[House Report 107-225]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    107-225

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



 
               INTERNET EQUITY AND EDUCATION ACT OF 2001

                                _______
                                

October 2, 2001.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Boehner, from the Committee on Education and the Workforce, 
                        submitted the following

                              R E P O R T

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

                        [To accompany H.R. 1992]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 1992) to amend the Higher Education Act 
of 1965 to expand the opportunities for higher education via 
telecommunications, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Internet Equity and Education Act of 
2001''.

SEC. 2. EXCEPTION TO 50 PERCENT CORRESPONDENCE COURSE LIMITATIONS.

  (a) Definition of Institution of Higher Education for Title IV 
Purposes.--Section 102(a) of the Higher Education Act of 1965 (20 
U.S.C. 1002(a)) is amended by adding at the end the following new 
paragraph:
          ``(7) Exception to limitation based on course of study.--
        Courses offered via telecommunications (as defined in section 
        484(l)(4)) shall not be considered to be correspondence courses 
        for purposes of subparagraph (A) or (B) of paragraph (3) for 
        any institution that--
                  ``(A) is participating in either or both of the loan 
                programs under part B or D of title IV on the date of 
                enactment of the Internet Equity and Education Act of 
                2001;
                  ``(B) has a cohort default rate (as determined under 
                section 435(m)) for each of the 3 most recent fiscal 
                years for which data are available that is less than 10 
                percent; and
                  ``(C)(i) has notified the Secretary, in a form and 
                manner prescribed by the Secretary (including such 
                information as the Secretary may require to meet the 
                requirements of clause (ii)), of the election by such 
                institution to qualify as an institution of higher 
                education by means of the provisions of this paragraph; 
                and
                  ``(ii) the Secretary has not, within 90 days after 
                such notice, and the receipt of any information 
                required under clause (i), notified the institution 
                that the election by such institution would pose a 
                significant risk to Federal funds and the integrity of 
                programs under title IV.''.
  (b) Definition of Eligible Student.--Section 484(l)(1) of the Higher 
Education Act of 1965 (20 U.S.C. 1091(l)(1)) is amended by adding at 
the end the following new subparagraph:
                  ``(C) Exception to 50 percent limitation.--
                Notwithstanding the 50 percent limitation in 
                subparagraph (A), a student enrolled in a course of 
                instruction described in such subparagraph shall not be 
                considered to be enrolled in correspondence courses if 
                the student is enrolled in an institution that--
                          ``(i) is participating in either or both of 
                        the loan programs under part B or D of title IV 
                        on the date of enactment of the Internet Equity 
                        and Education Act of 2001;
                          ``(ii) has a cohort default rate (as 
                        determined under section 435(m)) for each of 
                        the 3 most recent fiscal years for which data 
                        are available that is less than 10 percent; and
                          ``(iii)(I) has notified the Secretary, in 
                        form and manner prescribed by the Secretary 
                        (including such information as the Secretary 
                        may require to meet the requirements of 
                        subclause (II)), of the election by such 
                        institution to qualify its students as eligible 
                        students by means of the provisions of this 
                        subparagraph; and
                          ``(II) the Secretary has not, within 90 days 
                        after such notice, and the receipt of any 
                        information required under subclause (I), 
                        notified the institution that the election by 
                        such institution would pose a significant risk 
                        to Federal funds and the integrity of programs 
                        under title IV.''.

SEC. 3. DEFINITION OF ACADEMIC YEAR.

  Section 481(a) of the Higher Education Act of 1965 (20 U.S.C. 
1088(a)) is amended by adding at the end the following new paragraph:
  ``(3) For the purposes of any eligible program, a week of instruction 
is defined as a week in which at least one day of regularly scheduled 
instruction or examinations occurs, or at least one day of study for 
final examinations occurs after the last scheduled day of classes. For 
an educational program using credit hours, but not using a semester, 
trimester, or quarter system, an institution of higher education shall 
notify the Secretary, in the form and manner prescribed by the 
Secretary, if the institution plans to offer an eligible program of 
instruction of less than 12 hours of regularly scheduled instruction, 
examinations, or preparation for examinations for a week of 
instructional time.''.

SEC. 4. INCENTIVE COMPENSATION.

  (a) Amendment.--Part G of title IV of the Higher Education Act of 
1965 is amended by inserting after section 484B (20 U.S.C. 1091b) the 
following new section:

``SEC. 484C. INCENTIVE COMPENSATION PROHIBITED.

  ``(a) Prohibition.--No institution of higher education participating 
in a program under this title shall make any payment of a commission, 
bonus, or other incentive payment, based directly on success in 
securing enrollments or financial aid, to any person or entity directly 
engaged in student recruiting or admission activities, or making 
decisions regarding the award of student financial assistance, except 
that this section shall not apply to the recruitment of foreign 
students residing in foreign countries who are not eligible to receive 
Federal student assistance.
  ``(b) Exceptions.--Subsection (a) does not apply to payment of a 
commission, bonus, or other incentive payment--
          ``(1) pursuant to any contract with any third-party service 
        provider that has no control over eligibility for admission or 
        enrollment or the awarding of financial aid at the institution 
        of higher education, provided that no employee of the third-
        party service provider is paid a commission, bonus, or other 
        incentive payment based directly on success in securing 
        enrollments or financial aid; or
          ``(2) to persons or entities for success in securing 
        agreements, contracts, or commitments from employers to provide 
        financial support for enrollment by their employees in an 
        institution of higher education or for activities that may lead 
        to such agreements, contracts, or commitments.
  ``(c) Exception for Fixed Compensation.--For purposes of subsection 
(a), a person shall not be treated as receiving incentive compensation 
when such person receives a fixed compensation that is paid regularly 
for services and that is adjusted no more frequently than every six 
months.''.
  (b) Conforming Amendment.--Paragraph (20) of section 487(a) of the 
Higher Education Act of 1965 (20 U.S.C. 1094(a)(20)) is repealed.
  (c) Technical Amendment.--Section 487(c)(1) of the Higher Education 
Act of 1965 (20 U.S.C. 1094(c)(1)) is amended by striking ``paragraph 
(2)(B)'' each place it appears in subparagraphs (F) and (H) and 
inserting ``paragraph (3)(B)''.

SEC. 5. EVALUATION AND REPORT.

  (a) Information from Institutions.--
          (1) Institutions covered by requirement.--The requirements of 
        paragraph (2) apply to any institution of higher education 
        that--
                  (A) has notified the Secretary of Education of an 
                election to qualify for the exception to limitation 
                based on course of study in section 102(a)(7) of the 
                Higher Education Act of 1965 (20 U.S.C. 1002(a)(7)) or 
                the exception to the 50 percent limitation in section 
                484(l)(1)(C) of such Act (20 U.S.C. 1091(l)(1)(C));
                  (B) has notified the Secretary under section 
                481(a)(3) of such Act (20 U.S.C. 1088(a)(3)); or
                  (C) contracts with outside parties for--
                          (i) the delivery of distance education 
                        programs;
                          (ii) the delivery of programs offered in 
                        nontraditional formats; or
                          (iii) the purpose of securing the enrollment 
                        of students.
          (2) Requirements.--Any institution of higher education to 
        which this paragraph applies shall comply, on a timely basis, 
        with the Secretary of Education's reasonable requests for 
        information on changes in--
                  (A) the amount or method of instruction offered;
                  (B) the types of programs or courses offered;
                  (C) enrollment by type of program or course;
                  (D) the amount and types of grant, loan, or work 
                assistance provided under title IV of the Higher 
                Education Act of 1965 that is received by students 
                enrolled in programs conducted in nontraditional 
                formats; and
                  (E) outcomes for students enrolled in such courses or 
                programs.
  (b) Report by Secretary Required.--The Secretary of Education shall 
conduct by grant or contract a study of, and by March 31, 2003, submit 
to the Congress, a report on--
          (1) the effect that the amendments made by this Act have had 
        on--
                  (A) the ability of institutions of higher education 
                to provide distance learning opportunities to students; 
                and
                  (B) program integrity;
          (2) with respect to distance education or correspondence 
        education courses at institutions of higher education to which 
        the information requirements of subsection (a)(2) apply, 
        changes from year-to-year in--
                  (A) the amount or method of instruction offered and 
                the types of programs or courses offered;
                  (B) the number and type of students enrolled in 
                distance education or correspondence education courses;
                  (C) the amount of student aid provided to such 
                students, in total and as a percentage of the 
                institution's revenue; and
                  (D) outcomes for students enrolled in distance 
                education or correspondence education courses, 
                including graduation rates, job placement rates, and 
                loan delinquencies and defaults;
          (3) any reported and verified claim of inducement to 
        participate in the student financial aid programs and any 
        violation of the Higher Education Act of 1965, including any 
        actions taken by the Department of Education against the 
        violator; and
          (4) any further improvements that should be made to the 
        provisions amended by this Act (and related provisions), in 
        order to accommodate nontraditional educational opportunities 
        in the Federal student assistance programs while ensuring the 
        integrity of those programs.

SEC. 6. LEARNING ANYTIME ANYWHERE PARTNERSHIPS.

  Section 420J of the Higher Education Act of 1965 (20 U.S.C. 1070f-6) 
is amended by adding at the end the following new sentence: ``If for 
any fiscal year funds are not appropriated pursuant to this section, 
funds available under part B of title VII, relating to the Fund for the 
Improvement of Postsecondary Education, may be made available for 
continuation grants for any grant recipient under this subpart.''.

SEC. 7. IMPLEMENTATION.

  (a) No Delay in Effective Date.--Section 482(c) of the Higher 
Education Act of 1965 (20 U.S.C. 1089(c)) shall not apply to the 
amendments made by this Act.
  (b) Implementing Regulations.--Section 492 of the Higher Education 
Act of 1965 (20 U.S.C. 1098a) shall not apply to the amendments made by 
sections 2 and 3 of this Act.

                                Purpose

    The purpose of H.R. 1992, the Internet Equity and Education 
Act of 2001, is to amend the Higher Education Act of 1965 to 
expand access to higher education for all Americans through 
distance education and programs offered on a nontraditional 
basis, while maintaining the integrity of our federal financial 
aid programs. H.R. 1992 implements recommendations made by the 
Web-based Education Commission and its report, ``The Power of 
the Internet for Learning: Moving from Promise to Practice.''

                            Committee Action

    The Subcommittee on 21st Century Competitiveness held a 
hearing on the Internet Equity and Education Act of 2001 on 
June 20, 2001. This hearing focused on reviewing and evaluating 
the provisions contained within H.R. 1992. The Subcommittee 
heard testimony from Dr. Stanley Ikenberry, President, American 
Council on Education (ACE), Washington, DC; Ms. Lorraine Lewis, 
Inspector General, U.S. Department of Education, Washington, 
DC; Dr. Richard Gowen, President, South Dakota School of Mines 
and Technology, Rapid City, SD; Mr. Omer Waddles, Executive 
Vice President, ITT Educational Services, Inc., Indianapolis, 
IN; and Dr. Joseph DiGregorio, Vice Provost for Distance 
Learning, Continuing Education, and Outreach, Georgia Institute 
of Technology, Atlanta, GA.

                           Legislative Action

    On May 24, 2001, Representative Johnny Isakson (R-GA), Vice 
Chairman of the Subcommittee on 21st Century Competitiveness, 
introduced H.R. 1992, the Internet Equity and Education Act of 
2001. After considering the bill on June 28, 2001 and July 11th 
2001, the Subcommittee on 21st Century Competitiveness ordered 
the bill favorably reported to the Full Committee on Education 
and the Workforce, as amended by voice vote.
    On the basis of a hearing on June 20, 2001, and the 
recommendations of the Administration, the Subcommittee on 21st 
Century Competitiveness, and higher education associations, an 
amendment in the nature of a substitute was prepared and 
presented by Representative Johnny Isakson (R-GA). The Full 
Committee on Education and the Workforce considered the 
substitute in legislative session on August 1, 2001, during 
which two additional amendments were offered. The amendment in 
the nature of a substitute, along with an amendment concerning 
``Learning Anytime Anywhere Partnerships,'' offered by 
Representative George Miller (D-CA), were adopted by a vote of 
31-10.

                                Summary

    H.R. 1992, the Internet Equity and Education Act of 2001, 
modifies the ``50 percent rule'' to allow institutions to offer 
more than 50 percent of their classes by telecommunications. 
This modification only applies if the institution already 
participates in the student loan programs, if its student loan 
default rate is less than 10 percent for the three most recent 
years, and if the institution has notified the Secretary of its 
election to qualify by means of these provisions and the 
institution has not, within 90 days, been notified by the 
Secretary that such election would pose a significant risk to 
federal funds and the integrity of the Title IV programs.
    The Act also eliminates the burdensome 12-hour rule 
applicable to programs not offered on a traditional basis, and 
instead requires that these programs be held to the same 
attendance criteria as those offered on a traditional quarter 
or semester basis. Under this provision, certain institutions 
must notify the Secretary if they intend to offer an eligible 
program with less than 12 scheduled hours of instruction per 
week.
    Furthermore, H.R. 1992 addresses the incentive compensation 
provision with regard to student recruiting so that it is clear 
that the prohibition only applies to non-salary payments to 
persons directly involved in recruiting students or awarding 
financial aid as a result of their success in enrolling 
students at the institution. Additionally, the provision 
clarifies that salaries (not incentive compensation) must be 
paid on a regular basis and must not be adjusted more than once 
every six months. Under the bill, third party servicers would 
be exempt from the incentive compensation provision if they 
have no direct control over admissions, enrollment, or the 
direct awarding of financial aid. In addition, employees who 
secure contracts with employers for postsecondary education of 
employees would also be exempt from the incentive compensation 
provision.
    The Act requires a study and report by the Secretary of 
Education on the results of the Internet Equity and Education 
Act of 2001. Institutions that qualify under the 50 percent 
exception, the 12-hour rule exception, or that contract with 
outside parties for the delivery of instruction and securing 
student enrollment must report to the Secretary information on 
the method or amount of instruction offered, the types of 
programs or courses offered, their enrollment by type of 
program or course, the types of federal student aid received by 
students enrolled in nontraditional programs, and student 
outcomes. The Secretary must study, through grant or contract, 
and report on the effect of the amendments contained in this 
bill on the ability of institutions to provide distance 
learning opportunities and on program integrity, on verified 
claims of student aid inducement, and additional needed 
improvements to nontraditional educational opportunities. 
Additionally, with respect to distance education and 
correspondence courses, the Secretary must study and report on 
the method or amount of instruction offered, the types of 
programs or courses offered, the number and type of student 
enrolled in distance or correspondence courses, the amount of 
federal student aid provided to such students, and student 
outcomes. The Secretary's report shall be submitted to Congress 
by March 31, 2003.
    The Act would allow for the funds under the Fund for the 
Improvement of Postsecondary Education to be used for 
continuation grants for the Learning Anytime Anywhere 
Partnerships Program.
    Lastly, the Act exempts its provisions from master calendar 
requirements regarding regulations and exempts the 50 percent 
exception and the 12-hour rule exception from the negotiated 
rulemaking requirements.

                  Background and Need for Legislation


Background

    The Web-based Education Commission was authorized by 
Congress in the Higher Education Amendments of 1998 to 
determine how the Internet could be utilized to expand access 
to education. Chaired by former Senator Bob Kerry (D-NE) and 
Representative Johnny Isakson (R-GA), the Commission set out to 
discover how the Internet was being used to enhance learning 
opportunities for all learners regardless of age. The 
Commission heard testimony from a number of experts and 
witnessed several demonstrations of how technology can be 
successfully used in education. In the fall of 2000, the Web-
based Education Commission issued its report, ``The Power of 
the Internet for Learning: Moving from Promise to Practice.''
    Throughout the report, several recommendations were made 
for improving and expanding the use of the Internet to increase 
access to educational opportunities. One specific 
recommendation made by the Commission was to ``[r]evise 
outdated regulations that impede innovation and replace them 
with approaches that embrace anytime, anywhere, any pace 
learning.'' H.R. 1992, the Internet Equity and Education Act, 
by driving regulatory reform in higher education programs, 
addresses this recommendation.
    The Commission identified specific areas that should be 
addressed immediately in order to truly embrace anytime, 
anywhere and any pace learning. H.R. 1992 provides a modest 
expansion of Internet-based educational opportunities for 
students. These amendments will give the Committee a base of 
experience to draw from. By the next reauthorization of the 
Higher Education Act, it will be apparent if our efforts to 
provide increased access to Internet education opportunities 
were successful and if greater expansion is warranted.
    The Internet Equity and Education Act of 2001 will expand 
access to higher education to all Americans regardless of their 
distance from a college or university. In the process, it will 
expand opportunities for nontraditional students, and give 
potential students greater access to information on the 
availability of postsecondary education programs.

Need for legislation

    During the last reauthorization of the Higher Education Act 
(HEA) of 1965, it was apparent that distance education was 
expanding opportunities for postsecondary education beyond the 
Higher Education Act's capacity to accommodate them. 
Unfortunately, information available to the Committee limited 
the ability to take advantage of the true potential of distance 
education, without the risk of increasing fraud and abuse 
within the Title IV programs. As a result, the Committee's 
response to these new technologies was limited. Since that 
time, the potential of distance education has continued to 
expand. Fortunately, our knowledge base has increased as well. 
By taking the modest steps included in H.R. 1992, the Committee 
will acquire a greater knowledge base, and will be able to take 
advantage of the promise of new technologies without risking 
the integrity of our student financial aid programs.
    Perhaps the best summation of the need for action now is 
found in the testimony of Dr. Stanley Ikenberry, President of 
the American Council on Education (ACE), before the 
Subcommittee on 21st Century Competitiveness on June 20, 2001. 
In his testimony, Dr. Ikenberry stated:

          One key question that needs to be answered is why 
        make these changes now just two years before we start 
        to reauthorize the Higher Education Act? I think there 
        are three basic reasons.
           First, despite widespread recognition of 
        problems with all three provisions, the Department has 
        been unable or unwilling to make changes as part of the 
        regulatory process. Indeed, as part of negotiated 
        rulemaking, the Department considered changes in 
        incentive compensation but decided, at the last minute, 
        not to proceed. When the regulatory process fails on an 
        important matter, legislative action becomes the only 
        alternative.
           Second, by making the changes now, Congress 
        will have two years to monitor the impact of the 
        amendments and can easily make any necessary mid-course 
        corrections as part of the coming reauthorization.
           Third, we need to make the changes now 
        because distance education is changing the 
        postsecondary education landscape so quickly. If 
        changes are not made now, we will have to wait until 
        after the Higher Education reauthorization and, most 
        likely, until after the rulemaking process that follows 
        a reauthorization. This could easily mean a delay of 
        four or five years.

    Indeed, the most compelling reason to enact this 
legislation now is the fact that we have the opportunity to 
gather needed information to address this issue for the next 
reauthorization of the Higher Education Act without significant 
risk to program integrity. At the same time, we have an 
opportunity to expand access to higher education to those with 
the most need, and to those who cannot afford to take classes 
on a traditional quarter or semester basis. An initial report 
has been issued by the Department of Education on the Distance 
Education Demonstration Program. With respect to the 50 percent 
rules and the 12-hour rule, to date there have been no problems 
with waivers or relaxations of these provisions. In addition, a 
letter from Secretary Paige to Chairman Boehner (July 31, 2001) 
stated that:

          The Administration supports the Isakson substitute to 
        H.R. 1992, which would allow needy students who require 
        federal student aid to have access to the many new 
        educational opportunities now available to other 
        students.

    Secretary Paige's letter went on to affirm that sufficient 
safeguards existing in current law, in combination with 
aggressive enforcement by the Department, ensures that 
enactment of H.R. 1992 does not jeopardize program integrity.

                            Committee Views

    H.R. 1992, the Internet Equity and Education Act of 2001, 
implements the recommendations of the Web-based Education 
Commission with respect to expanding access to postsecondary 
education. It will allow needy students who require federal 
student aid to have access to the many new educational 
opportunities now available to other students, expand 
educational opportunities to nontraditional students who cannot 
afford to take courses on a traditional quarter or semester 
basis, and provide potential students with better information 
on their educational opportunities while protecting the 
integrity of our federal financial assistance programs.

50 percent rules

    Under the Higher Education Act of 1998, an institution may 
not offer more than 50 percent of its courses by 
telecommunications or correspondence without losing 
eligibility, or allow more than 50 percent of its students to 
take courses by telecommunications without risking a 
substantial amount of federal financial aid for those students. 
The Web-based Education Commission identified these provisions 
as a significant impediment to the delivery of distance 
education courses. As a measured response, the amendment in 
section 2 eliminates this impediment for low-risk institutions 
by allowing them to exceed these limits without sanctions if 
they:
          (1) Are already participating in the federal student 
        loan programs;
          (2) Have student loan default rates which do not 
        exceed 10 percent for each of the three most recent 
        fiscal years; and
          (3) Report to the Secretary their intent to qualify 
        as an eligible institution under this provision, and 
        are not notified by the Secretary that such an election 
        would pose a significant risk to federal funds or the 
        integrity of the Title IV programs within 90 days of 
        the notification.
    By carefully controlling the scope of this exemption, the 
Committee intends to gain greater experience with programs 
offered through telecommunications without increasing the 
potential for fraud or abuse of our student financial aid 
programs. In addition, the reporting requirements will enhance 
the Secretary's ability to monitor the use of this provision. 
Finally, the Committee intends that an institution that 
qualifies for this exemption but has a default rate in excess 
of 10 percent in a subsequent year will remain an eligible 
institution until the end of that academic year before being 
required to comply with the 50 percent rules. The Committee 
does not intend for any institution to lose eligibility part 
way through the academic year as a result of the cohort default 
rate determinations.

12-hour rule

    The amendment made in Section 3 eliminates the 12-hour rule 
for programs offered on a nontraditional basis, and replaces it 
with the one-day rule that is in effect for programs offered on 
a traditional quarter or semester basis. The 12-hour rule is a 
Department of Education regulation that requires each week of 
instructional time in a non-standard term or non-term program 
to include at least 12 hours of regularly scheduled 
instruction, examinations, or preparation for examinations. 
This quantitative seat time standard for nontraditional 
programs does not apply to traditional programs utilizing 
standard terms. For those programs, the regulations require 
that a week of instruction provide at least one day of 
regularly scheduled instruction, examinations or preparation 
for examinations. Hence, if an institution offers the exact 
same program in both a standard term format and a non-standard 
or non-term format, in the first instance they must provide at 
least one day of regularly scheduled instruction, and in the 
second instance, they must provide 12 hours of regularly 
scheduled instruction.
    Since early last year, the higher education community has 
been raising concerns with respect to the application of the 
12-hour rule to nontraditional programs. However, with the 
dramatic growth in distance education and the proliferation of 
nontraditional degree programs particularly designed for 
working adults, confusion has turned into widespread 
dissatisfaction with the 12-hour rule, and for good reason. The 
Department of Education, in its report to Congress on the 
Distance Education Demonstration Program, dated January 2001, 
states:

          It is difficult if not impossible for distance 
        education programs offered in nonstandard terms and 
        non-terms to comply with the 12-hour rule. The 
        regulation would seem to require that full-time 
        distance education students spend 12 hours per week 
        ``receiving'' instruction. There is no meaningful way 
        to measure 12 hours of instruction in a distance 
        education class.

    At a time when we are looking for new ways to expand access 
to higher education, we should not be clinging to outdated and 
obsolete regulations. The Report to Congress cited above goes 
on to say:

          The rules tend to limit the options institutions have 
        to configure academic programs in ways they believe 
        best meet the needs of students and the curriculum. 
        Anecdotal information also suggests that where 
        institutions offer programs in configurations other 
        than standard terms, they often do not provide federal 
        student aid to the students enrolled in those programs 
        simply because of the complexity of Title IV 
        requirements.

    The Committee does not support regulations that limit a 
student's access to federal student aid and academic enrichment 
unless there is a known significant risk to the federal student 
aid programs. In the case of the 12-hour rule, there is no such 
risk. In repealing the rule, the Committee maintained the 
existing one-day rule that applies to all standard term 
programs. In addition, as Secretary Paige noted in his letter 
in support of H.R. 1992, other safeguards against course length 
manipulation, such as the 30-week academic year minimum and the 
clock-hour/credit-hour conversion requirements all remain in 
place. Finally, in order to provide the Secretary with the 
ability to monitor institutions that offer programs that would 
be subject to the 12-hour rule except for this legislation, the 
Committee included a provision requiring institutions with non-
standard term and non-term programs to notify the Secretary if 
they will be offering less than 12 hours of regularly scheduled 
instruction each week.

Incentive compensation

    As the Web-based Education Commission indicated in its 
report, the incentive compensation prohibition was enacted to 
protect students against misleading and abusive recruiting 
tactics and to maintain the integrity of the federal financial 
aid programs. However, as a result of the broad language in the 
Higher Education Act and the lack of clear regulatory guidance, 
the Department of Education's application of the incentive 
compensation prohibition has been inconsistent and at times, 
has exceeded the original intent of Congress.
    Removing the term ``indirectly'' from the current provision 
of the Higher Education Act and making reference to payments 
based directly on success in securing enrollments clarifies 
that institutions may provide incentive compensation based on 
the performance of legitimate recruiting activities that are 
commonly undertaken on behalf of institutions of higher 
education prior to admission, enrollment and the awarding of 
financial aid. These activities include advertising and 
otherwise providing information about an institution to 
stimulate inquiries and interest from prospective students. In 
addition, the reference to persons or entities directly engaged 
in recruiting or awarding financial aid clarifies that the 
statutory prohibition applies only to those whose primary job 
responsibility is to directly recruit students or award 
financial aid and not to those with managerial or supervisory 
responsibilities for recruitment, admissions or financial aid.
    In addition to amending the prohibition on the payment of 
incentive compensation, section 484C(b) specifically recognizes 
contractual arrangements that are outside the scope of the 
prohibition. Payments made pursuant to contracts with third 
party service providers that have no control over admissions or 
enrollment or the awarding of financial aid are exempt from the 
prohibition so long as no employee of the third party service 
provider is paid a commission, bonus or other incentive payment 
based directly on success in securing enrollments or financial 
aid. The Committee intends that this exception will allow 
institutions to make payments to entities that provide any 
number of services to the institution, which may include 
legitimate recruiting activities, so long as the entity does 
not pay commissions or bonuses to its employees based directly 
on success in securing enrollments or financial aid. Third 
party service providers that create web sites, provide online 
services, provide marketing and advertising materials, or 
provide similar services that post or offer information about 
an institution could be paid based upon the number of hits on a 
particular web site, the number of inquiries to the institution 
resulting from those who accessed the web site or received the 
marketing materials or even the number of enrollments that 
result from such information sources. For this exception to 
apply, institutions of higher education must ensure that all 
decisions related to admissions, eligibility for enrollment and 
the awarding of financial aid are under the control of the 
institution. Under these circumstances, employees of the third 
party service provider will have no incentive to use 
misleading, aggressive, or intimidating recruiting tactics or 
to refer unqualified applicants to an institution of higher 
education, two of the key protections envisioned in the 
underlying legislation.
    The second exemption with respect to contractual 
arrangements would allow incentive payments when institutions 
of higher education and companies enter into contractual 
arrangements resulting in financial support for enrollment by 
company employees. The Committee understands that many 
institutions of higher education wish to seek and secure 
contracts with companies to provide for additional education 
and training of the companies' employees. Incentive payments 
for activities designed to secure such contracts do not raise 
the dangers about which Congress was concerned when it enacted 
the prohibition on bonuses, commissions and incentive payments 
for success in securing enrollment. The requirement that 
employers commit their own resources provides a significant 
demonstration of the quality of education. Employers can be 
expected to have the ability to negotiate contracts in an 
arm's-length manner that protects their interests and the 
interests of their employees. The abuses that led to enactment 
of the prohibition--recruiting tactics that took advantage of 
vulnerable and unsophisticated individuals simply to fill 
seats--are not present in these circumstances. On the contrary, 
allowing incentives to be paid for securing agreements of this 
sort serves the important goal of facilitating the ongoing 
upgrading of the skills and education of the work force and 
increasing access to higher education.
    The Committee believes that institutions of higher 
education do not and will not intentionally enroll unqualified 
students. As Secretary Paige stated in his letter in support of 
H.R. 1992, there are safeguards in place to protect against 
fraud and abuse, including student eligibility requirements and 
stringent requirements applicable to the return of federal 
student aid funds when a student withdraws from an institution 
of higher education. The Committee expects the Department of 
Education to pay close attention to any sudden and significant 
increases in withdrawal rates at a particular institution of 
higher education that may indicate a problem at that specific 
institution. If reports of misleading or intimidating 
recruiting tactics come to the attention of the Department, the 
Committee expects them to be fully investigated. The purpose of 
these changes is to allow institutions of higher education to 
engage in reasonable and standard business practices that 
promote and encourage greater enrollment in higher education. 
The Committee does not intend for a return to the past when 
some institutions were engaged in recruiting unqualified 
students simply to take advantage of the student and the 
federal financial aid programs.
    Additionally, under section 484C(c) a person shall be 
treated as receiving fixed compensation (and not as receiving 
incentive compensation) when such person is paid in accordance 
with a fixed annual salary or a fixed hourly wage and such 
salary or wage is adjusted no more frequently than once every 
six months. Routine changes to an employee's benefit package 
(including health and life insurance and retirement plans) 
should not be considered to be changes in salary. This 
definition of ``fixed compensation'' clarifies that schools may 
provide merit-based pay increases for employee performing 
legitimate job functions. However, ``fixed compensation paid 
regularly for services'' does not permit the payment of 
commissions, bonuses, or other incentive payments under the 
guise of salary or wages. In considering whether an institution 
is complying with this provision, the Secretary may consider 
whether the fixed compensation paid to employees covered by 
Section 484(c) includes large fluctuations in pay; is 
disproportionate to the increases and decreases received by 
other employees at the institution; or creates a significant 
incentive to enroll unqualified students. The Committee and 
Secretary Paige believe that this statutory limitation will 
guard against institutions using frequent salary or wage 
adjustments as de facto commissions.
    Finally, by removing this provision from section 487 and 
creating a new section 484C, the Committee intends to clarify 
that fines or assessments of liabilities are to be commensurate 
with the seriousness of the violation and the harm that has 
been caused to students or federal taxpayers. It was never the 
intent of Congress that a violation of this prohibition should 
result in assessment of liabilities equal to the total amount 
of federal funding that the institution has disbursed. However, 
by moving this provision, the Committee does not intend to 
lessen the importance of violations of this provision. Such 
violations are a serious matter, and the Committee expects the 
Department to investigate such violations fully, and to impose 
sanctions that while appropriate to the violation, stifle any 
urge to skirt the intent of this provision.

Report

    Section 6 requires the Secretary to commission a report on 
the effects of the Internet Equity and Education Act of 2001. 
This report will provide the Committee with much needed 
information on distance education for the next reauthorization 
of the Higher Education Act of 1965. This provision was offered 
as an amendment by Representative Wu (D-OR), and accepted by 
the Subcommittee on 21st Century Competitiveness. The Committee 
expects that the Secretary will ensure that the report will 
provide adequate information to guide the Administration and 
the Committee as they consider the next reauthorization of the 
Higher Education Act. In addition, the Committee recognizes 
that the information required from institutions will aid the 
Department in monitoring program integrity.

Learning Anytime Anywhere Partnerships

    Section 6 amends the Learning Anytime Anywhere Partnerships 
(LAAP) program to allow funding of continuation grants from 
funds appropriated for the Fund for Improving Postsecondary 
Education (FIPSE) in the event that insufficient funds are 
appropriated for the LAAP program. This provision was offered 
by Representative Miller (D-CA) during full committee markup, 
and was accepted by the Committee. In approving this provision, 
the Committee notes that it coincides with the Administration's 
budget proposal, and supports the intent of this legislation.

Implementation

    Section 7 exempts amendments made by this Act from master 
calendar provisions under the Higher Education Act of 1965, and 
exempts amendments to the 50 percent rules and the 12 hour rule 
from negotiated rulemaking provisions of the Higher Education 
Act. The Committee believes that provisions of this Act need to 
be implemented as soon as possible and should not be delayed. 
However, the Committee recognizes that certain provisions must 
be implemented with the full participation of the higher 
education community. Specifically, it is essential that the 
Department and the community work together to ensure that 
common business practices are recognized as acceptable under 
the incentive compensation provisions of the Higher Education 
Act.

                      Section-by-Section Analysis

    Section 1--sets forth the short title of this Act as the 
``Internet Equity and Education Act of 2001.''
    Section 2--provides for an exception to the 50 percent 
correspondence course limitations. Specifically, it allows 
institutions to exceed the 50 percent limitation on the number 
of courses they can offer through telecommunications, and the 
number of students an institution can enroll in 
telecommunications courses.
    Section 3--amends section 481(a) of the Higher Education 
Act of 1965 to eliminate the 12-hour rule for programs offered 
on a nontraditional basis, and requires that these programs be 
held to the same standard as those offered on a traditional 
quarter or semester basis.
    Section 4--amends part G of title IV of the Higher 
Education Act of 1965 by inserting after section 484B the 
following new section:

          Section 484C removes the current incentive 
        compensation restrictions from the section dealing with 
        program participation agreements and moves them into a 
        new section which is enforced by program audits, 
        clarifies that it only applies to recruiters that are 
        directly involved in recruiting, provides that 
        compensation can only be counted as salary if it is a 
        fixed compensation that is paid regularly for services 
        and is adjusted no more frequently than every sixth 
        months, and clarifies that third party service 
        providers (such as Web portals) are exempt from this 
        provision as long as they have no direct control over 
        admissions, enrollment, or the awarding of financial 
        aid.

    Section 5--requires institutions that qualify under the 
provisions of section 2 or section 3, or that contract with 
outside parties for the purpose of securing the enrollment of 
students to report certain information to the Secretary and 
requires the Secretary to conduct by grant or contract an 
evaluation and report on the results of the Internet Equity and 
Education Act of 2001.
    Section 6--amends section 420J of the Higher Education Act 
of 1965 by allowing funds appropriated for the Fund for the 
Improvement of Postsecondary Education (FIPSE) to be used to 
fund continuation grants under the Learning Anytime Anywhere 
Partnerships (LAAP) in the event that no funds are made 
available for grants under LAAP.
    Section 7--exempts amendments made by this Act from master 
calendar provisions under section 482(c) of the Higher 
Education Act of 1965 and exempts the amendments made by 
sections 2 and 3 from negotiated rulemaking provisions under 
section 492 of the Higher Education Act of 1965.

                       Explanation of Amendments

    The Amendment in the Nature of a Substitute is explained in 
the body of this report.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. H.R. 1992 amends the Higher Education Act of 1965 to 
expand access to higher education for all Americans through 
distance education and programs offered on a nontraditional 
basis, while maintaining the integrity of our federal financial 
aid programs. The bill does not prevent legislative branch 
employees from receiving services provided under this 
legislation.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. H.R. 1992 amends the spending programs under the 
Higher Education Act. As such, the bill does not contain any 
unfunded mandates.

                             Rollcall Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee Report to include for 
each record vote on a motion to report the measure or matter 
and on any amendments offered to the measure or matter the 
total number of votes for and against and the names of the 
Members voting for and against.


                             Correspondence

                     Congress of the United States,
                                  House of Representatives,
                                    Washington, DC, August 6, 2001.
Hon. John Boehner,
Chairman, Committee on Education and the Workforce, Rayburn House 
        Office Building, Washington, DC.
    Dear Mr. Chairman: Due to other legislative duties, I was 
unavoidably detained during Committee consideration of H.R. 
1992, ``Internet Equity and Education Act of 2001.'' 
Consequently, I missed roll call number 1, the vote on final 
passage of the bill. Had I been present, I would have voted in 
favor of the bill.
    I would appreciate your including this letter in the 
Committee Report to accompany H.R. 1992. Thank you for your 
attention to this matter.
            Sincerely,
                                              Tom Tancredo,
                                                Member of Congress.
                                ------                                

                     Congress of the United States,
                                  House of Representatives,
                                    Washington, DC, August 1, 2001.
Congressman John Boehner,
Chairman, House Committee on Education and the Workforce, Rayburn House 
        Office Building, Washington, DC.
    Dear Chairman Boehner: Due to a scheduling conflict, I was 
unavoidably detained during Committee consideration of HR 1992, 
the Internet Equity and Education Act. Consequently, I missed 
the vote on final passage of the bill offered by Rep. Johnny 
Isakson. Had I been present, I would have voted in favor of the 
bill.
    I would appreciate your including this letter in the 
Committee Record to accompany HR 1992. Thank you for your 
attention to this matter.
            Sincerely,
                                             Bob Goodlatte,
                                                Member of Congress.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the body of this report.

   New Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 and with respect to 
requirements of 3(c)(3) of rule XIII of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for H.R. 1992 from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 21, 2001.
Hon. John A. Boehner,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed estimate for H.R. 1992, the Internet 
Equity and Education Act of 2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Donna Wong.
            Sincerely,
                                            Dan L. Crippen,
                                                          Director.
    Enclosure.

H.R. 1992--Internet Equity and Education Act of 2001

    Summary: H.R. 1992 would make various changes to the Higher 
Education Act of 1965 that could affect the eligibility of 
institutions and academic programs that participate in federal 
financial aid programs. It would also modify the current-law 
prohibition on incentive payments from institutions of higher 
learning to private entities engaged in student recruitment 
activities. CBO estimates that the bill would have negligible 
effects on the federal budget. However, because H.R. 1992 would 
have some impact on direct spending, pay-as-you-go procedures 
would apply.
    H.R. 1992 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments. Enactment of this legislation would benefit 
institutions of higher education, including state universities, 
that offer courses through the Internet. The bill would allow 
some of these schools to offer more courses via 
telecommunications and still qualify for federal aid programs.
    Estimated cost to the Federal Government: CBO estimates 
that implementing H.R. 1992 would cost less than $500,000 a 
year, assuming the availability of appropriated funds. We also 
estimate that any changes in direct spending, primarily for 
federal loan programs, under the bill would total less than 
$500,000 a year--at least over the next five years.
    Modification of the Definition of Eligible Institution. 
H.R. 1992 would modify the definitions that determine the 
eligibility of institutions of higher education to participate 
in the federal Pell grant, student loan, and other financial 
aid programs. Under current law, institutions are ineligible to 
participate in these programs if more than 50 percent of 
coursesoffered at the institution are correspondence courses, 
or if more than 50 percent of the institutions students enroll in 
correspondence courses--including courses via telecommunications. The 
bill would allow courses offered via telecommunications to be excluded 
from the definition of correspondence courses for the purpose of these 
two restrictions if an institution is currently participating in the 
federal loan programs, has a cohort default rate of less than 10 
percent for the last three years, and the Secretary of Education does 
not deny a request for providing such courses based on financial 
integrity grounds.
    There are few data available upon which to base an estimate 
of federal costs. Staff at the Department of Education indicate 
that no low-default institutions currently exceed the 50 
percent limitations. With the potential growth in distance 
education, however, it is possible that a number of schools 
could be affected by this provision in the future if the 
Secretary of Education does not restrict participation based on 
financial integrity grounds. In addition to this uncertainty, 
it is unclear now distance education would supplement or 
substitute for more traditional education. To the extent that 
this form of education substitutes for other forms, no 
additional federal costs would result from this provision. At 
this time, CBO has no basis for estimating any significant 
costs from implementing this provision.
    Modification of the Definition of Academic Year. H.R. 1992 
would amend the definition of an academic year. For programs 
that use credit hours but are not on a semester, trimester or 
quarter system, a week of instruction is currently defined in 
the regulations as at least 12 hours of regularly scheduled 
instruction, examination, or preparation for examination. The 
bill would define a week of instruction as at least one day of 
instruction, examination, or preparation of examination--the 
same definition that is currently used for all other credit 
hour programs. Institutions affected by this rule change would 
be required to notify the Secretary of Education if they plan 
to offer programs of less than 12 hours of classroom time per 
week. Based on information from the Department of Education, 
CBO estimates that the costs associated with this provision 
would be less than $500,000 annually on both direct spending 
and discretionary programs.
    Prohibition on Incentive Payments. The bill would also 
prohibit institutions from making any payment of a commission, 
bonus, or other incentive payment based directly on success in 
securing enrollments or financial aid, to any person or entity 
directly engaged in student recruiting or admission activities, 
or making decisions regarding the award of student financial 
assistance. The current-law prohibition focuses on people or 
entities that indirectly engage in these activities as well. 
CBO estimates that this provision would have no effect on 
federal spending.
    Report by the Secretary of the Department of Education. The 
bill would require the Secretary of Education to complete a 
report on the effect of these amendments by March 31, 2003, and 
would require the report to be completed by grant or contract. 
Given the relatively limited scope for the report, CBO 
estimates the cost of the report would be less than $500,000 
with the costs spread over fiscal years 2002 and 2003.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. Enacting 
H.R. 1992 would affect direct spending, but CBO estimates that 
such effects would be less than $500,000 a year--at least for 
the next five years.
    Intergovernmental and private-sector impact: H.R. 1992 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments. Enactment of this legislation would benefit 
institutions of higher education, including state universities, 
that offer courses through the Internet. The bill would allow 
some of these schools to offer more courses via 
telecommunications and still qualify for federal aid programs.
    Estimate prepared by: Federal costs: Donna Wong and Deborah 
Kalcevic. Impact on State, Local, and Tribal Governments: Elyse 
Goldman. Impact on Private Sector: Nabeel Alsalam.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

         Statement of General Performance Goals and Objectives

    In accordance with Clause (3)(c) of House rule XIII, the 
goal of H.R. 1992 is to expand access to higher education for 
all Americans through distance education and programs offered 
on a nontraditional basis, while maintaining the integrity of 
our federal financial aid programs. The Committee expects the 
Department of Education to comply with H.R. 1992 and implement 
the changes to the law in accordance with these stated goals.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress in the 
Constitution to enact the law proposed by H.R. 1992. The 
Committee believes that the amendments, made by this bill to 
the Higher Education Act, are within Congress' authority under 
Article I, section 8, clause 1 of the Constitution.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 1992. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

HIGHER EDUCATION ACT OF 1965

           *       *       *       *       *       *       *



                      TITLE I--GENERAL PROVISIONS

PART A--DEFINITIONS

           *       *       *       *       *       *       *


SEC. 102. DEFINITION OF INSTITUTION OF HIGHER EDUCATION FOR PURPOSES OF 
                    TITLE IV PROGRAMS.

  (a) Definition of Institution of Higher Education for 
Purposes of Title IV Programs.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Exception to limitation based on course of 
        study.--Courses offered via telecommunications (as 
        defined in section 484(l)(4)) shall not be considered 
        to be correspondence courses for purposes of 
        subparagraph (A) or (B) of paragraph (3) for any 
        institution that--
                  (A) is participating in either or both of the 
                loan programs under part B or D of title IV on 
                the date of enactment of the Internet Equity 
                and Education Act of 2001;
                  (B) has a cohort default rate (as determined 
                under section 435(m)) for each of the 3 most 
                recent fiscal years for which data are 
                available that is less than 10 percent; and
                  (C)(i) has notified the Secretary, in a form 
                and manner prescribed by the Secretary 
                (including such information as the Secretary 
                may require to meet the requirements of clause 
                (ii)), of the election by such institution to 
                qualify as an institution of higher education 
                by means of the provisions of this paragraph; 
                and
                  (ii) the Secretary has not, within 90 days 
                after such notice, and the receipt of any 
                information required under clause (i), notified 
                the institution that the election by such 
                institution would pose a significant risk to 
                Federal funds and the integrity of programs 
                under title IV.

           *       *       *       *       *       *       *


                      TITLE IV--STUDENT ASSISTANCE

  Part A--Grants to Students in Attendance at Institutions of Higher 
Education

           *       *       *       *       *       *       *


SEC. 420J. AUTHORIZATION OF APPROPRIATIONS.

  There are authorized to be appropriated to carry out this 
subpart $10,000,000 for fiscal year 1999 and such sums as may 
be necessary for each of the 4 succeeding fiscal years. If for 
any fiscal year funds are not appropriated pursuant to this 
section, funds available under part B of title VII, relating to 
the Fund for the Improvement of Postsecondary Education, may be 
made available for continuation grants for any grant recipient 
under this subpart.

           *       *       *       *       *       *       *


   Part G--General Provisions Relating to Student Assistance Programs

SEC. 481. DEFINITIONS.

  (a) Academic and Award Year.--(1) * * *

           *       *       *       *       *       *       *

  (3) For the purposes of any eligible program, a week of 
instruction is defined as a week in which at least one day of 
regularly scheduled instruction or examinations occurs, or at 
least one day of study for final examinations occurs after the 
last scheduled day of classes. For an educational program using 
credit hours, but not using a semester, trimester, or quarter 
system, an institution of higher education shall notify the 
Secretary, in the form and manner prescribed by the Secretary, 
if the institution plans to offer an eligible program of 
instruction of less than 12 hours of regularly scheduled 
instruction, examinations, or preparation for examinations for 
a week of instructional time.

           *       *       *       *       *       *       *


SEC. 484. STUDENT ELIGIBILITY.

  (a) * * *

           *       *       *       *       *       *       *

  (l) Courses Offered Through Telecommunications.--
          (1) Relation to correspondence courses.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Exception to 50 percent limitation.--
                Notwithstanding the 50 percent limitation in 
                subparagraph (A), a student enrolled in a 
                course of instruction described in such 
                subparagraph shall not be considered to be 
                enrolled in correspondence courses if the 
                student is enrolled in an institution that--
                          (i) is participating in either or 
                        both of the loan programs under part B 
                        or D of title IV on the date of 
                        enactment of the Internet Equity and 
                        Education Act of 2001;
                          (ii) has a cohort default rate (as 
                        determined under section 435(m)) for 
                        each of the 3 most recent fiscal years 
                        for which data are available that is 
                        less than 10 percent; and
                          (iii)(I) has notified the Secretary, 
                        in form and manner prescribed by the 
                        Secretary (including such information 
                        as the Secretary may require to meet 
                        the requirements of subclause (II)), of 
                        the election by such institution to 
                        qualify its students as eligible 
                        students by means of the provisions of 
                        this subparagraph; and
                          (II) the Secretary has not, within 90 
                        days after such notice, and the receipt 
                        of any information required under 
                        subclause (I), notified the institution 
                        that the election by such institution 
                        would pose a significant risk to 
                        Federal funds and the integrity of 
                        programs under title IV.

           *       *       *       *       *       *       *


SEC. 484C. INCENTIVE COMPENSATION PROHIBITED.

  (a) Prohibition.--No institution of higher education 
participating in a program under this title shall make any 
payment of a commission, bonus, or other incentive payment, 
based directly on success in securing enrollments or financial 
aid, to any person or entity directly engaged in student 
recruiting or admission activities, or making decisions 
regarding the award of student financial assistance, except 
that this section shall not apply to the recruitment of foreign 
students residing in foreign countries who are not eligible to 
receive Federal student assistance.
  (b) Exceptions.--Subsection (a) does not apply to payment of 
a commission, bonus, or other incentive payment--
          (1) pursuant to any contract with any third-party 
        service provider that has no control over eligibility 
        for admission or enrollment or the awarding of 
        financial aid at the institution of higher education, 
        provided that no employee of the third-party service 
        provider is paid a commission, bonus, or other 
        incentive payment based directly on success in securing 
        enrollments or financial aid; or
          (2) to persons or entities for success in securing 
        agreements, contracts, or commitments from employers to 
        provide financial support for enrollment by their 
        employees in an institution of higher education or for 
        activities that may lead to such agreements, contracts, 
        or commitments.
  (c) Exception for Fixed Compensation.--For purposes of 
subsection (a), a person shall not be treated as receiving 
incentive compensation when such person receives a fixed 
compensation that is paid regularly for services and that is 
adjusted no more frequently than every six months.

           *       *       *       *       *       *       *


SEC. 487. PROGRAM PARTICIPATION AGREEMENTS.

  (a) Required for Programs of Assistance; Contents.--In order 
to be an eligible institution for the purposes of any program 
authorized under this title, an institution must be an 
institution of higher education or an eligible institution (as 
that term is defined for the purpose of that program) and 
shall, except with respect to a program under subpart 4 of part 
A, enter into a program participation agreement with the 
Secretary. The agreement shall condition the initial and 
continuing eligibility of an institution to participate in a 
program upon compliance with the following requirements:
          (1) * * *

           *       *       *       *       *       *       *

          [(20) The institution will not provide any 
        commission, bonus, or other incentive payment based 
        directly or indirectly on success in securing 
        enrollments or financial aid to any persons or entities 
        engaged in any student recruiting or admission 
        activities or in making decisions regarding the award 
        of student financial assistance, except that this 
        paragraph shall not apply to the recruitment of foreign 
        students residing in foreign countries who are not 
        eligible to receive Federal student assistance.]

           *       *       *       *       *       *       *

  (c) Audits; Financial Responsibility; Enforcement of 
Standards.--(1) Notwithstanding any other provisions of this 
title, the Secretary shall prescribe such regulations as may be 
necessary to provide for--
          (A) * * *

           *       *       *       *       *       *       *

          (F) the limitation, suspension, or termination of the 
        participation in any program under this title of an 
        eligible institution, or the imposition of a civil 
        penalty under [paragraph (2)(B)] paragraph (3)(B) 
        whenever the Secretary has determined, after reasonable 
        notice and opportunity for hearing, that such 
        institution has violated or failed to carry out any 
        provision of this title, any regulation prescribed 
        under this title, or any applicable special 
        arrangement, agreement, or limitation, except that no 
        period of suspension under this section shall exceed 60 
        days unless the institution and the Secretary agree to 
        an extension or unless limitation or termination 
        proceedings are initiated by the Secretary within that 
        period of time;

           *       *       *       *       *       *       *

          (H) the limitation, suspension, or termination of the 
        eligibility of a third party servicer to contract with 
        any institution to administer any aspect of an 
        institution's student assistance program under this 
        title, or the imposition of a civil penalty under 
        [paragraph (2)(B)] paragraph (3)(B), whenever the 
        Secretary has determined, after reasonable notice and 
        opportunity for a hearing, that such organization, 
        acting on behalf of an institution, has violated or 
        failed to carry out any provision of this title, any 
        regulation prescribed under this title, or any 
        applicable special arrangement, agreement, or 
        limitation, except that no period of suspension under 
        this subparagraph shall exceed 60 days unless the 
        organization and the Secretary agree to an extension, 
        or unless limitation or termination proceedings are 
        initiated by the Secretary against the individual or 
        organization within that period of time; and

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    We share the excitement over the vast potential of distance 
education to transform higher education. Used properly, it 
could improve both the quality and affordability of higher 
education and lifelong learning. Its promise is the greatest 
when it is applied to those left behind today, who are 
disproportionately likely to be low-income students, 
minorities, and Americans with disabilities.
The Challenge of Ensuring Program Integrity
    While distance education creates new opportunities, it also 
creates new challenges. It was not very long ago that the 
student aid programs were plagued by widespread fraud and 
abuse. We sympathize with the concern--expressed eloquently by 
Ms. Mink and others--that unless we proceed very carefully, we 
risk returning to those days.
    We appreciate the majority's willingness to strengthen H.R. 
1992 and reduce the risk of fraud and abuse. Mr. Isakson has 
made three important changes to this bill since he first 
introduced it.
    First, the Secretary of Education may continue to apply the 
50 percent rules when necessary to avoid ``a significant risk 
to federal funds and the integrity of programs.'' Exercising 
this discretion is an important new responsibility, and we urge 
the Secretary to take it seriously.
    Second, schools offering non-traditional academic programs 
in which full-time students receive less than 12 hours of 
instruction a week must so notify the Secretary.
    Finally, H.R. 1992 includes Mr. Wu's proposal to 
independently assess the impact of this bill in two years. The 
Wu study will give Congress early warning of potential problems 
or unintended consequences of this legislation.
    With the help of these safeguards, we will keep a close eye 
on the implementation of this new law. We recognize the 
Secretary of Education's assurances in his July 31st letter to 
the Committee that he will ``closely monitor institutions, 
enforce the many safeguards that are in place, and aggressively 
pursue any instances of fraud and abuse in the Federal student 
aid programs.'' If necessary, we can improve the balance 
between promoting distance-learning opportunities and 
maintaining program integrity when we consider the 
reauthorization of the Higher Education Act in two years.
    Moreover, a bipartisan group of Members of the Committee is 
requesting a General Accounting Office study on distance 
education and the digital divide at minority-serving 
institutions. It is our hope that this report will inform the 
Committee's efforts to fully tap the potential of distance 
education in the pending reauthorization of the Higher 
Education Act.
Learning Anytime Anywhere Partnerships
    We are gratified that the Committee bill includes a 
provision ensuring that if the Learning Anytime Anywhere 
Partnerships (LAAP) initiative is abolished--as President Bush 
proposes--worthy LAAP projects can be continued through the 
Fund for the Improvement of Postsecondary Education.
    Alone, H.R. 1992 does not do enough to unleash the 
potential of distance education. Due to the well-documented 
``digital divide,'' students who are low-income or minority, 
who live in rural areas, or who have disabilities are far less 
likely to enjoy the opportunities created by this legislation. 
While distance education threatens to make old measures 
obsolete--like the 12-hour rule eliminated by H.R. 1992 and 
academic credits based upon class time--we haven't developed 
new measures to replace them. And too often, institutions 
invest in easily marketed and profitable courses like business 
and computer programming, while neglecting innovative 
approaches to meet community needs.
    A bipartisan, three-year-old initiative--Learning Anytime, 
Anywhere Partnerships--is making a modest investment in 
addressing these concerns. LAAP projects, in which federal 
funds are matched dollar-for-dollar, include efforts to:
           Reach underserved communities, such as rural 
        Americans, American Indians, and Hispanic Americans;
           Create new educational and career 
        opportunities for Americans with disabilities;
           Develop new standards to measure student 
        learning, and to accredit distance education programs; 
        and
           Reach displaced workers and solve worker 
        shortages from oilrig technicians in Texas to nurses in 
        Detroit.
    President Bush proposes to eliminate LAAP, arguing that its 
activities could be funded through the Fund for the Improvement 
of Postsecondary Education (FIPSE). However, the President's 
budget cuts FIPSE from $147 million to $51 million even while 
it asks FIPSE to assume this important new responsibility. It 
is a mistake to walk away from this promising new initiative. 
At a minimum, we ought to ensure that existing LAAP projects 
receive continuation funding, whether through LAAP or FIPSE.
Conclusion
    We support H.R. 1992 because we believe that flawed or 
obsolete rules and regulations should not deny education 
opportunities to students. We look forward to continuing to 
expand those opportunities and ensure the integrity of federal 
student aid programs.

                                   George Miller.
                                   Major R. Owens.
                                   Ron Kind.
                                   Dennis J. Kucinich.
                                   Betty McCollum.
                                   Robert E. Andrews.
                                   Harold Ford.
                                   Ruben Hinojosa.
                                   Hilda L. Solis.
                                   Carolyn McCarthy.

                            DISSENTING VIEWS

                              introduction

    We are disappointed that the Committee on Education and the 
Workforce has reported out a bill that could compromise the 
stability of the Federal student financial aid program. The 
debate on this bill raised many substantive issues that 
seriously question the wisdom of moving forward with such haste 
to eliminate crucial protections for hardworking students and 
taxpayers that were designed only recently to help guarantee 
that Federal student aid is spent on high quality programs that 
deliver the promised education. This bill is premature, and 
these changes should be considered when Congress reauthorizes 
the Higher Education Act when more information about the 
potential impact of eliminating these protections will be 
available. Congress can then appropriately view the changes in 
the context of the Higher Education Act as a whole.
    The Committee has heard from many groups expressing 
reservations about the potential impact of these provisions and 
questioning the need to move this bill at this time. We share 
their concerns, and their recommendations against moving in 
haste to change provisions that have contributed to the 
reversal in the high default rates of the 1990's. These 
necessary safeguards have contributed significantly to ensuring 
the quality of education students receive, that the Federal 
government, and ultimately, taxpayers, pay for.
    Combined with these reservations, the letter of July 24, 
2001 from the Secretary of Education, Rod Paige, to 
Congresswoman Mink offered further reason to delay the 
enactment of this bill and to oppose changing these provisions 
at this time. Despite the Secretary's ultimate support for this 
bill on July 31st, just a week earlier he had stated that he 
could not make any recommendations on how to change either the 
12-hour rule or the incentive compensation ban. Even the 
Secretary saw the need for further discussion with the higher 
education community on these difficult issues, stating, ``We 
will continue to monitor the issue closely and may propose 
additional changes if necessary during the reauthorization 
process.''
    Along with the letter of July 24th, the Department of 
Education released its report on the 12-hour rule, and strongly 
made the case for not rushing through these changes. The 
Department specifically chose not to make any recommendations 
for next steps on the 12-hour rule, and chose not to issue 
guidance on the Incentive Compensation ban at this time. In 
both cases, the Department committed to going back and working 
further with the higher education community to find responsible 
ways to address the difficult issues of the 12-hour rule and 
the Incentive Compensation ban. Regarding incentive 
compensation, the Secretary said, ``I want to listen to the 
views of the higher education community before providing any 
new guidance on prohibited activity.'' Despite the 
contradictory statement of the Department to endorse this bill, 
the Secretary's message from July 24th was clear that these 
changes are complex, will have significant impact on higher 
education generally, and further work needs to be done to 
consider any impact or potential alternatives.
    Clearly, the potential of future studies, such as the 
Distance Education Demonstration Program, of the provisions 
affected by H.R. 1992, and the need to delay implementing these 
changes, seems greater than ever in light of Secretary Paige's 
letter of July 24th and the release of the 12-hour rule report.
    As the Committee has moved through this process, it has not 
been at all clear that these are the right changes, nor that 
this is the right time to try to make these changes. At the 
time of the full Committee markup of H.R. 1992, the Committee 
had incomplete information from the Demonstration Program. 
Additionally, the Department decided it needed to go back to 
the community to work more on the 12-hour rule and the 
Incentive Compensation guidance. Furthermore, the Web-Based 
Commission's recommendations, on which this bill was based, 
merely encouraged ``the federal government to review and, if 
necessary, revise'' these provisions, but made no clear 
recommendations. And the Committee heard from the National 
Association of Independent Colleges and Universities, the 
American Federation of Teachers, the American Association of 
University Professors, the United States Student Association, 
the State Public Interest Research Groups, the Inspector 
General of the U.S. Department of Education, and the Advisory 
Committee on Student Financial Aid, all raising concerns about 
these changes and advising delay or caution in proceeding until 
we know more from the Demonstration Program and other studies. 
It's clear that this bill has raised real concern in the higher 
education community that changes to these provisions may 
fracture the stability of the student aid programs.
    As has been stated previously in Subcommittee and 
Committee, members opposing these changes fully appreciate the 
staggering potential for web-based education to provide greater 
access to higher education for many Americans. Working 
students, older students, mothers at home with families, and 
other non-traditional students are the kinds of people who 
could benefit from distance learning programs. No one wants to 
get in the way of that.
    However, it is the responsibility of Congress to protect 
these very same hard-working students and taxpayers from 
getting taken advantage of. These provisions were enacted to 
curb abuses that were responsible for default rates of 22 
percent; as a result of these provisions, and other significant 
steps taken by the Clinton Administration to reform the student 
aid programs, the default rate is now 5.6 percent. And if this 
Committee is going to undermine this same Committee's well 
thought-out Demonstration Program to find the appropriate 
solution to this issue, the Committee needs to keep the 
responsibility of Congress to students and taxpayers at the 
forefront of its actions.
    Congress should also keep in mind that while the intent of 
this bill is to help expand distance education, the impact of 
these changes would reach far beyond distance education 
courses. This bill will affect every student taking courses in 
a nontraditional format, and could result in those students 
getting less instruction than taxpayers are providing financial 
support for. At the same time, the changes to the Incentive 
Compensation ban will affect every school currently 
participating in the Title IV programs, and could result in a 
return to the days when students found themselves victims of 
aggressive recruiting tactics. So this bill may be addressing 
distance education issues, but its impact is much wider than 
that. Furthermore, it's not entirely clear that distance 
education needs this help. The Advisory Committee on Student 
Financial Aid noted in its letter from June 19 that, ``Most 
existing distance education programs can and do benefit 
significantly from federal student assistance already.'' If 
that's true, has the Committeeproperly weighed the potential 
benefits of these changes with the potential problems it may cause?
    H.R. 1992 has raised some serious issues that will be 
facing the Committee as we approach the reauthorization of 
Higher Education. The technology revolution is affecting all 
aspects of our lives, and has made an impact on higher 
education as well. How technology changes our system of higher 
education is clearly a major issue that will likely impact most 
aspects of the HEA reauthorization, and this is an important 
precursor of those debates. As we work through this process, 
however, we should remember that in many of the ways technology 
has impacted our lives, it has not always replaced the existing 
way we live. In some cases, technology simply did not fit; in 
others, it has augmented and improved the way we live; but not 
always is there a wholesale revolution.
    The impact of technology on higher education is also not a 
new issue for this Committee. In 1998, this Committee first 
grappled with the issues we're dealing with here. At that time, 
the Committee, and eventually Congress, decided that these 
issues were thorny enough, and that insufficient information 
existed to properly deal with them, that it was prudent to 
create a laboratory of sorts to investigate how to deal with 
these issues in a responsible, thoughtful manner.
    As a result, Congress created the Distance Education 
Demonstration Program to look at how to change the 50 percent 
rules and the 12-hour rule in a way that doesn't jeopardize the 
student financial aid programs. These provisions, along with 
the ban on incentive compensation, were put in place to protect 
against fraud and abuse--changing these provisions prematurely 
could have serious consequences.

              the distance education demonstration program

    Congress recognized that the 50 percent rules and the 12-
hour rule were important provisions, so a very controlled 
experiment was developed, with significant oversight and 
reporting requirements. Indeed, the report from this Committee, 
which accompanied the authorization of the Demonstration 
Program, states that, although ``Distance education is emerging 
as an increasingly important component of higher education * * 
* There are provisions in the HEA designed to control fraud and 
abuse in distance education programs, and the Committee 
believes that these programs and courses must be carefully 
monitored to protect against such occurrences.'' The report 
language goes on to make absolutely clear that the Committee 
was very concerned about the impact of changing these 
provisions. The purpose of creating the Demonstration Program, 
the report clearly stated, was so that ``In these controlled 
circumstances, the potential of distance education can be 
tested without unduly increasing the risk of fraud and abuse.''
    Fraud and abuse was, and remains, a very real concern. 
These provisions were developed in the early 1990s, when more 
than one student in five was defaulting on loans within two 
years of leaving school--and the rates were much higher than 
that at some schools. Cases of fraud and abuse were widespread, 
and were the subject of congressional hearings, led by Senator 
Nunn, who documented remarkable abuses. Many of the cases came 
from the for-profit schools and correspondence schools and 
included:
           An auto repair shop operating out of a fruit 
        stand;
           A school enrolling Spanish-speaking students 
        that offered only classes in English; and
           A Texas truck-driving school that has lost 
        eligibility, but formed a new partnership with a Kansas 
        liberal arts college.
These are all schools that, at the time, were eligible to 
participate in the student aid programs.
    Students were also subject to deceptive or aggressive 
recruiting tactics. In congressional testimony, a 
representative of a New York legal clinic reported a deluge of 
``students defrauded by promises of free training and high-
paying jobs, tricked into signing for loans they did not 
necessarily need or want, disgusted by broken equipment and 
teachers who do not teach or even show up for class, and, 
ultimately, sued or harassed because of defaulted student 
loans.''
    And schools worked the system to wring the most financial 
benefit out of it. At the time, the Inspector General's office 
found schools that gave ``unreasonable'' numbers of academic 
credits--two or three times more than the number of class hours 
justified--solely to increase their students' eligibility for 
federal aid.
    So the record of abuses was clear. These provisions 
stripped eligibility from fraudulent operators, restored the 
integrity of the student aid programs, and have been very 
effective in protecting students and taxpayers. This Committee 
clearly recognized that in 1998 when, instead of simply doing 
away with these provisions, it created the Demonstration 
Program.
    Now, this Committee has voted to prematurely end this 
Demonstration Program, long before it has had the opportunity 
to provide us with the answers it was created to provide. The 
Demonstration Program has only had time to issue one report. 
Indeed, the Demonstration Program states, in its first report 
from this past January, 2001, that ``there are potential risks 
in the rapid expansion of distance education that require a 
certain degree of caution then considering the implications for 
the Title IV student financial assistance programs.'' Overall, 
the report speaks positively about the promise of distance 
education, and the difficulty such programs have in working 
under these provisions. At the same time, the report clearly 
acknowledges that ``these changes carry with them new risks to 
the Title IV programs that must be anticipated and managed to 
protect the integrity of the programs.''
    It doesn't make sense to preemptively repeal the 
Demonstration Program while it is still investigating how to 
replace these provisions in a way that does not put the student 
financial aid programs at risk. In waiving these provisions for 
a carefully selected group of participants in the Demonstration 
Program, Congress is able to more carefully and properly 
monitor the impact of these changes on students and taxpayers. 
H.R. 1992 undermines the intent of Congress in 1998 and will 
short-circuit the Demonstration Program before we have an 
opportunity to learn from it.

                            THE 12-HOUR RULE

    Regarding the 12-hour rule in particular, we are concerned 
that simply eliminating the 12-hour rule will mean students in 
non-traditional programs will get less instruction than 
students in traditional programs, yet will receive the same 
amount of Federal aid. Reading the Department of Education's 
report on the 12-hour rule only reinforces that concern, yet 
the report conspicuously fails to point to any clear 
alternatives to the 12-hour rule. This concern was manifested 
in the Committee markup by an amendment offered by 
Representative Holt (D-NJ) to strike the provision in H.R. 1992 
that would eliminate the 12-hour rule. As a former college 
professor, he expressed significant concern that without the 
12-hour rule, students would be given less instruction than 
they're paying for. Regrettably, after much debate, the 
amendment was defeated.
    The 12-hour rule was adopted to ensure that non-traditional 
programs offered the same amount of instruction as traditional 
programs. For traditional programs, the requirement was ``one 
day'', however, as the report notes, ``The Department did not 
establish a minimum number of instructional hours that must 
occur during that one day because, as stated in the preamble to 
the November 29, 1994 regulations, full-time students attending 
standard term programs were generally presumed to be in class 
attendance for at least 12 hours each week.'' For non-
traditional programs, however, there were concerns that 
``nonterm and nonstandard term programs might be set up with 
elongated instructional schedules that did not provide the 
appropriate amount of instruction for a full-time student. As a 
result, a student could receive more Title IV funds than was 
appropriate for the amount of instruction received.''
    Now, it has been reported that distance education programs 
are having difficulty meeting the 12-hour rule, as the first 
report of the Distance Education Demonstration program states. 
Yet, the Demonstration Program report goes on to state that 
``changes carry with them new risks to the Title IV programs 
that must be anticipated and managed to protect the integrity 
of the programs.'' The report on the 12-hour rule reinforces 
this statement, noting that ``Changes to the 12 hour rule have 
such broad implications and are so intertwined with other areas 
of Federal student financial assistance administration'' that 
the effects of changes could be far-reaching. This seems to 
argue for taking a closer look at the Distance Education 
Demonstration Program and its potential to better inform this 
discussion as we move towards the HEA reauthorization.
    As the 12-hour rule report rightly states, ``The key issue 
is how to make changes that allow the continued development of 
innovative educational programs while ensuring that the amount 
of educational instruction is adequate and comparable to that 
offered in traditional term-based programs.'' Yet the 
Department, in the 12-hour rule report, states clearly that 
``This report * * * contains no recommendations for next steps. 
It is the Department's intention to continue working with the 
higher education community on issues surrounding nontraditional 
education and, in particular, providing Federal student 
financial assistance to students enrolled in those programs.'' 
Currently, H.R. 1992 offers no guarantees, as Representative 
Holt correctly pointed out in offering his amendment to 
preserve the 12-hour rule, that students will receive 
comparable amounts of instruction without it.
    Whether or not there's a way to accommodate the needs of 
distance education while keeping the intent of the 12-hour rule 
intact is something the Committee needs to consider. As the 
American Federation of Teachers put it in their 2001 report, A 
Virtual Revolution: Trends in the Expansion of Distance 
Education, ``* * * deep knowledge of a subject is not simply a 
matter of passing a competency test. It does in fact require 
time--in the same room or in cyberspace--with teachers and 
other students chewing over ideas, hearing contrary points of 
view and defending conclusions. There is a reason for concern 
if time on task comes to be viewed as a luxury rather than a 
necessity in distance education on the corporate model.''

                     the incentive compensation ban

    Regarding the incentive compensation ban, there is concern 
that any weakening of this ban could result in loopholes 
developing and reports of growing abuses in the next few years. 
In Subcommittee, Representative Patsy Mink (D-HI) offered an 
amendment to strike these changes, but unfortunately it was not 
adopted. These concerns are strongly shared by the Inspector 
General of the Department of Education who stated that not only 
would the impact of these changes be unclear, the ban will be 
very difficult to enforce and provide students with protections 
against aggressive recruiting tactics that were such a problem 
in the past. The Inspector General recommended retaining a 
complete ban on awarding such incentive payments.
    Secretary Paige has also stated, in his letter accompanying 
the 12-hour rule report, that the Department is not prepared to 
issue guidance on incentive compensation. Instead, the 
Department sees the need to begin ``new discussions with the 
higher education community on the safeguards that must be in 
place to ensure accountability and integrity.''
    The Secretary, on July 24th, said that he would not be 
making any recommendations on how to change the 12-hour rule, 
nor is he prepared to issue guidance on the incentive 
compensation ban, stating that he needs to consult more with 
the community.
    In light of the Inspector General's position, and the 
Secretary's stated need to continue working on this issue, we 
feel strongly that the degree to which this ban is weakened is 
the same degree to which the door is opened to fraud and abuse.

                               conclusion

    Distance education should not be viewed as a replacement 
for traditional educational systems. As the AFT notes in their 
report, Distance Education: Guidelines for Good Practice, while 
many students perform better in distance education than in 
traditional classrooms, many do not. Almost half of the AFT 
members providing distance education reported higher dropout 
rates in their distance education courses. Many also reported 
that ``successful distance education students need to be highly 
motivated, and found the practice more problematic for younger, 
less-motivated students.'' Over 70 percent of these same AFT 
members advocate that half or less of an undergraduate degree 
be offered by distance education. As the report states, ``These 
responses are important because they came from distance 
education practitioners who were generallyfavorable to the 
practice, considered it successful and indicated that they would teach 
a distance education course again if asked.''
    As Secretary Paige put it in his letter from July 24th, 
``We need to strive for a consensus on boundaries that allow 
our institutions of higher education to operate in a reasonable 
and predictable environment and that also protect the public 
from the types of abuses we saw in the past.'' We fully agree 
with the Secretary, and applaud his decision to not rush these 
changes through before their impact has been sufficiently 
studied. To quote him from July 31st, ``Let me assure you that 
I am not about to open the door for fraud and abuse * * * we 
will closely monitor institutions, enforce the many safeguards 
that are in place, and aggressively pursue any instances of 
fraud and abuse in the Federal student aid programs.'' This is 
admirable and we hope that the Secretary and the other members 
of the Committee have a chance to work together to monitor the 
Demonstration program, and to learn from the Secretary's 
further consultation with the community.
    It is clear that all sides of this debate--Congress, the 
Department of Education, advocates of distance learning, and 
those concerned about the impact of these changes--will benefit 
from having more information, from the Demonstration Program 
and from other sources, to address these issues responsibly as 
we progress towards reauthorization of the Higher Education 
Act. In the meantime, during a time of soaring levels of 
student debt we should be decreasing, not increasing, the 
likelihood that students will be saddled with enormous debt 
with no real benefit from their education. Congress must 
advocate for protecting students and taxpayers. And that must 
be this Committee's primary focus. As a result, at this time, 
we strongly believe this bill is premature and we oppose it.

                                   Donald M. Payne.
                                   Tim Roemer.
                                   Lynn N. Rivers.
                                   Loretta Sanchez.
                                   Susan Davis.
                                   Patsy T. Mink.
                                   Bobby Scott.
                                   John F. Tierney.
                                   Rush Holt.

                                
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