to the committee rules any member may submit an opening statement in writing which will be made part of the permanent record i now recognize myself followed by the ranking member guthrie for an opening i want to welcome my colleagues on both sides of the aisle to this important hearing on ensuring student eligibility requirements for federal aid i want to give a special welcome to chairman george miller for his tremendous leadership on these issues and thank you for joining us today as members of this committee we have the responsibility of providing oversight of our institutions of higher learning regardless of whether they are public nonprofit are part of the for profit post secondary education sector i want to thank the government accounting office for the release of their report entitled proprietary schools stronger department of education oversight needed to help ensure only eligible students receive federal student aid earlier this year i requested the g a o study the for profit post secondary education sector to learn more about how these institutions function and deliver educational services i am troubled by what g a o found first of all i am concerned that congress and the department of education have not been providing the appropriate oversight necessary to protect students as they pursue educational opportunities at for profit colleges and universities we have also not done enough to monitor the quality of educational programs offered at these despite the growth of the for profit sector in recent years as you know for profit colleges and universities enroll large numbers of low income and minority students based on the findings of the g a o report it is clear to me that some of these institutions have not served students well i am particularly concerned that some for profit institutions have engaged in a number of crew plus practices to increase their access to title for funds in some cases of from for profit sector institutions assisted students in obtaining invalid high school diploma from diploma mills in order to gain access to federal loans in another case that i read the g a o found that there were irregularities in the administration of the ability to benefit known as the tests such as providing students w answers to the test questions so that students would meet the minimum eligibility requirements for title for programs encouraging students who do not possess a high school diploma to incur and in order to amount of student loan debt and to pursue a course of academic study that they are unprepared for a disservice to those students the g a report is a great starting point for today's congressional hearing and i hope that we can have a robust discussion and learn more about these issues from our distinguished witnesses thank you i now yield to my friend ranking member bret thank you mr chairman thank you for holding this hearing and you know that there is about how the federal government works with all institutions of our education to ensure that suit eligibility requirements for federal student aid outlined in the higher education act to be met understand that there is significant history on this topic before us and i look forward to hearing more about the study and the oversight measures that are being taken to protect students and taxpayers the diversity that currently exists within the american our education system is what makes ours the best in the world for example this past weekend i was pleased to participate in the commitment ceremony at sullivan university  traditional college students in fact according to the port before us more than half the students attending proprieties because over the age of twenty five in addition over half the population is from a minority background finally in many cases these institutions are geared is in particular in this economic downturn i was concerned by the recent findings i strongly believe that mismanagement testing or abuse of federal financial aid should not be taken lightly these cases must be addressed and hopefully the findings of g a o can help us determine whether there is an underlying vulnerability of the system that needs to be addressed one thing i hope that we will not lose sight of during the hearing is that the g a o did not find a pattern of infractions in interview well even one incident of mismanagement or abuse is one too many it's important to understand the scope of this issue as we work to address it i would also note that the g a o did not visit or review any nonprofit institutions of higher education as soon as ability arose and we're talking about here are required of both proprietary and it is and as such should be written in force regardless of profit status of the school in the interest of protecting all students what we continue to work to blast federal safeguards across all sectors of higher education our country is facing a difficult economic time and many are finding themselves not employed with an uncertain future as we work to enhance ourselves and wrote out those who have broken the law we must be vigilant about preserving and expanding a diverse array of options for students in need of additional education thank you thank you at this time i ask unanimous consent to recognize the all of our all of our before we before i do that i wish to speak to the lighting system that we have before us for those of you who have not testified before this subcommittee please let me explain our lighting system and the five minute rule everyone including members is limited to five minutes of presentation or questioning the green light is illuminated when you begin to speak when you see the yellow light it means you have one minute remaining when you see the red light it means your time has expired and you need to continue your steps your testimony please be certain as you testified to turn on and speak into the microphone in front of you we will now here we i will now start with the introduction the first witness will be mr george scott he is director education and workforce and income security issues for the united states government accountability office he is a frequent witness before our committee he oversees the high quality work the g a o provides for our committee in various areas of our jurisdiction he is a graduate of north carolina chapel hill and has received several management awards george has been recognized for exemplary achievement in public administration once again we are anxious to hear from you and welcome the second presenter will be robert sharman who is the deputy undersecretary in the department of education he is a leading expert on college access and financial aid prior to his appointment he served on the federal advisory committee on student financial assistance robert has served as staff for senator simon and during the clinton administration he served on the national economic council  he holds a bachelor's degree in economics from the university of california at berkeley and a master's degree from harvard in education as well as the university of san francisco in public policy thank you for being with us today nationally miss mary mitchell sign with the acting inspector general office of inspector general the department of education in the year two thousand she served as assistant inspector general for analysis and inspection in the year two thousand and two she became counsel to the inspector general and has been in her current position for thirteen months she has served as a law school dean has clerked in the u s district court and has served in two federal departments and has been recognized for her professional contributions on numerous occasions it is a pleasure having you here this morning also we will hear from mr harris and miller who was named c e o and president of the career college association in february two thousand and seven prior to his appointment harris was president of the information technology association of america for eleven years the leading trade association representing the industry mr harris has also served as house staff on the judiciary committee as well as senate staff as a legislative director for senate he also has experience working for the us office of personal management mr miller political science and philosophy from the university of pittsburgh and has earned a master's in philosophy in political science from welcome to our hearing and we look forward to your testimony with that we're ready to begin we call him mr scott german miller chairman ranking member got three members of the subcommittee i'm pleased to be here today to discuss the department of education's oversight of  ibility for federal student aid and for profit schools also known as proprietary schools generally students who do not have a high school diploma or ged are required to pass an ability to benefit or test a basic math and english are working from similar findings by education's office of inspector general and new york state investigators the problems within a five result in part from weaknesses in education oversight of a t v testing we found that education had not followed up with test publishers to ensure compliance with certain requirements for example as of early two thousand and nine one of the approved test publishers had not submitted test score analyses due in two thousand and five and two thousand and eight for two of its approved tests education officials told us that the employer responsible for test publisher oversight had retired in two thousand and eight after that time no one in education had followed up with test publishers to obtain past two tests or an and earlier this year in response to our review in two thousand and two education's office of inspector general reported on problems with a tb testing however education has done little since then to strengthen its oversight of test publishers we also defied cases in which recruiters at two separate proprietary schools help prospective students obtain invalid high school diplomas so that the students could obtain federal student loans for example one student told us that he was flunking out of high school when a recruiter at the proprietary school directed him to a place where he could pay a fee to take a test and obtain a high school diploma based on our further review we confirmed that the entity was a high school diploma m problems with the use of invalid high school diplomas to gain access to federal student aid are due in part to weaknesses in education policies and the lack of information and guidance on high school diplomas we found that several states already provide a list of the high schools they recognize and make them available to the public on their website however education provides little information on these available resources that could help identify invalid high school diplomas in conclusion our finding represent nor imply widespread problems at all proprietary schools many of these schools play an important role in providing a range of students the opportunity to obtain the education they need to increase their work skills and find jobs however our work identified potential fraud in a few schools and significant vulnerabilities and educations oversight education has announced steps to help address these issues and we plan to monitor their progress in strengthening oversight in this area mr chairman  got three of members of the committee thank you very much for the opportunity to testify today federal student aid serves a particularly important role in helping our nation recover from the economic downturn last year we saw an unprecedented twenty percent increase  the number of applications filed for financial aid for college more students than ever qualified for pell grants and more students from all economic backgrounds took out federal loans in light of the vital importance of federal student aid in these uncertain economic times it is an extremely important that we maintain program integrity and ensure that the consumers and taxpayers are protected i want to speak broadly about this issue a program integrity but let me start by addressing the issues raised a report i asked mr scott mentioned the higher education act requires that an institution participating in a federal student aid programs has to admit as regular students those who either have a high school diploma or have taken the ability to benefit test the these serve as important indicators of whether a student is qualified to study at the post secondary level in general we agree with the findings and recommendations the g a o has made about a tb test even before the release of the report we had taken steps to improve our monitoring and oversight of the a tb test publishers the department of education now has systems in place to monitor and track the three year test analyses required of all test publishers we are in the process of contracting for the services of independent psychometricians who will review not only those three year test analyses but also any new or renewal requests received from test publishers for approval of those tests moreover the department has begun planning for changes to its school reporting systems that will support students specific a t b reporting the results of this reporting will help us to focus on monitoring efforts  institutions that have a high number of eligible students ability to benefit testing is among the issues for end up upcoming rulemaking sessions that we started the process for in  may among the topics around ability to benefit testing that will be discussed in these negotiations are the establishments of controls on individuals who have been decertified by test publishers and possibly more frequent reporting by test publishers also at the rulemaking we will discuss how we might address the problem of high school diploma mills this could involve regulations or it might simply involve the department identifying resources for helping colleges to identify a legitimate sources of high school diplomas mr chairman we expect more than fourteen million students to take advantage of federal financial aid in this coming year and we want to do all we can to ensure the best possible outcome for students having a real opportunity again the skills and knowledge to be successful in the workforce and in their communities in recent months the department began to take additional steps to improve accountability first have improved communication and cooperation both within the department of education and with other agencies that fund and monitor post secondary education institutions for example we are program review office that the federal student aid is now linked to the federal trade commission's database of consumer complaints so that we can tap into the complaints that the federal trade commission receives we have now created a database of state consumer  agencies state attorneys general offices so that we can refer complaints that we receive to the appropriate state offices we have expanded and internal a joint project to identify areas that are at high risk for fraud this is in working with the inspector general's office at the department of education second we have increased our efforts to get more and better information to consumers for example now when students are prospective students are applying for financial aid on the web using fafsa on the web and are identifying the schools that they want to receive their financial aid information they can see what the graduation transfer and retention rates are at those particular schools giving some giving some initial information to students we are also looking into ways that we might be able to make better use of the department of labor's useful career information those are the third area that we are launching is a this rule making process that i mentioned where in addition to addressing the issue of high school diploma mills and ability to benefit test through input that we should receive starting in may we had if identified a number of areas that we will be working on such as satisfactory academic progress links between training program and specific occupations earnings and costs of those programs recruitment tactics and the role of state mr chairman our goal is to chairman miller ranking member guthrie and members of the subcommittee thank you very much for inviting me to testify today i will focus my testimony on the two issues highlighted in report examinations and online diploma high school diploma m i will also address an area that is need in need of greater oversight and statutory or regulatory change and that area is online distance education first regarding a strat changes in the program in  implemented by the partment regulations eliminated the largest opportunity for abuse we have conducted a series of audits in two thousand and two that made recommendations to the department on how it could improve its oversight of the test publishers while the department did respond conduct currently we have fifteen related investigative matters under way and an analytical project that is generating even more leads now turning to the second issue online high school  diplomas higher education and department regulations do not define what a valid high school diploma is for purposes of receiving federal student aid we have identified efforts by some entities to exploit this ambiguity never to include cases in which schools help students obtain diplomas from high school diploma mills as an example we conducted an undercover operation in which a proprietary school official directed our undercover agent to purchase an online high school diploma and provided him a copy of the test answers to render him eligible for federal student aid as a result of this investigation and other information we have received a number of online high schools and obtain subpoena records from thirteen of them are analysis of that data identified more than ninety five hundred students who had purchased diplomas from these high schools and who were now receiving federal student aid or had received between the years two thousand and five and two thousand and eight we are currently working with the department of ways to use this information to prevent the disbursement of federal student aid to individuals who purchase project diplomas finally for their i third issue i would like to discuss the potential for fraud in distance education the risk here stems from the difficulty in ensuring that students are actually enrolled and engaged in academic activities and that they are who they say they are in order to receive federal student aid a student must be in attendance in school recent work of my office as concluded that determining what constitutes a class a class attendance in the online environment is a challenge in the absence of defined class times or delivery of instruction by instructors the online environment also creates challenges for determining whether a student has enrolled for purposes of obtaining a credential or is simply completing sufficient online activity to receive a disbursement of student aid funds which she or she will then use for other purposes at present neither the a nor department regulations define what constitutes education related investigative efforts underway which were identified in just the last two years in my written testimony examples of problems in this area in closing let me reiterate that he will continue efforts in fighting fraud and abuse in the federal student aid program including addressing the issues that we have discussed here today this concludes my statement and i'm happy to answer any questions thank you but we do not see any evidence that is widespread yet one episode of cheating is too many as mr guthrie said and particularly the diploma mill area again we think we need to have more work done to make it more visible as to what can be done by schools to prevent inadvertently being tied up with the palm mills compliance is a constant theme at c c a and that's my second point we know there's a triad of oversight the government department of education the state departments of education o ther regulators of the state level and the accrediting bodies we promote regulatory compliance all kinds of c c a in the two and a half years i've had of the organization we have presented sixty separate compliance sessions for our members that are conventions o leadership institute and our conferences and through monthly webinars that we do it we also it's urge our schools to attend all the compliance seminars done by the department of education itself and our state associations also do training on compliance our schools and gays and extensive investment in the sternal compliance including training oversight many of our schools hire their own mystery shoppers to come in and make sure that the admissions officers and the financial counselors are not providing advice or information that is in any way inaccurate so when we talk finally about the default rate issue it's an issue that the starves all of us in a perfect world no students would default but the simple reality is the g a o points out quite clearly as report is  institutions who have a higher percentage of low income students and minorities tend to have higher default rates not just in our sector but also in traditional higher education this has to do a lot with the simple fact that as mr sharman pointed out many more students are applying for federal aid fourteen million anticipated this year and then those students do not come from upper middle class backgrounds where it's easy for them to repay a loan but it is not the position of our sector or schools to simply give up on these students and assume that they're going to fall on the contrary c c a has had a partnership with the department of education since two thousand and three that a fall prevention issue where we work closely with the department to try to help lower default rate we have studies underway to help schools understand best practices at the end of the day mr chairman we're all about compliance and accountability and we look forward to your question thank you very much thank you time to ask chairman miller  office at the end of your testimony you suggested that this was not did not represent or imply a widespread problem at all proprietary schools and i have no reason to disagree with that but i ask inspector general has pointed out these problems we do believe that they do rise to a level of concern that we believe it's important for their part of education to take action steps mr chairman certainly sounds very promising but we're going to make sure we continue to monitor got a diploma from a diploma mill i'm not saying they're not necessarily willing but they may be willing because they're desperate to get an education and try to figure out how to how they can navigate let's assume a little bit of good faith there or they  or school they can get part of that money back for their living expenses or what have you on go on their way and really not show up online in class or on campus where the hell it is so we kind of getting hit from both ends here are we  financial aid which she will then use for other purposes a third problem is receiving the a correct amount of aid aid is delivered based upon credit hour if i am taking twelve credit hours i'm entitle to a full age package  department as not defined credit hours by the statute in the regulations if i want to credit hour is so it's not clear whether the student is particularly in an online environment is receiving enough instruction to draw justify the amount of credit  she is receiving and of the four question then is should drop out and not continue her study in that program what amount of refund of student financial aid is due what degree of instruction did she actually receive was actually in attendance many schools are not required to take attendance and so particularly in the online context there is a lot of ambiguity about who is participating for what purpose how long and whether they are actually do the full amount of financial aid we have just done some work looking at the question of credit hours because mr scott mentions a triad and one of the triads is you crediting agencies they accrediting agencies are relied upon to determine what credit hours should be awarded based upon a particular program of instruction we went to different credit agencies and asked that question about tell us how you make that judgment about what amount of credit hours is appropriately awarded in this situation we found varying standards and some extent no standards and that's a set of inspections that we will be issuing starting in the near term information that i think the department will find very useful as it takes up this where we were two years ago with liar loans and no doc loans in the housing market where people start accepting people who couldn't prove their income couldn't prove employment but we sold them a four hundred fifty thousand dollars house and that of that all came crashing down here i'm a little worried when i see these tapes and i see these tests and i see the diploma mills outlined here that we're we're we're developing a process here that looks a lot like sort of sub prime student loans and knowing that certain institutions because if they become the feeder systems for sub prime loans to these to these students we've got a real problem here and it's going to go beyond just the school if you will it's  going to be out in society in terms of people inheriting this you know what can be a substantial amount of debt for their situation is certainly the the reason to have the requirement of a high school diploma or passage of ability to benefit test is to at least have some measure of confidence that the students are entering post secondary education and will be able to achieve get through those courses perhaps get a degree get the benefit of the income and be able to repay their loans and when we fail to have the appropriate checks to make sure that they are qualified we are not just potentially costing taxpayers but all so jeopardizing those students by putting them into that four degrees that they're likely not going to get not be able to to get that employment so we need to be vigilant we do that statu requires and we do look at various types of risk factors and identifying the institutions that are subject to our program or as we look at dropout rates we look at sudden large increases in the amount of  loans or pell grants that might be going to an institution default volume of defaults as well so we are always on the lookout for and we're working with the inspector general on other kinds of respect that we can use to have to figure out it's very hard to tell a student you can't afford to do this so this isn't going to work out for you but they're suggesting we can manage all this from an institutional point of view i'm asking what happens to the student out there  from there from their point of view if you expect fifty percent of the defaults in the private loans but we'll leave that open for a question because i for an answer but i just i'm a little concern here that  we're not focusing too much on what happens to let's just assume good faith on part of these students and what they're being told they can't make and they can handle it they can't handle at this point thank you mr chairman again for holding this  think it raises a number of very serious issues going forward for all parts of the student loan community thank you for your questions at this time i'd like to recognize myself for a few questions and the first one is to mr scott can you share with us any positive experiences you may have had in your visit to proprietary schools and yes mr chairman some of our and opportunity for students who otherwise would not be able to pursue a post secondary education and learn respect reassuring to see that some of these schools are in fact taking the necessary steps to support their students that said however you know we c testimony with the ability to benefit test and point to weaknesses in the education monitoring of the test publishers who provided these tests to the schools so what steps should department of education take to better monitor the program i was the chairman as i as i mentioned earlier sounds like education is already started down that road in terms of improving its oversight of test publishers as you may know in our report we made a number of recommendations to the department to improve oversight in this area including providing a mid point test analysis to try to more quickly identify cases of testing irregularities hundred people whose job it is to help oversee over seven hundred eighty two billion dollars with a program that's part of an appropriation of around sixty five billion the amount of money they raise how many more should we be able to get the job amounted to about eleven of the popular population receiving financial aid in that year and that amount to twelve billion dollars that is a lot of these programs are so large and so expensive that in order to be to do effect of fraud parents we have are developing analytical tools that help us identify where the risk places are we have now approximately a little over ninety special agents obviously they're not going to be able to investigate i've noticed and i've heard the president so i know that the administration is strongly supportive of post secondary education although tenure is only a few months along do you see or do you foresee some legislation changes the congress might consider in the recent reauthorization of higher education act or the now pending we're expect that well first off we are in the process of identity and distance learning so we have been in the process of finalizing regulations about what we will expect of accrediting agencies in that regard there are a number of other items like that where we need to implement what congress also be a workforce investment act reauthorization so all of these are opportunities for us to take a closer look at a program integrity generally and ways that we particularly on the job training realm ways that we might work with department of labor and department of education to better connect the training opportunities with the needs of the workforce in closing i want to say that i've noticed the willingness by the secretary of education and the secretary of labor coming together and communicating so that we can indeed do what you just ended your statement with my time has run out and i'd like to yield time to ranking member got three thank you simple reality is that some people who are down are locked but maybe they were discouraged from going to high school maybe they're immigrants they simply are never going to be successful in passing a g and we as a society have to make a decision as to whether to cut them off from post secondary education or not the reality is that we have decided at the side of this congress has approved the department has approved admitting these students because we believe they deserve another chance  chance to get the education get the skills they need to move into a career which puts them into the middle class and i think we all should support that the department recognizes even though obviously some improvements are needed based on today's hearing receive federal aid probably about five percent of all students the department is very cognizant of that and has created a lot of rules and regulations that if properly enforced should make sure that only students who are truly qualified pass the a test and then have a good chance of completing and getting the degree and the new job opportunity which they see thank you and then for mr scott i have a question when you selected the schools to do your investigation of how did you select those as you randomly select schools often you walk in and you have something as obvious or as blatant as as what we just saw some that can be more blatant lightly wrong but did you have some kind of inside and that particular school to attain or is it you just randomly picked on  that sort of thing so we just happened to pick a local you know publicly traded proprietary school and this is what we found and do you think that i mean obviously we look at proprietary schools in this g a o do you think this type of  issues could be all types of different institutions as well absolutely the rules apply to all sectors of the post secondary education community and so you know they've the things we found in the recommendations we made to their part of education would benefit all students across the sectors  the school is the personal attention that they do give to the students and there are a lot of first that i asked that question a lot of first generation college graduates nontraditional students getting their associates in diplomas and some getting master's actually in your experience is that as our colleges typically operate with a lot more personal touch absolutely mr guthrie that is one of the expectations that a student has coming to our school and that's one of the expectation our schools have they see students as customers not students of supplicants and the reality is mr guthrie that many of these students have challenges coming into a career college they may have academic challenges and have not have a particularly good of he did a study earlier this summer they looked at what percentage of students at colleges in the community colleges were pal eligible and they looked at the percentage of students who actually received pell grants and he found  community college less than fifty percent of the students who were pal eligible were receiving pell grants were as a career college is ninety seven percent receiving up now that's unfortunate for the students who go to community colleges and i don't think it's because community colleges don't want their students to receive the federal aid which they are entitled to and which cut this congress approves is because often a community college simply doesn't have the financial staff to assist an applicant to fill out what we all admit is a very complicated application process but i know mr sharman in this congress are trying to simplify but i think that is a perfect example mr godfrey of the focus on personal attention the other thing that's important is that when you go to a career college you're not going to grow up you're not going to learn to drink beer you're not going to root for your football team the reason a lot of people go to traditional college is people go to career colleges because they want to career they're very focused and so from the day you walk into our institution the institution is structured to support you in getting your career how to write a resume how to basic work habits giving you information that is current in the employment market in the career market so you're being trained you're being trained for what will get you that career now that's what our students want and that's what we provide thank you thank you at this time i'd like to recognize the gentlewoman from ohio congresswoman fudge thank you very much chairman thank you for holding this hearing students very well but many of these students are purposely i think targeted for failure based upon the fact that they are put in institutions they know they can't finish i mean they really do know that these students are not prepared to go forward so i just like you know what if any sanctions are appropriate for institutions that are found to be fraudulent and if there are none what should there be a start on that when well an institution that enrolls students and provides them with federal financial aid if those students were not eligible for financial aid that becomes they have to repay those funds to the federal government if that was  purposeful then we would likely refer that to the inspector general others and there would be possible criminal action and in relation to that but if it was carelessness on the part of a college it becomes a liability those are the kinds of things that we do find in  compliance audit and our program reviews of of institutions so that there are there are consequences for a school and rolling those kinds of students there is not any minimum level  dropout or graduation rate for example that is expected of an institution so there is not a penalty per se for something like that however that is one of the risk factors that we look at in identifying institutions that should be subjected to a program review in the instance that mr scott displayed for us what would happen to that institution who purposely was violating the rules well what what we don't know in this situation was was this the was this the individual was this the testing company was this the institution what was the intent who you know what who made what kind of instructions to whom so depending on what we or others found about the situation and what the real pattern was that would determine where where where some liability might lie congresswoman the regulatory points which was disarm and there's also the accreditation process if a school is nationally accredited and the national creditors themselves are subject to approval by the u s department of education most of them do have graduation completion r and placement rates as a criteria for maintaining that accreditation and if a school fails to meet those requirements fails to prove to the oversight accrediting body that students are graduating at a rate that is set up by the accrediting body and or is failing to place students in their chosen career field then they can be put on provisional status by their creditor and if that's repeated they will lose their accreditation that they will lose their accreditation congressman fudge that means they lose the ability to have their students eligible for title for fun so it's a very serious risk they run the other point to make congresswoman is the basic place that our schools get the referrals even though there's a lot of talk about marketing and advertising but if you talk to any of our schools large or small the basic place they get rich or says of students is referrals personal referrals and the students who come to the school almost always talk to someone else that they know personally a relative a friend an employer that they trust just the way you decide to go to a movie based on what your friends say or you may decide to buy a car based on your friends are students talk to somebody else so if you're running a sham school if you're not really providing quality education then you're not going to getting those referrals in fact are going to be getting negative referrals because people as they don't go to school and you're not going to roll this do in because when the prospective student checks with his friends or neighbors relatives the last one in the congresswoman i don't think this is fully appreciated is you're going to be a very unsuccessful school financially if you're just turning students the way a school is able to be profitable grow have money to invest expand is by getting students keeping them graduating them and making sure that you have a quality outcome for the students because ultimately if you're just turning students over and just turning them over you're to good reputation you're not going to place your students you're not going to get the referral and you're going to be out of business the students are smart they understand they shop on the internet they talk to their friends they have a lot of sources there's a lot of competition and in major cities now many of our schools are competing with one another so schools that are not playing by the rules that are not turning people out that are not graduating students a few may get away with it here and there and that's the job of the i g to investigate that and creditors to investigate the state congressman kline thank you mr chairman thank you for your time and for holding this hearing this is a terrific panel that we have again i'm always excited when we have a panel of real experts and that's what we have here today so i want to thank the witnesses for your subject to some of the same the same problems can you tell me you know is the g a o looking at the rest of the schools beyond the proprietary sector mr klein the work that was requested by chairman house ask us clear that this is not pervasive throughout the sector you know as i mentioned earlier the scope of our work was narrowly focused we visited a few schools on the other cover investigation that we conducted to place at one school so early i'm not really in a position to say gee i was not really in a position to say whether this is widespread or not as i mentioned you know the fact that this has continue despite prior work and the work of others does cause concern and so we think at the end of the day this is really about protecting students protecting the taxpayers and the integrity of our education system so it's important for that part of education to really step up here and improve his oversight of this area and look across the board and look across all  since we are talking about proprietary schools career colleges and you're here representing them just a couple of comments and questions i come from a district where i've got every sector represented i've got some very traditional four year college located in the same city which i always find interesting so they have a cross city rivalry there in north field minnesota i've got some wonderful community colleges and of course we have quite a large number of career colleges across a wide lot of a lot of districts but it seemed to me as pretty clear to me as i was visiting the career colleges that they seem to be pretty nimble and adjusting to the work demands and the need to shift careers and that i suppose applies to the name of career colleges but as we see the economy in shambles and unemployment to rise but there's a demand for a shift in in careers a shift in jobs in many places and and the career colleges seem to be a just into that and we're picking up students for everything from pharmacy assistance to nurses about it why do you think that those who are schools are able to do that and make that adjustment i agree with your assessment mr klein and it's because we're single purpose a traditional colleges and universities community colleges serve a whole series of missions and functions they have a lot of different groups they have to respond to trustees faculty alumni all of whom are pulling in different directions lots of fights about what kind of programs that have what ball coaches sometimes you don't have any alumni pulling in any any direct we listen to our alumni but our number one customer is our student always our number two cost of our employers who hire our students and that means that every single one of our members has a close relationship with the employer community in the locality in which that school operates and that enables two things mr klein number one that ensures that the school is offering the course work the textbooks the technology in the classrooms that is current to the career opportunities not teaching computer programming courses that were for computer programs are being used anymore not using nursing technology no hospitals today they teach what is current today and secondly this decline that enables the schools to work with the employers to make sure that the students have internships exter and ships and most importantly a chance to actually launch their career because the employer community knows these schools knows the quality of the students they have that constant dialogue today in florida for example according to the florida department of health fifty six percent of all new entrants into the allied health field in the state of florida come from colleges even though we're only about twelve percent of the students in the state of florida florida needs a lot of health care workers as well population they need it and so our schools are ramping up their programs quickly because that's what the employment market demands and that addresses the issue of how you're getting out of my district that the career colleges had a very high success rate in actually placing their graduates in jobs and i think that i was going to go into that but i think you covered that there with your answer that was close working on the needs of the students and their career aspirations and the employers and i applaud the schools i've visited in your your sector for doing that and hope that the rest of my very fin schools are going to be able to do as well thank you mr chairman i yield back thank you i now call on the gentleman from the great state of new york timothy bishop thank you mr chairman thank you very much for holding this hearing into the panel thank you all for your  definition of independent is a rather liberal one that definition would allow for on campus assessment offices to provide the test am i correct in that mr chairman that is my understanding yes so my question mr scott do you know if the two examples you cited of where there was clearly fraudulent behavior taking place where the testers where they truly independent of the school for which the testing was being conducted or where they employees of the school independent of the admissions office my understanding from our undercover visit that the independent test administrator was contracted was under contract it's not clear in terms of whether they were contracted by the test publishers or by the school itself but they were certified by the test publishers to  eligible to administer the test ok but eligible based on a rather liberal definition of independent director consistent with the house version of the higher education act that we passed whenever that was a year and a half ago or longer included a provision that if a school in rolled more than five percent of its title for eligible population under ability to benefit testing that the test of the ability to benefit test would have to be administered by a truly independent entity that it could not be an employee of the school in some other department if and that that provision was knocked out in conference not in the final higher education act if we were to make such a provision law do you think that that might help us deal with at least a already in a position to take certain steps that we think would help address certain vulnerability at a minimum i would expect that apartment to follow through on some of the things which are sharma pointed out and terms of steps that it's in the process of taking to improve our side of  do you do you think that provision might help to mitigate this problem somewhat it does sound as though it would be a provision that would take a step toward integrity thank you yes in fact those are the kind of things that we will discuss in the context of the current rule making as well as we are developing the ability for us to know what percentage of schools population is there under an ability to benefit test which will also in our monitoring with or without any particular rule applied to any nonselective or open admission school the other way that a student may qualify for title for money is to earn six credits with a reasonable average and show that he or she is capable of post secondary level work would there be any interest in and a pilot program for schools to allow a student to enroll for six credits at no charge to the student to demonstrate that they can they can handle post secondary level work my thought here is that unless the population that that would be subject to such a pilot program is too large there would be no marginal cost to the institution of going to enroll fifteen students in an entry level course and now you're going to enroll you're not going to add an instructor would there be any interest in trying that as a pilot program to see if students truly are capable of post secondary level work and that would they've never had an original idea in my life whether they are their competitors of course so whether they'd be willing to allow me to anonymize share it with you i could talk to them about it but i do know some of our schools have been experimenting in this back on the students and that's a blessing and a curse for our society i mean it's a blessing and one can argue because it's more likely that you're not going to have fraud and not going to have the problems are not going to have the negative outcomes that frequently occur with  v students even those are legitimate lee enrolled but for society for the purposes that president obama articulated in his speech in february which many members on both sides of this aisle talked about the need to have a more highly educated workforce and not drop the twelve fourteenth's in the world where we are today in terms of post secondary education in our schools schools who try to be open in many cases are cutting back in eighty b because of concerns about covert default right because of concerns about ninety pounds because of concerns about failure to graduate not meeting their accreditation standards is that good from the societal point of view i would argue as a citizen it's not maybe that's what they have to do is the self interested parties stay inside the lines that we've all drawn but i will tell you candidly that's what's occurring that many of our schools are beginning to cut back on the rate t v population and i'm not sure that's good for our society but that's sort of in the box that many of them are finding themselves and thank you jim thank  call on the gentleman from colorado congressman polish thank you mr chair question for mr scott two questions actually in your report you discuss a number of the factors related to higher default rates including the demographic characteristics of the borrowers their success in school the characteristics of their loans the repayment options however it seems that price and availability bill ability of institutional grant aid would also be critical factors are also a critical variable despite serving high sure low income students to issues and fees at the for profit institutions are among the highest in post secondary education and given the profitability levels one would think that they could offer significant gran where of the compare default rates for students attending proprietary public and nonprofit institutions that control over student characteristics to allow for an apples to apples comparison that could shed light on issues of quality by comparing the actual rates over time and how they differ between the graduates of public proprietary and nonprofit institutions response to your first question the scope of our study was really  in our study the general research that we saw in this area is pretty limited and so we are really constrained to sort of looking at the existing research thank you mr chairman in addition to the surge in demand a proprietary schools for federal student loans proprietary schools have the largest proportion of students taking out much higher cost private loans and the largest increase in private loan borrowing forty two percent of all proprietary school students have private loans students attending for profit schools composed about nine percent of all undergraduates but twenty seven percent of those with private loans even more troubling about two thirds of the private loan borrowers borrowed less than they could have in a stafford loan program compared to less than half private as congress is expanding and making even more safe and reliable the federal student aid program how can we encourage students to exhaust every last dollar of the lower cost federal aid options before turning to high cost private loans that are eligible for the deferment income based repayment or loan forgiveness options that come with federal student loans do you think that schools should be required to inform prospective students of these federal loan measures or the default  rates we are very concerned about the amount of debt that students are taking on whether that be federal student loans as well as private loans that do tend to have much higher interest rates and lack the kind of consumer protections that federal loans have their  previous administration did and began a campaign really a federal aid first effort to make sure that students and colleges did more to help students be aware of the availability of federal loans  we're noticing in this current economy a lot of families had assumed they weren't eligible for federal loans and were pleasantly surprised to find out that they were once applying we do think it will help to simplify the fafsa to make make that cross some of  federal loans at all i think the toughest question is this question of students who for some reason they do have some federal loans but they are not taking full advantage and we need to take a closer look at what is happening in those situations and whether it's  the school not having him enough information about levels of potential levels of borrowing students could take out and so that's an area where where we need to get get get a better handle on going on miller similar to that uses audit tactics such as mystery shopping to ensure that schools are not committing fraud in missions and financial aid and as your evidence from these exercises indicate the same results  any school focusing on compliance and i hope that's all the members compliance all the time has a mystery shopping program the simple reality is that humans are fallible and they make mistakes obviously sometimes they're apparently it's intentional  mistakes demonstrate earlier sometimes or inadvertent mistakes that they simply even with all the training they don't understand and that's why our schools focus so much on compliance including anticipating the situation that person will either intentionally mislead a prospective student or unintentionally but in both cases our schools and gauge use or hiring an outside firm often headed by a former law enforcement person who will come in and do mystery shopping to try to make sure that the people at ground level actually talking to the students are telling them the truth obviously we do not control directly the testing companies but we support the g a o recommendation that there needs to be aggressive oversight of the testing companies for a t v program and mr miller also one of the concerns prevention what's your process there c c a does not do that itself the accrediting agencies do and as mr sharman said that's often a yellow light that goes on when the department itself is deciding whether to do a detailed program  review but what we've tried to do mr mr all meyer is to come up with best practices to find out from our schools many of them have very low default rates mr omar we recently had an article on our poorly magazine we have a school a welding school the default rate is less than one half of one percent and in the g a o report mr scott and his colleagues reported that they found many schools in our sector with very low to fall rights including even a few in inner cities so clearly they're doing something different doing something better and so our purpose is working in holding this hearing the work that you're doing here the subcommittees doing on fraudulent administration tests is very important test integrity is very important i think there's unanimity among the panel members that  want to also talk about the loan problem and mr scott as usual the the g a o has done exemplary work in examining this area thank you for the excellent report that you've written i want to walk through some of the issues first of all the academic research tend to indicate that students who are nontraditional students which i believe is defined as twenty five and over for purposes of this are included for example being more nontraditional students family income parental education of the parent so there are a number of factors and that research was one of those factors also financially independent that students who were financially independent had higher instances of i don't recall i'd have to look that up and i think there was also a gender issue that women tend to have higher default rates as well the reason i raise this question is is there any research that's been done on the effect of the combination of these factors on default rates and other words that if there are four or five which tend to lead toward higher default rates is there any research on what happens when you combine those  combination and i do think i read in your report that the proprietary sector has a disproportionately high share of students that have some of those problems right so that if i read this correctly students over the age of twenty five make up six percent of the student body the proprietary schools only thirty five percent of the public and thirty eight percent at the private nonprofit student proprietary schools make up seventy six  percent rather seventy six percent of students are financially independent of their parents whereas only fifty percent of the publics and thirty nine s the private nonprofit and i think the income data would reflect that as well i think we'd be but i think it's important that we not run the risk of mischaracterizing the ownership of a school with the problem of student loan would you agree that there's nothing in the record that would suggest that the form of ownership of the school is a causal factor of the rate of the fall and that's clearly the balance we're trying to strike in our report pointing out that mr miller and others have stated clearly proprietary schools are offering opportunities to students who probably otherwise would not have access rate after the in the second year six and a half percent in the fourth year in the proprietary point six for the second year twenty three point three for the fourth year is there any evidence that suggests that that default is caused by defects in educational quality or would the evidence suggest that it's caused by other life factors like losing your job or getting sick or going through a family crisis what's the causal that if i read the g a o report correctly you're not suggesting there's any research that says that the climb in default rates over time is attributable to lack of quality education not saying it isn't but not saying it is  identified as i stated earlier i believe that you know from our perspective additional statutory changes may be warranted we believe that they are part of education is already currently in the position to take action on its own and it sounds like from mr chairman statement that they are in work closely with them and we did refer that to the apartments of inspector general for further investigation yes or we commonly investigate cases of fraud and we work with the department of justice or state prosecutor to bring the prosecution against the individuals i might situation where if a student if an institution's default rate exceeds a certain threshold they are subject to penalty where they would lose eligibility to administer title for programs for two years have to apply for readmission so on such a penalty exist the is it in the menu of penalties that could be visited upon a school that engages in the kind of fraudulent behavior that mr scott uncovered certainly a school that engages  fraud could be subject to limitation terminations of their eligibility for financial aid at all under under our the department of education's responsibility of affirming their ability to efficiently and properly administer federal financial aid so we certainly have that authority in case of these kind of severe has it ever been imposed for the kind of situation we're dealing with now with the ability to benefit testing being morning so again but i want to drop and i do want to make a brief statement and based on experience some years ago when i first got here we had a small college in my district run by people i knew well who were working at essentially a substandard wage and faculty that was equally dedicated and they develop programs to try to get students who are from very limited educational backgrounds in fact for that to get parents as well interested in higher education get involved in the programs for the school eventually run out of business primarily because the department of education was very are good people trying to do something good in very bad neighborhoods and we did not prevail so i'm just saying that mr chairman you know there's two sides to some of these stories and this was a case i felt so we shouldn't automatically assume that someone's trying to commit fraud when they're in a very tough situation like that and i'm sure you're very sensitive to that as well so i'm not saying  clearly her expect her to really go after those who have done something wrong but just make sure the people who have done something wrong with it are you thank you thank you very much congressman i have a great deal of respect for you and i certainly agree with you that not everybody is bad not everybody is committing fraud but those who do i think should be reprimanded ye also want to acknowledge the chairman and rather the member of our committee john tierney from massachusetts who arrived and if you have questions or wish to make a statement please feel free not i appreciate the opportunity but i'm going to let it pass the chairman i'm content to just listen to the witnesses and read their testimony as well thank you very well if there are no other questions i would like to give my closing statement i'd like to thank our witnesses for their testimony as well as my colleagues on this committee for their questions and comments today this has been a very productive and informative hearing i com the department of education for taking initial steps to address the g a o recommendations it is clear that congress needs to provide guidance and oversight in this sector of post secondary education at the state level the secretary may want to reach out to existing federally sponsored entities that have the capacity or if they are already involved in collecting student financial aid data to join this effort in accordance with regulatory guidance or directive of the department the education and labor committee and this administration have been working diligently to increase affordability and accessibility in higher education in the past two years we have passed landmark legislation to make college more accessible and affordable we have also encouraged states cost down so that students can go to college without carrying the burden of long term debt closing i want to say that as we continue to increase accessibility and affordability in higher ed i urge the department to act on the recommendations and to take a much more active role in monitoring the practices of for profit colleges and universities we must do our due diligence to protect the interests of our students and their families without objection all members will have fourteen days to submit additional materials questions for the hearing record with that call this meeting and th