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


                   PROTECTING STUDENTS AND TAXPAYERS:
                      IMPROVING THE CLOSED SCHOOL
                           DISCHARGE PROCESS

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                          HIGHER EDUCATION AND
                          WORKFORCE INVESTMENT

                                OF THE

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

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, SEPTEMBER 30, 2021

                               __________

                           Serial No. 117-29

                               __________

      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                    
45-794 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 DeSAULNIER, 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 McBATH, Georgia                 MARIANNETTE MILLER-MEEKS, Iowa
JAHANA HAYES, Connecticut            BURGESS OWENS, Utah
ANDY LEVIN, Michigan                 BOB GOOD, Virginia
ILHAN OMAR, Minnesota                LISA C. McCLAIN, 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
                               
                               ------                                

       SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE INVESTMENT

                FREDERICA S. WILSON, Florida, Chairwoman

MARK TAKANO, California              GREGORY F. MURPHY, North Carolina
PRAMILA JAYAPAL, Washington            Ranking Member
ILHAN OMAR, Minnesota                GLENN GROTHMAN, Wisconsin
TERESA LEGER FERNANDEZ, New Mexico   ELISE M. STEFANIK, New York
MONDAIRE JONES, New York             JIM BANKS, Indiana
KATHY E. MANNING, North Carolina     JAMES COMER, Kentucky
JAMAAL BOWMAN, New York              RUSS FULCHER, Idaho
MARK POCAN, Wisconsin                MARIANNETTE MILLER-MEEKS, Iowa
JOAQUIN CASTRO, Texas                BOB GOOD, Virginia
MIKIE SHERRILL, New Jersey           LISA C. McCLAIN, Michigan
ARIANO ESPAILLAT, New York           DIANA HARSHBARGER, Tennessee
RAUL M. GRIJALVA, Arizona            VICTORIA SPARTZ, Indiana
JOE COURTNEY, Connecticut            JULIA LETLOW, Louisiana
SUZANNE BONAMICI, Oregon             VIRGINIA FOXX, North Carolina
ROBERT C. ``BOBBY'' SCOTT, Virginia    (ex officio)
  (ex officio)
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on September 30, 2021...............................     1

Statement of Members:
    Wilson, Hon. Frederica S., Chairwoman, Subcommittee on Higher 

      Education and Workforce Investment.........................     1
        Prepared statement of....................................     3
    Murphy, Hon. Gregory F., Ranking Member, Subcommittee on 
      Higher 
      Education and Workforce Investment.........................     4
        Prepared statement of....................................     6

Statement of Witnesses:
    Cooper, Preston, Research Fellow, The Foundation for Research 
      on Equal Opportunity.......................................    33
        Prepared statement of....................................    36
    Emrey-Arras, Melissa, Director, Education, Workforce and 
      Income security, U.S. Government Accountability Office.....     8
        Prepared statement of....................................    10
    Rhodes, Karyn, Student Borrower..............................    29
        Prepared statement of....................................    32
    Sith, Robyn, Senior Attorney, Legal Aid Foundation of Los 
      Angeles....................................................    46
        Prepared statement of....................................    49

Additional Submissions:
    Takano, Hon. Mark, a Representative in Congress from the 
      State of California:
        Prepared Statement of Veterans Education Success.........   130
    Questions submitted for the record by:
        Chairman Scott...........................................   138
        Bonamici, Hon. Suzanne, a Representative in Congress from 
          the State of Oregon....................................   135
    Response to question submitted for the record by:
        Ms. Emrey-Arras..........................................   136
        Ms. Smith................................................   139

 
                   PROTECTING STUDENTS AND TAXPAYERS:
             IMPROVING THE CLOSED SCHOOL DISCHARGE PROCESS

                              ----------                              


                      Thursday, September 30, 2021

                  House of Representatives,
                      Subcommittee on Education and
                              Workforce Investment,
                          Committee on Education and Labor,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:15 a.m. via 
Zoom, Hon. Frederica S. Wilson (Chairwoman of the Subcommittee) 
presiding.
    Present: Representatives Wilson, Takano, Leger Fernandez, 
Manning, Bowman, Pocan, Castro, Espaillat, Bonamici, Scott, 
Murphy, Grothman, Stefanik, Banks, Miller-Meeks, Good, McClain, 
Letlow and Foxx (ex officio).
    Staff present: Katie Berger, Professional Staff; Jessica 
Bowen, Professional Staff; Rashage Green, Director of Education 
Policy; Christian Haines, General Counsel; Rasheedah Hasan, 
Chief Clerk; Sheila Havenner, Director of Information 
Technology; Ariel Jona, Policy Associate; Andre Lindsay, Policy 
Associate; Max Moore, Staff Assistant; Mariah Mowbray, Clerk/
Special Assistant to the Staff Director; Kayla Pennebecker, 
Staff Assistant; Veronique Pluviose, Staff Director; Manasi 
Raveendran, Oversight Counsel--Education; Banyon Vassar, Deputy 
Director of Information Technology; Claire Viall, Professional 
Staff; Michael Davis, Minority Operations Assistant; Amy Raaf 
Jones, Minority Director of Education and Human Resources 
Policy; Hannah Matesc, Minority Director of Member Services and 
Coalitions; Chance Russell, Minority Professional Staff Member; 
and Mandy Schaumburg, Minority Chief Counsel and Deputy 
Director of Education Policy.
    Chairwoman Wilson. Good morning. Good morning to all of 
you. We're ready to begin. I will count down from five and then 
we will start, 5, 4, 3, 2, 1. The Subcommittee on Higher 
Education Workforce Investment will come to order.
    Welcome everyone. I note that a quorum is present. The 
Subcommittee is meeting today to hear testimony on protecting 
students and taxpayers, improving the closed school discharge 
process. 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, and when they 
wish to seek recognition. I also ask that Members please 
identify themselves before they speak. Members should keep 
their cameras on while in the proceeding. Members shall be 
considered present at the proceedings when they are visible on 
camera, and they should be considered not present when they are 
not visible on camera.
    The only exception to this if they are 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 to immediately call 
the Committee's IT director whose number was provided in 
advance.
    Should the Chair experience technical difficulties or need 
to step away to vote on the floor, Representative Bonamici--
thank you Ms. Bonamici, as a Member of the Subcommittee, or 
another majority Member of the Subcommittee is not available, 
is hereby authorized to assume the gavel in the Chair's 
absence.
    This is an entirely remote hearing and as such the 
Committee's hearing room is officially closed. Members who 
choose to sit with their individual devices in the hearing room 
must wear headphones to avoid feedback, echoes and distortion 
resulting from 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 masks, 
hand sanitizer and wiping down their areas both before and 
after their presence in the hearing room.
    In order to ensure the Committee's five-minute rule is 
adhered to, staff will be keeping track of time using the 
Committee's digital timer which appears in its own thumbnail 
picture. Members and witnesses are asked to wrap up promptly 
when their time has expired.
    Pursuant to Committee Rule 8(c) opening statements are 
limited to the Chair and the Ranking Member. This allows us to 
hear from our witnesses sooner and provide all Members with 
adequate time to ask questions. I now recognize myself for the 
purpose of making an opening statement.
    Today we're meeting to discuss ways to improve the Closed 
School Discharge Program which provides relief to students when 
their institution abruptly closes. This discussion will focus 
on new preliminary findings from a Government Accountability 
Office study that will be presented to the Committee this 
morning.
    In the last decade at least five large, for-profit college 
chains have collapsed overnight leaving tens of thousands of 
students with significant student loan debt, and often without 
degrees. These school closures can be devastating for students, 
plunging them into financial and emotional despair, while 
robbing them of the education and opportunity they deserve.
    The support these students Congress included a closed 
student discharge provision in the Higher Education Act. Under 
current law affected students have three options. No. 1--
continue presenting the degree either through a teach out plan 
offered by their own institution, or through agreements with 
other institutions.
    No. 2--transfer to another institution of their choice, or 
three--apply for a discharge of their Federal student loans. 
Unfortunately, the first two options are fraught with 
challenges. Many institutions will not accept credits earned at 
default schools, and institutions that do participate in teach 
out plans or accept credits, are often very low quality.
    In fact, in 2017 GAO found that students who transferred 
their credits from for-profit schools to public school lost 94 
percent of their credits. The students applying for a full 
discharge of their Federal student loan is often the best 
option because it both reduces their financial burden, and 
restores their eligibility for Federal student aid.
    The closed school discharge process should be simple to 
understand and easy to navigate for students. The GAO's finding 
show that this is not the case as we'll hear today that three 
key problems at the Education Department must solve.
    First, many students do not become aware that they are 
entitled to loan relief until they have already damaged their 
credit through delinquency and default. It is critical that 
affected students receive more timely information about the 
process for applying for closed school discharge.
    One way to address this challenge is to restore the 
automatic school discharge process that was implemented under 
the Obama administration. This process streamlined relief for 
affected students without forcing them to submit information 
that the Education Department already has.
    Unfortunately, the Trump administration under Betsy DeVos 
eliminated this program. The Education Department also could 
reduce the 3-year waiting period that student borrowers must 
endure before their loans are fully discharged.
    Second, students who experience a school closure often do 
not go on to complete their degrees at another institution. The 
teach out options that defunct schools are required to provide 
their students often follow them into other low-quality 
schools. The Education Department should address this challenge 
by conducting greater oversight, over teach out plans and other 
agreements between institutions.
    And finally, the GAO's preliminary finding once again 
demonstrate that low-quality, for-profit schools are costing 
students and taxpayers billions of dollars. 96 percent of the 
students who receive closed school discharges between 2010 and 
2020 attended for-profit schools. I'll say that again, 96 
percent of the students who received closed school discharges 
between 2010 and 2020 attended for-profit schools.
    Congress and the Education Department must work together to 
crack down predatory schools that continue to cheat our 
students and our taxpayers. The challenges described in the 
GAO's preliminary findings are important and extremely timely.
    In the next 2 weeks the Education Department will begin 
considering changes to the closed school discharge process. I 
hope the Rulemaking Committee will closely review the lessons 
that can be learned from the GAO's report.
    [The prepared statement of Chairwoman Wilson follows:]

  Statement of Hon. Frederica S. Wilson, Chairwoman, Subcommittee on 
               Higher Education and Workforce Investment

    Today, we are meeting to discuss ways to improve the Closed School 
Discharge program, which provides relief to students when their 
institution abruptly closes. This discussion will focus on new 
preliminary findings from a Government Accountability Office study that 
will be presented to the Committee this morning.
    In the last decade, at least five large for-profit college chains 
have collapsed overnight, leaving tens of thousands of students with 
significant student loan debt-and often without degrees. These school 
closures can be devastating for students, plunging them into financial 
and emotional despair while robbing them of the education and 
opportunities they deserve.
    To support these students, Congress included a closed school 
discharge provision in the Higher Education Act. Under current law, 
affected students have three options:

    One--Continue pursuing their degrees either through a teach-out 
        plan offered by their own institution or through agreements 
        with other institutions;

    Two--Transfer to another institution of their choice;

    Or Three--Apply for a discharge of their Federal student loans.

    Unfortunately, these first two options are frought with challenges. 
Many institutions will not accept credits earned at defunct schools, 
and institutions that do participate in teach-out plans or accept 
credits are often very low quality.
    In fact, in 2017, GAO found that students who transferred their 
credits from for-profit schools to public schools lost 94 percent of 
their credits.
    For students, applying for a full discharge of their Federal 
student loans is often the best option because it both reduces their 
financial burden and restores their eligibility for Federal student 
aid. The Closed School Discharge process should be simple to understand 
and easy to navigate for students.
    The GAO's findings show that is not the case. As we'll hear today, 
there are three key problems that the Education Department must solve.
    First--Many students do not become aware that they are entitled to 
loan relief until after they have already damaged their credit through 
delinquency and default. It is critical that affected students receive 
more timely information about the process for applying for closed 
school discharge.
    One way to address this challenge is to restore the automatic 
school discharge process that was implemented under the Obama 
administration. This process streamlined relief for affected students 
without forcing them to submit information that the Education 
Department already has. Unfortunately, the Trump administration, under 
Betsy DeVos, eliminated this program.
    The Education Department also could reduce the 3-year waiting 
period that student borrowers must endure before their loans are fully 
discharged.
    Second--Students who experience a school closure often do not go on 
to complete their degrees at another institution. The teach-out options 
that defunct schools are required to provide their students often 
funnel them into other low-quality schools.
    The Education Department should address this challenge by 
conducting greater oversight over teach-out plans and other agreements 
between institutions.
    And finally, the GAO's preliminary findings once again demonstrate 
that low-quality for-profit schools are costing students and taxpayers 
billions of dollars. 96 percent of the students who received closed 
school discharges between 2010 and 2020 attended for-profit schools.
    I'll say that again: 96 percent of the students who received closed 
school discharges between 2010 and 2020 attended for-profit schools.
    Congress and the Education Department must work together to 
crackdown on predatory schools that continue to cheat students and 
taxpayers.
    The challenges described in the GAO's preliminary findings are 
important and timely. In the next 2 weeks, the Education Department 
will begin considering changes to the closed school discharge process. 
I hope the rulemaking committee will closely review the lessons that 
can be learned from the GAO's report.
                                 ______
                                 
    I want to thank the GAO and all of our witnesses for being 
with us today. I now recognize the distinguished Ranking Member 
for the purpose of making an opening statement, Representative 
Murphy.
    Mr. Murphy. Thank you, Madam Chairman. Thank you very much 
everyone for coming today. When a college class closes 
thousands of students are thrown off their academic paths, some 
permanently. This often leaves students that are left with tens 
of thousands of dollars in debt and no degree to show for it. 
Without credentials, it is exponentially more difficult for 
these students to repay their loans.
    They are thus left in a worst place then when they started 
their degree. This is simply not right. These students deserve 
protections. They should not face the full financial burden of 
student loan debt if their school's closure forced them to end 
their education abruptly.
    In the best-case scenario when a school closes students 
should have the option to continue their program at another 
college. Students have already invested time and money into 
starting a degree, and it would be unfortunate to see this 
effort go to waste.
    Finishing their programs would be a far greater benefit for 
students in the long-term, really than just forgiving their 
loan. Simply discharging students? debt without providing every 
avenue possible to degree completion leave taxpayers bearing an 
unnecessary burden. This is simply not a reasonable pathway, 
nor is it right for an administration to use its narrow 
authority to grossly abuse the closed school discharge program.
    In August the Biden administration announced that it was 
expanding the ``look back window,'' to students who attended 
ITT Tech in 2008. A full 8 years before it closed. This will 
cost taxpayers over a billion dollars. This policy is simply 
reckless and financially honestly absurd. It is clear that the 
Biden administration is using this narrow program as a trojan 
horse for the Democrat's radical mass student loan forgiveness 
agenda. We must resist these efforts if we're ever to get our 
Nation's financial house in order.
    The money simply does not grow on trees. Education is an 
investment, and all investments have inherent risks. We need to 
get back to the belief in this country that personal 
responsibility means something. Everything is not free when 
faced with adverse circumstances.
    While no student however should be left holding the bag if 
their school preemptively closes, we should ensure that schools 
receiving Federal financial dollars are financially viable, 
rather than cleaning up the mess after they've closed.
    This topic is just one of many that we should be discussing 
in the context of a higher and full reform of the Higher 
Education Act. If we're serious about addressing this issue, I 
urge the Committee together that we work together in a 
bipartisan manner, which we can do, to adequately legislate.
    The pandemic exposed some significant flaws with our 
country's higher educational system. Our country's college 
students deserve better from their institutions. When 
discussing such reforms it is critical that we balance the 
interest of hard-working taxpayers with those of student 
borrowers.
    It is difficult to explain to a hard-working American that 
never went to college why he or she would have to pay off 
someone else's student loan. Blue collar Americans have 
struggled the most throughout this pandemic, many losing their 
jobs or being told they aren't allowed to show up for work.
    And all of these Americans now are being asked to pay for 
white collar degrees. That is simply not right. Degree 
completion is a student's best bet for a successful future. 
This should be our focus, not burdening taxpayers with debt 
that is neither their fault, nor their responsibility.
    [The prepared statement of Mr. Murphy follows:]

 Statement of Hon. Gregory F. Murphy, Ranking Member, Subcommittee on 
               Higher Education and Workforce Investment

    When a college closes, thousands of students are thrown off their 
academic path, some permanently. This often means students are left 
tens of thousands of dollars in debt and no degree to show for it.
    Without credentials, it is exponentially more difficult for these 
students to repay their loans. They are thus left in a worse place than 
when they started their degree. This is simply not right.
    These students deserve protections and should not face the full 
financial burden of student loan debt if their school's closure forced 
them to end their education abruptly.
    In the best-case scenario, when a school closes, students should 
have the option to continue their program at another college. Students 
have already invested time and money into starting the degree, and it 
would be unfortunate to see this effort go to waste. Finishing their 
programs will be a far greater benefit for students in the long term 
really than just forgiving their loan.
    Simply discharging students' debt without providing every avenue 
possible to degree completion leaves taxpayers bearing an unnecessary 
burden. This is simply not a reasonable pathway. Nor is it right for an 
administration to use its narrow authority to grossly abuse the closed 
school discharge program.
    In August, the Biden administration announced that it was expanding 
the 'look back window' to students who attended ITT Tech in 2008-a full 
8 years before it closed. This will cost taxpayers over $1 billion.
    This policy is simply reckless and financially, honestly, absurd. 
It is clear that the Biden administration is using this narrow program 
as a Trojan horse for the Democrats' radical mass student loan 
forgiveness agenda. We must resist
    these efforts if we are ever to get our Nation's financial house in 
order. The money simply does not grow on trees. Everything is not free.
    Education is an investment, and all investments have inherent 
risks. We need to get back to the belief in this country that personal 
responsibility means something. Everything is not free when faced with 
adverse circumstances.
    While no student, however, should be left holding the bag if their 
school preemptively closes, we should ensure that schools receiving 
Federal dollars are financially viable, rather than cleaning up the 
mess after they close.
    This topic is just one of many that we should be discussing in the 
context of a full reform of the Higher Education Act. If we are serious 
about addressing this issue, I urge the committee work together in a 
bipartisan manner, which we can do, to adequately legislate.
    The pandemic exposed some significant flaws with our country's 
higher education system. Our country's college students deserve better 
from their institutions.
    When discussing such reforms, it is critical that we balance the 
interests of hardworking taxpayers with those of student borrowers.
    It is difficult to explain to a hardworking American that never 
went to college why he or she would have to pay off someone else's 
student loan.
    Blue-collar Americans have struggled the most throughout this 
pandemic, many losing their jobs or being told they aren't allowed to 
show up for work. And these are the Americans we are asking to pay for 
white-collar degrees.
    That is simply not right.
    Degree completion is a student's best bet for a successful future. 
This should be our focus, not burdening taxpayers with debt that is 
neither their fault nor their responsibility.
                                 ______
                                 
    Thank you Madam Chairman. I look forward to an excellent 
Subcommittee meeting, and I appreciate the time to speak. I 
yield back.
    Chairwoman Wilson. Thank you. Without objection all other 
Members who wish to insert written statements into the record 
may do so by submitting them to the Committee Clerk 
electronically in Microsoft Word format by 5 o'clock p.m. on 
Thursday, October 14, 2021.
    I will now introduce the witnesses and thank you so much 
for coming today. Our first witness is Melissa Emrey-Arras who 
is a director of GAO's Education Workforce and Income Security 
Team. She oversees GAO's higher education work. Prior to 
joining GAO she worked as a private sector consulting company 
conducting program evaluations for State and local governments, 
and worked in non-profit agencies serving children and 
families.
    Melissa earned a master's degree in public policy from 
Harvard University, and a bachelor's degree from Swarthmore 
College. Welcome Melissa.
    Our second witness is Karyn Rhodes who's a mother, 
grandmother, entrepreneur, and real estate agent from Torrance, 
California. In 1988 as a single mother Miss Rhodes took out 
$6,625.00 in Federal student loans to enroll in a data entry 
program at American Business Institute, ABI, which suddenly 
closed 7 months into Ms. Rhodes' education.
    Ms. Rhodes has never been informed about her right to a 
closed school discharge, but eventually had her loans 
discharged in August 2020.
    Our third witness is Preston Cooper, who is a Research 
Fellow at The Foundation for Research on Equal Opportunity, a 
non-partisan, non-profit think tank focused on bringing 
opportunities to those who least have it.
    Mr. Cooper's work focuses on the Federal student loan 
program and the economics of higher education. He's also a 
regular contributor to Forbes. Mr. Cooper holds a bachelor's 
degree from Swarthmore College and a master's degree in 
economics from George Mason University, welcome.
    And last we will hear from Robyn Smith, who currently works 
as a Senior Attorney with the Legal Aid Foundation of Los 
Angeles where she concentrates on student loan and for-profit 
school issues. She also acts as, Of Counsel, for the National 
Consumer Law Center where she coauthored NCLC Student Loan Law 
Treatise.
    Mrs. Smith also worked as a supervising Deputy Attorney 
General at the California Attorney General's Office where she 
investigated and prosecuted fraudulent for-profit colleges. 
Last, she has authored a report on the Department of 
Education's existing authority to provide widespread discharges 
to borrowers impacted by student loan closures welcome.
    We appreciate the witnesses for participating today, and we 
all look forward to your testimony. Let me remind the witnesses 
that we have read your written statements, and they will appear 
in full in the hearing record.
    Pursuant to Committee Rule 8(d) and 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 a timer 
will sound when your time is up.
    Please be attentive to the time. Wrap up when your time is 
over and remute your microphone. If any of you experience 
technical difficulties during your testimony or later in the 
hearing do not disconnect. Stay on the platform, make sure you 
are muted, and use your phone to immediately call the 
Committee's IT Director whose number was provided to you in 
advance.
    We will let all the witnesses make their presentations 
before we move to Member questions. When answering a question 
please remember to unmute your microphone. I will first 
recognize Miss Emrey-Arras, that's it.

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

    Ms. Emrey-Arras. You got it.
    Chairwoman Wilson. Good morning.
    Ms. Emrey-Arras. Good morning, Chairwoman Wilson, 
Republican Leader Murphy, Chairman Scott, Republican Leader 
Foxx, and Members of the Subcommittee. I am pleased to be here 
today to discuss GAO's work on closed school discharges. When a 
college closes it can derail the education of many students 
leaving them with loans, but no degree.
    Those who cannot complete their education may be eligible 
to have their Federal student loans forgiven through a closed 
school discharge from the Department of Education. I will focus 
my remarks on GAO's research findings in two areas. One, what 
is known about borrowers who were enrolled in colleges that 
closed, and two, the extent to which these borrowers received 
closed school discharges.
    Beginning with a look at the borrowers who were enrolled at 
schools that closed, we found that about 246,000 of Federal 
student loan borrowers were enrolled in over 1,100 colleges 
that closed from 2010 through 2020. We also found that 86 
percent of these borrowers were enrolled at for-profit colleges 
that closed. While some students at closed schools managed to 
complete their programs or transfer, including some students 
who transferred to another college that also subsequently 
closed, we found that many of the borrowers enrolled at closed 
schools did not complete their program or transfer making them 
eligible for a closed school discharge.
    Specifically, we found that over 40 percent of impacted 
borrowers did not complete their program before their college 
closed, or transferred to another college, showing that 
closures are often the end of the road for a student's 
education.
    Next, turning to GAO's research findings on closed school 
discharges, we found that over 80,000 borrowers had their 
Federal student loans forgiven through the closed school 
discharge process. The majority of these borrowers applied for 
loan forgiveness, however, over 27,000 received relief through 
a process that took effect in 2018, which automatically 
discharged loans for eligible borrowers.
    The automatic process discharges loans for eligible 
borrowers 3 years after a closure, and helps those who have not 
applied for a loan discharge. According to education officials, 
some of these borrowers may not have been aware that they were 
eligible for loan discharges.
    Automatic discharges have accounted for at least 42 percent 
of discharges since borrowers became eligible for them. The 
automatic discharge process has provided relief to many 
borrowers struggling to repay their loans. About 73 percent of 
borrowers who eventually received automatic discharges faced 
difficulty repaying their loans.
    Specifically, 52 percent of these borrowers defaulted on 
their loans, and an additional 21 percent were past due on 
their loans by 90 days or more at some point during repayment. 
More than half of the borrowers who fell into default before 
receiving an automatic discharge did so within a year and a 
half of their college closing.
    Since education processes discharges 3 years after a 
closure, many borrowers will receive these automatic 
discharges, or facing the consequences of default for a 
substantial amount of time before receiving the automatic 
discharge. Borrowers who eventually received automatic 
discharges faced higher rates of default than other borrowers.
    For instance, borrowers receiving automatic discharges 
defaulted at about five times the national average, and about 
nine times the rate of those who applied for and received 
discharges. Although many borrowers are at risk of facing 
severe financial burdens from their Federal student loans that 
were past due or in default, they did not apply for a 
discharge.
    Borrowers in default may be subject to wage garnishment or 
reduction in income tax refunds, and some social security 
benefits. Defaulted loans and loans past due for 90 days or 
more will also appear on the borrower's credit record, which 
may make it more difficult for them to obtain their other loans 
and can also harm their ability to obtain a job or rent or buy 
a home.
    Many borrowers who were struggling to repay their loans 
eventually received relief through the automatic process. Since 
education eliminated the process, borrowers impacted by future 
closures will have to apply to receive the discharge. Those who 
do not apply potentially because they are not aware of their 
eligibility, may face long-term financial burdens from student 
loans that are past due or in default even though those loans 
are eligible to be discharged.
    This completes my statement, and I would be pleased to 
answer any questions you may have.
    [The prepared statement of Ms. Emrey-Arras follows:]

               Prepared Statement of Melissa Emrey-Arras
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairwoman Wilson. Thank you so much. Next we'll hear from 
Ms. Rhodes.

        STATEMENT OF MS. KARYN RHODES, STUDENT BORROWER

    Ms. Rhodes. Good morning everyone. My name is Karyn Rhodes 
and I live in Torrance, California. I'm a wife, mother, 
grandmother and now a self-made entrepreneur. I would like to 
share this testimony of my 30 year long journey with the 
Department of Education to get a closed school loan discharge.
    My goal is to help anyone who is experiencing, or who has 
experienced a defaulted school loan as a result of a school 
closure. In 1988 I was a single mother who worked for Comcast 
as a customer service representative. In this position I was 
struggling financially.
    I wanted to provide a better life for my daughter, so I 
decided to try to become a data entry clerk. This position 
required a degree, and I discovered that the American Business 
Institute in Los Angeles offered this course. I made an 
appointment to tour the school. After the tour I enrolled and 
took out $6,625.00 in Federal student loans.
    I officially started school in April 1988, and attended 
classes while balancing my job and taking care of my daughter. 
Seven months later while trying to attend one of my night 
classes, several other students and I were stopped by the 
police from entering the school premises and were told there 
would not be any classes today. The police told us they could 
not give us any information, but they stated that there was an 
open investigation with the school and asked us to leave.
    The following week I called the school multiple times and 
left voice mails for all the employees listed on the school's 
website, but with no answer. I decided to drive to the school 
in hopes of reaching one of the faculty Members. Once I arrived 
I saw other students that showed up to the school as well.
    All we saw was a note taped to the school's main door 
stating that the school was closed. No other information was 
listed. One student informed me that the owners of the school 
had committed fraud and were indicted. I was stunned. Week 
after week I kept calling and stopping by, but nothing changed.
    I also reached out to other school branches, but I received 
no assistance. I then understood I was on my own and stuck with 
the debt from a school that was now closed. In the first few 
years after the school closed I told the people who were 
collecting my student loans about the closure, and asked for my 
loan to be canceled because I never received my degree.
    However, my requests were denied because at that time 
Congress had not created a closed school discharge process. For 
almost three decades I struggled to make my student loan 
payments and eventually defaulted. During that time I was a 
junior operator at a hair salon while attending cosmetology 
school, and my husband was the main provider for our family.
    Although, according to my legal aid lawyer, I was eligible 
for this discharge since 1994. I had never been invited to 
apply by my loan servicer or debt collectors, even when I 
explained that my school had closed. The Department of 
Education obtained a judgment against me in Federal Court and 
seized $2,100.00 in Federal income tax refunds.
    I was confused why my tax returns were seized because I had 
no knowledge of the judgment. I was never served, nor received 
any paperwork, and did not have any legal representation. Due 
to the judgment I was not eligible for stopping the tax refund 
offsets through consideration or rehabilitation. This also 
prevented me from going back to school because I would never be 
able to secure any Federal funding when I had a defaulted loan 
on my credit.
    This caused me tremendous stress and I felt the education 
system had failed me. In October 2018 I received a letter 
attempting to collect on my school loan. It stated that my 
original $6,625.00 loan had ballooned to a $26,000.00 debt. I 
was informed that I needed to make payments on the loan or else 
they would pursue wage garnishments against me.
    I agreed to start making $60.00 month payments to protect 
my family and our wages while I continued to pursue a school 
loan discharge. I researched on the internet and found that 
there was a class action suit against American Business 
Institute, so I called and spoke with Legal Aid Foundation of 
Los Angeles, explaining my situation.
    On December 23, 2018, Legal Aid assisted me by submitting a 
closed school discharge application. On December 21, my 
application was denied. In August 2020, Legal Aid submitted an 
appeal, a few weeks later I received a letter stating that I 
was granted my closed school discharge.
    I was so excited and relieved that I finally was free of 
that $26,000.00 debt. I was also refunded the $2,100.00 that 
was taken in income tax refunds. Legal Aid also succeeded in 
having the judgment removed from my credit as well as the 
lawsuit dismissed with prejudice.
    This was the icing on the cake for me and a day to 
remember. I was overjoyed that it was finally over after almost 
30 years. I felt vindicated and that the truth had prevailed in 
the end. I am glad my God never let me give up. He led me to 
the right people to help me, and they were at Legal Aid of Los 
Angeles. Thank you for this opportunity to share my story, and 
thank you Chairwoman Wilson, Ranking Member Murphy and Members 
of the Committee for this opportunity to share my experiences.
    [The prepared statement of Ms. Rhodes follows:]

                   Prepared Statement of Karyn Rhodes
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Chairwoman Wilson. Thank you. Thank you so much. We'll now 
hear from Mr. Cooper.

 STATEMENT OF PRESTON COOPER, RESEARCH FELLOW, THE FOUNDATION 
               FOR RESEARCH ON EQUAL OPPORTUNITY

    Mr. Cooper. Good morning Chairwoman Wilson, Ranking Member 
Murphy and distinguished Members of the Subcommittee. Thank you 
for the opportunity to testify today on improving the closed 
school discharge process. My name is Preston Cooper, and I am a 
Research Fellow in higher education policy at the Foundation 
for Research on Equal Opportunity, a non-profit, non-partisan 
think tank focused on bringing opportunity to people with 
incomes below the U.S. median.
    My remarks today are my own and do not represent the views 
of my employer. Closed school discharges are an important 
feature of the student loan safety net, but policymakers should 
view them as a last resort.
    Students affected by school closures did not originally go 
to college with the intention of taking out loans that would 
later be discharged. They went to college in order to earn a 
degree or certificate, and build a better life for themselves. 
When schools close we want students to complete their programs 
through a teach out, or transfer their credits to another 
university and earn a credential there.
    This will make them ineligible for a discharge, but they 
will get what they originally wanted, a degree. Closed school 
discharges should be the last option we consider not the first. 
When they occur it means we have failed students. The problem 
is not that schools sometimes close.
    School closures will always be a fact of life, in fact 
creative destruction in higher education is desirable. If 
schools never close it would be a sign of stagnation in higher 
education. The challenge is not preventing school closures, but 
managing them to ensure students can complete their education 
elsewhere and do not impose excessive burdens on taxpayers 
through the closed school discharge process.
    Institutions can sometimes shut down with little warning, 
leaving students scrambling to complete their education. The 
Department of Education's track record of predicting school 
closures ahead of time is poor. The key metric it uses to 
access school's financial health once suggested that a school 
for hypnotists is in better shape than Harvard University 
financially.
    Institutions such as Corinthian Colleges have found ways to 
manipulate financial responsibility metrics, and limit the 
Department's ability to take action to protect students and 
taxpayers.
    The private sector has often proven better than the 
Department of Education at assessing the true State of 
institution's financial health. According to the GAO in 2016 
private credit rating agencies gave junk bond status to 30 
colleges that received a clean bill of financial health from 
the Department of Education.
    To that end Congress should leverage the power of the 
private sector to help the Department predict when schools will 
close, and provide the financial incentives for schools to shut 
themselves down in an orderly fashion.
    The solution is to require schools to purchase insurance to 
cover the costs associated with closed school discharges. Each 
year the Department of Education would calculate taxpayer's 
total potential liability in the event of a school closure. 
Aid-dependent schools would then be required to purchase 
insurance on the private market to fully cover those potential 
losses.
    If the school fails, and closed school discharges are 
granted, the insurance company would make taxpayers whole. The 
key benefit is that insurance companies could vary 
institution's premiums according to the financial risk each 
school presents. Institutions on stronger financial footing 
would pay lower premiums.
    Schools with a well-defined teach out plan and articulation 
agreements with other colleges to ensure transferability of 
credit would also get a break on their premiums, but 
unscrupulous institutions such as Corinthian Colleges, might 
not be able to secure insurance coverage at all.
    The insurance mandate creates a direct financial incentive 
for institutions to serve students better. There is ample 
precedent for insurance mandates. Car owners must purchase 
insurance as must homeowners if they want to get a mortgage. 
It's not unreasonable to ask colleges and universities which 
receive taxpayer funding in excess of 100 billion dollars every 
single year to meet the same standard as ordinary people.
    The best way to serve students is not to grant as many 
closed school discharges as possible, but to make closed school 
discharges unnecessary. Students take on debt because they want 
a degree or certificate. Schools need incentives to maximize 
their students' chances of earning that credential, even in the 
event of the school closure.
    And insurance mandate for higher education could provide 
those incentives while protecting taxpayers at the same time. 
Thank you again for the opportunity to testify today, and I 
look forward to your questions.
    [The prepared statement of Mr. Cooper follows:]

                  Prepared Statement of Preston Cooper
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Chairwoman Wilson. Thank you, thank you very much. Well now 
hear from Ms. Smith.

STATEMENT OF ROBYN SMITH, SENIOR ATTORNEY, LEGAL AID FOUNDATION 
                         OF LOS ANGELES

    Ms. Smith. Chairwoman Wilson, Ranking Member Murphy and 
Members of the Committee, thank you for inviting me to testify 
today about improving the Federal loan discharge process for 
borrowers harmed by sudden school closures.
    I offer my testimony on behalf of the low-income clients of 
the Legal Aid Foundation of Los Angeles and the National 
Consumer Law Center. Legal Services organizations have long 
witnessed the suffering endured by Federal student loan 
borrowers after their school has abruptly closed.
    At least since 1986 thousands of for-profit schools have 
closed leaving hundreds of thousands of low-income students 
with student debt that they have been unable to repay through 
no fault of their own.
    In 1992 after Senate Subcommittee hearings revealed, the 
extensive harm caused by school closures, Congress amended the 
Higher Education Act to mandate that the Department grant loan 
discharges to borrowers who are unable to complete their 
education due to school closure.
    Congress applied the mandate retroactively to students 
whose schools closed after January 1 of 1986. The Department's 
closed school regulations published in 1994 provide discretion 
to the Department to grant automatic discharges to borrowers 
who are eligible based on information in its possession instead 
of using this authority to grant retroactive automatic 
discharges to borrowers harmed by school closures between 1986 
and the present, the Department has required students to submit 
applications, even though students remain unaware that a closed 
school discharge is even an option.
    Although the Department recently used this automatic 
discharge authority for some ITT Tech students, there are 
thousands of other schools that closed between 1986 and the 
present whose former students continue to suffer from the 
burden of Federal debt they do not owe.
    As a result, legal services organizations have a constant 
influx of borrowers whose schools closed from 2 to 35 years 
ago. All are low-income and most attended for-profit schools 
and are African American, Latin X, or other people of color. 
Most have no idea that they are eligible for a discharge, while 
others have been unable to obtain a discharge without the 
assistance of an attorney.
    They usually seek our help after they have defaulted, and 
the government has garnished their wages, seized tax refunds, 
or seized portions of Federal benefits such as social security. 
These punitive collection measures push our clients over the 
financial brink, ruining their credit histories, and causing 
severe distress when they cannot afford to pay for rent, 
utilities, transportation to and from work, medical supplies or 
even food.
    Thus the Department's decades long failure to grant 
automatic closed school discharges has systemically removed the 
wealth from economically disadvantaged families and communities 
of color through the collection of burdensome and invalid debt.
    Its failure has also prevented these borrowers from 
building wealth by barring many from earning a credential at a 
legitimate institution that would allow them to improve the 
economic well-being of their families. Cruelly the communities 
hit hardest by the Department's failure are the same 
communities currently hit hardest by the COVID-19 global health 
crisis.
    The Department's application requirements and reluctance to 
provide wide-spread automatic closed school discharges have 
hindered Congress's broad remedial intent in enacting the 
Higher Education Act's closed discharge mandate. It has caused 
decades of unnecessary suffering to thousands of students who 
are disproportionately people of color who are clearly eligible 
for discharges according to the Department's own records.
    There is little to be gained by continuing to wage this 
economic war on poor people who were harmed through no fault of 
their own by sudden school closures. At a minimum, the 
Department should immediately change course and comply with its 
statutory mandate by immediately beginning to grant automatic 
closed school discharges to all borrowers whose schools closed 
after January 1 of 1986 who are clearly eligible for discharges 
according to its own records.
    I describe in my written testimony other steps that the 
Department should take to alleviate the devastating 
consequences of abrupt school closures. Thank you for your 
close attention to this urgent issue, and for the opportunity 
to provide this testimony. I look forward to your questions.
    [The prepared statement of Ms. Smith follows:]

                   Prepared Statement of Robyn Smith
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairwoman Wilson. Thank you so much. Under Committee Rule 
9(a) we will now question witnesses under the five-minute rule. 
I will be recognizing our Subcommittee Members in seniority 
order. Again, to ensure that the Member's five-minute rule is 
adhered to staff will be keeping track of time, and a timer 
will sound when time has expired. Please be attentive to the 
time. Wrap up when your time is over and remute your 
microphone.
    As the Chairwoman, I now recognize myself for five minutes. 
Ms. Emrey-Arras the automatic discharge process was designed to 
provide relief for borrowers if they did not complete their 
program or transfer to another school within 3 years after 
their college closed.
    Is this time period quick enough to catch eligible 
borrowers before they face negative financial consequences?
    Ms. Emrey-Arras. Great question. We found that 73 percent 
of the borrowers who went on to receive the automatic 
discharges defaulted, or were past due on those loans by 90 
days or more prior to getting a discharge, and over half of 
those borrowers defaulted within a year and a half of the 
college closing.
    So within a year and a half many were defaulting, and then 
it wasn't until a year and a half later that they received the 
discharge.
    Chairwoman Wilson. Wow. Ms. Rhodes can you please describe 
your experiences in the first weeks immediately after the 
school closed? Ms. Rhodes?
    Ms. Rhodes. Yes. There we go I'm sorry. OK. After a few 
weeks of the school closing I really wanted to complete my 
education and become a data entry clerk. I wanted to finish my 
schooling as I had planned to do. My school closing caused me 
great stress. I was so devastated about not completing my 
courses, graduating and receiving my diploma. I didn't know 
what I was going to do now, and I was really worried about 
having outstanding loans.
    All I know was that I had to continue working to provide 
for my daughter until I could figure it out--what my next step 
was going to be. I didn't apply to any other schools because 
accumulating another debt didn't make any sense to me.
    However, in 1991 I was offered an opportunity to assist as 
a junior operator in a salon, and I jumped on that opportunity 
to do the apprenticeship and I became a cosmetologist.
    Chairwoman Wilson. Do you recall if you received any 
information about your eligibility for a closed school 
discharge during this time, and if so, was it difficult to 
understand the process given everything you experienced in that 
time. Did you know anything about this process?
    Ms. Rhodes. No. At the time there wasn't any closed school 
discharge, so I was unable to receive any information regarding 
my eligibility, and I feel like I was in the first wave of 
closed schools, and I was left to fight this issue on my own 
with no assistance from anyone.
    Chairwoman Wilson. Did you know if anyone else in your 
class was able to have any success the way that you were able 
to get success, or do you think most of them are just thrown 
away?
    Ms. Rhodes. I would say we were thrown away. We were all in 
the same situation. The school closed and we just had nowhere 
to turn, no information.
    Chairwoman Wilson. Were most of the students African 
American?
    Ms. Rhodes. I would say it was mixed, but yes my area would 
be considered more African American.
    Chairwoman Wilson. And how were you recruited to go to the 
school? How did you find out about it?
    Ms. Rhodes. I basically wanted, I worked for Comcast, and I 
wanted to become a data entry clerk, and they had a position 
available, but I had to get a degree, so I just searched the 
internet, and then found the school and it essentially was 
about five minutes from my home, that was perfect for me, and I 
could take night classes and still take care of my daughter, so 
that's why I chose the school.
    Chairwoman Wilson. Were there any other people in your 
community who had gone to that school, or were there any 
recruitment efforts from that school, or any other for-profit 
college in that community?
    Ms. Rhodes. There were other students that was in my 
neighborhood, but I didn't know them personally, but they were 
from the general area, yes.
    Chairwoman Wilson. Were there any recruitment efforts from 
the for-profit schools in that area to recruit you?
    Ms. Rhodes. I would say yes a little bit because they were 
in like a mall, so of course when you come in they kind of 
would give you flyers to join the school, so yes, a little bit 
of that recruitment.
    Chairwoman Wilson. Thank you so much. I now recognize the 
Ranking Member for the purpose of questioning the witnesses.
    Mr. Murphy. Thank you Madam Speaker, or Madam Chairman 
rather, and I want to thank all the witnesses that came today. 
Very good information. We obviously have a problem here. It's 
tragic when someone has put their name on the dotted line on a 
loan, and they put it forth with a good faith effort to get an 
education, and it's tragic when those places close their doors, 
and then the person is left with a burden of debt that is 
through literally no fault of their own.
    That said, is it fair to have someone who's never been to 
college and that just works hard at a blue-collar job to pay 
off that debt? There has to be something that we can put forth 
in the middle. And so let me just ask Mr. Cooper first a 
question. I'm intrigued by--I live in the world of medicine, 
and we all have to have malpractice insurance regardless.
    Is there any avenue that we can put forth for these for-
profit schools to get insurance beforehand before anything goes 
on that is recognized as them having financial troubles? 
Because we all know that State institutions are backed by the 
State. They have backing in that regard. Private institutions--
I went to a private undergraduate college, had a large 
endowment otherwise. And so I wonder if that's an avenue that 
has been pursued, we should pursue that may help prevent the 
taxpayer from having to take the burden if defaults occur?
    Mr. Cooper. Thank you, Doctor Murphy, that's a great 
question. So right now the Department does have some 
discretionary authority to request protection from schools when 
it looks like they're in danger of closures, such as requesting 
a letter of credit, in order to make taxpayers whole in the 
event of a closed school discharge.
    The problem is that this is very reactive, not proactive. 
The Department often waits to request a letter of credit until 
the problems in the schools have already become apparent, and 
at that point it's very hard for a school that has just been 
deemed financially irresponsible by the Department, to go to a 
bank and say please give us a letter of credit.
    And so that's why I believe we need a more proactive 
approach to financial protection, and that's where my proposal 
for an insurance mandate comes in which is analogous to the 
malpractice insurance mandate for doctors which you described. 
If institutions wish to participate in the Federal student loan 
program they are putting some financial risk on taxpayers 
because there is a risk that those schools will close and there 
will be hundreds of millions if not billions of dollar of 
closed school discharges associated with those closures that 
will place a burden on taxpayers.
    So my proposal is for them as a condition for participating 
in the Federal student loan program to have to purchase 
insurance in order to make taxpayers whole in the event of a 
discharge. And this won't only have the benefit of protecting 
taxpayers, but will also have the benefit of providing a 
financial incentive for schools to make sure that when they do 
face the risk of closure it's done in an orderly fashion, and 
that students are able to either complete their programs 
through a teach out, or transfer their credits to another 
school and complete their education there.
    Both of those scenarios would make them ineligible for a 
closed school discharge, but it will get them what they 
original went to college for which is a degree.
    Mr. Murphy. Yes. I think that's actually fair. I think 
that's a reasonable compromise for all this. We don't burden 
the taxpayers with money that unjustifiably is not their debt, 
and then but we hold them accountable for some of the other 
things. And one thing I wish we would also look into I think 
one of the speakers commented that up to 94 percent of credits 
were not accepted by other institutions.
    Well some of these institutions need to accept some of 
these credits, and I think as a condition of getting student 
loans they need to be much more lenient in accepting credits 
from for-profit institutions because you know we know that 
there is profit motive on the non-profit schools that they want 
those students to pay and do more of that.
    So you know there has to be a happy medium. I think running 
to the one side where all of a sudden there's more and more and 
more taxpayer money put into a program, put into these colleges 
and universities I think is wrong. I think there's a much 
smarter way to do that protects consumers, protects students, 
but also protects colleges and universities.
    We don't need to have a hoarding approach to all of this. 
So Madam Chairman I'm not sure of my time that's left. How much 
time do I have left. I can't even see it. 17 seconds? Well I 
could talk about the baseball game last night, but we won't 
talk about that considering it was such a resounding victory. 
But anyway I want to thank the speakers for coming in, and 
Madam Chair I'll yield back.
    Chairwoman Wilson. Thank you. Thank you Dr. Murphy. Now Mr. 
Takano from California.
    Mr. Takano. Thank you Madam Chair. You know you touched 
some glimmer of hope. I think the Ranking Member does recognize 
there's a problem. However these solutions I really beg to 
differ. I don't see the good in say a top-quality medical 
school being forced to accept credits from a fly by night 
medical school, or a school--but let's not talk about medical 
schools, but a regular school with a great reputation that has 
great standards to be accepting credits from a school that just 
closed. That makes no sense to me.
    That means even less accountability and less value for the 
taxpayer. But anyway, Ms. Smith. I want to thank you for your 
testimony today. Very quickly, before I begin the rest of my 
questions and respond to the Ranking Member more sensibly, I 
wanted to inquire if the extension of the lookback window for 
ITT was within the Education Department's authority?
    Ms. Smith. Yes. The extension back was within the 
Department's authority both as extenuating circumstances, but 
it also has the clear authority to grant automatic discharges 
based on information in its own possession. It can determine 
and has determined who withdrew from that school before it 
closed within the extended period and is granting automatic 
discharges.
    So this really shows that the Department has the authority 
and can in fact look back according to its own records to see 
who did not--who's eligible for a closed school discharge and 
grant widespread discharges if it wants to.
    For ITT Tech I understand that's about 115,000 borrowers. 
That of course is just the tip of the iceberg. There are 
probably hundreds of thousands of borrowers who remain stuck 
with debts that they don't owe, and struggling from that who 
have no idea still that they should be eligible for a closed 
school discharge.
    Mr. Takano. Well thank you. So the Department of Education 
has recently moved to provide other forms of loan relief, 
including total and permanent disability charges to borrowers 
without requiring them to submit an application. Can you 
explain how automatic processes can remove major barriers from 
borrowers and get them benefits they are entitled to under law?
    Ms. Smith. Sure. So, as you all know a closed school 
discharge not only discharges the debt, it also provides a 
restoration of Pell Grants and removes the negative history 
from credit reports so people who have for decades dealt with 
defaulted debt, who struggled because they can't get ahead. 
That idea with wage garnishments, they have bad credit reports, 
they can't get housing.
    And I see these folks, many of whom are people of color all 
the time who've gone to schools in the 80's, and 90's, and as 
recent as you know several years ago. So the closed school 
discharge is a bright light of hope for these borrowers who 
struggled for so long because it clears their history and they 
can go back to school, they don't have the psychological and 
emotional burden that kind of debt can bring.
    And so these discharges are incredibly important for also 
restoring the wealth to those communities. As I said the 
communities most impacted are communities of color and low-
income communities who traditionally have been excluded from 
higher education.
    So it is important to restore the wealth to those 
communities, to get them back on track to be able to go to 
legitimate institutions of higher education and pursue better, 
more financial stability for themselves and their communities.
    Mr. Takano. So, Ms. Smith would you consider shortening the 
period of eligibility for the closed school discharge will be 
from the current 3-year wait period? I mean it seems like that 
wait period, to me is a real problem.
    Ms. Smith. Yes it is as Melissa explained. Most borrowers 
first of all when a school closes, they look right away to 
transfer their credits, so it's within a year I would say that 
most borrowers decide either to move on to another school, or 
to give up. So the other issue of course is you want to give 
them a closed school discharge before they go into default.
    They have 6 months grace period, then 270 days before they 
will go into default, so it's important I think to shorten the 
period to about 1 year because that would get them out of 
default or keep them from going to default in the first place.
    Mr. Takano. Well thank you. I would like to explore that 
more, but my time is running out. It does seem to me that 
students are at a period like of real trauma or crisis, the 
schools close, it's not their fault. They should be given a 
choice about whether what they do next.
    Anyway before I yield back Madam Chair I'd like to enter 
into the record a statement submitted to the Higher Education 
Work Force Investment Committee from Veterans Education 
Success, a statement for the record. I ask unanimous consent.
    Chairwoman Wilson. So ordered. Thank you so much.
    Mr. Takano. I yield back Madam Chair.
    Chairwoman Wilson. Thank you. Now Mr. Banks.
    Mr. Banks. Thank you, Madam Chair. According to the U.S. 
Department of Education's College Affordability and 
Transparency Center, the average tuition rate for a public 2-
year technical school is only $3,588.00. When Corinthian 
College closed its campuses the Obama administration approved 
approximately 15,000 students for loan discharge relief who owe 
a total of 200 million dollars in student debt, forcing the 
taxpayers to foot the bill.
    In other words each former Corinthian student was on 
average granted over $13,000.00 in relief, meaning that it cost 
taxpayers nearly four times as much to pay for borrower's 
school discharge claim than it does to pay for the entirety of 
their trade school education. Mr. Cooper what are your thoughts 
on creating policy that allows students in the discharge 
process to pursue a different type of education at technical 
and trade school?
    Mr. Cooper. Thank you. Thank you, Representative Banks. I 
think that is the No. 1 goal that when a school closes we want 
students to have the opportunity to complete their education 
elsewhere, or complete their education at the original school 
through a teach out.
    Because when students take on loans they're not taking on 
loans with the hope that they will eventually be discharged, 
they're taking on loans with the hope that they'll be able to 
use this financing in order to get a degree or a certificate 
somewhere. And so I would say that is the No. 1 goal. We do 
want them to transfer to other schools, whether those are other 
private institutions or community colleges, and complete the 
credential there.
    I do know that if the programs which they are transferring 
is significantly different from the program which they were 
originally enrolled in at the school that was closed, they 
still might be eligible for a closed school discharge in that 
circumstance, but still it is the No. 1 goal for them to be 
able to get that credential that they originally went to 
college for and build a better life for themselves.
    Mr. Banks. So we know that the Department has historically 
had difficulties tracking transfer and re-enrollment of 
students in institutions of higher education. This is 
concerning given that the Biden administration's proposed 
changes to the closed school discharge regulations that were 
circulated this week would reinstate the automatic closed 
school discharge policy implemented under the Obama 
administration.
    But we've changed the re-enrollment period from 3 years to 
one. So for instance a student who attended a closed 
institution and had their loans discharged, and then enrolled 
in a new institution a few years later in a similar program, 
may receive a free degree.
    Mr. Cooper can you explain why reinstating the automatic 
closed school discharge is a poor policy?
    Mr. Cooper. Yes that is correct. And I believe that if you 
do instate these automatic closed school discharges which cast 
a very wide net that I don't really see a way for the 
Department of Education to effectively verify when a successful 
transfer of credits and a successful degree completion done at 
another college has taken place, but we're always going to--
there are always going to be some errors like that.
    I see that as fairly unavoidable, specifically when you're 
looking back to the pre-2014, pre-2019 enrollments in colleges 
when the data on program enrollments was just much poorer. And 
you know that's why I believe that the approach really needs to 
be centered around making sure that closed school discharges 
are not even necessary in the first place.
    That you know when we've exhausted all other options, yes 
we should make it easier for people to receive a closed school 
discharge, but we should only do that after we've exhausted all 
other options, and we have exhausted the options of trying to 
get students into other programs and into other programs where 
they might be able to get what they originally came for which 
is a degree.
    Mr. Banks. Mr. Cooper what other Federal policies have been 
enacted recently that you can think of that have propped up 
failing schools beyond their natural lifespan?
    Mr. Cooper. Yes. Well, I do know that the Department of 
Education under, excuse me, under President Obama did propose a 
number of policies that would have affected different sectors 
very differently, specifically they did target the for-profit 
sectors specifically, and some of those regulations might have 
been justified in terms of trying to do a stronger emphasis on 
outcomes and accountability, but I do worry that some of those 
regulations have basically exempted entire swaths of the higher 
education system, specifically public and private non-profit 
colleges that are enrolling the vast majority of students, 
about 86 percent of students, and therefore potentially 
ignoring the abuses and the potential poor outcomes that are 
transpiring at those schools which were not covered by Federal 
regulations.
    Mr. Banks. Thank you my time is expired.
    Chairwoman Wilson. Thank you. Thank you so much. And now 
Ms. Manning of North Carolina.
    Ms. Manning. Thank you, thank you, Madam Chair and Ranking 
Member. Mr. Cooper I want to make sure I understand your 
proposal. You're suggesting that all schools should be required 
to purchase insurance to protect against losses for schools 
that shut down leaving students with large debts and no 
degrees?
    Mr. Cooper. That is correct.
    Ms. Manning. So you're suggesting this for non-profit and 
for-profit schools?
    Mr. Cooper. Yes, that is correct because both non-profit 
and for-profit schools are subject to the current financial 
responsibility composites for regulations, and if either of 
them shut down there are potential closed school discharge 
costs associated with that.
    Ms. Manning. But I know you're aware that 86 percent of 
borrowers who were impacted by school closures attended for-
profit schools right?
    Mr. Cooper. Yes I'm aware of that.
    Ms. Manning. And 96 percent of students who received closed 
school discharges between 2010 and 2020 schools attended for-
profit schools correct?
    Mr. Cooper. I believe that's correct yes.
    Ms. Manning. So you would punish all schools with this 
insurance requirement even though the real problem lies with 
for-profit schools?
    Mr. Cooper. Well I don't like to think of it as punishing 
schools. I like to think of it as----
    Ms. Manning. You would impose this burden on all schools?
    Mr. Cooper. Yes. But----
    Ms. Manning. OK. And wouldn't you assume Mr. Cooper that 
schools required to purchase insurance would pass those 
additional costs on to students in their tuition or fees?
    Mr. Cooper. Yes that is a potential cost, but I do believe 
that it could be rectified with additional aid to students to 
counter out accountability.
    Ms. Manning. Ah, so you actually want to increase student 
loan debt by saddling schools, and therefore students, with the 
cost of buying insurance.
    Mr. Cooper. That is not how I would state my position.
    Ms. Manning. No. But that's what the outcome would be 
correct?
    Mr. Cooper. Yes, but I believe that----
    Ms. Manning. OK. And wouldn't this be a boom to the 
insurance industry?
    Mr. Cooper. Well, the insurance industry that would be able 
to sell insurance to these schools yes, but the insurance----
    Ms. Manning. OK. And so what you're proposing would help 
the insurance industry and would burden students with 
potentially higher student debt at a time when what we're 
trying to do is make school more affordable because more 
students needs a higher education to get jobs that pay a 
livable wage. Isn't that correct?
    Mr. Cooper. Yes. But I believe that this proposal----
    Ms. Manning. OK thank you very much. I'm going to move on 
to Ms. Emrey-Arras. Your testimony mentions that transferring 
to another college may not be a great option for students after 
closure. Can you talk about that a little bit more? Can you 
explain why is it that so many of the credits that the students 
get at for-profit schools are non-transferrable?
    Ms. Emrey-Arras. Thank you for that question. So when 
students transfer their tuitions, one is can they bring their 
credits with them? And two, is can they complete their 
education at that second school? And in terms of that first 
issue of can they bring their credits with them, in this work 
looking at closed schools we found that most students leaving a 
for-profit transferred to another for-profit school.
    And in our prior work we found that for that pathway 
students lose on the average 83 percent of their credits. 
Another common pathway that we found in this work is going from 
a for-profit school to a public school, and as you've heard 
previously we found that pathway results in a loss of 94 
percent of credits. And I would say----
    Ms. Manning. And why is that? Why is it that non-profit 
schools are so reluctant to accept the credits from for-profit 
schools?
    Ms. Emrey-Arras. I'm not able to comment on that. It's not 
the subject of this work, but I would say that those rates are 
much higher than the average credit loss rates. In average we 
found previously when students transferred regardless of where 
they were coming from, or where they were going, they lost a 
little over 40 percent.
    So these rates we're seeing are more than double the 
transfer loss rates for the general population per prior work.
    Ms. Manning. Thank you so much. And Ms. Smith do you have 
any answer to why so many credits are lost when transferring 
from for-profits to non-profits?
    Ms. Smith. Yes. Thank you for that question. In our 
experience a majority of for-profit schools that closed 
suddenly, there's been a large time period during which the 
education has deteriorated when a school is having financial 
issues, they tend to cut salaries, they stop paying teachers, 
teachers stop showing up.
    They stop updating equipment, and in addition these are 
often schools that are already very low quality and engage in 
other types of fraud to get the students in the door. So the 
students from these schools don't actually often have the 
skills or the education they need to succeed starting at a 
higher level at another institution.
    So those institutions take a hard look at those credits and 
say can this student actually succeed in starting at a higher 
level, or do they really need to retake those courses, so they 
get a good education? We don't want people dropping out because 
they're put into higher level course and then they can't 
complete it.
    So that's a primary reason that you don't see the 
transfers.
    Ms. Manning. Thank you. Madam Chair I yield back.
    Chairwoman Wilson. Thank you. Thank you so much. Ms. 
Miller-Meeks of Iowa.
    Mrs. Miller-Meeks. Thank you so much Madam Chairwoman, and 
I find it fascinating that there's a concern about having all 
colleges pay into insurance to cover colleges that are 
discharged when we just passed legislation and passed 
appropriations that don't cover the Hyde Amendment, so we want 
all taxpayers to pay for abortions, even if they are morally or 
religiously opposed to abortions.
    So there seems to be no concern about having all taxpayers 
pay for other things when it's to someone's preference. So 
interestingly enough Mr. Cooper, you noted that the higher 
education landscape is changing, and that Federal policies 
should adapt with it. What are some of the key changes or 
drivers of this changing landscape, and how big of an impact do 
you believe that changing demographics will have on college 
enrollment?
    Mr. Cooper. Thank you Congresswoman. So one of the most 
important factors that are driving changes in higher education 
enrollment is the fact that higher education is a rather 
counter cyclical industry, so when the economy is not so great 
people will tend to want to go back to school in order to get 
another degree, and potentially increase the scope of their job 
opportunities.
    And when the economy is doing better, then the labor market 
will look much better relative to education, because higher 
wages and more jobs available will mean more opportunities out 
there. During the decade of the 2010's we did see this, that 
there was a long decline in college enrollments between 2010 
and 2019.
    That may be the case again as the economy begins to recover 
from the COVID-19 recession, and this is going to have effects 
on the higher education sector that when enrollment contracts 
in this way due to the improving economy, not all colleges are 
going to be able to survive, and that's a natural part of the 
cyclicality of the higher education sector.
    And some colleges are going to close, it's unfortunate, but 
it is a reality, and that's why we do need to be prepared for 
when those college closures happen and make sure that both 
students and taxpayers are protected.
    Mrs. Miller-Meeks. So I think that we saw this in the past 
several years when you had MBA programs at both public and 
private colleges. There was a proliferation of MBA programs, 
but now we've seen those close. And part of that I think is 
this dynamic between the college degree you're achieving, and 
then the income opportunities, or employment opportunities 
thereafter, and do they you know is there a benefit to getting 
that higher education.
    So is this demographic similar for undergraduate as well as 
for graduate schools--that landscape that you're talking about 
changing?
    Mr. Cooper. That is definitely true. When the economy is 
improving, and when there are more opportunities out there, 
that simply that reduces the demand to get the next degree 
because students will say why should I spend two, or three or 4 
years in college when there is a great job opportunity waiting 
for me right now?
    But when the economy does turn south, then you see students 
going into those MBA programs which might not have the returns 
they promised, so they're going into other programs that they 
hope will be able to graduate them to a better life, but it is 
extremely cyclical and it's getting more cyclical with each 
business cycle.
    Mrs. Miller-Meeks. And I think you know certainly we don't 
you know want, we want all bad actors, bad performers held 
accountable. We want students who are trying to you know 
improve their education get a better education, improve their 
employment opportunities. You know we want them to be made 
whole.
    And so I guess in that vein looking at what's happened in 
the past and where we are economically now do you see more 
colleges closing their doors in the very near future?
    Mr. Cooper. I think it's certainly a possibility. We don't 
still fully understand how college enrollments, and therefore 
the number of colleges operating is going to react to the 
COVID-19 pandemic. You know if we recover fairly quickly 
economically, that might result in fewer students going to 
college, and therefore more college closures.
    I'm not going to say that it's definitely going to happen, 
but it's definitely a major possibility, and an eventuality 
that we need to be prepared for.
    Mrs. Miller-Meeks. Thank you so much. I thank all of our 
witnesses and I yield back my time Madam Chair.
    Chairwoman Wilson. Thank you very much and now we'll hear 
from our Vice Chair of the Committee Mr. Bowman from New York, 
welcome.
    Mr. Bowman. Thank you so much Madam Chair. Mrs. Rhodes 
thank you for being here today and telling us your story. As 
you say our education system failed you on so many levels. I 
was particularly heartbroken hearing your testimony that you 
have been eligible for a closed school discharge since 1994, 
but that you were never made aware of the process, or of your 
eligibility.
    If the closed school discharge process had applied to you 
automatically back in the 90's, how would that have affected 
your life?
    Ms. Rhodes. Well I will say this. If the school closed 
discharge was applied automatically it would have made my life 
easier and less stressful. I really wanted to succeed at this 
school, but that wasn't an option for me after the school 
closed. I would have continued pursuing my education in another 
school of my choice, and I would have definitely graduated.
    I'm a motivated woman who never gives up when my mind is 
set on something I want, I will pursue it and complete it. I 
eventually finished several education courses that I did not 
have to take out student loans for despite what happened to me. 
I am now a cosmetologist, salon owner, a real estate agent, and 
I own a trucking company with my husband, so I succeeded but.
    Mr. Bowman. Well of course you did because you're strong. 
That's why you succeeded. Thank you so much.
    Ms. Rhodes. Thank you.
    Mr. Bowman. For sharing that.
    Ms. Rhodes. Thank you.
    Mr. Bowman. Ms. Emrey-Arras thank you for being with us as 
well. I know that I and my colleagues on this Committee 
appreciate the excessive work that the GAO has done to 
investigate and shine a light on this topic. Your testimony 
provided really important information on how college closures 
affect borrowers, and how important a closed school discharge 
process is.
    And I'm hoping you could provide a bit more information 
about the experiences of these borrowers related to defaults. 
Specifically, how do the default rates of borrowers affected by 
a college closure differ from the average borrower?
    Ms. Emrey-Arras. Thank you for the question Congressman. 
The default rates for borrowers who went to closed schools are 
higher than the default rates for the general student 
population. For example, we found that between 2010 and 2020, 
19 percent of all borrowers who attended closed schools 
defaulted, and that 19 percent was much higher than the 
comparable rate in the general Federal student loan borrower 
population, which was about 11 percent.
    But think about those numbers. 19 percent for everyone 
affected by a school closure, now let's move to those that were 
affected by the automatic loan discharge process. Those folks 
have even higher default rates. The people who were then 
eligible for automatic discharges defaulted at 52 percent, so 
those are folks that are in significant distress, and those 
people are defaulting on loans that are eligible to be 
discharged, and they're defaulting about a year and a half 
after their school closes, and then waiting for another year 
and a half to get the discharge.
    Mr. Bowman. Yes. Thank you. Quick followup. In your opinion 
what do these differential rates tell us about how we can 
improve our higher education system to better support all 
students?
    Ms. Emrey-Arras. GAO doesn't have a particular opinion on 
this issue. We just want to make sure that the facts are 
available for policymakers to consider.
    Mr. Bowman. OK awesome. Thank you so much. Madam Chair I 
yield back.
    Chairwoman Wilson. Thank you. And now we'll hear from 
Representative Good.
    Mr. Good. Thank you Chairwoman Wilson and Ranking Member 
Murphy for holding this important hearing. It's crucial that 
American institutions for higher learning are providing the 
best possible education for our students. In a free market 
economy, it's important for students to be incentivized to 
complete their degrees, and be equipped with the tools to 
contribute to the workforce.
    It's also essential that competitive forces would 
incentivize educational institutions to provide the best 
possible education for our students. I am concerned that 
colleges and universities aren't focused on the most important, 
pardon me, I've lost my place there. That they aren't focused 
on the most important thing which is developing critical 
thinking. Students who are effectively prepared to contribute 
to the American economy.
    As has been said in testimony today, instead of trying to 
right the ship it seems too often that these sinking schools 
are just throwing up their hands and walking away and shirking 
all responsibly and leaving American taxpayers holding the bag.
    I hope that moving forward we can have truly beneficial 
discussions surrounding this topic and not resort to the 
consistent default solution from my colleagues in the majority 
to simply throw more money at the issue, and simply forgive 
loans with zero questions asked.
    I would also ask the majority to consider the fiscal 
implications of all the policies that we enact because that has 
to always be a factor for sustainable government and 
sustainable economy. I would also ask the majority would 
consider the morality of flippantly requiring those who don't 
or can't attend college, or those who sacrifice diligently to 
pay off their own student loans be required to pay for student 
loan balances of others regardless of the circumstances.
    That said, Mr. Cooper thank you for taking the time to come 
before the Committee today. You said that when discharges occur 
it means that we failed our students. You're exactly right, and 
I would add that the policies of the current administration are 
failing our students in many other ways as well.
    And I appreciate in your testimony you mentioned that the 
composite score tool used to determine the financial health of 
an institution is an untenable tool. What would a responsible 
and accurate evaluation tool that would give a timely and 
thorough assessment of the financial state of institution look 
like?
    Mr. Cooper. Thank you Congressman. So in 2017 the GAO 
identified a number of shortcomings with the financial 
responsibility composite score metric. One of the most 
important in my mind is that it only looks at a single, at the 
financial metrics for a single fiscal year, but pretty much any 
accountant in the private sector will tell you that you need to 
look at what are the trends, you know, are institutions getting 
more financially health, less financially healthy?
    What are the historical trends, what are the future 
projections that you need to have that context in order to get 
a true assessment of the institution's financial health. 
Another major problem with the scores is that they're 
vulnerable to manipulation by colleges which have orbits of 
accountants to figure out every loophole in its force, most 
infamously Corinthian Colleges which manipulated scores while 
it was still in existence by borrowing tens of million dollars 
in long-term debt on the last day of the fiscal year, paying it 
back on the next day during the next Fiscal Year and getting 
credit for all those debt repayments.
    So there are certainly ways that we can fix the financial 
responsibility formula today, and I believe the Department of 
Education is actively working on them. They haven't addressed 
all of the shortcomings. I'm glad to see that they're at least 
thinking about it, but I think in the long-run the only way to 
ensure that the metrics of financial responsibility are keeping 
up with the times and keeping up with what a financially 
responsible institution looks like in the 21st Century is to 
bring the private sector into the equation, and to leverage the 
power of the private insurance industry in order to help assess 
how healthy are institutions really.
    And what can we do in order to make them more financially 
healthy.
    Mr. Good. Thank you. Is there anything else that you might 
add, changes that you feel should be made to the accreditation 
process as to ensure that these educational institutions are 
held accountable for the product they're producing?
    Mr. Cooper. I agree. I think that the accreditation system 
is not a really well suited to the task of a gatekeeping the 
hundreds of billions of dollars in Federal loan and grant money 
that go out the door every year, and that's why I think we 
should be probably moving away from relying on accreditors to 
hold colleges accountable, and more toward a system of 
outcomes-based accountability incentives-based accountability, 
that directly holds institutions accountable for their 
financial health and for the outcomes that they're delivering 
for students.
    Mr. Good. Thank you, Mr. Cooper. And Madam Chairman I see 
I'm out of time, so I yield back. Thank you.
    Chairwoman Wilson. Thank you, thank you so much. Ms. 
Bonamici from Oregon welcome.
    Ms. Bonamici. Thank you, and thank you to the Chair and 
Ranking Member, but truly thank you to our witnesses today. Ms. 
Rhodes just following up on Representative Bowman's comment. 
You started your data entry clerk program in 1988, and the 
Higher Education Act was changed to add the closed school 
provisions in 1992.
    So you were eligible shortly thereafter then. I'm glad you 
found legal aid, but I find it tragic that it took decades. And 
listening to your story, thank you for sharing it, really I 
think exemplifies why we need to make some changes here today.
    We have unanticipated closures we know of institutions and 
especially for-profit colleges, and they can have devastating 
effects on students, academically and financially, and again 
Ms. Rhodes thank you for sharing your personal story. I can't 
imagine what those decades were like for you and the 
frustration.
    I used to work with Legal Aid, so I understand the 
importance of the work they do, but I also understand what you 
were going through. And so, since 2017 in Oregon, my home State 
has seen a significant number of school closures at Oregon 
State University, Concordia University, Oregon Culinary 
Institute, Pioneer Pacific College. We have to do everything we 
can to assist students who are faced with the consequences of 
those closed schools.
    And I do note that there are the options of transferring 
credits and teach out programs, but as we've heard a lot of 
credits just don't transfer, especially from for-profit 
institutions. But the GAO found that tens of thousands of 
borrowers eligible for closed school discharges were not 
applying for forgiveness, even though most of them were 
suffering financial consequences.
    So I want to ask Ms. Smith what steps can the Department 
take to improve the outreach and communication to borrowers who 
have been affected by school closures, so they are aware of all 
their options, including their potential eligibility for a 
discharge?
    Ms. Smith. Thank you that's an excellent question. The 
Department can do a lot to improve outreach, for example it can 
do a lot more with emails that are clearly labeled closed 
school discharges. It can provide many more communications to 
students as soon as the school closes instead of waiting for 
example 6 months to contact those students.
    But the point I think that's most important to make is that 
no matter what the Department does, you're going to have a 
significant number of borrowers who just don't know or 
understand their closed school discharge rights. When a school 
closes its complete chaos.
    Ms. Bonamici. Right.
    Ms. Smith. The students are getting incomplete and 
inaccurate information from their schools who typically push 
them into enrolling somewhere else and transferring credits so 
that they are not liable for a closed school discharge amounts 
to the Department, and students and the government are both 
focused on helping them to transfer credits, so they're not 
really thinking at that point about what other options they 
have, and they are in a state of panic and distress so that 
they often don't even notice that information if it is 
provided.
    Ms. Bonamici. I wanted to try to get another question in 
Miss Smith also for you, and I appreciate the answer. With so 
much of what we do here we're looking at how we address 
problems after they happen, but we really need to look at 
prevention.
    So an additional step would be for the Department to be 
more aware of the warning signs. For example, ITT Technical 
Institute officially closed in 2016. There were signs of 
financial issues for several years, which the Department 
recently shared in their decision to extend eligibility for 
students receiving the closed school discharge.
    At the time of their closure ITT Tech had 520 students 
enrolled in Portland and Salem in Oregon, and Courtney 
University in Portland similarly. They had long-standing 
financial trouble that contributed in part because of 
enrollment decline, but they began consolidating courses of 
study, but what really changes should the Department, or other 
regulatory entities make so they can act earlier in the process 
to protect students impacted.
    Ms. Smith. In the case of ITT Tech, and many of the 
schools, the Department had information and could have taken 
steps much, much sooner. It should I think create an 
enforcement unit that not only tracks these schools financially 
and do a better job of it, but also do more investigations 
regarding potential fraud.
    And the point I want to make is that as long as you have 
for-profit education receiving guaranteed Federal subsidies of 
up to 90 percent of their revenues, there is going to be fraud, 
and there will be school closures whenever you have businesses 
receiving that much money from one guaranteed source no matter 
what you do you will have school closures no matter what steps 
the Department takes to monitor those schools.
    Ms. Bonamici. I appreciate that very much, and I know that 
we're working on it with the Higher Education Act 
reauthorization. And I'm out of time, but I just want to note 
that I will be submitting a question because of this 
accountability issue about the financial responsibility 
composite score, and what we can do to make sure that is really 
more accurate and helpful in identifying problems at the 
outset. So I'm out of time, I yield back. Thank you Madam 
Chair.
    Chairwoman Wilson. Mr. Grothman of Wisconsin.
    Mr. Grothman. OK, OK. OK I have another question for Mr. 
Cooper. I think your proposal, what you're saying here is in 
line with the view many of us have, specifically I think that 
schools like taxpayers, have to have some skin in the game. 
However, your proposal also introduced another actor in the mix 
that have an incentive to protect students and taxpayers 
because they too bear financial risk.
    Why is it important that Federal policy ensures that all 
stakeholders have skin in the game, and are there examples in 
Federal policy, including those outside of higher education 
that illustrate the benefit of risk sharing?
    Mr. Cooper. Thank you. Thank you Congressman. Yes. I 
believe that you know accountability is really key. It's most 
important. And one of the reasons that we do see so many 
disasters in the closed school discharge arena is that right 
now schools really do not have the financial incentives to 
serve their students well in the event of a closure, and that 
we do need to make sure that procedures are in place for 
students to either be able to complete the teach out or 
transfer their credits in the event of the school closure.
    And that's where my insurance proposal comes in, that this 
is one of the things that will provide a direct financial 
incentive for that to happen. But the conversation about 
incentives and accountability shouldn't necessarily end there. 
That I think that there is potential for an entire overall of 
the way that we do higher education accountability to focus it 
more around incentives.
    One of the proposals out there which has attracted 
bipartisan interest is to do some sort of risk sharing for 
institutions which participate in Federal aid programs. And 
basically the idea behind this is that if students are unable 
to repay their Federal student loans after attending the 
college or university that the college or university would then 
be liable for a portion of the unpaid debts.
    And this would align the incentives of both the school and 
the student because if the student is able to graduate and get 
a good paying job, and pay back their loans, then the 
institution will be placed under much less financial liability 
for that. So yes, I believe that you know making use of 
incentives in order to do accountability for institutions which 
are dependent on the Federal purse for their revenues is 
basically the only way to ensure that we don't have repeat 
disasters like we saw with Corinthian and ITT Tech, and the 
many other disasters that have been mentioned over the course 
of this hearing.
    Mr. Grothman. OK. You made an important point in your 
testimony that students ultimately go to college to get a 
degree. And I think the approach taken by Secretary DeVos 
recognized that. Are there particular policies that the Biden 
administration should consider during the rulemaking process 
that were implemented under the previous administration?
    Mr. Cooper. Yes. I think one of the most important policies 
that the Biden administration could continue is the DeVos 
administration's policy of transparency. So in 2019 the DeVos 
Department of Education launched what's called the program 
level college scorecard, which is a first of its kind data base 
that essentially provides outcomes information for many, many, 
many different--over 200,000 different programs both bachelor's 
degrees, associate's degrees, certificates, graduate degrees.
    It provides earnings data. It provides loan repayment 
rates, and this is really an invaluable source of information 
for students who are looking for the best way to get an 
education, to create a better life for themselves, to graduate 
into a job which is going to deliver them a middle-class income 
and a middle-class lifestyle.
    I am encouraged to see that there is bipartisan interest in 
this with the Obama, the Trump, and the Biden administration 
seem to have interest in continuing these transparency efforts, 
and I look forward to seeing what the Biden administration 
recommends.
    Mr. Grothman. I'll give you another question I know how to 
answer. When you begin to do things like put graduation rates 
and that in there it's helpful, but I think we also use 
graduation rates as an important sign we have a good or bad 
high school. And I think one of the ways that schools deal with 
it is that they let everybody graduate.
    And you know already you're out of people with college 
degrees. You wonder, you know, you've got a college degree. Are 
you afraid in how you deal with the fact that as people you 
know go down this path, the universities just dumb down the 
degrees to look good.
    Mr. Cooper. I agree that's definitely a concern, and that's 
one reason why I'm reluctant to do accountability policy 
directly based on graduation rate, because as you say it is 
very easy for the institution to manipulate. And I think that 
if it's done it should be done in conjunction with other 
metrics such as graduate earnings and loan repayment rates, 
which are much harder for the institutions to fake.
    Mr. Grothman. OK. Would you be in favor of some sort of 
generalized test to say you've got to pass the test to get a 
college degree?
    Mr. Cooper. I think it's certainly a possibility that we 
could consider, but I also think we should recognize that 
higher education has a huge diversity of offerings out there, 
and not all programs are going to teach the same material, and 
I'm not sure it would be possible to design a standardized test 
which is both going to test the knowledge earned during a 
liberal arts bachelor's degree and you know a certificate of 
welding at a community college.
    Mr. Grothman. Thank you, and thank you for letting me go 
over.
    Chairwoman Wilson. Thank you so much. Mr. Espaillat of New 
York welcome.
    Mr. Espaillat. Thank you, thank you Madam Chair. My 
question is--my first question is for Melissa Emrey-Arras. 
According to your testimony the automatic discharge process is 
not an option for all borrowers that are eligible for closed 
school discharge. Can you explain which borrowers are not being 
caught in this safety net? Who does that apply to?
    Ms. Emrey-Arras. Happy to Congressman, thank you for the 
question. There are two groups that are not eligible for the 
automatic process, so they are eligible to apply, but they 
cannot get it automatically. Those are individuals who transfer 
but don't complete their program at the second college.
    And what we found in our work was that almost half of the 
people who did transfer were in the situation of not completing 
within 6 years. So you have a sizable population that are 
transferring and not completing, and those individuals are not 
eligible for that automatic process.
    Similarly, there's a second group of borrowers who transfer 
to another college in what's called a non-comparable program. 
So it's different than the original program that they were 
studying at the first college. Those folks are also eligible 
for a discharge, but cannot obtain it automatically.
    Mr. Espaillat. Thank you. My next question is for Karyn 
Rhodes. Karyn may you describe the process of putting together 
and completing a closed school discharge application? How was 
your experience with that?
    Ms. Rhodes. Thank you for the question. It wasn't easy. And 
it was the most difficult part for me was finding proof of 
documentation from 1988 needed for my application. And my 
lawyer from Legal Aid was able to find more information than I 
was, which was unbelievable. My application was denied at 
first, and then Legal Aid sent an appeal, and then it was 
granted after that.
    And it took almost 2 years to finally get my school loan 
discharged and receive relief from the debt.
    Mr. Espaillat. Were you able to get like a lawyer easily, 
or someone that was experienced in this area?
    Ms. Rhodes. No actually I contacted legal aid through 
researching the internet and found that American Business 
Institute, there was a class action suit, and that's how I was 
able to reach Legal Aid, they were handling the class action 
suit, so they----
    Mr. Espaillat. So it's not like Legal Aid had a unit you 
know within their office that dealt you know with this kind of 
help right?
    Ms. Rhodes. Not to my knowledge. I just saw them on the 
internet, and I reached out to them immediately, because that 
was the first time I had seen anything related to my school 
that I could get some assistance.
    Mr. Espaillat. OK. And how long did you have to wait to 
receive relief from the Department of Education?
    Ms. Rhodes. It was about 2 years. I contacted Legal Aid in 
2018, and so it took about 2 years from then for the process 
from them starting the application, to being denied, and then 
submitting an appeal. And then I was granted my closed school 
discharge after that in August 2020.
    Mr. Espaillat. Very good thank you. Thank you Karyn. My 
last question is to Robyn Smith. And you mentioned in your 
testimony that many of the individuals who you worked with have 
been unable to obtain a discharge without the assistance of an 
attorney right? So on this same line of thought, you know how 
difficult is it out there to get an attorney? And it seems that 
you know it's necessary to have one to really be able to 
navigate through this entire process.
    Ms. Smith. That's a great question, thank you so much. 
First of all we do have 1.5 I'm half of attorneys dedicated to 
student loans at Legal Aid Foundation of LA, but most Legal 
Aid's in the country just don't have the resources to do that 
so it's very difficult for most low-income people to get legal 
assistance. It is difficult also to get these closed school 
discharges often because schools have reported incorrect 
information to the Department.
    In Ms. Rhodes case, the American Business Institute, which 
at the same time was being prosecuted for fraud had 
fraudulently reported that she graduated before the school 
closed. That mean that we, after the appeal, after the initial 
application was denied, we had to do a FOIA request to the 
Department of Education to get evidence to show that it did in 
fact lie about student outcomes, and it took us a year and a 
half to do before we could successfully appeal her case.
    Mr. Espaillat. Thank you, thank you, Madam Speaker I yield 
back, Madam Chair.
    Chairwoman Wilson. Thank you. Thank you. Ms. Letlow 
welcome.
    Ms. Letlow. Thank you. And to all the witnesses thank you 
for taking the time to testify before the Committee today. It's 
deeply concerning that the rate of school closures has 
drastically increased over the last decade. School closures are 
harmful to students and the educational system as a whole.
    I've said before 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. Therefore, I believe Congress and the Department 
should focus our attention to help students who are enrolled in 
a closing school to receive assistance to continue their 
education.
    We should not leave students without a path forward to 
obtain a degree. Mr. Cooper simply forgiving the debt of 
students attending closed schools without ensuring they have 
had every opportunity to continue their education seems like a 
misguided approach.
    Rather, it's important that Congress and the Department 
value the time and effort, and the work these students did 
during their time at school. Do you believe our current 
policies are too heavily slanted toward loan discharge, rather 
than helping students complete their education?
    Mr. Cooper. That certainly seems to be my perception that 
may be the case, that there doesn't seem to be enough emphasis 
on helping students get what they originally came to college 
for, which is a degree or certificate, helping them either 
complete their program or transfer their credits to another 
school and complete there.
    It does seem at times that the goal of the administration 
is to deliver as many closed school discharges as possible, 
rather than necessarily trying to help these students get what 
they originally came to college for. That's not to say you know 
that's always going to be a great option.
    I mean some schools have been more fraudulent, and the 
proper remedy there is probably a closed school discharge. But 
that's not the case all the time, and I do believe that there 
should be more emphasis on helping students complete the 
education that they originally set out to get in the first 
place.
    Ms. Letlow. Thank you so much. I do have a followup 
question for you Mr. Cooper. As you noted in your testimony the 
Biden administration recently expanded the look back window for 
discharge eligibility to students attending ITT Tech to 8 years 
before it's closure.
    I find it difficult to believe that the Department's had 
the ability to accurately verify the over 115,000 claims that 
they approved. In fact, the Office of Federal Student Aid 
announced this month that a number of borrowers improperly 
received approvals for borrower defense claims as they did not 
attend an eligible school.
    Do you have any indication as to how the Department may be 
verifying this information, and how can we ensure that taxpayer 
dollars are not being spent on fraudulent or incorrect 
discharge cases?
    Mr. Cooper. Thank you Congresswoman. I don't have any 
special insight into the Department's process for how they're 
adjudicating these claims, but I would say that I'm skeptical, 
especially when we have a look back window that's going back to 
2008, 13 years ago before a lot of the more sophisticated 
transfer tracking data and program tracking data that came 
online.
    I would be very skeptical that they're able to verify truly 
whether each of those students who's receiving a discharge is 
in fact eligible for one.
    Ms. Letlow. Thank you so much Mr. Cooper. And I yield back 
the remainder of my time to the Ranking Member.
    Ms. Foxx. Thank you very much Dr. Letlow. While I 
appreciate the work GAO has done in compiling this data on 
closed school discharges, it seems to me this work is far from 
complete. While GAO's testimony includes some potentially 
troubling numbers, we do not have the additional context 
necessary to properly assess this data.
    As Mr. Cooper just indicated, indeed the report does not 
include any context as to why some students have not received 
relief. Further, there's nothing to help further the discussion 
about which policies may be affected, and which need reform. 
Unfortunately, we know that over the next decade many 
institutions will close their doors because students are 
increasingly looking for options other than the traditional 
brick and mortar model.
    Federal policy needs to adapt to these changes. Rather than 
rushing a hearing on an incomplete report, the responsible 
thing to do would be to let GAO complete its work so we have a 
full picture about the implications of the Department's 
policies. In the meantime I would suggest the Committee turns 
its focus toward a bipartisan reform with the Higher Ed Act.
    So Mr. Cooper I have a question. Under certain 
circumstances institutions may be required to remit a letter of 
credit to the Department to serve as collateral when there are 
concerns about the financial viability of an institution. Mr. 
Cooper as you noted in your testimony your proposal was similar 
to this policy, but is more proactive.
    In essence, your proposal would address these problems on 
the front end, rather than have taxpayers pick up the tab on 
the back end. Can you describe the benefits of a more proactive 
approach such as yours including for students, schools, and 
taxpayers?
    Mr. Cooper. Thank you Dr. Foxx I'd be happy to. So as you 
noted one of the main problems right now with the way we're 
holding institutions accountable for their financial outcomes 
is that our system is very reactive, so the Department does 
have the authority to request letters of credit from 
financially troubled schools in order to protect taxpayers, but 
often the Department waits to request these letters of credit 
until the financial troubles have become apparent and few banks 
are willing to extend this kind of surety to an institution 
which the Department has just said is in serious financial 
trouble.
    In some cases requesting a letter of credit can actually 
accelerate the collapse of an institution as you saw in the 
case of ITT Tech in which the Department requested the letter 
of credit from the institution which ITT Tech was not able to 
secure, and therefore had to shut down just 2 weeks after the 
Department made its request.
    This is why we need a more proactive approach in terms of 
holding schools accountable for the costs that they impose on 
taxpayers. I believe that if an institution decides to 
participate in the Federal student loan program, it is putting 
a certain amount of financial risk on taxpayers who will have 
to pick up the tab if the school closes without a teach out 
plan, or without a transfer of credit policies in place.
    And that's why because institutions are presenting this 
risk to taxpayers that they should be required to purchase 
insurance in order to make taxpayers whole in the event of a 
closure which will also provide the right incentives for 
schools to make sure that when its closure does have to happen, 
the school is wound down in an orderly fashion and students 
have numerous options to complete their education.
    Ms. Foxx. Madam Chair I'm going to yield back time from my 
time. Madam Chair I wouldn't go over that long, except I'll 
yield back time when it's my time OK?
    Chairwoman Wilson. OK. Thank you so much I appreciate it. 
And now Mr. Castro of Texas.
    Mr. Castro. Thank you Chair. The Department of Education 
has a duty under Federal law to provide debt relief to students 
who were defrauded by a for-profit college, and left holding 
the bag with nothing to show for it.
    School closures have left thousands of students many unable 
to find jobs in their field of study saddled with incredible 
student loan debt. And too many families shoulder the burden of 
debt when relief is available. To think that about half of 
eligible borrowers did not apply for a discharge, even 3 years 
after their school closed, and struggle with crippling debt is 
really shameful.
    That's why the conversation that we're having today about 
supporting these students is very important. Restoring the 
automatic discharge process is the right thing to do. We must 
protect students when they are affected by abrupt school 
closures, and I'm glad the Biden administration has taken steps 
to extend relief to students.
    I'd like to hear from Ms. Rhodes, our student borrower in 
this, so that she can share with the Committee how the 
Department of Education could have assisted her and many 
students who needed relief, and so Ms. Rhodes I had a question 
for you.
    Although you were eventually able to get your loans 
discharged, how do you think the Department of Education should 
have done a better job to mitigate the consequences that you 
experienced? And also, after your school closed, how long did 
it take you to decide your next steps, and whether or not you 
wanted to transfer to another institution?
    Ms. Rhodes. Thank you. As far as what I feel the Department 
of Education should have done, I feel that they should have 
done a better job to mitigate the consequences of a school 
closure for all students. When they decided to close the school 
there should have been a program in place to help students 
transition from a closed school to another school of their 
choice.
    They should have made sure that all of the students with 
the loan from any school closure had access to the appropriate 
resources, and that could have been discharged--that could have 
discharged their debt. My hope is that the Department of 
Education will implement a program that is easy for students to 
be informed about their options when a school closes.
    Inform them on how to transfer to another school, or about 
the discharge process, giving students like myself the full 
access to the resources needed to complete their application 
and receive their discharge loans in a timely manner. It 
shouldn't take several years to get assistance or relief from a 
closed school loan, and your second question?
    Mr. Castro. How long did it take you to decide your next 
steps, and whether or not you wanted to transfer to another 
institution?
    Ms. Rhodes. OK. It didn't take me very long to figure out 
my next steps because I basically was working, and just decided 
to continue to work. Once I realized the school was closed and 
I had no other options, no assistance to help me, I just 
continued working and just moved on. That was my only options 
at the time.
    Mr. Castro. Was there anything in your discussions with 
others that were affected in the same way that you were, 
classmates for example. Was there any other advice that you 
have for us, or anything else that you've picked up from them 
that you want to share with the Committee as we think about 
this issue?
    Ms. Rhodes. Basically I really feel like it should be some 
kind of mainly informing the students of what's going on 
because I think that was the biggest problem. We didn't know 
what was going on. We didn't know what to do. We didn't know 
why the school was closing. We're hearing the information 
secondhand.
    And then we have no resources to go anywhere to get 
assistance, so our hands were kind of tied. It's like what do 
you do? You have this debt looming over you and you can't do 
anything about it, and you have to pay it back. And then I for 
years felt that it was very unfair that I had to carry a debt 
and be responsible, and then it's ballooning to $26,000.00, and 
I can't get any assistance.
    And even when I applied I was denied without having Legal 
Aid or an attorney, so it's very difficult to navigate the 
process, so they need to have something to help us be able to 
work through the process.
    Mr. Castro. Notable. Thank you, Ms. Rhodes, for sharing 
your story with us.
    Ms. Rhodes. Thank you.
    Mr. Castro. When for-profit institutions that close their 
doors often thousands, hundreds or thousands of students 
suffer, and so we want to make sure that we prioritize the 
needs of defrauded students, and provide immediate and complete 
relief to that, so thank you. I yield back.
    Chairwoman Wilson. Thank you Mr. Castro. And now we'll go 
to Ranking Member Foxx. You have 4 minutes left.
    Ms. Foxx. Thank you Madam Chair, I appreciate that very 
much. I'll keep to my commitment. Mr. Cooper I would like to go 
back to you. While my colleagues are focused on one particular 
sector, both your testimony and that of GAO's note that for-
profits are not the only schools that have been forced to close 
their doors.
    Further, I think it's safe to say that many more will have 
closed in the previous 18 months, many more would have closed 
in the previous 18 months if it were not for the substantial 
support provided through the CARES Act, and subsequent relief 
packages.
    What factors are driving this trend of non-profit school 
closures, and do you expect this trend to accelerate? What 
changes to the way we handle these closures should be made to 
prepare for this coming consolidation in higher education?
    Mr. Cooper. Thank you, Dr. Foxx. Yes as you mentioned that 
for-profit institutions are not the only institutions that 
close, while they're most of them, they're not all of the 
institutions. And I do worry that you now as we're seeing the 
number of students participating in higher education has been 
dropping since about 2010, and that's a pretty natural process 
because as the economy was improving over the course of the 
2010's, fewer students wanted to go into education, most had 
better job opportunities, there were more jobs available, there 
were higher earning jobs available.
    And so the labor market simply looked more attractive to 
them. And so this is great for students obviously, but it 
leaves the question of what happens to the institutions? And of 
course some of them are going to close. That's a natural part 
of the higher education system. Institutions are going to close 
sometimes, and we need to make sure that we are prepared to 
deal with the consequences of those closures when they happen.
    Private non-profit institutions as noted, were relieved by 
the tremendous relief that Congress committed in the CARES Act 
and subsequent relief packages which definitely staved off a 
number of college closures, but that might not be the case 
forever. It might be the case that we might see another round 
of college closures as the economy recovers from the recession 
associated with the COVID-19 pandemic.
    And there's no guarantee that all of those closures are 
going to be for-profit colleges, it's possible that private 
non-profit colleges will be among the closures as well. It's 
also possible I would say that for-profit colleges in order to 
avoid the disproportionate regulation that is targeting them, 
might simply decide to change their tax status to non-profits, 
and thereby avoid those regulations, which is one reason that 
we also can't ignore the private non-profit sector.
    So yes, it's something that we absolutely need to be 
prepared for, and that's why I believe the insurance mandated 
proposal that I laid out in my written testimony is the best 
way to use incentives-based accountability in order to protect 
taxpayers and the students when these closures inevitably 
happen.
    Ms. Foxx. Thank you very much. Ms. Emrey-Arras, isn't it 
true that borrowers will still be able to obtain a closed 
school discharge by submitting a short application? And can you 
describe quickly what this application process looks like?
    Ms. Emrey-Arras. Yes Dr. Foxx thank you for the question. 
Yes borrowers will still be able to apply for a discharge 
through that process, and they will need to complete the 
application form which is two and a half pages, and has 
information about the borrower and their attendance at the 
closed school.
    Ms. Foxx. Thank you very much and again thank you Madam 
Chairman for your tolerance on my going over at the time that 
was given to me, I yield back.
    Chairwoman Wilson. Thank you so much, thank you. I'll go 
down here. Our distinguished Chairman of the Committee Mr. 
Scott.
    Mr. Scott. Thank you, thank you Madam Chairman and I want 
to thank all the witnesses for being with us today. First Ms. 
Smith in the clients that you represent, are they given any 
credit for payments made after they were entitled to discharge, 
or is just the balance due when the dust settles it's the only 
thing that gets discharged?
    Ms. Smith. Thank you. That's a great question. When the 
discharge happens they get a complete discharge of all amounts 
that are outstanding on the debt, so that includes interest and 
fees. They also get a refund of any amounts that they have paid 
back, and they do also get their Pell Grant eligibility 
restored, which is very important because then that allows them 
to restart the higher education at a legitimate institution if 
they want to.
    Mr. Scott. What do they get paid back?
    Ms. Smith. When it sometimes----
    Mr. Scott. What do they get paid back?
    Ms. Smith. They get paid back all amounts that were 
involuntarily taken from them, for example, if tax refunds were 
taken, if their wages were garnished, if social security was 
offset they get all of that money back.
    Mr. Scott. What about payments that were made after they 
were entitled to a discharge?
    Ms. Smith. Yes. All of that is returned as well.
    Mr. Scott. OK thank you. Ms. Emrey-Arras we've heard a 
little back and forth about non-profits and profits. We're 
looking into the for-profit conversions and the non-profits for 
reasons that have been articulated to avoid any abuse there.
    But what is the percentage of those abruptly closing in 
terms of profit and non-profit?
    Ms. Emrey-Arras. I don't have the figures of the schools at 
my hands. I know that 86 percent of the borrowers who were 
affected by school closures had been attending for-profit 
schools.
    Mr. Scott. Thank you. And we've heard from the Ranking 
Member and from Mr. Cooper about the importance of being 
proactive rather than reactive. Let me ask you a couple of 
questions all at once. One, should we be expecting more from 
our accreditors?
    These people they don't go insolvent overnight, should the 
accreditors be doing more? And if they abruptly close what 
could we have done to have made the school, not the taxpayer, 
pay for the closed school discharges? We know there's a letter 
of credit that can be available, but I understand one school 
had a nice letter of credit, but the Department of Education 
let them spend most of it.
    So when the dust settles there wouldn't be much for 
reimbursement. What could we reasonably expect in terms of 
bonding or to cover these losses, and personal responsibility 
for officers that were involved in the fraud?
    Ms. Emrey-Arras. Thank you for those questions, Chairman 
Scott. In terms of our prior work I can note that we have done 
work previously looking at accreditors, and whether accreditors 
sanction schools that were in financial distress, and we found 
that they did not always do so, so we have that work out there 
that shows that they have not always done that.
    In addition, we have done work--actually let me clarify. 
This work is a little bit dated, but the work on the 
accreditors found that they did not always sanction for schools 
that had quality metrics. They actually did a better job on the 
financial metric side in terms of holding schools accountable.
    In terms of our other work on what the Department of 
Education should do. We have an existing recommendation that 
has been referred to previously in Mr. Cooper's statement, 
which is to have the Department of Education improve the 
financial composite score.
    We found that it is an imprecise measure of school 
closures. It does not always predict which schools are going to 
close--those that are in financial trouble are not always 
caught in this metric, and we have an outstanding 
recommendation on that issue from 2017.
    So we're still waiting for the Department of Education to 
implement our recommendation. And our recommendation is to 
improve that composite score so that it does take into account 
broader metrics of financial health, including liquidity and 
historical trends.
    Mr. Scott. And you also suggested that it could be subject 
to manipulation, I assume your recommendation would correct for 
that. What about bonding and personal responsibility to recoup 
the losses, rather than taxpayer get left holding the bag?
    Ms. Emrey-Arras. We haven't done work on that sir.
    Mr. Scott. In terms of the bonding or letters of credit?
    Ms. Emrey-Arras. We have done work in a prior study on the 
financial responsibility score looking at the fact that letters 
of credit are required, but again you may not get to that point 
if the financial composite score doesn't correctly identify 
schools in financial distress.
    So even if that is a potential tool for the Department, 
they may not always use that tool.
    Mr. Scott. And you didn't look into personal responsibility 
of officers who may be involved in the fraud?
    Ms. Emrey-Arras. Correct. We have not looked at that sir.
    Mr. Scott. Thank you. Thank you Madam Chair, I yield back. 
Madam Chair I yield back.
    Chairwoman Wilson. Ms. McClain.
    Mrs. McClain. Hi. Thank you Madam Chair. Can you hear me?
    Chairwoman Wilson. I can, thank you.
    Mrs. McClain. OK thank you. I'm curious and I have a couple 
questions is we're not forcing these students to go to a for-
profit college correct? They do have options to go to a non-
profit college correct? Anyone can answer.
    Mr. Cooper. Yes that's correct.
    Mrs. McClain. OK. So the student does have some choice in 
terms of what college they choose right? I guess my question is 
this why is the answer always a bail out on the taxpayer when 
students have choices? Now I'm not saying that I don't have any 
empathy for the students who fall victim to this, but at the 
end of the day why if they have a choice does the bearer of the 
responsibility always fall on the taxpayer?
    I don't think that's fair either. So Mr. Cooper I think 
something needs to be said for personal responsibility. So 
students are willingly taking out massive loans for an 
education. Do you get any sense that these students are doing 
the background research that they need to do prior to taking 
out this massive loan and choosing the school of choice before 
they take out thousands of dollars in loans?
    Mr. Cooper. Thank you Congresswoman McClain. I think it's 
definitely very important to consider personal responsibility 
in these discussions, but it often goes unexamined, and yes 
there is a responsibility for the student to do their due 
diligence when they're choosing a school and to make use of the 
data that is available out there that the Department of 
Education under Secretary DeVos has made available on student 
outcomes.
    But I also do believe that there are things that 
policymakers can also do in order to guide the system in the 
right direction because the Education Department as we've seen, 
as Ms. Emrey-Arras has noted, is not necessarily great at 
predicting when these schools are going to close.
    Their current financial responsibility metrics are simply 
not predictive. They're somewhat predictive, but they're 
generally not very good at predicting when these schools are 
going to close. And so I wonder that when the Department of 
Education is having such a hard time with this, that students 
might also not necessarily have all the information available 
to them in order to figure out is this school that I'm 
attending at risk of closure?
    Because as we've seen the data that the Department of 
Education is putting out in terms of the financial 
responsibility metrics, the financial responsibility composite 
scores is flawed, and they do not always figure into when the 
school is going to close. And students that might be thinking 
about that might be making their decisions based on incomplete 
or imperfect information out there.
    And so yes, we absolutely shouldn't dismiss the role of 
personal responsibility, but I also believe that there is a 
role for policy in terms of improving the information that's 
available to students and pushing the higher education system 
in the right direction.
    Mrs. McClain. But to that end why is it my responsibility 
as a taxpayer to bail that institution out? Why not bail out 
failing other industries of people? Why does it always fall on 
the taxpayer?
    Mr. Cooper. I agree with you that it shouldn't be the 
taxpayer's responsibility to bail out these institutions.
    Mrs. McClain. OK.
    Mr. Cooper. That's why I propose that institutions be 
required to purchase insurance to make taxpayers whole.
    Mrs. McClain. I fully agree with you on that because I 
think as a taxpayer who does their due diligence, I shouldn't 
be responsible for somebody else's you know, where does that 
road end is I think the issue. And I like the idea of instead 
of giving loans, or forgiving the loans excuse me, forgiving 
the loans, maybe we should focus our effort instead of putting 
the burden on the taxpayer, finding other resources to get 
students into other schools.
    Because at the end of the day that was their ultimate goal 
right, was to get an education of which they were defrauded on, 
or for whatever reason a bad institution for example. That 
would be to me a much better use of our time, effort, energy 
and resources as opposed to burdening the taxpayers with paying 
their debt.
    Let's help them, and let's spend our time and effort and 
energy on finding another school as opposed to burdening the 
taxpayer. Would you agree with that synopsis?
    Mr. Cooper. I fully agree yes.
    Mrs. McClain. OK. With that I yield back.
    Chairwoman Wilson. Thank you so much.
    Mrs. McClain. Thank you.
    Chairwoman Wilson. I think we all have exhausted our 
witnesses with our testimony and questions today. Is there 
anyone else? OK. I 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 by close of business on October 14, 2021, preferably in 
Microsoft Word format. The material submitted must address the 
subject matter of the hearing. Only a Member of the 
Subcommittee, or an invited witness, may submit materials for 
inclusion in the hearing record.
    Documents are limited to 50 pages each. Documents longer 
than 50 pages will be incorporated into the record by way of 
the internet link, and that you must 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]. 
Again, I want to thank all of the witnesses for their 
participation today. Members of the Subcommittee may have 
additional questions for you, and we ask the witnesses to 
please respond to those questions in writing.
    The hearing record will be held open for 14 days in order 
to receive those responses. I remind my colleagues that 
pursuant to Committee practice, witness questions for the 
hearing record must be submitted to the Majority Committee 
Staff, or Committee Clerk within 7 days.
    The questions submitted must address the subject matter of 
the hearing. I now recognize the distinguished Ranking Member 
for a closing statement, Doctor Murphy.
    Mr. Murphy. Thank you Madam Chairman. I just want to extend 
a thank you to the speakers who came and witnesses who came 
today. I think we learned a great deal. We learned a lot and I 
think there was a lot of common ground discussed. I will say as 
someone who took out thousands of dollars of student loans 
myself to go to college and enter medical school, I would be 
devastated if I showed up 1 day and the school was closed, and 
I was left holding the bill.
    So I am truly empathetic with the cause that we are 
discussing here. But I want to return to just to one issue that 
I think is something that the Committee actually can find a 
great deal of bipartisan support for, and that was the issue of 
that insurance.
    But I just want to make sure that everyone understands how 
insurance actually works. A comment made by one of my 
colleagues argued that the burden of purchasing insurance would 
fall equally on all institutions, including those with the 
likelihood--very little likelihood of closure, and that's 
factually correct.
    But then again let's remember what insurance does, and I 
often fall back on my experience in medicine, and I apologize 
for this, but it's what I know best. As a physician I am 
required, as are all physicians to pay malpractice insurance, 
but the infinite majority of physicians do not have claims put 
against them.
    So while I may never not have a claim put against me, I am 
still paying malpractice insurance. And so while it's very 
similar in this concept that the function of a specific risk of 
an individual policy holder, which in this case is the 
individual school. And so they have to take some--pay for some 
risk for others that are within the educational system for 
failure.
    Therefore, however but in total contrast the policies that 
we're talking about today--the ones which the Biden 
administration seeks to expand, places the entire burden of the 
student's debt on hard-working taxpayers, a significant number 
of which never went to college.
    And so I just want to make this distinction very, very 
clear. We have two different very different paradigms. We have 
the tried-and-true method of insurance protection, or sadly 
enough, the often-repeated policy of continuing placing burdens 
on taxpayers. And while it's important that students who are 
unable to complete their degree have protections, I believe 
there's consensus on this Committee.
    It's equally important that we understand that taxpayers do 
as well. The proposal that was discussed today about insurance 
is one way of doing so. And this is why I really suggest that 
we work together in a bipartisan manner to reform the Higher 
Education Act, and discuss this further. It is a proactive way 
of helping these students who have been left out in the cold. 
It's critical that we do this despite my colleague's focus 
sometimes on a limited set of defunct proprietary claims that 
policy experts agree that over the coming decades we will see 
also another wave of school closures.
    So let's get this right now. This is not being just for 
for-profit schools, but for everyone. So let us work together 
on a proactive way of dealing with this rather than just 
dumping things often times again on taxpayers, most of which 
have no skin in this game.
    So let's talk about ensuring that students have the ability 
to complete their degree, which is the ultimate goal, and earn 
their credentialling that leads to a process of life-long 
success, and that should be our No. 1 priority. Burdening 
taxpayers further with other people's debt should be our last 
resort. Thank you Madam Chairman, thank you again visitors, and 
I yield back.
    Chairwoman Wilson. Thank you Dr. Murphy. I now recognize 
myself for a closing statement. I want to thank all of the 
witnesses for your time today. You have just been exceptional. 
All of us have learned so much, and we take your testimony 
very, very seriously, so thank you for taking the time from 
your busy day to come before our Higher Education Committee and 
testifying.
    We appreciate it so much. I want to particularly thank the 
Government Accountability Office for sharing its preliminary 
findings with our Committee, we really appreciate it. The GAO's 
examination of the closed school discharge process identified 
important challenges that the Education Department must address 
to support students affected by abrupt college closures.
    As our witnesses discussed, school closures are devastating 
to students, plunging them into financial and emotional 
despair, while robbing them of the education and opportunities 
they deserve. As the Education Department and the Negotiating 
Committee begin considering changes to the closed school 
discharge process, borrowers like Miss Rhodes, must be at the 
center of their discussions.
    The GAO's findings point to three clear steps that the 
Education Department can take to improve the closed school 
discharge process. First, restore the automatic school 
discharge process and streamline relief for students.
    Second, conduct better oversight of teach out plans to help 
students complete their degrees. And third, crack down on 
predatory schools that are costing students and taxpayers 
billions of dollars. I look forward to working with the 
Education Department to better protect students and taxpayers 
affected by school closures, a majority of which are predatory 
colleges, including holding these owners and executives that 
defraud their students to take on personal responsibility for 
their actions.
    I look forward to hearing more from you as you answer 
questions that are submitted to you, and thank you again for 
being our witnesses today. If there is no further business 
without objection the Subcommittee stands adjourned. Thank you 
so much.
    [Additional submission by Hon. Mark Takano, a 
Representative in Congress from the State of California 
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    [Question submitted for the record and the response by Ms. 
Emrey-Arras follows:]
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    [Questions submitted for the record and the responses by 
Ms. Smith follow:]
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    [Whereupon, at 12:28 p.m., the Subcommittee adjourned.]

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