[House Report 113-205]
[From the U.S. Government Publishing Office]
113th Congress } { Report
1st Session } HOUSE OF REPRESENTATIVES { 113-205
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SUPPORTING ACADEMIC FREEDOM THROUGH REGULATORY RELIEF ACT
_______
September 10, 2013.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Kline, from the Committee on Education and the Workforce, submitted
the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 2637]
[Including cost estimate of the Congressional Budget Office]
The Committee on Education and the Workforce, to whom was
referred the bill (H.R. 2637) to prohibit the Secretary of
Education from engaging in regulatory overreach with regard to
institutional eligibility under title IV of the Higher
Education Act of 1965, and for other purposes, 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 ``Supporting Academic Freedom through
Regulatory Relief Act''.
SEC. 2. REGULATORY RELIEF.
(a) Regulations Repealed.--
(1) Repeal.--The following regulations (including any
supplement or revision to such regulations) are repealed and
shall have no legal effect:
(A) State authorization.--Sections 600.4(a)(3),
600.5(a)(4), 600.6(a)(3), 600.9, and 668.43(b) of title
34, Code of Federal Regulations (relating to State
authorization), as added or amended by the final
regulations published by the Department of Education in
the Federal Register on October 29, 2010 (75 Fed. Reg.
66832 et seq.).
(B) Definition of credit hour.--The definition of the
term ``credit hour'' in section 600.2 of title 34, Code
of Federal Regulations, as added by the final
regulations published by the Department of Education in
the Federal Register on October 29, 2010 (75 Fed. Reg.
66946), and clauses (i)(A), (ii), and (iii) of
subsection (k)(2) of section 668.8 of such title, as
amended by such final regulations (75 Fed. Reg. 66949
et seq.).
(C) Gainful employment.--Sections 600.10(c),
600.20(d), 668.6, and 668.7, of title 34, Code of
Federal Regulations as added or amended by the final
regulations published by the Department of Education in
the Federal Register on October 29, 2010 (75 Fed. Reg.
66832 et seq. and 75 Fed. Reg. 66665 et seq.) and June
13, 2011 (76 Fed. Reg. 34386 et seq.).
(2) Effect of repeal.--To the extent that regulations
repealed by paragraph (1) amended regulations that were in
effect on June 30, 2011, the provisions of the regulations that
were in effect on June 30, 2011, and were so amended are
restored and revived as if the regulations repealed by
paragraph (1) had not taken effect.
(b) Certain Regulations Prohibited.--
(1) State authorization and gainful employment.--
(A) In general.--The Secretary of Education shall
not, during the period described in subparagraph (B),
promulgate or enforce any regulation or rule not in
effect on the date of enactment of this Act for any
purpose under the Higher Education Act of 1965 (20
U.S.C. 1001 et seq.) with respect to--
(i) the State authorization for institutions
of higher education to operate within a State;
or
(ii) the definition or application of the
term ``gainful employment''.
(B) Period of prohibition.--The period during which
the Secretary is prohibited from promulgating or
enforcing a regulation described in subparagraph (A)
shall be the period beginning on the date of enactment
of this Act and ending on the date of enactment of a
law that extends by not less than 2 fiscal years the
authorization or duration of one or more programs under
the Higher Education Act of 1965 (20 U.S.C. 1001 et
seq.).
(2) Credit hour.--The Secretary of Education shall not, on or
after the date of enactment of this Act, promulgate or enforce
any regulation or rule with respect to the definition of the
term ``credit hour'' for any purpose under the Higher Education
Act of 1965 (20 U.S.C. 1001 et seq.).
SEC. 3. THIRD-PARTY SERVICE PROVIDERS.
Section 487(a)(20) of the Higher Education Act of 1965 (20 U.S.C.
1094(a)(20)) is amended by adding at the end the following:
``Notwithstanding the preceding sentence, an institution described in
section 101 may provide payment, based on the amount of tuition
generated by the institution from student enrollment, to a third-party
entity that provides a set of services to the institution that includes
student recruitment services, regardless of whether the third-party
entity is affiliated with an institution that provides educational
services other than the institution providing such payment, if--
``(A) the third-party entity is not affiliated with
the institution providing such payment;
``(B) the third-party entity does not make
compensation payments to its employees that are
prohibited under this paragraph;
``(C) the set of services provided to the institution
by the third-party entity include services in addition
to student recruitment services, and the institution
does not pay the third-party entity solely or
separately for student recruitment services provided by
the third-party entity; and
``(D) any student recruitment information available
to the third-party entity, including personally
identifiable information, will not be used by, shared
with, or sold to any other person or entity, including
any institution that is affiliated with the third-party
entity.''.
Purpose
H.R. 2637, Supporting Academic Freedom through Regulatory
Relief Act, reduces the federal government's overreach into
postsecondary academic affairs and helps increase access to
higher education for our nation's most disadvantaged students.
It protects the academic autonomy of colleges and universities
and restores the authority of states and accrediting agencies
over our nation's higher education system. The bill repeals the
credit hour, state authorization, and gainful employment
regulations and amends the statute to clarify the incentive
compensation regulation. Additionally, the bill prohibits the
U.S. Department of Education from issuing related regulations
until after Congress reauthorizes the Higher Education Act.
Committee Action
As the Committee on Education and the Workforce continues
to evaluate the appropriate role of the federal government in
education, we are committed to ensuring students are afforded
the freedom to choose institutions of higher education that
best meet their unique needs, and colleges and universities are
protected from unnecessary and burdensome federal regulatory
schemes.
112TH CONGRESS
Hearings
On March 1, 2011, the Committee on Education and the
Workforce held a hearing in Washington, D.C. on ``Education
Regulations: Weighing the Burden on Schools and Students.'' The
hearing was the first in a series examining the burden of
federal, state, and local regulations on the nation's education
system. The purpose of the hearing was to uncover the damaging
effects of federal regulations that increasingly stifle growth
and innovation, raise institutions' operating costs, and limit
student access to affordable colleges and universities
throughout the nation. Testifying before the committee were:
Mr. Gene Wilhoit, Executive Director, Council of Chief State
School Officers, Washington, D.C.; Dr. Edgar Hatrick,
Superintendent, Loudoun County Public Schools, Ashburn,
Virginia; Mr. Christopher B. Nelson, President, St. John's
College, Annapolis, Maryland; and Ms. Kati Haycock, President,
The Education Trust, Washington, D.C.
On March 11, 2011, the Committee on Education and the
Workforce Subcommittee on Higher Education and Workforce
Training held a hearing in Washington, D.C. on ``Education
Regulations: Federal Overreach into Academic Affairs.'' The
purpose of the hearing was to discuss the most egregious and
intrusive pieces of the U.S. Department of Education's program
integrity regulations--the credit hour and state authorization
regulations--and uncover their unintended consequences on
states and institutions of higher education. Testifying before
the subcommittee were: Mr. Ralph Wolff, President, Western
Association of Schools and Colleges, Alameda, California; Mr.
John Ebersole, President, Excelsior College, Albany, New York;
Dr. G. Blair Dowden, President, Huntington University,
Huntington, Indiana; and the Honorable Kathleen Tighe,
Inspector General, U.S. Department of Education, Washington,
D.C.
On March 17, 2011, the Committee on Education and the
Workforce held a hearing in Washington, D.C. on ``Education
Regulations: Roadblocks to Student Choice in Higher
Education.'' The purpose of the hearing was to explore the
harmful consequences of the U.S. Department of Education's
gainful employment regulation and discuss how these
requirements impede college access, stifle job creation, and
demonstrate federal overreach into the nation's postsecondary
education system. Testifying before the committee were: Ms.
Catherine Barreto, Graduate, Monroe College and Senior Sales
Associate, Doubletree Hotels, Brooklyn, New York; Ms. Jeanne
Herrmann, Chief Operating Officer, Globe University/Minnesota
School of Business, Woodbury, Minnesota; Mr. Travis Jennings,
Electrical Supervisor of the Manufacturing Launch Systems
Group, Orbital Sciences Corporation, Chandler, Arizona; and Dr.
Arnold Mitchem, President, Council for Opportunity in
Education, Washington, D.C.
On July 8, 2011, the Committee on Education and the
Workforce Subcommittee on Higher Education and Workforce
Training held a joint hearing with the Committee on Oversight
and Government Reform Subcommittee on Regulatory Affairs,
Stimulus Oversight, and Government Spending in Washington, D.C.
on ``The Gainful Employment Regulation: Limiting Job Growth and
Student Choice.'' The purpose of the hearing was to explore the
harmful consequences of the U.S. Department of Education's
gainful employment regulation and how the new requirements
impede college access, stifle job creation, and continue the
administration's federal overreach into the nation's
postsecondary education system. Testifying before the
subcommittees were: Mr. Harry C. Alford, President and Chief
Executive Officer, National Black Chamber of Commerce,
Washington, D.C.; Dr. Dario A. Cortes, President, Berkeley
College, New York City, New York; Ms. Karla Carpenter,
Graduate, Herzing University and Program Manager, Quest
Software, Dane County, Wisconsin; and Dr. Anthony P. Carnevale,
Director, Georgetown University Center on Education and the
Workforce, Washington, D.C.
Legislative action--first session
On February 17, 2011, the House of Representatives
considered an amendment offered by Reps. John Kline (R-MN),
Virginia Foxx (R-NC), and Alcee Hastings (D-FL) to H.R. 1, the
Disaster Relief Appropriations Act of 2013. The amendment
prohibited the use of funds by the U.S. Department of Education
to implement and enforce the gainful employment regulation. The
amendment was agreed to by a bipartisan vote of 289 to 136.
On February 19, 2011, the House of Representatives passed
H.R. 1 by a vote of 235 to 189. The amendment was not included
in the conference agreement.
On June 3, 2011, Reps. Virginia Foxx (R-NC) and John Kline
(R-MN) introduced H.R. 2117, the Protecting Academic Freedom in
Higher Education Act. The bill repealed the federal credit hour
and state authorization regulations and prohibited the
Secretary of Education from defining ``credit hour'' for any
purpose under the Higher Education Act of 1965.
On June 15, 2011, the Committee on Education and the
Workforce considered H.R. 2117 in legislative session, and
reported it favorably, as amended, to the House of
Representatives by a bipartisan vote of 27 to 11. The committee
considered and adopted the following amendment to H.R. 2117:
Rep. Virginia Foxx (R-NC) offered an amendment in
the nature of a substitute to add a short title to the
legislation. The amendment was adopted by voice vote.
The committee further considered the following amendments
to H.R. 2117, which were not adopted:
Rep. Raul Grijalva (D-AZ) offered an amendment to
maintain the state authorization regulation's complaint process
and the requirement for authorization by name. The amendment
failed by a vote of 17-22.
Rep. George Miller (D-CA) offered an amendment to
prohibit implementation of the Act until the U.S. Department of
Education's Inspector General certifies there are equal or
greater protections in place related to program integrity under
Title IV of the Higher Education Act. The amendment failed by a
vote of 17-22.
Rep. Rush Holt (D-NJ) offered an amendment to
stipulate that the Act will be effective only if the maximum
Pell Grant award is at least $5,550 for the 2012-2013 school
year. The amendment was ruled out of order.
Rep. Tim Bishop (D-NY) offered an amendment to
strike the repeal of the federal definition of a credit hour.
The amendment failed by a vote of 11-27.
Rep. Tim Bishop (D-NY) offered an amendment to
strike the prohibition on the Secretary of Education from
defining credit hour in the future. The amendment failed by a
vote of 16-22.
Second session
On February 28, 2012, the House of Representatives passed
H.R. 2117 by a bipartisan vote of 303 to 114. The bill was sent
to the Senate and referred to the Senate Committee on Health,
Education, Labor, and Pensions.
113TH CONGRESS
Hearing--first session
On July 9, 2013, the Committee on Education and the
Workforce held a hearing in Washington, D.C. on ``Keeping
College Within Reach: Improving Higher Education through
Innovation.'' The purpose of this hearing was to highlight
innovation in higher education occurring at the state and
institutional level and in the private sector, and discuss
federal roadblocks to those innovative practices. Testifying
before the committee were: Mr. Scott Jenkins, Director of
External Relations, Western Governors University, Salt Lake
City, Utah; Dr. Pamela J. Tate, President and Chief Executive
Officer, Council for Adult and Experiential Learning, Chicago,
Illinois; Mr. Burck Smith, Chief Executive Officer and Founder,
StraighterLine, Baltimore, Maryland; and Dr. Joann Boughman,
Senior Vice Chancellor for Academic Affairs, University System
of Maryland, Adelphi, Maryland.
Legislative action--first session
On July 10, 2013, Reps. Virginia Foxx (R-NC), John Kline
(R-MN), and Alcee Hastings (D-FL) introduced H.R. 2637,
Supporting Academic Freedom through Regulatory Relief Act. The
bill, which includes the text of the Protecting Academic
Freedom in Higher Education Act (H.R. 2117) and the Kline/Foxx/
Hastings amendment to H.R. 1 from the 112th Congress, repeals
the credit hour, state authorization, and gainful employment
regulations and amends the statute to clarify the incentive
compensation regulation. Additionally, the bill prohibits the
U.S. Department of Education from issuing related regulations
until after Congress reauthorizes the Higher Education Act.
On July 24, 2013, the Committee on Education and the
Workforce considered H.R. 2637 in legislative session, and
reported it favorably, as amended, to the House of
Representatives by a bipartisan vote of 22 to 13. The committee
considered and adopted the following amendment to H.R. 2637:
Rep. Virginia Foxx (R-NC) offered an amendment in
the nature of a substitute to change a subsection title in the
legislation. The amendment was adopted by voice vote.
The committee further considered the following amendment to
H.R. 2637, which was not adopted:
Rep. Tim Bishop (D-NY) offered an amendment to
strike the prohibition on the U.S. Department of Education from
issuing regulations related to state authorization, gainful
employment, and credit hour. The amendment failed by a vote of
13-22.
Below is a summary of H.R. 2637.
Summary
The Supporting Academic Freedom through Regulatory Relief
Act eliminates the most burdensome ``program integrity''
regulations and prevents future federal overreach in
postsecondary academic affairs. Specifically, the bill:
Repeals the federal definition of a credit hour.
It would also prohibit the secretary from defining ``credit
hour'' in the future.
Repeals the state authorization regulation, which
forces states to follow federal requirements when deciding
whether to grant an institution--including those offering
online education programs--permission to operate within the
state.
Repeals the gainful employment regulation, which
would levy reporting burdens on community and proprietary
colleges and force administrators to seek federal approval
before creating programs.
Amends the statute to clarify the incentive
compensation regulation to ensure third-party service providers
are allowed to enter into tuition-sharing agreements with
nonprofit colleges and universities to aid in the development
of distance education platforms.
Prohibits the U.S. Department of Education from
issuing regulations on the state authorization and gainful
employment regulations until after Congress reauthorizes the
Higher Education Act and permanently prohibits the promulgation
of a federal definition of credit hour.
BACKGROUND ON THE REPEALED REGULATIONS
Federal credit hour
Under Title IV of the Higher Education Act of 1965, federal
student aid is awarded to students based on the number of
academic credits in which they are enrolled each term.
Historically, the U.S. Department of Education has relied on
accrediting agencies to oversee how an institution of higher
education defines a credit hour and assigns a specific number
of credit hours to each course. The new federal regulation
creates a federal definition of a credit hour, under which an
institution of higher education has only two ways to ensure its
students are enrolled in classes and earning the required
credit hours.
Under the first option, an institution must base its credit
hour on the ``Carnegie Unit,'' the traditionally accepted
definition for one credit hour. Under this metric, one credit
hour equals one hour of lecture and two hours of out-of-class
work for approximately 15 weeks for one semester or trimester
or 10 to 12 weeks for one quarter. Under the second option, an
institution must demonstrate an equivalent amount of coursework
for other academic activities, such as laboratory work,
internships, and practice, as established by the institution.
State authorization
Under the Higher Education Act of 1965, an institution of
higher education seeking to participate in federal student
assistance programs must be authorized to provide a
postsecondary educational program within a state. Historically,
the U.S. Department of Education allowed states to determine
what requirements institutions of higher education must meet to
carry out this requirement. The state authorization regulation
mandates the following:
Established by Name. States must establish an
institution of higher education by name. The institution
established by name must comply with all applicable state
approval or licensure requirements, unless exempted by the
state based on its accreditation or having been in operation
for at least 20 years.
Exemption if Institution is Established
as a Business or Charity. If a state establishes an
institution of higher education as a business or
charity (not established by name), the institution must
be approved or licensed to offer postsecondary programs
and may not be exempt from the approval process based
on accreditation, years in operation, or other
comparable exemption.
Impact on Religious Institutions. States
may exempt religious institutions from state
authorization processes by nature of their religious
affiliation. A ``religious institution'' is narrowly
defined as one that is ``owned, controlled, operated,
and maintained'' by a religious corporation and awards
only religious degrees or certificates.
Distance Education. An institution offering
distance education courses must be able to document it is
authorized by any state in which it would otherwise be subject
to state jurisdiction. This provision raised questions as to
whether online programs must be authorized in every state in
which they have enrolled students. On June 5, 2012, the
provision was struck down by the U.S. Court of Appeals for the
District of Columbia because it was not a ``logical outgrowth''
of the rest of the proposed regulation. On April 16, 2013, the
department announced in the Federal Register its intentions to
re-regulate on this issue.
Disclosure/Compliant Process. A college or
university must disclose to current and prospective students
information on filing complaints about institutions of higher
education with an accreditor, a state approval or licensing
agency, and any other appropriate state agency. States must
have a process to review and act on complaints about
institutions of higher education. Currently, all accreditors
must have a process to review and act on complaints against
institutions because they are responsible for institutional
quality. The regulation requires states to duplicate this
process.
Because of continuing questions from states as to whether
their laws are in compliance and confusion from institutions of
higher education, the department conditionally delayed
implementation of the state authorization regulation on two
separate occasions. The regulation is slated to go in effect on
July 1, 2014.
Gainful employment
Under the Higher Education Act of 1965, proprietary
institutions are permitted to participate in federal student
aid programs as long as their programs prepare students for
``gainful employment in a recognized occupation.'' Short-term
programs offered at community colleges or other nonprofit
colleges must also meet this requirement. The term ``gainful
employment'' has been in the law since 1965, and Congress did
not elaborate further when it reauthorized the law in 2008. The
final regulation contains three separate components:
Determination of Eligibility for Academic Programs:
Programs are categorized as: (1) eligible for federal student
aid; (2) eligible but restricted; and (3) ineligible for
federal student aid based on debt-to-income ratio and loan
repayment rate calculations.
Debt-to-Income Ratio Calculation. The debt-to-
income ratio would be determined by examining the median annual
loan payment made by students in the program compared to the
average annual income of the same group of students over a
three-year period. Two types of income would be compared to the
median debt level of each program: actual income, which
reflects the average annual income of students in a particular
program, and discretionary income, which is defined as the
difference between the average annual income of the program's
students and 150 percent of poverty.
Under the regulation, the debt-to-income ratio would be
``reasonable'' if the median annual loan payment amount for a
program's graduates is less than 12 percent of the average
annual earnings for these same students and less than 30
percent of the graduates' discretionary income. The income data
required for this calculation would be provided to the U.S.
Department of Education by the Social Security Administration
at the program level rather than on a student-by-student basis.
Loan Repayment Rate Calculation. The loan
repayment rate would be based on the number of graduates in
active loan repayment, defined by examining the average
percentage of former students who have reduced the principal on
their federal loans over a four-year period. Borrowers who are
in a repayment plan in which their principal is not being
reduced--which is common among new graduates--would not be
counted as in repayment on their loans, despite the fact those
borrowers would be in good standing and not in delinquency or
default on their loans. For purposes of the loan repayment rate
calculation, the department believes a program would have a
``reasonable'' repayment rate if more than 35 percent of its
former students (graduates and those who dropped out) are in
repayment.
New Programs: The U.S. Department of Education is required
to approve every new program created at a proprietary
institution prior to the start of enrollment and institutions
must comply with a number of new reporting requirements.
Disclosure: All proprietary institutions and the nonprofit
colleges and universities that offer short-term programs are
required to make public the following set of data elements,
much of which is different from what the federal government
collects on all institutions of higher education:
Information Published on the Institution's Website
Cost of the institutional program.
Median debt of the students over the past
three years (including a separate identification of
federal loans, private loans, and institutional loans).
Identification of the careers for which the
institutional program is providing training.
On-time graduation rates.
Job placement rates.
Information Reported to the Department Annually
Each student who completed the institutional
program.
The date the student completed the
institutional program.
The amount of private and institutional loans
received by the student.
On June 30, 2012, the U.S. District Court for the District
of Columbia upheld the department's authority to regulate on
gainful employment, but struck down the loan repayment rate
calculation because the standard was chosen arbitrarily. The
court struck down the debt-to-income ratio calculation because
it was so closely intertwined with the repayment rate standard.
The court also struck down the new program requirement.
Finally, the court held that institutions are not required to
report any data to the department under the disclosure
requirements, but are required to make data public. On April
16, 2013, the department announced in the Federal Register its
intentions to re-regulate on this issue. The negotiated
rulemaking sessions are scheduled to start in early September
2013.
Incentive compensation
The Higher Education Act of 1965 prohibits institutions of
higher education from paying any commission or bonus based on
employees' success in recruiting students if those employees
are engaged in student recruitment, admissions, or student
financial aid. Regulations for this provision used to include
12 ``safe harbors,'' or activities in which schools could
engage without violating the incentive compensation ban. One of
the safe harbors allowed for tuition-sharing agreements between
institutions and third-party providers for recruitment
activities. The U.S. Department of Education's incentive
compensation regulation eliminated all allowable safe harbors.
On March 17, 2011, the department released informal
guidance in the form of a ``Dear Colleague Letter'' (DCL)
delineating acceptable activities. To address concerns voiced
by smaller colleges and universities who use third-party
providers for a variety of services, the DCL clarified that a
tuition-sharing plan between a college and a third-party
service provider does not violate the incentive compensation
prohibition as long as the payment compensates an entity
unaffiliated with the college or university making the payment.
To further clarify the department's position, the DCL provided
several examples, one of which stated the third-party provider
could not be affiliated with any other college or university,
even if the affiliated college has nothing to do with the
third-party entity providing the services.
Committee Views
In late 2010 and early 2011, the U.S. Department of
Education released several packages of regulations purportedly
to improve the integrity of student financial aid programs,
such as Pell Grants and federal student loans. Two of these so-
called ``program integrity'' rules--the credit hour and state
authorization regulations--expand the reach of the federal
government into issues that are traditionally academic or state
affairs. A third regulation--the gainful employment rule--harms
job creation and imposes federal cost controls on institutions.
The final regulation--the incentive compensation rule--hampers
the ability of nonprofit colleges and universities to move
coursework online. These regulations, combined, increase the
regulatory burden on institutions, impede innovation, and
expand the federal footprint on college campuses across the
country, making it difficult for colleges and universities to
focus on their true mission of educating students.
History of examining regulatory red tape
The committee has long championed bipartisan efforts to
examine the regulatory burden imposed by the federal government
on colleges and universities. In 2001, the committee introduced
a first-of-its-kind, web-based tool to enable higher education
stakeholders across the nation to participate in identifying
ways to reduce red tape and bureaucracy for students, financial
aid personnel, and colleges and universities. Known as the FED
UP project, this bipartisan initiative, developed by Rep.
Howard P. ``Buck'' McKeon (R-CA) and the late Rep. Patsy Mink
(D-HI), was instrumental in fostering a more efficient and
effective federal student aid system. The project solicited
suggestions from the higher education community as to which
provisions in the Higher Education Act, and corresponding
regulations, should be changed or eliminated and why. More than
3,000 responses were received from loan professionals,
financial aid officers, students, higher education
associations, and concerned citizens. Congress and the
department used the suggestions from this project to streamline
regulatory and reporting requirements in 2002.
The Higher Education Opportunity Act (HEOA), the 2008
reauthorization of the Higher Education Act, also included
efforts to examine the federal regulatory burden on
institutions of higher education. The HEOA required the
Advisory Committee on Student Financial Assistance to solicit
comments from personnel working at colleges and universities
about federal regulatory burdens and how to address them.\1\
The HEOA also required the National Research Council at the
National Academy of Sciences to conduct a study to examine the
regulatory burden on institutions of higher education.\2\ The
committee is currently awaiting the results from the National
Research Council.
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\1\Higher Education Opportunity Act Sec. 492(a)(2)(F)
\2\Higher Education Opportunity Act Sec. 1106
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Recent efforts to examine regulatory red tape
In the 112th Congress, the committee continued its efforts
to streamline the federal regulatory burdens imposed on states,
institutions of higher education, school districts, schools,
and other entities impacted by the programs under its
jurisdiction. In furtherance of this goal, the committee held a
number of hearings that examined the regulatory burden imposed
on schools, institutions, and students by the federal
government. During these hearings, college presidents,
accrediting agency heads, and students testified about the cost
of complying with burdensome, overreaching federal laws and
regulations. For example, during a March 1, 2011 hearing before
the Committee on Education and the Workforce, Mr. Christopher
Nelson, the president of St. John's College, testified about
the harmful impact of excessive regulations on colleges and
universities:
The cost of compliance is large for institutions of
all sizes, but particularly so for a school of our size
that has no office of institutional research or staff
dedicated to support that function. This means that
literally dozens of people on our campus, myself
included, assume this burden as part of our daily
work.\3\
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\3\``Education Regulations: Weighing the Burden on Schools and
Students,'' hearing before the House Committee on Education and the
Workforce, 112th Congress, 1st Session (March 1, 2011) (oral testimony
of Christopher Nelson).
Mr. Nelson went on to discuss how the time spent by his
faculty and other staff on reporting and compliance affects
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their ability to educate:
When I step back from the mass of the more mundane
record-keeping, reporting, and compliance environment,
I try to see what the effect of all this is on our
principal task, fulfilling our educational mission for
the sake of our students. Every diversion or
distraction from these primary purposes weakens our
best attempts to achieve those ends.\4\
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\4\Ibid.
Finally, he offered a worthwhile suggestion, ``As new
requirements are created, get rid of some of the old at the
same time. The concept would be something along the lines of a
pay-go system for regulation that could be applied both to
regulatory requirements and to data collection.''\5\ The
committee believes this is a sensible suggestion that the U.S.
Department of Education should consider as it enters into
future negotiated rulemaking sessions to improve student aid
programs. Our goal should be to reduce, not increase, burdens.
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\5\Ibid.
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The credit hour regulation will shut down innovative programs for
students
The committee believes the new credit hour regulation,
which creates a federal definition of credit hour for the first
time, undermines the traditional role of institutions of higher
education and may be harmful to students and their colleges and
universities. By imposing a restrictive set of new requirements
when measuring coursework, the regulation will stifle
innovative teaching practices being developed by colleges and
universities around the country, including accelerated learning
programs. This will shut down the programs unemployed or
underemployed workers rely on to gain the skills necessary to
get back to work, jeopardizing the nation's fragile economic
recovery.
The credit hour is at the heart of an academic decision.
Institutions develop their credit hour policies and work with
faculty to determine how many hours should be assigned to each
course. Accrediting agencies then review each institution's
policy and assignment of credit hours for the programs. Many of
the agencies avoid strict standards to maximize flexibility in
accounting for differing institutional policies and developing
innovative ways to deliver educational content. During the
March 11, 2011 hearing before the Subcommittee on Higher
Education and Workforce Training, members heard from numerous
presidents of institutions of higher education and accrediting
agencies who will be forced to comply with the new federal
credit hour regulations when they go into effect this year. Dr.
G. Blair Dowden, President of Huntington University, stated:
For the credit hour, I think the definition is . . .
confusing and how it relates to a variety of
educational experiences that we offer at the
institution including practicums and student teaching
experiences and many other experiences that don't
include the formula of seat time and that might be
difficult to find out an equivalency as proposed in the
regulations.\6\
---------------------------------------------------------------------------
\6\``Education Regulations: Federal Overreach into Academic
Affairs,'' hearing before the House Subcommittee on Higher Education
and Workforce Training, 112th Congress, 1st Session (March 11, 2011)
(oral testimony of G. Blair Dowden).
Ms. Pamela Tate, President and Chief Executive Officer for
the Council for Adult and Experiential Learning, highlighted
the flaws to students of maintaining a seat-based federal
definition of credit hour during a July 9, 2013 hearing before
---------------------------------------------------------------------------
the Committee on Education and the Workforce. She stated:
The main policy issue is that, currently, federal
financial aid programs like Pell grants and federal
loans support only traditional time-based learning. The
financial aid system under Title IV is not structured
for an outcomes-based and assessment-based approach to
postsecondary completion. It excludes assessment of
prior learning fees, even though these fees
significantly reduce the student's overall student loan
debt or the amount to be covered by Pell grants or
other educational benefits.\7\
---------------------------------------------------------------------------
\7\``Keeping College Within Reach: Improving Higher Education
through Innovation,'' hearing before the House Committee on Education
and the Workforce, 113th Congress, 1st Session (July 9, 2013) (written
testimony of Pamela J. Tate).
Across the country, institutions like Huntington University
and Western Governors University (WGU), which use a competency-
based model to award credit, are undertaking innovative and
creative approaches to student learning. The committee believes
the federal government should encourage more universities to
adopt these models that are improving the higher education
landscape. Under the federal credit hour regulation, WGU's
competencies are relegated to exceptions, which could lead to
accrediting bodies further questioning what they are doing and
how they are doing it.
While H.R. 2637, Supporting Academic Freedom through
Regulatory Relief Act, repeals the federal definition of
``credit hour,'' it leaves in place two other components of the
credit hour regulation. First, it retains the requirements for
accrediting agencies to review institutional policies on credit
hour. Second, it leaves in place requirements for states to
examine institutional policies on credit hour as the state
decides whether to grant authorization to institutions of
higher education to operate in their state. These two
requirements were tentatively agreed to during the U.S.
Department of Education's negotiated rulemaking session. While
these remaining items still have challenges, the affected
parties agreed to them in order to protect against potential
fraud and abuse, and the Act does not change those regulations.
Unfortunately, the federal definition of ``credit hour'' is
the one issue on which the department did not abide by the
tentative agreement reached by the negotiated rulemaking panel.
In defense of this provision, the committee notes the
department relies on an Inspector General report of the Higher
Learning Commission (HLC) and its review of American
InterContinental University,\8\ which was an isolated incident
that does not represent a systemic problem in accreditation.
---------------------------------------------------------------------------
\8\``Management Information Report--Review of The Higher Learning
Commission of the North Central Association of Colleges and Schools'
Standards for Program Length,'' Office of the Inspector General, U.S.
Dep't of Education, May 24, 2010.
---------------------------------------------------------------------------
During the March 11, 2011 Subcommittee on Higher Education
and Workforce Training hearing, Rep. Rob Andrews (D-NJ) asked
Ms. Kathleen Tighe, the department's Inspector General, whether
the issues she found in reviewing HLC represented one limited
incident or a systematic problem and questioned whether the
federal definition is a solution in search of a problem.\9\ The
Inspector General pointed out that she had concerns with HLC's
practices, but that other accrediting agencies her office
reviewed did not have similar problems. In his testimony before
the subcommittee, Mr. Ralph Wolff, President of the Western
Association of Schools and Colleges and one of the participants
in the negotiated rulemaking session, pointed out that
participants continually asked the department about the
problems it was trying to solve. He noted the department kept
relying on the isolated incident with HLC without citing any
other examples, ``We asked repeatedly at the negotiated
rulemaking, what is the scope of this problem so that we could
help define a resolution. And we were never told what the scope
was, beyond this one incident.''\10\
---------------------------------------------------------------------------
\9\``Education Regulations: Federal Overreach into Academic
Affairs,'' hearing before the House Subcommittee on Higher Education
and Workforce Training, 112th Congress, 1st Session (March 11, 2011),
p. 67.
\10\Ibid. (oral testimony of Ralph Wolff).
---------------------------------------------------------------------------
The state authorization regulation will jeopardize college access and
completion
The committee believes the new state authorization
regulation imposes a one-size-fits-all requirement that will
harm students and public and private colleges. In issuing the
regulation, the federal government is overstepping its
traditional role of utilizing the knowledge and expertise of
states and accrediting agencies to measure and ensure
institutional quality. The rule also infringes on the right of
states to regulate their higher education systems and will
likely require most, if not all, states to change how they
currently authorize or license institutions of higher education
to comply with the new requirements. For almost 50 years, the
Higher Education Act included language that an institution of
higher education participating in federal student aid programs
must be authorized to provide a postsecondary educational
program within a state.\11\ The state authorization regulation
micromanages how states comply with this long-standing
requirement.
---------------------------------------------------------------------------
\11\Higher Education Act Sec. 101(a)(2)
---------------------------------------------------------------------------
One of the more troubling aspects of the state
authorization regulation is its consequences for distance
education programs. Even though the requirement was struck down
by the U.S Court of Appeals for the District of Columbia,\12\
the Secretary of Education announced\13\ his plans to re-
regulate on this issue in the near future. Under the previous
regulation, institutions of higher education that offer
distance education programs may be forced to seek authorization
in each state in which the students it serves live, no matter
how small its presence. These institutions may be forced to
comply with authorization requirements in multiple states,
including paying new fees, which will increase the cost of
providing a high-quality postsecondary education. Ultimately,
these innovative colleges and universities may decide to stop
serving students in a particular state, thereby denying access
to students. Rural states may be the most affected by this
regulation and an institution's decision to forego
authorization in states with limited populations.
---------------------------------------------------------------------------
\12\Association of Private Sector Colleges and Universities vs.
Arne Duncan. United States Court of Appeals for the District of
Columbia Circuit. (June 5, 2012).
\13\``Negotiated Rulemaking Committee; Public Hearings,'' 78
Federal Register 73 (16 April 2013), pp. 22467-22469.
---------------------------------------------------------------------------
The rapid expansion of distance education demonstrates
colleges and universities are utilizing new technology to
provide cost-effective ways to deliver postsecondary education
to students, especially nontraditional students. The distance
education component of the state authorization regulation could
put this new, innovative tool in jeopardy, reducing options for
students without the resources or time to attend a traditional
college or university. Fewer students with access to
postsecondary education mean fewer graduates entering the
workforce with the skills necessary to meet local economic
demands.
During the March 11, 2011 hearing, the Subcommittee on
Higher Education and Workforce Training heard from Mr. John
Ebersole, President of Excelsior College, an online institution
of higher education. In his testimony, Mr. Ebersole discussed
the burden the state authorization regulation will impose on
his institution:
We do know we have put money in our budget for
compliance and we estimate that at our institution by
the time we hire the additional staff that will be
necessary to coordinate this and we pay the fees which
each of these states requires we are going to have an
annual recurring cost of somewhere between $150,000 and
$200,000 which when multiplied by the number of
institutions that offer online programs today, we are
talking about an additional cost which will eventually
be passed to students of $500 million.\14\
---------------------------------------------------------------------------
\14\``Education Regulations: Federal Overreach into Academic
Affairs,'' hearing before the House Subcommittee on Higher Education
and Workforce Training, 112th Congress, 1st Session (March 11, 2011)
(oral testimony of John Ebersole).
In a letter sent to the committee on July 22, 2013, Dr.
Robert Mendenhall, President of Western Governors University,
discussed the cost the state authorization regulation has
already had on his campus. He stated, ``Simply put, State
Authorization has cost WGU more than $1,000,000 over the past
two-years. Those precious dollars could have been spent much
more effectively on students.''\15\
---------------------------------------------------------------------------
\15\Mendenhall, Robert W., Western Governors University. Letter to
Chairman John Kline, House Committee on Education and the Workforce.
July 22, 2013. .
---------------------------------------------------------------------------
The overriding consequence of the new regulation will be to
put postsecondary education out of reach for students, many of
whom are low-income or disadvantaged. In this tough economic
climate, the federal government needs to put forward policies
that improve college access and completion, thereby helping
more skilled individuals enter the workforce. Instead, it is
pushing policies that will deny students the ability to gain
the skills necessary to succeed in the global economy.
The Subcommittee on Higher Education and Workforce Training
also heard during the March 11, 2011 hearing about the negative
consequences the state authorization regulation would have for
private or religious colleges. The new federal requirements
could force states to exercise unprecedented authority over
private colleges and universities, going far beyond granting
the authority to operate as postsecondary institutions. Dr. G.
Blair Dowden, President of Huntington University, highlighted
his concerns with the new requirement, stating, ``My concern is
that there appears to be no limits to what factors a state can
consider when granting or withholding authorization and no
mechanisms for appeal or due process.''\16\
---------------------------------------------------------------------------
\16\``Education Regulations: Federal Overreach into Academic
Affairs,'' hearing before the House Subcommittee on Higher Education
and Workforce Training, 112th Congress, 1st Session (March 11, 2011)
(oral testimony of G. Blair Dowden).
---------------------------------------------------------------------------
He went on to discuss the extremely narrow definition of
``religious institution'' included in the regulation and
pointed out that most religiously affiliated institutions would
not qualify for the exemption, consequently opening the
institution up to unwarranted state interference:
. . . the possibility exists that certain states may
use this new state authorization requirement as
leverage to achieve their own higher education policy
agenda at the expense of institutional missions. For
instance, a state could require a certain curriculum or
text books in order to gain authorization potentially
violating both the academic prerogatives and religious
convictions of the institutions.\17\
---------------------------------------------------------------------------
\17\Ibid.
These consequences clearly go beyond the existing federal
requirement that states grant authority to operate as a
postsecondary institution within the state, threatening the
academic freedom and mission of private colleges and
universities.
The Gainful Employment Regulation stifles job creation
The committee strongly opposes the gainful employment
regulation as an unprecedented attack on the proprietary sector
of higher education that will limit student choice and
jeopardize local economic and workforce development. Instead of
working with Congress during the upcoming reauthorization of
the Higher Education Act, the department proposed and finalized
a regulation that contained a complex matrix of metrics
involving debt-to income ratios and loan repayment rates. The
regulation also gave unprecedented authority to the U.S.
Secretary of Education to approve each new program created by a
proprietary institution, taking away these institutions'
ability to remain flexible to ensure their academic offerings
meet the needs of the local economy. Finally, the regulation
imposes new, burdensome disclosure requirements on all programs
at proprietary institutions and select short-term programs at
nonprofit institutions--information that is, in some cases,
different from what colleges are already required to make
public through the Integrated Postsecondary Education Data
System (IPEDS).
The committee notes the House of Representatives has been
clear in its opposition to the promulgation of this regulation.
On February 18, 2011, the House voted to prohibit the secretary
from regulating on gainful employment by a strong bipartisan
vote of 289 to 136, including members of the Republican and
Democratic leadership. On July 13, 2012 and April 18, 2013, a
bipartisan group of members sent letters urging the secretary
to abandon his plan to re-examine the flawed gainful employment
regulation and work with Congress. Despite these efforts and a
federal court ruling striking down the bulk of the
regulation,\18\ the department recently announced plans to
convene a negotiated rulemaking panel to revise the regulation;
the panel is expected to meet and begin consideration in
September 2013. This shortsighted action will surely result in
another round of legal proceedings and continuing instability
for students at career colleges, most of whom seek the skills
necessary to retain or access employment. The committee
strongly urges the secretary to abandon his efforts to re-
regulate this flawed regulation and work with Congress to
reauthorize the Higher Education Act.
---------------------------------------------------------------------------
\18\Association of Private Sector Colleges and Universities vs.
Arne Duncan. U.S. District Court for the District of Columbia. (June
30, 2012).
---------------------------------------------------------------------------
While supportive of efforts to increase institutional
transparency, the committee believes the federal government
needs to streamline and develop consistent disclosure
requirements across all institutions, not just proprietary
colleges. As demonstrated by Mr. Alex Garrido, the student
veteran witness who testified during the April 24, 2013
Subcommittee on Higher Education and Workforce Training
hearing, students do not utilize the vast federal resources
available online when looking for a college. Instead they
frequently visit the college, look at the website, and talk to
friends when selecting their institution.\19\ Mr. Garrido
stated, ``After selecting the schools I was interested in, I
began to visit the campuses and speak to admissions advisors. I
wanted to get a feel for the environments of each individual
school and this is hard to gauge solely from school
websites.''\20\
---------------------------------------------------------------------------
\19\``Keeping College Within Reach: Enhancing Transparency for
Students, Families, and Taxpayers,'' hearing before the House
Subcommittee on Higher Education and Workforce Training, 113th
Congress, 1st Session (April 24, 2013) (oral testimony of Alex
Garrido).
\20\``Keeping College Within Reach: Enhancing Transparency for
Students, Families, and Taxpayers,'' hearing before the House
Subcommittee on Higher Education and Workforce Training, 113th
Congress, 1st Session (April 24, 2013) (written testimony of Alex
Garrido).
---------------------------------------------------------------------------
If federal policymakers hope to help students make informed
decisions about their postsecondary pathways, then Congress
needs to scale back the amount of information it requires
institutions to disclose to the public and make sure that
information is consistent and helpful to the consumer: students
and families.
As has been discussed at length since the rule's initial
release, the gainful employment regulation has a number of
unintended and harmful consequences for institutions, students,
and working adults. Despite the claims of the administration
and opponents of private sector education, the regulation will
harm economic development in communities across the country.
Many of the institutions harmed by this regulation are
students' last hope as they try to gain new skills or update
their skills to enter into the workforce. The true harm to
students will come to those smaller to mid-sized institutions
that do not have the same resources as bigger institutions to
deal with the regulations. Many of these schools operate in
areas that are underserved by other colleges and universities.
During a joint hearing held on July 8, 2011 between the
Subcommittee on Higher Education and Workforce Training and the
Committee on Oversight and Government Reform Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government
Spending, Mr. Harry Alford, President and Chief Executive
Officer of the National Black Chamber of Commerce stated:
The black owned businesses that I represent rely on
graduates of proprietary colleges targeted by the
recent Gainful Employment Rule. These proprietary
colleges serve minority, low-income, and high-risk
students at much greater numbers than traditional four-
year institutions and have more success doing it.\21\
---------------------------------------------------------------------------
\21\``The Gainful Employment Regulation: Limiting Job Growth and
Student Choice,'' joint hearing before the Subcommittee on Higher
Education and Workforce Training and the Committee on Oversight and
Government Reform Subcommittee on Regulatory Affairs, Stimulus
Oversight, and Government Spending, 112th Congress, 1st Session (July
8, 2011) (written testimony of Harry C. Alford).
The committee believes students should have the ability to
choose a higher education institution that best meets their
unique needs. That choice should not be undermined by an
arbitrary regulation proposed and enforced by federal
bureaucrats.
The Incentive Compensation Regulation should encourage higher education
innovation
The committee believes the U.S. Department of Education's
effort to clarify the role of third-party providers in the
incentive compensation regulation has hampered competition and
picked winners and losers in the higher education marketplace.
Independent third-party providers are permitted to engage in
tuition-sharing plans with other universities, but affiliated
third-party providers, including those held by private
companies that may also own institutions, are not allowed to
continue the business practice. Many of these affected third-
party entities help nonprofit public and private institutions
develop online platforms for their courses; these institutions
would not be able to afford such costs if a large up-front fee
for services was charged. The statute must be changed to ensure
the regulation and sub-regulatory guidance to not discourage
innovation in higher education and instead restore competition
in the postsecondary marketplace.
The language included in H.R. 2637 is nearly identical to
H.R. 2525, the Collaborative College Services Act, introduced
by Reps. Matt Salmon (R-AZ) and Rob Andrews (D-NJ). The
legislation would ensure all third-party service providers are
treated the same in the eyes of the law, regardless of whether
those providers are affiliated with another college or
university.
Current protections against fraud and abuse
The committee takes its responsibility to protect the
accountability of federal funds seriously. The committee notes
the Higher Education Act already includes numerous provisions
to prevent waste, fraud, and abuse of federal student aid
programs. The federal government--in partnership with
accrediting agencies--conducts audits and program reviews.
Institutions must stay below caps on cohort default rates and
meet satisfactory academic progress standards, and report on a
whole host of information regarding institutional and program
quality. The law also makes clear states and accrediting
agencies have an important role as part of the triad governing
federal funds.
While the ongoing conversations among states, accrediting
agencies, and institutions may have started because these
regulations pushed states and accreditors to pay more attention
to their own duties, maintaining these burdensome regulations
is likely to hamper innovation moving forward. Instead of
setting a federal definition of credit hour, the U. S.
Department of Education should leave it to accrediting agencies
and institutions, which have a strong record of appropriately
measuring academic quality. Rather than dictating to states how
they must approve institutions to operate within their
boundaries, the department should allow them to determine the
best way to protect their citizens. Instead of singling out the
proprietary sector for additional regulation, the department
should increase transparency for all colleges and universities.
Conclusion
Instead of protecting students from fraud and abuse, the
credit hour, state authorization, gainful employment, and
incentive compensation regulations are clear examples of
federal overreach into the academic affairs of states,
accrediting agencies, and public and private institutions of
higher education. These unnecessary regulations will impose
additional regulatory burdens on colleges and universities,
which could lead to higher costs being passed down to low-
income and disadvantaged students. More importantly, students
who are looking to gain the skills necessary to succeed in the
workforce will be denied access to innovative instructional
programs that will keep us competitive in the global economy.
A broad array of organizations, representing a diverse
group of colleges and universities, support this legislation
because they know it promotes access to an affordable
postsecondary education. The higher education institutions and
organizations include the: American Council on Education,
Association of American Universities, Association of Jesuit
Colleges and Universities, Association of Private Sector
Colleges and Universities, Council for Christian Colleges &
Universities, Council for Higher Education Accreditation,
Excelsior College, Middle States Association of Colleges and
Schools--Commission on Higher Education, National Association
of Independent Colleges and Universities, National Association
of Student Financial Aid Administrators, New England
Association of Schools and Colleges Commission on Institutions
of Higher Education, North Central Association of Colleges and
Schools--The Higher Learning Commission, Northwest Commission
on Colleges and Universities, Rebuilding America's Middle
Class, Southern Association of Colleges and Schools--Commission
on Colleges, Western Association of Schools and Colleges--
Accrediting Commission for Community and Junior Colleges,
Western Association of Schools and Colleges--Accrediting
Commission for Senior Colleges and Universities, and Western
Governors University.
H.R. 2637, Supporting Academic Freedom through Regulatory
Relief Act, ensures colleges and universities are able to focus
their energy and resources on educating students. Congress and
the administration should focus on increasing educational
opportunities for students and streamlining federal regulations
that inhibit innovation in higher education.
Section-by-Section Analysis
Section 1. Short title
States the short title as the ``Supporting Academic Freedom
through Regulatory Relief Act.''
Section 2. Regulatory relief
Repeals the state authorization regulation.
Repeals the definition of the term ``credit hour'' in
regulation.
Repeals the gainful employment regulation.
Prohibits the Secretary of Education from issuing
regulations on state authorization or gainful employment for
the purposes of carrying out the Higher Education Act of 1965
until such time when Congress reauthorizes the Act.
Prohibits the Secretary of Education from defining the term
``credit hour'' for the purposes of carrying out the Higher
Education Act of 1965.
Section 3. Third party service providers
Amends the statute to clarify the incentive compensation
regulation to ensure third-party service providers affiliated
with institutions of higher education are allowed to enter into
tuition-sharing agreements with nonprofit colleges and
universities to aid in the development of distance education
platforms.
Explanation of Amendments
The amendments, including the amendment in the nature of a
substitute, are 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. 2637 repeals the credit hour, state authorization,
and gainful employment regulations, amends the statute to
clarify the incentive compensation regulation, and prohibits
the U.S. Department of Education from issuing related
regulations until after Congress reauthorizes the Higher
Education Act.
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. This issue is addressed in the CBO letter.
Earmark Statement
H.R. 2637 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of House Rule XXI.
Roll Call 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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Statement of General Performance Goals and Objectives
In accordance with clause (3)(c) of House Rule XIII, the
goals of H.R. 2637 are to reduce the federal government's
overreach into postsecondary academic affairs and help increase
access to higher education for our nation's most disadvantaged
students. The Committee expects the Department of Education to
comply with these provisions and implement the changes to the
law and regulations in accordance with these stated goals.
Duplication of Federal Programs
No provision of H.R. 2637 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from the Government Accountability Office to Congress
pursuant to section 21 of Public Law 111-139, or a program
related to a program identified in the most recent Catalog of
Federal Domestic Assistance.
Disclosure of Directed Rule Makings
The committee estimates that enacting H.R. 2637 does not
specifically direct the completion of any specific rule makings
within the meaning of 5 U.S.C. 551.
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 CBO Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following estimate for H.R. 2637 from the Director of the
Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 30, 2013.
Hon. John Kline,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2637, the
Supporting Academic Freedom through Regulatory Relief Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Justin
Humphrey.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 2637--Supporting Academic Freedom through Regulatory Relief Act
H.R. 2637 would repeal three regulations previously
published by the Department of Education and prohibit future
rulemaking in those areas. It also would amend the Higher
Education Act of 1965 (HEA) to permit institutions of higher
education to make certain payments to third parties for student
recruiting services. CBO estimates that enacting H.R. 2637
would not have any significant impact on the federal budget.
The bill would repeal regulations that require institutions
of higher education to be authorized by the state or states in
which they offer a curriculum. It also would repeal regulations
that require certain institutions of higher education to meet
benchmarks related to the repayment of student loans and debt-
to-income ratios of former students in order to be eligible to
participate in the federal student aid programs (this rule is
commonly referred to as ``gainful employment''). The bill would
prohibit the department from defining or enforcing rulemaking
related to these terms until the Congress extends the
authorizations in the HEA for at least two years.
A federal court invalidated portions of both of the rules
described above, and the Department of Education has announced
that it is restarting the negotiated rulemaking process to
develop new rules. Thus, CBO assumes that neither rule is
currently in effect and that repealing the rulemaking would
have no impact. Finally, the bill would repeal a rule that
defines the term ``credit hour'' and would prohibit the
department from defining or enforcing rulemaking related to
this term any time after the date of enactment of H.R. 2637.
Enacting the bill could affect discretionary spending for
Pell grants and direct spending for student loans and Pell
grants; therefore, pay-as-you-go procedures apply. However, CBO
estimates that the effects on both direct spending and
discretionary spending would be insignificant for each year and
over the 2013-2023 period. Enacting the bill would have no
impact on revenues.
H.R. 2637 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Justin Humphrey.
This estimate was approved by Peter H. Fontaine, Assistant
Director for Budget Analysis.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 2637.
However, clause 3(d)(2)(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 (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
HIGHER EDUCATION ACT OF 1965
* * * * * * *
TITLE IV--STUDENT ASSISTANCE
* * * * * * *
Part G--General Provisions Relating to Student Assistance Programs
* * * * * * *
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. Notwithstanding the
preceding sentence, an institution described in section
101 may provide payment, based on the amount of tuition
generated by the institution from student enrollment,
to a third-party entity that provides a set of services
to the institution that includes student recruitment
services, regardless of whether the third-party entity
is affiliated with an institution that provides
educational services other than the institution
providing such payment, if--
(A) the third-party entity is not affiliated
with the institution providing such payment;
(B) the third-party entity does not make
compensation payments to its employees that are
prohibited under this paragraph;
(C) the set of services provided to the
institution by the third-party entity include
services in addition to student recruitment
services, and the institution does not pay the
third-party entity solely or separately for
student recruitment services provided by the
third-party entity; and
(D) any student recruitment information
available to the third-party entity, including
personally identifiable information, will not
be used by, shared with, or sold to any other
person or entity, including any institution
that is affiliated with the third-party entity.
* * * * * * *
MINORITY VIEWS
Overview
H.R. 2637 props open the door to waste, fraud and abuse
within the Title IV system. The bill repeals three regulations
that are intended to better ensure that students and taxpayers
receive a quality education for their investment. It then
restricts the Secretary of Education from issuing any new
versions of these rules. It also codifies several loopholes in
the nation's long-time ban on incentive compensation. Lastly,
the bill fails to offer constructive solutions or alternatives
to these measures to ensure the integrity of federal
investments in higher education. Laws and regulations for the
effective and efficient use of taxpayer dollars should be
strengthened, not weakened or repealed, particularly in this
tough budget environment.
Now more than ever, the federal government has an
obligation to students and taxpayers to ensure that there is a
minimum standard of institutional eligibility for federal
student aid. The cost of college continues to skyrocket; on
average, in-state tuition and fees at a 4-year college
increased by almost 4 percent a year in inflation adjusted
dollars over the last decade.\1\ Additionally, more students
are attending college and using federal student aid. In 2013,
the Department of Education will provide over $170 billion in
grants, loans, and work-study assistance to students at
institutions of higher education.\2\ It is imperative that
federal laws and regulations ensure adequate accountability at
our institutions of higher education.
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\1\Trends in College Pricing 2012, The College Board.
\2\Department of Education Budget Justifications.
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The ``Triad'' Regulatory Structure in Higher Education and the Federal
Role
Title IV of the Higher Education Act (HEA) authorizes the
federal student aid programs and establishes a regulatory
structure that includes three actors--the federal government,
states, and accrediting agencies--known as the ``triad''.
Because of concern about federal interference in school
operations, curriculum, and instruction, the Department of
Education (the Department) has relied on accrediting agencies
and States to determine and enforce standards of program
quality. The HEA recognizes the roles of the federal
government, states, and accrediting agencies as providing a
framework for a shared responsibility and for ensuring that the
``gate'' to student financial aid programs opens only to those
institutions that provide students with quality education or
training worth the time, energy, and money they invest.
Although the Department relies on accrediting agencies to
assess and certify program quality at institutions, the
Department does perform an important oversight role. In
particular, the federal government has a direct role in
ensuring that the student aid programs are properly used by
institutions and students. As the funder and operator of more
than $170 billion in student aid,\3\ the federal government has
a responsibility to ensure that institutions have policies and
procedures that protect federal dollars, and are acting in the
best interests of students and the taxpayers.
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\3\Ibid.
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Two of the rules repealed by H.R. 2637, the federal
definition of a credit hour and state authorization, are
written in a way that respects the current triad structure,
providing for greater accountability through consistent
definitions while relying on institutions, accreditors, and
states as strong partners in ensuring such accountability for
federal dollars.
Federal Definition of a Credit Hour
H.R. 2637 repeals the regulatory definition of a credit
hour and prohibits the Secretary of Education from promulgating
any future rules that define a credit hour.
The HEA defines an academic year for an undergraduate
program as requiring a minimum of 24 semester or trimester
credit hours or 36 quarter credit hours in a course of
study.\4\ The amount of student financial assistance that can
be awarded is based on the number of credit hours earned, but
the term ``credit hour'' is not defined in the HEA. Therefore,
the credit hour is not only the basic unit of an academic
program at an institution of higher education; it is also the
basic unit underlying the distribution of federal student aid.
Yet, prior to the October 2010 regulation, this term had never
been defined for federal aid purposes.
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\4\Section 481(a)(2)(A) of the Higher Education Act of 1965, as
amended.
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Inspector General Report on `Egregious' Credit Hour Policies
A 2009 Alert Memorandum by the Department of Education
Inspector General reported a lack of clear standards and
policies in accounting for credit hours, as well as a
questionable decision by one accrediting agency to accredit an
institution which peer reviewers observed had ``egregious''
credit hour policies. The policy increased revenue to the
institution, but raised the cost of higher education for their
students, and for the taxpayer.
Following the memorandum, the Department's Inspector
General conducted reviews at three of the seven regional
accrediting agencies and found the oversight of institutional
assignment of credit hours insufficient at all three agencies.
These three agencies accounted for more than 70 percent of the
Federal student aid funds awarded in 2009-10. The potential for
a small number of unscrupulous institutions to exploit this
lack of minimum standards led the Department to regulate in
this manner to safeguard taxpayer funds.
The Inspector General testified in front of the Committee
on two occasions, on June 17, 2010 and March 11, 2011, to
discuss her findings in this matter. In both instances, she
expressed the need for a federal definition of a credit hour in
order to ensure that federal student aid dollars were protected
from potential waste, fraud, and abuse.
The Credit Hour Regulation and Innovation
The definition of a credit hour for federal purposes is
necessary, in part, because more than $150 billion of federal
financial aid is awarded annually based on an individual
student's enrollment, as represented in number of credits. The
rule works to appropriately balance the need for accountability
while providing the freedom for colleges to innovate and
accommodate new technologies.
The new regulations address vulnerabilities in the student
aid programs that leave them open to fraud and abuse. The
regulations are grounded in commonly accepted practice in
higher education and do not intrude on core academic decisions
made by institutions and their accrediting agencies.
Additionally, the Department of Education took additional steps
to broadly define a credit hour to provide more opportunities
for colleges to experiment with new innovations and
technologies. Experts have argued that some accreditors have
been too conservative when allowing colleges to try new
education models. The broadly defined credit hour definition
opens the playing field for colleges to innovate.
By repealing this moderate and flexible definition, H.R.
2637 significantly undermines accountability, transparency and
consistency in the awarding of federal student aid at a time
when more students are attending postsecondary education, using
more federal student aid, and institutions of higher education
are growing and adapting to meet student demands.
H.R. 2637 takes a step beyond repealing the particulars of
federal definition set in the regulation. The bill would
prohibit the Secretary of Education from ever providing a
federal definition of a credit hour. This prohibition would
hinder the Secretary from addressing current or future issues
of waste, fraud, and abuse without an act of Congress. Such a
restriction would greatly limit the Secretary's authority and
ability to adequately and responsibly operate the federal
student aid programs in the best interests of students and the
taxpayers.
The federal government must know families are getting what
they paid for when borrowing thousands of dollars to pay for
college. Democrats do not take this question lightly and this
Congress must fully discuss the issue in the reauthorization of
the Higher Education Act.
State Authorization
In order for students at an institution of higher education
to be eligible for Title IV funds, an institution must be
legally authorized by a State to provide a program of
postsecondary education.\5\ This requirement has always been a
part of the HEA, though there have been few specifics in
regulations. In its issuance of regulations on October 29,
2010, the Department specified how it will determine whether an
institution is authorized by the State.
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\5\Sections 101(a)(2), 102(b)(1)(A)(ii)(B), and 103(c)(1)(B) of the
Higher Education Act of 1965, as amended.
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H.R. 2637 repeals the state authorization rule issued in
October 2010. This repeal would completely eliminate the
definition of state authorization, including consumer
protection provisions stipulating that institutions are only
considered to be authorized by a state if such state has a
process to review complaints against the institution.
H.R. 2637 would also prohibit the Department from
promulgating or enforcing any rules related to state
authorization until the successful reauthorization of the
Higher Education Act. Such a prohibition would bind the hands
of the Secretary from ensuring program integrity within the
federal student aid program.
Gainful Employment
The Higher Education Act specifies that in order to obtain
access to Title IV funds, public, private and proprietary
colleges that offer career programs are required to ensure
those programs adequately prepare students for ``gainful
employment in a recognized occupation''. However, a common
definition of ``gainful employment'' had not been established.
In regulations published in 2011, the Department established a
three part test for measuring a program's effectiveness in
preparing students for ``gainful employment'' in an effort to
judge eligibility for Title IV funding. In addition, the new
rules were designed to provide important consumer disclosures
to help students make smart economic decisions given high
college costs.
By repealing gainful employment regulations, H.R. 2637
would eliminate critical consumer disclosures currently in
effect that help students make more informed decisions about
where to attend school. The bill would also prohibit the
Department from promulgating or enforcing any rules related to
gainful employment until the successful reauthorization of the
Higher Education Act. Such a prohibition would bind the hands
of the Secretary from ensuring program integrity within the
federal student aid program.
Incentive Compensation
Incentive compensation allows colleges to reward college
employees or individuals, through compensation or other means,
for enrolling new students in their academic programs. Critics
say it puts the financial interests of college employees or its
partners before the needs of students. As a matter of
transparency, when students discuss their enrollment with
colleges they believe academic advisers are their advocates,
not paid salesmen.
Congress adopted the ban on incentive compensation in 1992
with bipartisan cooperation, and has not acted to amend the
statute since. The Bush Administration implemented a series of
12 regulatory loopholes, often referred to as ``safe harbor
provisions'' to the incentive compensation statute in 2002,
clearly outside of congressional intent. Studies conducted by
the Government Accountability Office (GAO), the media and the
Senate Health, Education, Labor and Pensions (HELP) Committee
have shown that far too often, unscrupulous colleges could use
these loopholes to enroll students, encourage them to max out
their financial aid and then fail to deliver on the value
proposition of a good education. In 2011, the Department of
Education brought the regulations back in line with the
original legislative intent by eliminating the loopholes
established in 2002.
H.R. 2637 would codify several of the 2002 loopholes
directly into the Higher Education Act, providing companies the
opportunity to return to deploying commissioned recruitment
schemes.
Democratic Amendment
Committee Democrats strongly believe that the Secretary
must be able to respond to waste, fraud and abuse. Taxpayers
expect proper oversight of the nearly $170 billion investment
into student aid they make yearly.
The Democratic amendment, offered by Representatives Bishop
(D-NY) and Hinojosa (D-TX), would strike the prohibition on the
Department of Education from establishing protections for
students and safeguards for taxpayer dollars. Committee
Republicans rejected the common sense amendment by a vote of
13-22.
Conclusion
Now more than ever the federal government has an obligation
to students and taxpayers to ensure that there is a minimum
standard of institutional eligibility for federal student aid.
H.R. 2637 fails to meet that goal by repealing three
regulations that are intended to better ensure students and
taxpayers receive a quality education for their investment,
restricting the Secretary's ability to devise alternative
measures, and codifying several loopholes in the nation's long-
time ban on incentive compensation. Furthermore, the bill fails
to offer any constructive alternative solutions even while it
ties the Secretary's ability to act, thereby leaving students'
and taxpayers' dollars vulnerable to waste, fraud, and abuse of
federal programs.
At a time when the higher education market is in so much
flux, and the demand for student financial aid is growing,
program integrity should be a top priority. Instead, H.R. 2637
moves backwards in accountability measures, lacks any
alternative approaches, and fails to protect the nation's
students.
H.R. 2637 is opposed by the following organizations, which
work on behalf of students, consumers, veterans, faculty and
staff, civil rights and college access and affordability: Air
Force Sergeants Association (AFSA); American Association of
University Professors (AAUW); American Association of
University Women (AAUP); American Federation of Teachers;
Americans for Financial Reform; Association of the United
States Navy (AUSN); Center for Law and Social Policy; Center
for Responsible Lending; Consumer Action; Consumers Union;
Crittenton Women's Union; The Education Trust; Initiative to
Protect Student Veterans; The Institute for College Access &
Success; The Leadership Conference on Civil and Human Rights;
Iraq and Afghanistan Veterans of America (IAVA); League of
United Latin American Citizens; Mississippi Center for Justice;
National Association for Black Veterans, Inc. (NABVETS);
National Association for College Admissions Counseling;
National Consumer Law Center (on behalf of its low-income
clients); National Consumers League; National Education
Association; The National Guard Association of the Association
of the United States (NGAUS); NCLR (National Council of La
Raza); New Economy Project (formerly NEDAP); NYPIRG; Paralyzed
Veterans of America; Public Citizen; Rebuild the Dream; Service
Employees International Union; United States Student
Association; U.S. PIRG; Veterans Education Success; VetJobs;
VetsFirst, a program of United Spinal Association; Veterans of
America; and Young Invincibles.
George Miller.
Ruben Hinojosa.
Jared Polis.
Timothy H. Bishop.
Suzanne Bonamici.
Frederica S. Wilson.
John F. Tierney.
Joe Courtney.
Raul M. Grijalva.
John A. Yarmuth.
Gregorio Kilili Sablan.
Susan A. Davis.