U.S. DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

OPEN HEARING ON

NEGOTIATED RULEMAKING

Friday, November 16, 2007

9:08 [a.m.]{.smallcaps} -- 3:00 [p.m.]{.smallcaps}

U.S. Department of Education

Auditorium

550 12^th^ Street, SW

Washington, D.C.

[P R O C E E D I N G S]{.underline}

MR. BERGERON: Good morning.

\[Discussion off the record.\]

I'm David Bergeron. I am Director of Policy and Budget Development in
the Office of Postsecondary education. Welcome to the Department.

I always feel, when I come here, that I've come to a remote outpost of
the Department, because it is a little walk from our Headquarters
building, and quite a walk over here for us coming from K Street. But I
want to welcome you here.

We like this room, in terms of space, to have meetings in. I know that
security is not always the easiest getting into the building, although I
hope we have made it a little bit easier than most of our guests to this
building have experienced.

But with that, there are a couple little parts of the deal. And part of
the deal is, when you leave the building, see one of the federal staff,
and they will escort you out of the building. That's to prevent people
getting off on the wrong floors and ending up in the wrong part of this
building, which is not completely occupied by the Department of
Education. And some of our other Executive Branch colleagues in the
building get a little concerned when they have uninvited\--or unintended
guests on their floors.

So, the security people of the Department ask that we arrange for people
to be escorts, and I hope you find my colleagues to be good at that. If
they are not around, you can even grab me or Danny and we'll help get
you out of the building without any trouble.

This is the second on the series of three public hearings that we're
having to consider and develop the agenda for our negotiated rulemaking
that will be the result of, primarily, College Cost Reduction and Access
Act that was signed into law back in September.

That Act includes a number of provisions, which I know you are aware, in
which regulations are required. And most significantly, I think, for
many of us, the TEACH Grants that are authorized by that ACT, where they
become\--that Program becomes effective on July 1, 2008.

We have a sense of urgency around getting those regulations in place so
that Program can begin with good rules governing it. That Act also
includes some issues around some loan programs and including the changes
in repayment plans and differential special allowance payments for
lenders depending on whether they are for-profit or not for-profit.

So, we expect that there will be a number of issues that we will
regulate around. The purpose of these public hearings is to get your
input and advice as we begin that process, about what issues we should
be looking at as we negotiate those regulations, and to give you an
opportunity to suggest other areas that we might need to look at as we
implement those programs and other things in our education act.

I'm going to let my colleagues here at the table introduce themselves.
Throughout the day, there will be different people sitting here, I'm
sure. I know that Danny and I have to make a trip back to K Street later
in the day for a little while, and so, there will be different\--we
know, this afternoon, there will be others sitting here. I also know
that Brian may not be here the whole time either. So, if you're here and
you see us changing places, just bear with us.

Right now, we don't have a lot of people signed up to testify. If you
haven't signed up, I would encourage you to go out and see my colleagues
who are at the table outside this room who are signing people up.

But we do have a couple of people this morning and at least one for this
afternoon who has signed up, but we will proceed as soon as the people
who have currently signed up\--as soon as my colleagues have an
opportunity to introduce themselves.

MR. MADZELAN: Thanks, David. Thanks everyone, again, for coming this
morning.

I'm Dan Madzelan, Director of Forecasting and Policy Analysis in the
Office of Postsecondary Education, and I've done this kind of thing
before, not only the start of the process, these public hearings, but
also the middle part of it, the actual negotiations, where we all get in
a room and enjoy each other's company and ideas, and then, at the end of
the process, where we actually publish a proposed rule and, ultimately,
a final rule.

And again, thanks for coming today. We certainly look forward to your
thoughts and suggestions.

MR. SIEGEL: And I am Brian Siegel, an attorney in the Department's
Office of the General Counsel, and I have primary responsibility for the
areas covered by the CCRA.

MR. BERGERON: And with that, I invite Sandra Robinson to come forward as
our first witness\--or first presenter. I don't know exactly what we
call you.

MS. ROBINSON: Good morning.

I want to thank you for this opportunity to provide suggestions for
consideration and action by the negotiated rulemaking committee.

I will probably refer to my texts for the remarks, because I know they
need to be brief. And in order to be brief, I will keep with the
remarks.

MR. BERGERON: I will add that, right now, we do not have a lot of people
signed up. So, you do not need to be as brief as advertised.

MS. ROBINSON: All right. I have been practicing speed talking, so I will
slow down a little bit.

MR. BERGERON: You can slow down.

MS. ROBINSON: I'm from the South, so that is very difficult to have to
practice here, so thank you very much.

I'm Sandra Robinson. I'm Dean of the College of Education at the
University of Central Florida, America's sixth largest university, and
we're the largest source of education degrees in the State of Florida.

Our programs graduate teachers and school leaders who go on to fill the
high-need areas of science, math, educational technology, and special
education.

Our college partners with 11 public school districts, comprised of over
6,000 K-12 schools, with an enrollment of over half a million students.
And as a public university, we also appreciate the partnerships with key
corporate entities, such as Lockheed-Martin, Progress Energy, Boeing,
and State Farm Insurance, with a goal of preparing highly qualified
teachers and educational leaders.

Today, I am speaking on behalf of American Association of Colleges of
Teacher Education, representing nearly 800 public and private schools,
colleges, and departments of education at institutions of higher
education throughout the nation and its territories, as well as
affiliate members, including state departments of education, community
colleges, educational laboratories and centers, and online teacher
preparation programs.

AACTE's mission is to promote the learning of all pre-kindergarten
through 12^th^ grade students through high-quality, evidence-based
preparation and continuing education for all school personnel.

AACTE embraces the TEACH Grant initiative, having vigorously supported
the passage of the TEACH Grant provisions of HR 2669.

This Program will encourage and serve as an incentive for students to
enter the profession of teaching and education, and encourage practicing
educators to continue their lifelong learning and professional
development.

It is a proactive measure that addresses the critical shortage of
teachers in every discipline, especially in the high-need areas of STEM
and special education, and the need for highly qualified teachers in
hard to staff schools, which we know a lot about in Florida.

With full support for the TEACH Grant Program, AACTE would like to raise
the following issues of concern in terms of expediting and streamlining
the implementation of the TEACH Grant program so that solutions to the
problems that they address can be put quickly into place, and I have
seven different areas to address quickly.

First, clarifying under the definition of "eligible institution," what
constitutes extensive clinical experiences.

AACTE advocates that teacher preparation programs include, at a minimum,
450 hours of supervised clinical experience. Teacher candidates must
spend significant time in the classrooms during that preparation,
observing expert teachers and teaching methods, developing classroom
management skills, and working with diverse student populations.
Clinical experiences improve candidates' effectiveness in the classroom,
and prepare them for the realities that they are going to face.

In addition, the value of a supervisor's extensive observation of a
teacher-candidate's interaction with children cannot be underestimated.

We recommend that the regulations include a standard of 450 hours of
clinical experiences.

Second, clarifying what happens when the teacher shortage areas change.
The TEACH Grants require a four-year teaching service commitment in a
high-need subject area over what happens to a teacher who begins
teaching in a declared shortage area but that shortage area is no longer
deemed such in the following year or three years?

AACTE recommends that the teacher be allowed to teach all four years in
the same subject area regardless of whether that area remains a shortage
filed.

Third, clarifying the number of the TEACH Grants available. The TEACH
Grant Program is supported through mandatory spending, thus, it appears
that as much funding as is required to meet the demand for applicants
will be available.

It would be helpful to have the regulations clarify for students and
institutions that the program will indeed accommodate as many teacher
candidates as apply. This will enable the institutions to engage in
extensive outreach campaigns without concern for over-promising or
over-promoting the scholarship opportunity.

Fourth, clarifying the payee of the TEACH Grant Program and the timing
of the distribution of grants. AACTE supports the distribution mechanism
for tuition assistance. However, timing and distribution of grants
should be shaped to work in concert with the federal grant system. We
recommend that institutions be able to apply for additional funds
throughout the year, as students\--particularly our non-traditional
students tend to enter postsecondary education at different times during
the year.

Five, clarifying reporting process for TEACH grantees during their
teaching service commitment. AACTE recommends that the U.S. Department
of Education assume responsibility for receiving evidence required of an
applicant's employment at the end of each service year.

While institutions of higher ed are equipped to track students during
their period of enrollment, tracking transient students for an
eight-year period after graduation would necessitate creating and
monitoring a data system, the cost of which is not included in the TEACH
Grant, so which we are not asking for.

As one example, the State of Florida successfully administered a program
of this nature in the past. It had centralized recordkeeping maintained
by the state.

Sixth, clarifying who is eligible to apply for a TEACH Grant in the
graduate program. The statute, as written, appears to exclude a
significant category of potential teachers, that being career changers
who are not retired and who may not have content expertise in a teaching
shortage area, but who want to go back to school to get their master's
degrees to become certified in a shortage area.

One example of this is our partnership with Lockheed-Martin, who is very
interested, of course, in engineers. So, they are providing funding for
a master's degree program for such people.

AACTE recommends that the Department of Education's regulations clarify
this issue regarding eligibility to receive a TEACH Grant for a master's
degree program.

And finally, developing an annual report on the TEACH Grant Program. In
order to better understand the impact of the TEACH Grant Program in
addressing serious and chronic teacher shortages in our Nation, AACTE
recommends establishing the requirement for an annual public report,
including the number of TEACH Grants issued each year by shortage field,
the number of institutions of higher education participating in the
program, and an accounting of how many applicants are teaching in K-12
schools, and where they are teaching, to include locations, school type,
and the field in which they're teaching.

AACTE urges the Department to develop and operationalize a significant
marketing campaign to make sure that the TEACH Grants become a household
name and highly sought after.

Members of AACTE are committed to playing a vital role in the spreading
the word and sharing the good news about TEACH Grants with our
institutions and in the K-12 schools where our faculty and our
candidates work daily with students.

Thank you very much for the opportunity to present these
recommendations.

MR. BERGERON: Thank you.

Can I ask a follow-up question?

MS. ROBINSON: Sure.

MR. BERGERON: You raised the issue of clarifying the shortage areas, in
that a teacher can teach for the period of their service obligation in
that same field.

The concern of the\--the issue that we have been struggling with is
around how do students know what shortage areas there are nationally
today, because they are the ones listed in the statute. And then are
there any that are designated by states, for example.

And so, the struggle I think we have been struggling a little bit with
is "What do you do for the students in terms of their experience while
they're in school? Do you grandfather in the shortage areas that
were\--when they first received a grant, or do you do it only when
they've entered the teaching workforce.

I mean, we've had some conversations on that. We would welcome your
thoughts on that.

MS. ROBINSON: I think in terms of the requirements that the states have,
it would be most advantageous to the students themselves to grandfather
them in. Whatever the teaching shortage area is when they begin their

preparation\--because, for many of us, that is so designed and dictated,
frankly, by the states, that once a student starts in a certain area, it
would be difficult to change.

Now, admittedly, maybe a year or two in here, the first two years are
pretty much general education sorts of courses, because, by our national
accreditation, students must take all the general ed fields. So, there
is a little bit of flexibility, but once they really are admitted to
professional education programs, they are pretty much following the
dictates of the state in order to become certified. So, it would
probably add years to their preparation programs if, indeed, they were
not grandfathered in at some point in the process.

MR. BERGERON: Thank you.

Whenever I do this, I know that, invariably, that I will hit a name that
stumps me.

And at these times, I generally hand them to Mr. Madzelan and say,
"Danny, you can call our next person to come to the table.

Dennis Patanazek \[ph.\]\--close?

MR. PAKANIZZEK: I think it was pretty close. It is Pakanizzek. If the
"z" were an "h," it wouldn't scare, but the "z" always scares people. It
is really interesting.

MR. BERGERON: Yes. Thank you, Dennis.

MR. PAKANIZZEK: Thank you for the opportunity to be here.

I am the Dean at Salisbury University, which is just across the Bay. We
are Maryland's third largest institution for preparing teachers, and
today, I am representing not only Salisbury University, but the Maryland
association of Colleges for Teacher Education, as well.

And you would think that Dr. Robinson and I spent some time together
preparing our testimony, but we did not. Even though we were colleagues
in Florida together, we prepared our testimony independently, but it
really strikes at many of the same issues.

Maryland, like many of the states, has what is called "an extreme
teaching shortage." We, last year, hired 6,500 new teachers in the
state, and Maryland institutions prepared somewhere around 2,600. So, we
had to find teachers from a lot of other places. So, we're very excited
about the TEACH Grants as a way to provide incentives for teachers to
enter the field.

But we do have a number of questions. We are very excited about the
program, but want to raise some issues that we think that the negotiated
rulemaking committee may want to address, and certainly the first of
those is clinical experience.

And like Dr. Robinson, we believe strongly that the clinical experience
portion is a critical part of teacher preparation, and it may be one of
the single most important pieces that affects teacher retention. Without
the extensive clinical experience, people enter the classroom unprepared
to teach and unprepared to manage classrooms.

The question that I think we need to consider is\--we know that the
pipeline for a four-year degree in teacher education often involves, for
many, many students, beginning at the community college level. So, we
need to figure out\--one of the questions to figure out is how do
community colleges fit into this equation for extensive clinical
experience. So, that's one area that we share in common.

The second issue is about "post-bac," because what we know is that we
really, probably, are not going to solve the teacher shortage,
especially in the critical fields through traditional four-year
undergraduate teacher preparation programs.

We need to have programs that focus on career changes. So, my concern is
that we make sure that\--here's what we don't want to end up with.

We don't want to have people who take a course here and then go to
another college and take a course, and then go to another college and
take a course, because that is going to lead to a less-than-cohesive
program, and I would think an accounting and accountability nightmare in
terms of these grants, as well.

So, I think my recommendation would be that we talk about\--that these
will be for people who enter a program and finish that program, rather
than people who sort of shop around for the most convenient course that
fits into their life. So, it is another area, I think, to get some
clarity about.

The other is issue is probably whether or not any undergraduate work can
be eligible for TEACH Grants if in fact the teacher preparation is at
the Post-bac level.

Example, California. California requires a fifth year. Most of the
fifth-year programs in California are post-bac programs. They are not
master's degree programs. And in those instances, people have to finish
their bachelor's degree to get their content before they go on to the
fifth year.

So, I think some clarity about in what cases would undergraduate count
and be eligible for TEACH Grants would be necessary in the rulemaking.

Certainly another area is eligibility, and this sort of relates to the
whole business about the shortage fields. Does one become eligible
simply by declaring a major in one of the high-need areas? That's the
first thing. We need to make sure that institutions can verify that
eligibility. And it seems another piece that we need to make sure\--we
are talking about, literally, people who would be high-school seniors in
some cases.

We need to make sure that those student are aware of, when they seek
money through a TEACH Grant, that what the requirements are for service
afterwards\--so, probably instigating some sort of promissory note will
accomplish that and also provide a way, perhaps, to focus their studies.

I am concerned, as you are, about what happens\--the teacher shortage
areas is an interesting one, because the language talked about a number
of areas pre-identified, but then others that would be identified by
state or local education agencies.

Let me give you the Maryland example. Today, in Maryland, early
childhood education is a critical shortage area. Will it be in five
years when the student finishes the program? We don't know that. So, we
need to solve that problem. And I think that\--it is sort of, like, if
you sign on the dotted line that you are entering a shortage area that
has been identified by the state that, in fact, the deal would be a
deal, that if you continue and follow that path and teach in that area,
that we should probably honor our promise.

But in Maryland, it is a little bit more complicated, because we put out
a teaching staffing report every year based on data that comes from
somewhere. In that staffing report, then they declare what the shortage
areas are. It is possible for a district in Maryland to declare itself a
geographic shortage area. Every one of the school districts has done so.

In addition, in Maryland, minority teachers and males are considered
shortage areas.

So, I think this goes way beyond the intent of the language of the bill,
but it is one of those things that I think\--achieving clarity about how
state and local shortage area declarations will be treated is a critical
piece.

So, I think that, you know\--I also have attached to my testimony some
comments from our financial aid director that get into a level of detail
that goes way beyond the expertise of a dean, and I am attaching that
because I think it is important to you, but I would be delighted to
answer any questions that you might have or address anything further.

But thanks for the opportunity, and I wish you well in the negotiated
rulemaking. It is going to be quite a process.

MR. BERGERON: It is going to be quite a process and quite a rapid
process.

MR. PAKANIZZEK: A rapid process.

MR. BERGERON: I expect\--how do you think we should address the issue of
community colleges and how they would fit within this.

MR. PAKANIZZEK: Well, I think community\--to be honest, I think
community colleges serve two very different roles right now.

One is that they serve as really part of four-year programs by offering
associate's degree or, in many states, associated arts and teaching
degrees that are really an articulated part of four-year programs.

I think in those cases, most of them have agreed that they will provide
clinical experience for their students in several of the three or four
courses that become part of the teacher education program.

I know in our state, for example, students will usually leave the
community colleges with at least 100 hours of such experience through
three or four courses.

The other role that community colleges play, often, is a provider of
alternative certification programs. And in my belief, it is at that
point that we really need to think about the clinical experience that is
required as comparable to what you would require of any other teacher
education program, an extensive clinical experience.

So, I mean, I think it depends on the role of the community colleges.
You just can't say for community colleges it is this way, because they
play very different roles.

So, that would be my take.

MR. BERGERON: So, you would see, at least as a first role, the role as
the first two years of the undergraduate program, some kind of
articulated agreement between the community college and a four-year
institution that awards degrees in teacher education.

MR. PAKANIZZEK: Yes. Either institutions or institution. In Maryland, we
have a statewide agreement that we have all agreed to accept the
associative arts degree in teaching as an articulated program.

They come into our institutions with no further course review. So, I
think that's the key for the first scenario, is some sort of an
articulated agreement, whatever that might look like.

MR. BERGERON: In the second scenario, do you think it is covered in some
manner by the general eligibility requirements?

MR. PAKANIZZEK: I think so.

MR. BERGERON: Right, right.

Other questions?

MR. MADZELAN: Yes, you touched upon, you know, the notion of, at least
initially, the student eligibility for the grants.

You mentioned that they were trying to ensure that\--at least at the
start\--that we get into the TEACH Grant Program those people that
intend to be teachers. And again, I think you mentioned we try and stay
away from scenarios where students are kind of shopping around a bit.

And you, you know, talked about a promissory note or some sort of
agreement, or something like that. And again, these are the same kinds
of issues that we've been discussing back in the office.

And, you know, it is a concern for us, because, obviously, this is not a
trivial amount of money, \$4,000, that\--you know, this is a grant
program, but, in a sense, it is a loan program that\--where the loan is
either repaid through service or cash.

And so, that's the concern for us is to minimize at the front end that
pool of students that, kind of on the back end, will not be repaying via
service. And you know, so we think about the counseling that needs to be
provided. And you know obviously who is in the best position to provide
that counseling? The schools.

I mean, we can do a little bit of that upfront in a sort of FAFSA
screening and stuff like that, but that's a real concern for us, that we
don't have individuals\--we don't have students that say, "Wow. A free
\$4,000."

MR. PAKANIZZEK: Right. I think it is a critical piece.

It is a critical piece in a couple of ways also, because it seems to me
that receiving a TEACH Grant, then, is computed into a student's overall
eligibility for other awards, and so, the timing becomes critical. The
accuracy of the information that the student receives becomes critical.
And that is all a timing issue, also, and that is why the Department
needs to move forward with more deliberate speed than we in higher
education have ever imagined.

But we're on board with you in terms of knowing how fast this has to
work, because really it will become\--it will become a recruiting tool.

I was at an open house for prospective students last Saturday, and I was
talking about the TEACH Grants, and people said nobody seems to know
about these. And I said, "Well, that's because we're a much better
university than any of the others that you've been looking at."

But the reality is we really do have to get this pretty clear and pretty
quick so that we can actually make it available for prospective students
in the fall.

MR. BERGERON: When we implemented Academic Competitiveness and National
SMART

Grants\--it will be two years on July 1^st^\--we did it through a
process that involved us publishing an interim final regulation without
negotiated rulemaking and the normal customary public comment process.

Our goal here is not to do that in this case. Our goal here is to do the
normal, though expedited dramatically, negotiated rulemaking process in
the advance of doing an NPRM, with a very short comment period in
turning around a final rule so that it is in place by July 1^st^.

And that is an extraordinarily ambitious calendar. And to the extent
that you all in the community can help us with that, we appreciate it.
It is a challenge. I will say I am comfortable that we can accomplish it
working it together. We got\--while we did not have a formal negotiated
rulemaking or any formal public comment process around ACG and National
SMART Grants, we got a lot of people from the community telling us stuff
early on in the process that helped us make sure that we weren't too far
off track.

And then, we did do\--go through a process of finalizing the rule, and
then doing a Neg Reg. We've had lots of comment on that. But this will
be a process that we'll have to all be working very closely together and
moving very quickly.

And I appreciate your coming today and providing us your thoughts early
in this process. So, thank you.

MR. PAKANIZZEK: Good.

MR. BERGERON: Right now, we have no one else signed up to testify that I
know of. I will check with my colleagues in a second. So, we will just
take a little break and, when someone is ready, we will reconvene.

\[Recess.\]

MR. BERGERON: We're going to reconvene now. We have a couple of
additional people who have signed up to speak.

I think it is S. Saunders from American Assistance\--NASLA.

How are you? Good to see you again.

I was looking for a first name, and there wasn't one.

MS. SAUNDERS: Shelley.

MR. BERGERON: I know that, Shelley.

MS. SAUNDERS: So, good morning.

As we discussed, my name is Shelley Saunders, and I am Vice-President of
Strategic Services with American Student Assistance, and I am here on
behalf of ASA and my fellow guarantors up in the National Association of
Student Loan Administrators.

NASLA is a private, non-profit, voluntary membership organization,
comprised of four VFA guarantors, who are: ASA, California Student Aid
Commission Education Fund, Great Lakes, and Texas Guaranteed.

NASLA is organized to ensure consistent and reliable delivery of student
loan services to America's students, parents, and post-secondary
institutions.

First thing I would like to talk about is participation in negotiated
rulemaking. Over the last several years, many factors have impact
student loan borrowing, including the rising cost of education,
increasing borrower indebtedness, the rapid growth of private loan
borrowing, significant changes in interest rates and the popularity of
loan consolidation.

Because of the importance in these trends and changes in student loan
borrowing, NASLA believes that it is important that guarantors
participate as both a lead and backup negotiator on the loan issues team
in negotiated rulemaking.

A core focus of guarantors is to maximize the success of borrowers in
repaying their loans, and as an administrator of the FFELP, a guarantor
works closely with the Department, students, and families, schools,
lenders, and loan servicers through the life of the loan. Inclusion of a
guarantor voice in the negotiations will promote broad-based, well
informed rules.

NASLA has been an effective participant in negotiated rulemaking during
the last several times it has been conducted, and we encourage the
Department to approve a NASLA guarantor representative as a participant
in negotiated rulemaking once again.

Our first issue is federal preemption. We believe the Department of
Education should provide explicit and total preemption of state laws
which regulate the conduct of Title IV institutions to allow for
consistent administration of the Title IV student loan programs
throughout the Nation.

The Secretary's comments to the final Title IV regulations, implementing
changes under HERA and CCRAA published on November 1^st^ included
language which clearly reiterates that federal regulations preempt any
state statute or regulation which stands as an impediment to the federal
law.

Such an explicit statement was welcomed by Title IV institutions as
providing a solid foundation from which we may assess our program
obligations.

The difficulty for Title IV institutions, meaning schools, lenders,
guarantee agencies, servicers, and secondary markets stems from state
laws or regulations which do not appear to stand as an impediment to the
federal law, but which, in effect, create multiple and competing
obligations, and regulatory schemes through which Title IV institutions
must navigate.

Currently, several states either have passed or are contemplating laws
which regulate the conduct of Title IV institutions acting within the
state, or in an interstate commerce, with state residents, under the
theory that unless explicitly preempted, state laws, which are more
restrictive than the federal laws, are permissible.

Simply put, new regulations should state that Title IV programs are, by
definition, an area of regulation exclusively reserved to the Secretary
and the Department of Education and that state law in this area is
totally preempted. In that way, each Title IV institution will have one
clear set of guidelines thus avoiding the problems of an uneven
application of the federal laws to arise.

Next issue is with respect to the Pilot PLUS auction program. The Pilot
PLUS auction program provision in the act raises several issues that
will need to be promulgated through regulatory language.

Issues concerning borrower choice, such as whether a borrower would be
able to borrow from a lender other than one of the two winning lenders
for that particular state. We are also concerned about the guarantor's
role in the Pilot auction process. The law does not address the
guarantee of the Parent PLUS Loan made under the auction program.

We would like for the Department to clarify in regulations whether the
two winning bidders per state get to choose the guarantor from which
they will obtain their loan guarantees on the PLUS loans. Or, since it
is on a state-by-state basis, the state designated guarantor will be the
automatic guarantor for all parent PLUS loans made in that state.

Economic hardship. Continuation of the debt burden test. We would like
to advocate for the continuation of the debt burden test that the
Secretary retained in regulations, despite the removal of the test in
the Higher Education Act put forth through the College Cost Reduction
and Access Act. Indications from the Department are that this debt
burden test will remain in regulations for the time being, and we
strongly support that the test be retained permanently.

In addition, we encourage the Department to consider revising other
areas in the regulations where such income measurements or guidelines
could be utilized to benefit borrowers.

The application of the established debt burden test could prove
beneficial to a borrower who has exhausted all his economic hardship
deferment eligibility but is still needing to postpone and obtain a
forbearance.

However, the forbearance provision does not incorporate the borrower's
family size, which is critical when evaluating a borrower's debt burden
relative to his or her income.

NASLA appreciates the Department's consideration of this testimony, and
offers itself as a resource to the Department on these and other issues
that you may consider.

Thank you.

MR. BERGERON: Thank you.

One question. Well, a comment, and whether you want to have any
observations. When we retained it, our view was that we wanted to retain
the debt burden test as it currently stands, at least until such time as
we regulated around income-based repayment and that payment plan was
available. To some extent, there is some potential conflict or overlap
between those two provisions.

Do you think we should still retain that, or do you think that we would
be more\--that it would be more appropriate for us to look at it
holistically in the context of that IBR plan?

MS. SAUNDERS: If you're going to look at it more holistically, then that
makes sense, but if the gap is going to stay out there, then\...

MR. BERGERON: Right. Well, our concern right now was that if we didn't
retain it in regulations, there would be, clearly, a gap.

But when we said we were going to look at it\--we want to look at in the
context of the new repayment plan, as well as whether or not we should
just retain or do something different there.

MS. SAUNDERS: Yes.

MR. BERGERON: Anything else?

MR. SIEGEL: Yes, I would like to ask a question about the preemption
issue.

I understood, and our final regulations reflect, that we would consider
the issue of preemption as it relates to preferred lender lists and
improper inducements.

It sounds like NASLA is asking for a much broader preemption question
that would relate to the entire student loan program. Is my
understanding correct?

MS. SAUNDERS: Those are the two main issues at hand, that you just
discussed, but if we could clean it all up at once, that would be nice.

MR. SIEGEL: Okay.

Just as NASLA and others prepare for this discussion, negotiated
rulemaking, I just ask you to keep in mind that the standard for federal
preemption of any state law is relatively narrow.

And that it\--the state laws generally have to frustrate the federal
purpose. It is not just that they may in some instances conflict.

MS. SAUNDERS: I understand.

MR. SIEGEL: So, there will have to be some evidence from NASLA and
others that those conflicts exist, and that they would frustrate the
federal purpose\--

MS. SAUNDERS: Okay.

MR. SPIEGEL: \--before we would have any authority to preempt.

MS. SAUNDERS: Understood.

Thank you.

MR. BERGERON: Thank you.

andrew Friedson.

Is Andrew in the room?

AUDIENCE MEMBER: I think he is running a little late.

MR. BERGERON: Yes. We apologize for confusion about location and
difficulty finding us.

We will just hang out for a minute and give Andrew an opportunity to get
here, because we're not going anywhere.

And if anyone else wants to sign up to give testimony, see my colleagues
outside at the table.

Thank you.

\[Recess.\]

MR. BERGERON: We're going to reconvene.

Andrew Friedson is joining us.

Andrew.

MR. FRIEDSON: How are you? I feel like we are too close to use the
microphone.

MR. BERGERON: The court reporter does need you to use the microphone.

MR. FRIEDSON: I'll use it anyway.

Good morning. My name is Andrew Friedson. I currently serve as the
Student Body President at the University of Maryland. I stand before you
this morning to represent the 25,000 undergraduates at College Park, and
also to advocate for millions of college students across the Nation.
Thank you for allowing me the opportunity to testify.

Last November, I testified during the negotiated rulemaking process.
Although we weren't able to use that process to make significant
changes, it was an important starting-off point to passing some of the
most significant federal legislation for students in a half-century.

This morning, I stand before you, one year later, to discuss some
concerns that I have and to express my hope that you make these programs
as student-friendly as possible in implementation.

I truly appreciate your initiative in moving this process forward so
hastily, and I'm looking forward to having them done.

The College Cost Reduction and Access Act of 2007 will literally
transform the number and demographics of students who will be able to
attend college, and will drastically improve their opportunities once
they graduate. It promotes desperately needed public sector jobs,
increases access for the neediest students, supports under-represented
communities, and appropriately links repayment to income.

Students face serious hardship in terms of the cost of college and the
burden of debt, and this legislation makes crucial strides to improve
both. It is absolutely critical that this negotiated rulemaking process
ensures that the legislation does what was originally intended: to help
students better afford college both during their time as a student and
once they graduate.

I have a few recommendations for this Committee to consider when it
implements the legislation.

First, I hope the Department of Education works to ensure that all
students have access to student loan programs. We must ensure that all
students have access to income-based repayment.

Secretary Spelling should provide clear guidance to lenders, servicers,
and guarantors of their responsibility to assist borrowers in
identifying the best option for their individual circumstances.
Borrowers who face duplicity from lenders should be able to consolidate,
or reconsolidate, into a direct loan in order to provide them with all
available options.

Additionally, the maximum repayment for income-based repayment and
income-contingent repayment should be capped at 20 years. The Secretary
of Education has discretionary power to limit repayment from the current
25-year statutory limit. It is important to note that the vast majority
of borrowers who will have paid their loan before 20 years; however,
this will alleviate the small number of students who have struggled with
their repayment from the burden of debt and will allow them to be
productive society members for their future years.

And lastly, I recommend that the Department of Education clarify the
rules of what periods of repayment count towards cancellation following
the duration of repayment.

I would suggest including the following: periods while on income-based
repayment, periods while on income-contingent repayment, periods of
economic hardship deferment, payments under a standard 10-year repayment
plan, and payments that are at least equal to the standard repayment
plan, regardless of which plan the borrower is using.

Inevitably, other issues will arise throughout this process. It is my
sincere hope that the Department of Education will act in the best
interest of students in each decision it makes when implementing these
changes to student borrowing programs.

In closing, please continue to keep in mind that the purpose of
education and the backbone of America is the idea of increasing
opportunities through one's hard work and through his or her dedication.
With the passage of this landmark legislation and the tireless work of
this Committee, we have an opportunity to offer college graduates the
chance to make decisions based on their interests and not on their
income. Having a workforce that is actually passionate about their jobs
is in the public's best interests both today and long into our future.

Again, thank you for your time, and for moving so quickly to make
college more affordable for students throughout this country. I
appreciate it.

MR. BERGERON: Thank you, Andrew.

Andre is the last person we have signed up to testify this morning.

If you are interested in testifying and didn't sign up as you came in, I
would encourage you to go and see my colleagues outside the door and get
on the list of people to testify.

Otherwise, we will just hang out here until about lunchtime.

Thanks.

\[Recess.\]

MR. BERGERON: Good morning. We are going to reconvene.

So, if there are conversations, they can go out in the hallway. That
would be great. Also, if anybody wants to sign up to testify, go ahead
and visit with our colleagues outside at the table. But right now, we do
have somebody who is here to testify, and that is Phil Schrags

Could you come forward, Phil.

MR. SCHRAG: Thank you. I'm Philip, with one "l," Schrag, S-C-H-R-A-G.

I am a professor of law at Georgetown University, and I'm speaking on
behalf of the Association of American Law Schools.

Thank you for allowing me to appear at this hearing and discuss the
agenda for negotiated rulemaking, to take account of the changes made by
the College Cost Reduction and Access Act.

I agree with the observation of Senator Edward Kennedy that this law is
the most important boost to the financing of higher education since the
GI Bill, from the point of view of graduate and professional students,
especially those who will incur high educational debt in relationship to
their expected incomes.

The most important feature of this new law is the creation of the
income-based repayment plan. Sections 2.03 and 4.01 of the new law,
creating income-based repayment and a public service loan forgiveness
program, were necessary because of the income-contingent repayment
option, which had failed to achieve one of its principle
goals\--principle goals of the Congress that had created it in 1993, and
that was to enable students who wanted lower-paying public service
careers to obtain the costly advanced education necessary to be able to
work in those careers.

In a book I wrote in 2002, [Repay as You Earn]{.underline}, I documented
the lack of interest in the ICR plan among students with very high
educational debt and among financial aid advisors who counsel them.

The main reasons why students do not voluntarily elect ICR is the long
25-year period before any forgiveness can occur. The IBR plan in Section
2.03 lowers monthly repayments compared with ICR or any other repayment
plan for those with high debt-to-income rations.

But just as important, for idealistic students with high educational
debt, Section 4.01 provides for forgiveness of remaining balances at the
end of 10 years for borrowers who have made 120 payments under IBR, ICR,
or standard repayment while working full-time during that period in
public interest jobs.

I have written an article describing the operation and great importance
of these provisions. It will be published next month in the [Hofstra Law
Review]{.underline} and is available on the Web in draft form on the
Georgetown University website, and on the Social Science Research
Network website.

The new law leaves open several questions, however. These are among the
most important issues for negotiated rulemaking.

First, what types of work qualify as public service jobs? Some of the
qualifying occupations are clear from the statute, including those in
government and those in an employment by non-profit organizations that
are described in Section 501C3 of the federal income tax law.

But Section 4.01 appears to encompass employment in other jobs, well.
For example, Section 4.01 appears to cover, "public service for
individuals with disabilities, and jobs in 'emergency management,' even
if those employees are not working for the government or for 501C3."

Those two types of employment are specifically covered in the catch-all
clause at the end of 4.01, but all the other specific occupations
in\--listed in Section 4.01 must be dealt with by the regulators as
well.

Similarly, prosecutors are specifically covered by Section 4.01 even if
they do not work for the government. Does this mean that prosecutors,
for example, who are working for an international criminal court or are
employed by an international body are entitled to the benefits of this
section?

Second, how many hours per week or in a month constitute full-time
employment within the meaning of Section 4.01?

Third, if a borrower who wants to use the public service forgiveness
program consolidates an FFEL loan before beginning repayment into a
federal direct consolidation loan, will the regulations characterize the
federal direct consolidation loan as one that is made by the United
States to assist the individual in attending an educational
organization?

This is important because, if it is characterized that way, then Section
1.08(f) of the internal revenue code appears to exempt the amount of
forgiveness for public service at the end of 10 years from the gross
income of the borrower.

Conversely, if such a consolidation loan is not regarded as fitting that
category, only forgiveness on loans that were federal direct loans from
the start will be tax exempt under section 1.08(f)

That would provide a significant competitive advantage to loans under
the federal direct loan program. There is no indication that enacting
the College Cost Reduction and Access Act Congress intended such a
distinction between the tax treatment of forgiveness\--between FFEL
loans that were consolidated into federal loans and loans that
originated as federal direct loans.

Fourth, are all lenders required to offer IBR repayment plans? If they
are not, what must they do to disclose to potential borrowers that they
will not be able to repay through this plan.

Fifth, if, as expected, Congress permits a married borrower to file a
separate tax return and base IBR repayment on the borrower's own income
and debt, should married borrowers who use income-contingent repayment
and whose spouses are not also using income-contingent repayment, have
the same opportunity to avoid a marriage penalty. The Higher Education
Act only requires imputation of spousal income to borrowers who file
joint tax returns, although the regulations that are currently in effect
go beyond the necessary requirements of the ACT.

And finally, now should FFEL borrowers be notified of their right to
consolidate their loans into a federal direct consolidation loan for the
purpose of using the public interest loan forgiveness program? Can the
procedure of consolidating be made as simple as possible?

Since months of employment in public service already qualify for the
10-year period after which forgiveness will occur, an event that started
on\--a status that started on October 1^st^, should the Department
quickly adopt interim measures to facilitate consolidation with ICR
repayment for those who are now in public service, and who want to begin
repaying under the ICR formula immediately while waiting for IBR to take
effect in 2009.

Thank you.

MR. BERGERON: Thank you. I don't think we have questions.

I think we'll go ahead and adjourn until 1:00, when we will reconvene.

\[Recess.\]

MR. BERGERON: Good afternoon.

We're going to reconvene the public hearing on negotiated rulemaking.

At the moment, we have no one who has requested time to speak. So, we
are going to wait and provide opportunities for people to sign up, and
then reconvene when there is speaker available.

Otherwise, we will just recess for a little while.

\[Recess.\]

MR. BERGERON: At this time, I will close this hearing with respect to
negotiated rulemaking and reopen, or meet again, on November 29^th^ in
San Diego.

Thank you.

\[Whereupon, at 4:01 p.m., the hearing was adjourned.\]