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THE GAINFUL EMPLOYMENT REGULATION:

LIMITING JOB GROWTH AND STUDENT CHOICE

JOINT HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY AFFAIRS,

STIMULUS OVERSIGHT AND GOVERNMENT

SPENDING

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

AND THE

SUBCOMMITTEE ON HIGHER EDUCATION

AND WORKFORCE TRAINING

OF THE

COMMITTEE ON EDUCATION

AND THE WORKFORCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

JULY 8, 2011

Serial No. 112–77

Committee on Oversight and Government Reform

Serial No. 112–32

Committee on Education and the Workforce

Printed for the use of the Committees on Oversight and Government Reform

and Education and the Workforce

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON NATIONAL SECURITY, HOMELAND DEFENSE AND FOREIGN

OPERATIONS

JASON CHAFFETZ, Utah, Chairman

RAU ́ L R. LABRADOR, Idaho, Vice Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PAUL A. GOSAR, Arizona

BLAKE FARENTHOLD, Texas

JOHN F. TIERNEY, Massachusetts, Ranking

Minority Member

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

STEPHEN F. LYNCH, Massachusetts

MIKE QUIGLEY, Illinois
(III)

COMMITTEE ON EDUCATION AND THE WORKFORCE

JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin

Howard P. ‘‘Buck’’ McKeon, California

Judy Biggert, Illinois

Todd Russell Platts, Pennsylvania

Joe Wilson, South Carolina

Virginia Foxx, North Carolina

Bob Goodlatte, Virginia

Duncan Hunter, California

David P. Roe, Tennessee

Glenn Thompson, Pennsylvania

Tim Walberg, Michigan

Scott DesJarlais, Tennessee

Richard L. Hanna, New York

Todd Rokita, Indiana

Larry Bucshon, Indiana

Trey Gowdy, South Carolina

Lou Barletta, Pennsylvania

Kristi L. Noem, South Dakota

Martha Roby, Alabama

Joseph J. Heck, Nevada

Dennis A. Ross, Florida

Mike Kelly, Pennsylvania

George Miller, California,

Senior Democratic Member

Dale E. Kildee, Michigan

Donald M. Payne, New Jersey

Robert E. Andrews, New Jersey

Robert C. ‘‘Bobby’’ Scott, Virginia

Lynn C. Woolsey, California

Rube ́n Hinojosa, Texas

Carolyn McCarthy, New York

John F. Tierney, Massachusetts

Dennis J. Kucinich, Ohio

David Wu, Oregon

Rush D. Holt, New Jersey

Susan A. Davis, California

Rau ́l M. Grijalva, Arizona

Timothy H. Bishop, New York

David Loebsack, Iowa

Mazie K. Hirono, Hawaii

Barrett Karr, Staff Director

Jody Calemine, Minority Staff Director

SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE TRAINING

VIRGINIA FOXX, North Carolina, Chairwoman

John Kline, Minnesota

Thomas E. Petri, Wisconsin

Howard P. ‘‘Buck’’ McKeon, California

Judy Biggert, Illinois

Todd Russell Platts, Pennsylvania

David P. Roe, Tennessee

Glenn Thompson, Pennsylvania

Richard L. Hanna, New York

Larry Bucshon, Indiana

Lou Barletta, Pennsylvania

Joseph J. Heck, Nevada

Rube ́n Hinojosa, Texas

Ranking Minority Member

John F. Tierney, Massachusetts

David Wu, Oregon

Timothy H. Bishop, New York

Robert E. Andrews, New Jersey

Susan A. Davis, California

Rau ́l M. Grijalva, Arizona

David Loebsack, Iowa

George Miller, California

(V)

C O N T E N T S

Page

Hearing held on July 8, 2011 ................................................................................. 1

Statement of:

Cortes, Dario A., president, Berkeley College; Karla Carpenter, graduate

of Herzing University; Anthony Carnevale, director, Center on Education and Workforce, Georgetown University; and Harry C. Alford,

president and CEO, National Black Chamber of Commerce .................... 26

Alford, Harry C. ......................................................................................... 49

Carnevale, Anthony ................................................................................... 41

Carpenter, Karla ....................................................................................... 34

Cortes, Dario A. ......................................................................................... 26

Letters, statements, etc., submitted for the record by:

Alford, Harry C., president and CEO, National Black Chamber of Commerce, prepared statement of ...................................................................... 51

Carnevale, Anthony, director, Center on Education and Workforce,

Georgetown University, prepared statement of .......................................... 43

Carpenter, Karla, graduate of Herzing University, prepared statement

of ..................................................................................................................... 36

Cortes, Dario A., president, Berkeley College, prepared statement of ......... 29

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland:

Letter dated February 3, 2011 ................................................................. 7

Prepared statement of ............................................................................... 17

Prepared statement of Ms. Issa ............................................................... 13

Foxx, Hon. Virginia, a Representative in Congress from the State of

North Carolina, prepared statement of ....................................................... 4

Hastings, Hon. Alcee L., a Representative in Congress from the State

of Florida, prepared statement of ................................................................ 76

Hinojosa, Hon. Rube`n, a Representative in Congress from the State of

Texas, prepared statement of ....................................................................... 24

Waters, Hon. Maxine, a Representative in Congress from the State of

California, list of program integrity negotiators ........................................ 82

(1)

THE GAINFUL EMPLOYMENT REGULATION:

LIMITING JOB GROWTH AND STUDENT

CHOICE

FRIDAY, JULY 8, 2011

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON REGULATORY AFFAIRS, STIMULUS OVERSIGHT AND GOVERNMENT SPENDING, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, JOINT WITH THE SUBCOMMITTEE ON

HIGHER EDUCATION AND WORKFORCE TRAINING, COMMITTEE ON EDUCATION AND THE WORKFORCE,

Washington, DC.

The subcommittees met, pursuant to notice, at 10 a.m., in room

2154, Rayburn House Office Building, Hon. Jim Jordan (chairman

of the Subcommittee on Regulatory Affairs, Stimulus Oversight and

Government Spending) presiding.

Present from Subcommittee on Regulatory Affairs, Stimulus

Oversight and Government Spending: Representatives Jordan,

Buerkle, Labrador, Kucinich, Speier, and Braley.

Present from Subcommittee on Higher Education and Workforce

Training: Representatives Foxx, Petri, Biggert, Platts, Roe, Hanna,

Ross, Hinojosa, Tierney, Wu, Bishop, Andrews, Davis of California,

and Miller.

Also present from Subcommittee on Regulatory Affairs, Stimulus

Oversight and Government Spending: Representatives Meehan,

Davis of Illinois, Towns, Hastings, and Waters.

Also present from Subcommittee on Higher Education and Workforce Training: Representative McCarthy.

Staff present from Subcommittee on Regulatory Affairs, Stimulus

Oversight and Government Spending: Ali Ahmad, deputy press secretary; Robert Borden, general counsel; Lawrence J. Brady, staff director; Sharon Casey, senior assistant clerk; John Cuaderes, deputy

staff director; Gwen D’Luzansky, assistant clerk; Adam P. Fromm,

director of Member liaison and floor operations; Linda Good, chief

clerk; Christopher Hixon, deputy chief counsel, oversight; Justin

LoFranco, press assistant; Mark D. Marin, senior professional staff

member; Kristina M. Moore, senior counsel; Laura L. Rush, deputy

chief clerk; Matthew Tallmer, staff investigator; Sharon Meredith

Utz, research analyst; Becca Watkins, deputy press secretary;

Peter Warren, policy director; Ronald Allen and Kevin Corbin, minority staff assistants; Jaron Bourke, minority director of administration; Ashley Etienne, minority director of communications; Jennifer Hoffman, minority press secretary; Carla Hultberg, minority

chief clerk; Leah Perry, minority chief investigative counsel; Dave
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Rapallo, minority staff director; and Cecelia Thomas, minority

counsel/deputy clerk.

Staff present from Subcommittee on Higher Education and Workforce Training: Jennifer Allen, press secretary; Katherine Bathgate,

press assistant/new media coordinator; Casey Buboltz, coalitions

and Member services coordinator; Heather Couri, deputy of education and human services policy; Lindsay Fryer, professional staff

member; Amy Raaf Jones, education policy counsel and senior advisor; Brian Melnyk, legislative assistant; Krisann Pearce, general

counsel; Linda Stevens, chief clerk/assistant to the general counsel;

Alissa Strawcutter, deputy clerk; Aaron Albright, minority communications director for labor; Ahlgren Kate, minority investigative

counsel; Tylease Alli, minority clerk; Daniel Brown, minority junior

legislative assistant; Jody Calemine, minority staff director; Megan

O’Reilly, minority general counsel; Julie Peller, minority deputy

staff director; and Melissa Salmanowitz, minority communications

director for education.

Mr. JORDAN. The joint hearing will come to order, and I want to

thank our witnesses and guests today. Unfortunately, I have to

leave and get to a meeting in the Whip’s office, but we are going

to be in the able hands of the gentlelady from North Carolina, Ms.

Foxx. So she will take over, but I guess I officially had to hit the

gavel. So again I apologize, but we are looking for to a great hearing, and I will turn things over to Ms. Foxx.

Ms. FOXX [presiding]. Thank you, Chairman Jordan. There are a

lot of things going on around here today and people are going to

be moving in and out, as I am sure most of you know.

The committee will come to order. I want to welcome everyone

here today. I appreciate the opportunity to hold a joint hearing

with the Oversight and Government Reform Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending.

And I would like to thank all of our witnesses and guests for joining us today.

Supporting freedom of choice in higher education should be a priority for all Members of Congress. Postsecondary education opens

doors for greater job opportunities and the chance for a more stable

career path, both of which are critical for Americans struggling to

make ends meet and support their families in this tough economy.

Unfortunately, the administration’s efforts to impose the widely

criticized gainful employment regulation on proprietary colleges

could severely limit education and job training opportunities for

millions of students and inhibit local economic development in communities across the country.

Proprietary colleges are unique institutions with the flexibility to

offer courses in formats that meet the demands of the student population and in subjects based on the needs of the local community.

The majority of students attending a proprietary institution are

what we commonly refer to as ‘‘nontraditional students,’’ meaning

they are not attending college right after graduating from high

school. In fact, 48 percent of students enrolled in a 2-year proprietary program and 72 percent of 4-year program students are 25

years of age or older. Many of these students have families, fulltime jobs, or seek job training for career opportunities in a new

field. The option to take courses in the evenings, on the weekends,
3

at an accelerated pace, or even online, can be a valuable alternative for students who may otherwise be unable to pursue postsecondary education.

Proprietary colleges serve several fast-growing industry sectors,

including the computer data processing and health care fields.

From 2008 to 2009, for example, 79 percent of the allied health and

medical assisting work force and 11 percent of nurses were educated at proprietary colleges. Students who choose to attend proprietary institutions often benefit from the institution’s close working

relationship with local business owners and hiring managers,

which helps the schools better develop programs that meet the

needs of the local work force.

In a hearing held by the Education and the Workforce Committee earlier this year, a hiring supervisor with Orbital Sciences

Corp. in Arizona praised a local proprietary institution’s efforts to

gain input from business leaders that would better prepare students to compete in the job market, ‘‘Private postsecondary educational institutions actively practice continuous improvement

through the use of industry advisory committees,’’ the witness said.

‘‘These advisory committees allow industry leaders the opportunity

to provide constructive feedback and recommendations for curriculum enhancement based on graduate performance in the industry. This approach has an immediate benefit for employers, as new

graduates enter the industry armed with the skills and knowledge

to solve real issues in the workplace.’’

The reams of red tape in reporting requirements established by

the Department of Education’s gainful employment regulation

could make it more difficult for proprietary schools to create the career training programs valued by local businesses. In turn, this

could force businesses to outsource job opportunities to find skilled

candidates or even relocate to another part of the country. The new

unemployment numbers released by the Department of Labor this

morning show private sector job growth remains sluggish. More

than 14 million Americans are out of work and the unemployment

rate continues to hover above 9 percent. Our economy added only

18,000 jobs in June. That is simply unacceptable.

It is absolutely critical that Congress do everything in its power

to rein in harmful regulations that hamper economic growth and

job creation, and we must start by putting an end to the misguided

gainful employment regulation.

I hope today’s hearing will shed additional light on the serious

ramifications that this regulation could have on students, employers, job creation in the economy as a whole. I look forward to our

witness testimony.

I would now like to recognize Mr. Cummings from Maryland for

his opening statement.

[The prepared statement of Hon. Virginia Foxx follows:]
4
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Mr. CUMMINGS. Thank you very much, Madam Chairlady.

There is one principle we should all be able to agree on today:

our Nation’s young adults deserve the best education they can get

and scarce taxpayer dollars should be used to maximize their opportunities to ensure that they receive quality instruction and to

prepare them to become successful members of our Nation’s work

force.

This hearing should not be about protecting jobs at for-profit

schools. It should be about creating millions of jobs for American

students who are striving to better themselves and our society.

Unfortunately, the record of for-profit schools raises significant

concerns. Generally, students at for-profit schools are less likely to

graduate, less likely to find a job, more likely to have higher debts,

and more likely to default on those debts than students at public

and private nonprofit schools. In addition, low-income and minority

students, who make up a substantial part of the student body at

for-profit schools, are three times more likely to borrow Federal

student loans, four times more likely to borrow private loans, and

less than half as likely to graduate than the same groups of students at nonprofit schools. For this reason, nearly every major civil

rights group in the country, including the NAACP, La Raza, LCCR,

MALDEF, and others have expressed serious concerns about this

problem.

Madam Chairlady, I ask unanimous consent to enter into the

record a letter sent on February 3rd from 17 major civil rights and

consumer protection groups relating to this issue and a statement

from Wade Anderson of the LCCR. I ask unanimous consent to

have those placed into the record.

Ms. Foxx. Without objection.

[The information referred to follows:]
7
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10
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Mr. CUMMINGS. Thank you, Madam Chair.

I want to make clear that I fully support the educational mission

of for-profit schools. I have attended numerous graduation ceremonies, actually spoke at three graduation ceremonies in Baltimore

recently. I have met personally with their CEOs and presidents,

and I have seen the gleaming faces of graduates holding diplomas

in their hands.

My concerns relate to whether U.S. taxpayers are fueling an incentive structure that encourages for-profit schools to use Federal

student loans to pay their CEOs exorbitant salaries, to pay their

shareholders lucrative dividends, and to plow millions of dollars

into recruitment and marketing campaigns, all while spending less

on education and job placement programs that would actually help

students fulfill their dreams.

For example, the CEO of Strayer Education made more than $40

million last year, many times more than the highest paid president

of a private nonprofit university, and Strayer spent more than $100

million on marketing for admissions. In the 2008 and 2009 school

year, Strayer received 77 percent of its revenue from hard paid

Federal dollars, taxpayer dollars. Despite these numbers, Strayer’s

6-year graduation rate is just 14 percent, compared to 55 percent

for public schools and 65 percent for nonprofit schools. Strayer’s

loan repayment rate is 25 percent less than half that of public and

nonprofit schools, and I would venture to guess that there is no

member of these subcommittees or committee, if you were running

a firm, would stand for that, that kind of effectiveness.

A bipartisan coalition of 10 State attorneys general have now

launched an investigation into deceptive marketing practices and

misrepresentations by for-profit schools. The attorney general of

Kentucky, Jack Conway, who was leading the probe said, ‘‘I want

to make sure these institutions are as interested in educating their

students as they are in collecting Federal loan money. I want to

make sure that students aren’t being misled and left owing tens of

thousands of dollars in student loans for credits that don’t transfer

or a degree that will not benefit them.’’

Consider the story of Yasmine Issa, a 24-year-old mother of twin

3-year-olds who recently divorced. In a written statement submitted for today’s hearing, she describes her experience at SanfordBrown Institute in White Plains, New York. She said this, ‘‘The

school’s recruiters did not know much or give much detail about

the program. It seemed like they were just trained to be very aggressive and sell the seat for the program, which would cost me a

little over $32,000. They said I would not have a hard time finding

a job and that career services at the school would be dedicated to

helping me find a job. The recruiters kept calling me and told me

that the seats for the program were filling fast and I needed to

hurry up and sign up for the program.’’

After successfully completing the program, Ms. Issa tried for

months to find a job. Only then did she discover that the program

was not accredited and she was unable to become certified for her

ultrasound degree. As she explained in her statement, ‘‘I continued

to search for a job. This time I visited a hospital in New Jersey.

The supervising ultrasound tech informed me that if I had attended an accredited school I would be able to sit for the registry
12

exam immediately after graduation. This was the first time I found

out that Sanford-Brown Institute did not offer an accredited

ultrasound program.’’

I ask unanimous consent to enter Ms. Issa’s statement into the

record, Madam Chairlady.

Ms. FOXX. Without objection.

[The information referred to follows:]
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Mr. CUMMINGS. Our committee has responsibility to determine

whether taxpayer dollars are being spent effectively and efficiently,

or are being abused. If billions of dollars in student loans could be

used to help increase graduation rates and employment placement

after graduation, rather than enriching CEOs and corporate shareholders, our job is to examine the best ways to do just that.

I commend the Department of Education for developing the gainful employment rule in an open manner and, in addition to this

comment period, the Department held six public hearings and hundreds of meetings with stockholders.

With that, Madam Chair, I see my time has run out. Therefore,

I yield back and would submit my statement.

[The prepared statement of Hon. Elijah E. Cummings follows:]
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Ms. FOXX. Thank you, Mr. Cummings.

I now recognize Vice Chairman Ann Marie Buerkle.

Ms. BUERKLE. Thank you, Madam Chairman.

Earlier this week, Americans across this great Nation came together to celebrate Independence Day and the many opportunities

that this great Nation offers to its people. For generations, citizens

of this country have strived to obtain the American dream.

However, the persistence of this great recession and chronically

high levels of unemployment have led many Americans to lose confidence in this dream. Just this morning we learned that the unemployment rate actually rose to 9.2 percent. One of the contributors

to the economic morass are the layers of bureaucratic red tape and

the onerous regulations that stifle entrepreneurial activity and suppress the private sector to create jobs.

As part of the committee’s commitment to promote job creation,

today’s hearing continues our ongoing examination of Federal regulations, regulations that are preventing millions of American businesses from creating jobs and putting Americans back to work, contrary to the American dream.

Sometimes the testimony received by this committee is unsettling; sometimes it is disturbing. For example, in February a small

business owner from Ohio was asked, would you do it all over

again, knowing what the regulatory environment is today in this

country? His response was disturbing and it was heartbreaking:

No, sir, I would not. But he is not alone. Every hearing brings in

more Americans who are frustrated, discouraged, and believe that

the American Government is actually working against them, failing

their success rather than supporting their efforts to help expand

the U.S. economy and create jobs.

Today’s hearing will explore an issue that we first learned about

in February 2011, the Department of Education’s gainful employment regulation. The regulation is targeted at for-profit institutions

of higher learning, such as the University of Phoenix and Strayer

University, to name just two well-known schools. These schools

provide opportunities for Americans who may be the first in their

family and to high-risk students, in other words, those whose previous collegiate experiences were interrupted by family responsibilities, military obligations, financial crisis, or perhaps some who

were simply not ready to persevere as younger students. Additionally, many of their programs are designed to fit lifestyles of nontraditional students, like working moms, or economically displaced

individuals who seek to gain new skills so that they can pursue a

second career.

In addition to the opportunities that these institutions provide to

many of our fellow Americans, there is some evidence that some

bad actors have left some students with unaffordable debts and

poor employment prospects. In response to these concerns, the Department of Education announced final gainful employment regulations on June 2, 2011.

As the committee has reviewed this regulation, it has heard from

many students, employers, and universities that it will hurt both

reputable as well as problematic programs equally, eliminating

postsecondary options for many students.
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As a general matter, institutions of higher learning offer important opportunities to Americans seeking to expand their skills and

earn postsecondary degrees and certificates. The unemployment

rate for Americans with a Bachelor’s degree or higher is 4.5 percent

less, that is less, than half of the national rate of 9.2 percent. Of

the 18 million undergraduate students in fall of 2009, 9 percent, or

1.62 million, attended for-profit institutions, for them, as will the

other students obtaining a Bachelor’s degree, a proven way to combat unemployment and to obtain the American dream that so many

Americans strive for.

However, according to one study, the gainful employment rule

will cause 1.2 to 2 million students to decline to enter postsecondary schooling over the next decade. This includes 700,000 to 1.3

million female students, 200,000 to 360,000 Black students, and

200,000 to 330,000 Hispanic students. In addition to eliminating

educational choice, Americans employed by for-profit institutions

may be impacted if their employer is forced to eliminate programs

or if it experiences shift in enrollment. The uncertainty of how this

regulation will affect for-profit schools may also affect new program

development, investment and infrastructure, and, worse yet, hiring.

Concern for these regulations has been bipartisan. House Minority Leader Nancy Pelosi voted, along with distinguished former

chairman of this committee, Ed Towns, and a majority of members

of the House, to block the Obama administration from implementing the regulations. The administration, however, ignored the

concerns and moved forward with finalizing the rules.

Today we will hear from the most directly impacted by the gainful employment regulations: students, schools, and the business

community who all rely on for-profit institutions for educational opportunities. The testimony we will hear today will help us examine

how these regulations will impact job creation as we attempt to foster an economic recovery that puts Americans back to work.

I yield back. Thank you, Ms. Chairman.

Ms. FOXX. Thank you very much.

I now recognize the distinguished member of the Subcommittee

on Higher Education and Workforce Training, the gentleman from

Texas, Mr. Hinojosa, for his opening statement.

Mr. HINOJOSA. Madam Chair, I am going to request unanimous

consent that Representatives Alcee Hastings, Maxine Waters, Ed

Towns, and Danny Davis be permitted to participate in this hearing and ask questions of the witnesses. Also include Caroline

McCarthy.

Ms. FOXX. We welcome our distinguished colleagues to the hearing today.

Mr. HINOJOSA. Thank you.

Chairman Jordan, Ranking Member Kucinich, and Chairwoman

Foxx, as ranking member of the Subcommittee on Higher Education and Workforce Training, I strongly support the Department

of Education’s final rule on gainful employment for a number of

reasons.

First of all, as members of these two committees, we have a tremendous responsibility to exercise oversight and ensure that these

taxpayer dollars are spent wisely and in the best interest of students and taxpayers.
22

During my 15-year tenure in Congress, I have fought vigorously

to expand accessibility and affordability in higher education by

working with my colleagues to increase the maximum Pell Grant

award to $5,550 and provide our students access to affordable student loans.

These investments in Federal financial aid support President

Obama’s college completion goals and increase America’s global

competitiveness and are indeed necessary to educate and graduate

greater numbers of students in our Nation’s colleges and universities.

At the same time, the Federal Government must be assured that

students and taxpayers are receiving an adequate return on their

investment, particularly in the sectors of higher education. that are

growing rapidly and rely heavily on Title IV funds.

In 2008–2009, for-profit institutions enrolled approximately 12

percent of all the students enrolled in Title IV institutions. In 2010,

the Department of Education awarded $9.2 billion in Pell Grants

to for-profit colleges, or 25 percent of the total Pell Grants awarded, and $27.2 billion in student loans, representing 26 percent of

all student loans awarded to students enrolled in for-profit institutions. Importantly, approximately 15 percent of for-profit institutions derive between 85 and 90 percent of their total revenue from

Title IV funds.

We know that students at for-profit institutions are more likely

to borrow. According to the Education Trust, 97 percent of students

attending the 2-year for-profit schools took out student loans in

2007–2008, compared to just 14 percent of students attending public community colleges.

Students who attended for-profit colleges are also more likely to

default than students who attended nonprofit schools. Whereas

10.8 percent of the 2008 cohort who attended public colleges defaulted on loans within 3 years, the default rate for students attending for-profit institutions was 25 percent.

In today’s hearing, some of my colleagues may argue that the

gainful employment regulation limits educational opportunity for

low-income and minority students. Ladies and gentlemen, this is

simply not the case. I find these assertions troubling and misleading.

To be clear, this rule is fair, targeted, and promotes a rehabilitative approach by giving underperforming programs 3 years to improve before removing eligibility for student aid. The rule targets

the worst actors, who I believe are 2 percent, who fail to improve

student outcomes and incentivizes programs to make improvements, lower default rates, and increase graduation rates.

It is important to note that the gainful employment rule applies

to 55,000 programs, which includes 37,000 programs at public institutions, 5,000 at private, nonprofit institutions, and 13,000 at

for-profit institutions.

I also want to underscore that the rule does not harm minority

and low-income students. Instead, the rule helps low-income and

minority students access higher quality programs that increase

their employment prospects.

What is more, the U.S. Department of Education estimates that

only 2 percent of all the programs would ultimately lose eligibility
23

under the rule. In fact, programs lose eligibility only after failing

each metric three times within a 4-year period, and no program

could be ruled ineligible for Title IV funds until the year 2015.

In closing, I want to say that we must put students and taxpayers before company profits. There is no doubt that Pell Grant

scholarships and affordable student loans expand educational opportunity and help our students prepare for family sustaining jobs,

careers, and life. The final gainful employment rule protects the integrity of these vital Federal financial aid programs, particularly in

the for-profit sector.

With that, I yield back.

[The prepared statement of Hon. Hon. Rube`n Hinojosa follows:]
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Ms. FOXX. Thank you very much, Mr. Hinojosa.

Members may have 14 days to submit opening statements and

extraneous material for the record.

We will now welcome testimony from our witnesses, and I will

take just a couple of minutes to introduce our distinguished witnesses today.

Dr. Dario A. Cortes is the president of Berkeley College, Ms.

Karla Carpenter is a graduate of Herzing University, Dr. Anthony

Carnevale is the director of the Center of Education and Workforce

at Georgetown University, and Mr. Harry C. Alford is the president

and CEO of the National Black Chamber of Commerce.

Pursuant to Oversight Committee’s rules, all witnesses will be

sworn in before they testify, and I would like to ask the witnesses

if they now would rise and raise your right hands.

[Witnesses sworn.]

Ms. FOXX. Let the record reflect that the witnesses answered in

the affirmative. Thank you very much. Please be seated.

We know that we are going to be called for votes very, very

shortly. In fact, we thought it would be by now, but I am going to

make a couple more comments, and I think if it is okay with the

other members of the committee, we will go ahead to recognize Dr.

Cortes and then we will break to go vote.

So I would like to recognize Dr. Cortes for 5 minutes. I hope you

see the lights in front of you. When it turns to orange you have 1

minute left; when it turns to red, your time is up. And we would

appreciate your staying as close as possible to the 5-minutes.

Thank you very much.

STATEMENTS OF DARIO A. CORTES, PRESIDENT, BERKELEY

COLLEGE; KARLA CARPENTER, GRADUATE OF HERZING UNIVERSITY; ANTHONY CARNEVALE, DIRECTOR, CENTER ON

EDUCATION AND WORKFORCE, GEORGETOWN UNIVERSITY;

AND HARRY C. ALFORD, PRESIDENT AND CEO, NATIONAL

BLACK CHAMBER OF COMMERCE

STATEMENT OF DARIO A. CORTES

Mr. CORTES. Good morning, Chairman Jordan, Chairwoman

Foxx, Chairman Issa, Chairman Kline, Ranking Member Kucinich,

Ranking Member Hinojosa, Ranking Member Cummings, Ranking

Member Miller, and other distinguished members of the respective

committees. A special greeting also to Berkeley College Members of

Congress, Rob Andrews, Caroline McCarthy, and Ed Towns, to

whom I sincerely thank for their leadership and support for private

sector education.

My name is Dr. Dario Cortes. I am privileged to serve as the

president of Berkeley College. I applaud you for holding this joint

hearing and appreciate the invitation to share our perspective on

the impact of the new Federal gainful employment regulation on

our colleges, communities, family owned businesses, and jobs in the

New York and New Jersey region.

Fully accredited and family owned and operated, Berkeley College has four New York and four New Jersey campuses and Berkeley College online. We have serious concerns about the final Federal rule. On the surface, the question of how it will affect our stu-
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dents, faculty, and campuses and programs seems quite clear, but

the answer is quite the opposite. The honest response, however, is

we just don’t know. The honest and in spite of the changes included

in the final version of the rule is institutions will essentially be

navigating a minefield blindfolded and using an updated map.

Before I elaborate on the rule, I would like to provide you with

a snap shop of Berkeley College. This year we celebrate 80 years.

Since our founding in 1931, during the Great Depression, Berkeley

College has been a leader in business education. We now have enrollment of nearly 9,000 students, including more than 800 international students in our Baccalaureate and Associate degree programs. Our student demographic is comprised of 31 percent Hispanic, 29 percent African-American, 17 percent White, 4 percent

Asian, and 19 percent other.

Our female enrollment is 68 percent and 46 percent of our students are over the age of 23. Berkeley College’s offerings are more

than 20 career fields, including health sciences, information systems, business administration, accounting, criminal justice, and

fashion marketing, among others. Our professors bring a rich array

of real world experience to the classroom and, additionally, 50 percent of our faculty members hold doctoral degrees in their own

field.

I was appointed president of Berkeley College in July 2008. Prior

to accepting this position at the college, I served in senior roles at

the Fashion Institute of Technology, Fairleigh Dickinson University

in New Jersey, University of Maryland at College Park, Johns Hopkins University, North Carolina State University, and University of

Wisconsin at Madison. The opportunity to serve both at traditional

and private sector institutions has really, truly opened my eyes to

the positive impacts that our sector and our college has on our students, many of whom may not have been able to pursue the college

dream otherwise.

As Berkeley College has evolved over the past 80 years, we have

cultivated relationships with our business communities. We strongly believe that it is essential for students to gain work experience

while acquiring their degrees, and this is why the internship experience is a graduation requirement at Berkeley. We have student

success philosophy. This is evident through our many programs

and initiatives which are aimed at encouraging financial literacy,

reducing student debt, and increasing retention and graduation

rates, and providing scholarships and grants.

Turning to the new Federal gainful employment rule, I have

three major concerns. First, we believe that the gainful employment rule will create uncertainty and unnecessary confusion about

the status of our programs under the rule not only for students, for

the school, leaving the Federal Government the only entity completely in the know about the full impact of the rule. Specifically,

the initial data the Department of Education will provide to schools

will measure the loan repayment histories of students who graduated or entered the loan repayment so long ago, we question

whether that information is even accurate. Further, the Department’s proposed alternative data collection means are impractical,

as most States do not have the appropriate data collection infrastructure in place and most institutions like ours, family owned
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schools, do not have the staff or the capability to conduct the required service.

Second, there remains a lack of clarity regarding the debt-to-income calculation and institutions’ ability to exclude costs outside of

tuition fees such as living expenses.

Finally, and third, the rule will impose significant undue regulatory burdens. This would only result in diverting precious college

resources away from the core mission of teaching and learning and

educating our students in favor of gathering and maintaining volumes of data to report to Washington, none which measure the

quality of our institution, our programs, or the satisfaction of our

students.

I appreciate the opportunity to address the joint subcommittee

today and I would be happy to answer any questions following my

testimony. Thank you very much.

[The prepared statement of Mr. Cortes follows:]
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Ms. FOXX. Thank you, Dr. Cortes. I forgot to mention that the

entire written statement will be made a part of the record.

Ms. Carpenter, you are recognized for 5 minutes.

STATEMENT OF KARLA CARPENTER

Ms. CARPENTER. Chairwoman Foxx and Ranking Member

Hinojosa and Chairman Jordan and Ranking Member Kucinich and

other distinguished subcommittee members, thank you for holding

this joint hearing and for the opportunity to share my educational

story with you.

A special greeting to Congressman Petri, a member of the Education and Workforce Committee. Thank you for your continuing

support for students and graduate of career colleges. We greatly

appreciate it.

My name is Karla Hammer Carpenter. I am a mother of boys

ages 15 and 18. I am a 2007 graduate of Herzing University in

Madison, WI, and now, thanks to my education, I am employed in

my chosen field of work. I work as a program manager for Quest

Software, a California-based multinational company that develops,

sells, and supports enterprise level software for public and private

sector businesses all across the globe. I have been employed at

Quest Software since finishing my one and a half year of studies

to attain my Associate’s degree in computer networking from

Herzing University 4 years ago. My degree has proven to be of high

value to me and to my employer.

Prior to starting my family and being out of the paid workforce

for 14 years, I spent the 10 years after high school working without

a college degree. After high school and through my early twenties,

I briefly attended Luther College in Decorah, Iowa, the University

of Wisconsin-Madison, UW Extension School-Baraboo, and Madison

Area Technical College. After several shifts in my academic focus,

I entered the work force full-time without a postsecondary degree.

During a portion of that time, I worked at an emerging manufacturing company not far from Madison; you may have heard of it,

Trek Bicycle Corp. I gave that job up to stay home with my children when I started my family. But after 14 years at home and removed from the rigors of formal academic study and technological

changes in the workplace, I found myself forced to return to work

to support my two boys after the end of my marriage.

The last five and a half year journey from housewife duties to my

current software management responsibilities has not been without

great effort. Given the nature of the technological shift timed

against my absence from the work force, it clearly necessitated that

I return to college in order to be marketable.

When I decided to return to school, I knew that I needed to select

the correct college environment that I could afford that would mesh

well with my existing life. The local community colleges had considerable wait lists, could not guarantee me availability of my preferred programs, or, most importantly, class times.

Without question, Herzing University offered me the best daily

schedule via block programming, the best program options for viable employment with highly desirable skills in the local marketplace, the best graduation time line, incredible faculty accessibility

and career services, and the best total value of any program or
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school I investigated in the area. I met the admissions requirements for every school in the area, but I did not think these other

schools met my requirements, except for Herzing University.

By participating in this hearing, I would like to give an additional voice to many who are seeking educational options to better

their lives and contribute more fully to our economy and society.

I attended classes and partnered on projects with many students

who had little to no family support, financially or emotionally, as

first generation college attendees, many armed services veterans

and enlisted soldiers on leave, and many various minority members

of society who all felt that Herzing University was a special and

caring environment where faculty and staff were invested in helping each and every student attain their educational goals.

While enrolled, my fellow students and I often joked, as we

learned more about each other, shared our reasons for attending

school, and disclosing our dreams for our futures, that we seemed

to be in the ‘‘Hallowed Halls of Second Starts.’’

Just as business practices have changed over the years to accommodate global, more technologically advanced business operations,

so too our schools must adapt in equal measure on the educational

front. But education policy changes should not impact student

choice, and I worry about the negative impact that the gainful employment rule will have on future students who are currently my

sons’ ages and younger, and other returning adult students in the

work force currently. My fear is that fewer, not more, students will

fulfill our national educational vision of more Americans obtaining

a higher level of postsecondary training.

As a final note, as a returning adult student, I represent an important and growing demographic of students that our educational

institutions will need to serve in order to best fulfill our national

goals for postsecondary education and work force development.

Six years ago it was I who stood at a crossroads in my professional life as I contemplated going back to college. Many more prospective students will soon face this same crossroad. I only hope

that others have the opportunity to attend a college as fine as my

alma mater, Herzing University. I hope they can attend a school

of their true choice that meets their needs perfectly, just as

Herzing University did for me.

Thank you, and I stand ready to answer your questions that you

may have.

[The prepared statement of Ms. Carpenter follows:]
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Ms. FOXX. Thank you very much, Ms. Carpenter.

Ladies and gentlemen of the committee, we have 12 minutes left

in the votes, so if it is okay with you, we will go with Mr.

Carnevale and then we will take a break to go vote and we will

come back. We will save the best for the last, Mr. Alford. Okay?

Mr. Carnevale, you are now recognized for 5 minutes.

STATEMENT OF ANTHONY CARNEVALE

Mr. CARNEVALE. Thank you, Madam Chairwoman, Mr. Chairman, ranking members, and esteemed members of the subcommittees. I think it is important to say at the outset that I think many

people, there are some, I suppose, are engaged in this issue who

don’t believe that for-profit institutions make a huge contribution

to the individuals who attend them or that, in my view, at least,

they make a huge contribution to American higher education. They

have offered models that are quicker, more tightly tied to labor

market value; models that, in light of their scheduling, as Ms. Carpenter points out, and their structure, are much more friendly to

non-traditional students.

Having said that, I think it is important to note that there are

some serious problems here, and in that regard I think the administration’s response with the rulemaking has been appropriate, and

I think, actually, fairly deliberate and accommodating in this particular case.

We find in all of our research, and we are not alone as economists at Georgetown who find this, that there has been a fundamental change in the relationship between higher education and

the economy; not just in the United States, but in the world, largely since the end of the 1980–1981 recession, where, once we finally

tamed inflation by putting lots of people out of work, we then

turned technology loose and essentially restructured the American

economy somewhat dramatically over the next 20 years. Ms. Carpenter’s experience, I think, reflects that. The economy we all

worked in in the 1980’s is not the same one that existed by 1995.

And what happened as a result of that was that automation, the

simplest force let loose, was able to automate the repetitive tasks

in every job, and what remained were the jobs that included nonrepetitive tasks. Those tasks bundled together made up new kinds

of jobs, sometimes altogether new jobs, but changed the jobs that

already existed. A mechanic who used to repair a car needed mechanical skills. Now they need electro-mechanical skills and an understanding of computer operations to repair a car. Any of you who

have faced that awful moment, or at least of my vintage, I remember as a boy, if I could open up the hood of a car, I could fix it.

A year or two ago I faced a broke down car, opened the hood and

finally turned away in disgust; I had no idea what was going on

in there.

So that fundamental shift has raised the value of postsecondary

education, and we have been under-producing postsecondary education ever since 1983–1984. The evidence of that is plain. The

earnings returns to postsecondary education and training relative

to high school have risen from 30 percent to 84 percent, although

this is cloaked over more and more in this recession, where the return has dropped down to 74 percent higher than a high school de-
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gree. But the bottom line here is that in the United States and in

most advanced economies, if you are going to go anywhere after

high school, you have to get some postsecondary education or training first.

And the second change that I think is of great note here and

makes this ruling sensible is that the relationship between the texture of education is changed as it relates to the economy, and what

I mean by that is it doesn’t matter so much anymore which degree

you get, whether you get a certificate, an industry-based certificate,

a BA, a graduate degree.

What matters more and more is what you take, not the degree.

Still true that, on average, if you get a BA you will make more

than a person with a certificate. But if you get a certificate in engineering, you will make more than almost 40 percent of BAs. There

is a vast shift in the relationship between education and the economy. It is no longer just the preferred way to join the middle class,

it is becoming the only way.

So there are still some high school jobs left, but there are only

about one of those for every 15 people who get no education and

training after high school, and those jobs pay about $35,000 a year.

With experience and promotion, you can go to $45,000 or $50,000

in some of those jobs, but most of them not so. And those are the

jobs that are being eliminated or the education requirements are

increasing.

So it becomes important that we focus on the programs, not the

degrees. And programs have wildly different earnings returns, even

at the BA level. If you go get a degree in petroleum engineering,

you will make $120,000 a year, if you become a high school counselor, you will make, on average over 40 years, about $30,000 a

year. There is a difference there of almost $2 million. So it matters.

We need to have much better information on the relationship between programs and earnings, and that, in the end, is what this

set of regulations begins to do.

I think in the end these regulations are exactly of the right sort.

They are regulations that will make markets work better. Information is what makes markets work better. The collapse in the financial community was in large measure due to the fact that we had

no information. Bankers didn’t know any better who they were

loaning money to than they knew the people who printed the

money. So the postsecondary system, people, I think, students, parents, and legislators, have a right to know what the earnings returns are to higher education programs, especially now when public

resources are so precious. We are at least $30 billion low if we intend to meet the President’s goal of becoming the number one Nation in the world in postsecondary attainment.

Ms. FOXX. Mr. Carnevale, thank you very much.

Mr. CARNEVALE. Thank you.

[The prepared statement of Mr. Carnevale follows:]
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Ms. FOXX. Ladies and gentlemen, I think we should go vote, and

then I would urge you to come back immediately after the last vote

and we will continue the hearing.

Thank you all very much, and I am sorry to have this recess, but

we need to go vote. Thank you.

[Recess.]

Ms. FOXX. We want to thank everyone for their patience in 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 are supposed to do, so I think we will go ahead and ask

Mr. Alford if he now would present his 5 minute testimony. Thank

you, Mr. Alford.

STATEMENT OF HARRY C. ALFORD

Mr. ALFORD. Thank you, Madam Chair. Committee Chairs and

distinguished members of this joint subcommittee, thank you for

allowing me to testify today. I am president and CEO of the National Black Chamber of Commerce, which represents the fastest

growing segment of American small business, Black-owned businesses.

At the inception of the NBCC in 1993, there were 300,000 Blackowned businesses doing $33 billion in annual sales. Today there

are more than 1.9 million Black-owned businesses doing over $138

billion in annual sales. This fantastic growth leads to a growing demand for a larger educated workforce.

But a study by Stanford University shows unemployment among

all teenagers at 24.2 percent; among Black teenagers, regardless of

gender, the rate is 41.6 percent; but among Black teenage males

the rate is a very dangerous 45.5 percent. 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, etc., will be very small, indeed. The best alternative is proprietary schools.

The above is made all the more crucial when you look at the educational access. The Bureau of Labor Statistics data shows that

Americans with less than a high school diploma have an unemployment rate of 14.7 percent; those with a high school diploma, 9.5

percent; those with Associate degree or certificate, 8 percent; and

those with a Bachelor’s degree, 4.5 percent. 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 for-profit 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 52 percent of these high-risk students, while

nonprofit schools serve only 9 percent and public schools serve a

paltry 6 percent. Furthermore, 49 percent of the students enrolled

at for-profit institutions are low-income, as opposed to just 18 percent; at public schools, also 50 percent of the students attending

for-profit colleges are minority students, compared to just 34 percent 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
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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 flawed, if not corrupted. We want to draw your

attention to questions that beg your intervention.

We know that secret meetings took place between department officials and Wall Street short-sellers that were placing heavy bets

against the share prices of for-profit schools. What was going on?

We know that the department assembled a covert group of allies,

including former employers of department staff, short-sellers and

competitors of the for-profit 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 for-profit 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 reported, but never withdrew this report from their process

of consideration. What was going on?

We know that the department assembled a biased rulemaking

committed composed of a 16 to 1 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 at every college

in our Nation?

In conclusion, the gainful employment rule is now 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

to 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 for-profit schools. The biased 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 8 seconds.

[The prepared statement of Mr. Alford follows:]
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Ms. FOXX. You get the star, the gold star for not going over your

time today, Mr. Alford. Thank you very much for your comments

and, again, we appreciate your patience in waiting for us, and we

are very happy that Mr. Kucinich has joined us.

I just want to make a couple comments, brief comments, and

then I am going to ask a couple of questions. 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 would like to make based

on Mr. Carnevale’s comments. In Mr. Towns’ letter, he says, ‘‘Mr.

Chairman, I know there is good faith disagreement as to whether

the GE regulations, as written, are right or wrong, needed or not

needed. But there is one principle on which we all should be in

agreement, and that is a rulemaking that allows non-elected government officials to establish policy and have the force of law must

be fair, unbiased, and transparent.’’ And then he asks that we have

this hearing as soon as possible.

Mr. Carnevale, I was very interested. I am a person who has 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 is 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. Therefore, I think you made a

great case for the fact that if we are going to have regulations like

these, they should certainly apply to everyone. So I appreciate very

much the comments that you made.

I would 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?

Mr. Cortes. Chairwoman Foxx, I do believe that even with the redefined rules, the rule itself is complex, 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 is also very difficult from the Federal side to really be able to coordinate the ability to gather all the data and then having a matrix that allows

them to determine and make decisions for institutions without having all the dots connected.

So I do believe that the rule, although it is 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
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amount of time gathering data and our concern about teaching and

learning and providing the education that we need to our students.

We had 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 came down, so I

think institutions in our sector in particular have been affected by

this significant and targeted way in that not all the institutions are

treated equally, that this GE rule is only applied to the for-profit

institutions. I think it is unfair and not equitable.

Ms. FOXX. 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 30 seconds, so let me let you keep that in mind.

Mr. CORTES. Absolutely. I think 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 data base, 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 institution’s welfare and well-being.

Ms. FOXX. Thank you very much.

Mr. Kucinich, I would like to recognize you for 5 minutes.

Mr. KUCINICH. I thank my friend, the gentlelady, the Chair.

I want to speak about the high default rates at for-profit institutions. Staff, could you put up display chart number two, if it is

available? Thank you.

According to the February 2011 data released by the Department

of Education, defaulters from for-profit colleges disproportionately

account for 48 percent of student loan defaults across all higher

education sectors. It is also true that 64 percent of the students at

for-profit colleges are low-income minority students. Since these

students are over-represented at for-profit schools, they make up

the majority of the default rates caused by for-profit institutions.

Now, Dr. Carnevale, some for-profit colleges have argued that

their high default rate is due to the fact that they disproportionately serve low-income minority students who are more likely to

have financial stresses, and there is an assertion that that is the

reason why you end up with so many defaults. But I am just wondering if a more accurate description of defaults is that low-income

minority students at these for-profit colleges are more likely to default because for-profit colleges have tuition costs that are, in some

instances, eight times greater than nonprofit public colleges and

thereby put 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 would like your response to that.

Mr. CARNEVALE. 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 is a disproportionate affect

on minorities and low-income students. But when you run statistical tests to figure out what the cause is, what comes through very

clearly, and, again, it surprised me, was that the cost and the low

wage rate is the principal determinant of default. There does seem

to be, in some ways, when data——
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Mr. KUCINICH. You want to explain that? When you say cost and

the low wage rate, what do you mean?

Mr. CARNEVALE. That is, the reason people aren’t paying the

money back is they aren’t 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, the

fact that people don’t repay is because they can’t repay, and——

Mr. KUCINICH. But let’s look at another variable here, which is

a dependent variable, because when you look at the fact of the cost

that nonprofit colleges have for an education, there is multiples of

that cost, as opposed to other colleges. Wouldn’t you agree with

that?

Mr. CARNEVALE. Oh, sure. But one of the things that——

Mr. KUCINICH. You may not making enough money, but the

mountain you have to climb of debt is much larger if you are going

to a for-profit college.

Mr. CARNEVALE. Yes. 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.

Mr. KUCINICH. 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.

Mr CARNEVALE. Yes. This is part of this whole discussion that

really is sort of a couple horizons away. We are talking about, in

the end, in the short haul, whether the programs are worth it. But

then there is 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 in a community college will end up costing you eight grand or nine grand, and a forprofit college cost you multiples of that. Should the government be

concerned about the cost differential? That really doesn’t come up

much in this debate.

Mr. KUCINICH. Well, it is coming up now.

Mr. CARNEVALE. Yes, you have brought it up.

Mr. KUCINICH. And I think that this committee is the proper

forum for us to determine whether or not the low-income minority

students who are experiencing these high rate of defaults are in a

situation where they are boxed in by the extraordinary cost at forprofit colleges, because when you are coming from an inner city

background, that is 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 are in debt for the next 10, 15 years of their life.

But the default rate, how do we deal with that?

I want to thank the Chair for her indulgence in giving me some

extra time here. Thanks.

Ms. FOXX. Thank you, Mr. Kucinich.

Mr. Petri.

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 questions of Ms. Carpenter. First, I wondered if

I could give you an opportunity if you had any reaction to the
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points made by your fellow panelists, I would be interested in hearing them.

Ms. CARPENTER. Thank you very much, Congressman Petri. I do

have some impressions. As a layperson, a parent, a graduate, clearly, I am thrilled that there is more public discourse on the topic

of educational reform as a whole. I think it is 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 industrial-aged society, of a more nationally oriented business economy to one that is far more global, more technologically advanced,

clearly, we are 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 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 is before us for the gainful employment regulation. I am not as well informed as others on the panel who have

given testimony, but clearly they have important input for the

panel.

Mr. PETRI. When we met and you participated in a little different

panel in Madison, WI, you indicated that probably because of 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 high tech areas, your company was working computer programming and the like, you said people—it was sort of a cry from the

heart, if I remember, that people better start waking up as to what

is really going on and not be too self-indulgent and assume that we

will just continue in the future as it has been in the past. I wonder

if you could expand that.

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 are dealing with young people

who are looking for jobs, doing essentially the same thing but

whether they are from India or China or Africa or Europe. What

is your perspective on how well we are doing or whether that assessment is accurate, that we are a little self-indulgent here?

Ms. CARPENTER. There are certain skill sets that are in severe

shortage within the tech sector in which I work, so, yes, we do

work with people in multiple countries in providing the research

and development work that is 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 are at in the development cycle.
61

Many of these individuals are working for an American corporation

speaking in a second language, English is our predominant language of the business, layered on top of the very technical skills

they have acquired.

It is 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

skill set 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 in providing the curriculum and programs that are adept to train our

work force and still lead the Nation in our economic and workforce

development.

Thank you.

Ms. FOXX. Thank you, Mr. Petri.

Mr. Cummings.

Mr. CUMMINGS. Thank you very much.

I would like 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 are very proud of you

and what you have accomplished. You are not the person who we

are most concerned about because you have done well. It is the

ones that don’t make it. There is a description in the Bible, Jeremiah 15:9, that says, ‘‘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 we are concerned about. Their sun

set while it is still day.

On that note, Mr. Carnevale, when I look, it says both the Senate Health Committee and the Education Trust have reported that

for-profit colleges often have tuition rates much higher than those

of local colleges. These for-profit tuitions can be as much as five

times that of local community or 4-year public colleges. If a student

chose to attend Berkeley, Dr. Cortes, a for-profit institution, to obtain a 2-year Associate degree, it would cost her about $41,400 in

tuition fees. However, if that same student chose to go to the City

University of New York Community College in Manhattan, it

would cost her $6,496 over the 2-year period for the same degree.

I want to go to you, Dr. Cortes, then I want to come back to you,

Dr. Carnevale. Dr. Cortes, what justifies Berkeley’s tuition costing

nearly $35,000 more than a public community college?

Mr. CORTES. 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 requirement for graduation, the ability to be placed in the job, faculty, as I said earlier, that are faculty doctorally trained, the ability

to have small groups of students working together in order to engage in their graduation. But more important I think is the ability

for institutions like ours in the private sector is about capacity. It

is really to look at what President Obama has indicated that——

Mr. CUMMINGS. And what do you do for retention? Do you use

any of that money that you make for retention?
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Mr. CORTES. Absolutely. We invest over $37 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——

Mr. CUMMINGS. But is that what most of these schools do?

Mr. CORTES. Well, I can only speak for my school.

Mr. CUMMINGS. Right. And that is part of the problem. I understand that and I appreciate that.

Mr. CORTES. Sure.

Mr. CUMMINGS. But, Dr. Cortes, you describe much of your student population as being at-risk, is that right?

Mr. CORTES. Absolutely. The majority of our students need significant remedial work. We instituted, for instance, this coming

year, a bridge program that will allow students to take courses for

a period of about 5 weeks. We don’t charge any tuition, it is almost

like a trial period. We allow the students to make sure that they

don’t get into loans, that they are not paying tuition.

Mr. CUMMINGS. But 51 percent of your students take on riskier

loans, do they not?

Mr. CORTES. I am sorry?

Mr. CUMMINGS. Fifty-one percent of your students take on riskier

loans, is that not correct?

Mr. CORTES. Well, I don’t know if they are riskier; they take

loans. But the difference between what they cannot afford between

Federal and State aid and the $37 million that we give, that is

what the students need to——

Mr. CUMMINGS. Dr. Cortes, you understand what I am saying,

don’t you?

Mr. CORTES. Sure I do.

Mr. CUMMINGS. 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?

Mr. CORTES. I understand that.

Mr. CUMMINGS. And there are a whole lot of them. So I hear people talk about minority students and how they feel so happy about

all these opportunities, but for every one that graduates there are

seven or eight that have fallen by the wayside, in many instances

never to return to college. Never. That is criminal. Criminal.

Mr. CORTES. Absolutely. I am a product of a public school New

York City education and I am a product of a community college, so

I can speak from real life experience. I do believe that what we do

in our sector, we take students who are so much at risk, we are

able to get students to a point of graduation.

I will give you an example. In the great city of Newark, New Jersey, where the high school dropout rates are over 50 percent, if we

can get four students out of ten to graduate from that great city

of Newark, we are doing a tremendous service to the city of Newark because those four students, without Berkeley in that vicinity,

in that local area, will not be going to college because they cannot
63

go to a community college, they are not going to the private institutions or the public because of capacity.

Mr. CUMMINGS. Thank you, Madam Chair. And the other six are

left in debt.

Mr. CORTES. No, they are not.

Mr. CUMMINGS. Well, what happens with them?

Mr. CORTES. They are not. They either—they did not continue.

They have to go back to work. Many of them have to exist by working.

Mr. CUMMINGS. So the debt is extinguished?

Mr. CORTES. 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 are able to come back and return and finish their degree

if they are able to come back.

Mr. CUMMINGS. Thank you, Madam Chair.

Ms. FOXX. Thank you, Mr. Cummings.

Mr. Meehan.

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 am struggling with the

issue here in which we are treating the for-profit institutions in

one way and we aren’t really analyzing the same effect in the notfor-profit 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. So if we are

going to use a standard, I am struggling with the regulation. We

have now come up with rules and we are going to determine, we

are going to hold people accountable to a standard.

Mr. Carnevale, I know you have discussed this a little bit and

tried to look at this issue. Is it fair for us to hold the not-for-profit

institutions in a different category than the for-profit if we are

making these analyses on a year-by-year basis, first, and then, second, a lot of kids come out, they struggle for a year or two, then

they get that first job. Should we be doing this the next year or

should we be waiting 3 or 4 years to make this calculation?

Mr. CARNEVALE. The regulation essentially gives the institutions

4 years, so it extends over a fairly lengthy period of time, and the

calculation in terms of loan repayment allows 10 years for AA and

some college, 15 for a BA, and 20 for selected programs like dental

programs and so on. So in that sense it is not, 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 is only 2 percent

of the total, it is capped at 5. This is essentially a device for moving

programs toward higher labor market value, is in the end what it

is.

The other point 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 a huge debt, first of all, whether you

are default or not, you are 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
64

to pay it back. So it matters which program it was and then the

other difficulty for the students is you only get one bite at the

apple, because you can’t go back and get more debt to go to school.

Mr. MEEHAN. Mr. Alford, would you respond to this, because I

think I have experienced, as I have visited institutions across the

range, from community colleges to my universities, too, some of the

schools and the for-profit schools. Many of the students in the forprofit schools are nontraditional students.

In fact, this is one of the real opportunities they have where

somebody is reaching back to them and saying I am going to give

you a chance; I am going to give you a skill that you can then take

and find a way to gain employment in a very difficult market. And

what I am concerned about is the potential that this higher standard may lead to a situation where those kinds of schools will say,

fine, we are going to now stop reaching back to that student who

is the least traditional, who is the toughest reach, because that is

the most likely to fail; let’s just go find the safe middle.

Mr. ALFORD. Cherry pick.

Mr. MEEHAN. So would you please tell me what your perspective

is on that?

Mr. ALFORD. Yes. I think it would have a devastating consequence on the people I represent or businesses who try to hire

people from these communities. There are two big problems with

my constituents. One is management trainees. Our most successful

businesses scour this Nation looking for good educated Black talent. Second is labor, the lower level; drugs. Can’t pass a drug test.

And that is a requirement for any insurance policy. So those are

the two major problems.

And one thing that is unfair too, sir, private for-profit schools

have a higher tuition because they don’t have Uncle Sam and the

State government and local governments giving them subsidies,

tax-funded money. It is 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 would probably be more expensive than the

for-profit schools. Playing with numbers.

Mr. MEEHAN. Thank you for making that point, Mr. Alford.

Madam Chairman, my time has expired. Thank you.

Ms. FOXX. Thank you, Mr. Meehan.

Mr. Braley.

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 is a forprofit college, a nonprofit college, a private college, or a public institution.

My nephew has attended a for-profit 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 for-profit 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 for-profit colleges are providing the type of re-
65

sults for the investment we are 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 63.4 percent of Associate degree students at publicly traded for-public schools and 58

percent 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 1 year, are left with substantial debt, and

that a 4-month stay at a for-profit school can leave a student with

$4,000 to $11,000 in debt.

Now, these are the facts. Even though for-profit students make

up only 10 percent of all higher education students, the schools receive 25 percent of Federal student aid. Even more alarming is the

fact I mentioned earlier, that 48 percent of all student loan defaults

come from students who attend for-profit colleges, and in many

States that rate is greater than 50 percent.

Mr. Carnevale, are you familiar with the data that I just cited?

Do you believe that the sector that we are 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?

Mr. CARNEVALE. I think the evidence that is, when you get

passed the anecdotal evidence, and there is anecdotal evidence on

both sides, that is, there are wonderful stories, we heard Ms. Carpenter today, and there are 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 education program that will get you a job at a sufficient wage to pay back the

cost, in this case there is a very substantial share of programs that

simply don’t do that, and those are highly concentrated in for-profit

institutions at the certificate and AA level, frankly.

Mr. BRALEY. Well, and 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 1,700

recruiters working for those schools and one placement officer. Do

you find that troubling?

Mr. CARNEVALE. I know from relationships with particular forprofit institutions that naturally where they see growth in demand,

i.e., when the military benefits went up in the past few years, there

was a huge increase in recruiters for military personnel to move to

for-profit 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. 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 college on the GI bill,

so did my two brothers. They are not included in this regulation,

and one of the dangers in this is if, because it is a private market

oriented institution, it will take its profits where it can. That is the

way it is supposed to work. So if we shut down, using the current
66

regulation, a lot of the expansion in these programs that don’t pay

among the regular population, there is a risk here that there will

be a shift to the military, and personally I have a problem with

that.

Mr. BRALEY. Thank you.

Ms. Carpenter, you mentioned you worked at Trek Bicycle Co. in

Waterloo, WI, and I am from Waterloo, Iowa. You also mentioned

the Decorah connection with Luther College. One of the things that

is concerning to me is that the very school you attended and obviously got a great education, you are doing great things and I commend you for that, but Herzing had a dropout rate of 53 percent

for Associate degree students and 48 percent of Bachelor degrees

within the first year. Were you aware of that phenomena while you

were a student on campus, and what would be your explanation for

why those dropout rates were so high?

Ms. CARPENTER. On my campus in Madison, WI 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——

Mr. BRALEY. These were Herzing’s own figures provided to the

Senate Health Committee. So I am just asking you whether that

was something that you were aware of when you were—obviously

it was not.

Ms. CARPENTER. No, not within my degree program and for the

group of students that I graduated with. That was not my experience.

Mr. BRALEY. And one of the other disturbing things about

Herzing’s Web site is there is 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 at 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 costs of attending

Herzing as opposed to some other school?

Ms. CARPENTER. 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 Associate’s degree within a year and a half

time, as opposed to the traditional 2 years, based on block programming, based on the availability of course work.

So I think that Herzing is doing a very intelligent job of allowing

themselves the opportunity on a one-on-one basis to sit down with

prospective students and explain how their program is differentiated, how they are different, 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 is an advantage, as I mentioned, that
67

Herzing gives the opportunity to encourage their students to come

in and talk about that one-on-one and not rely on face value information on a Web site that doesn’t tell the whole story.

Mr. BRALEY. Thank you.

Ms. FOXX. Ms. Carpenter, thank you very much.

Mr. Braley, you get the prize for going over the farthest.

Mrs. Biggert.

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 will start with Dr. Cortes. I have gone out to visit

several of the schools and gotten some information, but when this

first came up we were talking about why doesn’t disclosure work;

why, if you want to know how a program works in a school, for example, one of the schools that I went to, and I don’t have the numbers exactly, but they were all over 90 percent, and this was their

school of nursing, and 92 percent of all those enrolled graduated,

96 percent of them passed the certification test, and 99 to 100 percent of those that had passed the certification found jobs.

Now, this seems to me that this then gives a student or a consumer choice on where they want to go in looking at the programs,

rather than looking at the debt to income in determining whether

there is value to students. Is this something that you would see

that would work or are there other things besides the way that the

gainful employment has been described, and is there something

else that you think would work?

Mr. CORTES. Thank you, Madam Biggert. I do agree, I think it

is all about, to a certain extent, consumer protection that we are

looking at. If you look at Berkeley College today on our Web site,

not only you will 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, 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 tuitions 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 make——

Mrs. BIGGERT. 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. The colleges had

a rapport with these businesses. Could you address that?

Mr. CORTES. 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, 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 up to date, that we look at the
68

changes in the global economy to make sure that we are training

our students to get into the marketplace.

But more important, we are 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 was only one career

placement professional at some institutions. We have over 20 career placement professionals making sure that our students from

the beginning, from their freshman experience all the way up to

their senior year, get the level of advice and counsel to make

sure——

Mrs. BIGGERT. Thank you. Now I would just like to ask, before

my time, Mr. Alford, would you comment on this?

Mr. ALFORD. Yes, ma’am. I think our biggest concern, National

Black Chamber of Commerce, is the whole process of this and the

singling out of for-profit schools. In a nutshell, what we want is a

fair and transparent process. As I learned in the military, leadership 101 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 is quite clear.

Community colleges have a lesser graduation rate than for-profit

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 it is not the process that I think

makes this country great.

Mrs. BIGGERT. Thank you.

Mr. ALFORD. I hope I answered your——

Mrs. BIGGERT. I agree with you.

I yield back.

Ms. FOXX. Thank you very much.

Mr. Miller.

Mr. MILLER. Thank you very much for holding this hearing,

Madam Chair, and I want to thank the witnesses for testifying.

Mr. Carnevale, I think you sort of set the stage when you talked

about the changes in the economy and in the workplace and in the

requirements that have taken, both up and down, in terms of

where you would get your degree and certificates and the rest of

that, and that is why many of us have been very strong supporters

of the for-profit sector in higher education and believe that they do

fill a need for many students, certainly adult students as they

originally start off, people who have to work full-time 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 sort of like the old saying, friends don’t let friends drive

drunk, I have a lot of concern about a sector that I have been an

advocate for for a very long time in my 37 years on the committee,

that we have 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 for-profit.

It doesn’t only apply to for-profits. Of the 55,000 programs, as

Mr. Hinojosa pointed out, 37,000 are in public institutions and

5,000 are for non-profit and 13,000 for-profit. And for the public institutions, they are there because this is the first President that
69

raised issues about the completion rates of 2-year institutions,

which are abysmal. They are outrageous. But the suggestion that

somehow this is just targeted for for-profit. I was one of those who

went to the administration and said that their original ruling was

wrong, but the point is this is the question.

Then members of the panel suggested that this high standard

will force people to leave the field or to cut out nontraditional students. This high standard is that 35 percent 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 70 percent of my customers

are going to default? I don’t think you would get a loan from the

bank for your used car business. But if you are in this business,

70 percent of your customers might default and you are okay for

the taxpayer to put up the money. And you only have to meet that

in 1 out of 3 years; 1 out of 3 years. And there is no penalty until

you really screw up. And this is a burden that apparently this industry just can’t suffer.

We are talking about maybe 2 percent of the programs that are

going to be implicated here, and I suggest, as I had suggested to

the industry, you might want to look internally and think that you

have some outliers here that you should have dealt with within the

various associations here. This is not whether we support for-profit

schools or we don’t, because all of us have had experiences in our

own community, in our families, of their successes. This is about

what is going on with respect to the taxpayer.

Mr. Alford, you asked about what is going on with the Department and how they came about this rule. I would just say,

anecdotally, we have an investigation going on about what happened with short sellers now with the Inspector General’s Office.

I would say if 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 is going on with an institution that says

that they are going to double the volume of their private student

loans, as Corinthian College did, to $240 million and they expect

55 percent of their private loan dollars to end up in default. And

their default rate on Federal student loans doubled between 2005

and 2009 to 21 percent, and they recently told their investors that

they are going to manage their default rate by pushing borrowers

most likely to default into deferments, forbearance, and incomebased repayment. I want to know what is going on there.

I want to know when Bridgepoint Education buys a college and

takes the amount of money spent on education from $5,000 to $700

per student, I know there are great savings on the Internet, but

at the end of that process 64 percent of their Bachelor degree and

85 percent of their Associate degree students are withdrawing from

that institution.

What is going on? Because when they withdraw they have already given over part of their Pell, they have already given over

part of their student loans; their accounts are running down. I

want to know what is going on when that same institution then,
70

which gets 86 percent of its money from the Federal taxpayers, has

30 percent profit and 30 percent on marketing.

I want to know what is going on at the ATI Career Institute in

Texas when the State work board found that 300 of their employee

graduates had no jobs at all and 427 graduates were not employed

as the Institute reported they were, and the State cut off all of

their WIA funding, but they are still eligible for Pell Grants and

for student loans. I want to know what is 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

37 and 31 percent. I want to know what is going on.

It is not a question of whether I support private schools, for-profit 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 is why we

have these inquiries and that is 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

is a minimum, that is 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. We

also want to ask what is going on when Indiana, Illinois, and California and Florida have joined to look at for-profit institutions

there. Indiana’s attorney general is asking questions about institutions; Florida is investigating eight institutions who violated their

unfair business practices; Iowa, student default rates; Kentucky,

job placement recruitment practices; Massachusetts, recruitment

practices and student loan practices.

Ms. FOXX. Mr. Miller, as you know——

Mr. MILLER. There is an obligation——

Ms. FOXX. As you know,——

Mr. MILLER [continuing]. Very generous with the time and I appreciate it.

Ms. FOXX [continuing]. You can put whatever your comments are

in the record.

Dr. Roe.

Mr. MILLER. I have seen the record; it doesn’t do so well.

Mr. ROE. Thank you.

Mr. MILLER. But I appreciate the offer.

Mr. ROE. I think I won’t give a speech; I will try to ask some

questions.

I spent 24 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 for-profit. Dr. Carnevale makes a great

point: 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 is too expensive to go to school,

I couldn’t argue with that more. I served as a foundation board

president at 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, a great university,

just before I came here. Forty-one thousand dollars is the tuition
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and $58,000 to go there for a year. If you get a job teaching school

somewhere after that is over, you can never pay that back. If you

are a police officer in Johnson City, TN, where I am from, you

could 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 $212,000 in student loans and he is starting his residency and he will make about $30,000 a year. Just the

interest on his student loan is $1,200 a month, just the interest.

He didn’t have anything left to eat after that. So it is not just forprofit universities; it is 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 is 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 multi-million dollar buildings, as Mr. Alford pointed

out, that is not amortized into that cost. So it is in the private tuition, it is amortized in the cost. Could you point that out? You

made a great point a minute ago, that you are not really comparing

apples to apples. Do you agree with that?

Mr. ALFORD. Absolutely, sir.

Mr. ROE. I think that——

Mr. ALFORD. I envision Ohio State, my alma mater, University

of Wisconsin, just humongous, all paid for by taxpayers.

Mr. ROE. And Ms. Carpenter made a point of some students, and

many of them are not traditional students, in a much smaller classroom setting. Your average freshman class at Ohio State or University of Tennessee in freshman English is 200 to 500 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 going to 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 is what I did when

I went. My choice was I didn’t have the bus money out of town,

so I knew where I was going to go to school, but it was an informed

choice. And I think that is what you did, you made a very informed

choice about what your needs were. Obviously, you were not an 18-

year-old, as I was, 17, 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 in our own State of Tennessee, where you

get a Hope Scholarship to go to college, to junior college, to community college, or to a 4-year school, 50 percent of our students in 2

years don’t qualify after that, they lose their Hope Scholarship because they are not succeeding academically.

I think if we are going to do this gainful employment rule, everybody should have to do the gainful employment rule. If you are

going to set standards, and there is 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

the same rules. If you are going to do that, then private schools

should, public schools should, and for-profit schools should.
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Dr. Cortes, would you comment on that?

Mr. CORTES. Yes, I do agree with you, Congressman. As you

know, not all for-profit institutions are alike. Do you know, for example, that there are only 94 regionally accredited for-profit institutions in this country and Puerto Rico? That is an example of the

differences. Berkeley College is a bricks 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 our students—most people assume that

for-profits are all online colleges. They are not. Colleges like ours

are 80 years changing lives in the States of New York and New

Jersey, and there are many family owned businesses that are forprofit 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 $223 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 and 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 see the quality of many

of our institutions, and they see the ability to get degrees that they

cannot have in other places. In the State of New Jersey, for example, there are only two institutions that offer fashion merchandise

degrees and we are one of them. So they can’t go to the public institutions because they are full; then they come to us and we do a

very good job.

Ms. FOXX. Thank you.

Mr. ROE. 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 have been a great panel.

I yield back.

Ms. FOXX. Thank you, Dr. Roe.

Mr. Davis.

Mr. DAVIS OF ILLINOIS. Thank you very much, Madam Chairman.

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 for-profit

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. So I

love every opportunity that we can find for access to higher education for our citizens.
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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 for

over a million students by approximately $845 per student. Some

Republicans have recently described Pell Grants disparagingly, as

a welfare handout, and highlighted it as in need of substantial

funding cut. How important are Pell Grants to your students? And

would a loss or reduction in Pell Grants harm access to higher education for your students and those who attend your education?

Mr. CORTES. Thank you for the question, Congressman Davis.

Absolutely, I think the loss of any funds for the students that we

serve is going to impact their ability to access and to persist in college graduation. I will give you an example. Many of our students

sometimes, in the middle of the year, come to us for additional

funding that we can provide as institutional aid in order to pay

their books, in order to get transportation to school, in order for

them to pay their rent in their homes. We are talking about students, which I mentioned earlier, with an average family income of

somewhere around $25,000.

Mr. DAVIS OF ILLINOIS. So it would be harmful to your students.

Mr. CORTES. Very harmful, extremely harmful.

Mr. DAVIS OF ILLINOIS. Thank you. Let me move on because my

time is about to expire.

Mr. Alford, let me ask you. I have 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.

Mr. ALFORD. Thank you, sir.

Mr. DAVIS OF ILLINOIS. I was struck by your testimony, though,

at one point, where you suggest that for-profit schools are the ones

that truly are serving low income and minority students. So I ask

what about the HBCUs, what about the HSIs, what about the

PBIs? What about these minority-serving institutions that are public, are not for-profit and do a great job?

Mr. ALFORD. Yes, and I support them, and they are at capacity.

University of Wisconsin, when I graduated in 1970, its enrollment

was 3 percent Black. Today, 2011, its enrollment is 3 percent

Black. University of California system, each semester they have

fewer and fewer Blacks matriculating at those schools. So HBCUs,

yes, sir, but they are a small percentage of the potential we have

to educate our people. The largest HBCU, Howard University is

11,000. You get from Southern at 10,000, Texas Southern at

10,000, then you are down to four digits in any of those schools.

They couldn’t house a population of 40 million whose children need

a higher education.

Mr. DAVIS OF ILLINOIS. 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.

Mr. ALFORD. Thank you, sir, as always.
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Ms. FOXX. Thank you, Mr. Davis.

Now I would like to recognize Mr. Towns.

Mr. TOWNS. Thank you very much, Madam Chair. Let me also

thank you for holding this hearing. I 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 has been a long day and it has been

a tough day for many of us in terms of conflicts, but the point is

that I am happy that you are here.

Let me just say, as I listen to some of my colleagues, I am 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 because of the fact there are just

no jobs, and I think that sometimes when we look at things 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 that we discuss in terms of gainful employment, and then we sort of ignore

the fact that there is 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, balanced 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 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 are some other areas that we need to look into.

When you look at some of these athletic programs, and it is

known that there was one university that went for 10 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, across the board, rather than

just sort of looking at one thing and picking on it and staying with

it.

I am also not certain that the process which the Department

came to the rule was entirely fair and balanced. I am not convinced

of that. I heard some of my colleagues saying it was fair and balanced. I am 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? We won’t be able

to say it. I don’t see it until we get that information. So I am just

sort of cautioning my colleagues.

Mr. Alford, let me just sort of raise this with you very quickly.

I share your concerns regarding the disproportionate impact that

this regulation 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 have heard all of

that, and low retention rates. However, we need to look at that also
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with the economic situation. If you are in school and then you have

an economic crisis in the family, what are you going to do? You are

going to drop out.

So I think that sometimes we just look at these things and we

sort of look 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 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?

Mr. ALFORD. I think we need to go back and review this in a fair,

transparent process, one that is open. I think when a short seller

writes an article, subprime goes to college, and he is talking about

the gainful employment rule, how they are going to make this happen and they are going to make big money, I think something is

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.

Mr. TOWNS. My time has run out, Madam Chair, and I would

like to just ask unanimous consent that the statement by Mr. Alcee

Hastings from the State of Florida be included in the record.

Ms. FOXX. Without objection. Thank you, Mr. Towns.

Mr. TOWNS. Yield back.

[The information referred to follows:]
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Ms. FOXX. Mr. Bishop.

Mr. BISHOP. Thank you, Madam Chair. I appreciate you 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 am very interested in.

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 is 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 have absolutely nothing to fear from this regulation. Nothing. So congratulations. I am 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 am

glad you are on your path to the American dream.

I want to pick up on where Mr. Miller’s questioning was. This

regulation, in my view, and I was one who urged 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. I won’t engage you, Mr. Alford, on

whether or not the process was transparent, but I think reviewing

90,000 comments, I think that is something that is not to be taken

lightly.

But here is the environment in which we are in. This regulation

says that if 35 percent of an institution’s former students in years

3 and 4 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 is the context that we are 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 $3,000, from $5,550 to $3,000. If we don’t act, we will

have no Perkins Loan Program come 2014. H.R. 1, which, frankly,

thankfully, will never take on the force of law, eliminated SEOG.

So here is the Republican vision of Title IV, Student Financial Aid

Programs: no Perkins, no SEOG, a $3,000 Pell Grant maximum,

and work study at its current level. That is the Republican vision;

that is what they voted for.

Now, I ask you, in that context how long do you think the Federal Government will be willing to guarantee $90 billion a year of

student loans if in years 3 and 4 we consider it onerous, impossible

to achieve of a 65 percent default rate in years 3 and 4? I would

suggest to you that the underpinning of the finances of the for-profit sector and, frankly, every other sector, which is the guaranteed

student loan program, we are not going to be able to count on that
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guaranteed student loan program if we are looking at that level of

default. And yet that is in fact what this regulation contemplates.

So I would urge anyone who is 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 am a former college

administrator; I am a former financial aid director. I have spent

my entire adult life dealing with the issues of access and affordability; they mean a great deal to me.

And I am very fearful that if we are not careful, careful stewards

of taxpayer money, then that money is going to go away. 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 would ask you to look at it in

that context.

Let me then go—I am sorry, my time has expired, Madam Chair,

and I appreciate your indulgence. Thank you.

Ms. FOXX. 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 2006 the amount spent on

Pell Grants was $12.4 billion, and the amount scheduled to be

spent on Pell Grants for 2012 is $49 billion.

Mr. BISHOP. Would the gentlelady yield?

Ms. FOXX. Let me go on to the next—I am just putting out a fact

there to you.

Mr. BISHOP. I was going to put that fact in context.

Ms. FOXX. Okay. If I could, let me recognize Congresswoman

Speier. I would like to finish this up no later than 2, if at all possible.

Ms. SPEIER. 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 have 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 for-profit colleges at 90 percent. Now,

mind you, if we are funding you at 90 percent, you are government

schools. The University of California is a public institution and the

funding from the State is less than 20 percent.

But you are for-profit schools and 90 percent 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, 29 percent of their spending in 2010 was

for marketing and 30 percent was for profit. So only 40 percent 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
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by the government; and if you can’t make these very modest standards, then you shouldn’t be in business.

Now, here is 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 low-income 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 self-esteem, vocational rehabilitation, experienced a recent

death, physically and mentally abused, drug rehab, fired or laid off.

That is the target populations 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 is going to happen. We are

going to have some outliers, I am not suggesting that you are, but

some outliers going out and targeting our veterans. And we have

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, was insured, 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. 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 in disgust with the ways

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 by these for-profits to focus on veterans because they are not going to be subject to these modest

standards that are being suggested by the Department of Education?

Mr. CARNEVALE. Well, I don’t want to make this a character assault on people who run these institutions, but I used to run forprofit 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 is the outcome, unless we start judging these things by the outcome. It is good that for-profits chase

after abused women. If they serve them, that is fine. And that is

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

is going to be no more equity, because we can’t afford it.

Ms. SPEIER. Thank you, Mr. Carnevale. I might also point out

that the University of Phoenix received over $84 million in post-GI

bill benefits and it increased its recruiters to the military from 91

in 2003 to over 452. So I am putting word out to all the for-profits.

I am going to watch what happens to the profiles of veterans in

your programs because we need to protect them, and we are not

going to have them waste their great GI bill benefits on institutions that don’t deliver.

I yield back.
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Ms. FOXX. Thank you, Ms. Speier, and you, of course, can put

anything in the record that you would like.

Ms. Waters.

Ms. WATERS. Thank you very much, Madam Chair. I am 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 is why I spent so many years

on this.

I do believe that this potential scandal is going to 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 are

doing for minorities and how, if you are not offering opportunities

for minorities, they are not going to 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 for-profit institutions represent 12 percent of all higher education students, 26 percent of all student loans, and 46 percent 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 going to harm

the private school industry? Mr. Alford.

Mr. ALFORD. I have a lot of relatives that have grown up in your

district and those who received education, many from for-profit

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.

Ms. WATERS. 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 in your family.

Mr. ALFORD. It was real, ma’am. It is real.

Ms. WATERS. 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 has been a lot of talk about the rulemaking process.

I would like to submit the list of program integrity negotiators for
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the record. The negotiated rulemaking included several different

types of stakeholders, all of whom stood to be impacted by the rule.

The following communities of interest were represented: students, consumer advocacy organizations, 2-year public institutions,

4-year public institutions, private nonprofit institutions, private

for-profit institutions, college presidents, admissions officers, business officers, financial aid administrators, regional accreditators,

national accreditors, work force development officers, lending community representatives, test publishers, and State higher education

officials.

I would like to submit that to the record.

Ms. FOXX. Without objection, Ms. Waters.

[The information referred to follows:]
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Ms. FOXX. And I will point out to you that your time is up.

Ms. WATERS. Thank you very much. I appreciate the opportunity.

I am sorry I was not, Madam Chair, to get into all of this discussion about short-selling, because I really do want to reveal something about what has taken place in that whole area.

I yield back the balance of my time.

Ms. FOXX. 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. I don’t know if you are going to try to

get away on a Friday afternoon, but we do want to thank you very

much for coming and hope you will return sometime under a little

more relaxed situation.

With that, the committee stands adjourned.

[Whereupon, at 1:50 p.m., the subcommittees were adjourned.]

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