[Congressional Record Volume 140, Number 8 (Thursday, February 3, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: February 3, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
             THE INTEGRITY OF FEDERAL STUDENT AID PROGRAMS

  Mr. PELL. Mr. President, as the chairman of the Subcommittee on 
Education, Arts, and Humanities, I am dedicated to ensuring that our 
student aid programs serve the purpose for which they are intended: to 
provide access to quality educational opportunities for deserving 
students. I am equally dedicated to doing everything possible to 
safeguard these essential programs from those who would defraud and 
abuse them.
  Mr. President, I read with great concern the New York Times articles 
on fraud and abuse in our student aid programs. In view of those 
articles, I think it important to note that today, the Department of 
Education, under the able leadership of Secretary Riley, is working to 
reverse the downward spiral in student aid program review and 
administration that occurred during the 1980's. Secretary Riley clearly 
understands that the public's confidence in our student aid programs 
depends, in large measure, upon its confidence in the Department's 
ability to effectively administer those programs, to root out abuse, 
and to punish those who would cheat or defraud the Government. I 
applaud his ongoing efforts to strengthen the operation and oversight 
of our vital student aid programs.
  I also wish to applaud our most able colleague, the senior Senator 
from Georgia, Sam Nunn, for his continuing efforts to ensure the 
integrity of these programs. As Senator Nunn knows, my subcommittee 
took very seriously the recommendations of his Permanent Subcommittee 
on Investigation to strengthen the loan program. Indeed, most of those 
recommendations were included in our 1992 reauthorization bill.
  Like his earlier student loan program hearings, I anticipate that 
Senator Nunn's recent work on abuses in the Pell Grant Program will 
produce important information that will help us to strengthen that 
program. I was pleased to testify at the first of two hearings on Pell 
grant abuses Senator Nunn conducted last October and I look forward to 
continuing to work closely with him as he holds additional hearings on 
the student aid programs in the near future. Senator Nunn has my 
assurance that I stand ready to work with him to develop any necessary 
changes to current law.
  Mr. President, I wish to highlight some of the most significant 
actions we have taken, to date, to end student aid program abuses. In 
the early 1980's, we focused on efforts to recover money from those who 
did not repay their loans. We required that loan defaulters be reported 
to credit agencies so that failure to repay their loans meant they 
could not get a credit card or borrow money to buy a car.
  We also put into place and made permanent the requirement that the 
tax refunds of defaulters be withheld. This provision caused a storm of 
protest from deadbeats who had not repaid their loans. It has also 
resulted in the recovery of an estimated $2 billion in defaulted loans.
  Since 1986, Federal law has required students to maintain at least a 
C average or its equivalent in order to continue receiving Federal 
student aid. We also require that the student must be working toward a 
degree or certificate, and not just taking a course because of personal 
interest.
  In 1987, in response to growing student default rates, the Senate 
adopted an amendment to cut off school participation in the loan 
program if the institution had a default rate in excess of 25 percent. 
After passing the Senate several times, the legislation was finally 
enacted 4 years ago. To date, nearly 400 schools have been dropped from 
the program as a result of this legislation. This year, additional 
schools with default rates above 25 percent for the past 3 years will 
become ineligible.
  But whatever we do and whatever we require, the Department must be 
diligent in its enforcement of the law. At the default hearings the 
Education Subcommittee held in 1987, we found that annual institutional 
program reviews by the Department of Education had dropped by two-
thirds, from 1,200 a year to 400. This disturbing reduction in program 
reviews occurred at the same time the student loan programs were 
growing. To put it simply, Mr. President, the policeman had been taken 
off the beat. I believe we all know what happens when that occurs.
  Following our 1987 hearings, we developed even more comprehensive 
legislation to curb default problems. With the cooperation of former 
Secretaries Cavazos and Alexander, many of these reforms were 
implemented through Federal regulations. The problem, however, remained 
that the Department had so severely cut back personnel that unless a 
problem bubbled to the surface, it often went unnoticed and uncovered.
  When we reauthorized the Higher Education Act in 1992, we enacted 
numerous program reforms that are just now being implemented. Included 
in the new law are provisions that: Require that short-term programs 
maintain at least a 70-percent completion and a 70-percent placement 
rate to participate in Federal student aid programs; ban from student 
aid programs for-profit schools that derive more than 85 percent of 
their total revenues from such programs; require that schools have in 
effect a fair and equitable pro rata refund policy; and bar schools 
from using paid recruiters to attract students.
  The 1992 amendments also strengthen the three legs of the triad, 
which consists of State oversight and licensing, accreditation by a 
separate and independent accrediting body, and institutional 
eligibility and certification by the Department of Education. Last 
week, the Department issued proposed rules to implement the new 
statutory provisions that strengthen the roles of the States and 
accrediting bodies.
  As the New York Times articles point out, the law now contains a list 
of triggers, and a school that trips any one of these triggers must 
undergo rigorous State review. To assist States in performing these 
mandated reviews, we provided $5 million last year and an additional 
$21 million for this fiscal year. Under the 1993 budget bill, States 
that fail to take this mandate seriously will end up owning the Federal 
Government a share of the default costs for schools that exceed a 20 
percent cohort default rate. Some of the schools that have been the 
subject of recent investigations by the GAO and the Senate Permanent 
Subcommittee on Investigations would indeed trigger such a review under 
the new law. Still others would be identified as a result of the 
mandatory recertification review required by the 1992 amendments.
  Mr. President, we have evidence that our program integrity efforts 
are meeting with success. The national default rate has fallen from 
22.4 percent in fiscal year 1990 to 17.6 percent in fiscal year 1991, 
the most recent year for which we have data.
  The Department of Education has doubled the share of initial 
institutional applications for student aid that are rejected--from 17 
percent and 44 denials in 1990 to 35 percent and 87 denials in 1993.
  The Department has increased the number of LS&T [Limitation, 
Suspension, and Termination] actions taken from 70 in fiscal year 1990 
to 168 in fiscal year 1993. Although the actual numbers are not yet 
official, the Department plans to significantly increase the number of 
staff devoted to institutional gatekeeping and monitoring in the 
current fiscal year.
  The Department will increase from 300 in fiscal year 1993 to 
approximately 1,000 in fiscal year 1994 the number of institutions on a 
reimbursement system. In other words, those institutions will not be 
permitted to automatically draw down student aid money. This number 
compares to a total of 6,300 institutions that are certified to 
participate in the Pell Grant Program. Further, higher education 
technical amendments enacted late last year will strengthen the 
Department's ability to place these institutions on a reimbursement 
system--without concern that abusive schools may be able to block its 
action through litigation.
  The number of institutional reviews--which fell below to 400 during 
the mid-1980's--will increase from 600 in fiscal year 1993 to about 
1,000 in fiscal year 1994.
  The Department expects that the States, in carrying out their new 
responsibilities pursuant to the 1992 amendments, will review 1,600 
institutions this year alone. For fiscal year 1995, the Department is 
requesting funds sufficient to enable States to conduct reviews of 
2,000 institutions.
  Mr. President, as I stated at the beginning, we have two equally 
important objectives: One to make sure that students who receive aid 
are deserving of that aid and take their responsibilities seriously 
and, two, to make certain that the schools who participate in Federal 
aid are on the up-and-up and provide a quality education.

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