itself a non-profit, but it still has to act like 
a for-profit, maximizing its income, not student outcomes. By 
the way I didn't make up that transaction, it's the actual deal 
that Grand Canyon University made.
    Other schools have also added huge debts to their for-
profit partners too, 134 million, 321 million, 636 million. 
Look at, so what should education do about this? Title IV 
allows ED to decide when a school is a non-profit for purposes 
of the statute. As you probably know, that's also a 
determination IRS makes, based on similar language for purposes 
of figuring out whether an organization can be tax exempt.
    As the GAO report tells us, the IRS hasn't closely examined 
a lot of these conversions, some of them it hasn't even known 
about. IRS hasn't actually flunked any of these organizations, 
but that doesn't mean everything is fine. Instead, it should 
signal that education needs to conduct its own independent 
review.
    Right now, education and IRS have what I call a centerfield 
problem. I was a youth baseball coach. Every time there's a 
flyball to centerfield, two of my kids would both yell, ``I got 
it,'' and then the ball would fall right to the ground.
    Education should be fielding the problem of for-profit 
conversions. IRS doesn't have the resources. Even if that 
agency got another billion dollars a year, there's still one 
and a half million charities for them to monitor every year.
    IRS also doesn't have student protection as its primary 
mission. The law it enforces isn't aimed at telling which 
charities are really non-profit and which aren't. To be clear 
in my view a lot of the conversion transactions I examined fail 
ed basic and important tax law requirements.
    But figuring out which schools prioritize money over 
student outcomes is not IRS's job. So that brings me to my 
conclusion. Education is the right agency to monitor for-profit 
conversions. Title IV is intended to impose tougher standards 
on schools that have a financial incentive to favor revenues 
over student outcomes.
    Education can and should implement Title IV to make sure 
that that is true no matter whether some organizations might 
slip past IRS scrutiny. Thank you again for inviting me to 
testify. I'm happy to answer any questions you might have. I 
hope my comments are helpful to the committee.
    [The prepared statement of Mr. Brian Galle follows:]

                   Prepared Statement of Brian Galle

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    Chairman Scott. Thank you. Mr. Gillen?

STATEMENT OF ANDREW GILLEN, Ph.D., SENIOR POLICY ANALYST, TEXAS 
                    PUBLIC POLICY FOUNDATION

    Mr. Gillen. Thank you. And thank you to all the Members of 
the committee for inviting us to talk on this important topic. 
I first want to comment the Government Accountability Office 
for putting together a very useful and insightful report. I 
think it's done a great job on a sound basis for their 
discussion.
    Having said that I do want to raise a couple issues that I 
think can benefit from further conversation and investigation. 
So, the first concerns the GAO's recommendation that the IRS 
add more questions about recent for-profit college conversions 
to non-profit to their annual filings.
    This may be a good idea, it may not, but I think it really 
needs to be conducted and subjected to a cost benefit test. And 
I'm skeptical that it would pass such a cost benefit test, 
because the benefits are very small. The numbers of conversions 
per year are very, very small. The number of conversions that 
involve insiders are even smaller, so we're talking about one 
or two colleges per year where this would even be relevant.
    And moreover, this information is already collected by the 
Department of Education, so this would be just a duplicative 
kind of data collection by the IRS. But the cost wouldn't 
necessarily be as negligible, and that's because the IRS would 
be required to collect this information from all sorts of 
universities, and maybe other charities as well.
    And see you could potentially be asking 300,000 others non-
profits about a question that only applies to one, maybe two of 
them. And so, this committee has a lot of experience with the 
FAFSA form, how over the years it accumulated into you know 
just a massive amount of questions.
    And it took us a decade to figure out how to simplify it. 
And so, I'd like us to keep that in mind when we are 
encouraging the IRS to add other requirements that are only 
relevant to a very, very small fraction of schools.
    A second point that I'd like to bring up is it would be 
very useful for us to distinguish between the different types 
of insider benefit and proper insider benefit. The lumping them 
all together is not necessarily appropriate because some of 
them can be assessed at the time of transaction, and some of 
them need to be assessed at an ongoing basis and making that 
distinction would be very valuable.
    Another issue I'd like to flag is the issue of regulatory 
arbitrage, and so there's a number of different policies and 
regulations that apply to for-profits, or that don't apply to 
non-profits that can raise kind of a wedge between the value of 
a school as a for-profit and the value of the school as a non-
profit.
    And so, we just need to be careful when we're kind of 
assessing whether a transaction is fair. The value can 
actually--the value of the school can actually change quite a 
bit, whether it's for-profit or non-profit. Some states are 
kind of increasing regulations of for-profits.
    There are a set of regulations at the Federal level that 
only apply to for-profits as well. And so, this regulatory 
arbitrage could kind of skew some of the assessments if we 
aren't careful.
    And then, the last point I want to make is really that the 
accountability system that we have for higher education, if we 
were able to improve that accountability system, that would 
really do a lot to take much of the improper benefit problem 
that we could see with some of these entire conversions off the 
table.
    So, with a better--and there's really two reasons for this. 
So, the first is that if we have a better accountability 
system, it's easier to value an account. Right now, it's very 
difficult to value a college, and so it's relatively easier for 
a nefarious insider to arrange for an inflated estimate.
    That would be much harder if the accountability system we 
had made it much more objective way to value the account. The 
second way that a better accountability system would improve 
higher education, and kind of limit any insider involvement 
problems is that it would really allow for us to escape what's 
going forward in Bowen's laws.
    And we don't have time to go all the way into those laws, 
but one of the implications of Bowen's laws is that essentially 
higher education is going to see increase in expenditure over 
time. And if you're in that environment, insiders at non-
profits even, can find it very easy to arrange for improper 
benefit.
    And so, the for-profit versus non-profit conversion, that's 
not even the real issue. The real issue is non-profits 
themselves can find a very easy way to arrange for an improper 
benefit when we are stuck in this Bowen's Law world where we've 
got increasing spending over time.
    Thank you for allowing me to testify and I'll pass on the 
time.
    [The prepared statement of Mr. Andrew Gillen follows:]

                  Prepared Statement of Andrew Gillen

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman Scott. Thank you. Ms. Emrey-Arras.

          STATEMENT OF MELISSA EMREY-ARRAS, DIRECTOR, 
       EDUCATION, WORKFORCE AND INCOME SECURITY ISSUES, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Emrey-Arras. Good morning, Chairman Scott, Republican 
Leader Foxx, and Members of the committee. I am pleased to be 
here today to discuss GAO's report on for-profit college 
conversions. I will focus my remarks on three issues. One, what 
is known about insider involvement in college conversions.
    Two, IRS's oversight of college conversions. And three,
    the Department of Education's oversight of college 
conversions. Beginning with a look at insider involvement, we 
found that about a third of the 59 for-profit college 
conversions we identified involved insiders.
    Collectively, colleges with insider conversions received 
nearly 1.8 billion in Federal student aid funds in the 2018-19 
award year. Insiders may be the for-profit colleges former 
owners, or their family Members, executives, or board Members 
who continue to play a leadership role in the new non-profit 
college.
    While leadership continuity can benefit a college, insider 
involvement poses a risk that insiders may improperly benefit 
financially. For example, insiders could influence the non-
profit to pay more for the for-profit college than it is worth, 
or insiders could steer college contracts toward businesses the 
insiders' control through an inflated price.
    Doing so would be prohibited under the Internal Revenue 
Code and the Higher Education Act, which do not allow a non-
profit's earnings to improperly benefit private individuals. In 
addition, in examining the financial health of colleges 
converting, we found that colleges with insider conversions 
generally had stronger financial performance before their 
conversions.
    For example, all of the colleges with insider conversions 
had a passing education financial responsibility score the year 
before their sale, however, almost all of them had a failing 
financial score the year of their sale.
    Turning now to how the IRS oversees college conversions we 
found that IRS guidance directs staff to closely scrutinize 
whether insider transactions exceed fair market value and 
improperly benefit insiders. If an application contains 
insufficient information to make that assessment, guidance says 
the staff may need to request additional information.
    However, we found that for two of the planned or final 
conversions involving insiders, IRS approved the application 
without certain information. For example, IRS approved college 
conversions without information on the college's planned 
purchase price, or the appraisal report estimating the 
college's value.
    Without such information IRS staff could not assess whether 
the price was inflated to improperly benefit insiders which 
would be grounds to deny the application. Accordingly, we 
recommended the IRS assess and improve its application review 
process.
    Now turning to education. We found that education had 
strengthened its reviews of for-profit college conversion 
applications. As of August 2020, education had approved 35 of 
the 59 colleges for non-profit status and denied two. The 
remaining applications were under review or no longer required 
action because the colleges had closed.
    However, in terms of monitoring colleges after approving 
them as non-profits, we found that education does not monitor 
the newly converted colleges to assess ongoing risk of improper 
benefit. In two of the three cases we reviewed in-depth, we 
found college financial statements disclosed transactions with 
insiders that could indicate the risk of improper benefit.
    Consequently, we recommended that education develop 
procedures to review financial statements to monitor newly 
converted colleges. In conclusion, for-profit college 
conversions involving insiders can pose risks to students and 
taxpayers.
    If a non-profit college's revenues are diverted to 
improperly benefit insiders, funds available to support the 
college's educational mission can be reduce, potentially 
harming the college and its students, and violating Federal 
requirements.
    We believe that GAO's recommendations will help IRS and 
education address these risks. This completes my statement, and 
I will be pleased to answer any questions you may have.
    [The prepared statement of Ms. Melissa Emrey-Arras 
follows:]

               Prepared Statement of Melissa Emrey-Arras

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Scott. Thank you. Thank you. Now we'll have 
questions from Members.
    Under Committee Rule 9(a), questions will be by the five-
minute rule. I'll be recognizing committee Members in seniority 
order. Again, to ensure the five-minute rule is adhered to, 
staff will be keeping time in the timer 001--timer. I will now 
recognize Mr. Grijalva first for questions. Mr. Grijalva.
    Mr. Grijalva. Thank you very much Mr. Chairman and thank 
the witnesses and thank you for the hearing. Ms. Cao, the 
Century Foundation and specific to an issue here in Arizona, 
but I think indicative and representative of issues across this 
country.
    The Foundation has recently written about the University of 
Arizona's plans to purchase Ashford University following that 
college, Ashford's failed non-profit conversion attempt. Can 
you walk us through your key concerns about that deal?
    Ms. Cao. Sure. I think this is a great example and thanks 
for the opportunity to discuss Ashford's conversion into a non-
profit entity called University of Arizona global campus. So, 
this is a particular dangerous form of a conversion where you 
have a for profit entity that has been under investigation and 
is currently approaching a trial from the California Attorney 
General's Office for misleading and predatory tactics used to 
recruit students.
    Ashford University is also a school that spends very little 
of student's tuition dollars that come from Federal loans, 
student loan debt and military benefits on its student's 
instruction. It's something about 18 cents per dollar received 
in student tuition dollars. This is a conversion that would 
help Ashford's shareholders, but not necessarily the students 
who would be brought into the new University of Arizona global 
campus.
    And part of the reason here is that the conversion keeps in 
place Zovio's shareholder's ability to extract profits from 
student's tuition dollars. In particular, we have conducted an 
analysis that shows over 70 percent of revenues coming in from 
student's tuition dollars will be going to Zovio shareholders 
after the conversion.
    So, every dollar of debt that a student takes on, 70 cents 
going to Zovio shareholders. And that would occur through a 
contract that is a long-term service contract that keeps in 
place the aspect of Zovio's practices that is the most 
predatory, and that is the way that it advertises, markets, 
recruits, and takes out student loans for students.
    And I think that is a huge concern. I also want to look at 
the other side of the equation in this conversion which is the 
University of Arizona itself.
    Mr. Grijalva. Yes, I was going to ask about that.
    Ms. Cao. Yes, so going from a situation where there is one 
revenue extracting entity, Zovio, to a situation where you now 
have two revenue extracting entities--Zovio on the one hand and 
University of Arizona on the other hand which yes, needs more 
resources as a public university.
    But I argue the way for the University of Arizona to 
balance its budget is not off the backs of low-income students. 
With these for-profit conversions that involve public 
institutions, I fear that we are veering toward a system of 
separate and unequal units or affiliates within public 
institutions.
    And not only is the University of Arizona and the 
University of Arizona global campus separate and unequal, but 
you have a situation where the low-income, minority, and non-
family supported students at the University of Global Canvas 
are in fact subsidizing their much more privileged peers, who 
are already receiving a greater benefit from the education at 
University of Arizona, which because it is subject to genuine 
non-profit oversight, it's returning far greater value to 
students already.
    Mr. Grijalva. Yes, which begs the question about the light 
touch review that the Department of Education gives on these 
conversion partnerships between a public entity non-profit, 
Grand College at the University of Arizona, and a former for-
profit college, Ashford.
    Any safeguards that you see and that light touch review 
process so that we don't end up with both the student burden 
that you said very rightfully, issues of equity and higher 
education, and the taxpayer projects that are required for a 
tax supported institution like the University of Arizona.
    Ms. Cao. Yes, so the GAO mentioned the Department of 
Education has started to improve its review of this conversion, 
and arguably it needs to continue the purpose. You know a tax-
exempt status according to IRS is just one part of a three-
pronged review the Department of Education will probably need 
to do.
    And at the heart of that review is checking for the revenue 
extraction power that prior owners and other entities might 
retain.
    Mr. Grijalva. Thank you very much. Thank you Mr. Chairman I 
yield back.
    Chairman Scott. Thank you. Next is the Ranking Member of 
the Full committee Dr. Foxx.
    Mrs. Foxx. Thank you, Mr. Chairman. And thank our 
witnesses. Ms. Emrey-Arras. To make sure it is clear could you 
please answer the following questions regarding the GAO report. 
Did your report find that Department of Education engaged in 
any illegal activity?
    Ms. Emrey-Arras. No.
    Ms. Foxx. Did your report make any determination or 
judgments about a particular school's conversion?
    Ms. Emrey-Arras. We did not do an audit of any particular 
school.
    Ms. Foxx. What was the Department of Education feedback to 
GAO regarding the project, and how did you address those 
comments in the report?
    Ms. Emrey-Arras. The Department of Education agreed with 
our recommendation to it and said they will be implementing a 
recommendation.
    Ms. Foxx. Is there anything illegal, generally speaking, 
about any for-profit company converting to a non-profit 
organization? Is there anything again, general speaking, about 
a for-profit college transitioning into a non-profit entity?
    Ms. Emrey-Arras. No. For-profits are allowed legally to 
convert into non-profits.
    Ms. Foxx. Right. Both in the education field and elsewhere?
    Ms. Emrey-Arras. Correct.
    Ms. Foxx. Thank you. Doctor Gillen one of the greatest 
benefits that college education provides students is better job 
prospects. Most students go to college to get a job. 
Unfortunately, many institutions are inadequately preparing 
students for post-college success.
    Is this problem concentrated in any one sector, or is this 
an issue that is found in all sectors of post-secondary 
education?
    Mr. Gillen. So, our research has shown that this is a 
problem across higher education. Most of higher education of 
course performs very well, but there are many, many programs 
out there where student outcomes are not very good. And so, 
your question is you know is this concentrated among a 
particular sector and it's not.
    So, we have a report coming out soon that looks at the debt 
to earnings ratio at all programs in the country. And there's 
about 4,500 of these where students graduate with more debt 
that they have expected earnings.
    Ms. Foxx. And those are in public and not for profit 
schools?
    Mr. Gillen. Yes, so that's across the whole country, so 
about 4,500. And only between 4 and 500 of those are for-
profits. So about 1 in 10 of problematic programs are located 
at for-profits, the other 90 percent are located at either 
public or private non-profits.
    Ms. Foxx. Right. So, we're looking at 10 percent today when 
we ought to be looking at the 90 percent, really skewed. What 
other student outcomes should Congress consider attaching 
accountability metrics to, and should these accountability 
metrics evaluate entire institutions, or calculate outcomes on 
a program-by-program basis?
    Now I know you've already mentioned some, but would you 
respond to those?
    Mr. Gillen. Yes absolutely. So, I think higher education 
can really benefit from explaining accountability metrics in 
two particular areas. So, the first is learning outcomes. So, 
for particular fields if we can figure out how to measure how 
much students have learned that would be a great accountability 
metric, as that is the entire purpose of these programs is to 
attach with their students.
    That admittedly is difficult, but when it can be done, you 
should definitely try to. But the second one is earnings 
outcomes. And so, as you mentioned most students go to college 
to get a better job. And so, we can look at labor market 
outcomes to assess how well programs are preparing their 
students for that.
    And so, I would really love to see learning and earning 
outcomes. And you mentioned what is to be applied at the 
institution level as for the entire university or at the 
program level and applying it at the program level is 
definitely the way to go and the reason for that is because you 
can have a badly performing program at a relatively good 
institution that escapes all accountability.
    And you can also have the Congress. You can have a really 
good program at a relatively poorly performing university that 
if you do university level accountability, you're going to be 
punishing that good program. And so, if you can do program 
accountability you avoid both of those problems and you 
actually reward the programs that should be rewarded, and you 
punish the ones that should be punished.
    Ms. Foxx. Well, I tell you I had that experience when I was 
the president of the community college. I eliminated a program 
that had been poorly performing for 10 years and put in a 
program that was desperately needed by the community. So, I've 
been through that, and I understand how that works.
    Ms. Emrey-Arras does the department monitor either non-
profits or publics for improper benefits--because you talk 
about improper benefits for those that have been converted, but 
I don't know anybody. I mean we're paying football coaches 
millions of dollars. We're paying presidents and provosts 
millions of dollars. Who is to say what is a benefit? And is 
anything happening with non-profits or publics?
    Ms. Emrey-Arras. All right. So, for our work we did not 
look at executive compensation at schools. We did focus 
specifically on conversions of for-profit schools and did find 
concerns about the lack of monitoring of those schools. Those 
schools are subject to additional monitoring. After being 
approved they're in a provisional status.
    Ms. Foxx. We understand that. So, Mr. Chairman I'd like to 
put into the record information on abysmal graduation rates for 
not-for-profit schools and public schools, specifically Thomas 
University, graduation rate of 14 percent after 8 years, a 
private institution. Harris Stowe State University 16 percent 
graduation rate after 8 years.
    University of New Mexico Taos campus 13 percent graduation 
rates. There are some other items to put into the record report 
from AEI and higher education has a tax problem and it's 
hurting local communities. We'll be putting these into the 
record. Thank you Mr. Chairman I yield back.
    Chairman Scott. Next is Representative Wilson from Florida.
    Ms. Wilson: Thank you Chairman Scott and Ranking Member 
Foxx for holding this very important meeting. And I'd like to 
thank all of the witnesses for participating in the meeting 
today. Increasingly we have seen predatory for-profit 
institutions mislead the public and abuse their trust by 
illegitimately converting to tax exempt non-profit status.
    These dubious conversions often seriously harm students and 
taxpayers and enrich the for-profit former owner and other 
private individuals. Congress must do more to hold bad actors 
to account and ensure that students can make informed decisions 
about their post-secondary careers.
    Under existing law non-profit institutions are prohibited 
from improperly steering profits toward private figures. 
Unfortunately, in the case for profit converts this happens all 
too often. The Government Accountability Office found that 
conversions that involved the former owner or other executives 
accounted for 75 percent of all Federal aid that went to for-
profit converts.
    Clearly, too many bad actors are slipping through the 
cracks and this must stop. With that in mind I have a few 
questions for our witnesses. Ms. Cao what is the harm of 
students mistakenly believing that a school they're considering 
attending is mission driven, when actually it is still 
operating on a quasi-for-profit model?
    And based on your experience surveying various for-profit 
conversions, would you say that the improper and harmful way 
they did this committee has been examining today is limited to 
only a few bad actors?
    Ms. Cao. Thanks for the question. In terms of harm to 
students I think we need to start with all the risks for harm 
that already exist and are concentrated within for-profit 
schools. We're talking about high loan rates, high default 
rates, low earnings and a debt to earnings ratio that result in 
a life-long debt sentence for students.
    Start with those results. Now strip away protections like 
the gainful employment tests, and the 90/10 rule, which help to 
provide some guardrails and protections for students, and some 
requirement for for-profits to demonstrate their value. Take 
those protections away. Now add in the opportunity for 
predatory institutions to mislead the students by touting their 
non-profit status.
    These are institutions that are leveraging the charitable 
status of non-profits that are reinvesting their resources in 
order to benefit shareholders that will be extracting those 
resources. And that's the equation you have with these 
conversions. All of the risk of for-profit schools, none of the 
protections, and the added risk of being able to mislead 
students.
    Ms. Wilson. Thank you. Director Emrey-Arras, the GAO issued 
two recommendations to the IRS. What, if any steps, has the IRS 
taken to implement those recommendations?
    Ms. Emrey-Arras. Thank you. The IRS said that it is 
reviewing its process for approving applications for tax exempt 
status to decide whether or not any changes need to be made, 
and it is considering our second recommendation on gathering 
information in a way that it can be used to help with its 
monitoring.
    Ms. Wilson. Can you explain to us why it is important for 
the IRS to collect information and to help identify tax exempt 
colleges with a for-profit history? Why is that so important?
    Ms. Emrey-Arras. Well, the IRS itself has identified these 
organizations as at-risk for improper benefit. So, it has just 
said that organizations with the for-profit history are at an 
elevated risk of improper benefit. Given that it has created a 
compliance strategy to do monitoring of these schools, and the 
compliance strategy actually originated in concern over for-
profit school conversions and then broadened beyond higher 
education.
    However, ironically, they couldn't like even identify the 
schools in our study when they tried to do this compliance 
effort because they lacked the information in a searchable 
form. And to respond to an earlier witness statement about cost 
benefit issues I would say that the IRS has said that they're 
often collecting this information in narrative fields already.
    So, the information is already being gathered. It's just 
not being gathered in a searchable way. So, there wouldn't be 
much of a cost in terms of changing the field from a narrative 
field to a data field that could be searched which would then 
give the IRS the information it needs to actually be strategic 
in its monitoring and monitor this risk that it's very 
concerned about.
    Ms. Wilson. Thank you. I yield back Mr. Chair.
    Chairman Scott. Thank you. Mr. Walberg.
    Mr. Walberg. Thank you, Mr. Chairman, and thank you to the 
panel for being with us today. Dr. Gillen I think we all agree 
that the top priority for higher education institutions should 
be serving students, and that those failing to do so should be 
held accountable.
    I guess what I'd ask is what can the department do to 
improve accountability for all institutions and what can they 
not do because it is not within their authority?
    Mr. Gillen. That's a great question. So, the department 
right now has a lot of capability of providing more information 
in transparency. So, there are a number of data collection 
tools that are already used, and so the department can add 
information to IPEDS, the integrated post-secondary education 
data system.
    It could add College Navigator which is a Department of 
Education website. It could add it to its College Scorecard 
which is another Department of Education website. And so simply 
providing more information to students, parents, policymakers, 
that is kind of the foundation of making wise decisions for 
everybody.
    In terms of kind of actually enhancing accountability with 
carrots and sticks, at that point you would need you know this 
committee and Congress more broadly to pass legislation to 
authorize new accountability metrics. And as I mentioned 
earlier it would be great to see accountability metrics on 
learning outcomes, on earning outcomes and labor market 
outcomes more broadly.
    Mr. Walberg. I guess expanding on that what should Congress 
consider when we next reauthorize the HEA to protect students 
and taxpayers from fraud or abuse?
    Mr. Gillen. So, I think we should start with the date we 
already have which is the new college scorecard data, and so 
right now it's producing data on college earnings and debt by 
student. So, we can create, and we should definitely start with 
creating some accountability metrics that essentially look at 
earnings relative to debt.
    So, are students able to afford to be able to repay their 
loans? Are programs consistently graduating students that are 
going to struggle with their student loans? And so, 
accountability metrics devoted to that would be great. I would 
also love to see different kinds of types of accountability.
    So, you know the first level is this program achieving this 
level? And we can do that with the existing data. We can say 
OK, if you have you know twice as much debt as your students 
earn, we're going to cut you off on the total financial 
burdens. But I'd also like to see growth measures as well.
    So, if you're taking students that are you know otherwise 
going to be really struggling in the labor market, and even if 
they aren't achieving at the top levels of the labor market 
after attending your program, if you've improved their kind of 
career trajectory by enough, that would be another great 
accountability metric.
    So, I would love to see a plethora of these accountability 
metrics. You know we shouldn't just think in terms of this is 
you know the one and only accountability metric. There should 
be you know a dozen of these, and institutions can meet, you 
know, 8 to 10 of them and to maintain their eligibility for 
financial aid program.
    Mr. Walberg. A real education in the process. OK. 
Appreciate that. Ms. Emrey-Arras what factors does the IRS 
examine when determining whether any entity may convert from a 
for-profit status to non-profit status?
    Ms. Emrey-Arras. It looks at a variety of materials that 
the tax-exempt organization submits, however we have concerns 
that it doesn't always look at the materials it needs to make 
that call. As noted earlier, we found instances in which the 
IRS approved applications for tax exempt status involving 
college conversions without the purchase price of the college, 
without an independent appraisal of the college.
    So, there was no known information about the value of the 
college. Instead, there was just a promise. The applicant 
promised that in the future you know the market, the price 
would be a fair one. It would be a market value price, and they 
would get an independent appraisal in the future. And with that 
promise the IRS approved the applications.
    Mr. Walberg. Can you point to a statute or code, or 
regulatory language that guides this process?
    Ms. Emrey-Arras. I can point to IRS guidance that says that 
relationships between tax exempt applicants and for-profit 
entities may be vulnerable to abuse and need scrutiny to ensure 
fair market value, and organization earnings cannot improperly 
benefit private individuals over its charitable mission.
    And that's what happens. If a college is sold above its 
fair market value, you have money improperly benefiting 
individuals in that case. And that is against the Internal 
Revenue Code.
    Mr. Walberg. Thank you. My time has expired. I yield back.
    Chairman Scott. Thank you. The Gentlelady from Oregon Ms. 
Bonamici.
    Ms. Bonamici. Thank you to the Chair and Ranking Member and 
thank you to all of our witnesses for being here today. First, 
I want to object to the suggestion that was made by Mr. Gillen 
to use income of an institution's graduates to measure 
accountability.
    If someone is doing meaningful work at social services and 
earning low wages for example, that does not mean that they did 
get a good education, it likely means that their work is 
undervalued. As someone with a consumer protection background, 
I am very glad we're having this hearing today.
    For-profit colleges have preying on students, families, 
often by making unsubstantiated claims of the value of 
educational opportunities they offer, and too many students 
have found out themselves, with tens of thousands of dollars in 
debt and no closer to the career they were working toward.
    A few years ago, I had the opportunity and the honor of 
meeting with several military veterans in northwest Oregon who 
told me about how they were defrauded by for-profit colleges 
that had misrepresented accreditation, tuition, and services. 
They were targeted, these veterans, because they were eligible 
for GI benefits, which is a common practice among profit 
institutions.
    And now unfortunately, as more students are coming to 
understand the predatory practices of so many for-profit 
institutions now as we've heard, some of these same schools are 
converting to non-profits, but too often is continuing to 
employ the same harmful practices that take advantage of 
students.
    So, Ms. Cao it is clear that the Federal Government has not 
been conducting the necessary oversight to prevent these 
conversions, in addition to the problems from the conversions, 
and in addition to increased Federal oversight and 
accountability measures, what role can and should states and 
accreditors play in scrutinizing these conversions?
    Ms. Cao. Thank you for that question. And I'm glad that you 
pointed out the impact that these conversions can have on 
veterans in particular. I want to recognize the progress that 
this committee and Congress has made in improving the 
protections in the 90/10 rule.
    To Mr. Gillen's point about measuring both earnings and 
learning of students, we actually have that in the form of the 
Gainful Employment Protection, which measures earnings as a 
ratio against debt, and we have that in the form of the 90/10 
protections, which measure learning by leaving it to the market 
to determine whether the learning that happens within an 
institution is worth the cost.
    And so, we actually have both learnings and earnings 
measured within the for-profit sector, but what we have seen 
time and again is that instead of doing the hard work to 
demonstrate learning and earning of value in their 
institutions, the most predatory schools choose to cheat by 
seeking disingenuous conversions to non-profit status.
    And yes, there are states that are stepping up to address 
the problem. Both Maryland and the State of California have 
enacted legislation that authorizes the states to engage in a 
closer look of insider benefits in the same way that the GAO 
has pointed out that the IRS and the Department of Education 
should do.
    I am worried about the problem that Professor Galle talked 
about earlier where you have too many kids running toward the 
ball and it falling through the cracks in the process.
    Ms. Bonamici. Thank you. In fact, I'm going to ask 
Professor Galle. I've worked for years on collaboration between 
the IRS and the Department of Education on the issue of 
verifying income for income-driven repayment plans. And when 
you used your analogy, I'm not going to be able to get that out 
of my head now.
    I'm thinking about you know trying to coordinate between 
the two agencies. Should it be that the coordination between 
the IRS and the Department of Education on for-profit 
conversions and if so what kind, or is that kind of 
coordination really achievable based on how you understand the 
agencies to operate?
    Mr. Galle. Thank you for that question. I think that some 
more coordination would certainly be helpful. And there's some 
small legal obstacle to a full coordination in the sense the 
IRS is very limited in what kinds of taxpayer information it's 
allowed to share.
    And although it is allowed to share taxpayer information 
for purposes of verifying income driven repayment eligibility, 
it's not clear that the IRS can share information about whether 
it's audited a for-profit institution with the Department of 
Education.
    But I think more generally the real story here is that ED 
needs to take the lead and in protecting student interests. 
It's not the IRS's primary mission. It's not their primary 
interest, and the statutory authority that IRS is working under 
doesn't really lend itself to identifying schools that are 
protecting their own bottom line over the student interest.
    Ms. Bonamici. I appreciate that. We are policymakers 
though, and if the policy doesn't exist that's what we want to 
hear about. That's one of the purposes of having a hearing like 
this, so I thank you Mr. Chairman, and I yield back the balance 
of my time.
    Chairman Scott. Thank you. gentleman from Wisconsin Mr. 
Grothman.
    Mr. Grothman. Thank you. I have a few comments here not 
directly at anybody in particular because I know there are 
obviously people out there who are hostile to the idea of a 
conversion, but of course I know some people or some 
conversions I think were done for the best of reasons. And I 
think the idea of making this in essence against the law is a 
huge, a huge mistake.
    Do you all agree that there are for-profits converting to 
non-profits and that it's working out well and there aren't 
abuses?
    Ms. Cao. I just want to point out I don't think that any of 
the witnesses are saying that a for-profit college converting 
to a non-profit status is against the law. Having pointed out 
the risks associated with for-profits that engage in revenue 
extraction, I would love for for-profit colleges to convert to 
true non-profit status with a commitment to reinvesting 100 
percent of revenue in educational and charitable purposes.
    The concern is not for-profits converting to non-profit 
status, it is for-profits claiming that they are non-profits 
without doing the hard work of actually reinvesting resources 
in students.
    Mr. Grothman. I guess the question is because I don't know 
if it's a minority or majority, but there's certainly many, 
probably a majority when they convert for the best of reasons 
OK. You may convert for succession reasons OK. You like your 
college. Your children or whatever are not going to continue 
down the path, so you switch to make it a non-profit.
    You may have a situation in which you have a nursing 
degree, and we have a real shortage of nurses in this country, 
and in order to establish a coalition with local medical 
facilities, you're required to go a non-profit, so for the 
benefit of your nursing students you go a non-profit.
    You can do fundraising, obviously if you become a 501(c)(3) 
you can fundraise just like public universities can. And I 
guess I want to get you folks on the record that these are all 
three good reasons to convert, and you do not want to prevent 
these conversions with some legislative bill.
    Can you see the reasons all these three reasons why they 
are good reasons why you want to convert?
    Ms. Cao. Those are excellent reasons for conversion, and if 
any for-profit school pursues conversion for those reasons, and 
prohibits insiders from extracting benefit for private gain, 
then I absolutely support those, and I'll turn to the rest of 
the witnesses.
    Mr. Grothman. OK. Could everybody else be on record as 
saying that there are good conversions, these are good reasons 
to convert and there are ways in which we keep capped light 
successful currently for-profit colleges going?
    Mr. Galle. I would describe those scenarios Congressman as 
hypotheticals. I didn't see any of the--
    Mr. Grothman. They are not hypotheticals, why do you 
believe--I could think of an example where they do this right 
now. Why do you feel it's a hypothetical?
    Mr. Galle. Well, based on my reading of the GAO report in 
which the vast majority of for example, the government 
subsidized money going to converted organizations, is going to 
organizations where the former owner is still keeping the 
supposedly converted organization a prisoner of their 
obligations to the original owner.
    There's no way for these organizations to operate in the 
way that other non-profits genuinely operate. And if you wanted 
to really transition and the organization to operate the way 
that non-profits do, you would free it financially to maximize 
student outcomes instead of student revenues, and that's just 
not what this contract said.
    Mr. Grothman. OK. Any other comments?
    Mr. Gillen. Yes. So, all those kind of reasons to convert 
are completely valid. There's tons of conversions out there 
that I don't think anybody would object to. The other thing I'd 
like to point out is that all the concerns that have been 
raised here about improper benefit, that's already forbidden by 
both the IRS and the Department of Education.
    And so, this whole issue is whether the Department of 
Education and the IRS procedures are adequately detecting any 
sort of hypothetical improper benefit. But improper benefit has 
not been shown in any of the approved cases, and the Department 
of Education has denied some of these conversions. So, I feel 
like some of the comments have been taking place assuming that 
there's this huge problem, when it's more of a hypothetical 
problem at this point, or a yet to be proven.
    Mr. Grothman. I agree. I think there's just some people who 
are instinctually hateful of an educational institution that 
isn't part of the government, and as the result they risk 
throwing out some very good former for-profits. Now if I have 
any time left, I guess Representative Foxx wants to ask a 
question.
    Ms. Foxx. Thank you, Mr. Grothman. I would point out that 
OK. Never mind, I believe Mr. Grothman's time is up.
    Chairman Scott. The Gentleman's time has expired. The 
Gentleman from the North Mariana Islands Mr. Sablan.
    Mr. Sablan. Yes, thank you very much Mr. Chairman, and 
thank you to our witnesses. I apologize I'm jumping between two 
committees, two committee hearings. So, I am going to just go 
out and ask a question for Ms. Cao. Ms. Cao please.
    Ms. Cao your organization wrote about two conversion 
transactions--The Non-profit Center for Excellence in Higher 
Education's purchase of four for-profit colleges owned by Carl 
Barney and the non-profit Everglades College's purchase of the 
for-profit Keiser University, which involved the college's 
former owner donating part of the college price to the non-
profit purchaser, enabling them to take hundreds of millions in 
tax deductions.
    GAO also mentioned the phenomenon of former owners donating 
part of their college sale price back to the college. How do 
you interpret these potential charitable donations from the 
goodness of their heart? Are they truly charitable? Are they 
truly from the goodness of their heart?
    Ms. Cao. Thank you for your question. I want to take a good 
close look at some of these charitable donations when for-
profit schools convert to non-profit status because the schools 
that you identified come with some real concerns.
    CEHE, the Center for Excellence in Higher Education, the 
individuals for the insiders who benefited the most from those 
conversions were recently found personally liable for operating 
years of systemic fraud against both students and the Title IV 
system, drawing down student revenue while misrepresenting to 
them the benefits that they would get from it.
    Misrepresenting the amount of tuition, the likelihood of 
success, and whether or not the programs would ever lead to 
gainful employment in their fields of study. That type of 
behavior is indicative of the predatory nature of those 
institutions, as is the way that those conversions were 
structured.
    So, I want to take a look at the way that those conversions 
were structured because it was a very similar situation in both 
the CEHE and Keiser instances. You had a conversion that 
allowed the insider to continue extracting resources through 
two primary mechanisms--ongoing rent payments, and ongoing loan 
payments. So, you have an institution that remains in debt to 
its former boss who continues to hold the reins on the 
institution by being able to guide decisionmaking through these 
two contracts that puts the non-profit at a huge disadvantage.
    As for the reported donations, they are donations of 
intangible benefits. So, to take one of the examples, the 
Keiser University example. The original purchase price was 90 
percent intangible assets, which the Department of Education 
does not permit institutions to report on their audited 
financial statements.
    So, you have about 60 million dollars of real tangible 
assets, and you have a non-profit promising to pay 600 million 
for it. Of course, some of that 600 million gets donated for a 
tax credit, but you still have a non-profit being obligated to 
pay through an ongoing debt obligation, significantly more than 
the value of the real assets that they are obtaining.
    Mr. Sablan. So, after they cheated the parties, they have 
to just might as well make it three then. That's shortchanged 
the American taxpayer from avoiding taxes. Ms. Director Emrey-
Arras.
    Ms. Emrey-Arras. Yes.
    Mr. Sablan. Director can you tell me about how the value of 
the for-profit college was determined in the cases the GAO 
reviewed, where the transaction involved insiders? Was it based 
mostly on tangible assets like cash, investment, and property?
    And how does this compare to some of the conversions you 
looked at that didn't involve insiders? Half a minute.
    Ms. Emrey-Arras. So, for our case studies we found that 
those with insiders purchased mostly intangible assets, so 
goodwill, brand name, accreditation--things you can't touch. 
It's not money in the bank. It's not property. And in contrast 
when we looked at five randomly selected conversions without 
insiders, they mostly purchased tangibles, things that you 
could touch, cash, investments, property, so there's a real 
difference there.
    Mr. Sablan. Thank you. I again thank the witnesses today. 
Mr. Chairman I yield back.
    Chairman Scott. Thank you. The Gentleman from Idaho Mr. 
Fulcher.
    Mr. Fulcher. Thank you, Mr. Chairman. And I'm intrigued by 
this conversation on the valuation and Mr. Gillen you've 
touched on this, but I'd like to get a little bit of further 
thought on that. How does the HEA assess financial well-being 
of these institutions? And talk about that just for a minute, 
and do the measurements they use reflect accuracy and 
comprehensiveness of these institutions? Mr. Gillen please.
    Mr. Gillen. So, the Department of Education has a number of 
financial tests that institutions are subject to. The report 
itself talks about the financial composite score. There's a few 
others, the asset test, and so these are you know existing 
tests, financial tests that institutions have to pass.
    These are mostly looking at the kind of cash-flow health of 
the organization. They aren't really looking at the long-term 
sustainability. And so, one of the issues this raises is things 
like these intangibles are not included in those because those 
don't show up on you know a cash-flow statement.
    And so, you can have a lot of situations as the GAO report 
pointed out where you're using debt to purchase these 
intangibles. On paper that's going to make your financial 
evaluation deteriorate because the debt is showing up, is 
affecting your cash, but the intangibles don't. And so, there's 
a lot of kind of questions about that.
    Mr. Fulcher. So, there is kind of a composite score it 
sounds like that is partly formulated. So, in that sense do you 
feel like that that's a reasonable predictor of whether or not 
a college might close for example? The way it's gauged right 
now by the AGA?
    Mr. Gillen. So, my understanding just based on the number 
of colleges who have closed for primarily financial reasons is 
that these tests that the Department of Education subjects them 
to will catch most of the schools that are just going to run 
out of money. And so, it will kind of catch schools that are 
essentially already bankrupt.
    But it's not very predictive of schools that are going to 
become bankrupt. And so, these are tests that will catch, and 
are designed to catch kind of the kind of worst financial shape 
schools, but there's a bunch of other schools that are 
struggling financially. Maybe they're not going to go bankrupt 
this year or next year, but their long-term sustainability is 
just really in question.
    And these tests aren't going to catch that, and they're not 
really designed to.
    Mr. Fulcher. Thank you, Mr. Gillen. So just one more 
follow-up. I think I still have another minute. Let's talk 
places you know mainly familiar, if you were on this committee 
and you were going to reshape how the current law is in order 
to better assess or improve the calculation of the value, what 
would you recommend?
    Mr. Gillen. The value of--
    Mr. Fulcher. Of the institutions, the assessment structure.
    Mr. Gillen. So, I would really try to tailor accountability 
mechanisms to the specific program at hand. And so, for things 
like the student loan programs, where the government is 
providing this loan money to students, and so we should really 
be tailoring the accountability metrics for that program to 
loan outcomes.
    So, our students are able to be repay their loans would be 
kind of top of mind on that. But that isn't necessarily the 
same accountability program we'd want to use for say, Pell 
grants. Pell grants are designed to increase social mobility 
and equality of opportunity, and so we may not necessarily want 
to use those same labor market outcomes to evaluate Pell 
grants.
    Mr. Fulcher. Got it.
    Mr. Gillen. We would want to focus more on graduation rates 
for Pell grant recipients. And so really just I would encourage 
the committee to think about what would be the most appropriate 
accountability metric, or metrics for any given program that 
we're looking at.
    Mr. Fulcher. Good. Thank you. Mr. Chairman if I have any 
remaining time, I will yield that to Dr. Foxx.
    Ms. Foxx. Thank you. I want to thank the Gentleman. You 
know there are lies, damn lies, and statistics. So, an 
interpretation of numbers means something. In the 2017-2018 
school year private for-profit colleges spent an average of 27 
percent of their finances on instruction.
    Compare that to public schools which spent 29 percent of 
their money on instruction, private non-profits 31 percent. But 
the real kicker is in academic support. Private for-profits 
spent 63 percent of their money on academic support for 
students, and for public's and private non-profit only lower 
than 30 percent went to academic support.
    And we know that the for-profit schools are taking in 
students that the public's and the not for-profit don't want. 
They are the toughest students to teach, and yet they're giving 
them the kind of support that they need. So, the interpretation 
of numbers is very, very important here, and we will be 
submitting this for the record Mr. Chairman.
    I think it's very important that we get these things in the 
record. Thank you I yield back.
    Chairman Scott. Thank you. And before I recognize Mr. 
Takano, I'm going to ask for Mr. Sablan to assume the Chair for 
several minutes. I have another commitment, so I'll be back in 
a few minutes. The Gentleman from California Mr. Takano.
    Mr. Takano. Thank you, Mr. Chairman. I would dispute those 
statistics. I know in California the public institutions of 
higher education actually are required by law to spend at least 
half of their revenue on instruction and cannot spend it on 
administration.
    And furthermore, I think it's quite often the case that 
for-profit institutions do not have really admission standards. 
And you can reinterpret that to mean that they're taking 
students that other institutions don't want, but I would 
dispute the idea that they're taking students that have 
developmental educational needs and are really delivering on 
that.
    Ms. Cao can you clarify something for me and the public? Is 
it true that borrower defense and the 90/10 rule do not apply 
to non-profit institutions? They're only for for-profit 
institutions?
    Ms. Cao. No. That's borrower defense and the gainful 
employment rule apply to all institutions. It is just the case 
that 99.7 percent of borrower defense claims that have been 
submitted because students feel that they've been defrauded, 
reflect behaviors at for-profit and covert for-profit 
institutions.
    Mr. Takano. What about 90/10? Does 90/10 apply to non-
profit institutions? The studies that apply to non-profit 
institutions the 90/10 rule
    Ms. Cao. The 90/10 rule applies to for-profit institutions 
and sometimes to recent conversions.
    Mr. Takano. OK. I'm seeing Ms. Emrey-Arras shaking her 
head. 90/10 does not apply to non-profit institutions.
    Ms. Emrey-Arras. Correct. With the only exception being the 
reference just made previously that for the year after 
conversion is approved from a for-profit to a non-profit, they 
are still subject for that 1-year period to 90/10. But other 
than that, non-profits are not subject to 90/10.
    Mr. Takano. But Ms. Cao do we know of non-profit 
institutions that receive 90 percent or more of their revenue 
from the Federal Government?
    Ms. Cao. So, I can think of two conversions within the last 
20 years that might present this scenario. So, one is the case 
of Wright Career College which back in the 90's when the 85/15 
precursor to the 90/10 rule was enacted, they told the IRS 
we're going to go ahead and convert to non-profit status 
because we want to avoid the accountability of the 85/15 rule. 
The other one is a recent example.
    The Dream Center Schools told an accreditor that they 
wanted to obtain non-profit status for their revenue extracting 
schools so that they could avoid the 90/10 rule and avoid 
gainful employment programs. And they said avoiding these 
regulations will help us operate more efficiently, and of 
course that efficiency ran those institutions right into the 
ground.
    Mr. Takano. Well, thank you. Thank you, Ms. Cao. Mr. Galle 
would you give Department of ED the ability to audit non-profit 
educational institutions that receive Federal money, or lots of 
Federal money? Would that be part of the solution given enough 
authority to add to be able to properly oversee non-profits?
    Mr. Galle. Thank you, Congressman. I think ED already has 
that authority. The statute obliges Ed to decide whether an 
organization is a non-profit or public, or proprietary, which 
means for-profit school.
    And regulations explain how ED does that. You know it looks 
at whether IRS has treated the organization as a charity, but 
then independently ED regulations say ED has to decide whether 
the organization is providing a nexus of benefit to any private 
party, which usually means it's giving too much money to its 
insiders, or it's a prisoner of its debts, or if it's a risk 
contract.
    And so, it's already ED's obligation under existing 
regulations in my view to make sure that organizations are 
really protecting students and not their bottom line.
    Mr. Takano. Would you give ED some role in the vetting 
process of conversions? In other words, IRS establishes that 
they can become a non-profit, would you insert ED into that 
process and give them some sort of role in the vetting?
    Mr. Galle. So, I think it's appropriate for IRS to decide 
which organization face which tax consequences. It's mostly not 
IRS's view of their job to decide which organizations are fully 
charitable or not. Back in the 90's Congress found that IRS 
wasn't really willing to do that job. They weren't willing to 
impose the death sentence on organizations, then take away 
their charitable status, or refuse it in the first place.
    So, IRS only imposes this thing called an intermediate 
sanction, which is kind of a penalty tax on people who extract 
money from their organization. So, IRS is really just not in 
the business of figuring out who has the incentives to protect 
students and who doesn't.
    And so, I think it makes more sense for Ed to fulfill that 
test, because that's their statutory and regulatory mission.
    Mr. Takano. And that's how you would change the law.
    Mr. Sablan. Thank you.
    Mr. Takano. Thank you, Mr. Chair.
    Mr. Sablan. Thank you. Now I would like to recognize Mr. 
Allen of Georgia please, 5 minutes.
    Mr. Allen. Thank you, Mr. Chairman, and obviously this is a 
very partisan issue that you know our Democrat friends make 
clear that they want to dismount profit education. I think 
probably the reason that profit institutions exist is because 
of what is being taught at public institutions, and the 
American people want a choice.
    The fact is that many students, including non-traditional 
students and veterans, choose their schools because those 
schools fulfill what they are looking for out of college. Dr. 
Gillen what are some of the distinguishing features of for-
profits schools as compared to their peers in the non-profit 
and public space? And I'm referring to schools like Prager U 
and other schools like that teach you know civics and you know 
amongst the country and those kinds of things. And do they 
offer different programs or more flexibility?
    Mr. Gillen. Yes, great question. The for-profit sector 
historically has been rather innovative. And so, we've seen a 
number of practices that may have been you know, tried to 
scatter shot here and there, but they really became standard 
practice in the for-profit sector.
    So, helping students fill out the FAFSA was kind of an 
innovation that really scaled up within the for-profit sector. 
Allowing nighttime classes for students who are working full-
time, they didn't quit their job to go to school during the 
day, and so offering nighttime and weekend classes was really a 
specialty of the for-profit sector.
    And it's spread to some other institutions as well. And 
really the main advantage of the for-profit sector I think is 
this kind of experimental lab of how can we improve kind of the 
educational offerings?
    Mr. Allen. Right.
    Mr. Gillen. And I'll throw online education in there. For-
profits embraced online education very early, and as we just 
saw with COVID everybody had begun.
    And so, before the for-profits have sort of kind of 
experimented with the process a lot more, it wasn't as rough as 
a transition for everybody else because we had seen what online 
education does and how they do it.
    Mr. Allen. And so, this flexibility is critical. Students 
assume risk when they take out loans and the Federal Government 
taxpayer assumes risk by lending that money, but the 
institution, the one arguably benefiting the most from this 
arrangement, does not have any direct risk in the Federal 
student loan program.
    And in your opinion should colleges and universities have 
more skin in the game? If so, what are some of the ways we can 
incorporate institutions in the Federal student loan program?
    Mr. Gillen. Yes, I think skin in the game ideas make a lot 
of sense as long as we're restricting ourselves to the current 
loan system where the government is the lender. So, if we were 
not in the situation where the government was the lender, where 
we had private lenders, there would be no reason for skin in 
the game because the lenders themselves would be doing their 
due diligence on whether this is a wise one to be making.
    But both the government and the institutions under the 
current system our government is under don't have any desire to 
do their due diligence on these loans, and so you can--we do 
have a lot of programs that are consistently allowing students 
to over borrow.
    And so, one solution to that is skin in the game proposal. 
And there's a lot of different ways those can be structured, 
and so one kind of proposal that was tried in Chile was to hold 
universities responsible for the debt of dropouts. Now we need 
to be very careful though just replicating that, because one of 
the things they found in Chile was that this resulted in lower 
quality of their schools because the schools, knowing that they 
would be responsible for the debt of dropouts, lowered their 
standards so more students would graduate, they would have less 
dropouts.
    So, we need to be very, very careful in designing the skin 
in the game proposal, or a risk sharing proposal, but as long 
as we're in kind of the current status where the government's 
lending, and they're lending pretty indiscriminately, then some 
sort of skin in the game or risk sharing proposal I think 
within proprietors.
    Mr. Allen. Well, most of the young people that I've talked 
to about their student loan debt have admitted to me that they 
had no idea of what they were getting into. And they had no 
idea how they were going to pay it back. And that's why I had 
an amendment on the Higher Education Act to make sure they got 
proper financial counseling. I thank you and I yield back.
    Mr. Sablan. Thank you very much Mr. Allen. I now recognize 
Ms. Adams of North Carolina for 5 minutes.
    Ms. Adams. Thank you, Mr. Chair, and I appreciate the 
opportunity to participate in this hearing today. Director 
Emrey-Arras, do most conversions involving existing non-profit 
college with long-standing experience in running a school, 
taking over for-profit college. And let me repeat that.
    Do most conversions involve an existing non-profit college 
with long-standing experience in running a school, taking over 
the for-profit college?
    Ms. Emrey-Arras. The answer is no. Of the 59 conversions 
that we saw there were only five involving an existing non-
profit college.
    Ms. Adams. OK. So, what kinds of non-profit organizations 
are purchasing these for-profit colleges?
    Ms. Emrey-Arras. They can be an array of organizations that 
don't necessarily have experience educating students. We found 
a scholarship fund, a professional association, a private 
foundation, and others. So, you have an assortment of non-
profits and as we've stated these are not existing non-profit 
colleges assuming the for-profits.
    Ms. Adams. OK. So, they may be newly created non-profits 
being used to engineer these conversions?
    Ms. Emrey-Arras. Certainly. Of the 59 conversions we found 
that nine involved completely new non-profits that had no 
activities prior to the purchase of the for-profit school, and 
they were more likely to be involved in the insider 
conversions. So, the conversions without insiders involved 
almost always existing non-profits that had been established 
previously, while about half of the insider conversions 
involved completely new non-profits that had no prior track 
records.
    Ms. Adams. OK. So, what does it mean for protecting the 
best interests of students then?
    Ms. Emrey-Arras. Well, I think there's a difference when 
you have an existing non-profit college take over a school 
versus a foundation or a scholarship fund take over a school. 
So, I think there's a difference in terms of the educational 
experience that is brought to bear.
    Ms. Adams. Right. Thank you. Professor Galle what does a 
traditional non-profit college board look like?
    Mr. Galle. Usually a non-profit college board is a group of 
experts and community Members who volunteer their time. Many of 
them are large supports of the institution. They might be alums 
or other donors. They're not typically paid for their time. 
They have no financial interest in the ability of the 
organization to pay profits to its service provider, or the 
former for-profit that it owes a huge IOU to.
    That is not true of several of the boards that I examined 
after reading the GAO report. For example, there's one board 
where the board Members receive about $300.00 an hour for their 
time as a board member, which is far outside the norm, and 
certainly you can imagine affects their incentives to go along 
with the financial interests of the people who they participate 
with.
    Ms. Adams. OK. So, when an insider is retaining some or all 
of the same leadership roles post-conversion, how does it 
affect the ability of a college to function as a true non-
profit?
    Mr. Galle. I mean it's impossible. First of all, just talk 
about legally you have a so-called fiduciary duty, you have a 
legal obligation to look out for the interests of an 
organization that you're the head of. It's impossible for 
someone like Brian Miller, who runs both GCU and it's for-
profit parent to follow the law in both cases, right because 
you owe a duty to the non-profit to pay as you know, to get as 
good as a price as you can from your contracting partner, but 
you also have a duty on behalf of the contracting partner that 
you're running to get as much money as you can out of the non-
profit, there's just no way to do both.
    Ms. Adams. OK. Mr. Chairman I wish to submit for the record 
a letter from the National Association of Independent Colleges 
and Universities in support of Federal oversight for non-profit 
conversions to ensure integrity in these processes and with 
that Mr. Chairman I'll have to yield back.
    Mr. Sablan. All right. Without objections it is so ordered.
    Mr. Sablan. Now I recognize Mr. Keller of Pennsylvania. Sir 
you have 5 minutes.
    Mr. Keller. Thank you, Mr. Chairman. I believe we can all 
agree that the government should hold all post-secondary 
institutions accountable for the benefit of students and 
taxpayers alike. At the end of the day higher education is as 
diverse because students are diverse, think differently and 
learn differently.
    Pennsylvania has colleges, universities, technical schools, 
vocational programs, and other types of schools, all designed 
to get their students ready for the workforce. I hear firsthand 
how important a qualified workforce is for Pennsylvania's 12th 
congressional District.
    No matter what industry we talk about, employers are 
struggling to find qualified workers. Regardless of what 
industry or type of college we're talk about, it's clear to me 
that educational programs should be evaluated based on outcomes 
achieved by and for students.
    So, my question is that for Dr. Gillen, thank you for your 
testimony and for being here today. What can the Department of 
Education do to improve accountability for each institution 
under its purview, and what does Congress need to do to give 
them proper authority in the interest of maximizing 
accountability?
    Mr. Gillen. That is a great question, and we can spend you 
know many, many hearings, specifically on that topic. One of 
the big obstacles I think to seem kind of impermanent in higher 
education is actually the accreditation system. And so, one of 
the problems with the way accreditation which is all 
universities are required to have accreditation in order to 
participate in the Federal financial programs.
    And the accreditation rules typically kind of mandate the 
inputs and the processes that universities need to follow. And 
so, if you're mandating the inputs on the processes, you're 
essentially sort of already you're basically saying you can 
bake whatever cake you like, but you have to use this chocolate 
cake recipe right.
    So, it's no surprise that we end up getting you know a lot 
of chocolate cakes. Or maybe we need vanilla cakes. Maybe we 
need you know Korean tacos. Like there's a lot of innovation 
that should be happening in education right now that we aren't 
seeing because the accreditation system is a barrier to that 
innovation.
    So, I would really like to see what I call escape hatches, 
introduced them into accreditation. So, accreditation is really 
kind of a one size fits all solution, and so instead of 
mandating accreditation for everybody, we can introduce escape 
hatches.
    So, for more vocational programs we could have a labor 
market outcome serve as an alternative to accreditation. So, if 
enough of your graduates are graduating and getting you know 
really, really well-paying jobs, that can serve as a form of 
accreditation for financial aid purposes.
    We can also do this with learning outcomes. So, for law 
schools you know if 95 percent of your students are passing the 
bar exam, you don't really need accreditation. We know you're 
doing a good job. And so, introducing these escape hatches 
would allow programs and institutions to innovate on the inputs 
in the processes, because we're more directly measuring the 
outputs and the outcomes.
    So, accountability should 100 percent be focused on outputs 
and outcomes. Right now, the accreditation system is not 
focused on that, and it's really limiting I think, the 
innovation that we could see in higher education.
    Mr. Keller. Thank you. I was also interested to see that 
the chart you included in your written testimony which shows 
which fields have been most successful broken down by academic 
field, can you speak to the metrics for coming up with the data 
reflected in the chart, and if there are any notable trends you 
found?
    Mr. Gillen. Yes absolutely. So, in the written testimony 
there's a chart in there that we look at. I think it's the 27 
largest academic fields, and so this is using the 2019 college 
score accreditation. And so, what we did was we recreated the 
gainful employment regulations.
    So, at that point the gainful employment regulations had 
been set aside. And so, what we did was we recreated them, but 
we applied them to everybody, not just for-profits. And so, 
when you do that, you can then classify each program as 
passing, probation or fail. Technically the probation was a 
public zone in the gainful employment regulations.
    The probation is the essence of it. And so, when you do 
that, you saw some fields that you know virtually every program 
was passing gainful employment, and so fields like mechanical 
engineering, vehicle repair and maintenance, I think was above 
90 percent of graduates were attending these programs that had 
these excellent outcomes.
    But then there were a bunch of fields that weren't doing so 
well, so social work is now around a third of graduates were 
attending programs that would not have passed gainful 
employment if it had been applied to them.
    And then the field that really stuck out as having the 
worst outcomes was actually law. And so, we did a followup 
report where we--
    Mr. Sablan. I'm sorry, but we need to get on to the next 
member. Thank you very much sir for your--
    Mr. Keller. Thank you.
    Mr. Sablan. Let's stay in Pennsylvania. Ms. Wild you have 5 
minutes please.
    Ms. Wild. Thank you so much Mr. Chairman. I'd like to 
direct my first question to Ms. Cao. I hope I got that correct 
and thank you all for being here on this very important 
subject. Ms. Cao whenever I am engaging in conversations about 
higher education, I want students to be central to the 
discussion.
    And just by way of background, I want you to know that in 
my district, which is the Lehigh Valley, I actually have six 
colleges and universities that are non-profits as well as a 
couple of for-profit schools, so this is an area of great, 
great interest to me.
    I believe it's vital that students who are pursuing higher 
education are able to do so with the peace of mind that the 
college they attend has their best interests in mind and will 
invest its resources to provide the highest quality education 
and the best outcome. I think we all feel that way about it.
    So, what I'd like to do with that as a backdrop, I'd like 
to discuss the effects on students when for-profit colleges 
convert to non-profit colleges. When that happens is the 
college required to improve the quality of its academics or 
better support student's learning?
    And all as the second part of my question at the same time. 
After undergoing a conversion, does the college have to improve 
the outcomes of students, like increasing job placement rates 
after graduation, or lowering default rates on student loans? 
And I'll be quiet now and let you answer. Thank you.
    Ms. Cao. Sure, thank you. So, in order to be recognized by 
the Department of Education as a non-profit, a college does not 
have to improve the quality of the learning within the school 
or improve the quality of the outcome that the students 
experience.
    However, to kind of return to the core distinction between 
non-profit and for-profit status, genuine non-profits make that 
commitment to reinvest 100 percent of resources in student 
learning. And to go to Professor Galle's point about fiduciary 
status, genuine non-profits owe a fiduciary responsibility for 
the educational mission of their school, and no fiduciary 
responsibility to investors or shareholders.
    And what that means is that with all of those Title IV 
resources, going to support student education, you end up with 
better outcomes, and you end up with better investment in 
student's education. I want to go back to provide a 
clarification on the numbers regarding instructional spending 
that Ranking Member Foxx referenced earlier on, because this is 
something that I described in my written testimony.
    So, when you look at the share of student's tuition 
dollars, the share of HEA dollars that is going to instruction, 
the numbers are pretty clear about what the difference is 
between sectors are. So, to take 4-year schools at a for-profit 
school students are getting 26 cents on the dollar.
    At a non-profit they're getting on average 79 cents. And at 
a public institution they're actually getting more than a 
dollar's worth of instructional spending, $1.13. So that's the 
best bang for your buck.
    And the reason this is different from the numbers that 
Ranking Member Foxx was describing, is because she's 
incorporating at the denominator all of the revenue which 
includes revenue for Hadron collector generators for the 
research farm, or the revenue produced by the non-profit 
hospital that is attached to the institution.
    So, when you're really looking at what students are 
getting, and I'm so glad you understood the conversation, it's 
a really different deal at for-profit institutions versus non-
profit and public counterparts.
    Ms. Wild. Can I just ask you in the time that I have left, 
are there particular types of students that are more likely to 
attend a college that recently converted to non-profit?
    Ms. Cao. Yes. So, the for-profit schools who are engaging 
in these conversions are among the most predatory. We know that 
the target low-income students, Black and Hispanic students, 
working parents and students who don't have family support, but 
are rather supporting their families.
    And returning to the case of the Ashford conversion to 
University of Arizona's global campus, you have the leadership 
there expressly saying, ``We are pursuing this conversion in 
order to better target low-income students and minority 
students.''
    Ms. Wild. How does the quality of their academic 
instruction while they're in college and their outcomes after 
compare for students who attended a recently converted non-
profit college from students that attended a non-profit that 
never operated as a for-profit?
    Ms. Cao. The problematic conversions behave just like for-
profit schools with the difference of a for-profit schools have 
to live by the Gainful Employment and 90/10 rules. So, the 
outcomes are going to be significantly worse at converted 
schools that are genuine non-profits.
    Ms. Wild. Thank you so much. I appreciate it. I yield back.
    Mr. Sablan. All right. Thank you very much Ms. Wild. I am 
told that Ms. Miller-Meeks is next. Ms. Miller-Meeks? All right 
we're going to try Mr. Owens? Mr. Good? Mrs. McClain.
    Mr. Good. Bob Good's here.
    Mr. Sablan. Oh, Mr. Good. All right sir welcome, you have 5 
minutes sir thank you.
    Mr. Good. Thank you very much and thank you to all of our 
guests here today. And my questions will be directed to Dr. 
Gillen please. In your testimony you discussed how making 
available important data related to post-graduation outcomes 
for specific colleges and specific degrees can help students 
and families make good investments in their higher education, 
and that this trend could lower the overall cost of education.
    That said, do you have a recommendation regarding how 
Congress can help promote and facilitate this data transparency 
without also expanding the size and scope of government?
    Mr. Gillen. Yes absolutely. So, the way the current college 
score card data is collected is it's focused just on students 
who are receiving Federal financial aid. And so, I think that's 
a completely appropriate approach because these Pell grants and 
students' loans are being provided to these students, just as 
kind of congressional and governmental due diligence, we need 
to be able to assess the overall outcomes of those programs, 
and so we need to be able to track the outcomes for students 
who receive these.
    So, I think that's a very appropriate approach, kind of 
figuring out what information we need to determine how 
effective financial aid programs are and then collecting it.
    Mr. Good. Thank you. You also had noted, and I'm 
paraphrasing a little bit, that you know since colleges are 
locked in a never-ending academic arms race, to spend as much 
as possible in the pursuit of prestige, and this has a very 
negative consequences regarding college affordability, and it 
can make it easy for insiders to hide excessive spending.
    Do you feel that accountability regarding degrees and the 
labor market outcomes is enough to lower the costs of higher 
ed, or what else might you recommend?
    Mr. Gillen. Yes, so this is in reference to the Bowen's 
laws portion of my written testimony, and just very brief 
background. So, with Bowen's laws the basic is that when you 
can observe quality, you're competing based on reputation or 
perceived quality.
    Mr. Good. Right.
    Mr. Gillen. And one of the ways you can increase reputation 
or prestige, or perceived quality is to spend more money on 
kind of flashy items. So, you know Nobel Prize winning faculty, 
high-achieving students you know big shiny new ads, that kind 
of stuff.
    And so, you know that's all great, but that all costs 
money, and so schools are locked in this never-ending cycle of 
needing more revenue. And so as soon as they get more revenue, 
they use it to increase spending, and so if you look at the 
kind of overall trend of what happens to higher education in 
this Bowen's Law world, is we're going to see a never-ending 
trend of increases in spending.
    So, one of the ways we can escape that is by having better 
metrics on outcomes and outputs. And so, these accountability 
mechanisms that basically publicize, and try to encourage 
schools to have better outputs and outcomes would do a lot to 
fix that because right now there's a handful of law schools in 
the country that do a great job in terms of labor market 
outcomes relative to student debt.
    There's also a ton of them that don't, where their students 
are really struggling with their student debt. And so right now 
the question hey, should I go to law school doesn't make any 
sense because it really depends on which law school we're 
talking about. Some of them have great outcomes, some of them 
don't.
    And so, in providing students with enough information that 
they can make that distinction between those two types of 
programs is absolutely critical. And then once students are 
competing--sorry, once universities are competing based on the 
outcomes, we've basically escaped the Bowen's Law world and 
then we move into more of kind of a standard competitive 
environment where schools are competing to increase quality and 
lower cost.
    And that's a very healthy environment to be in because any 
innovation that does either one of those will be adopted 
widespread by universities across the country.
    Mr. Good. At the risk of offending my many friends who are 
lawyers here in Congress, it was interesting to see that one of 
the worst returns in your data provided was that for the law 
degrees, in light of we've got such a growth in that area in 
the country.
    Just speaking though generally with regard to the cost of 
higher education, what role do you think that the overall 
Federal spending on education might be impacting the overall 
increasing costs of higher education?
    Mr. Gillen. So, there's a big debate among scholars about 
the extent to which Bowen's hypothesis is--I'm sorry the 
Bennett hypothesis is indicative. And so, essentially there's 
an argument that some scholars make that increases in 
government funds will encourage schools to raise tuition to 
essentially harvest those funds without actually lowering the 
cost to the students.
    Now there's been you know multi-decade debate about how big 
of a problem this is, and so unfortunately, we can't go into 
too much detail. But right now, if I see a study that says it's 
less than 20 cents on the dollar, or a study that says it's 
more than 80 cents on the dollar, I'm skeptical.
    Anything in between there is pretty consistent with the 
evidence that I've seen, so it's not that schools raise tuition 
by a dollar for every dollar that the government provides, and 
it's not that they don't raise it at all. It's somewhere in the 
middle.
    Mr. Good. Thank you, sir. I see my time has expired. I 
appreciate your answers.
    Mr. Sablan. Yes, Chairman Scott is back in the room and so 
Mr. Chairman you have the gavel please.
    Chairman Scott. Thank you. Can you--is Mr. Levin next?
    Mr. Sablan. No. I think it's Ms. McBath, well she was here, 
all right. Mr. Chairman McBath, Ms. Hayes was here, yes, you're 
right Mr. Levin is he here?
    Mr. Levin. I am.
    Chairman Scott. The Gentleman from Michigan Mr. Levin.
    Mr. Sablan. Mr. Levin you have 10 minutes.
    Mr. Levin. Ooh.
    Mr. Sablan. 5 minutes, 5 sorry.
    Mr. Levin. I'll take the first offer. Thanks to you both. 
All right. Well, this is I thank the chairman for this hearing. 
It's super educational I think for the American people. Over 
the last decade for-profit institutions have converted to non-
profit institutions at an accelerated rate, and we've seen an 
alarming amount of these conversions happening at ethically 
dubious for-profit colleges, converting to non-profit 
institutions to circumvent accountability, or repair their 
reputations, line the pockets of owners and executives, and 
evade tax liabilities to the American people.
    Take for example Dream Center, a non-profit holding company 
that pushed for the purchase of three for-profit college chains 
with the intent to convert these schools to non-profit 
institutions even as the Higher Learning Commission revoked 
accreditation for some Dream Center owned schools over concern 
that the intent of the conversion was to and I'm quoting, 
``Cloak predatory practices.''
    This led Dream Center to misrepresent and defraud millions 
of students into believing they were attending a fully 
accredited institution when they were not. Within 18 months of 
the transaction Dream Center closed or sold every school.
    So, I want to ask Ms. Cao about this. We've seen a lot of 
these abrupt and expensive closures of schools that are 
converted from for-profit to non-profit. For instance, the 
committee found that the Dream Center conversion and subsequent 
collapse, will cost taxpayers at least 600 million dollars.
    Is there something particular about these conversions that 
makes them likely to close abruptly like this?
    Ms. Cao. Yes. Thank you so much for that question. And the 
Department of Education did find that the collapse cost 
taxpayers 600 million dollars.
    Mr. Levin. It's incredible.
    Ms. Cao. One of the executives at Dream Center, who was 
extracting revenues for his family's foundation, actually 
estimated the overall cost of the closure would be 1 billion 
dollars, and that's part of the committee's report as well. But 
I think of the increased risk of closure that the GAO found in 
highlighting that 15 of 16 insider driven conversions went from 
being financially responsible, to financially irresponsible 
within the span of 1 year, is one of the real risks to both 
students and taxpayers of allowing these for-profit conversions 
to go forward.
    I talked about how non-profits can never extract revenue 
for owners, and how for-profits have a restriction where when 
they are already financially unstable, owners cannot extract 
revenue for private benefit, or at least there are some 
restrictions in their ability to continue to withdraw equity.
    But when you have a for-profit college that continues 
revenue extraction, but as a non-profit, they are free to 
extract dollar after dollar to the point where they are running 
their institution into bankruptcy.
    And in the case of Argosy, you saw owners extracting 
revenue to the point where the institution had used up all the 
Title IV funds, and then go after student's stipends in order 
to be able to balance their budgets. And then run out of all 
funds entirely.
    And so, I think there is a real--
    Mr. Levin. And milk it until it doesn't exist anymore 
basically. I mean since time is limited, let me just ask you to 
kind of zoom out because I mean in a way these stories about 
the particular institutions are so compelling and disgusting 
you know.
    What I want to ask you is how can we understand the impact 
of these particular stories, these conversions and these 
subsequent closures on higher education and students as a 
whole? How are the for-profit conversions impacting other 
schools in both the for-profit and non-profit sectors, and how 
does that you know, end up impacting college students all 
across the country?
    Ms. Cao. Thanks. So, when for-profit conversions happen 
among the most predatory schools, that impacts the rest of the 
for-profit field because any school that wants to remain with 
for-profit regulations when it has this option of a giant 
loophole, is going to be either too small, too unsophisticated, 
or too scrupulous to lawyer up and take advantage of the for-
profit conversions that allow them to operate in an even more 
predatory manner.
    When it comes to the non-profit status, there is also I 
think a corrupting impact of for-profit conversions on non-
profits. And so, Mr. Gillen mentioned an arms race, and I think 
that the aggressive and predatory recruitment of for-profit 
conversions is going to, and already has created an arms race 
for the non-profits to try to distinguish themselves from the 
covert non-profits, and that's going to draw resources away 
from student instruction in order to be able to educate 
students through recruitment and marketing practices.
    Mr. Levin. All right well thanks. Mr. Chairman my time's 
expired, but I just have to say that when I ran the State 
workforce system in Michigan and created the No Worker Left 
Behind Program when we put 162,000 Michiganders back to school, 
we proudly worked with State institutions, community colleges, 
non-profits and for-profits, and we've got to fix this problem 
so that students can still have the full panoply of options. 
With that I yield back.
    Chairman Scott. Thank you. Next the Gentlelady from Iowa 
Ms. Miller-Meeks.
    Ms. Miller-Meeks. Thank you so much Chairman Scott. And Ms. 
Cao you actually inspired this question. You said, ``Higher 
tuition equals higher debt.'' As the first person in my family 
of 10 to not only go to college, the only one to ever go to 
medical school, I am extremely concerned about the rising cost 
of tuition.
    At the State level, as a State Senator I worked on these 
issues, especially for the health professions. However, student 
loans, loan forgiveness for locating to rural areas, J-1 Visas, 
and scholarships don't address my most pressing concern, and 
that's the skyrocketing cost of colleges.
    Mr. Gillen you've done a lot of work investigating why 
college prices are rising, and one reason you mentioned earlier 
was the Bennett Hypothesis. Could you describe this a little 
bit more in detail, and also other drivers of rising tuition 
and suggest ways Congress could address the fundamental drivers 
of college cost when we reform the HGA because that in turn is 
what creates more college debt is the rising costs. Thank you.
    Mr. Gillen. Yes absolutely. So, one of the main 
contributors to rising college costs is this Bowen's Law world 
that I described previously where there's essentially never-
ending need for any non-profit, but in this particular case, 
colleges to have more revenue.
    There's always going to be some other program, or some more 
students, or some initiative that the University wants to take 
and that they think will improve their college. So, there's 
never going to be enough money for colleges.
    There's a couple of amusing kind of descriptions of this 
process by scholars of higher education. So, Derek Bach, former 
President of Harvard, he wrote a book where he described 
colleges as just like compulsive gamblers in the sense that 
there's never going to be enough money to their needs.
    There's a scholar at Cornell, Ronald Ehrenberg who 
described the college's need for money as analogous to the 
cookie monster, just whatever cookies are available, cookies 
being revenue in this case will be devoured.
    A co-author of mine, Robert Martin, described higher 
education finance as a black hole, and it will just suck up any 
revenue that's around. And so, the question is OK, what happens 
when we institute a financial aid program in this environment? 
And that's where the Bennett Hypothesis comes in.
    And so, Secretary Bennett, he was Secretary of Education 
back in the 80's. He said that the Federal Government providing 
financial aid will actually encourage these schools to raise 
their tuition--to harvest that aid money. And that's really the 
combination of these two. So, the Bennett Hypothesis is a 
danger because we live in this Bowen's Law world.
    And so, the question is OK well how big of a problem is it? 
And scholars, as I've mentioned, have been debating this. There 
was a real turning point around 2012 where almost all the 
scholarship that has come out since then, because it's using 
better data, and better school techniques, is finding some 
evidence in support of the Bennett Hypothesis, regardless of 
sector.
    So, it's you know an issue at the for-profit sector. It's 
an issue at public's, it's an issue at private non-profits. And 
but there are some things that could be done to sort of attain 
the Bennett Hypothesis. And so, some of the things you can do 
is make sure that it is need based.
    So, programs like the Pell grant are much less likely to 
suffer from kind of tuition inflation as a result of the 
program, than kind of a universally available program that is 
not subject.
    Ms. Miller-Meeks. Thank you so much for that, and it's the 
same thing that plagues our healthcare with third party 
payment, and I'm going to yield the balance of my time to 
Representative Foxx. Thank you so much. And thank all the 
panelists.
    Ms. Foxx. Thank you very much for yielding. I want to point 
out that one of our witnesses has said non-profits can never 
extract revenues for individual benefit. Well, I'd like to 
point out that private colleges and universities, some are 
paying exorbitant fees to their presidents. University of 
Southern California, 7 million dollars. University of Chicago, 
6 million dollars. Thomas Jefferson University, 5 and a half, 
Columbia, 4 and a half million. Harvard, 3 and a half million. 
University of Pennsylvania, 3 million.
    Wesleyan University, 3 million. University of Rochester, 3 
million. Texas Christian, 2 and a half and the Savannah College 
of Arts and Design, almost 2 and a half million. I would say 
that students going to those schools would say that that is 
extracting revenue for individual benefit.
    And then Mr. Chairman, we'll enter that into the record. 
This has come I believe from it's a Chronicle of Higher 
Education, and also the top 10 salaries of public schools. 
Georgia State, 3 million, Auburn, almost 2 million, Texas A and 
M over 1 and a half, Ohio State, 1 and a half. Texas A and M, 
system office 1.3. University of Pittsburgh, 1.2. University of 
Virginia 1.2.
    University of Nebraska a little over one million. 
University of Houston 1 million, a little over, and Arizona 
State University incidentally, over 1 million. I would say 
those publics and those privates are certain extracting revenue 
for personal gain.
    And I think the record needs to be straightened out. Thank 
you very much Mr. Chairman.
    Chairman Scott. Thank you. Those documents will be entered 
into the record without objection. The Gentleman from Indiana, 
Mr. Mrvan.
    Mr. Mrvan. Ms. Cao you have written about Perdue 
University's joint venture with Kaplan University. Based on 
your knowledge of this conversion, do you see any unique risks 
posed by public college contracts with for-profit colleges 
compared to a for-profit college's conversion to non-profit 
status?
    Ms. Cao. Could you repeat the second half of your question, 
I'm sorry I didn't hear it.
    Mr. Mrvan. That's OK. The second half of it is do you see 
any unique risks posed by public college contracts with for-
profit colleges compared to a for-profit college's conversion 
to non-profit status.
    Ms. Cao. Got it. Thank you for clarifying. Yes, so I think 
of the risks of for-profit colleges converting in a way where 
they appear to have public college status, or a public college 
affiliation is even more pronounced because of the public trust 
that students have in a school like Purdue University, or the 
University of Arizona.
    That is why shareholders at Graham Holdings or the 
shareholders at Zovio are so excited when they can find a 
public institution that will lend its good name to one of these 
for-profit college conversions.
    And I think the students have really spoken for themselves. 
Purdue University Global is the only public college that has 
garnered more than 100 student complaints through the borrower 
defense program. And I also want to add that there are two 
additional risks with these for-profit public conversions 
occur.
    One is the double revenue extraction. So, you have funds 
from student tuition dollars going to both Graham Holding and 
to support Purdue. And the third harm is that equity harm that 
I mentioned at the beginning.
    You have separate unequal institutions where poor students 
are subsidizing wealthier students.
    Mr. Mrvan. Well, thank you very much and I yield back my 
time.
    Chairman Scott. Let's see. Good, McClain, the Gentlelady 
from Tennessee Ms. Harshbarger.
    Ms. Harshbarger. Thank you, Mr. Chairman. I appreciate the 
time. This is directed to Dr. Gillen. I have constituents in 
East Tennessee that a traditional 4-year degree is really it's 
not the most practical steps for those high school students, 
and really for a lot of the adults looking for a post-secondary 
degree. And I absolutely agree that we need to have 
accountability measures put in place for any institution, like 
the learning versus earning, versus growth.
    And there's no way to measure out if we don't have those 
measures. And Dr. Gillen for-profit colleges don't just take 
public money and in the form of those Title IV student aids 
programs, but because they do pay taxes to State and Federal 
Governments, really, they're taxpaying institutions basically. 
In addition to paying taxes, these schools employ thousands of 
people. They contribute a lot of other ways to a local economy 
or community.
    And my question is this. Are you aware of any analysis 
that's done to assess the real value-added institutions have on 
their communities? What is it that they do to these 
communities? How do they give back? And have you assessed 
anything that would show us what these measures do and those 
employees, in hiring all those employees, what kinds of value 
does that have on the community?
    Mr. Gillen. Yes, sorry about that. So, the first part of 
the question you know what is the overall social impact of--
these higher education, and does it distinguish between for-
profit, non-profit and public. And so, whenever you have either 
a subsidy or a tax, that's going to introduce a wedge between 
the social return to any particular activity and the private 
return.
    And so, when you look at higher education if you compare 
say the public university to a for-profit university. So, the 
public universities are generally heavily subsidized by the 
State that the reside in, and they do not pay taxes.
    And so, you've got sort of two wedges that are kind of 
present for public universities. The for-profit universities, 
not only do they not get subsidized, but they do pay taxes. And 
so that's going to introduce a big wedge between the social 
rate of return relative to the private rate of return.
    So, if you just for simplicity just assume the equivalent 
private rate of return for students at those, you can see very, 
very different social rates of return because of the 
subsidization and the different tax laws.
    As for what higher education does for the communities, it 
really depends on the particular community, and on the 
universities within it. And so, a lot of states actually import 
college graduates, and so a particular State may really 
generously fund its colleges to try and increase the 
educational attainment level at the population, and then it 
sees a lot of those students just move next door because they 
want to live in New York City or something like that.
    And so, it's an open question how much at the local 
community level the universities are going to benefit, because 
it really depends on how many of those students remain within 
the community, and how many go to some other community.
    At the national level that's not as much of an issue. You 
still have students going internationally after they graduate, 
moving overseas. But at the community level that's much 
broader.
    Ms. Harshbarger. You know our goal should be to get, it 
doesn't matter which university if it's public, for-profit, not 
for-profit, you know the goal is to get these students 
educated, or to give these adults post-secondary degree.
    As Dr. Miller-Meeks said, I was the first one in my family 
to ever go to college and get a Doctorate degree in pharmacy. 
And nobody encouraged me, that's just something that I wanted 
to do along the way. And I went to a private institution, and 
it cost a lot of money. And I paid every penny of that back. 
You know we look at these endowments at some of these bigger 
not-for-profit universities.
    They could bankroll every student that came through their 
doors if they wanted to. So, I guess just having those measures 
in place to see how successful these for-profit, not for-profit 
universities are, it's how you do it in the business world.
    You've got to make sure. And my part of the State, in East 
Tennessee we need skills training. We need things to where they 
can get out and get a good job. And I'm now knocking higher 
education, but I'm looking for you know, my emphasis is on 
workforce development per se in my district.
    But I appreciate your answers. I think that we need to look 
and assess what these for-profit universities do and do some 
kind of a study to show what they do to imply. They employ all 
these people in their communities. Let's find out what kind of 
benefit that has been and measure it that way as an outcome.
    But I appreciate your answers, and everybody being here, 
and I yield the remainder of my time to Dr. Foxx.
    Chairman Scott. Actually, there's not any time left.
    Ms. Harshbarger. Well, I'm so sorry.
    Chairman Scott. The Gentlelady's time has expired. Next the 
Gentleman from New York Mr. Jones.
    Mr. Jones. Well, thank you Mr. Chairman and to the Ranking 
Member. Thank you to our witnesses for all appearing before us 
today. Your testimony has placed a spotlight on the failings of 
the Federal Government to adequately protect our students. Make 
no mistake about that.
    Over the last 30 years for-profit colleges have offered 
minimal educational value, but have collected millions of 
dollars in tax breaks, all while saddling thousands of students 
with crushing debt. In recent years as skepticism of for-profit 
schools has continued to grow, these same predatory 
institutions have taken it upon themselves to restructure and 
convert to non-profits.
    They have done so not because they have seen the error of 
their ways, but because they seek to subvert the regulatory 
burdens placed on for-profit colleges, while continuing to 
defraud students and benefit financially.
    Ms. Cao how do for-profit colleges in disguise, or as you 
refer to them covert non-profits harm students?
    Ms. Cao. Thank you for your question. And first I just want 
to take a point of personal pride to say that we overlapped at 
Stanford University, and you graduated with many of my friends 
from Harvard Law School and I was so excited to see you 
elected.
    And I'm excited as well for your focus on the harm that 
students experience as a result of the activities of covert 
for-profit schools. And to return to the student harm, again I 
think the students have really spoken for themselves.
    When you look at the borrower defense claims that students 
submit, when they feel that they've been defrauded by 
institutions of higher learner, when they feel that their 
tuition dollars and debt dollars have been taken from them by 
deceptive and abusive practices you see crystal clear that it 
is for-profit and covert for-profit schools that are deceiving 
students.
    You can look at over 300,000 borrower defense claims the 
Department of Education has identified by institution, about 25 
percent are from covert for-profit colleges, about 75 percent 
are from for-profit colleges. Less than 1 percent come from the 
non-profit sector, and there are no public institutions on that 
list except for the affiliation of Purdue University Global.
    So, I think that it's really clear that the student harm is 
coming from the for-profit and covert for-profit sector, and if 
we don't do something about it, those types of harms are going 
to expand to corrupt the influences that are in place even 
further.
    Mr. Jones. Thank you for that. And what are the risks 
covert non-profits pose to taxpayers in particular?
    Ms. Cao. Yes. So, when it comes to stewardship of taxpayer 
money, there is a particular risk when covert for-profit owners 
can draw down revenue with one hand and then pass it on to 
insiders for personal enrichment on the other hand.
    Representative Foxx talked about the salaries of non-profit 
presidents. But you have the president of Harvard making 3 
million dollars a year, and the president of Keiser University, 
one of these covert for-profits, drawing down 34 million 
dollars a year through rents and loans paid by the non-profit 
that he owns. And I think that is a huge problem for taxpayers, 
especially if Congress takes a look now to double down on the 
investment and low-income students for things like Pell grants.
    You have to protect that investment from being handed right 
into the pockets of insiders with little benefit for students.
    Mr. Jones. I so appreciate that illuminating testimony. And 
with the approximate minute and 20 seconds I have left, I 
wanted to delve into the demographics of the impacted students. 
We've touched a little bit on how these for-profit colleges in 
disguise arm students.
    But we know that certain communities really bear the brunt 
of the adverse impacts, and so can you talk a little bit about 
who these students are in terms of the demographics, and you 
know what's the profile of these students who enrolled in these 
covert non-profit colleges?
    Ms. Cao. It is low-income students, Black and Hispanic 
students, working students, working mothers in particular, and 
students who are supporting their families instead of being 
supported by their families.
    In the world of research, we talk about reverse redlining 
or predatory inclusion, and I have a background representing 
low-income borrowers in the sub-prime mortgage crisis. There 
you talk about how banks have excluded minority borrowers, and 
what that leaves space for is predatory institutions to come in 
and offer a sub-prime product, saying that they're providing 
access, when in fact they are extracting wealth from those 
communities that need it most.
    And that's what we had in in higher education as well. We 
have predatory inclusion so that individuals who have been 
pushed out of valuable resources in the higher education field 
are being steered toward predatory actors.
    Mr. Jones. Thank you so much Ms. Cao. Go Stanford and I 
yield back Mr. Chairman.
    Chairman Scott. Thank you. The Gentleman from North 
Carolina Dr. Murphy.
    Mr. Murphy. Thank you, Mr. Chairman. And I want to say 
thank you to all of the Members who have come to the committee. 
I appreciate your perspective. I want to say specifically Mr. 
Galle you made one point that you thought that it was 
education's duty here, not the IRS to police these 
institutions, and I think that's correct.
    I think a lot of the comments here may have been misguided 
a little bit, and they obviously have a different reason for 
saying this. I do want to point out one thing though. I mean 
it's very interesting that we're just attacking the private 
institutions--I mean the profit not for-profit status.
    And if you look at our--I don't know if any of the other 
panelists have actually been on a college campus recently and 
looked at where money is actually spent on college campuses. 
Yes, there surely are aberrations and abuses in salaries, but 
if you look at what the taxpayers are paying for, and you look 
at what's happened with administrative bloat, I would submit 
that that is infinitely more of a problem to the American 
taxpayer, to the American student, than any of these problems 
that are heretofore this committee has brought up.
    This is the main reason that students are in debt these 
days is because administrative bloat has far outweighed 
payments on anything academic-wise, and to say otherwise is 
really just ignoring the issue and just attacking the for-
profit institutions. So that said, Dr. Gillen let me just ask 
one brief question, because I'm going to cede a lot of my time 
to Dr. Foxx who's smarter than I am on these things.
    The premise behind this hearing seems to be that for-profit 
conversions are a big, huge public policy issue. They're 
happening often, and they're not being handled appropriately, 
and that legislation is needed to fix this problem. Is that 
premise correct?
    Is it true, or are we dealing with such a huge, massive 
problem that several of the committee people have said, of the 
more than 5,000 institutions of higher education, how many of 
these are actually impacted by conversions?
    Dr. Gillen I'll let you answer those questions please.
    Mr. Gillen. So very few former formerly for-profits seek to 
undergo conversion, and even fewer of those involve insiders. 
So, this is a relatively small problem. And to the extent it's 
a problem, it's already forbidden, so the IRS doesn't allow an 
improper benefit and the Department of Education doesn't allow 
an improper benefit. So, the real question is does this--do the 
existing procedures used by IRS detect improper benefit?
    And so, if not, then that's an argument to improve those 
procedures. But the idea that all for-profits who undergo 
conversion are bad, I don't think is valid. And it's not even 
really internally consistent right, because we've been hearing 
about oh for-profit's bad, non-profit's good.
    Well, we're converting for-profits into non-profits, but 
they're still not good. So, it's kind of a strange approach.
    Mr. Murphy. Well, I thank you because it's you know without 
a doubt obviously our job as Members of Congress are to hold 
institutions accountable, but this is a chasing, in my opinion 
like we say in medicine, a wild herring. It's not really, it's 
more of a problem in search of a solution, and or rather a 
solution in search of a problem.
    I'm sorry for the mix-up. But I mean if you really look 
back, and I'll get on my rant of administrative bloat, and if 
we're actually caring about what's going on for students, 
that's the whole premise of this, if we're caring about what's 
going on for students, then look and see what colleges, public 
colleges, universities, private colleges and universities, how 
they are spending their money these days.
    And it may not be on massive salaries, but it is on 
administrative bloat, and that's been the death knell of higher 
education these days. With that I'll yield back the balance of 
my time to Dr. Foxx thank you.
    Ms. Foxx. I thank the Gentleman for yielding. And I would 
like to--
    Mr. Gillen. You got muted there Representative Foxx.
    Ms. Foxx. Oh, OK. Well, the Federal student loan 3-year 
default rates by sector and separation cohort, borrowers, and 
repayment in 2009 to Fiscal Year 202017 by the college board it 
shows public 2-year schools have a 14.4 percent default rate.
    The for-profit schools have a 12 percent default rate. And 
so, we see that 2-year colleges have a worse default rate. And 
I would like to ask a quick question of Ms. Emrey-Arras. From 
Dr. Adams, she asked you which conversions were better. And I 
want to know were you expressing a personal opinion, or one 
based on research in your official capacity?
    Ms. Emrey-Arras. I'm not sure that I answered on that 
front. Can you remind me?
    Ms. Foxx. Well, she asked you whether it was better for 
schools to go to for-profits, but I can get you the exact 
question and submit it to you for the record. But it sounded as 
though in your official capacity you are expressing an opinion, 
and I was just clarifying that.
    Ms. Emrey-Arras. I don't recall that, but I'm happy to 
answer any questions that you may have for the record.
    Ms. Foxx. OK thank you.
    Ms. Emrey-Arras. Sure.
    Ms. Foxx. I yield back.
    Chairman Scott. Thank you. The Gentlelady from North 
Carolina Ms. Manning?
    Ms. Manning. Thank you, Mr. Chairman. I'm going to address 
my first question to Ms. Cao, and I don't believe this is 
something that any of my colleagues from North Carolina have 
raised, but it's of great interest to constituents in my State.
    Reporters are raising questions about a non-profit that is 
a covert for-profit that's taking place in my State, and you're 
nodding your head. You probably already know about this. The 
Century Foundation reported on documents obtained from IRS and 
the Department of Education showing that Dr. Arthur Keiser who 
I believe has been discussed today, converted his for-profit 
college into the non-profit Keiser University to use it as a 
cash cow.
    And new reports indicate that Dr. Keiser has funneled 
donations from Keiser University to a traditional financially 
struggling, non-profit, St. Andrews University in North 
Carolina to assert control of that institution, and potentially 
leverage that control to benefit Southeastern College, a for-
profit school which Dr. Keiser owns.
    We are extremely concerned about this. Of course, I'll be 
following up with Andrews University for more information, but 
I am getting calls from very concerned constituents. Can you 
expand on these findings, and do they raise wider concerns both 
for St. Andrews, but also for other conversions?
    Ms. Cao. Thank you. Yes. And so, we have taken a look at 
St. Andrews and the relationship with Keiser University. You 
know you've heard of corporate takeovers within the private 
industry. Here we have a hostile takeover of a non-profit 
school that was experiencing financial strain.
    And coming out of this pandemic, and of economic hardship, 
we're going to have a lot of small, community-serving non-
profits that are experiencing financial strain.
    So, I think watching the pattern of this instance, and 
watching the patterns with these for-profit college conversions 
more broadly, is not responding to a hypothetical question, but 
it is responding to the early signs of a trend that is about to 
become much more dangerous and could be more widespread if 
action isn't taken now to reverse the trend.
    Getting back to the example of St. Andrews, we have a 
pattern that we've seen before where the Keiser family has 
leveraged the wealth that it obtained by extracting resources 
from other for-profit college conversions and used that wealth 
to buy control of the board of St. Andrews.
    With that control the Keiser family is operating St. 
Andrews is a way where it's starting to operate similar to a 
vassal State, which is to say it is not operating in the best 
interest of students, but rather helping to extract resources 
and deliver them to the for-profit school that is currently 
held by the Keiser family, Southeastern.
    And what we've seen is this example where they've opened up 
a new campus, called the new campus an extension of St. 
Andrews, but it's actually listed at the same address as one of 
the campuses for the for-profit school that the Keiser family 
also operates.
    I think it is possible that we'll see an application for a 
conversion in the near future, but even if not this 
relationship of a non-profit being taken over and its good name 
used to support insiders is a perfect example of the concerns 
this hearing addresses.
    Ms. Manning. Thank you so much. We have several non-
profits, small non-profits in my community that as a result of 
this pandemic are really struggling. I would hate to see this 
happen to any of our other good schools, so I'm going to switch 
the next question to Administrator Emrey-Arras. If you could 
help me understand what are the tools of the Department of 
Education, the IRS, and Congress can use to make sure this 
doesn't happen?
    Ms. Emrey-Arras. Thank you for the question. So, the IRS 
can review proposed conversions when new non-profits are 
applying for tax-exempt status. So, they can actually ask for 
the purchase price of a college. They can look at independent 
appraisals, versus getting a promise that a price will be fair 
market value.
    So, they could actually request materials to help make that 
decision, and if they decide that a sale is not going to be a 
fair market value one, they can deny the application for tax-
exempt status. After that, they have the ability to monitor 
tax-exempt organizations at a future date and our 
recommendation will help them do that more.
    On the education side, you know the department has done a 
lot in recent years to step up its oversight for those initial 
applications right? It's looking at more documents. It's 
looking at key bids, it's looking at contracts, it's really 
getting into the nitty-gritty to figure out is there improper 
benefit going on. So that's a good thing.
    But at this point it's not looking at what happens after it 
grants its approval, so those schools are in provisional status 
for one to 3 years, they're supposed to be closely monitored. 
Education already has their financial statements. It's using 
them for other stuff, but it's not actually looking at them to 
see if any improper benefit is happening at that point, and we 
think it should.
    Because you can find information in the statements about 
ongoing leases and other kinds of vendor arrangements that 
could raise questions about improper payment. So, we made a 
recommendation that the department use the information it 
already has to do a better job of monitoring, and the 
department agreed with us.
    Ms. Manning. Thank you and I yield back.
    Chairman Scott. Thank you. Gentleman from North Carolina, 
Mr. Cawthorn.
    Mr. Cawthorn. Thank you, Mr. Chairman. I sincerely 
appreciate all of the witnesses to have come on to be able to 
testify before us. I am disappointed that we are using our time 
with all the brilliant minds on this committee to be working on 
examining colleges converting from for-profit to non-profit 
status which impacts roughly 0.1 percent of for-profit 
colleges, and just in layman's terms that is 3 colleges a 
single year.
    I feel like the brilliant minds that are at use here and on 
this committee as our witnesses could be used for something 
more tangible, but I will take some time to ask you a question 
Dr. Gillen. The Higher Education Act makes all institutions, 
regardless of their tax status, ineligible to operate with 
Title IV student aid programs if too many of its students 
default on their loans within 3 years of leaving the college.
    Could you comment on whether this cohort default rate 
metric is effective, or also how can we as Congress, how can we 
improve upon it?
    Mr. Gillen. Yes. So, the cohort default rate is I think a 
perfectly fine accountability metric. The problem is that it's 
used as the accountability. And so, this is really the only way 
that schools can lose Federal financial aid for any sort of 
outcome that they have.
    And so, the cohort default rate could certainly be 
improved, so right now it looks at just the first 3 years after 
the loans, and so I think we could benefit from extending that. 
So, whether we want to look at you know 5, 10 or all of the 
above, maybe we have 3 different cohort default rates that we 
examine.
    I think that would be real useful. Another potential issue, 
particular for the 3-year rate is that a lot of students can be 
in deferment or forbearance which won't show up as defaults on 
our loans. But these are so indicative of the students who are 
struggling with their student loans.
    So, I think to really addressing kind of those flaws 
within--not flaws, but improvements in the cohort default rate. 
In terms of kind of the longevity of the cohort default rate, 
as more and more students are entering income driven repayment 
programs, that's actually going to turn the cohort default rate 
into an obsolete metric, because now students who can't afford 
their loans are defaulting on them.
    But once they're in an income driven or payment program, 
they're no longer defaulting on their loans, their student loan 
payment has just been set to zero. And so pretty soon as more 
and more students are entering the income driven or payment 
programs, the cohort default rate is really going to be an 
obsolete metric.
    So, one thing that we could do is replace it or supplement 
it with a repayment rate, and so that would be probably the 
wisest course of action I think where we look at what 
percentage of a university programs students are actually 
paying down the principal on their loans.
    Mr. Cawthorn. Well Dr. Gillen thank you very much for your 
time, and to all the witnesses thank you and with that Chairman 
Scott, Mr. Chairman I would yield the rest of my time to 
Ranking Member Foxx if she would so like to use it.
    Ms. Foxx. I thank the Gentleman for yielding. Since we're 
on the gainful employment and cohort default rate, I want to 
point out that there's an article in the Chronicle of Higher 
Education that pointed out that there were failing programs in 
the theater arts program at Harvard University, a music 
performance program at Johns Hopkins, and a music technology 
program at the University of Southern California.
    I think it's important that we point that out. Ms. Emrey-
Arras. First to clarify, just because an insider was involved 
in the transaction does not mean that they are illegal when a 
for-profit converts to a not for profit, isn't that correct?
    Ms. Emrey-Arras. That is correct.
    Ms. Foxx. OK. So, when the GAO noted that the Department 
had strengthened its review of the process, that came about 
during the Trump administration is that correct?
    Ms. Emrey-Arras. The department took several steps over 
time beginning in September 2016, though in 2018 the department 
did create a centralized team where they brought in experts 
with contracting knowledge, and finance knowledge to really 
look at these together, and that was in 2018.
    Mrs. Foxx. Right. So, they strengthened it during the Trump 
administration beginning in September 2016 as you said, right? 
Just before the election.
    Ms. Emrey-Arras. Right.
    Mrs. Foxx. So, I think it's important that we ascertain 
that when that strengthening came in was under a republican 
administration. Again, I think Republicans--the point we want 
to make over and over again, is that Republicans want 
accountability from all institutions, all institutions for 
students.
    Thank you Mr. Chairman I yield back.
    Chairman Scott. Thank you. The Gentlelady from Georgia, Ms. 
McBath.
    Ms. McBath. Thank you, Mr. Chairman, I'm really excited to 
be here today and thank you to all of our witnesses for their 
great testimony. And I would just say in my own district we saw 
first-hand what happens when an institution of higher education 
attempts to evade accountability.
    In 2019 Argosy University in my district closed its doors 
after months of misleading students on its accreditation status 
in an attempt to convert to non-profit status through its sale 
to Dream Center Holdings. In the end Argosy University ripped 
off thousands of students at campuses across the country, 
including one in my district, leaving them with untransferable 
credits, huge amounts of student debt, and degrees that just 
really aren't worth anything.
    And it's our duty as legislators to protect the success of 
our students as they pursue higher education and hold all 
institutions accountable, and that's why I am very proud to be 
introducing the For-Profit College Conversion Accountability 
Act, or we'll call it the FCCAA with my colleague 
representatives, Sara Jacobs and Kathy Manning.
    FCCAA would establish explicit criteria requiring the 
conversion to be made public, with proper advance notice and 
prohibit the institution from marketing itself as a nonprofit 
until the conversion has actually been given the final approval 
by the department.
    Additionally, the bill would establish an office within the 
Department of Education to determine the eligibility of for-
profit IHE's and monitor the conversion process. You know our 
students deserve better, and it's our duty as legislators to 
ensure that institutions are adhering to high standards.
    Ms. Cao my questions are you for today. In a recent piece 
you wrote that and I'm quoting, ``To increase rigor of the 
Department of Education's review, reviews of college 
conversions needs to continue in the Biden administration and 
should be applied to conversions that were approved earlier.''
    What opportunities are there for the department and this 
committee to revisit conversions that were previously approved?
    Ms. Cao. Thank you for the question and for recognizing the 
painful experience of Argosy students. And so, I want to talk 
about three opportunities that the Biden Administration has to 
revisit some of the errors that were made in the past, and that 
we're played out in the GAO report.
    The first is that in the case of the Dream Center the 
Department of Education made an effort to retroactively grant 
non-profit status to Argosy and the other Dream Center schools. 
And I would say the Department of Education can retroactively 
grant non-profit status in order to help institutions cheat 
students, then they sure should be able to retroactively remove 
non-profit status to stop that cheating.
    And I think that that is an important authority to explore. 
Second, this has come up previously, but any time an 
institution of higher education seeks a conversion in a non-
profit status, or a change in control, they go through a review 
that leaves them in a status known as provisional 
certification.
    When you change status, you change control. Your 
eligibility to receive Title IV ends at that moment at the 
change of control, and you have to prove that you deserve Title 
IV funding all over again.
    That gives the Department of Education a unique opportunity 
to continue to monitor and oversee whether these conversions 
are truly serving students.
    And finally, I want to just go back. We've been talking 
about conversions between non-profit and for-profit status, but 
really there are a series of requirements that Congress has 
imposed that all institutions must meet in order to be eligible 
for Title IV revenues. And some of the behaviors in these 
conversions, things like paying recruiters or recruitment 
entities a bounty for each student that they enroll, would 
violate the basic requirements for Title IV eligibility for all 
institutions, and the department has to address that as well.
    Ms. McBath. Well, thank you so much. And you previously 
wrote that our institution chain of for-profit schools had been 
sold to Dream Center Education Holding, a non-profit 
organization. It cooked the books and diverted stipends 
intended to cover student's groceries and living expenses.
    And I'm aware that the Department of Education sat on the 
Art Institute's application, and that of Argosy International, 
Argosy University for non-profit status until it was too late. 
Do you have views about whether the Department's slow-moving 
response constituted a failure in oversight, and what do you 
think has been done differently, or could be done differently?
    Ms. Cao. The department failed students by not acting to 
protect them. And they failed taxpayers by allowing millions to 
go out the door to an unscrupulous and irresponsible 
institution that did not meet basic statutory requirements to 
receive Title IV dollars.
    Ms. McBath. OK. And thank you so much. I yield back the 
balance of my time.
    Chairman Scott. Thank you. The Gentlelady from Illinois, 
Ms. Steel.
    Ms. Steel. Thank you, Chairman. I came from California, not 
Illinois.
    Chairman Scott. I'm sorry.
    Ms. Steel. Thank you, thank you Chairman and thank you 
Ranking Member--
    Chairman Scott. I'm sorry the Gentlelady from California 
Ms. Steel, I'm sorry.
    Ms. Steel. And thank you for all the witnesses today. I 
really appreciate it. I think we can all agree that we must 
protect the use of taxpayer funds. We also agree the cost of 
college has grown out of control. We need to make sure the 
students who attend any college will graduate, and graduate 
with the skills they need to get a job.
    I believe we must have accountability, but also encourage 
flexibility to help all Americans find the higher education 
option that fits them the best. Colleges and universities have 
many reasons to choose whether they form as for-profit or non-
profit organizations.
    One of the reasons for conversion is the heavy, and 
sometimes unfair, burden places on for-profit institutions. 
Having said that, Dr. Gillen in your opinion if you run a for-
profit college, wouldn't you want to change from a for-profit 
to non-profit to level the playing field since there are many 
burdens on for-profit colleges?
    Mr. Gillen. Yes. So, I think that's a completely valid 
point. There are a number of reasons that universities would 
want to convert from for-profit to non-profit. And so, some of 
them that were highlighted in the GAO report were there was a 
State financial aid program that provided grants to students. 
The students at for-profit colleges were not eligible for this 
grant.
    And so, by converting to a non-profit that college's 
students would now be eligible for this financial aid program. 
And so, there's all sorts of issues like that where for-profits 
might benefit from converting into a non-profit.
    Ms. Steel. And testing's done too.
    Mr. Gillen. Yes, yes.
    Ms. Steel. For those schools. So, students across the board 
seem to be left with excessive student debt these days. Can you 
highlight some of the ways a successful for-profit college can 
help students who want and demand jobs?
    Mr. Gillen. Yes absolutely. So excessive student debt is a 
huge issue, and it's gotten a lot of national attention, 
appropriately so. The contribution I would like to see is the 
conversation less focused on the tax status of the degree 
granting institution, and more focused on the students 
themselves.
    And so last year we actually ran an analysis that basically 
subjected all programs to gainful employment. So, under the 
initial gainful employment regulations no degree program at a 
public or a private non-profit was subject to gainful 
employment, so only certificate programs were.
    And so, which is nonsensical right, like the MBA program at 
Wharton was not considered a vocational program, but a nursing 
program at the University of Phoenix was. It was just a bizarre 
way to define which programs are vocational and which aren't.
    But so, we went back, and we analyzed, OK what if you 
applied gainful employment to everybody? And so, we used the 
new college scorecard data to do that.
    What we found were that of the total students who are 
attending programs that would have failed gainful employment, 
28 percent of them attended for-profit universities, which 
means that 72 percent of them were attending private non-profit 
or public universities.
    And so, the notion that excessive student loan debt is a 
problem that's restricted to the for-profit sector, I think is 
completely false because the vast majority of students who had 
excessive student loan debt, as determined by a test like 
gainful employment, are going to be at public and private non-
profit universities, if for no other reason than for the fact 
that so many more students are at those institutions.
    Ms. Steel. Thank you very much Dr. Gillen. I yield my 
remaining time to Ranking Member Dr. Foxx.
    Ms. Foxx. I thank you Ms. Steel. Mr. Gillen we've talked a 
great deal again about what we want to see and the bias that 
exists against for-profits. As we've talked about this you've 
talked about program accountability, and I'd like you to 
mention that a little bit more because I am very concerned 
about the possibility of our going to individual students, and 
if you wouldn't mind mention how much information we can get 
from program accountability.
    Mr. Gillen. Yes absolutely. So, the most exciting kind of 
accountability potential that I've seen in my entire career has 
been the college scorecard data on program level earnings.
    So, they define the program as a university, a degree 
level, you know, associates, bachelor's, master's, and a field 
of studies. So, an academic field. And so, this is completely 
revolutionary to what we can do with accountability in higher 
education.
    Because up until now we've only really applied 
accountability at the entire university. And so, we've looked 
at things like the cohort default rate, which are calculated at 
the entire university level. With this program level 
accountability, we can really analyze specific programs, and 
you mentioned earlier in the comment there was a program at 
Harvard, it was a certificate program, so it was actually 
subject to the--that actually failed.
    Nobody knew. Nobody knew that this program was leaving its 
students with excessive student loan debt because nobody had 
bothered to look at the program level outcomes. And so, there's 
going to be a million examples like that. Where now that we 
have this program data, we can do a much better job of saying 
OK, you know the institution is doing great, but these four 
programs at this institution aren't.
    Or you know, this university is really struggling, but 
these handful of programs are having really good outcomes for 
the students. And so, this program level of protecting is--
    Ms. Foxx. I think Mr. Gillen my time is up. I need to stop 
you thank you.
    Chairman Scott. Thank you. Next is the Gentlelady from 
Connecticut Ms. Hayes.
    Ms. Hayes. Thank you, Mr. Chair, for holding this hearing 
today. When predatory for-profit schools don't follow the 
rules, the victims are often our most vulnerable students, 
first generation students, students of color, low-income 
students, working parents.
    When for-profits shutter their doors, students are left 
with tremendous debt and no credentials. Last Congress I 
introduced a bill that would restore Pell grant eligibility to 
students deceived by Corinthian College and ITT Technical 
Institute. I'm so proud that that legislation was signed into 
law in December.
    But we still have a long way to go. Ms. Cao my questions 
are for you, and I would ask you just I want to follow the 
rules to be mindful of the time on the clock. What role should 
transparency and consumer awareness play in addressing the risk 
posed by for-profit college conversions, and should more 
information be given to students about those conversions?
    Ms. Cao. Thanks. I would say transparency is necessary but 
not sufficient. And one aspect of transparency in the context 
of these conversions is making sure that institutions are not 
pulling the wool over students' eyes by claiming non-profit 
status when they're actually operating as for-profit 
institutions. I would also say that while choice is wonderful, 
and I support students having options of the type of college 
they go to, nobody wants students to be steered toward a choice 
that is going to harm them more than it will help them.
    And you know, you can look at the grocery store. You can 
look at the auto dealership, all of these contexts where we 
have consumer choice, there is a regulator making sure that you 
don't buy spoiled milk. There is a regulatory making sure that 
you don't buy a car that's going to explode when you drive it 
off the lot.
    Ms. Hayes. Thank you. That leads me to my next question for 
Director Emrey-Arras. Are colleges allowed to advertise as non-
profit colleges while they're awaiting the Department of 
Education to approve their conversion applications?
    And what did you find when you looked at the advertisements 
of colleges in pending status?
    Ms. Emrey-Arras. That's a great question. When we started 
our study education didn't have any formal rules on this issue 
and during the course of our work, they did decide to formally 
prohibit this practice, and they have developed instructions to 
schools letting them know that this is not allowable, and they 
have begun to distribute those instructions.
    And this is particularly important because we found that 
schools were doing that kind of advertising, so they were 
waiting for approval, did not have it yet, but yet were putting 
out in advertisements that they were non-profit institutions 
suggesting that they had been approved by the Department of 
Education to be non-profit colleges.
    That was not true. We saw that for all nine schools that 
were pending, and we also looked retroactively at some of the 
schools that had been denied. So, the two schools that were 
denied, we found had also previously advertised as non-profits. 
So, we think it's great that the department has formally said 
that this is not acceptable, and we think it's really important 
that they're getting the word out.
    Ms. Hayes. You've actually answered my next three 
questions. I'll wrap it up by saying you know what steps the 
U.S. Department of Education is taking to stop these deceptive 
advertisements.
    Ms. Emrey-Arras. Yes. So, they're actually putting it in 
their letters to schools that are awaiting decisions. They 
haven't notified each and every school yet, but they are in the 
process of doing so, so they're going to organizing their 
communications to make sure that they consistently message 
along those lines, and we think that's great.
    Because again, at the beginning of this study it was really 
quiet on this front, and a lot was going on that was against 
education's wishes. Education officials have expressed concerns 
about this, but there is nothing formally prohibiting it.
    Now the department has formally prohibited it and is 
telling schools that they're not allowed to do that.
    Ms. Hayes. Thank you. I really appreciate that and for your 
expertise on this issue at today's hearing because as 
legislators we are tasked with making sure that we are 
protecting the rights of all of our constituents no matter how 
big or small the problem is, and it doesn't matter--one student 
affected is one too many, so I'm very happy that you've taken 
the time to come before this committee to share your concerns 
so that we can make sure that we are protecting every student 
that seeks a higher education in this country,.
    With that Mr. Chair I yield back with 10 seconds to spare.
    Chairman Scott. Well, thank you very much. And next the 
Gentleman from New York Mr. Bowman.
    Mr. Bowman. Thank you, Mr. Chairman, and thank you to our 
witnesses for being here. My first question is to Director 
Emrey-Arras. You note in your testimony that the IRS did not 
systematically collect the information that can help identify 
insiders involved in conversion transactions.
    When the IRS is evaluating an application for tax-exempt 
status involving insider transactions, what is it supposed to 
be looking for?
    Ms. Emrey-Arras. It's supposed to be making sure that those 
transactions are a fair market value, so that no one is 
pocketing anything extra above what the price should be. So 
that's what they need to be doing, and they don't always have 
the information that they need to make that decision.
    Mr. Bowman. How is fair market value determined?
    Ms. Emrey-Arras. It's determined by looking at what the 
price would be for people who have how would I say this, if you 
have unrelated people who are looking at a good, it's their 
interest in what they think a fair price should be. It's a 
price that would be comparable with other prices on the market.
    It's not a price that's inflated to benefit an insider.
    Mr. Bowman. Got it. And what would be the grounds for the 
IRS denying an application?
    Ms. Emrey-Arras. If they did find improper benefits. So, 
for example if they found that the price of the college was 
inflated beyond market value to benefit an insider, they could 
deny the application for tax exempt status.
    Similarly, if they're finding other kinds of arrangements 
that look like there's improper benefit, so if you have service 
contracts, or leases, or what have you where it looks like 
individuals are improperly benefiting, and they're being paid 
above market rates to the detriment of the tax-exempt 
institution, that could be cause for denying the application.
    Mr. Bowman. I thought so. Thank you so much. My next 
question is to Ms. Cao. You've written about the Department of 
Education's process for approving for-profit conversions. Why 
can't the Department of Education just rely on the IRS 
determination?
    Ms. Cao. Thanks for the question. So, we've heard for-
profit schools complain that they're being unfairly regulated 
based on tax status, and I just want to clear up the record. 
The Department of Education does not regulate entities based on 
tax status. They regulate entities based on the risks that are 
posed to students and taxpayers based on whether an institution 
is a revenue extracting institution, or a revenue reinvesting 
institution.
    So, the department looks at tax status because if the IRS 
has already determined that an institution is extracting 
revenue for insiders, that means the Department of Education 
doesn't need to retread that ground. That institution has 
disqualified itself.
    However, the Department of Education's review goes one step 
beyond that. I had mentioned that it has a three-part test, an 
IRS review is just one prong of that three-part test. The 
Department of Education really owes a greater duty to students 
to protect them from institutions that are going to extract the 
revenue instead of investing it in their education.
    And you know I think one of the reasons for that is if the 
IRS messes up it can go back and collect back taxes with 
interest. But if the Department of Education messes up, 
students don't have that chance to take back those years of 
their lives, or in most cases take back the Pell grants, the 
loan debt, and the military benefits they've used in an 
institution that lied to them.
    Mr. Bowman. Thank you. And what resources would the 
Department of Education need to reliably make these 
determinations moving forward?
    Ms. Cao. I think that the resources are a part of the 
problem, and the GAO report identified some of the ways in 
which the Department of Education is starting to organize its 
resources to better address the issue of these conversions.
    But I think the department as well needs to use all the 
tools in its toolbox, including things like personal liability 
when there are insiders that are extracting profit to the point 
where they're ripping off students and driving institutions 
into bankruptcy.
    I think the department also needs to focus a little bit on 
the fiduciary duty that institutions owe to the Department of 
Education, and to taxpayers. When they sign that agreement to 
take Title IV dollars from taxpayers, they're agreeing to be 
fiduciaries to the Department of Education, and that aligns 
well when non-profit board of directors are already fiduciaries 
to educational purposes.
    But for-profit directors are fiduciaries to their 
investors, and there's a misalignment there.
    Mr. Bowman. Thank you so much and I yield back.
    Chairman Scott. Thank you. The Gentlemen from Wisconsin Mr. 
Pocan.
    Mr. Pocan. Thank you, Mr. Chairman. I appreciate it. Thanks 
to the witnesses. You know I think I've been on this committee 
when I first got to Congress and I'm glad to be back on the 
committee, but you know there's plenty of bad behavior by many 
of the for-profit entities. I think that's pretty undeniable, 
but I also think we have to recognize that some of these 
entities, especially the ones converting to non-profits, some 
are doing the right thing, and some are very much not doing the 
right thing.
    Grand Canyon, Purdue, Kaplan, there's a couple great 
examples of companies that I think aren't primarily educational 
institutions, they're profit-making entities period. I think 
it's hard to argue. Other than that, and I guess I'm personally 
less concerned about leadership in a conversion because I think 
many times some of the folks in leadership have the expertise.
    I would expect that they would be there for continuity, 
especially in a family held business. You're going to expect to 
see that. But what I am concerned about is where the abuses 
occur, where we see this split of having a non-profit and a 
profit entity especially, seems to be really problematic.
    Concerned on also performance. And let me ask a few 
questions if I could of Ms. Emrey-Arras, since you did the 
report to the GAO. Did you look at all the performance as you 
looked at this? So, what the completion rates are for students?
    Ms. Emrey-Arras. We did not.
    Mr. Pocan. Are you intending to do an additional study on 
that?
    Ms. Emrey-Arras. We're open to new requests from the 
committee if the committee is interested in that.
    Mr. Pocan. Yes, I think it would be interesting right, 
because that's a real key metric for us to know how things are 
performing. How about this question that I've learned of the 
profit, so an entity has a profit in a non-profit entity 
operating? I don't quite fully understand how that's not also 
known as a scam, and then there's other entities again who are 
truly non-profit, and now they're all getting painted with one 
brush.
    And I worry about we're hurting those that are trying their 
very best to do the right thing in the conversion, versus the 
ones that are clearly trying to get around the system. Did you 
look specifically at some of the abuses between the profit and 
non-profit dual entities moving forward?
    Ms. Emrey-Arras. We looked at some of the financial 
statements and found issues that raised red flags for us. So, 
if you're looking at situations where you know a president of a 
non-profit college is also engaging in lots of service 
contracts with the for-profit college which the president also 
owns, that can raise issues.
    Leasing arrangements, other situations like that can raise 
red flags about whether or not those are really you know good 
arrangements in the best interest of the non-profit college, or 
whether they're there to improperly benefit insiders.
    Mr. Pocan. So does anyone look at that for example, the 
fair market value. If someone is leasing, I fully understand if 
a family had it and they had property and now they're leasing 
it back. There's fair market value or there's not. Does anyone 
actually look at that through the process, either education or 
IRS?
    Ms. Emrey-Arras. Well, the IRS is supposed to scrutinize 
transactions involving insiders for just that reason, to 
determine if there is improper benefit. And if there is, that 
can be grounds for denying an application for tax exempt 
status. Similarly, the Department of Education is looking at 
that issue now.
    Previously they didn't, as Dr. Fox had raised the issue 
about you know previous years, we found that the Department of 
Education has not always done this. We looked at some cases 
prior to 2016 and found red flags, but officials there weren't 
looking for them.
    So yes, it's something that they are looking at now, and we 
think that that's a good thing.
    Mr. Pocan. And the IRS doesn't do that aggressively, would 
that be fair to say?
    Ms. Emrey-Arras. That was our interpretation when they 
didn't have the sales price and approved the transactions, 
nonetheless.
    Mr. Pocan. So, it sounds like from the conversation, and I 
hope I'm paraphrasing this correctly, that it sounds like more 
power should really go to the Department of Education who 
actually understands educational outcomes rather than the IRS 
because this is not really about a financial transaction per se 
in the long-run, it's about educating students.
    Were there specific recommendations that you've made on how 
we can beef up what Department of Education does versus IRS?
    Ms. Emrey-Arras. So, we made recommendations to both 
Federal agencies. Our focus was really on a Federal oversight, 
so we made recommendations to the IRS on what the IRS could do 
better to shore up that oversight, and then we also made a 
recommendation to the Department of Education on what it could 
do better.
    And we thought that the area of growth for the Department 
of Education was really in that monitoring after school is 
approved to make sure that they're really operating as a non-
profit and that there's no improper benefit going on.
    Mr. Pocan. Great. I yield back Mr. Chairman thank you.
    Chairman Scott. Thank you. Let's see, the Gentleman from 
Kentucky Mr. Yarmouth.
    Mr. Yarmouth. Thank you, Mr. Chairman. I also want to thank 
all the witnesses. We've been going on 4 hours now, and I 
appreciate all of your responses. I know at the beginning the 
Ranking Member questioned whether we should be having this 
hearing, and I will say that it seems to me this has been a 
very useful and thoughtful discussion with a lot of good 
questions from all sides.
    And I've learned a lot myself, and had some questions 
raised as well. But it seems to me for instance, I think it was 
the GAO report that had said in 2018 and in 2019 the for-profit 
conversions received almost 2 billion dollars-worth of Federal 
aid. So, there's a significant amount of money at stake here, 
taxpayer money, so I think this is a very important discussion.
    Thinking about I want to go back to what Mr. Grothman 
discussed, and clearly, I think there are good reasons for a 
for-profit to merge to a non-profit. I don't think there's any 
debate about that. But there are also some pretty nefarious 
ones, so it seems to me that in certain situations yes, we 
might have a principle who's built a for-profit institution, 
and then his kids or friends don't want to carry it on, so he 
or she would want to convert it for a perfect legitimate 
reason.
    But it also seems there could be situations where he's just 
trying to cash out, and essentially lay off the risk, get rid 
of the risk and put it all in non-profit and cash out when you 
can. And whether or not they're improper benefits, which in 
these situations seem more like self-dealing, at least some of 
the examples we have.
    Improper benefits seems like a euphemism for self-dealing 
here. But I want to turn to Professor Galle. In your testimony 
you talked about how private foundations actually prohibit many 
of these insider transactions because the assumption is that 
any insider transaction is going to be inherently unfair to the 
non-profit and that it would be very difficult to police.
    It seems to me there has been some confusion, at least in 
my mind, during some of the testimony as to what is prohibited 
now, what is not prohibited now. So, my question to you 
Professor Galle is all right, are those restrictions on private 
foundations, would some of those be useful when we're talking 
about other non-profits, especially non-profit educational 
institutions?
    Mr. Galle. Thank you, Congressman. I do think they would be 
useful, or something like them. So private foundations are 
charities that get their support from just a few people, and 
they're not schools typically. And so, the assumption is there 
aren't a lot of eyes on those transactions.
    And so, it's difficult to be sure that they're fair to the 
charity. And the situations that we've heard about, and we read 
about in the GAO report, are situations where it's hard to 
believe that these transactions could possibly be fair to the 
charity or to the students who believed that they're getting an 
education at a real non-profit school.
    And so, I think that both Ed and the IRS should approach a 
deal between a charity that was founded by the same person 
who's lending it money with some real suspicion. And as I 
discussed before, this is an excellent way for the seller to 
make the school a prisoner of their debts, or as you said, to 
cash out and eliminate their risk.
    So, I think being skeptical at least of these transactions 
is appropriate here.
    Mr. Yarmouth. Well, I have no other questions. I want to 
thank the witnesses again, and again Mr. Chairman thank you for 
holding the hearing. I've learned a lot and I think it's been 
very useful. I yield back.
    Chairman Scott. Thank you. I don't see anyone else seeking 
recognition, so I'll recognize myself for 5 minutes. Professor 
Galle in your research you said the Grand Canyon University 
pays 95 percent of its revenues to its former owner through 
loan payments and servicing contracts, and therefore should not 
have been granted IRS tax exempt status.
    Is there reason for there to be a different standard, or is 
there a different standard between the IRS non-profit status, 
and Department of Education non-profit status?
    Mr. Galle. Thank you, Mr. Chairman. That 95 percent finding 
was from GAO, and I relied on their findings. So, the IRS 
applies a different standard because their mission is not to 
protect students. The IRS was very reluctant to say that an 
organization wasn't charitable and didn't get tax exemption.
    Because if they said that the charity would close its 
doors. And Congress responded to that by creating a new regime 
in the late 90's called the Intermediate Sanctions Regime. And 
that regime tells the IRS don't try to revoke organization's 
tax-exempt status. Don't decide whether they're really 
charitable or not.
    Your main job is just to assign penalty taxes on people who 
extract extra benefits. And so, the IRS isn't looking at these 
transactions to determine whether the organization is really 
non-profit and really has an incentive to maximize students 
over revenues. And so those fundamentally are different 
standards.
    There are doctrines that IRS could conceivably employ if it 
were to look very closely at these transactions, and I think 
you know, a transaction like Grand Canyon is so blatant that it 
should fail even in the scrutiny of the IRS.
    Chairman Scott. Doesn't the Department of Education have a 
different standard?
    Mr. Galle. It should. And the Department of Education 90/10 
and gainful employment are there to make sure that 
organizations with incentives to line their own pockets are 
subject to higher standards and more accountability. And that's 
not something that IRS does.
    So, IRS isn't looking out for those interests. Ed needs to 
establish its own standards, identify which schools are the 
ones that should be subject to closer scrutiny and make sure 
those schools get the scrutiny.
    Chairman Scott. Thank you. Dr. Emrey-Arras we've talked 
about inflated purchase prices. What are some of the other ways 
you can benefit from an ongoing transaction--ongoing insiders 
can benefit from the actual transaction, and how can they 
benefit in getting money after the transaction?
    Ms. Emrey-Arras. Right. So, there are two opportunities for 
abuse. So, there's an initial opportunity with the purchase 
price of the college where insiders could intervene and rig it 
so that they get more money than the fair value of the college, 
and then they pocket the difference.
    The other opportunity is subsequent to the purchase of the 
college. They could engage in extensive service contracts with 
the college, or lease agreements. You might have the former 
for-profit owners like leasing you know land or facilities to 
the now non-profit college.
    And the terms of those leases or contracts may not be 
favorable to the non-profit college, and they may not be fair 
market value. They may also improperly benefit the insiders.
    Chairman Scott. Thank you. Ms. Cao we've heard about these 
high salaries. What's the difference between a high salary for 
a college president and insiders taking money out of the 
operation?
    Ms. Cao. Sure. So, one difference is whether the college 
has gone through an independent review and hiring process, or 
whether an insider is extracting revenue for his personal 
benefit from non-profit that he essentially controls. And I 
think the later situation is what we've seen at some of these 
for-profit conversions.
    You have shareholders who are benefiting from a conversion 
to non-profit status, and any time that shareholders are 
promised a pay day, from non-profit status, I think that tells 
you all you need to know.
    Chairman Scott. Well in the case of those high salaries, if 
the president essentially because he's an insider is setting 
his own salary rather than an independent board, is that a 
different situation?
    Ms. Cao. Yes. The president is not just setting his own 
salary. He's guiding the administration of the school to 
maximize the revenue that he's taking out and paying himself 
with or keeping his equity. And that means steering the school 
toward higher tuition prices and lower investments in a 
student's education.
    Chairman Scott. Well, thank you. And I want to thank all of 
the witnesses for being with us today. I want to remind my 
colleagues that pursuant to committee practice, materials for 
submission for the hearing record must be submitted to the 
Committee Clerk within 14 days following the last day of the 
hearing.
    So that's by close of business May 4, preferable in 
Microsoft Word format. The material submitted must address the 
subject matter of the hearing. Only a Member of Congress, or 
excuse me, a Member of the committee, or the invited witnesses 
may submit materials for inclusion in the record.
    Documents are limited to 50 pages each. Documents longer 
than 50 pages can be incorporated into the record by way of an 
internet link which you can provide to the Committee Clerk 
within the required timeframe, but please recognize that in the 
future that link may no longer work.
    Pursuant to House rules and regulations, items for the 
record should be submitted to the clerk electronically by 
emailing submissions to [email protected]. 
Member's offices are encouraged to submit materials to the 
inbox before the hearing or during the hearing at the time the 
member makes such a request.
    Again, I want to thank the witnesses for your 
participation. Members of the committee may have some 
additional questions for you, and we would ask you to respond 
to those in writing. The hearing record will be held open for 
14 days in order to receive the responses.
    I remind my colleagues that pursuant to committee practice, 
witness questions for the hearing must be submitted to the 
Majority Committee Staff within 7 days and questions must be 
related to the subject matter of the hearing.
    I now recognize the distinguished Ranking Member for any 
closing statement that she might want to make, Dr. Foxx.
    Ms. Foxx. Thank you, Mr. Chairman. Mr. Chairman I want to 
thank the witnesses for their testimony. We covered a lot of 
ground today and there's several things worth noting. 
Republicans oppose all fraud and abuse no matter the tax status 
of the perpetrator.
    Republicans care about all students no matter what 
institution they attend. Republicans support reforming the HEA 
to make sure all students attending institutions of post-
secondary education give them the chance to succeed in the 
workforce. In contrast, democrats want to talk about a 
college's legal and financial structure, not about students.
    Democrats are obsessed with a perfectly legal financial 
arrangement that 0.1 percent of for-profit colleges pursued per 
year in the past 10 years. Democrats want to shut down small 
business in the middle of the pandemic to serve students.
    Democrats are uncomfortable with the notion that not all 
public and non-profit colleges act in their student's or their 
communities' best interest, and here Mr. Chairman I'd like to 
insert a Time article related to this issue.
    There are real issues American students and families are 
grappling with. Outstanding student loan debt has never been 
higher because college tuition rates are skyrocketing. Students 
are struggling to find a good job after graduation because 
their college is not preparing them for career success.
    On-time college completion rates are abysmal. Colleges are 
trampling on students first amendment rights. China is stealing 
intellectual property and infiltrating college campuses. 
Families don't care about who runs a college, they do care 
about their ability to succeed.
    We could have had a hearing today on what actually matters 
to our constituents, and I'm disappointed on their behalf that 
my democrat colleagues don't seem to care about them. I call 
upon my colleagues to pursue a bi-partisan path forward to 
reforming the Higher Education Act. I yield back.
    Chairman Scott. Thank you. I want to thank our witnesses 
again for being with us today and both your testimony and our 
discussion have shed light on the urgent need to prevent for-
profit institutions for converting to non-profit institutions 
at the expense of students and taxpayers.
    As it's been pointed out, all are not guilty of fraud, but 
many are. And we've heard that the impact not just on the 
students but on the Federal Government could be intense. The 
estimate of 600 million dollars to a billion dollars in just 
one institution should not be ignored.
    We've heard that these conversions deceive the students, 
decrease funding for student learning. We've also heard that 
virtually all the fraud in the higher education sector in the 
borrowed defense claims occurs in the for-profits and the 
covert for-profits.
    The simple fact is that many of the most concerning 
conversions occur when there are insiders at both the non-
profit and the for-profit institution. Common sense tells us 
these institutions are unable to engage in transactions with 
one another, instead the for-profit institution ends up 
profiting for the non-profit institution at the expense of 
students with fewer funds invested in their education.
    These schools cannot compete on equal terms, the true non-
profits, and public institutions, and as a result they often 
turn to fraud like we saw in the Dream Center case, that costs 
the Federal Government hundreds of millions of dollars. I also 
want to respond to some of my colleagues decided researched 
which relies on data from the college scoreboard which shows 
the publicly available consumer information is sufficient to 
protect students and taxpayers.
    However, we know this data is not sufficient to determine a 
debt to earnings ratio comparable to the one used in the 
gainful employment rule. More importantly, we should not treat 
better consumer information as a replacement for strong 
accountability measures.
    It actually should go hand in hand. And finally, I want to 
thank my republican colleagues for raising the need to improve 
the cohort default rate, the CDR, the College Affordability 
Act, which committee approved last Congress, would have closed 
the CDR forbearance loophole, measured CDR's using longer 
timeframes, and created a loan repayment rate to supplement the 
CDR.
    Based on Mr. Gillen's testimony today this seems to be an 
area of bipartisan agreement, and I look forward to working 
with my republican colleagues to advance these important 
reforms. Moving forward I hope my colleagues on both sides of 
the aisle will come together to stand up for our Nation's 
children and our students and enact meaningful solutions that 
protect students and taxpayers against deceptive for-profit 
schools.
    If there is no further business to come before the 
committee without objection the committee stands adjourned. 
Thank you.

    [Additional submissions by Ranking Member Foxx follow:]

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    [Additional submission by Ms. Adams follow:]

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    [Questions submitted for the record and the responses by 
Ms. Cao follow:]

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    [Questions submitted for the record and the responses by 
Mr. Gillen follow:]

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    [Questions submitted for the record and the responses by 
Ms. Emrey-Arras follow:]

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    [Whereupon, at 1:56 p.m., the committee was adjourned.]

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