we want to thank everyone for their patience and the delay that we had because of votes we appreciate your coming back today and i like to reward people being on time and doing what they're supposed to do so i think we'll go ahead and ask mr alford if he now would present his five minute testimony thank you mr alford thank you committee chairs and distinguished members of this joint subcommittee thank you for allowing me to testify today i am president ceo of the national black chamber of commerce which represents the fastest growing segment of american small business blackowned businesses at the inception of the nbcc in ninety three there were three hundred thousand blackowned businesses doing thirty three billion in annual sales excuse me today there are more than nineteen million blackowned businesses doing over one hundred and thirty eight billion in annual sales this fantastic growth leads to a growing demand for a larger educated workforce by a study by stanford university shows unemployment among all teenagers at two hundred and forty two among black teenagers regardless of gender the rate is four hundred and sixteen but among black teenage males the rate is a very dangerous four hundred and fifty five nearly half of that population is unemployed the percentage of these young people who will be enrolling at the university of southern california ohio state et cetera will be very small indeed the best alternative is proprietary schools the above is made all the more crucial when we look at the educational access the bureau of labor statistic's data shows that americans with less than a high school diploma have an unemployment rate of one hundred and forty seven those with a high school diploma ninety five those with a associate degree or certificate eight and those with a bachelor's degree forty five we can reach but one conclusion it should be the primary goal of the federal government to provide as many young minority americans as broad a range of educational opportunities as possible why is the department of education targeting forprofit schools with a vengeance that will harm a certain segment of our population the gainful employment rule is a job killer incredibly proprietary schools serve fifty two of these highrisk students while nonprofit schools only serve nine and public schools serve a paltry six furthermore forty nine of the students enrolled at forprofit institutions are lowincome as opposed to just eighteen at public schools also fifty of the students attending forprofit colleges are minority students compared to just thirty four at public schools so the problem at hand is that minority students are already at a great disadvantage and now the department of education has made it worse by shutting down a major path to education and jobs the department of education has drifted over into a lane reserved for the congress of the united states making laws that the department has created this rule is harmful enough the process was definitely flouted if not corrupted we want to draw your attention to questions that beg your intervention we know the secret meetings took place between department officials and wall street short sellers that were placing heavy bets against the share prices of forprofit schools what was going on we know that the department is somewhat a covert group of allies including former employers of department staff short sellers and competitors of the forprofit industry and that they traded secret information against the code of the rulemaking process the question is what was going on we also know that department officials elicited negative information about forprofit colleges from the secret cabal and the information was provided even when it was deceptively collected what was going on we know that the department relied heavily on a now discredited gao report but never withdrew this report from their process of consideration what was going on we know that the department assembled a biased rule making committee composed of a sixteen to one ratio meaning that there was no opportunity for the industry and the minority students they represent to have a fair voice in the proceedings what was going on we know that the department was intent on punishing proprietary colleges from the very beginning even while america's higher education challenges confront every type of institution so what is the joint subcommittee going to do to address student debt academic performance and occupational preparation in every college in our nation in conclusion the gainful employment rule is never the law of the land and will have grave consequences on hundreds of thousands of minority students we want to remind everyone that to qualify for public assistance programs proprietary schools must meet exactly the same academic standards set by the same accreditation agencies as harvard or penn state the fact is that the opponents of proprietary schools are really trying to mask the same concerns that all colleges share such as student debt academic performance and occupational preparation the black employers that i represent hope you will work together to find solutions to these vexing challenges rather than make a scapegoat out of forprofit schools the bias and corrupt process which produced this rule should be reversed through the congressional review act or some other means thank you and i look forward to your questions and discussions i yield eight seconds you get the star the gold star for not going over your time today mr alford thank you very much yes ma'am for your comments and again we appreciate your patience in waiting for us and we're very happy that mr kucinich has joined us i just want to make a couple of comments brief comments and then i'm gonna ask a couple of questions and then we will take turns as members of the committee asking questions of the panel members i first want to read a statement that was in the letter from congressman towns who asked us to have this hearing because i think it fits well into a comment that i'd like to make based on mr carnevale's comments in mr town's letter he says mr chairman i know there's goodfaith disagreement as to whether the ge regulations as written are right or wrong needed or not needed but there's one principle on which we all should be in agreement and that is a rulemaking that allows nonelected government officials to establish policy and have the force of law must be fair unbiased and transparent and then he asked that we have this hearing as soon as possible mr carnevale i was very interested i'm a person who's had some experience in higher education and i was very interested in your comments about the need to focus on programs and not degrees i have long agreed with that i very much agree i think even more so that we should focus on skills and not necessarily on degrees i don't agree with you that regulations make markets work better necessarily but i do think that having information is very important which is a big point that you made and it seems to me that if that is true for one sector of higher education it's true for all sectors of higher education that we need students to have accurate information about the return on their spending or their investment i don't think government makes investments but people make investments they make investments in money and in time and therefore i think you made a great case for the fact that if we're going to have regulations like these they should certainly apply to everyone so i appreciate very much the comments that you made now i'd like to ask dr cortes a question as you know the department of education recently made a number of changes to the final gainful employment regulation do these modifications allay your fears that the regulations are going to negatively impact students attending proprietary colleges chairman woman foxx i do believe that even with the redefined rules the rule itself is complex it difficult to manage from both ends from our institutional ability to carry the task of identifying and to getting the data correctly i think it's also very difficult from the federal side to really able to coordinate the ability to gather all the data and then having a matrix that allow them to determine and make decisions for institutions without having all that's connected so i do believe that the role although it's more flexible than it was in the original it still doesn't have the transparency it doesn't have the connection that is needed for us in the trenches as educators to be able to spend as i said earlier significant amount of time gathering data and now concern about teaching and learning and providing the education that we need to our students we have taken significant amount of time at berkeley college alone to try to gather the details that we need by july 1st to be able to comply with some of the rules that just come down so i think at the institutions in our sector in particular have been affected by this significant targeted way in that not all institutions are treated equally that this ge rule is only applied to the forprofit institutions i think it's unfair and not equitable do you want to say anything more about the social security administration data that the department plans to use i mean you touched on it in your comments and we only have about thirty seconds so let you keep that in mind absolutely i think it's not only the privacy of the data and the confidentiality of social security information but again as i said earlier i don't see how that database along with the information that is being required is going to be able to be managed in a way that will maximize the ability to make choices by the federal government to our institutions welfare and wellbeing thank you very much mr kucinich i'd like to recognize you for five minutes thank you my friend the gentelady the chair i want to speak about the high default rates at forprofit institutions staff could you put up display chart number two it's available thank you according to the february two thousand and eleven data released by the department of education defaulters from forprofit colleges disproportionately account for forty eight of student loan defaults across all higher education sectors it's also true that sixty four of the students at forprofit colleges are lowincome minority students since these students are overrepresented at forprofit schools they make up the majority of the default rates caused by forprofit institutions now dr carnevale some forprofit colleges have argued that their high default rate is due to the fact that they disproportionately serve lowincome minority students who are more likely to have financial stresses and there's an assertion that that's the reason why you end up with so many defaults but i'm just wondering if a more accurate description of defaults is that a lowincome minority students at these forprofit colleges are more likely to default because forprofit colleges have tuition costs that are in some instances eight times greater than nonprofit public colleges and thereby puts those minority students who attend them in greater jeopardy just because of the sheer amount of expense and debt that they have to incur i'd like your response to that the social science on this is interesting and somewhat surprising frankly to me we ran these numbers and expected to find as we did that there's a disproportionate effect on minorities and lowincome students but when you run a statistical test to figure out what the cause is what comes through very clearly and i again it surprised me was that the cost and the low wage rate is the principle determinant of default there does seem to be in some ways when data you want to explain that when you say costs in a lowwage rate what do you mean that is the reason people aren't paying the money back cause they're not making enough money to do it which i know is in some sense logical but you never expect that in social science so it was really very striking in the numbers that is people the fact that people don't repay is because they can't repay but you know let's look at another variable here which is a dependent variable because when you look at the fact of the cost of that nonprofit colleges have foreign education there's multiples of that cost as opposed to other colleges i mean wouldn't you agree with them oh sure but one of the things that you may not be making enough money but the mountain you have to climb with debt is much larger if you are going to a forprofit college and the size of the debt does appear to have a direct relationship on repayment that is people are intimidated by the debt i guess is the way to say it but let's not miss the connection the size of the debt comes from the amount of money that people are charged for their education this is part of this whole discussion that really is sort of a couple horizons away we're talking about in the end in the short haul whether the programs are worth it but then there's a question that we haven't really addressed yet is should the programs be least cost that is you can get two programs that are essentially the same thing one at a community college will end up costing you eight grand or nine grand and a forprofit college costs you multiples of that should the government be concerned about the cost differential that really hasn't come up much in this debate but it's come up now yes you brought it up and i think that this committee is the proper forum for us to determine whether or not the lowincome minority students who are experiencing these high rate of defaults are in a situation where they're boxed in by the extraordinary cost at forprofit colleges cause you know when you're coming from an innercity background that's where i came from i can tell you that going to college is like a dream and people will do anything to do it including madam chair taking on extraordinary expenses and getting over their heads and sometimes putting themselves in a position where they're in debt for the next ten years or fifteen years of their lives but to the default rate how do we deal with that i want to thank the chair for her indulgence and giving me some extra time here thanks thank you thank you mr kucinich mr petri thank you very much madam chairman and thank all the panelists for the effort that you made to be here today and to prepare your testimony i had a couple of questions of ms carpenter first i wondered if i could give you an opportunity if you had any reaction to the points made by your fellow panelists i'd be interested in hearing them thank you very much congressman petri i do have some impressions as a layperson a parent a graduate clearly i'm thrilled that there is more public discourse on the topic of educational reform as a whole i think it's a vital vehicle by which americans of all socioeconomic sectors in our society can use to attain their personal pursuit of the american dream and given my experience in reentering the workforce in a dramatically changed economic environment transitioning from an industrialaged society of a more nationally oriented business economy to one that is far more global more technologically advanced clearly we're living in times of transition and once again as i stated in my testimony we are now faced as a nation in addressing the appropriate responses in the educational forum to meet the demands and needs of our society and our economy so thanks to all of you for giving very very important consideration to what the best reform would be beyond that statement i would really defer to other people who are more professionally invested in the process to speak specifically to the issue of what's before us for the gainful employment regulation i'm not as well informed as others on the panel of who's given testimony but clearly they have important input for the panel when we met and you participated in a little different panel in madison wisconsin you indicated that probably because your training at herzing but mainly because of your work with an international company where you are dealing with hiring and evaluating possible employees or current employees all over the world in different hightech areas your company was working computer programming and the like you said people it was a sort of a cry from the heart if i remember that people better start waking up as to what's really going on and not be too selfindulgent and assume that we will just continue because in the future as it has been in the past i wonder if you could expand on that and you and other employers who operate not just in the united states but in other countries have a perspective we ought to be learning more about because you're dealing with young people who are looking for jobs doing essentially the same thing but whether they're from india or china or africa or europe what's your perspective on how well we're doing or whether that assessment is accurate that we're a little selfindulgent here there are certain skillsets that are in severe shortage within the tech sector in which i work and so yes we do work with people in multiple countries in providing the research and development work that's necessary for my company quest software which is a publicly traded company on the nasdaq based in orange county california for them to be able to hire enough qualified employees we do employ people from all over the globe i personally work on a research and development group that writes enterprise level software i have coworkers who reside in russia china new zealand that i meet with weekly sometimes daily depending on where we're at in the development cycle many of these individuals are working for an american corporation speaking in a second language english is our predominant language of business layered on top of the very technical skills they've acquired it's critical that americans wake up to realize that in order to be successful in business you will most likely be doing business with people as coworkers from all over the globe therefore our skillset in language skills cultural sensitivity skills as well as the technical background is really critical for success and how do we attain those things but through our educational institutions and in providing the curriculum and programs that are adept to train our workforce and still lead the nation in our economic and workforce development thank you thank you mr petri mr cummings thank you very much i want to thank our witnesses for being here today your testimony has been extremely helpful the thing that i ms carpenter as i listened to you first of all we're very proud of you and what you have accomplished you're not the person who we are most concerned about cause you've done well it's the ones that don't make it there's a scripture in the bible jeremiah one hundred and fifty nine that says her sun rose while it was still day meaning that her sun set while it was still day meaning that there are people who have opportunities and they still have life but something happens in their life that causes their dreams to die those are the people that were concerned about the sun set while it's still day and on that note mr carnevale can you you know when i look at it says both the senate health committee and the education trust to report it that forprofit colleges often have tuition rates much higher than those of local colleges these forprofit tuitions can be as much as five times that of local community or four year public colleges if a student chose to attend berkeley dr cortes a forprofit institution to obtain a two year associates degree it will cost her about forty one thousand four hundred in tuition and fees however if that same student chose to go to the city university of new york community college in manhattan it would cost her six thousand four hundred and ninety six over the two year period for the same degree i wanted to go to you dr cortes and then i want to come back to you dr carnevale dr cortes what justifies berkeley's tuition costing nearly thirty five thousand more than a public community college thank you congressman cummings for the question absolutely i think the value of a berkeley education consists of small classes faculty who are practitioners in the field students who have the ability to get a required internship as part of the requirements for graduation the ability to be placed in the job faculty as i said earlier that are faculty doctorally trained the ability to have a small groups of students working together in order to engage in the graduation but more important i think is the ability for institutions like ours in the private sector is about capacity it's really to look at what president obama have indicated that what do you do for retention what do you do do you use any of that money that you make for retention absolutely we invest over thirty seven million back institutionally to assist students through scholarships and grants to subsidize the additional money that they don't have besides what they get from pell or tap in new york or tag in new jersey so we do invest significantly not only in our own income going back to the students because we know they need it the average salary but is that what most of these schools do well i can only speak for my right and that's part of the problem i understand that i appreciate that sure but dr cortes you describe much of your student population as being at risk is that right absolutely the majority of our students need significant remedial work we instituted for instance this coming year a bridge program that we allowed students to take courses for a period of about five weeks we don't charge any tuition it's almost like a trial period we allowed the students to make sure that they don't get into loans that they're not paying tuition but fifty one of your students take on riskier loans do they not i'm sorry fifty one of your students take on riskier loans is that accurate well i don't know if they're riskier they take loans but you know the difference between what they cannot afford between federal and state aid in the thirty seven million that we give that's what their students need to dr cortes you understand what i'm saying don't you sure i do you understand that we are concerned about people whose dreams are taken away and then they leave school with two bags one with nothing in it and the other with debt marked all over it and then their dreams are not deferred but they are killed you understand that right well i understand i can and there's a whole lot of them so you know i hear people talking about minority students and how they feel so happy that all these opportunities but for every one that graduates there at seven or eight that's fallen by the wayside in many cases never to return to college never that's criminal criminal absolutely i think it yeah you know i'm a product of a public school new york city education and i'm a product of a community college so i can speak from the real life experience i do believe that what we do in our sector we take students who are so much at risk we're able to get students to a point of graduation i give you an example in the great city of newark new jersey with the highschool dropout rates well over fifty if we can get four students out of ten to graduate from that great city of newark we do a tremendous service to the city of newark because those four students without berkeley in that vicinity and that local area will not be going to college because they cannot go to a community college they're not going into the private institutions or the publics because there's capacity thank you madam chair and the other six are left in debt no they're not well what happens with them they're not they either do not they did not continue they have to go back to work many of them are have to exist by working so the debt is extinguished no many of the students who enter will be able to complete if i give the example of the four that graduated the other six will able to come back and return and finish their degree if they were able to come back thank you madam chair thank you mr cummings mr meehan thank you madam chairman and thank you for the opportunity to participate in this hearing today on this i think we all share the concern of trying to assure that the funds that are forwarded to the students are repaid but i'm struggling with the issue here in which we are treating the forprofit institutions in one way and we aren't really analyzing this same effect in the notforprofit institutions i for one have benefited from a number of college students who are volunteering to work in my office because they can't find jobs and yet they are tens of thousands of dollars in debt and so if we're going to use a standard i'm struggling with the regulation we've now come up with rules and we're going to hold people accountable to a standard mr carnevale i know you've discussed this a little bit and tried to look at this issue is it fair for us to hold the notforprofit institutions in a different category than the forprofit if we're making these analysis on a year by year basis first and then second a lot of kids come out they struggle for a year or two and then they get that first job i mean should we be doing this the next year or should we be waiting three or four years to make this calculation the regulation essentially gives the institutions four years that is so it extends over a fairly lengthy period of time and the calculation in terms of loan repayment allows ten years for aa and some college fifteen for a ba and twenty four selected programs like dental programs and so on so in that sense it is not one of the way i think especially the amended regulation here the way to think about this truthfully is the brunt of this is aimed at program improvement the penalty part of this is very marginal frankly it's only two of the total it's capped at five this is essentially a device for moving programs toward a higher labor market value is in the end what it is the other point and is raised by mr cummings is that it is true the institutions get three strikes on this the students just get one that is if you end up with huge debt first of all whether you default or not you're not likely to return to school and they don't we know that and that relates directly to the size of the loan and the wages that the program leveraged that allows them to pay it back so it matters which program it was and then the other difficulty for the students is you only get one shot one bite at the apple because you can't go back and get more debt to go to school okay mr alford would you respond to this because i think that i have experienced as i've visited institutions across the range from community colleges to my universities to some of the schools and the forprofit schools many of the students in the forprofit schools are nontraditional students in fact this is one of the rural opportunities they have where someone's reaching back to them and saying i'm gonna give you a chance i'm gonna give you a skill that you can then take and find a way to gain employment in a very very difficult market and what i'm concerned about is the potential that this higher standard may lead a situation where those kinds of schools will say fine we're going to now stop reaching back to that student who's the least traditional who's the toughest reach because that's the most likely to fail let's just go find the safe middle cherry pick so would you please tell me what your perspective is i think it would have a devastating consequence on the people i represent or businesses who hire who try to hire people from these communities there's two big problems with my constituents one is management trainees our more successful businesses scour this nation looking for good educated black talent secondly is labor the lower level trucks can't pass a drug test and that's a requirement for any insurance policy so those are the two major problems and one thing that's unfair too sir private forprofit schools have higher tuition because they don't have uncle sam and the state government and local governments giving them subsidies tax funded money that's unfair to have a graph that shows all this high tuition but they don't charge that much if you put the tax subsidies in there they'd probably be more expensive than forprofit schools playing with numbers thank you for making that point mr alford madam chairman my time has expired thank you thank you mr meehan mr braley i would like to make it clear at the outset that the entire focus of every conversation we should be having about higher education is whether students are achieving progress toward a degree at a reasonable rate and whether the federal dollars being invested in any of these institutions meets the expectations of taxpayers who are providing that assistance whether that's a forprofit college a nonprofit college a private college or a public institution my nephew has attended a forprofit college got a degree and is working in a job that he loves and the question is not whether there have been substantial successes at forprofit colleges because ms carpenter your very presence here shows that there have been the question in this environment that all of us work in is whether or not forprofit colleges are providing the type of results for the investment we're making in them so let's talk for a moment about that my good friend senator tom harken has been doing a lot of analysis of this issue on his senate help committee and as a part of the exhaustive study that his committee has done there are some troubling findings one of them is that six hundred and thirty four of associate degree students at publicly traded forprofit schools and fifty eight of bachelor degree students at these schools drop out within a year and that almost every single one of those students more than half a million in one year are left with substantial debt and that a four month stay at a forprofit school can leave a student with four thousand to eleven thousand in debt now these are the facts even though forprofit students make up only ten of all higher education students the schools receive twenty five of federal student aid even more alarming is a fact i mentioned earlier that forty eight of all student loan defaults come from students who attend forprofit colleges and in many states that rate is greater than fifty mr carnevale are you familiar with the data that i've just cited do you believe that this sector that we're here talking about today which has done good things by your own testimony is doing a good job at being stewards of federal tax dollars given those results i think the evidence that is when you get past the anecdotal evidence and there's anecdotal evidence on both sides that is they're wonderful stories we heard ms carpenter today and they're awful stories the data which is more comprehensive says quite clearly that there is an issue here with public funds that is government doesn't want to buy planes that don't fly and in this case since the promise is an educational program that will get you a job as a sufficient wage to pay back the cost in this case there's a very substantial share of programs that simply don't do that and those are highly concentrated in forprofit institutions at the certificate in aa level frankly well one of the other disturbing things that came out of those findings in the harken committee's investigation was that there were schools who were getting a large number of online students which is great in terms of dealing with changing demands of students pursuing higher education but they had one thousand seven hundred recruiters working for those schools and one placement officer do you find that troubling i know from relationships with particular forprofit institutions that naturally where they see growth in demand ie when the military benefits went up in the past few years there was a huge increase in recruiters for military personnel to move to forprofit colleges in the end my bias about that is if in the end they get a good education a good job i don't care that's right but there is an issue here that they don't and i must say another thing that no one speaks to here today but should be spoken to is i went through the college on the gi bill so did my two brothers they're not included in this regulation and one of the dangers in this is if cause it is a private market oriented institution it will take its profits where it can that's the way it's supposed to work so if we shut down using the current regulation a lot of the expansion in these programs that don't pay among the regular population there's a risk here that there'll be a shift to the military and i personally have a problem with i thank you ms carpenter you mentioned you worked at trek bicycle co in waterloo wisconsin and i'm from waterloo iowa where you also mentioned the decorah connection with luther college one of the things that's concerning to me is that the very school you attended and obviously got a great education you're doing great things and i commend you for that but herzing had a dropout rate of fifty three for associate degree students and forty eight of bachelor's degrees within the first year were you aware of that phenomenon while you were a student on campus and what would be your explanation for why those dropout rates were so high on my campus in madison wisconsin and within my degree program i find those numbers not to sync up with my personal experience very few students if any dropped out of my associate's degree program as a matter of fact i only had these were herzing's own figures provided to the senate help committee right so i'm just asking you whether that was something that you were aware of when obviously it was not no not within my degree program and for the group of students that i graduated with that was not my experience and one of the other disturbing things about herzing's website is there's a link on it to tuition and instead of talking about the actual cost of attending herzing it says unfortunately a simple comparison of tuition price won't give you enough information to compare the true cost of attending school is it all bothersome to you that your alma mater would not be willing to give students who are considering enrolling there an opportunity to make comparisons of the various cost of attending herzing as opposed to some other school i don't believe that herzing withheld that information they certainly would encourage you to come in and speak with an admissions counselor so that they could clearly identify the value for the tuition that you do pay i was absolutely well aware as a consumer what the cost would be one of the reasons that herzing was a true value to me is that within my testimony i had mentioned i attained an associates degree within a year and a half time as opposed to the traditional two years based on black programming based on the availability of coursework so i think that herzing is doing a very intelligent job of allowing themselves the opportunity on a oneonone basis to sit down with prospective students and explain how their program is differentiated how they are differently situated and valued and giving potential students prospective students all of the facts to know what will my education at herzing cost in comparison to other options other institutions for the same types of pursuits same types of degree programs and the onus is on the individual consumer shopping for their own education and i think it's an advantage as i mentioned that herzing gives the opportunity to encourage their students to come in and talk about that oneonone and not rely on face value information in a website that doesn't tell the whole story thank you ms carpenter thank you very much mr braley you get the prize for going over the farthest mrs biggert thank you madam chairman and i thank the witnesses for being here and your patience while we had those pesky votes which seem to have taken an awfully long time thank you my question let's start with dr cortes i went to you know have gone out to visit several of the schools and gotten some information but when we start when this first came up we were talking about why doesn't this disclosure work why if you want to know how a program works in a school for example one of the schools i went to and i don't have the numbers exactly but they were all over ninety and this was their school of nursing and ninety two of all those enrolled graduated ninety six of them passed the certification test and ninety nine to one hundred of those that had passed the certification found jobs now this seems to me that this is you know this then gives a student or a consumer choice on where they want to go and you know looking at the programs rather than looking at the debt to income determining whether there's a value to students is this something that you would see that would work or are there other things besides this you know the way that the gainful employment has been i guess described and is there something else that you think would work thank you madam biggert i do agree i think it's all about to a certain extent the consumer protection that we're looking at if you look at berkeley college today in our website not only you'll get the full tuition clearly stated we have every single indicator of graduation rates debt to default rates we have by degree each degree the level of graduation we believe that transparency is very important in our sector we make clear that we have a code of conduct that talks about not only academic excellence and student success but then we put that information very clearly that everybody can look and they can compare cost for instance in the state of new jersey for example with the lowest we have the lowest tuition increases of any of the institutions in the state of new jersey and in fact we have one of the lowest tuition of all the private institutions in new jersey which include of course princeton and other private institutions we have the lowest tuition rates so we do very clearly look at making sure that our students get the information they need to well one of the things that really impressed me too at these schools is how they worked with the local businesses so that they were able to find jobs for the students and the colleges had a rapport with these businesses could you address that yes absolutely we work very closely with the industry and the advisory from the corporate sector every degree has an advisory board so that means that for fashion management or for accounting or finance or marketing we work very closely with the business community for two reasons we want input to make sure our curriculum is uptodate that we look at the changes in the global economy to make sure that we training our students to get into the marketplace but more important we making connections with them in order for our students to get the internships that i mentioned earlier and also for the ability to get them placed once they graduate as an example someone mentioned that there were only one career placement at some institution we have over twenty career placements professionals making sure that our students from the beginning from the freshman experience all the way up to the senior year they get the level of advice and counsel to make sure thank you and i'd like to just ask before my time mr alford would you comment on this yes ma'am i think our biggest concern national black chamber of commerce is the whole process of this and the singling out of forprofit schools in a nutshell what we want is a fair and a transparent process and as i learned in the military leadership one hundred and one is fair and impartial treatment for all and i think some are getting less evaluation an unequal evaluation if i may use that term than others and it's quite clear community colleges have a lesser graduation rate than forprofit schools but you don't hear talk about that i heard talk about the senate hearing that quoted the false gao report even after it was divulged that it was false so i think there's some it's not the process that i think that makes this country great i hope i answered you i agree with you i yield back thank you very much mr miller thank thank you very much should go to button pressing school for holding this hearing madam chair and i want to thank the witnesses for testifying mr carnevale i think that you sort of set the stage when you talked about the changes in the economy and in the workplace and then the requirements that have taken both up and down in terms of where you'd get your degree and certificates and the rest of that and that's why many of us had been very strong supporters of the forprofit sector in higher education and believe it that they do fill a need for many students and certainly adult students as they originally start off people who were had to work fulltime and also try to secure an education to acquire new skills or a new job or what have you that they saw on the horizon but sorta like the old saying friends don't let friends drive drunk i have a lot of concern about a sector that i've been an advocate for for a very long time in my thirty seven years on the committee that we've got some outliers here that are giving real heartache to the american taxpayer and you can keep saying not you mr carnevale but the panel and other members can keep saying that somehow this only applies to forprofit it doesn't only apply for forprofits of the fifty five thousand programs mr hinojosa pointed out thirty seven thousand are in public institutions and five thousand are for nonprofit and thirteen thousand forprofit and for the public institutions they're there because this is the first president that raised issues about the completion rates of two year institutions which are abysmal they're outrageous but the suggestion that somehow this is just targeted for forprofit i was one of those that went to the administration and said that the original ruling was wrong but the point is that this is the question then the members of the panel suggested that this high standard this high standard will force people to leave the field or to cut out nontraditional students this high standard is that thirty five of your former students are successfully repaying the principal on their federal loans in their third and fourth year after they leave the school what if you were a used car dealer and you went to the bank and said i want to borrow money but seventy of my customers are gonna default i don't think you'd get a loan from the bank for your usedcar business but if you're in this business seventy of your customers might default and you're okay for the taxpayer to put up the money and you only have to meet that in one out of three years one out of three years and there's no penalty until you really screw up and this is a burden that apparently this industry just can't suffer now we're talking about maybe two of the programs are going to be implicated here and i suggest and as i had suggested to the industry you might want to look internally and think that you've got some outliers here that you should have dealt with within the associate various associations here this is not whether we support forprofit schools or we don't cause all of us have had experiences in our own community in our families of their successes this is about what's going on with respect to the taxpayer mr alford you asked about what's going on with the department and how they came about this rule i just say anecdotally i don't know we have an investigation going on what happened with short sellers and now with the inspector general's office i'd say that the congress had listened to the short sellers prior to the financial collapse maybe this nation would be in a different place today but i want to ask what's going on with an institution that says that they're gonna double the volume of the private student loans as corinthian college did to two hundred and forty million and they expect fifty five of their private loan dollars to end up in default and their default rate on federal student loans doubled between two thousand and five and two thousand and nine to twenty one and they recently told their investors not the public told their investors that they're gonna manage their default rate by pushing borrowers most likely to default into deferments forbearance and incomebased repayment i want to know what's going on there i want to know when bridgeport education buys a college and it takes the price of the amount of money spent on education from five thousand to seven hundred per student i know there's great savings in the internet but at the end of that process sixty four of their bachelor's degrees and eighty five of associate degree students are withdrawing from that institution what's going on cause when they withdraw they've already given over a part of their pell they've already given over part of their student loans their account's running down i want to know what's going on with that same institution then which gets eighty six of its money from the federal taxpayers has thirty profit and thirty on marketing i want to know what's going on with the ati career institute in texas when the state work board found that three hundred of their employed graduates had no jobs at all and four hundred and twenty seven graduates were not employed as the institute reported they were and the state cut off all of their wia funding but they're still eligible for pell grants and for student loans i want to know what's going on i want to know when the repayment rate for four out of five of the profit schools receiving the most pell grants and the gi bill is thirty seven and thirty one i want to know what's going on it's not a question of whether i support private schools forprofit schools or not we sit on this side of the dais on behalf of the taxpayers who are on that side of the dais and that's why we have these inquiries and that's why we have a rule that probably does not much more than develop a lot of information and i think it will cause some people swimming at the bottom of the pool to swim a little faster to try to stay off the bottom but i think that's a minimum that's a minimum that we can ask as members of congress on behalf of the taxpayers madam chairman if i just might say i would just say this you know we also want to ask what's going on when indiana illinois and california florida have joined to look at forprofit institutions there indiana attorney general asking questions about institutions florida investigating eight institutions on violating the unfair business practices iowa student default rates kentucky job placement recruitment practices massachusetts recruitment practices and student loan practices mr miller as you know there is an obligation as you know and i appreciate as you know you can you've been very generous with the time and i appreciate it you can put whatever your comments are in the record dr roe i've seen the record it doesn't do so well oh thank you but i appreciate the offer i think i won't give a speech i'll try to ask some questions i gave the speech already i spent twenty four years in school not including kindergarten so i basically overdosed on school and all in the public school system not in the private not in the forprofit and dr carnevale makes a great point is the whole purpose is to get an education and hopefully find gainful employment once you leave that institution that will pay if the argument is here that it's too expensive to go to school i couldn't argue with that more i served as a foundation board president of the college where i attended and helped to raise money to help educate people that were lower income as i was when i went to college but to give you an example if the gainful employment rule is to be applied to everybody i looked at georgetown great university just before i came here forty one thousand is the tuition and fifty eight thousand to go there for a year if you get a job teaching school somewhere after that's over you can never pay that back if you're a police officer in johnson city tennessee where i'm from you can never pay that back i had a medical student's dad call me the other day and said dr roe he said my son has two hundred and twelve thousand in student loans and he's starting his residency and he'll make about thirty thousand a year just the interest on his student loan is one thousand two hundred a month just the interest he didn't have any left to eat after that so it's not just forprofit universities it's everybody school is too expensive and i couldn't agree with dr carnevale he makes great points you should go to the school to get a job to pay for something the other thing i think that's a little misleading having been a foundation board president is that when you compare the forprofits the bricks and mortar are not calculated in those tuition fees all those million multimillion dollar buildings as mr alfred pointed out that's not amortized into that cost so it is in the private tuition that is amortized in the cost could you point that out you made a great point a minute ago is that you're not really comparing do you agree with that absolutely sir yeah i think i envision ohio state my alma mater university of wisconsin just humongous all paid for by taxpayers and ms carpenter made a point of some students and these are many of them are not traditional students in a much smaller classroom setting your average freshmen class at ohio state or university of tennessee in freshman english two to five hundred students sometimes watching a video screen i have a problem with that and it is true when you get into a smaller classroom setting it is gonna cost more money to do that and i think ms carpenter you made a tremendous point information is key so you can go in and make an informed consumer choice that's what i did when i went my choice was i didn't have the bus money out of town so i knew i was gonna go to school but it was an informed choice and i think that's what you did you made a very informed choice about what your needs were obviously you were not an eighteen year old as i was seventeen when you started college you had a little more of an idea about what you needed to do i didn't and graduation rates mr miller makes a tremendous point on that is that if you look at our own state of tennessee where you get a hope scholarship to go to college to junior college to community college or to a fouryear school fifty of our students in two years don't qualify after that they lose their hope scholarship because they're not succeeding academically and i think if we're going to do this gainful employment rule everybody should have to do the gainful employment rule if you're gonna set standards there's no question there probably are some bad actors out there that are not living up and doing what they need to do but everybody ought to have the same standards in this country mr alford made that and thank you for your service to our country by the way everybody ought to have to apply with the same rules if you're gonna do that then private schools should public schools should and forprofit schools should dr cortes would you comment on that yeah i do agree with you congressman as you know not all forprofit institutions are alike do you know for example that there are only ninety four regionally accredited forprofit institutions in this country and puerto rico that's an example of the differences berkeley college is a brick and mortar we own our buildings we pay taxes local federal and state we invest back into our community and to our technology when you look at our sector we led the sector in technology in distance learning not all out students most people assume that forprofits are all online colleges they're not colleges like ours are eighty years changing lives in the state of new york and new jersey and there are many familyowned businesses that are forprofits that put a significant amount of money in the economic development of the region in your folders you have a report that we put together in new york berkeley college and in new jersey we have invested in economic development over two hundred and twenty three million in a given year both about economic support to the economy jobs student expenditures building construction those are the impacts that the private sector institutions are offering it also offers access and choice for students as you did when you chose your institution the students come to us because they see the flexibility they seen the quality of many of our institutions and they see the ability to get degrees that they can not have in other places in the state of new jersey for example there are only two institutions that offer fashion merchandise degrees and we're one of them so they can't go to the public institution because they're full then they come to us and we do a very good job thank you madam chairman i want to thank the panel for sticking around for our votes i really appreciate you all doing that indulging us and thank you you've been a great panel i yield back thank you drroe mr davis thank you very much madam chairman and i also want to thank the witnesses for being here it seems to me that we are holding a hearing in search of a problem that is not being addressed and i say that only because the rules that have been promulgated that have been issued seem to be fair seem to be balanced provides opportunity for correction and i was one of those individuals who urged the department as they were having discussions and looking at making new rules to try and make sure that they took into consideration the needs of all the institutions because i represent a large number of forprofit institutions of higher learning i also represent a large number of public institutions of higher learning so i want everybody to be treated fairly as a matter of fact the philosopher camus is supposed to have said one time that i love my country but i also love justice as i love every opportunity that we can find for access to higher education for our citizens but i also love transparency i love factual information i love serious analysis i love good counseling and information that will help lead individuals to the kind of choices that will not only improve the quality of their lives but will give them the resources to pay back whatever it is that they owe dr cortes let me ask you as you know the continuing resolution that the house leadership offered sought to cut pell grants over a million students by approximately eight hundred and forty five per student some republicans have recently described pell grants disparagingly as a welfare handout and highlighted it as a need of substantial funding cut how important are pell grants to your students and will a loss or reduction in pell grants harm access to higher education for your students and those who attend your institution thank you for the question congressman davis absolutely i think the loss of any funds for the students that we serve is gonna impact their ability to access and to persist in college graduation i give you an example many of our students sometimes in the middle of the year come to us for additional funding that we could provide as institutional aid in order to pay their books in order to get transportation to the school in order for them to pay the rent in their homes we talking about the students which i mentioned earlier an average family income of somewhere around twenty five thousand so it would be harmful to your very harmful extremely harmful thank you let me move on because my time is about to expire mr alford let me ask you and i've had a great time working with you and the national black chamber of commerce i have a great deal of affinity for the work that you do and for your organization and i thank you for it thank you sir i was struck by your testimony though at one point where you suggest that forprofit schools are the ones that truly are serving lowincome and minority students and so i asked what about the hbcus what about the hsis what about the pbis what about these minority serving institutions that are public or notforprofit and do a great job yeah and i support them and they are at capacity university of wisconsin when i graduated in one thousand nine hundred and seventy it's enrollment was three black today two thousand and eleven it's enrollment is three black the university of california system that each semester they have fewer and fewer blacks matriculating at those schools so the hbcus yes sir but there are a small percentage of the potential we have to educate our people the largest hpcu is howard university's eleven thousand you get from southern at ten thousand texas southern ten thousand and then you're down to four digits in any of those schools they couldn't house forty million a population of forty million people whose children needed higher education i would certainly agree with that and indicate that they still have capacity though that is unmet but let me thank you for your answer and thank you for participating and i yield back madam chairman thank you sir as always thank you mr davis and now i'd like to recognize mr towns thanks very much madam chair and let me also thank you for holding this hearing i really really appreciate you moving forward with it and i want to thank the witnesses for being here and to say that i know that it's been a long day and been a tough day for many of us in terms of conflicts but the point is that i'm happy that you're here and let me just say that as i listened to some of my colleagues you know i'm sort of wondering are they thinking about the economic situation that we face across the board the top universities in this country have people that are now unemployed and because of the fact there are just no jobs and i think that sometimes you know when we look at things that you know we sort of forget about that when you look at the top universities people coming out no jobs and then we look at the situation we discussed in terms of gainful employment and then we sort of ignore the fact that there's going to be some problems there when it comes to jobs as well let me start by saying i support a fair balanced process i really do and of course i support a fair balance process and i support a good government and i support educational choice but i do not support poor quality institutions i do not support predatory practices and i didn't do not support a regulatory process that is not transparent i believe that the department's rules leave many bad actors still capable of harming students i also believe that the department's rules may adversely impact many quality programs and in turn hinder educational choice for minorities first in the family college attendees and economic disadvantaged students but i also think there's some other areas that we need to look into and when you look at some of these athletic programs and it's known that there was one university they went for ten years and did not graduate one basketball player i mean nobody wants to talk about those kinds of things i mean let's look at the real issues of education if we are serious you know across the board rather than just sort of looking at one thing and picking on it and staying with it you know i'm also not certain that the process which department came to the rule was entirely fair and balanced i'm not convinced of that i heard some of my colleagues saying it was fair and balanced i'm not sure of that there are a number of aspects that are currently undergoing review by the ig of the department and until we have the final report how can we say who won't be able to say it i don't see until we get that information so i'm just sort of cautioning my colleagues mr afrin let me just sort of raise this with you very quickly i share your concerns regarding the disproportionate impact that dysregulation will have on minority students as well as your concern regarding the process by which the regulation was crafted i agree with many of my colleagues here today that there are numerous good things being done by career colleges though i also agree that there are a few bad actors in the mix some are citing examples of questionable recruitment practices and i've heard all of that and low retention rates you know however we need to look at that also with the economic situation you know if you in school and then you have an economic crisis in the family what are you gonna do you're going to drop out i mean so i think that sometimes we just look at these things and we sorta looking at them with tunnel vision and i don't think we can do that i think that we need to look and highlight in terms of a lot of people that as a result of these institutions have been able to go on and live a very decent life and make a major contribution to many people and i think we should not forget that so mr alford what do you suggest that we do real quickly i think we need to go back and review this in a fair and transparent process when it's open i think when a short seller writes an article subprime goes to college and he's talking about the gainful employment rule how they're gonna make this happen and they're gonna make big money i think something's wrong with that and that same individual can go into the inner circle of a federal agency and talk to executives of a federal agency and make suggestions talking about mr eiseman it stinks and something should be done about that i think i think we need to go back and punt and reevaluate this my time is without merit madam chair and i would like to just ask a unanimous consent that the statement by mr alcee hastings from the state of florida that his statement be included in the record without objection thank you mr towns i yield back mr bishop thank you madam chair i appreciate your holding the hearing and i apologize for arriving so late another committee i was on had a markup but this is an issue that i'm very interested in well let me start ms carpenter i read your testimony i found it very moving and i congratulate you and herzing university on doing such a good job there was one particular statement that you made that i just want to highlight you say my associate's degree from herzing university has proven to be of high value to me and my employer my employment history with quest software is but one example that proves that fact i know you know this but i think it's important to say for the record that if such a statement could be made even in much more modest form by your fellow graduates herzing university or any other university that graduates students who can say that has absolutely nothing to fear from this regulation nothing so congratulations i'm glad your experience went well and what this regulation is designed to deal with as mr miller said are the outliers not those who are doing the work of providing access to a higher education and to help people get the american dream and i'm glad you're on your path to the american dream i want to pick up on where mr miller is questioning was this regulation in my view and i was one who urge the department to withdraw the first pass at this i felt that it was an unfair regulation and i frankly applaud the department for going back and having several iterations of this and i won't engage you mr alford on whether or not the process was transparent but i think reviewing ninety thousand comments i think that's something that is not to be taken lightly but here's the environment in which we're in this regulation says that if thirty five of an institution's former students in years three and four of their repayment status make at least one payment that is an institution that is satisfying the gainful employment regulation i find it impossible to believe that someone can consider that regulation to be an onerous or arbitrary or unfair regulation and let me put it in the context that we are in here's the context that we're in the budget resolution that passed the house of representatives if it were to ever take on the force of law let us hope it does not would cut the pell grant maximum to three thousand from five thousand five hundred and fifty to three thousand if we don't act we will have no perkins loan program come two thousand and fourteen hr one which thankfully will never take on the force of law eliminated seog so here's the republican vision of title iv student financial aid programs no perkins no seog a three thousand pell grant maximum and work study at its current level that's the republican vision that's what they've voted for now i ask you in that context how long do you think the federal government will be willing to guarantee ninety billion a year of student loans if in years three and four we consider it onerous impossible to achieve of a sixty five default rate in years three and four i would suggest to you the underpinning of the finances of the forprofit sector and frankly every other sector which is the guaranteed student loan program we're not gonna be able to count on that guaranteed student loan program if we're looking at that level of default and yet that is in fact what this regulation contemplates so i would urge anyone who's taking the position that this is somehow excessive to assess it in that context because i think all of us have the same goal here which is to see to it that students of modest means get a chance to go to college i'm a former college administrator i'm a former financial aid director i've spent my entire adult life dealing with the issues of access and affordability they mean a great deal to me and i'm very fearful that if we're not careful careful stewards of taxpayer money then that money is gonna go away and so i view this regulation frankly as a modest means of the congress and the administration discharging its responsibility to be careful stewards of taxpayer money so i just really ask you to look at it in that context let me then go i'm sorry my time is expired madam chair i appreciate your indulgence thank you i want to thank you mr bishop i will point out to you a note that congressman roe has just handed to me that points out that in two thousand and six the amount spent on pell grants was one hundred and twenty four billion and the amount scheduled to be spent on pell grants for two thousand and twelve is forty nine billion would the gentelady yield let me go on to the i'm just putting out a fact there for you i was going to put that fact in context okay let me if i could let me recognize congresswoman speier i'd like to finish this up no later than two o'clock if at all possible madam chair thank you very much and i want to thank all of the witnesses who are here again we all apologize for the frantic pace that we operate under it doesn't make a lot of sense from time to time i think this is a very important hearing but i've got to tell you at the outset i think what the department of education has recommended is embarrassingly small i would challenge any of my colleagues to go back to their districts and say to their constituents that we are funding many forprofit colleges at ninety now mind you if we're funding you at ninety you are government schools the university of california is a public institution and the funding from the state is less than twenty but you are forprofit schools and ninety of your money in some cases is coming from the federal government and i might also point out that in one of the colleges that was highlighted bridgepoint education twenty nine of their spending in two thousand and ten was for marketing and thirty was for profit so only forty of the money at that institution was spent on students i would challenge any of us to go back to our districts and say this is good government this committee is about dealing with waste and i would suggest to you as mr bishop did earlier that if you can't make this i mean this is embarrassingly low as a standard and if you can't make these standards then you shouldn't be in business because frankly you are government operated institutions you are funded by the government and if you can't make these very modest standards then you shouldn't be in business now here's where my concern is this reminds me of the financial meltdown this reminds me of subprime loans this reminds me of the same institutions that targeted lowincome people for subprime loans to get into loans they shouldn't get into and then they went belly up and the country went belly up one of the institutions has said that it is looking at student profiles for recruitment welfare moms with kids pregnant women recently divorced low selfesteem vocational rehabilitation experienced a recent death physically and mentally abused drug rehab fired or laid off that is the target population that some of these institutions these for profit institutions are seeking candidates from now my concern is since these actual standards don't apply to the military to veterans guess what's gonna happen we're gonna to have some outliers i'm not suggesting that you are but some outliers going out and targeting our veterans and we've already had cases frontline recently did an evaluation and actually said to a marine sergeant who was enrolled at the art institute told the recruiter they suffered from ptsd and was ensured that the college had special tutoring programs for veterans and he later flunked out of his photography degree program for being unable to finish the work and receiving no help from the college or former marine wade cutler and guardsman brad seliga also in the frontline report who were hired by ashford university specifically to recruit fellow veterans both of whom quit and discuss with the way veterans were being suckered out of their gi bill benefits now my question to mr carnevale do you think that we are going to see an engagement now by these forprofits to focus on veterans because they're not gonna be subject to these modest standards that are being suggested by the department of education well i don't want to make this a character assault on people who run these institutions but i used to run for profit operations and i can tell you i would that is i would go after the populations where the money was and the regulation wasn't in the end i have no problem with that my problem would be what's the outcome and unless we start judging these things by the outcome it's good that forprofits chase after abused women if they serve them that's fine and that's what i think this regulation does it demands that we use outcome standards to judge the use of public funds efficiently and if we don't start looking at efficiency in postsecondary education there's gonna be no more equity cause we can't afford it i might also thank you mr carnevale i might also point out that the university of phoenix received over eighty four million in post gi bill benefits and it increased its recruiters to the military from ninety one in two thousand and three to over four hundred and fifty two so i'm putting word out to all the forprofits i'm gonna watch what happens to the profiles of veterans in your programs because we need to protect them and we are not gonna have them waste their great gi bill benefits on institutions that don't deliver i yield back thank you ms speier you of course can put anything in the record that you would like ms waters thank you very much madam chair i'm very appreciative for you allowing me to take part in this hearing today i have a long history dealing with private postsecondary private schools i come from the california state legislature where i created a whole body of law relative to private postsecondaries and private schools based on my experiences in south los angeles i ran job training programs there and i watched the recruitment methods i watched the kind of messaging that was done by many of these private postsecondary institutions and private colleges where they raised the hopes and dreams of a lot of poor people who certainly did not realize any careers or real jobs from the pell grant money that they allowed to be spent in these institutions and it was disheartening and that's why i've spent so many years on this i do believe that this potential scandal is gonna be bigger than the subprime housing meltdown scandal where many of our homeowners were tricked into mortgages and loans that resulted in foreclosures i have over the years involved myself with any number of these institutions corinthian itt kaplan on and on and on and the record is replete with what they have done i take particularly exception to this messaging that talks about how well you're doing for minorities and how if you are not offering opportunities for minorities they're not gonna be able to be educated or to have careers or jobs i think mr alford you stated that gainful employment regulations will harm minority students but students attending these institutions are already being exploited students at forprofit institutions represent twelve of all higher education students twenty six of all student loans and forty six of all student loan dollars in default how would you propose that we protect these students from being saddled with debt and low prospects for job opportunities and how is it that these very very mild conditions of gainful employment that was just described by ms speier is gonna harm the private school industry mr alford i have a lot of relatives that have grown up in your district and those who received education many from forprofit schools are doing well raising families and living prosperous lives those relatives of mine around 73rd and hoover and going further into south central who did not receive education are either dead in jail or on welfare education is the key so i don't think hurting an opportunity a vehicle to educate someone is a productive thing to do i don't know what you just said i was listening for some facts i thank you for sharing with me that little vignette about what happened it is was real ma'am it is real but you have no facts so it does not resignate at all i want to ask a little bit well i have something here i understand there's been a lot of talk about the rulemaking process i would like to submit the list of program integrity negotiators for the record the negotiated rulemaking included several different types of stakeholders all of who stood to be impacted by the rule the following communities of interests were represented students consumer advocacy organizations two year public institutions four year public institutions private nonprofit institutions private forprofit institutions college presidents admissions offices business offices financial aid administrators regional accreditators national accreditors workforce development officers lending community representatives test publishers and state higher education officials i'd like to submit that to the record without objection ms waters and i will point out to you that your time is up thank you very much i appreciate the opportunity sorry i was not madam chair able to get into all of this discussion about shortselling because i really do want to reveal something about what is taking place in that whole area i will back the balance of my time feel free to put other pieces in the record we have all done our best to express our appreciation to the members of the panel for the disjointed hearing that we had today we appreciate your being with us on a friday afternoon some of you came from long distances and we understand the hassle of coming here to washington any time but particularly when you come from long distances and i don't know if you're gonna try to get away on a friday afternoon but we do want to thank you very much for coming and hope you will return some time under little more relaxed situations and with that the committee stands adjourned