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U.S. DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

PUBLIC REGIONAL HEARING ON

NEGOTIATED RULEMAKING

Monday, June 22, 2009

9:00 a.m. – 4:00 p.m.

Community College of Philadelphia

Center for Business & Industry

C2-28 Lecture Room

18th & Callowhill Streets

Philadelphia, PA
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1 P R O C E E D I N G S

2

3 MR. MADZELAN: Good morning, everyone. My 

4 name is Dan Madzelan. I am the currently Acting 

5 Assistant Secretary for Postsecondary Education in 

6 the Department of Education. I want to welcome 

7 everyone here today for this hearing where we are 

8 here to get your ideas around this next round of 

9 Negotiated Rulemaking.

10 Before I go any further, I want to 

11 introduce my colleagues here at the table. My 

12 immediate left, also from the Office of 

13 Postsecondary Education, Carney McCullough, and far 

14 left, from our Office of General Counsel, Steve 

15 Finley.

16 So, today we have on our end a very simple 

17 protocol: you talk; we listen. And this is the 

18 start of our Negotiated Rulemaking process. I 

19 recognize a number of people in the audience today, 

20 so I know you are as familiar with this as we are 

21 at this end of the room. But basically we have a 

22 statutory requirement that when we regulate in the 

23 HEA Title IV Student Aid Programs, that we engage 

24 in a process of Negotiated Rulemaking to develop 
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1 the proposed rule. Basically, that's where we sit 

2 at a table with representatives of parties affected 

3 by our regulations--affected by and interested in 

4 our regulations.

5 So, the first step in that process is the 

6 convening of public hearings such as this one here 

7 today. This is the third that we--third and final 

8 for this round of rulemaking. Last week we were in 

9 Denver and Little Rock, and today, of course, in 

10 Philadelphia. So, we did publish a notice in the 

11 Federal Register, not only announcing this round of 

12 rulemaking, but also the topic areas that we have 

13 indicated we think are ripe for rulemaking at this 

14 time.

15 Now, backing up just slightly, we are 

16 still in the midst or coming down to the middle of, 

17 I guess, the prior rulemaking--Negotiated 

18 Rulemaking session. We started this past winter 

19 with five teams implementing provisions of the 

20 Higher Education Opportunity Act--last summer's 

21 reauthorization of the Higher Education Act. And 

22 so we went through a process very similar to this 

23 with public hearings and then our negotiated 

24 sessions which we finished up a month or two ago. 
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1 And so now we are in the process of getting our 

2 Notice of Proposed Rulemaking published, five of 

3 those, which I think we are pretty much on schedule 

4 to have those accomplished by around July 1st. 

5 That might slip slightly, but again, we have to 

6 have final rules in place by November 1st.

7 So, again, we're still continuing an 

8 existing process as we kick off this new process. 

9 Well, why are we kicking off this new process or a 

10 second round now? Well, when we looked at the 

11 Higher Education Act and what the Congress had 

12 passed last summer, we basically divided the 

13 amendments into two parts--two buckets--Column A 

14 and Column B. Column A being the items that we 

15 needed to do right away to get implemented quickly, 

16 and Column B was those items that could wait 

17 perhaps a little bit. And we've indicated in the 

18 notice at least some of those Column B items. The 

19 provisions related largely to foreign institutions 

20 whose students participate in our student loan 

21 programs.

22 Of course, a big change in Washington over 

23 the fall and winter, so with a new team in place, 

24 with addition to Column B, we got a Column C. And 
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1 so some additional items that we've identified back 

2 at the Department and again as we've published in 

3 the notice. 

4 And these--if you want to put a single 

5 label on it, it's really about program integrity. 

6 So, you've seen--and some of these actually bled 

7 out a little bit from some of the discussions that 

8 we had in the round of Negotiated Rulemaking that 

9 we just ended. So, a couple around, you know, 

10 satisfactory academic progress and, you know, 

11 definition of a credit hour for purposes of the 

12 Pell Grant--the two Pell--year-round Pell Grant. 

13 You know, we had that notion of acceleration, 

14 accelerating your program of study for eligibility 

15 for the two Pell in one year. So, again, that kind 

16 of touches satisfactory academic progress. So, 

17 there's a couple of things that, you know, in 

18 conversation in the last round and some of our own 

19 thinking we thought we might take another look at.

20 A couple of others around state 

21 authorization and of institutions as part of the 

22 eligibility for Title IV programs. And also, 

23 another item in that area within the definition, 

24 you know, gainful employment that, you know, 
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1 eligible institutions need to provide their 

2 students for gainful employment.

3 A couple of other items that have been out 

4 there for a while and we've had some experience now 

5 and maybe take another look at some of our 

6 incentive compensation. You know we developed some 

7 safe harbors in rulemaking several years ago. We 

8 have six or seven years of experience under our 

9 belts now. It's probably not a bad idea to take a 

10 look at how those safe harbors have worked.

11 Also, sort of in the same vein as 

12 something we hadn't looked at in a while are 

13 verification rules, so part of some of our ongoing 

14 efforts around simplification of the financial aid 

15 application process. Possibly, you know, better 

16 use of IRS data, those kinds of things, maybe not a 

17 bad idea to take a look at our verification rules 

18 again.

19 And, lastly, you know, the definition of a 

20 high school diploma for purposes of our student aid 

21 programs. Now, you know, to be eligible--a student 

22 to be eligible for aid programs has to be a high 

23 school graduate or possess the recognized 

24 equivalent, generally GED. Not only have we seen, 
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1 obviously, online education expand in recent years 

2 in the postsecondary area, evidently it's expanding 

3 a bit in the secondary area as well. So, we've had 

4 some questions around, you know, just exactly what 

5 is a high school diploma for purposes of a student 

6 establishing eligibility for Title IV programs.

7 So, again, those are the things that we've 

8 identified. And we are hopeful that you will share 

9 with us your ideas as well. If you want to comment 

10 on what we are proposing, you're welcome. If you 

11 want to suggest to us additional items, we 

12 certainly welcome that as well. Process-wise, we 

13 will take the information we have gotten here 

14 today, as well as at Denver and Little Rock, and 

15 the written comments that we will have received by 

16 the end of the week, and put together--take a 

17 little bit of time back at the office and put 

18 together an initial negotiating agenda. And a 

19 little bit later this summer, we'll publish another 

20 notice in the Federal Register describing what it 

21 is we intend to discuss, to negotiate, as well as 

22 the schedule for the actual negotiating committees.

23 Before I go on any farther I want to 

24 welcome Glenn Cummings, also from the Department, 
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1 our Deputy Assistant Secretary in our Office of 

2 Vocational and Adult Education.

3 The last point I want to make is remember 

4 this is a rulemaking process. We are here to 

5 interpret and implement statute. We are not here 

6 to make statutory changes nor to undue statutory 

7 provisions through the rulemaking process. That's 

8 just something we are not able to do. We are not 

9 legislators here; we are regulators here.

10 So, with that I would offer my colleagues 

11 from the Department an opportunity to offer any 

12 comments they may have.

13 Glenn?

14 MR. CUMMINGS: Thank you, David. I'm 

15 Glenn Cummings, Deputy Assistant Secretary in OVAE,

16 as we call it.

17 I just want to thank David for his 

18 overview and thank you for being here. I think he 

19 has outlined exactly what we need to do today. 

20 We're looking for feedback, we're looking for help, 

21 and we're looking for working within the parameters 

22 of the specified regulation ability that we have. 

23 So, at that point, we're looking forward 

24 to learning ourselves and to making sure that we're 
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1 clear about where many of you stand. And we're 

2 hoping for a very productive couple of days.

3 Thank you.

4 MR. FINLEY: I have nothing to add to that 

5 except that it's a long way from here to a final 

6 regulation, and it's always interesting to look at 

7 a final regulation and walk it backwards and see 

8 its origins from comments at hearings just like 

9 this. So, we're here today to listen and see what 

10 develops from it.

11 MS. McCULLOUGH: I also really have 

12 nothing to add other than I'm looking forward to 

13 hearing your comments about things that we put on 

14 the table and maybe some additional items that you 

15 would like to see on the table.

16 MR. MADZELAN: Okay, with that we'll 

17 begin. Now, you have signed up to speak in 10-

18 minute intervals. It has generally been our 

19 experience that you don't take your full 10 

20 minutes, and also you don't see any, you know, red, 

21 green, and yellow lights up here. It's not that 

22 we're going to time you. But, again, you know, 

23 please limit your remarks to right around 10 

24 minutes. 
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1 And as some of you don't use your full 

2 allotted time, then we'll just kind of speed up the 

3 morning a little bit. We'll just continue to march 

4 through our list of speakers. And we are scheduled 

5 for a 10-minute break right around 10:30. So, 

6 again, we'll see. When we get close to 10:30 we'll 

7 see where we are and maybe take a break a little 

8 bit earlier or a little bit later.

9 So, with that I want to welcome our first 

10 speaker of the morning, Stephen Curtis.

11 MR. CURTIS: Good morning. I'm Steve 

12 Curtis, President of Community College of 

13 Philadelphia.

14 And first, let me welcome you to 

15 Philadelphia and to our college. We're very 

16 pleased, not only to have the opportunity to 

17 testify before you, but also to serve as one of the 

18 locations around the country where you are hosting 

19 these public hearings. So, on behalf of all of us 

20 at the college, welcome.

21 I'm providing written testimony. I'm not 

22 going to read it all. I'm just going to try to 

23 summarize a few points. But what I would like to 

24 do--when I think about the regulatory environment 
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1 at the federal level, I'm aware that it has a very 

2 direct impact on students and, in this case, 

3 students at my own institution. So, I'll preface 

4 my remarks with just a couple of statements about 

5 students because I think that's important to 

6 understand in terms of a couple of the suggestions 

7 I'd like to make.

8 Last year, the Philadelphia Workforce 

9 Investment Board issued a report for our city 

10 called "A Tale of Two Cities." It utilized 

11 substantial research to help establish an agenda 

12 for Philadelphia's economic future. The report 

13 portrayed "a city on the rise"--that's a quote--

14 focused on the prosperity associated with a world15 class city that has world-class educational, 

16 medical, cultural institutions. We have, for 

17 example, one of the highest concentrations of 

18 higher education students in the United States. 

19 But this same report also depicted 

20 Philadelphia as--and I quote again--"a city on the 

21 decline." We have a public school system taken 

22 over by the state; a ranking atop the nation's 10 

23 largest cities in the percentage of people living 

24 in poverty; a labor force participation rate that 
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1 is 96th out of the nation's 100 largest cities; a 

2 college attainment rate that places Philadelphia 

3 92nd among the 100 largest cities.

4 We see Community College of Philadelphia 

5 as a bridge that moves residents from "the city on 

6 decline" to "the city on the rise." With that in 

7 mind, we support an open admission policy, we seek 

8 to keep the cost of higher education affordable, 

9 and we place a premium on student success outcomes. 

10 Our commitment to the twin principles of access and 

11 student success is the reason we have such a strong 

12 interest in the federal government's support of 

13 these same goals and of the regulatory context for 

14 that support.

15 About two-thirds of our students here are 

16 women. The same proportion attend part-time, and 

17 the overwhelming majority of our students are 

18 adults, not the traditional 18- to 20-year-old 

19 college student. We are the largest single point 

20 of entry into higher education anywhere in the 

21 Commonwealth of Pennsylvania for students of color. 

22 Seventy percent of our full-time degree-seeking 

23 students and approximately 60 percent of all 

24 degree-seeking students receive some type of 
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1 financial aid. And the last characteristic I want 

2 to cite: many of our students are the first in 

3 their families to pursue a postsecondary education.

4 With those facts, let me focus on a couple 

5 of things in terms of federal rules. The college 

6 supports most of the federal government's current 

7 regulations in regards to satisfactory academic 

8 progress for students. We appreciate that under 

9 the current regulations, Community College of 

10 Philadelphia is able to establish our own 

11 guidelines for satisfactory academic progress, and 

12 we ensure that our policy meets all minimum federal 

13 statutory and regulatory requirements.

14 Among the minimum federal regulatory 

15 requirements is that an institution is set a 

16 maximum time in which a student is expected to 

17 finish a program of study. For undergraduate 

18 programs, the maximum timeframe cannot exceed 150 

19 percent of the published length of the program 

20 measured in academic years, academic terms, credit 

21 hours attempted, or clock hours completed. 

22 Where the college policy, or reality 

23 perhaps, and federal guidance on the issue of 

24 satisfactory academic progress depart is in 
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1 counting withdrawals. Title IV Rules do not 

2 currently recognize academic or time amnesty in 

3 evaluating a student's eligibility for financial 

4 aid. Every class a student attempts is counted 

5 towards the maximum timeframe of 150 percent of the 

6 college's published length of time needed to 

7 complete the credits to graduate from the program 

8 of study. Even periods in which a student did not 

9 receive Title IV funds must be counted.

10 However, our college believes it is 

11 important to give students a second chance, so our 

12 internal academic policy is to allow students one 

13 application for academic amnesty and one for time 

14 amnesty. We found that a number of our returning 

15 adult students were not college-ready immediately 

16 after graduating from high school, so they withdrew 

17 from college classes they had registered for 

18 without understanding that it might make them 

19 ineligible for financial aid later on when they 

20 were ready to tackle college as an adult. 

21 And this is particularly relevant to my 

22 institution because, as I have indicated before, of 

23 the adult nature of our students: more than half 

24 of our students are adults age 25 or older. Our 
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1 College recognizes that sometimes students are 

2 unsuccessful academically for a variety of reasons. 

3 In later years, despite current high academic 

4 achievement, the students may discover that a 

5 previous low grade point average is a barrier to 

6 entry into occupational fields or further academic 

7 progress.

8 The College's academic and time amnesty 

9 policy addresses this issue and ensures that a 

10 student's one-time academic poor performance does 

11 not have a detrimental effect on a student's long12 term ability to persist and complete academic 

13 goals. To safeguard against students "gaming the 

14 system," so to speak, we've instituted rules for 

15 when academic and time amnesties will be permitted. 

16 Those rules are delineated in the College's 

17 catalogue. And just so I'm clear, the catalogue 

18 also states that "federal student aid"--and I'm 

19 quoting—"regulations do not provide for time 

20 amnesty or academic amnesty in evaluating a 

21 student's eligibility for financial aid."

22 Under our academic and time amnesty 

23 policy, the College's Financial Aid Office reviews 

24 students' academic progress after each term. A 
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1 student deemed not to be making satisfactory 

2 academic progress is placed on financial aid 

3 probation, and students who do not meet the 

4 probationary conditions described in our academic 

5 standards and progress policy become ineligible for 

6 financial aid.

7 We would recommend that the Department of 

8 Education look at ways to allow students who 

9 receive academic or time amnesty to continue to 

10 receive financial aid under certain conditions such 

11 as those that I have described. Again, I'm trying 

12 to focus on something that I think is prevalent in 

13 a community college adult environment.

14 And two other brief comments--so I hope 

15 I'll finish well within my 10 minutes--one on Pell 

16 Grants and the other on the general financial aid 

17 process. I just want to say that we do support the 

18 new federal rule that allows a student to obtain 

19 two Pell Grants in a year, the year-round Pell 

20 Grant. This, again, makes a real difference for 

21 our students who are overwhelmingly part-time and 

22 use every term to attempt to complete their degree. 

23 Without the year-round Pell provision some 

24 students, even full-time students, would find 
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1 themselves in danger of using up their Pell Grants 

2 in the fall and spring semesters and would be 

3 ineligible for Pell Grants in the summer. We view 

4 that as very positive. And I can't take--miss the 

5 opportunity in any venue to say on the general 

6 financial aid process it's no secret that the 

7 current process can be cumbersome and difficult to 

8 understand for many students.

9 Again, focusing on this student body, the 

10 complexity of the financial aid process is of 

11 particular concern to our students because so many 

12 are the first in their families to attend college 

13 and have no one in their household to offer 

14 guidance in filling out financial aid forms. To 

15 help our students navigate the financial aid 

16 process and to help increase student persistence, 

17 our college has begun offering financial planning 

18 sessions. These are meant to go beyond the 

19 standard "how to apply for financial aid." FAFSA 

20 is terrible, but it's not just about FAFSA. It's 

21 also so that students will have a broader 

22 understanding of higher education costs and long23 term financial planning.

24 But we do support simplifying the FAFSA 
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1 application, thereby making the financial aid 

2 process more understandable for students and less 

3 cumbersome for financial aid managers. 

4 In Pennsylvania, completing the FAFSA is 

5 also the key to applying for state tuition 

6 assistance as well as many scholarships. Tying the 

7 FAFSA to IRS system data is one way of perhaps 

8 simplifying the application process.

9 That concludes my testimony. Thanks for 

10 the opportunity to share thoughts. And again, 

11 welcome to the Community College of Philadelphia.

12 MR. MADZELAN: Thank you very much.

13 Barmak Nassirian, American Association of

14 Collegiate Registrars and Admissions Officers.

15 MR. NASSIRIAN: Good morning. I am Barmak 

16 Nassirian with the American Association of 

17 Collegiate Registrars and Admissions Officers. Our 

18 association is fairly well known to the Department, 

19 but I should probably just summarize that we are a 

20 non-profit association of more than 2,500 

21 institutions of higher education and represent 

22 about 10,000 campus officials, primarily from 

23 admissions and academic records professions.

24 Our members view themselves as 
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1 systemically interested in academic integrity. As 

2 admissions officers they have an important role in 

3 terms of gate-keeping for institutional purposes. 

4 They are reliant parties on the credentials and 

5 credits earned elsewhere, and spend an inordinate 

6 amount of their time--increasingly so over the 

7 course of the past decade--trying to detect and 

8 expose diploma mills and fraudulent credentials, 

9 which are becoming a terrifying problem in this 

10 country. There are people cutting patients open 

11 that we, at AACRAO, do not believe actually 

12 attended medical school. It is that scary. So, 

13 increasingly we are combating a problem that is 

14 becoming global and that is afflicting U.S. 

15 citizens here in terms of their health and safety.

16 Beyond that, obviously, the registrar 

17 profession is in the business of credentialing 

18 people. They are in the business of developing and 

19 enforcing academic policy for institutional 

20 purposes and they are major consumers of other 

21 institutions' products in terms of academic credits 

22 and credentials as well. 

23 All of this is to explain that our 

24 interest in this matter, frankly, transcends 
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1 financial aid. And that because we have our own 

2 reasons for seeking systemic improvements to 

3 program integrity, we believe our members would be 

4 very reliable and well-informed partners to assist 

5 the Department in improving the integrity of Title 

6 IV programs.

7 Now having said that, one of our concerns 

8 is that, candidly, inadequate gate-keeping 

9 provisions for accessing federal financial aid are 

10 now hampering the efforts of our members instead of 

11 helping them. Institutions, including from high 

12 schools all the way to so-called doctoral 

13 institutions, have cropped up all over the place. 

14 And, regrettably, because the so-called triad--

15 accreditation, state licensure, and federal 

16 recognition--are substantively inadequate--and I'll 

17 go through as to why we think they're substantively 

18 inadequate--some of our members view some 

19 institutions that now have gained access to the--

20 not only to the billions of dollars available under 

21 federal student aid programs, but more insidiously 

22 the imprimatur--the implied seal of approval that 

23 that carries--as diploma mills. And we are gravely 

24 alarmed at a system that was never designed to do 
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1 what we ask it to do today. 

2 So, that's by way of describing our 

3 interests. We are very pleased to see that the 

4 Department has refocused its attention on these 

5 important questions of program integrity. 

6 We have a number of comments. I'm just 

7 going to go through on the topics for the agenda 

8 that may be assigned to the Negotiated Rulemaking 

9 Committee on these matters. But we would very much 

10 like to add additional topics that without 

11 addressing which we do not believe participation in 

12 Title IV can be cleaned up. 

13 One observation on behalf of our members--

14 and I think it relates to the President's remarks 

15 before me--participation in Title IV is 

16 extraordinarily arduous, but only procedurally so. 

17 In other words, if you have enough lawyers and 

18 enough consultants and enough time and enough 

19 resources, we believe almost any institution can 

20 actually manage to gain entry. 

21 Now, this has insidious consequences for 

22 both students and the taxpayers. The logic of 

23 federal financial aid works for the majority of 

24 students who actually gain some benefits. For 
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1 those who don't, they are certainly left far worse 

2 off than they would have been if they had never 

3 gained "access" to the educations they received.

4 So, that's what happens to the students. 

5 Obviously, the taxpayers foot the bill and they are 

6 left substantially worse off. And as I mentioned, 

7 legitimate institutions are left worse off on two 

8 grounds: One, because now they're left to their 

9 own devices to sift through credits and credentials 

10 that they don't know what to do with; and secondly, 

11 because the regulatory noose tightens, again, 

12 purely procedurally, but it imposes an enormous 

13 burden on institutions to comply with ultimately 

14 ineffective but arduous regulations. 

15 One of our hopes is that by focusing on 

16 substance as opposed to mere procedure, that we can 

17 improve the quality of the regulations that address 

18 federal concerns and that we do so in a way that is 

19 efficient and effective from an institutional 

20 perspective.

21 I'm going to zip through the topics. 

22 Incentive compensation. Both my association and 

23 the other associations that represents admissions, 

24 NACCAC, vociferously objected to the 12 loopholes 
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1 that the Bush Administration decided to fabricate 

2 out of whole cloth in the plain statutory language 

3 that bans incentive comp. 

4 You pointed out that this is a regulatory 

5 proceeding. We would have liked the same 

6 philosophy to have governed the previous one. We 

7 thought that the Bush Administration jerry-rigged 

8 the negotiations leading to that change. And even 

9 so, they couldn't get consensus and they decided to 

10 retreat and come back with 12 exceptions that you 

11 cannot find a trace of in the statutory language 

12 that the Department purports to be regulating. We 

13 think you should go back to the pre-2002 regulatory 

14 language which echoes the statutory ban and simply 

15 set a limit of $25. 

16 I have a lengthier statement which I will 

17 forward to you. We restate our initial objections 

18 in that submission.

19 An issue that you have not put on the list 

20 that I hope you do is the question of 

21 accreditation. Accreditation works fabulously if 

22 you are actually interested in voluntary self23 improvement. And we have no quarrel with people 

24 accrediting each other, working together to improve 
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1 through a system of peer review. The problem is 

2 when it comes to gate-keeping. Accreditation is 

3 increasingly looking feeble as organizations with 

4 minimal resources--resources that are a fraction of 

5 AACRAO's resources--purport to be in the business 

6 of policing and overseeing multi-billion dollar 

7 entities that are entirely incremensurable in terms 

8 of what they can throw at the accreditor.

9 So, we think you need to look at resources 

10 that accreditors have before they become qualified, 

11 and we also take note of the fact that 

12 accreditation is systemically biased in favor of 

13 taking risks in favor of institutions. 

14 Accreditors, unlike auditors, suffer no ill 

15 consequence when they are consistently wrong. And, 

16 in fact, accreditors that develop a reputation for 

17 being too tough lose members and revenues, which 

18 means saying yes is the safe say to go. And that 

19 is no gate-keeping.

20 We are very alarmed about the extent to 

21 which federal reliance and accreditation is 

22 fundamentally biased in favor of simply letting 

23 people in and seeing what happens.

24 Definition of high school diploma. You 
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1 flag one issue, which is the rise of high school 

2 diploma mills, both for Title IV eligibility 

3 purposes as well as for NCAA purposes. Our members 

4 are increasingly running into high school diploma 

5 mills on the Internet. One other variation on it 

6 that we are very concerned about are arrangements 

7 that appear to be in place between eligible--Title 

8 IV-eligible postsecondary institutions, which seem 

9 to be referring non-high school graduates to 

10 particular high schools with which they have 

11 financial arrangements. We think there are things

12 we could do to provide some minimum standards here.

13 Gainful employment in a recognized 

14 profession. We think recognized professions should 

15 be indexed to state licensure and that not every 

16 activity putatively described as a profession 

17 should be taken as such. In addition, we think 

18 gainful employment should have a meaning that is 

19 indexed to the amount of wage enhancement in 

20 relation to debt service. It is insufficient to 

21 provide counterterrorism training for $60,000 of 

22 outstanding debt and then have people get minimum 

23 wage jobs sitting in the lobby of One DuPont. 

24 We think you need to look at the extent to 
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1 which wages exceed minimum wage, which after all 

2 doesn't need any particular skills and doesn't 

3 require borrowing. And we think you need to tie it 

4 to the amount of debt that went into it.

5 State authorization. We think the federal 

6 government should define minimum standards and 

7 define particular attributes for any state agency 

8 that purports to license institutions. We think 

9 when states fail to do that, that institutions in 

10 that state should not be eligible to participate. 

11 As you know, some states are currently operating in 

12 an entirely open system.

13 Another important topic not on your list 

14 which we would like you to consider is saturation 

15 advertising and deceptive marketing practices. We 

16 think there is a problem here in terms of the 

17 dollar amounts involved. By our estimates, the top 

18 9 Title IV advertisers spent $1.75 billion--with a 

19 B--for the last year, for which complete data are 

20 available. We think they're on track to spend $2 

21 billion in 2009. This is just the top nine 

22 advertisers.

23 Nothing wrong with advertising Snuggies if 

24 you're doing it with your own money. The problem 
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1 is here we have better than 80 percent dependency 

2 on Title IV, which we believe will pay $1.5 billion 

3 for advertising by the top 9 advertisers alone.

4 Disclosures. We think--and again, I'm 

5 emphasizing things that we think the Department can 

6 do--we think that the Department should actually 

7 generate meaningful disclosures to students, 

8 including cumulative lifetime default rates, the 

9 extent to which students at a particular 

10 institution borrow, and average indebtedness by 

11 student and by borrower cohort. We also believe 

12 the extent of Title IV dependency ought to be 

13 disclosed to students--to prospective students 

14 because they can determine the extent to which 

15 other parties may be willing to spend their money 

16 at the institution.

17 We have ideas on definitions for credit 

18 hour and for satisfactory academic progress, which 

19 is after all what our members do. We think there 

20 are things you could do that are non-intrusive on 

21 academic policy, but that protect the taxpayers and 

22 the students. We do realize that much of the 

23 significant changes that could improve the system 

24 for the better will require statutory changes and 
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1 we're working with committees of jurisdiction in 

2 Congress, but I think the lists that are rattled 

3 off is a list that the Department could actually 

4 work on through a regulatory process.

5 I appreciate the opportunity. Thank you.

6 MR. MADZELAN: Thank you very much.

7 Bernard McCree.

8 MR. McCREE: Good morning. I'm Bernard 

9 McCree. I'm Director of Financial Aid Services at 

10 Kutztown University of Pennsylvania here in the 

11 Commonwealth. And I'm here representing PASFAA, 

12 the Pennsylvania Association of Student Financial 

13 Aid Administrators, of which I'm the Vice President 

14 and Chair of the Government Relations Committee.

15 I thank you for the opportunity to share 

16 comments with you this morning concerning some of 

17 the concerns that we have as a financial aid 

18 administration about financial aid as it evolves in 

19 the coming months and year.

20 A couple of things. One, we want to 

21 acknowledge the fact that we are very pleased to 

22 know that AES/PHEAA was selected as one of the 

23 servicers moving forward. And a couple of things 

24 we want to make sure that the Department is aware 
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1 of concerning their involvement, especially here in 

2 Pennsylvania. As a state guarantee agency with 

3 public employees, they are fulfilling some 

4 important roles which include the administration of 

5 student loans, the loan servicing, and loan 

6 origination, and other services which include 

7 financial literacy, loan collections, default loan 

8 collections, and many other services that help 

9 students and families considering college. 

10 They also provide a range of services to 

11 colleges and universities that save our schools 

12 thousands of dollars each year. Currently, the 

13 federal government does not provide for those types 

14 of services. These services are funded currently 

15 through fees paid to the guarantee agencies and 

16 through earnings on FFELP loans. The 

17 Administration's proposal to convert to Direct 

18 Loans does not provide adequate recognition of or 

19 funding of those services.

20 PHEAA, in essence, would preserve the jobs 

21 of state employees, not only here in the 

22 Commonwealth, but those jobs that are attributed to 

23 the servicing of student loans. They will also 

24 preserve quality financial aid-related services for 
djj 30

1 students, families, and schools, and save states 

2 and schools the considerable cost associated with 

3 replacing current services.

4 Their proposal would accomplish these 

5 goals by maintaining current services provided by 

6 guarantee agencies and not-for-profit secondary 

7 markets funded by FFEL within DL by recognizing 

8 state-designated guarantee agencies and not-for9 profit secondary markets as the preferred entity to 

10 provide these services.

11 As these agencies have longstanding 

12 relationships with statewide colleges and 

13 universities and high schools, we propose that they 

14 would be recognized as the entity of choice to 

15 provide these services and receive an adequate fee, 

16 recognizing state-designated guarantee agencies as 

17 the preferred entity to collect defaulted loans as 

18 they already have an established relationship with 

19 the borrowers and schools.

20 As an addendum to all of this information, 

21 as a state financial aid association we are very 

22 strongly--very strongly--opposed to a single option 

23 for our students in terms of borrowing. Choice is 

24 a factor; this is the American way. And I know the
djj 31

1 CBO has conducted their savings analysis, but they 

2 did not include in that analysis implementation, 

3 the cost of human capital to provide extended 

4 customer service to our students, and also for the 

5 resolution of technical issues that will arise when 

6 you seek to convert 4,000 schools into a system 

7 that has not provided sufficient technical 

8 resources already. And we want the Department--

9 we're not opposed to a single entity, but we are 

10 saying do not rush to judgment, especially in the 

11 time allotment that it is being sought to be 

12 handled in. 

13 We look at some of the precedents that 

14 have been already not fully successful. That was 

15 the GAPS program; transferring the paper FAFSA to 

16 electronic, even though that has happened. But in 

17 doing so we talked about simplification--excuse me 

18 --and we go from 6 to 8 to 13 questions on the 

19 dependency status, which has made it very difficult 

20 for us, as my prior colleague said, procedural-wise 

21 to do some of these things. ACG SMART was not a 

22 smooth transition for us. And then the Direct Loan 

23 Program as it is today was not the Direct Loan 

24 Program that it was when it was first initiated. 
djj 32

1 So, we do urge the Department to proceed 

2 with caution as you are making decisions for making 

3 the changes that are going to happen as provided 

4 through the HEA for financial aid.

5 Thank you.

6 MR. MADZELAN: Thank you.

7 Jackie Curtis, Herzing University.

8 MS. CURTIS: Good morning. My name is 

9 Jackie Curtis, and I'm here representing Herzing 

10 University, which is a career-focused proprietary

11 institution. And today I'd like to discuss two of 

12 our institutional recommendations.

13 The first recommendation we have is for 

14 schools to have more discretion to limit student 

15 borrowing. The way it stands right now, students 

16 are eligible for the maximum loan amounts at their 

17 grade level, and this is resulting in large amounts 

18 of student loan debt. Even with counseling, this 

19 is not translating into long-term effects to 

20 students. And we as an institution are concerned 

21 about our students going into default due to their 

22 large repayment amounts.

23 The second recommendation we have is that 

24 schools be allowed to offer incentive to students 
djj 33

1 who contribute cash towards their educational 

2 expenses and who limit their loan borrowing while 

3 in school. When we discussed this option with an 

4 industry expert, we were advised against such an 

5 effort because its general principle went against 

6 the regulation that denied schools the right to 

7 limit student borrowing. This type of incentive 

8 would not only reward student financial 

9 responsibility, but it would also mean lower loan 

10 debt to students.

11 The two recommendations I just discussed 

12 are being recommended in the best interest of the 

13 student and of the school. If institutions of 

14 higher education are to be held responsible for 

15 default rates, should they not have more discretion 

16 to limit borrowing on the front end? Irresponsible 

17 borrowing is not something we want to promote or 

18 allow. 

19 Furthermore, we would like to see schools 

20 have the ability to offer incentives, like 

21 scholarships, for students who are financially 

22 responsible and who agree and commit to limiting 

23 their student borrowing and contributing money 

24 towards their educational expenses while in school.
djj 34

1 Thank you for your time.

2 MR. MADZELAN: Thank you. 

3 Mike Woods, Embassy of New Zealand.

4 MR. WOODS: Tena koto, tena koto, tena 

5 koto katoa. Greetings from Aotearoa, New Zealand. 

6 It's a great pleasure to be here. I speak 

7 warmly on behalf of the eight New Zealand schools 

8 that participate in federal student aid. We have 

9 seven of our eight universities. The other 

10 university, Lincoln University, is still registered 

11 for federal student aid for the purposes of 

12 deferment, but it doesn't have sufficient students 

13 to warrant being part of the program due to the 

14 compliance costs.

15 The eighth provider is a private training 

16 establishment, as we call them in New Zealand, a 

17 private school, that specializes in chiropractory. 

18 Our schools are very well regarded. Five are in 

19 the top Times Higher Education list for 

20 international schools; 4 in the top 500 for the 

21 Shanghai listing. So we have very, very high 

22 quality schools. So, inevitably, we attract a few 

23 American students to come down and study in our 

24 country.
djj 35

1 And our schools have been members of 

2 Federal Student Aid for a number of years and have 

3 seen various iterations of legislation coming from 

4 Congress, but we have ongoing concerns around the 

5 compliance costs. We very much appreciate the 

6 generosity of the taxpayers of America to allow 

7 American students to study abroad. It gives them 

8 exposure to other languages, other cultures. These 

9 students are in full degrees, so they're typically 

10 doing two years at least if they're doing a 

11 master's program; three years if they're doing a 

12 bachelor's or Ph.D. program as minimum 

13 requirements.

14 So, they come back with very, very good 

15 understandings of a foreign culture and extensive 

16 networks, which later become important for business 

17 networks or government networks. We can't 

18 underline enough the value that the program 

19 provides in providing finances for American 

20 students to study abroad.

21 However, there are concerns, and it's this 

22 balancing of compliance costs with protections for 

23 American students. We do understand the necessity 

24 to regulate the learning industry as we do 
djj 36

1 ourselves in New Zealand as a matter of government 

2 policy.

3 Our particular concerns relate to 

4 compliance audits and the financial audits. The 

5 induction and training--or rather the lack of 

6 thereof--third-party contracts and the 

7 interpretation around inducements, distance and 

8 electronic provision, arrangements in the Higher 

9 Education Act. And I want to raise finally some 

10 issues around the proposed legislative change by 

11 the Obama Administration surrounding direct lending 

12 and its particular implications for foreign 

13 schools.

14 So, to begin with, compliance audits and 

15 financial statements--audited financial statements. 

16 All of our schools are required to maintain audited 

17 financial statements of account to the 

18 International GAAP. We have continued to provide 

19 those reports to UACD, our schools, over the years. 

20 This involves putting them into an envelope and 

21 posting them because they are already produced. 

22 For schools over $500,000 of loans it has been a 

23 major headache. Why? Because your rule book. The 

24 rule book. Can you imagine this? This is a major 
djj 37

1 issue for any foreign school. It's bad enough 

2 trying to understand your own country's 

3 legislation; it's another issue altogether to

4 understand American legislation with nomenclature 

5 like Title IV, which, of course, means nothing to 

6 somebody starting out in Korea, like me three and a 

7 half years ago coming to Washington.

8 The financial statements, therefore, are 

9 not a burden. We appreciate the recent Dear 

10 Colleague Letter, which removes the requirement to 

11 provide audited financial statements. But I do 

12 have a concern personally around whether this makes 

13 sense for all foreign schools. I don't think 

14 there's a problem finding that information in most 

15 cases, but maybe there are some foreign schools 

16 that there may be concerns about when it comes to 

17 auditing.

18 The compliance audits are another issue 

19 altogether. These typically cost between $10,000 

20 and $15,000 USD per institution. If you have only 

21 a few students, and most of our schools only have 6 

22 to 10 students typically--some have a lot more than 

23 that--but for a few students this is an excessive 

24 burden. It would make sense--I know that the 
djj 38

1 legislation change provides for flexibility for the 

2 Department. It would make sense to require at 

3 least one audit to start with, but then to provide 

4 some flexibility for small numbers of students who 

5 are receiving federal student aid to not require 

6 those on an annual basis. Maybe every three to 

7 five years you could look for another audit 

8 statement. I would think that the same thing could 

9 apply for financial statements, but we have no 

10 problem with the removal of the requirement.

11 The second issue of concern is the lack of 

12 any kind of induction and training mechanism. We 

13 know that schools in the United States are able to 

14 access training. Our schools end up paying private 

15 consultants to receive training in federal student 

16 aid, and we think this is not ideal. We wrote a 

17 letter from our Secretary of Education to your 

18 Federal Student Aid Director in 2006, asking for 

19 training. We have not had any response to that as 

20 yet in a positive manner. We would certainly like 

21 to see training available to foreign schools, 

22 perhaps on a regional basis, not necessarily on a 

23 per country basis. That would be of great 

24 assistance.
djj 39

1 Inducements. We understand very much the 

2 concern around the potential for student loan 

3 inducements, but we do have concerns about a 

4 current situation which indicates a tightening of 

5 requirements. Contracts to third-party providers 

6 are now being sought by the Department. Those 

7 contracts have been found to be wanting, and we 

8 believe this is not appropriate. 

9 All of our providers have third-party 

10 contracts with organizations based in the United 

11 States. These organizations provide services to 

12 students to prepare them to come to our country. 

13 This includes services such as arranging travel, 

14 arranging insurance cover, providing basic 

15 information on the country, providing a welcoming 

16 service in-country. Also, they provide advice on 

17 course selection, choosing a provider, all sorts of 

18 other services which are related to recruitment. 

19 And we acknowledge that this is the case. 

20 The only reasonable way in which our 

21 institutions can pay for those services is on the 

22 basis of a fee-for-service which is linked to 

23 volumes of students that arrive. It would be 

24 unreasonable to think of any other mechanism. I'm 
djj 40

1 concerned, though, that the current move will drive 

2 down transparency, and we would ask particularly 

3 for transparency to be one of your key criteria 

4 here in making decisions on rules that apply under 

5 the changes from last year's amendment.

6 If our providers are required to have 

7 contracts which are fixed-amount contracts, you can 

8 be sure there will be private discussions around 

9 volumes which will make this non-transparent, which 

10 will work against the interests of students in 

11 America and loan borrowers once they return. It 

12 would be better to have these transparent.

13 These third-party program providers do not 

14 provide loan services. We cannot see that there is 

15 a connection here to any form of inducement. They 

16 don't pay their recruitment staff on the basis of 

17 bonus payments or payments that are linked to 

18 students recruited, so I can't see that there is an 

19 issue there with any form of inducement. They may 

20 provide access to basic websites with regard to 

21 information on federal student aid, but they do not 

22 have any loan management responsibilities.

23 The last issue in this group is the 

24 provisions around electronic enrollment and 
djj 41

1 distance education that are in the Higher Education 

2 Act. We're concerned that in an age--in the 21st 

3 century where electronic provision is very 

4 widespread and students take mixed modes--they take 

5 an electronic course, an E-course, alongside a 

6 traditional face-to-face mode--that the way that 

7 this is currently interpreted prevents students 

8 from looking to do a mix of provision. We have no 

9 problem with removing any requirement for students 

10 to enroll in full electronic provision. This is 

11 about risk reduction; we understand the issues 

12 there. But to take a mixed mode makes sense to 

13 provide the kind of flexibility for students that 

14 you would expect in this century. We do 

15 understand, also, that the way in which that 

16 legislation could be interpreted leaves it open to 

17 all sorts of problems, so we'd be very happy to 

18 work through that.

19 On that note, the International Education 

20 Council is a recognized body here in the United 

21 States. It provides support for foreign schools 

22 more generally in all countries, and we would 

23 encourage you to include them on the Negotiated 

24 Rulemaking Committee.
djj 42

1 Finally, direct lending. This has been 

2 proposed by the President, and we understand that 

3 it is currently being prepared for introduction in 

4 both the House and the Senate. We have some 

5 concerns about the potential for overlooking 

6 American students studying in foreign providers, 

7 particularly as direct lending is not currently 

8 accessible by foreign schools. Only the FFEL 

9 Programs are available. And the--we're also very 

10 concerned about the potential for much higher 

11 compliance costs for our schools in participating 

12 in the Direct Lending Program. Currently, the 

13 system is not accessible by foreign schools, and we 

14 have questions about whether such a system could be 

15 made accessible by the 1st of July next year as 

16 well.

17 So, a number of issues there. I realize 

18 they're not part of the current work of your 

19 Department, but will be shortly, and we just want 

20 to foreshadow those for you.

21 Thank you very much for the opportunity to 

22 speak.

23 Tena koto, tena koto, tena koto katoa.

24 MR. MADZELAN: Thank you very much. 
djj 43

1 John Cavanaugh, Pennsylvania State System 

2 of Higher Ed.

3 MR. CAVANAUGH: Good morning. My name is 

4 John Cavanaugh and I have the privilege of serving 

5 as Chancellor of the Pennsylvania State System of 

6 Higher Education, or PASSHE.

7 PASSHE consists of 14 universities across 

8 the Commonwealth that serves nearly 113,000 

9 students. Our universities are the public 

10 universities in Pennsylvania. Other sectors 

11 include the state-related institutions and the 

12 private institutions. Ninety percent of PASSHE 

13 students are residents of Pennsylvania, about 40 

14 percent are first generation college students, and 

15 about 80 percent remain in Pennsylvania after 

16 graduating with a baccalaureate degree for either 

17 their first job as a graduate or for graduate or 

18 professional school.

19 PASSHE strongly supports President Obama's 

20 call to be the world leader in educational 

21 attainment. In our view, his administration's 

22 commitment to Title IV programs heralds a new era 

23 in the federal-state partnership for higher 

24 education. PASSHE is firmly committed to doing its 
djj 44

1 part in conjunction with the other states to 

2 graduate or credential an additional 1 million more 

3 students a year in order to meet this ambitious 

4 goal. In truth, we have no other choice if we want 

5 our country to be a true world leader in innovation 

6 and in economic clout.

7 Certainly this goal will necessitate a 

8 dramatic increase in completion rates as well as an 

9 expanded commitment to reach returning adult 

10 students, underprepared students, and underserved 

11 populations more effectively than we have in the 

12 past. Such commitments and program improvements 

13 necessitate adequate student data and information 

14 systems, collaborative financing mechanisms, more 

15 effective and lower-cost academic and 

16 administrative support, and institutional funding 

17 based on performance.

18 I'm proud that PASSHE has all of these, 

19 enabling it to provide academic programs of high 

20 quality at the most affordable cost in the state. 

21 Part of a new, more effective partnership between 

22 the federal government and state governments for 

23 higher education is surely to make the many parts 

24 of our complex federal system work together as well 
djj 45

1 as possible. Rulemaking is an important tool for 

2 this purpose, and we welcome whatever role at the 

3 table we may be able to be invited to for future 

4 sessions.

5 PASSHE is very interested in the six 

6 topics that the Department listed in the May 26 

7 Federal Register announcement. All of them are 

8 areas of direct and continuing state involvement or 

9 point to new areas where states like Pennsylvania 

10 could benefit from additional federal policy 

11 guidance.

12 While today's hearings are intended merely 

13 to take a reading of rulemaking interest in these 

14 areas, not to actually address the underlying 

15 questions, let me make a few comments on the 

16 importance of each. And I have provided written 

17 testimony as well, so I'll provide just some 

18 summaries here.

19 The first, regulations governing foreign 

20 schools, including implementation of the HEOA. The 

21 increasing globalization of higher education brings 

22 states face-to-face with a set of policy issues 

23 that go well beyond the demands of traditional 

24 international programs. Both U.S. and foreign-born 
djj 46

1 students are increasingly mobile, raising questions 

2 related to immigration or visa status, financing, 

3 liability, consumer protection, and other areas of 

4 state interest. Like many U.S. institutions, 

5 PASSHE institutions are increasingly engaged in 

6 programs abroad, which sometimes occur under 

7 unclear jurisdiction. Most important, 

8 globalization demands that states compete in a much 

9 broader, more complex higher education marketplace, 

10 a challenge that some other nations address through 

11 national higher education export or import 

12 strategies designed to help institutions compete 

13 globally. For a combination of reasons, our 

14 federal system makes this difficult.

15 PASSHE institutions to a large extent 

16 compete on their own, a situation different than 

17 many countries in which they operate. Rulemaking 

18 may not be the only mechanism for this, but the 

19 fact that many may not be familiar with the new 

20 provisions under HEOA suggest the need for direct 

21 state involvement and continuing conversation in 

22 this area.

23 Satisfactory academic progress. Like most 

24 public colleges and universities, PASSHE is engaged 
djj 47

1 in a variety of strategies to improve the 

2 preparation of students for postsecondary 

3 education, ensure smooth transition from high 

4 school to college and from one college university 

5 to another, and increase program completion rates. 

6 Satisfactory academic progress criteria for 

7 purposes of federal Title IV programs relate 

8 directly to these efforts. PASSHE has deliberately 

9 increased the range in quality of academic and 

10 other support services and have increased 

11 completion rates significantly as a result. 

12 I am certainly aware of the difficulties 

13 in both defining and holding institutions 

14 accountable for satisfactory academic progress as 

15 well as the concerns the Department has about the 

16 length of time it takes for institutions to take 

17 appropriate action when such action is not 

18 demonstrated. However, I might suggest that the 

19 Department take a look at the way that PASSHE has 

20 held institutions appropriately accountable in its 

21 performance funding approach. So, it is possible 

22 to create such accountability models.

23 If rulemaking in this area is undertaken, 

24 states' system heads and states' academic affairs 
djj 48

1 officers would be appropriate participants. And 

2 again, I would encourage the Department to take a 

3 look at performance funding models around the 

4 country to see how satisfactory academic progress 

5 can be used as one indicator of appropriate 

6 performance.

7 The third topic of incentive compensation 

8 for recruiting and admission activity. States play 

9 a variety of roles in preventing fraud and 

10 providing consumer protection in higher education 

11 as well as in other areas. Whether through state 

12 systems or under the authority of the state 

13 attorney general, these roles are both a legal 

14 obligation and an important component of the 

15 regulation of postsecondary education at the state 

16 level. The forms of compensation allowable under 

17 program participation in Title IV may appear to be 

18 outside the boundaries of this state authority. 

19 But to the extent that abuses, fraud, or consumer 

20 complaints occur, they are likely to involve state 

21 as well as federal laws in enforcement. Moreover, 

22 federal changes could require changes at the state 

23 level or contribute to any consistencies in 

24 treatment and enforcement.
djj 49

1 So, in order to ensure good articulation, 

2 states should be included in any rulemaking in this 

3 area and adequate representation will need to take 

4 into account the diversity of roles, statues, and 

5 structures across the states.

6 The fourth area of gainful employment in a 

7 recognized occupation. Documentation of employment 

8 by those who complete federal education and 

9 training programs is done in a variety of ways 

10 across the states. A growing number of state 

11 system offices, like PASSHE, have created more 

12 comprehensive tracking of students from 

13 postsecondary education into the workforce due to 

14 accreditation or accountability requirements.

15 This may require the involvement of other 

16 state offices which operate within differing agency 

17 structures. Whether or not the Department 

18 determines that rulemaking in this area is required 

19 or appropriate, there is a growing need to bring 

20 the various federal agencies and the various 

21 reporting and accountability requirements into 

22 better alignment with state needs and state 

23 practices in these areas. For this purpose, state 

24 participation would be advisable.
djj 50

1 The fifth topic of state authorization as 

2 a component of institutional eligibility. This 

3 topic raises extremely complex issues due to the 

4 variety of roles that states play relative to 

5 institutional operation and degree granting 

6 authority. For this reason, state authorities need 

7 to be included in any rulemaking on this topic, 

8 along with a balanced representation of 

9 postsecondary providers who enroll students across 

10 state lines as well as accrediting agencies and 

11 organizations.

12 The sixth topic of definition of "credit 

13 hour" for program and PELL eligibility. The 

14 federal government, and the National Center for 

15 Educational Statistics in particular, play 

16 extremely important roles in establishing 

17 consistent definitions for many of the data 

18 elements widely used in higher education. 

19 Unfortunately, the importance of this federal role 

20 may get lost in the technical complexity in 

21 obscurity in the issues. Many of these common and 

22 critical definitions, though, are used directly by 

23 states in funding formulas--and you heard a little 

24 bit about that earlier--allocation mechanisms, 
djj 51

1 program review and approval, and other functional 

2 and administrative areas.

3 So, credit hour definitions under Pell and 

4 other Title IV programs are just one of the many 

5 factors states typically take into account in 

6 providing all kinds of different things like 

7 financial aid and accreditation.

8 Federal and NCES leadership in this area 

9 are needed and important, particularly as students 

10 and programs use other types of metrics for student 

11 eligibility and progress--such as competency 

12 assessments--as a substitute for basic contact hour 

13 or seat time measures, the more traditional 

14 approaches. Maintaining consistency between state 

15 and federal definitions will require broad 

16 participation by state higher education officials 

17 and their chief information officers or research 

18 directors in the rulemaking process and other types 

19 of policy development.

20 Let me conclude by saying PASSHE welcomes 

21 opportunities to be full participants in the 

22 Department's rulemaking actions. I suspect that we 

23 all realize, though, that we need to take steps 

24 that go well beyond the purposes and realms of 
djj 52

1 rulemaking. What we need is a recommitment, not 

2 just to work together more effectively, but to work 

3 together meeting increasingly urgent national, 

4 state, and local needs with commitment and 

5 collaboration far surpassing that of the past. 

6 Immense progress has been achieved when the federal 

7 government marshals the efforts of institutions and 

8 leverages the resources of states to expand 

9 educational opportunity and provide the basis for 

10 growth and innovation in the economy. It is time 

11 and it is imperative that we make this partnership 

12 even better.

13 Thank you for this opportunity for PASSHE 

14 to testify.

15 MR. MADZELAN: Thank you.

16 Richard Dumaresq, Pennsylvania Association 

17 of Private School Administrators.

18 MR. DUMARESQ: Thank you and good morning. 

19 Excuse me. My name is Richard Dumaresq. I'm the 

20 Executive Director of the Pennsylvania Association 

21 of Private School Administrators. And on behalf of 

22 the 320 proprietary schools and colleges in 

23 Pennsylvania and their 73,000 students, I'd like to 

24 offer some comments on the issue of over-borrowing 
djj 53

1 Title IV loan funds.

2 Just a few comments about the outcomes of 

3 our schools in Pennsylvania. According to the 

4 Pennsylvania Department of Education, in 2007-2008, 

5 we have--the schools in Pennsylvania have a 59.8 

6 percent graduation rate and an 87 percent placement 

7 rate. And that's according to the Pennsylvania 

8 Department of Education.

9 We're concerned--schools are concerned 

10 because we may not see that in the future if over11 borrowing continues. Increasingly, students 

12 attending Title IV-eligible institutions are 

13 demanding the maximum amount of student loan money 

14 available. Since loans in the Title IV program are 

15 an entitlement, colleges and schools by law cannot 

16 refuse a student request for all available loans to 

17 fund their education.

18 Colleges and schools must disburse all 

19 loan funds to students, if requested by the 

20 students, and when tuition payments are current. 

21 Financially illiterate student borrowers often 

22 spend the money without budgeting and many have to 

23 drop out when they run out of money. They are then 

24 left with a higher debt burden, while not having 
djj 54

1 completed the education needed to seek employment 

2 to pay for that education. As a result, many 

3 students in that predicament default on their 

4 loans. Other students incur such a higher debt 

5 burden, often borrowing two times what they need 

6 for their education, that the monthly loan 

7 repayments are beyond their budget.

8 Educational institutions do not want to 

9 send a graduate or student borrower out with 

10 additional debt when they might have somehow 

11 limited the amount of debt for that student. 

12 Currently, schools are trying to limit 

13 student borrowing legally. But the only tools that 

14 they have are counseling students away from extra 

15 debt and advising students of their costs, their 

16 debt obligations after graduation, and the 

17 importance of being financially responsible. But 

18 we believe these current tools are not enough to 

19 stem the tide of over-borrowing, especially in a 

20 down economy.

21 We would propose some changes to allow 

22 schools the following authority: Number one, 

23 possibly allow for professional judgment by the 

24 Financial Aid Office to limit loans to the cost of 
djj 55

1 attendance; or two, allow an institution to set a 

2 limit on what reasonable living expenses are by 

3 defining them; or three, create a formula for 

4 allowable educational expenses.

5 The Financial Aid Offices in schools and 

6 colleges do not want to be in the situation of some 

7 of the banks that encouraged over-borrowing for 

8 homes.

9 Thank you for considering our comments on 

10 educational over-borrowing.

11 MR. MADZELAN: Thank you.

12 Susan Saxton, Laureate Education.

13 DR. SAXTON: Good morning.

14 MR. MADZELAN: Hello.

15 DR. SAXTON: My name is Dr. Susan Saxton. 

16 I'm the Chief Academic Officer for Laureate Higher 

17 Education Group.

18 Laureate Education's U.S. campuses are 

19 members of the Laureate international network of 

20 universities, a growing network of over 40 

21 institutions in 20 countries. Laureate's United 

22 States presence consists of three accredited 

23 institutions: Weldon University, Kendall College, 

24 and the NewSchool of Architecture and Design.
djj 56

1 I appreciate the opportunity to share 

2 Laureate's thoughts with you on a number of issues 

3 that we believe the Department should consider 

4 during its next Negotiated Rulemaking process.

5 As I speak today on the specific concepts 

6 of incentive compensation, gainful employment in a 

7 recognized occupation, and state authorization, I 

8 do so with the broader recommendation that any 

9 changes take into consideration the success and 

10 needs of the non-traditional adult students that we 

11 serve.

12 Regarding incentive compensation, the 

13 Higher Education Act's prohibition has proven 

14 difficult to implement and regulate. In 2002, the 

15 Department reasonably tried to clarify the contours 

16 of the prohibition by creating safe harbors to 

17 assist institutions in maintaining compliance with 

18 the statutory limitation and allowing for salary 

19 adjustments under certain circumstances. Even with 

20 the safe harbors, however, institutions have had to 

21 make good faith interpretations of the provisions. 

22 Because the safe harbors list provides only 

23 examples of permissible activities, institutions 

24 are similarly left to determine on their own what 
djj 57

1 other compensation practices may be allowed.

2 Institutions have legitimate reasons under 

3 common employment practices to adjust their 

4 employees' salaries. Institutions need greater 

5 clarity about what appropriate compensation 

6 increases to financial aid and admissions employees 

7 or their supervisors are permissible. We thus 

8 believe that while safe harbors should be 

9 preserved, additional clarifications by the 

10 Department in this area may be beneficial. 

11 Helping our students succeed in the 

12 workplace is a priority for all Laureate schools. 

13 Weldon University, for example, offers degree 

14 programs based in part on emerging needs and long15 term trends in job market and professions. Kendall 

16 and NewSchool train students in very specific 

17 fields. Laureate, therefore, understands the 

18 Department's interests in better understanding what 

19 it means to offer a program that leads to gainful 

20 employment in a recognized occupation. However, we 

21 would also like to raise a number of concerns for 

22 your consideration.

23 First, the Higher Education Opportunity 

24 Act's legislative history explicitly stated that 
djj 58

1 its inclusion of liberal arts language was not 

2 meant to affect the eligibility of current programs 

3 or alter the method used by the Secretary in 

4 determining recognized occupations as currently 

5 required by the Act.

6 Second, it is essential to recognize that 

7 the HEA uses the phrase "gainful employment in a 

8 recognized occupation" or a similar phrase in 

9 sections other than the definition of eligible 

10 proprietary institutions. Therefore, should the 

11 Department decide that regulations are needed to 

12 interpret the phrase "gainful employment in a 

13 recognized occupation," these regulations would not 

14 apply just to proprietary institutions, but also to 

15 many other types of institutions as well.

16 Third, the Department has indicated a 

17 particular interest in considering what the terms 

18 "gainful employment" and "recognized occupation" 

19 mean. As I mentioned, Laureate supports policy 

20 discussions related to institutional outcomes, and 

21 our schools spend a significant amount of time 

22 obtaining and reviewing student outcomes.

23 Students graduating from all three of our 

24 institutions experience similar impressive 
djj 59

1 outcomes, including their job placement rates. 

2 However, we would caution against any federal 

3 policy that assumes a uniform meaning of "gainful 

4 employment." That term may have different 

5 meanings, depending on the institution and each 

6 student's personal situation. For example, many 

7 students graduate from one program and then 

8 immediately enroll in another, whether graduating 

9 from the undergraduate to graduate level or from 

10 the master's to the Ph.D. level.

11 Further, Laureate's U.S. students are 

12 primarily working adults. Completing a degree 

13 might not result in new employment, but in a 

14 promotion, an increase in pay, or, as with many 

15 students, an entirely new career focus.

16 In this economy, a degree in one of our 

17 programs simply may be helpful in providing job 

18 retention for these students or those in other 

19 programs. Given the broad range of personal 

20 circumstances, regulating what constitutes gainful 

21 employment would be very difficult at the federal 

22 level.

23 Weldon University is an entirely online 

24 institution based in Minnesota. Kendall has a home 
djj 60

1 campus in Illinois, while offering online programs. 

2 And the NewSchool has its campus in California. 

3 With state approvals currently in multiple states, 

4 each of our institutions look forward to learning 

5 more about the Department's concerns with the state 

6 authorization requirements as a component of 

7 institutional eligibility.

8 It is essential to stress the importance 

9 of encouraging a flexible state regulatory 

10 environment that continues to improve access to 

11 students through new delivery alternatives, 

12 including online, as well as an option for

13 institutions to add new campuses.

14 I appreciate the opportunity to speak 

15 today on behalf of Laureate, and hope the 

16 Department will keep in mind the impact of 

17 regulatory changes on the non-traditional student 

18 as it begins its next round of Negotiated 

19 Rulemaking.

20 Thank you.

21 MR. MADZELAN: Thank you.

22 Nancy Broff, ITT.

23 MS. BROFF: Good morning. My name is 

24 Nancy Broff, and I am here today representing ITT 
djj 61

1 Educational Services, Inc.

2 ITTESI is a leading provider of 

3 technology-oriented postsecondary degree programs. 

4 As of June 1st of 2009, ITTESI operated 116 ITT 

5 Technical Institute locations in 37 states, 

6 predominantly providing career-focused associate's 

7 and bachelor degree programs of study to a total of 

8 approximately 65,000 students.

9 As of June 10th, ITTESI also owns and 

10 operates Daniel Webster College, a residential 

11 college in Nashua, New Hampshire, that offers 

12 associate's, bachelor's, and master's degree 

13 programs in the fields of aviation, computer 

14 science, management, engineering, and social 

15 science. I'm going to talk about a number of the 

16 issues in front of us today. 

17 First, gainful employment in a recognized 

18 occupation. The HEA requires that a number of 

19 different types of institutions demonstrate that 

20 they provide an educational program that leads to 

21 gainful employment in a recognized occupation. 

22 This means the institution must be able to 

23 demonstrate that there's at least one occupation 

24 that a student who completes the program would be 
djj 62

1 qualified to enter.

2 Currently, institutions assign a CIP code 

3 to each program, which provides a crosswalk to 

4 occupational listings through various databases of 

5 the Bureau of Labor Statistics, Employment and 

6 Training Administration and the Census Bureau.

7 However, many educational programs do not

8 fit neatly into a single CIP code, but rather could 

9 have one of several CIP codes attached. As a 

10 result, the occupations that graduates obtain may 

11 not correlate exactly with the occupations in the 

12 crosswalk from the CIP code that is assigned to the 

13 program.

14 In addition, it's important to recognize 

15 that a significant number of adult students are 

16 pursuing higher education for career advancement, 

17 not initial job entry. Particularly in the 

18 graduate programs, students may be obtaining a 

19 credential that will allow them to progress within 

20 their current field rather than training for a new 

21 occupation.

22 Most for-profit institutions provide 

23 information to prospective students of examples of 

24 the types of employment that graduates of the 
djj 63

1 program have obtained in the past. Because of the 

2 possibility that a single program can prepare a 

3 student for a number of occupations, ITTESI 

4 suggests that any regulation implementing this 

5 statutory provision should not be overly 

6 prescriptive in requiring direct linkage to one 

7 single occupation.

8 Incentive compensation. In general, the 

9 safe harbor approach to the incentive compensation 

10 issue has been very helpful. A number of us may 

11 remember that prior to the current regulation, the 

12 lack of clear guidance made it very difficult for 

13 institutions to be confident of their ability to 

14 comply with this important rule. Prior to 2002, 

15 institutions often obtained advice on a case-by16 case basis from the Department of Education, and 

17 the advice often conflicted between what the 

18 institution was told in one case and another, 

19 sometimes varying by region, sometimes from one 

20 institution to another.

21 Under the current regulation, institutions 

22 have the ability to fashion compensation programs 

23 that are within the safe harbors and are able then 

24 to operate with some confidence. Clarity in the 
djj 64

1 regulatory guidance is especially important in this 

2 regulation because the statutory language is so 

3 vague.

4 Definition of a high school diploma. With 

5 institution locations in almost every state and 

6 students coming from almost every state, ITTESI can 

7 attest that there can be difficulties in 

8 determining what is a legitimate high school 

9 diploma. There have been a number of diploma mill 

10 high schools that have begun operating over the 

11 last few years, and there's currently no way to 

12 know easily whether a particular high school is 

13 legitimate.

14 The Department of Education does not 

15 maintain a list of legitimate high schools nor does 

16 it maintain a list of recognized accreditors in the 

17 K-12 space. The state education agencies also do 

18 not keep comprehensive lists of legitimate high 

19 schools or high school programs in their states. 

20 Some states keep lists of accredited high school 

21 programs, but high schools are not required to be 

22 accredited in order to be legitimate. 

23 ITT Technical Institutes attempt to ensure 

24 that our students have presented legitimate high 
djj 65

1 school diplomas through a variety of checks and 

2 reviews, including having our internal auditors 

3 review a sample of diplomas. When we are able to 

4 identify a diploma mill, we add it to a list and no 

5 longer accept diplomas from that high school.

6 However, to the extent that diplomas from 

7 diploma mill high schools or any other high schools 

8 look on their face to be legitimate and there's no 

9 publicly available database of legitimate high 

10 schools from which to check, it would be an 

11 unreasonable burden on institutions to require them 

12 to research the legitimacy of every single high 

13 school from which a student produces what appears 

14 on its face to be a legitimate diploma.

15 Verification. Verification continues to 

16 be one of the most common program review findings 

17 across all sectors and types of institutions. It's 

18 an area on which ITTESI spends a lot of time and 

19 effort to ensure compliance. 

20 One area that poses particular challenges 

21 is the level of expertise relating to the Federal 

22 Tax Code that our financial aid officers need to 

23 have in order to resolve surface-level 

24 discrepancies, such as determining whether the 
djj 66

1 student and his or her family filed their income 

2 taxes properly as head of household or married 

3 filing separately, for example.

4 Another area is data matches. 

5 Certificates of Naturalization for citizenship 

6 always come out as C codes because they can't match 

7 in any of the available databases.

8 Simplification of the FAFSA is one 

9 important way to reduce the number of items that 

10 require verification. In simplifying the FAFSA, 

11 ITTESI urges that the Department carefully 

12 scrutinize each data element to determine whether 

13 it's really necessary in order to determine 

14 eligibility for student aid funds. For example, if 

15 we're never going to have a data match with IRS, do 

16 we really need to collect parent Social Security 

17 numbers?

18 ITT Technical Institutes proudly serve a 

19 large number of veterans and active-duty service 

20 members. We appreciate that combat pay was removed 

21 as an addition to income for the 2009-2010 award 

22 year. We suggest that this policy be broadened by 

23 removing all veterans' non-education benefits from 

24 being added to untaxed income.
djj 67

1 The more that the Department of Education 

2 can do to simplify the data elements that must be 

3 verified and provide database matching capability 

4 and provide clear guidance to federal aid 

5 administrators, the better positions institutions 

6 will be for compliance.

7 Satisfactory academic progress (SAP). ITT 

8 Technical Institutes devote significant resources 

9 to tracking the academic progress of our students. 

10 We track SAP not only for federal aid purposes, but 

11 also as a means of determining whether students 

12 need additional assistance to be successful in 

13 their educational programs.

14 ITT Technical Institutes provide tutoring 

15 and advising to students who appear to be having 

16 difficulty with their class work. Students who are 

17 not making satisfactory academic progress lose 

18 their eligibility for additional federal aid and 

19 may be placed on what we term "extended 

20 enrollment." During this time, the students are 

21 required to take any courses over again in which 

22 they have received a grade of a D, F, or W. 

23 However, we do find that the majority of our 

24 students who lose eligibility for federal aid funds 
djj 68

1 under Satisfactory Academic Progress tend to 

2 withdraw.

3 As a result, our internal data show that a 

4 very small percentage of our students lose aid as a 

5 result of Satisfactory Academic Progress. This

6 doesn't mean we're not rigorously enforcing it. It 

7 just means they're not showing up as having lost 

8 aid as a result because they have withdrawn as an 

9 alternative.

10 SAP is also very complicated with a lot of 

11 possibility for error. ITTESI is working to 

12 automate the process as much as possible to 

13 eliminate errors. But because of the complexity of 

14 the current federal requirements, there are a 

15 number of points at which individual judgment is 

16 required. ITTESI would support changes that would 

17 simplify determination of SAP.

18 One additional item, to echo several of my 

19 colleagues who have spoken, that we would like to 

20 see added to the table is mechanisms that would 

21 help to limit over-borrowing by students. One way 

22 that we think this could be done would be to allow 

23 institutions to make a policy determination on a 

24 broad scale rather than on a student-by-student 
djj 69

1 basis that certain groups of students could be 

2 limited in their ability to borrow.

3 For example, a lot of the students--a very 

4 large percentage of the students at ITT Technical 

5 Institutes are working adults. The majority of 

6 these students continue to work full-time while 

7 attending school. Their living expenses have not 

8 changed as a result of their educational 

9 attendance, yet they're entitled to the same amount 

10 of living expenses as students who are in school 

11 full time and are not working at all.

12 The professional judgment exceptions 

13 cannot help this entire class of students, as 

14 having a large number of professional judgment 

15 overrides is a trigger to a program review, as well 

16 as it being burdensome for the financial aid 

17 officers to document each case.

18 It would be a welcome policy change if the 

19 Secretary, by regulation, would allow institutions, 

20 at their option, to set a zero cost-of-living 

21 allowance for students who continue in their 

22 current employment while attending school, and, 

23 therefore, have no additional costs that are fairly 

24 attributable as living costs for educational 
djj 70

1 attendance. The institution could have a policy 

2 that would permit the financial aid official to 

3 make an exception on a case-by-case basis that 

4 would allow a cost of living allowance for students 

5 who truly do have some additional cost-of-living 

6 expense attributable to their educational pursuit.

7 One of the policy forums tomorrow will 

8 focus on fostering student educational persistence 

9 and degree attainment. This discussion will likely 

10 focus on anecdotal and institution-specific 

11 comments. As a backdrop to that discussion, it may 

12 be helpful to briefly discuss some preliminary 

13 findings from a new research study that will be 

14 published in final form later this summer.

15 At the recent Career College Association 

16 convention, the Imagine America Foundation 

17 presented initial data from a new study on 

18 retention and graduation rates. The lead 

19 researcher, Dr. Watson Scott Swail of the 

20 Educational Policy Institute, examined the factors 

21 that have a negative impact on persistence and 

22 graduation, including factors like age, parental 

23 legacy, and income. 

24 He analyzed data from both the BPS 
djj 71

1 longitudinal survey and the IPED DAS. Not 

2 surprisingly, he found that student bodies at 

3 career colleges have more risk factors than 

4 students attending institutions in the traditional 

5 college sectors.

6 However, when he examined the outcomes of 

7 career college students, he made some interesting 

8 findings. Career colleges overall had a lower 

9 graduation rate at the four-year level than 

10 private, not-for-profit, and public institutions: 

11 48 percent compared to 64 percent for the not-for12 profits and 53 percent for the publics. But we did 

13 have higher rates at the two-year level: 59 

14 percent for career colleges compared to 55 percent 

15 at not-for-profits and 23 percent for public two16 year institutions. 

17 However, when you drilled down and looked 

18 at institutions comparing those with similar 

19 student bodies, career colleges outshone their 

20 public and not-for-profit private colleagues. And 

21 I'll just highlight a few of the findings.

22 Among four -year institutions whose 

23 student bodies are less than 25 percent white, 

24 career colleges graduated a significantly higher 
djj 72

1 percentage of students: 47 percent compared to 40 

2 percent at private not-for-profits and 33 percent 

3 at four-year public institutions. Among two-year 

4 institutions that served a similarly high 

5 population of minority students, career colleges 

6 had a 56 percent graduation rate compared to a rate 

7 of 44 percent at the private not-for-profits and 16 

8 percent at public institutions.

9 Among four-year institutions that are open 

10 admissions institutions, career colleges graduated 

11 45 percent of their students compared to 42 percent 

12 at the private, not-for-profit four-year 

13 institutions and 31 percent at public institutions. 

14 And at the two-year level, open admissions career 

15 colleges graduated 60 percent of their students 

16 compared to 59 percent at private not-for-profits 

17 and only 23 percent at public institutions. 

18 So, when you look at comparing 

19 institutions on an apples-to-apples basis, when you 

20 really drill down and look at the student bodies 

21 they're serving, you see that the career college 

22 sector is doing a very good job of helping their 

23 students with persistence and attaining the degrees 

24 that they are seeking.
djj 73

1 The student Financial Aid Program 

2 regulations are technical and complex. Of 

3 necessity, this statement does not cover every 

4 issue that is of importance to ITT Technical 

5 Institutes. I know I'm standing between the group 

6 and their first coffee break.

7 We very much appreciate the opportunity to 

8 have provided input in this initial process and 

9 look forward to continuing to participate in the 

10 process to the extent possible.

11 MR. MADZELAN: Thank you.

12 MS. BROFF: Thank you.

13 MR. MADZELAN: Thank you.

14 Let's take a break and come back here at 

15 10:40. We're actually right on schedule.

16 MR. MADZELAN: We'll go ahead and get 

17 started now. Couple of things. First, you may 

18 have noticed we do have our sign language 

19 interpreters. If there's no need for their 

20 service, at least for the next few minutes, we can 

21 give them a break. So, does anyone need any 

22 assistance like that? 

23 Okay. Then we'll--I will--every so often, 

24 I will ask again just to make sure, okay?
djj 74

1 Second thing is that if, you know, I 

2 mangle your name when introducing you, please don't 

3 hesitate to correct me. I try to be sensitive to 

4 that since I'm one of those people with one of 

5 those names, so.

6 So, we will resume our hearing with Harris 

7 Miller of the Career College Association.

8 MR. MILLER: Hi. Well, thank you, 

9 Mr. Madziano [sic].

10 [Laughter.]

11 MR. MILLER: He did get my name right. 

12 Thank you very much, Dan.

13 A couple of preliminary comments. First 

14 of all, I'm very sorry that our host, Dr. Curtis, 

15 left because I grew up in Western Pennsylvania, and 

16 I just have four words for the people here in 

17 Philadelphia: Pittsburgh Steelers, Pittsburgh 

18 Penguins.

19 There we go. Okay, good. This is good.

20 And secondly, as a proud graduate of the 

21 University of Pittsburgh, one of the state 

22 universities that was mentioned before, all I can 

23 say to my friends from Penn State is: Go, 

24 Panthers.
djj 75

1 Also, I'm very surprised to learn that so 

2 many people with MBAs from Harvard and Columbia are 

3 interested in major topics such as verification of 

4 information included on student aid applications. 

5 So, thank you all for being here today.

6 The President of the United States, John 

7 Kennedy, when I was 10 years old made a commitment 

8 to the United States. He said by the end of this 

9 decade, we will land a man on the moon. And while, 

10 unfortunately, the young president didn't live to 

11 see that, we all actually--at least many of us in 

12 this room--did get to witness that, that grainy 

13 picture in 1969 as Neil Armstrong stepped on the 

14 moon.

15 I will mention parenthetically that I once 

16 spoke at a conference in Greece and Neil Armstrong 

17 was the keynoter and I was the second keynoter. 

18 And as I drove up, his name was in letters about 

19 five feet tall and mine were in letters about one 

20 inch tall, but that was probably appropriate.

21 On February 26th, President Obama made a 

22 similar commitment. He said by the year 2020, this 

23 country will once again be number one in the world 

24 in terms of people with postsecondary degrees. To 
djj 76

1 us in the career college world, to employers, to 

2 people in society, the fact that this country has 

3 fallen in one generation from 1st to 10th or 14th, 

4 depending on how you count it, is a real 

5 disappointment not just psychologically as many 

6 people take it, but as a fundamental threat to the 

7 well-being of this country and a fundamental block 

8 to growing a middle class in this country. So we 

9 are very, very excited about what President Obama 

10 has committed.

11 We're very, very pleased that even though 

12 according to the Department of Education data our 

13 sector is currently only about 7 percent of higher 

14 education, also according to the Department of 

15 Education data last year 16 percent of the 

16 associate degrees awarded in this country went to 

17 students who graduated from career colleges. But 

18 our sector is growing by an average of 10 percent a 

19 year. And that the number of baccalaureate degrees 

20 awarded from our institutions is growing by more 

21 than 20 percent a year, though admittedly from a 

22 smaller base than traditional higher education.

23 So, we believe we have a critical role to 

24 play in meeting the goals that President Obama set 
djj 77

1 out in his February 26th speech, and we're very 

2 pleased to be working with the Department.

3 Dan, we thank you for coming to speak at 

4 our convention last week. It was very much 

5 appreciated by the almost 2,000 attendees.

6 Speaker Cummings--Secretary Cummings--I 

7 don't know what to call you yet--I want to thank 

8 you for taking the time to spend some time 

9 consulting with me. I very much appreciate it.

10 And, of course, Steve, we thank you for 

11 all the assistance you provide our membership and 

12 all the opportunities.

13 A few issues have already come up that I 

14 just want to mention briefly. There was some 

15 concern about advertising. I share that concern. 

16 Three times before I got to the train station this 

17 morning to leave my home, the University of 

18 Maryland, University College had a radio ad running 

19 on WTOP. My son got 450 letters from colleges 

20 asking him to apply for admissions when he was 

21 ready to apply for college. And my next door 

22 neighbor told me last week when I went to her 

23 daughter's graduation, that she had been contacted 

24 by 40 coaches from colleges around the country
djj 78

1 because she's a high school water polo player.

2 The point is that every type of college 

3 and university advertises and promotes. The real 

4 issue is do they educate? And we in the career 

5 college sector are very proud of our success in 

6 taking students, many of whom, as you heard earlier 

7 from other speakers, are older students, often 

8 first generation. Over 50 percent of our students 

9 are first generation, often minorities. About 40 

10 percent of our students are minorities. Often 

11 students who have tried other colleges or 

12 universities and failed at it. Many of our schools 

13 have 20 or 25 percent of their students who have 

14 attended another college, a community college 

15 perhaps, before they have attended our schools. 

16 So, we're very proud of those high completion 

17 rates.

18 In a perfect world, every student would 

19 complete. In a perfect world, every student would 

20 finish. We're not living in a perfect world. But 

21 we're working in a world where we devote our 

22 resource and our attention, our schools--if you've 

23 heard from speakers previously from some of the CCA 

24 members and other schools that are not members--to 
djj 79

1 working to complete their education.

2 So, let me talk briefly just about some of 

3 these issues. You've already heard quite a bit 

4 from other speakers, so I'm not going to spend a 

5 lot of time. 

6 One of the issues that has come up quite a 

7 bit is the issue of FAFSA simplification, and I 

8 know you're having further discussion on that 

9 tomorrow. We as an association greatly support 

10 that. We think it's critically important. But I'd 

11 also mention to you that a recent report that was 

12 done by Dr. Mark Kantrowitz of FinAid found that 

13 while among the general population--overall student 

14 population, a little over 60 percent of students 

15 who were Pell-eligible actually get a Pell and 

16 while among community college students it's about 

17 55 percent of students who are Pell-eligible 

18 actually receive a Pell. Among career college 

19 students, it's over 97 percent.

20 Now, I don't think that necessarily means 

21 that our students are better with dealing what 

22 everyone admits is a very, very complicated 

23 application. I think what it shows, though, if the 

24 school was willing to work with the student in a 
djj 80

1 collaborative manner--starting from day one when 

2 that student wants to be admitted--works through 

3 the process of how do you get a student aid package 

4 together, helps them to understand what a college 

5 education is about and ultimately helps that 

6 student get a job. That's very important.

7 I had the privilege on Friday night of 

8 speaking to a graduating class in Richmond, 

9 Virginia, at--in Stratton College. Ninety-nine 

10 students graduated, the overwhelming majority of 

11 them African-American, a large percentage of them 

12 women. Of the 99 students who graduated on Friday 

13 night, 91 percent already have a job in an area for 

14 which they were trained. This is in Richmond, 

15 Virginia, an area of high unemployment in a very 

16 difficult time. And that gives us a great deal of 

17 pride.

18 Let me talk about an issue that's been 

19 mentioned several times by Nancy Broff, by Dick 

20 Dumaresq, by Ms. Curtis from Hertzing. And that's 

21 the issue of over-borrowing. 

22 Let me first of all put this in context, 

23 because I think it's important to understand. We 

24 in the career college sector represent some schools 
djj 81

1 that are, frankly, fairly expensive. They have 

2 very great expense to run the schools, there's a 

3 lot of technology involved, a lot of equipment 

4 involved. We run schools that are middle expense, 

5 and we run schools that are lower expense.

6 So, you might say, well, how is it that 

7 the Career College Association on the one hand, on 

8 behalf of its members is supporting more federal 

9 aid--whether it's more Pell grants, whether it's 

10 more federal loans--and on, the other hand, 

11 supports the idea of restricting over-borrowing.

12 Well, the answer again is, we do represent 

13 such a broad group of schools. In traditional 

14 higher education, there are demarcations between 

15 not-for-profit private, not-for-profit state16 supported, community colleges primarily. And those 

17 are different price points and they have different 

18 types of approaches to federal aid. And, in fact, 

19 most community colleges, I understand, aren't 

20 interested in signing up in part for some of the 

21 loan programs because they're worried about over22 borrowing.

23 And I think what you were hearing today 

24 from Mr. Dumaresq, for example, and from Ms. Broff 
djj 82

1 and Ms. Curtis, is in some of our lower cost 

2 programs, there clearly is over-borrowing. If the 

3 program is not that expensive and if the expected 

4 earnings are not that high, we believe the schools 

5 should have the right--and we support the similar 

6 proposal to what Ms. Broff put forward--where on a 

7 programmatic, transparent basis--so there's no 

8 question of individual discrimination or individual 

9 decision. But on a programmatic, transparent 

10 basis, say, this program only cost this much and it 

11 simply doesn't make sense to allow the student to 

12 borrow more than is needed when, in fact, another 

13 program or a school may cost a lot more, 

14 particularly when there's likely also to be a major 

15 earnings difference when the person completes his 

16 or her education.

17 Again, we understand the concerns about 

18 discrimination and we think the response to that is 

19 to make it very transparent--require to be 

20 transparent to the students, to the department, to 

21 the accreditors, and to the regulators.

22 So, we think that's--hope that that would 

23 be added to the issues that the Department 

24 considers.
djj 83

1 On the incentive compensation. Again, 

2 it's been said previously by several speakers, in 

3 our minds, these things are called safe harbors. I 

4 wasn't around in 2002, but I've talked to a lot of 

5 people who were and discussed this with a lot of 

6 schools and attorneys. And I think the basic 

7 problem was, as Ms. Broff and Dr. Saxton, others 

8 said, there simply was no clarification. 

9 Our bottom line at CCA is, we're not sure 

10 the system is broken. But if the Department feels 

11 that this is an appropriate topic, we'll certainly 

12 participate in Negotiated Rulemaking. But our 

13 bottom line is simple: Give us clear rules. Give 

14 us clear details. 

15 These compensation systems are 

16 administered by human resource directors. Human 

17 resource directors like to have very clear rules 

18 because this is a form of labor law. And they like 

19 to have very clear rules as to what they're allowed 

20 or not allowed. So, we look forward to working 

21 with the Department if this remains as one of the 

22 issues.

23 On high school diploma mills, we hate 

24 them, you hate them. If we can figure out a way to 
djj 84

1 get rid of them, we're all for it. When I first 

2 came to the CCA, we called the NCAA and said you 

3 have any great ideas? And they said we've tried. 

4 We can't figure it out. But we look forward to 

5 working with you. It's a nightmare for our schools 

6 and something that really drives them crazy.

7 In terms of satisfactory academic 

8 progress, I think we're the same place the 

9 Department is. In terms of gainful employment, 

10 again, you've heard some detailed comments before. 

11 But basically, we're all about outcomes. We think 

12 everything should be about outcomes in education 

13 except for some special schools that maybe it does 

14 make no sense. So, we certainly look forward to 

15 working with the Department on this. 

16 Again, I repeat some of the comments of 

17 the earlier speakers. Let's not be overly 

18 prescriptive because it's a complex world out there 

19 in terms of educational programs and in terms of 

20 employment opportunities. But at the end of the 

21 day, I think the more there is in higher education 

22 about outcomes, the same way they're being more and 

23 more asked about K-12 and that's pushed both 

24 through the Bush Administration and now Secretary 
djj 85

1 Duncan in the Obama Administration, we believe 

2 those same questions must be asked in higher 

3 education. And we're glad to stand up and talk 

4 about our outcomes and hope that other sectors will 

5 be interested and willing to do the same.

6 That's the end of my comments, Dan. And I 

7 appreciate you and the others allowing me to 

8 present today.

9 MR. MADZELAN: Thank you.

10 Timothy Moscato, Apollo Group.

11 MR. MOSCATO: Good morning. My name is 

12 Tim Moscato, and I work for the University of 

13 Phoenix as a Regional Vice President here in the 

14 Northeast.

15 I would like to address one of the 

16 specific policy issues on the agenda having to do 

17 with the definition of a credit hour.

18 While the credit hour remains an important 

19 medium of exchange and a common benchmark of 

20 accomplishment for academic institutions, we hope 

21 there will not be a backward trend to so narrowly 

22 define it as to stem the tide of important 

23 innovations we see flourishing today, such as 

24 weekend courses, distance learning, and a variety 
djj 86

1 of alternative schedules.

2 These are the innovations that are 

3 imperative to serving the broadest majority of 

4 students in our country today, working learners 

5 over the age of 25 who constitute more than half of 

6 all college enrollment.

7 For too many adults who want to earn 

8 postsecondary credentials, the traditional 

9 structure and organization of higher education pose 

10 powerful barriers to access and particularly to 

11 persistence and success. And this is even more 

12 significant when taking into account the continued 

13 educational disparity based on ethnicity in the 

14 United States.

15 Many in the for-profit education sector 

16 serve these working learners who come to us after 

17 having tried attending school at other public and 

18 private colleges and universities in America. At 

19 University of Phoenix, our students have attended 

20 an average of four colleges and universities prior 

21 to enrolling with us and understand this is a 

22 common trend among most institutions that serve 

23 working adults.

24 The reasons for their stopping and 
djj 87

1 starting at different schools are as varied as the 

2 students themselves. Some were simply not ready 

3 for school, or their work got in the way, or they 

4 became a single mom, or they lost their job. But 

5 one thing is clear from all these enrollment 

6 patterns and that is there's no one-size-fits-all 

7 solution when it comes to education.

8 America's population needs more education. 

9 They need plenty of variety and flexibility to meet 

10 the considerable obstacles they face in their lives 

11 and to address their assorted interests, abilities, 

12 and motivations. The for-profit education sector 

13 certainly encompasses variety. And while I'm sure 

14 it makes the task of regulation even more 

15 difficult, we hope you'll keep this in mind as you 

16 proceed through Negotiated Rulemaking.

17 Our sector comprises four-year 

18 comprehensive universities like University of 

19 Phoenix, which is regionally accredited and offers 

20 associate's degrees through doctoral degrees, as 

21 well as other types of good schools that provide 

22 everything from test preparation for CPAs to 

23 vocational training for medical technologists, 

24 graphic designers, and dog groomers. But there is 
djj 88

1 a reason we're a thriving sector and I will now 

2 focus my comments on my own institution because 

3 it's one I know best.

4 The University of Phoenix is often 

5 rhetorically defined as a for-profit university. 

6 It does a lot of marketing. But this isn't how we 

7 define ourselves. Our business success is only 

8 possible because of our academic success, which is 

9 the result of being completely and unswervingly 

10 focused on helping our students get through to 

11 degree completion.

12 We are a purpose-driven organization that 

13 grew out of a social mission: to serve an 

14 underserved population. In the early 1970s, when 

15 Phoenix was founded, there simply were no 

16 alternatives for working adults. Night classes 

17 were possible, but not plentiful, and it took about 

18 10 years to obtain a college degree while working 

19 full-time to support your family.

20 Our teaching-learning model today retains 

21 the original founding principles even in its newer 

22 online programs: One, that we focus equally on 

23 cognitive and effective domain. Two, that class 

24 size is small to maximize faculty support. And 
djj 89

1 three, that collaborative learning methods today 

2 termed social networking is a central component for 

3 keeping students motivated and providing them with 

4 additional support systems.

5 And finally, to come full circle on the 

6 definition of a credit hour, four, that schedules 

7 should be flexible so working adults can fit their 

8 education into their busy lives. Because what this 

9 means in real terms is that in the last four years 

10 alone, 14,700 nurses, 25,400 school teachers, and 

11 over 20,000 computer scientists have graduated from 

12 the University of Phoenix, contributing

13 significantly to areas where the nation has 

14 experienced critical workforce shortages.

15 It is our graduates who define us, and I'm 

16 proud to be one of them.

17 Thank you.

18 MR. MADZELAN: Thank you.

19 Stephen Isaac, Education Dynamics.

20 MR. ISAAC: Good morning. I'm Stephen 

21 Isaac. I'm the CEO of Education Dynamics. We are 

22 a company that helps colleges and universities 

23 find, enroll, and retain students.

24 In addition, I spent four years on the 
djj 90

1 faculty and staff of Virginia Commonwealth 

2 University and two years on the administrative 

3 staff of Passaic County Community College. So, 

4 I've seen higher education from a couple of 

5 different angles and there are a couple of issues 

6 that I wanted to touch on this morning regarding 

7 the rulemaking process that I feel are 

8 interrelated, but have some concerns about 

9 interpretation during the process.

10 The first is, of course, the persistence 

11 and completion, which has been brought up several 

12 times today, but the actual area of satisfactory 

13 academic progress and how that will be talked about 

14 and defined in the rulemaking process. And then 

15 secondly, which has been talked about a bit, is 

16 incentive compensation and the safe harbors and the 

17 clarity around marketing practice, which one of the 

18 concerns I have is that the interpretation of 

19 encouragement gets broadened to all of marketing 

20 practice.

21 And I'd like to address this in a couple 

22 of different ways. Bob Shireman recently in a 

23 conference call said the overall goal at the 

24 Department of Education in postsecondary education 
djj 91

1 is to make sure that students--potential students, 

2 whether young or old--have access to college; they 

3 have the information they need to make good 

4 choices; and that they have good quality 

5 postsecondary education that serves both of them as 

6 students and the taxpayers as well. The taxpayer 

7 certainly is entitled to a return on their 

8 investment in higher education and that return 

9 doesn't get realized unless students actually 

10 complete the programs that they start. 

11 So, on the one hand, it is important that 

12 students have that opportunity to complete. On the 

13 other hand, it is also important that students are 

14 making a match with the programs that they're 

15 likely to be successful at.

16 I think that though it is important that 

17 we have some obvious restrictions around certain 

18 practices of encouragement enrollment, it is 

19 absolutely critical that students do have an 

20 opportunity to be encouraged. I've spent a lot of 

21 my work, both on the academic side and through the 

22 schools that I work with, with the adult student, 

23 who has been talked about several times this 

24 morning. And I can tell you quite honestly that 
djj 92

1 the adult student needs a lot of encouragement to 

2 go back to school in many cases. In fact, the very 

3 populations most likely to be served by Title IV 

4 funds need the most level of encouragement. We 

5 have, through working with several of our schools 

6 for the past three years, run a very successful 

7 scholarship program called Project Working Mom. 

8 And obviously it speaks for itself.

9 But what we find with the people who write 

10 the essays that apply for that program is that one 

11 of the key factors that daunts them about going 

12 back to school, that prevents them from going back 

13 to school, is a simple lack of confidence that they 

14 can do it. So, I'm concerned a bit that we--and 

15 I've heard it in a couple of conversations this 

16 morning--that we get too far removed from the kind 

17 of encouragement that's necessary to get people to 

18 enroll and go back to school and either complete a 

19 degree, start a degree, finish a degree, et cetera.

20 I think if we're going to hit the goals 

21 that the President states, the answer to the issue 

22 is not making it more restrictive for people to 

23 have an opportunity to go back to school. The 

24 answer is not making it more difficult for them to 
djj 93

1 get access to the funds they need in order to be 

2 acceptable.

3 I think the answer is largely in the 

4 process of retention. So, it is the completion 

5 process that I think the committee should address 

6 with greater focus than necessarily the enrollment 

7 process. And what I mean by this is that these 

8 students will oftentimes need the assistance that a 

9 school can provide and often doesn't provide in 

10 helping them be successful in the program.

11 That can translate to remedial activity. 

12 It can translate to a retention program. 

13 Dr. George Kuh at the University of Indiana, the 

14 National Center for Education and Engagement, has 

15 done a number of studies over the years and I'm 

16 sure you're familiar with them. Many of the people 

17 in this room I'm sure are as well. But there are a 

18 number of points on which we engage students. And 

19 it doesn't really matter whether they are full-time 

20 undergraduate students, part-time working community 

21 college students, working adults who have gone back 

22 to school, or online students, they need to be 

23 engaged in a variety of different ways in order to 

24 be persistent and be successful. And the factors 
djj 94

1 often working against them are pretty severe. Life 

2 factors, if you will.

3 So, I think that as we look at the 

4 rulemaking process, one of the things that we 

5 should focus on is what the schools are actually 

6 doing to help people succeed. Because the highly 

7 motivated, the super-qualified student is a 

8 relatively small percentage of the population. But 

9 as we heard this morning from a variety of 

10 different people, there are a number of schools 

11 that serve students, particularly working adults, 

12 that provide them an opportunity for a leg up, a 

13 chance to improve their lives, to make their lives 

14 better. And in order to really focus on that, we 

15 can't be more restrictive about who goes to school. 

16 We need to be more positive and helpful for those 

17 who do go to school.

18 That's basically all I have to say this 

19 morning.

20 MR. MADZELAN: Thank you very much.

21 MR. MOSCATO: Thank you.

22 MR. MADZELAN: Elaine Neely, Kaplan.

23 MS. NEELY: Good morning. Thank you for 

24 the opportunity to appear before you here today. I 
djj 95

1 am Elaine Neely, the Senior Vice President of 

2 Regulatory Affairs for Kaplan Higher Education.

3 Kaplan Higher Education is the largest 

4 division of Kaplan Inc., which is a subsidiary of 

5 the Washington Post Company. Our Higher Education 

6 Division serves more than 100,000 students in over 

7 70 on-ground campuses and online through Kaplan 

8 University. Kaplan University includes the 

9 nation's only completely online law school.

10 Our students range from individuals who 

11 are attending diploma-allied health programs to 

12 classroom teachers pursuing master's degrees and 

13 business professionals seeking MBAs and law 

14 degrees.

15 Most of our students are women, many are 

16 single, working parents. What they all have in 

17 common is a need for education and training that 

18 they will help advance them economically through 

19 courses that have scheduling flexibility and the 

20 personal attention that they need.

21 We have reviewed the possible topics for 

22 Negotiated Rulemaking and, today, I will just 

23 briefly touch on some of them. And if there are 

24 questions or further information is needed, I think 
djj 96

1 you know where to get me.

2 We believe that satisfactory progress is 

3 an area which could benefit from review. And we 

4 urge the Department to consider the standard to the 

5 national accrediting agencies as these standards 

6 include measurable success criteria. 

7 There has been much public discussion and 

8 speculation concerning the Department's intent 

9 regarding incentive compensation. With respect to 

10 the safe harbors, we urge that the Department 

11 strive for clarity. As most of you know, once the 

12 safe harbors were issued, the conversations 

13 basically dried up between the Department and the 

14 community and there are still areas that do need 

15 clarification. We would also like you to keep in 

16 mind the 21st century outreach, which may include 

17 media that we haven't even yet contemplated. 

18 We look forward to learning more about 

19 your intent with respect to gainful employment in a 

20 recognized occupation. As Nancy Broff mentioned, 

21 this is an area that would include not only 

22 proprietary schools, but community college, 

23 private, and non-profit. We don't believe that the 

24 term needs to be defined, so we would like to have 
djj 97

1 more further discussions with you.

2 We do urge you to tread lightly with 

3 respect to the state authorizations as a component 

4 of institutional eligibility. As you know, 

5 currently, if a state does not have a state 

6 authorizing area agency, your fallback is to 

7 accreditation. We believe that this has worked 

8 well, and it is evidence of the value of the 

9 Department's recognition process for accrediting 

10 agencies.

11 On the issue of credit hours, we support 

12 the continuing eligibility of students through the 

13 term structure. And we also urged the year-round 

14 Pell be awarded according to the current 

15 eligibility criteria without imposing additional 

16 requirements for recipients who are, as you know, 

17 the students who need the financial aid the most.

18 We support review for the requirements for 

19 verification of information submitted on the 

20 student aid application, and encourage such review 

21 in conjunction with the simplification process. 

22 The verification process needs to be streamlined to 

23 reduce the burden on both students and 

24 institutions.
djj 98

1 And finally, we are really happy to hear 

2 that you are planning on looking at the definition 

3 of the high school diploma as a requirement for 

4 receiving aid. We currently have an internal list 

5 with over 85 institutions that attempt to extort 

6 money from students. And in our opinion, where 

7 they charge students between $250 and $500 to 

8 receive their high school diploma, only for them to 

9 present it to one of our colleges and be told that 

10 it's not legitimate and they wasted their money.

11 We have been asking the regional 

12 Departments of Education for assistance in this 

13 area, and, of course, the general consensus is that 

14 it's a K-12 issue, not a postsecondary issue. So, 

15 we will work--we're looking forward to working with 

16 you on this. It is really confusing for both the 

17 students and the schools.

18 Kaplan Higher Education appreciates the 

19 opportunity to provide input, and looks forward to 

20 working with you in the Department as we go further 

21 in Negotiated Rulemaking.

22 With your permission, I would like to 

23 include additional information about Kaplan along 

24 with comments from students and our employers as 
djj 99

1 part of the hearing record.

2 MR. MADZELAN: Sure.

3 MS. NEELY: Thank you. Thank you.

4 MR. MADZELAN: Christopher Lambert, 

5 Accrediting Commission of Career Schools.

6 MR. LAMBERT: Hi. Good morning. My name 

7 is Chris Lambert. I'm the Director of External 

8 Affairs with the Accrediting Commission of Career 

9 Schools and Colleges of Technology. We are a 

10 recognized accrediting agency with the United 

11 States Department of Education. Currently ACCSCT 

12 accredits over 780 institutions that serve over 

13 200,000 students across the United States. 

14 I am here this morning on behalf of our 

15 Board of Directors and our Executive Director, 

16 Dr. Michael McComis, who recently served on Team 

17 III of the most recent round of Negotiated 

18 Rulemaking, which reached consensus on its 16-item 

19 agenda. 

20 A little notice of proposed rulemaking 

21 listed several areas in which the Department 

22 intends to put forth in the Negotiated Rulemaking 

23 process. I intend to only speak on three of these 

24 issues, ones which we believe to be the most 
djj 100

1 relevant to institutional accreditation practices. 

2 These issues include satisfactory academic 

3 progress, gainful employment, and the definition of 

4 a high school diploma. 

5 First, with respect to satisfactory 

6 academic progress, we believe strongly that 

7 institutions should have a policy to assess student 

8 progress through the academic program and to 

9 address situations when a student may not be 

10 meeting an institution-stated expectation. ACCSCT 

11 has specific standards in these areas and 

12 understands the value of ensuring that institutions 

13 are mindful of and attentive to the needs of their 

14 students. 

15 Our standards, like the Department's 

16 current regulations, require institutional policies 

17 to address factors like integrals of assessment, 

18 which are not prescribed but flexible, 

19 institutional expectations in relation to 

20 graduation requirements, the normal duration of a 

21 program and the timeframe within a student is 

22 expected to complete that program, and the 

23 implications of not meeting an institution's 

24 satisfactory academic progress policy. 
djj 101

1 Bless you for whoever sneezed. 

2 ACCSCT supports the Department's interest 

3 in reviewing the manner in which institutions

4 implement these regulations and also how the 

5 implementation of new year-round Pell Grants may 

6 affect these regulations. 

7 Second, with regard to the Department's 

8 consideration of gainful employment in a recognized 

9 occupation, we urge the Department to exercise 

10 caution to avoid using this longstanding statutory 

11 language in a manner which unfairly constricts how 

12 institutions might assess outcomes vis-à-vis rates 

13 of employment. 

14 Like most measures of student achievement, 

15 rates of employment are highly textured and rely 

16 heavily on the specific field, the employment 

17 opportunities and expectations in that field, and 

18 the needs and desires of the student. For example, 

19 many students who graduate from ACCSCT-accredited 

20 institutions go on to be independent contractors in 

21 such fields as commercial art, film, broadcasting, 

22 cosmetology, and massage therapy, with highly 

23 varied working hours and wages. Thus, we feel it 

24 would be inappropriate to narrowly define or to 
djj 102

1 limit a definition of employment in the federal 

2 regulations. Instead, determinations of student 

3 achievement vis-à-vis employment should be left to 

4 the institutions and their accreditors where 

5 subjective judgment can be more appropriately 

6 applied. 

7 Third, with respect to a definition of a 

8 high school diploma, we welcome the Department's 

9 objective to provide clear regulations in this 

10 area. Major concerns affecting the ability to 

11 confirm the authenticity of a student's high school 

12 experience include the proliferation of high school 

13 diploma mills, home schooling credentials, the 

14 variety of state requirements and definitions of a 

15 high school diploma, and the allowance for students 

16 to self-attest that they have earned a high school 

17 diploma. 

18 A better-delineated definition of a high 

19 school diploma will improve the making of sound 

20 admissions decisions. Moreover, we urge the 

21 Department to reassess the allowance for students 

22 to self-attest as to having earned a high school 

23 diploma without also being required to take and 

24 pass an entrance exam, again for the purpose of 
djj 103

1 making sound admissions decisions. 

2 On behalf of ACCSCT and the 780 accredited 

3 institutions we serve, I appreciate the opportunity 

4 to provide these brief comments on these important 

5 regulatory areas. Moreover, if the Department 

6 believes that an accreditor's presence on the 

7 future Negotiated Rulemaking Committee will be 

8 helpful, ACCSCT would again be willing to serve and 

9 to provide our insight and experience regarding 

10 these issues.

11 Thank you. 

12 MR. MADZELAN: Thank you.

13 Mark Pelish, Corinthian Colleges. 

14 MR. PELISH: I'm Mark Pelish, Executive 

15 Vice President of Corinthian Colleges. Corinthian 

16 is one of the largest postsecondary education 

17 providers in North America. We have more than 

18 84,000 students at 106 campuses in the United 

19 States and Canada, and our mission is to prepare 

20 students for careers that are in demand or for 

21 advancement in their careers. 

22 We support the Department's goals for this 

23 regulatory proceeding. We believe that the 

24 interest of students, not institutions, should be 
djj 104

1 paramount in the student financial aid and other 

2 programs administered by the Department. We agree 

3 with Deputy Undersecretary Shireman's recent 

4 comments that the key considerations should be 

5 whether students get the information they need to 

6 select the right institution and whether 

7 institutions, irrespective of their ownership 

8 structure, are effective in producing a good return 

9 on investment for students and for taxpayers. 

10 We think this is especially true during 

11 our recent economic downturn. With appropriate 

12 regulation, the Federal Financial Aid Programs can 

13 support workforce development and help speed 

14 economic recovery. This proceeding will succeed if 

15 it leads to practical steps to help them achieve 

16 the President's goal that every American commit to 

17 at least one year or more of higher education or 

18 career training. Whatever that training may be, 

19 every American will need to get more than a high 

20 school diploma. 

21 To achieve this goal we will need the 

22 capacity offered by all sectors of postsecondary 

23 education, including proprietary institutions. 

24 Indeed, we'll need additional capacity and 
djj 105

1 additional options for students, and we think we 

2 have the ability to provide that capacity and can 

3 make a real contribution toward that goal. 

4 With those overarching points in mind, we 

5 offer the following comments on the topics listed 

6 in the Federal Register Notice. First, 

7 satisfactory academic progress. We participated in 

8 the recent NegReg to implement the changes made by 

9 the Higher Education Opportunity Act, and this 

10 subject was highlighted for reform in the 

11 discussion of year-round Pell Grants. We support a 

12 reexamination of SAP standards to ensure that 

13 students are not simply being carried by 

14 institutions when all reasonable efforts to help 

15 them succeed have failed. This will not only 

16 facilitate the implementation of the year-round 

17 Pell Grant included in the HEOA, but also ensure 

18 that financial aid funds are used efficiently. And 

19 we agree with some of the comments of others that 

20 the national accrediting agencies have some 

21 standards here that might be helpful to look at. 

22 Second, on the topic of incentive 

23 compensation, it's important to remember that the 

24 whole purpose of the Incentive Compensation Rule is 
djj 106

1 to encourage the provision of accurate information 

2 to students prior to their enrollment and 

3 application for financial aid and to encourage a 

4 good match between students and institutions. We 

5 fully support these aims. 

6 All postsecondary institutions have lived 

7 under the Incentive Compensation Rule since the 

8 Higher Education Amendments of 1992. In the wake 

9 of that legislation in the 1990s, however, 

10 ambiguity, confusion, and interpretive problems 

11 abounded. This supposedly simple rule could be 

12 interpreted in many ways and, in fact, was. These 

13 problems were encountered not just by proprietary 

14 institutions, but by a number of other 

15 institutions, including small liberal arts schools. 

16 In 2002, a NegReg process was implemented 

17 to bring much needed clarity to the rule. That 

18 process resulted in 12 clarifications or safe 

19 harbors. And although these clarifications helped, 

20 problems have continued because the Department has 

21 declined to provide additional interpretive rulings 

22 on how the regulations apply to specific 

23 circumstances. 

24 As the Department reviews these 
djj 107

1 regulations, we would urge the Department, first, 

2 not to take any steps back to the uncertainty that 

3 existed prior to 2002; and, second, to consider a 

4 process for providing guidance on the application 

5 of the regulations to circumstances that the 

6 regulations, however thorough, can never completely 

7 anticipate. 

8 Now some comments on particular aspects of 

9 the current regulations. First, we believe that 

10 compensation based on successful student completion 

11 should continue to be permitted as it has almost 

12 from the inception of the rule, because it is 

13 consistent with the rule's purposes that I 

14 articulated a moment ago. 

15 Second, any new rule should remain focused 

16 on those who have direct contact with students and 

17 their immediate supervisors. Upper-level campus or 

18 corporate officials who don't directly deal with 

19 students are not within the rule's ambit. 

20 And third, the Internet was in its infancy 

21 when Congress enacted the original rule in 1992, 

22 and the circumstances surrounding student 

23 institution interaction via the Internet are very 

24 different from the face-to-face interactions upon 
djj 108

1 which the rule was based. 

2 In 2002, the NegReg process resulted in 

3 the addition of a clarification related to 

4 compensation paid for Internet-based recruitment 

5 and admissions activities. Even so, this remains a 

6 complicated area to regulate. Today all 

7 institutions make use of the Internet to attract, 

8 provide information to, and communicate with 

9 potential students, not just proprietary 

10 institutions, and the current generation of 

11 students who use the Internet are very savvy. The 

12 Department should proceed carefully if it chooses 

13 to revisit this component of the regulations. 

14 One final comment on incentive 

15 compensation, incentive compensation would require 

16 less regulation and scrutiny if the Department and 

17 the Higher Education Act placed more focus on 

18 student outcomes for all institutions. If 

19 institutions are producing good, measurable 

20 outcomes, it would follow that the student 

21 enrollment process is functioning as it should. 

22 Now, gainful employment in a recognized 

23 occupation. This topic appears to speak to what we 

24 advocate: greater focus in the regulations on the 
djj 109

1 effectiveness of institutions and preparing 

2 students to be productive members of the workforce. 

3 However, we're not sure this is the right vehicle 

4 to address this point. The statutory provisions 

5 here have been in place for many years and we are 

6 unaware of any congressional intent that they be 

7 used to judge institutions by the outcomes they 

8 produce in terms of, for example, placement rates 

9 or income in relation to student debt. Rather, the 

10 provisions are a threshold requirement focused on 

11 the aim of the programs offered by institutions. 

12 Moreover, it's inaccurate to state that 

13 Congress completely rewrote the definition of a 

14 proprietary institution in the HEOA. All Congress 

15 did was add a provision to the proprietary school 

16 definition that permitted such institutions under 

17 certain conditions to provide liberal arts 

18 programs. That provision was addressed in the 

19 just-concluded NegReg and will be handled in the 

20 forthcoming Notice of Proposed Rulemaking on those 

21 and other HEOA changes. 

22 The Gainful Employment Provision was 

23 simply carried forward from previous law with no 

24 change in its meaning intended. 
djj 110

1 And finally, if the Department elects to 

2 pursue elaboration of the Gainful Employment 

3 Provision, it will have ramifications not only for 

4 proprietary institutions, but also for public and 

5 non-profit institutions as well because this 

6 provision is utilized in the definitions of 

7 postsecondary vocational institution and eligible 

8 program in Sections 102(c), 101(b)(1), and 

9 481(b)(1)(A)(i). 

10 State authorization. We understand the 

11 inclusion of this topic was a potential area of 

12 regulation, it was prompted in part by the 

13 expiration of the licensing apparatus in California 

14 for proprietary institutions. We would welcome a 

15 clarification of how the HEA and the Department's 

16 regulations operate in this area since, I might 

17 say, not all Department officials have always been 

18 on the same page on this one. 

19 Any institution--public, non-profit, or 

20 proprietary--must, under the HEOA, be in a state 

21 and be "legally authorized within such state." 

22 Section 495 of the HEA establishes state 

23 responsibilities in relation to the Title IV 

24 programs. And those responsibilities are, in sum, 
djj 111

1 informational regarding, among other things, the 

2 process for "licensing or other authorization for 

3 institutions to operate within the state." 

4 The Department should consider three 

5 points before regulating this topic. First, 

6 Congress did not alter this provision in the HEOA 

7 and thus there is no evident congressional intent 

8 for striking out in a new direction. Second, the 

9 statute does not require licensure. It simply 

10 calls for institutions to have such authorization 

11 as the state elects to require. And third, if the 

12 Department is going to require some type of state 

13 oversight or minimum standards as it reinterprets 

14 the state authorization requirement, it is going to 

15 have to come to grips with the exemptions that many 

16 institutions currently get from any state 

17 oversight, often based on regional accreditation. 

18 If state authorization is to mean some type of 

19 oversight or minimum standards, in what sense would 

20 these exempt institutions meet the test? 

21 Finally, high school diploma. Like 

22 others, we support regulations that would bring 

23 greater clarity in this area. The proliferation of 

24 high school diploma mills is a real problem for 
djj 112

1 campuses. We have no interest other than admitting 

2 qualified students. We suggest, perhaps, that the 

3 Department might work with the states to develop a 

4 national registry of high schools that have 

5 appropriate authorization to award diplomas. A 

6 student bearing a credential from a high school not 

7 on the register would have the burden of proof that

8 the credential is legitimate. 

9 We appreciate the opportunity to present 

10 our views and will provide more detail in our 

11 written testimony, and we look forward to working 

12 with you constructively as this process moves 

13 ahead. 

14 MR. MADZELAN: Thanks, Mark.

15 Rob MacArthur. Alternative Research 

16 Services. 

17 MR. MacARTHUR: Hi. My name is Rob 

18 MacArthur. I'm in the investment industry. I've 

19 been following the for-profit education sector for 

20 over a decade. Over the many years I've watched -

21 the cat-and-mouse game between the Department of 

22 Education and the industry. Sadly, despite the 

23 claims of being heavily regulated, this industry 

24 has been largely unregulated under the Bush 
djj 113

1 Administration. With a former Apollo lobbyist at 

2 the helm of postsecondary education, enforcement 

3 was lax despite numerous Inspector General reports 

4 encouraging better enforcement. 

5 I personally have no investments in the 

6 industry. I am here before you today to bring to 

7 your attention an issue which has received some 

8 press, but has yet to be properly addressed by the 

9 Department. That is the corruption and chronic 

10 misbehavior of the for-profit education sector. 

11 There are many issues the Department needs 

12 to address, including transferability of credits, 

13 default prevention, graduation rates, and, of 

14 course, the incentive compensation we've heard 

15 about so much today. 

16 Apollo Group, parent company of the 

17 University of Phoenix (UOP), that's the largest 

18 school in the country, in 1998 they had 71,000 

19 students. Today they have nearly 400,000 students. 

20 In FY 2008, the company spent $322 million on 

21 advertising and an additional $385 million on 

22 enrollment counselor incentive compensation. 

23 In FY 2008, the University of Phoenix 

24 received 82 percent of its revenue from Title IV 
djj 114

1 programs. UOP received only 10 percent of its 

2 revenue from Title IV programs in 2001. 

3 Enrollment counselors are being overly 

4 incentivized to bring in students with no chance of 

5 paying off their loans. There are many, many sad 

6 stories I can tell to you and recount direct abuse 

7 that I've conducted with UOP and other for-profit 

8 education sector company students. Many of these 

9 documents are also available in a Qui Tam lawsuit 

10 with multiple depositions from former employees of 

11 the industry against University of Phoenix. 

12 In the now famous February 2004 program 

13 review, the author begins, "This report contains 

14 serious findings regarding the school's substantial 

15 breach of its fiduciary duty." UOP systematically 

16 engaged in actions designed to mislead the 

17 Department of Education and to evade detection of 

18 its improper incentive compensation system.

19 "The Department interviewed more than 60 

20 present and former enrollment counselors prior to 

21 and after the site visit." Most of the recruiters 

22 said that when they were hired, UOP told them that 

23 their job had tremendous financial potential and 

24 that they could "make a lot of money." UOP 
djj 115

1 promised to "double or triple salaries in three to 

2 six months."

3 In another deposition, an enrollment 

4 counselor stated, "I was told to enroll students no 

5 matter what, regardless of their qualifications." 

6 Another enrollment counselor complained that the 

7 student was illiterate, but they were being forced 

8 to enroll that student. 

9 Buried in Apollo's website, they report a 

10 graduation rate of 9.77 percent. On the IPEDS

11 website, the online division graduation rate is 

12 around 5 percent. With 400,000 students, why 

13 aren't there more students graduating? The 

14 national average is roughly 55 percent. 

15 Refund calculations. In an OIG report 

16 dated December 2005, the Department found UOP 

17 applied inappropriate methodologies to determine 

18 the percentage Title IV aid earned for calculation 

19 purposes. UOP did not have a policy to review 

20 accurate payment periods and end dates for the 

21 purposes of calculating Title IV. They 

22 systematically monitored student's data, progress, 

23 readjusting beginning and ending dates of payment 

24 periods to accommodate leaves of absence, no shows, 
djj 116

1 failed courses, or repeat findings--repeat courses. 

2 Referring to this process as remapping, UOP 

3 readjusted payment period end dates and rescheduled 

4 second disbursement dates. 

5 In March of 2005, SFA wrote a letter to 

6 WIU, a division of Apollo Group. They found 37 

7 percent of refunds were not made on a timely basis. 

8 They found inaccurate refunds or not paid at all. 

9 WIU incorrectly calculated 25 percent of the 

10 refunds. Many of them had not been paid up to 800 

11 days late. 

12 In 2005, John Higgins, Office of the 

13 Inspector General, testified in front of the U.S. 

14 Congress 74 percent of their institutional fraud 

15 cases involved proprietary schools. Violations 

16 occur when refunds are not paid timely, when 

17 incorrect calculations result in returning 

18 insufficient funds, and when institutions fail to 

19 pay refunds at all, which is a criminal offense. 

20 While I understand the Administration's 

21 desire to improve college access, the for-profit 

22 model is not an efficient way to achieve this goal. 

23 Intel came out two years ago--a few years ago, and 

24 reported that they would no longer honor University 
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1 of Phoenix's graduates; they would not accept their 

2 degrees because of the low quality of that student. 

3 One need look no further than ripoffreport.com or 

4 consumercomplaints.com with hundreds and hundreds 

5 of pages of complaints by former students being 

6 duped by University of Phoenix. 

7 The Department is really ill-prepared, 

8 through no fault of its own, to deal with such 

9 ruthless, sophisticated, and contempt for the law. 

10 Current regulations that are obsolete have been 

11 softened by the industry lobbyists over the years 

12 and need to be improved. 

13 I have three suggestions. Incentive 

14 compensation, I believe, should be based upon the 

15 number of graduates, not on the number of warm 

16 bodies brought in. Clearly there's too much 

17 incentive for enrollment counselors to bring people 

18 in who fail to stay in the school for more than two 

19 or three classes. 

20 Most importantly, I would recommend that 

21 the Department apply the new third year default 

22 rate calculation retroactively, not starting with 

23 the 2009 cohort, which is what's planned as stated 

24 last year. Starting with the 2006 data or the 
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1 preliminary 2007 data, I think the Department of 

2 Education could ensure taxpayer safety much better 

3 if they included the third year defaults.

4 Through the overuse and abuse of 

5 deferments and forbearance, students have been 

6 allowed to not pay their monthly payments on their 

7 student loans. Those students are dropped out of 

8 the calculation. In 2003, December, the OIG did a 

9 report showing that the default rate for the third 

10 year is roughly 50 percent. So you have many 

11 schools that have a six percent, seven percent, 

12 eight, 10, 11 percent cohort default rate, first, 

13 second year, and then it averages up into the 20s. 

14 Last year, at the end of the Bush 

15 Administration, the cohort default rate limit for 

16 loss of eligibility was increased from 25 to 30 

17 percent. It was increased because the industry 

18 realizes that if the third year calculation is put 

19 into place, their average cohort default rate will 

20 suddenly double. Many of them are up 50 percent 

21 sequentially from 2006 to 2007. So I would 

22 strongly recommend that the Department lower the 

23 cohort default rate eligibility threshold from 30 

24 percent back down to 15 percent. 
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1 Nobody wants to talk about these issues. 

2 I've dedicated the last 12 years of my life 

3 examining this industry and I see very similar 

4 parallels between this and Countrywide Credit and 

5 the predatory marketing practices that have 

6 occurred in the mortgage industry. I have similar 

7 information on the other for-profit education 

8 companies. I just singled out Apollo because I 

9 happened to be following the lawsuit most closely 

10 because there are so many interesting depositions 

11 coming out of that lawsuit. 

12 The quality of education is very low. If 

13 you go to the Higher Learning Commission's website 

14 regarding transferability of credits, it basically 

15 says the schools can make up whatever 

16 transferability credit they have. And there are 

17 multiple ways that I won't go into as to how this 

18 industry brings students in, denies them some of 

19 the transfer credits that they believe the students 

20 are led to believe, and then forces the students to 

21 take additional classes they didn't anticipate. 

22 Thank you very much. 

23 MR. MADZELAN: Thank you.

24 Tom Netting. American Association of 
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1 Community Colleges (AACS).

2 MR. NETTING: Good morning. My name is 

3 Tom Netting and I'm here representing the American 

4 Association of Community Colleges this morning. 

5 I wanted to start off by telling 

6 Mr. Cummings and others that anecdotally similar to 

7 the statements that Harris Miller made, I'm here 

8 actually because both of the co-chairs of the 

9 American Association of Cosmetology Schools 

10 couldn't be here today. One is actually involved 

11 in the start of another enrollment class and, 

12 therefore, couldn't be here as they were actively 

13 enrolling students and welcoming them into their 

14 campus, and the other just completed a graduation 

15 yesterday evening of which 157 students graduated 

16 from their class. All but five already have jobs, 

17 so a placement rate and a job rate of over 96 

18 percent. 

19 As I said, I'm here on behalf of AACS, an 

20 organization that is comprised of over 1,000 

21 institutions providing tens of thousands of 

22 students each year with a quality education leading 

23 to a licensed credential enabling graduates to 

24 enter the workforce and pursue a rewarding, 
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1 professional career in an industry generating over 

2 $3 billion a year in annual revenue. 

3 While diverse, the vast majority of AACS's 

4 membership is comprised of and continues to be 

5 anchored by small, sole-proprietor institutions. 

6 While they do have a growing number of institutions 

7 that are chain-related institutions, they are 

8 primarily small institutions of higher education. 

9 It bears noting that none of these institutions are 

10 publically traded, so for the myriad of individuals 

11 here that are market analysts, I guess we're not a 

12 part of your discussion or your focus. 

13 AACS is here to let it be known that we 

14 support all of the proposals that are being put 

15 forward by the Department of Education. We ask 

16 that as the Department looks at all of these issues 

17 that they take care. 

18 I live in Washington, a world of acronyms. 

19 And for us, CARE stands for choice, which means 

20 student choice; access, which means student access; 

21 regulatory reform, which means that we support 

22 reforms that are done for and provided for all 

23 institutions of higher education; and equity, 

24 equity for all students and equity for all 
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1 institutions in the development of any new 

2 regulations brought forward. 

3 As I said, we support the initiative and 

4 we support the initiatives of President Obama and 

5 the new administration. We embrace the challenges 

6 that he has put forward on behalf of the new 

7 administration and the goals set forward to provide 

8 all individuals with a college education by 2020. 

9 We also support the recent comments made by Bob 

10 Shireman on several different calls, including the 

11 quote that the Department is working towards 

12 "broadly making sure students and taxpayers are 

13 served well whether the schools are public, non14 profit, for-profit, two-year, less than two-year, 

15 four-year, or graduate." 

16 Today I'd like to spend the time focusing 

17 not on the issues that you've heard so much about, 

18 but on additional recommendations that the American 

19 Association of Cosmetology Schools would like to 

20 put forward, and there are four of those. 

21 The first, at a recent AACS student 

22 financial aid workshop, our regional Department of 

23 Education official stated that the Department had 

24 made a determination that 225 hours is considered 
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1 the equivalent of six semester credit hours for 

2 purposes of applying the new HEOA provision with 

3 regard to ability to benefit. We ask that the 

4 clock hour--we note that the clock hour to credit 

5 hour conversion is 180 hours, is the equivalent to 

6 6 semester credit hours. Therefore, given the 

7 inconsistencies in determination of clock hours to 

8 credit hour equivalency, AACS requests that the 

9 determination of clock hour equivalency, for 

10 purposes of new ability to benefit--of the new 

11 ability to benefit definition, be added to the list 

12 of topics for consideration in the next round of 

13 negotiations. 

14 Second, with regard to cohort default 

15 rates, AACS urges that the addition of cohort 

16 default rate appeals options in the list of topics 

17 for consideration in the next round. During the 

18 recently completed federal negotiations 

19 implementing the HEOA provisions, several non20 federal negotiators as a part of Team 2, of which 

21 AACS was a part, added a list of additional CDR--

22 attempted to add a number of additional cohort 

23 default rate appeals options to the agenda. In 

24 bringing their proposals forward, the non-federal 
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1 negotiators expressed serious concerns with the 

2 anticipated impact of the economy, the 

3 corresponding unemployment rates, and the collapse 

4 of the federal lending and banking community as 

5 part of why the students might be willing or, more 

6 importantly, unable to repay their loans. 

7 Unfortunately, the federal negotiators 

8 opposed the addition and the inclusion of these 

9 provisions as a portion of the Team 2 agenda in the 

10 last round of negotiations, suggesting that 

11 existing exceptional mitigating circumstances 

12 appeals as well as lender deferments and 

13 forbearances were enough to provide adequate 

14 opportunities for institutions and students to 

15 address cohort default rates (CDR). 

16 AACS respectfully disagrees with the 

17 Department's assessment in this area and once again 

18 requests that the following CDR appeal options be 

19 open to federal negotiations. First, institutional 

20 fulfillment of their default plan. On a case-by21 case basis, institutions who efficiently and 

22 effectively implement the default management plans 

23 as required in the statute, in coordination with 

24 the Department of Education, must be qualified and 
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1 eligible to continue participating in the programs. 

2 Second, significant localized 

3 unemployment. In areas where the local 

4 unemployment rate exceeds the national average, 

5 institutions serving students from these 

6 populations should be given additional latitude in 

7 the application of the eligibility criteria under 

8 cohort default rates. 

9 Third, alignment of appeals rights. The 

10 regulations should align the appeals provisions so 

11 that institutions are eligible to begin seeking 

12 appeals rights as established under both the two13 year and three-year proposals sooner, not later. 

14 And we also request that the Department 

15 consider ensuring that their response time for 

16 erroneous data appeals is limited. Currently under 

17 erroneous data appeals there is no defined timeline 

18 for when decisions will be made by the Department. 

19 Third, prior minor-year charges. A little 

20 more than a year ago, AACS first became aware of a 

21 shift in interpretation by the Department regarding 

22 the awarding of federal student financial 

23 assistance under the prior minor year charges 

24 regulations. Since that time, we have actively 
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1 engaged in dialogue with the Department in an 

2 effort to address the unintended consequences we 

3 believe negatively impact students and their 

4 ability--and our ability to comply. We acknowledge 

5 and appreciate steps taken by the Department over 

6 the past 14 months to address our concerns, and 

7 your willingness to work with us to protect the 

8 interest of students in schools in this area. 

9 We believe that our discussions help to 

10 bring about an effective solution and have been 

11 patiently and eagerly awaiting the publication of a 

12 "Dear Colleague" letter clarifying the Department's 

13 definitive guidance. To date, this guidance has 

14 yet to be published. Therefore, AACS respectfully 

15 requests that if such guidance is not published 

16 prior to the announcement of the topics for 

17 consideration in the next round of negotiations, 

18 that this issue be added to the agenda. 

19 And finally, as previously stated, the 

20 issue of professional judgment as it relates to 

21 over-borrowing of students, AACS urges the 

22 Department to work with our community to develop 

23 regulations under the Criteria for Professional 

24 Judgment which will enable our financial aid 
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1 administrators to prevent students from borrowing 

2 federal student financial assistance beyond that 

3 which is needed directly for their education and 

4 training. We are deeply concerned that the 

5 emphasis on providing students and their families 

6 with information on all of the student financial 

7 assistance that they qualify for may present very 

8 serious and unintended consequences in the form of 

9 increased borrowing, leading to larger than 

10 necessary student indebtedness, an increased risk 

11 of future defaults for students from lower socio 

12 and economic incomes and PACs, and additional 

13 upward pressure on proprietary institution's 

14 eligibility to comply with the participation under 

15 the 90/10 rule.

16 As I noted prior, we support all of these. 

17 We welcome the opportunity to work with the 

18 Department in the development of these regulations, 

19 and we'll be offering up our opportunity and our 

20 nominations for participation once the notice is 

21 put forward.

22 Thank you. 

23 MR. MADZELAN: Thanks, Tom.

24 Tom was our last speaker scheduled for 
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1 this morning, so since it is close to 12:00, we 

2 anticipated breaking for lunch anyway, let us break 

3 now for lunch, give you an extra 10 minutes or so, 

4 and we will reconvene precisely at 1:00 p.m. Thank 

5 you.

6

7

8 [Whereupon, at 11:50 a.m., a luncheon 

9 recess was taken.]

10

11

12

13

14

15

16

17
djj 129

1 A F T E R N O O N S E S S I O N

2 [1:00 p.m.]

3 MR. MADZELAN: We'll go ahead and get 

4 started now with our first speaker this afternoon, 

5 Jillian Estes; James, Hoyer, Newcomer, Smiljanich & 

6 Yanchunis, if I have any or all of those right. 

7 MS. ESTES: What's that? 

8 MR. MADZELAN: If I have any or all of 

9 those right of your firm name? 

10 MS. ESTES: You got the point across. 

11 MR. MADZELAN: Welcome. 

12 MS. ESTES: Thank you. Thank you for the 

13 opportunity to speak today. My name is Jillian 

14 Estes and I'm a class action consumer advocacy 

15 attorney with the law firm of James, Hoyer, 

16 Newcomer, Smiljanich & Yanchunis. And yes, I gave 

17 the stenographer a business card so she doesn't 

18 have to spell those. 

19 It's my honor to represent a group of 

20 students who is perhaps the most important people 

21 involved in the entire rulemaking process: the 

22 students of the career colleges. 

23 In the interest of full disclosure, I 

24 currently represent a class of students alleging 
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1 deceptive trade practices and unsupervised internal 

2 lending against Westwood College, a for-profit 

3 career institution based out of Denver, Colorado. 

4 As such, much of my investigation into the industry 

5 has centered around Westwood. However, I'm 

6 confident in my findings that the career college 

7 community is a small one and the practices of one 

8 school are often reflected very similarly in the 

9 practices of the others. 

10 First, I'd like to commend the Department 

11 for its continuing efforts in opening these 

12 hearings and the rulemaking process to the public. 

13 I find few things more troubling than the remarks 

14 made at the October 2008 hearings at which Harris 

15 Miller, whom we heard from earlier, as President of 

16 the Career College Association, requested that 

17 negotiating over a certain topic be restricted only 

18 to members of his association. With all due 

19 respect to Mr. Miller, the implication that 

20 allowing many parties to affect the regulations of 

21 our government would be like "allowing non-pilots 

22 to fly a plane" is so wholly illogical that it 

23 would be laughable if not for the alarming insight 

24 it shows into the CCA, and assumingly its member 
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1 schools, as to how they view the public, including 

2 their own students. 

3 Perhaps this is why students of career 

4 colleges across the country have come to my firm in 

5 droves, crying out for someone to hear their 

6 concerns and to help them have a voice. The 

7 desperate need for representation was not a 

8 reaction I anticipated when I ventured into the 

9 for-profit college arena, but the necessity of a 

10 unified voice for students is remarkably apparent, 

11 particularly given the unbalanced presentations at 

12 today's proceedings. 

13 In addition to student victims, I'm 

14 contacted on a daily basis by former and current 

15 employees of various colleges looking to tell me

16 about their school's practices. While my ethical 

17 obligations prohibit discussion with current 

18 employees of certain colleges, the simple fact that 

19 they continue to reach out speaks volumes. 

20 However, the former employees have no such 

21 restrictions and they speak freely about the 

22 practices they've witnessed and participated in. 

23 While the career colleges may appeal to regulators, 

24 they do not pay bonuses in exchange for 
djj 132

1 recruitment. The environment created at the 

2 schools tells a very different story. Employees 

3 repeatedly tell me stories of parties and gift 

4 certificates, meals out, extra vacation time, and 

5 even exotic trips to the Caribbean, all for 

6 securing a certain number of student applications. 

7 Not graduations, just applicants that stay past the 

8 14-day window needed to secure Title IV funds. 

9 Competitive team environments encourage 

10 recruiters to think of potential students as points 

11 to be scored rather than individuals that may or 

12 may not be suited to a particular learning 

13 environment. The safe harbors that have been 

14 frequently discussed today are ironic in name and 

15 implication. The idea of safety betrays the 

16 priority of the administration that created them as 

17 the regulations provide safety only to the schools 

18 who use them to tow the line of propriety while 

19 wholly disregarding the impact on students who are 

20 subjected to those recruiting practices. 

21 My first suggestion then is that the 

22 Department completely reexamine the practical 

23 impact of these dangerous harbors and remove or 

24 narrowly define them to consider the elaborate 
djj 133

1 incentive programs as part of the bonus structure 

2 that is weighed in considering Title IV compliance. 

3 I apologize in advance for a slight 

4 deviation in getting to my next suggestion for 

5 Department regulation. I was educated at the 

6 University of Florida, and for 10 years, I have 

7 been a devoted fan of the Gator football program. 

8 It's been a good 10 years for us. Any diehard fan 

9 of college football will tell you that the single 

10 most important indicator of continuous program 

11 success is strong recruiting. And while Mr. Harris 

12 attempted to compare career college recruiting to 

13 his neighbor's water polo contacts, he left out the 

14 major difference: Because of the critical nature 

15 of recruitment, college coaches' recruiting 

16 activities are heavily regulated by governing 

17 bodies and any misstep is quickly and consistently 

18 penalized. Simply, schools that violate the rules 

19 of recruiting are forbidden from recruiting in 

20 future years with the number of years tied to the 

21 severity of the violation. The threat to future 

22 seasons encourages accountability and 

23 responsibility by all members of the team in 

24 ensuring a proper recruiting period. 
djj 134

1 The financial success of a career college 

2 is undeniably similar in that it depends nearly 

3 entirely on the continued enrollment of new 

4 students, but the current penalties for violations 

5 fall far too short of providing a deterrent value. 

6 Under the current system, schools that are tapped 

7 with admissions violations are largely able to 

8 dismiss the issue and continue on with business as 

9 usual. By way of example, Westwood College 

10 recently settled a federal lawsuit alleging a 

11 variety of recruiting and state regulating issues. 

12 The $7 million settlement was a mere pittance to a 

13 school that brought in over $300 million last year. 

14 At that rate, schools are likely to consider the 

15 lawsuits or fines simply to be part of the cost of 

16 doing business. 

17 But if the Department instills a penalty 

18 that would limit the amount of federal funds that 

19 can be spent on recruiting, the schools will 

20 recognize that there is no other option than to 

21 correct any improper practices or risk losing the 

22 life blood of their financial success. Restricting 

23 the federal funds allowed to be used for 

24 advertising would make the money into a shield used 
djj 135

1 to protect the students rather than a sword to 

2 attack uninformed and unprepared potential 

3 applicants. 

4 Schools who are confident that their 

5 advertisements and recruiters are relaying accurate 

6 information should find no objection to this as it 

7 serves only to raise the accountability industry8 wide. Schools will be forced to monitor the flow 

9 of information more closely and to ensure that 

10 potential students are not subjected to boiler room 

11 recruitment tactics that blur the line between 

12 truth and aspiration. 

13 It is tremendously encouraging to see that 

14 the Department of Education has focused its 

15 regulatory sites on the critical issues of program 

16 integrity. It is undeniable that these hearings 

17 are dominated by industry representatives who 

18 encourage loosening regulations and letting the 

19 schools essentially regulate themselves. It is 

20 equally undeniable that the schools should not be 

21 the Department's primary concern. The students 

22 need protection, they need regulation, and they 

23 need to be heard.

24 As a consumer attorney, I'm committed to 
djj 136

1 representing the students whose lives have been 

2 destroyed by insurmountable debt created as a 

3 result of misinformation and straight-out lies 

4 about program quality. There is a lot of job 

5 security in that field these days. But the value 

6 of constantly reacting pales in comparison to the 

7 value of proactive regulatory measures, the two 

8 suggestions I've introduced--a broad view of the 

9 incentives included in Title IV compliance 

10 evaluations and the penalties focused on limiting 

11 the amount of Title IV dollars that can be used in 

12 recruiting--will strongly encourage career 

13 institutes to reevaluate their recruiting methods 

14 to make students, rather than profit, their true 

15 priority. 

16 MR. MADZELAN: Thank you. 

17 MR. CUMMINGS: David, I actually have a 

18 question. 

19 MR. MADZELAN: Jillian, question from 

20 Glenn.

21 MR. CUMMINGS: Ms. Estes, could you 

22 describe specifically where you see the--examples 

23 of the infractions you see on enrollment recruiting 

24 and the process of recruiting?
djj 137

1 MS. ESTES: Certainly. 

2 MR. CUMMINGS: What would be some 

3 examples? 

4 MS. ESTES: I don't have the copy with me, 

5 but I will direct your attention to the lawsuit 

6 we've recently filed against the college which 

7 highlights a large variety of the recruiting 

8 practices. A couple that we've seen in particular 

9 have to do with faulty misinformation about the 

10 accrediting process. We talked a lot today about 

11 the difference in regional and national 

12 accreditations and the way that representation is 

13 made to the students. Oftentimes, as is 

14 understandable, national accreditation sounds like 

15 it would be the bigger and more commonly accepted 

16 accrediting process. And, in fact, we've heard 

17 recruiters as recently as December say on the phone 

18 that, yes, any national accreditation will be 

19 accepted at any other college just like if you went 

20 to University of Michigan or University of Florida, 

21 to a potential student on the phone. 

22 In addition, we believe that the schools 

23 violate a--and I'm speaking, I apologize, but 

24 mostly about Westwood because that's where the bulk 
djj 138

1 of my information has come from--that the schools 

2 represent their admissions counselors as having a 

3 background in education and being qualified to make 

4 enrollment decisions when, in fact, they're sales5 related jobs. Their job descriptions strictly 

6 define sales positions. They have no background in 

7 education. And I think one of the major concerns 

8 we've seen, I can--I'll submit a copy of our 

9 lawsuit, but as the exhibit to that, there has been 

10 e-mails exchanged showing really the way that the 

11 recruiters consider the students as simply targets. 

12 In one example they use the method of a drive-by 

13 shooting as an analogy for having recruiting 

14 another student, sending around to the whole 

15 company a picture of some gangsters shooting out a 

16 window as an indication they've secured a second 

17 application that morning. So just a variety of 

18 ways that show that the students are being 

19 disregarded and it's purely about the sale.

20 Any other questions? 

21 MR. CUMMINGS: Thank you. 

22 MR. MADZELAN: Thank you.

23 David Ureña, Community Legal Services of 

24 Philadelphia. 
djj 139

1 MR. UREÑA: Good afternoon, everyone. My 

2 name is David Ureña. I'm a paralegal at Community 

3 Legal Services (CLS) of Philadelphia. First, I'd 

4 like to thank the Department of Education for the 

5 opportunity to offer our comments and suggestions. 

6 Community Legal Services is a non-profit 

7 law firm which represents and assists low-income 

8 Philadelphians in civil matters. Last year alone 

9 we represented or assisted over 17,000 clients in 

10 matters ranging from employment law to mortgage 

11 foreclosure with many practice areas in between. 

12 For decades, we have represented clients 

13 in student loan and trade school problems. As a 

14 paralegal I have directly assisted clients with 

15 student loan issues for over two years. And it is 

16 in light of this experience and the experience of 

17 Sharon Deitrich, the managing attorney at CLS and 

18 my supervisor, that I wish to provide the following 

19 comments and suggestions which focus on the impact 

20 student loan and trade school problems have on low21 income borrowers. Some of the comments and 

22 suggestions deal with substantive issues and other 

23 with procedural issues. 

24 The first common problem we see is that 
djj 140

1 trade schools continue to present problems for low2 income students. CLS continues to see people who 

3 appear to have legitimate complaints against trade 

4 schools. For example, the cases that follow are 

5 all from the last several years.

6 Client A attended a casino dealing school 

7 for two weeks. Despite believing that he never 

8 signed for a loan, he was told that he has a 

9 student loan for $8,000. Client B relocated to 

10 Philadelphia from the South to attend an airplane 

11 maintenance school. Besides being very unhappy 

12 with the quality of the training, he was put in the 

13 position of being threatened with homelessness by 

14 his school. The idea was that he would be 

15 permitted to live in student housing temporarily 

16 until he found a job and housing, but he was not 

17 able to find an apartment within several weeks. He 

18 was given two weeks by the school to vacate his 

19 student housing by the year's end. 

20 Tough tactics by schools to leverage money 

21 from students is a common issue that we see, 

22 especially by threatening to withhold a certificate 

23 at the time that the training is complete. In 

24 particular, such clients have come to CLS from a 
djj 141

1 cosmetology school. For example, Client C had been 

2 told at enrollment by the cosmetology school that 

3 she would only need to take one loan to finance her 

4 education, but before she graduated she was forced 

5 to take a second loan by the school in order to 

6 complete her training. 

7 Another client expected to get a Pell 

8 Grant, but did not when the cosmetology school 

9 apparently mishandled her paperwork. Instead, the 

10 school forced the client to take out an additional

11 loan in order to get a graduation certificate and 

12 avoid missing the board exam. 

13 Methods must be identified to better hold 

14 schools responsible for their outcomes. Too many 

15 students are simply borrowing too much money for 

16 programs which they are not likely to complete and 

17 which are not likely to lead to employment if they 

18 do. 

19 Also, trade schools must be monitored to 

20 determine whether they deal fairly with students on 

21 payment issues. Too many students are experiencing 

22 bait-and-switch tactics in which they are quoted 

23 one figure as to the amount of money that they will 

24 owe or have to borrow, but later are told that a 
djj 142

1 second much higher number is their actual cost. 

2 Their completion certificates often are being held 

3 hostage in these disputes. Moreover, monitoring 

4 for compliance with refund terms of enrollment 

5 agreement is needed. 

6 Another problem that we see is that 

7 discharge applications--and this is a procedural 

8 problem--where they must be mailed to is unclear 

9 and confusing. And this might seem to be a minor 

10 issue on the surface, but this is a problem which 

11 impedes borrowers from successfully submitting 

12 discharge applications, leading them to become 

13 frustrated with the system and dropping their 

14 effort altogether when they could very well be 

15 entitled to a discharge. 

16 It is not uncommon to find it exceedingly 

17 difficult to find the correct address to which a 

18 discharge application should be mailed. This stems 

19 from the fact that many online discharge forms do 

20 not contain any directions on where the discharge 

21 form should be mailed to. Sometimes the 

22 information regarding where to mail discharge forms 

23 to provided online or over the form is errant or 

24 out of date, and discharge forms may be required to 
djj 143

1 be mailed to a different Department office 

2 depending on whether the borrower had previously 

3 applied for a discharge. Even we, as knowledgeable 

4 advocates, are often in the dark. 

5 As an example, Client F had applied for a 

6 discharge based on a total and permanent disability 

7 in 2005. This application was denied. 

8 Subsequently, he sought CLS's assistance. CLS 

9 mailed his discharge application to the San 

10 Francisco office of the Department only later to be 

11 informed that his application should have been 

12 mailed to the Disability Discharge Loan Servicing 

13 Center in Greenville, Texas, because the client had 

14 previously applied for a discharge. We were also 

15 told that the location of the client's application 

16 was unknown. 

17 In trying to locate the client's 

18 application, I was informed by the Default 

19 Resolution Group that it was forwarded to the 

20 Department's office in Atlanta, Georgia. I then 

21 spoke to the Atlanta office representative who was 

22 directly handling the client's application and was 

23 informed that his application had been 

24 preliminarily approved by herself. However, after 
djj 144

1 months of inquiries, the client's application was 

2 never transferred to the Disability Discharge Loan 

3 Service Center as was promised by the Atlanta 

4 office representative. Ultimately, a new 

5 application was sent to the Department's 

6 Greenville, Texas, office. This process took 

7 approximately one year. 

8 There is an easy fix for this. The 

9 Department should make publically available a 

10 directory of offices which handle discharge 

11 applications with instructions on which office a 

12 borrower's application should be sent to. 

13 A third issue that we commonly see is that 

14 processing times of discharge forms and transfers 

15 of forms between Department offices is too long. A 

16 Default Resolution Group or Disability Discharge 

17 Loan Servicing Center representatives often inform 

18 us that an individual's application will take 

19 approximately 90 to 120 days--three to four months20 -to first appear in their system and be processed. 

21 If, for any reason, an application must be 

22 transferred to a different office, this waiting 

23 period may repeat itself. This often becomes 

24 frustrating for borrowers and sometimes results in 
djj 145

1 their losing track of where their application is or 

2 giving up on the discharge process entirely. 

3 The Department should implement new 

4 processing procedures to curtail the length of time 

5 that it takes to include a new application in their 

6 system and review it or transfer a form to a 

7 different office. 

8 Another problem we commonly see is that 

9 the disability discharge process is unnecessarily 

10 opaque to both borrower and doctor. And I 

11 understand that the disability discharge process 

12 was addressed during the most recent rulemaking 

13 negotiation session. However, I wish to raise this 

14 procedural issue which continues to impact our 

15 clients negatively in spite of the substantive 

16 changes that resulted and were implemented last 

17 year.

18 As the Department is well aware, the most 

19 difficult stage of the disability discharge process 

20 is the medical review stage. Time and time again, 

21 our clients' disability discharge applications are 

22 rejected due to one specific problem: a gap in 

23 communication between the Department, the doctor, 

24 and the borrower. In our experience, if the 
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1 Department does not receive what it wants from the 

2 doctor, it merely follows up by sending the same 

3 black supplemental information request form to the 

4 doctor without feedback as to what information the 

5 Department wants in addition to what the doctor has 

6 already provided.

7 It is already difficult from the outset to 

8 get doctors to cooperate and assist clients by 

9 completing discharge forms because they're 

10 providing a service free of cost to their patient, 

11 which takes time away from other important facets 

12 of their practice. As a result, they commonly 

13 become agitated with the multiple responses they 

14 are asked for whenever the Department requires 

15 further information and they easily give up on the 

16 process. 

17 The borrower is also left in the dark 

18 about the status of their disability discharge 

19 application until they receive a letter stating 

20 that their application was rejected due to medical 

21 failure. 

22 As an example, Client G applied for a 

23 disability discharge a total of three times before 

24 coming to CLS for help. For each of the past 
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1 applications, the client's application was denied 

2 due to a medical review failure which resulted

3 because the doctor's office did not know what 

4 additional information to submit to the Department. 

5 The client's doctor no longer wishes to assist the 

6 client with the discharge application out of 

7 frustration and the client is now looking for a new 

8 doctor who may be willing to help him. 

9 It remains to be seen whether the new 

10 discharge form helps to fix this issue. 

11 Nevertheless, borrowers should be notified in 

12 writing by the Department if their doctor is being 

13 unresponsive or has provided insufficient 

14 information and documentation to support their 

15 application or allow a complete assessment to be 

16 made.

17 If it is a matter of insufficient 

18 information and documentation, the borrower should 

19 also be informed of what additional information and 

20 documentation is necessary to allow the Department 

21 to completely assess the borrower's application. 

22 In addition, doctors should also be informed 

23 clearly in writing what additional information or 

24 documentation is needed. 
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1 Yet another problem we see is that 

2 collection agency tactics mislead and antagonize 

3 borrowers to the detriment of both borrower and 

4 loan holder. Collection agencies frequently convey 

5 misleading and incomplete information regarding 

6 options available to borrowers, leading borrowers 

7 to believe their options are more limited and 

8 unaffordable than they actually are. In addition, 

9 agencies often employ tactics which intimidate 

10 borrowers such as verbally berating borrowers, 

11 contacting borrowers at irregular hours, contacting 

12 borrowers' relatives, and even contacting 

13 borrowers' employers. 

14 With low-income borrowers who are in 

15 financially vulnerable positions, these collection 

16 tactics are especially counterproductive to the aim 

17 of collecting on debts. In fact, these tactics 

18 often result in borrowers avoiding contact with 

19 collection agencies and ignoring collection notices 

20 they receive, initiating a cycle detrimental to 

21 both the borrower and loan holder. 

22 Furthermore, collection agencies 

23 frequently fail to follow Department of Education 

24 regulations, especially with respect to allowing 
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1 low-income borrowers access to reasonable and 

2 affordable repayment plans and rehabilitation 

3 through reasonable and affordable payments. 

4 Even when we, who are knowledgeable 

5 advocates, negotiate for those borrower rights, we 

6 are often told that these options are not 

7 available. For example, one client was contacted 

8 by a collection agency which threatened to garnish 

9 her wages and contact her employer if she did not 

10 make payments on her student loans. During the 

11 course of assisting her, she explained to me that 

12 she had been contacted by the collection agency at 

13 her workplace, which had attempted to reach her 

14 supervisor. When we contacted the collection 

15 agency, it claimed wrongly that she could not 

16 rehabilitate her student loans through income17 sensitive payments and that she was ineligible to 

18 reconsolidate her student loans. 

19 Another client who came to us for 

20 assistance in rehabilitating his defaulted student 

21 loans we assisted, and during a conversation with 

22 the lender the representative repeatedly--I'm 

23 sorry, during a conversation with the collection 

24 agency a representative repeatedly denied that the 
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1 client could rehabilitate his loans through income2 sensitive payments despite my citing the Department 

3 regulations multiple times. 

4 These issues appear to be the result of 

5 insufficient training of collection agency 

6 representatives, economic incentives which are 

7 inherent in how the collection agencies make 

8 profits, or the result of latitude individual 

9 collection agents sense they have in dealing with 

10 individual borrowers without fear of repercussions. 

11 Ideally the Department should scrap the 

12 use of collection agencies altogether and directly 

13 handle debt collection. A benefit of doing so 

14 would be having a single debt collector with 

15 uniform standards and training across the board so 

16 that individual representatives will have a better 

17 ability to navigate an individual borrower's 

18 rights. However, barring that outcome, more 

19 stringent standards concerning the information 

20 these agencies must convey to individual borrowers 

21 should be imposed. There should also be greater 

22 oversight over the collection agencies and 

23 penalties to deter the agencies from misleading 

24 borrowers with respect to their rights and the 
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1 options available to them. Finally, borrowers 

2 should be better informed as to what their rights 

3 are and whom they may contact to report collection 

4 agency abuses. 

5 Finally, the problem that we commonly see 

6 is that rehabilitation is not a viable option for 

7 low-income borrowers. A lot of low-income 

8 borrowers seek rehabilitation in order to primarily 

9 improve their credit, but not necessarily to renew 

10 eligibility for student loans. Rehabilitation is 

11 becoming a more important option for borrowers with 

12 defaulted student loans. For example, outside of 

13 the areas in which consumer credit history has 

14 traditionally been relied upon for the purpose of 

15 making lending decisions, consumer credit history 

16 is becoming increasingly important for hiring and 

17 employment. CLS has seen an increasing number of 

18 clients who are concerned that negative notations 

19 on their credit reports, which have arisen in 

20 connection to their student loans, will limit their 

21 ability to find employment. 

22 One downside to rehabilitation for low23 income borrowers is that the loan payments may 

24 become unaffordable upon successful rehabilitation. 
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1 As it stands, if a borrower rehabilitates his or 

2 her loans through income-sensitive payments, once a 

3 borrower has rehabilitated their defaulted student 

4 loans, the required monthly payment amounts revert 

5 back to 10-year standard repayment schedule. This 

6 is almost always unaffordable for low-income 

7 borrowers and greatly increases the risk of the 

8 loans lapsing back into default, thus nullifying 

9 the effects of rehabilitation, which then becomes 

10 unavailable after the second default. 

11 The second downside is that the negative 

12 notations on the borrower's credit report remain 

13 after rehabilitation has taken place. Although the 

14 default notation is completely removed after 

15 rehabilitation, any delinquent payment notations, 

16 as recent as seven years ago, remain, thus making 

17 the benefit of rehabilitation to one's credit 

18 negligible. 

19 As an example, we assisted a client with 

20 bipolar disorder who was diagnosed while attending 

21 college, and he dropped out as a consequence of his 

22 condition. The client was left with a high amount 

23 in student loan debt to repay, which he wasn't able 

24 to do because his condition prevented him from 
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1 obtaining employment. Consequently, his loans 

2 defaulted. 

3 When he came to us for assistance, he did 

4 so because of concern with his credit, and we 

5 proceeded to assist him in trying to obtain a 

6 rehabilitation of his student loans. Upon 

7 completion of the rehabilitation requirements, the 

8 client was told that he could not rehabilitate 

9 successfully because the lender had changed the 

10 rules regarding rehabilitation. Eventually we 

11 found out that the lender was willing to allow him 

12 to rehabilitate. However, he had to make $500 

13 monthly payments while the lender sought out a new 

14 buyer of his student loans, which was completely 

15 unaffordable. 

16 So, I'll just finish up by saying that 

17 upon successfully rehabilitating their student 

18 loans, borrowers should be allowed immediate access 

19 to the income-based repayment program which takes 

20 effect on July 1st, thereby allowing them to avoid 

21 the risk of defaulting on their student loans a 

22 second time. Additionally, all negative notations 

23 on a borrower's credit history related to the 

24 borrower's student loans should be removed upon 
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1 rehabilitation. 

2 Thanks again for this opportunity. 

3 MR. MADZELAN: Thank you. 

4 MR. CUMMINGS: I have a question. 

5 Mr. Ureña, could you describe your institutional 

6 concerns of whether you found that there were a 

7 small density of high violators or whether you 

8 thought it was pervasive?

9 MR. UREÑA: Based exclusively on the 

10 stories our clients come in with, it seems to be 

11 more of a pervasive problem rather than a high 

12 density problem. There do appear to be a couple of 

13 agencies which seem to be better at what they do, 

14 but, for the most part, a lot of agencies aren't, 

15 and sometimes these agencies even subcontract with 

16 other companies which themselves are pretty bad. 

17 MR. MADZELAN: Thank you.

18 Lauck Walton, Westwood College. 

19 MR. WALTON: Good afternoon. I'm Lauck 

20 Walton. I'm a Regional Vice President for Westwood 

21 College; work in the Northern Virginia area. On 

22 behalf of Westwood College, I thank you all for the 

23 opportunity to testify today. 

24 Before I get into Westwood's substantive 
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1 comments, I have to very briefly respond to the 

2 comments made about Westwood College and career 

3 colleges in general. On behalf of our tens of 

4 thousands of graduates, our current students, and 

5 our faculty and staff, we're deeply offended by the 

6 accusations made a few moments ago. The 

7 plaintiff's firm does not represent a class of 

8 students. They represent four students seeking to 

9 represent a class. Westwood does not think this is 

10 the appropriate forum to litigate this matter. 

11 Suffice it to say that we think their allegations 

12 are frivolous and we will demonstrate that in the 

13 appropriate forum in due course. 

14 Westwood is provided--is 100 percent 

15 committed to providing students with the knowledge, 

16 skills, and credentials to enable them to launch, 

17 enhance, or change their careers, and that 

18 commitment informs our comments today. 

19 So turning to the issues at hand, they're 

20 important and I would like to speak to the 

21 Department's proposed issues based on my hands-on 

22 experience working two Westwood campuses for 850 

23 students today. 

24 Current regulations call for satisfactory 
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1 progress to be evaluated one time per year. At 

2 Westwood, we evaluate five times per year, once 

3 each term. We do that because we believe the 

4 additional evaluations benefit students and it far 

5 outweighs the administrative costs. Students that 

6 need extra assistance get it quickly and 

7 efficiently and have an improved chance of 

8 graduation or will end a program of study even 

9 earlier. Both of these are in the public interest. 

10 The current regulations with respect to 

11 admissions compensation simply aren't clear. No 

12 reputable college wants to incent representatives 

13 to enroll unqualified students who aren't going to 

14 graduate. Currently the regulation is just unclear 

15 to the point where institutions are afraid to 

16 provide a Starbucks gift card to their admissions 

17 reps. You know, let's just get the rules down. 

18 Whatever they are, we can abide by them. It would 

19 be no problem. Spell out the regulations, what's 

20 permitted and not prohibited, and give the colleges 

21 an opportunity to correct minor issues when they 

22 are challenged. 

23 We commend the Department for considering 

24 the definition of gainful employment. This is a 
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1 key component of Westwood's mission. The 

2 Department has a great deal of program data already 

3 sorted by the CIP code. We certainly recommend 

4 collecting appropriate employment information by 

5 CIP code and allowing recognized accrediting 

6 agencies the ability to work with the institutions 

7 to evaluate those in subjective cases. 

8 Similarly, Westwood believes that our 

9 current regulations with respect to the definition 

10 of credit unit are properly determined in 

11 conjunction with those recognized accrediting 

12 agencies, and that no additional regulations 

13 prevent students from--preventing them from taking 

14 full advantage of the year-round Pell program. 

15 This is a benefit to all eligible students. 

16 Westwood supports simplification of the 

17 verification process. We think it adds credibility 

18 and integrity to the award of Title IV, however, 

19 pretty complicated. Heard from a number of 

20 speakers today, anything we can do to simplify it 

21 would be great. We'd like to get it right. The 

22 easier we can get the information, if we can share 

23 it with the IRS, that'd be great. If we can 

24 simplify the forms, that'd be great. But if we can 
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1 reduce the burden on the students and the families, 

2 we will have made progress.

3 Finally, Westwood applauds the Department 

4 for working on the definition of the high school 

5 diploma. As a member of the State Council of 

6 Higher Education of Virginia's Diploma Mill Task 

7 Force, this is a very complicated issue. Like one 

8 of the other speakers earlier today, Westwood has a 

9 list of over 100 fraudulent high school providers. 

10 We won't accept those as a matter of policy. But 

11 with the advent of more and more home school 

12 options, international education, so many 

13 possibilities in a world that's expanding every 

14 day, we need to have clear definitions of what's 

15 permitted, what kind of institution is going to 

16 qualify, and it's a great topic for the federal 

17 government to help us sort out and make right. 

18 Thank you so much for your time. 

19 MR. MADZELAN: Thank you.

20 Theodore Levitt, Miami-Dade.

21 MR. LEVITT: Afternoon, everyone. I'm Ted 

22 Levitt from Miami-Dade College. I am the Director 

23 of College Communications there, but in my other 

24 duties as assigned, I spend a good deal of time in 
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1 the areas of persistence and completion. And, for 

2 the most part, my recommendations here are around 

3 persistence and completion, but I'm really here for 

4 the--primarily for the forum tomorrow, so most of 

5 what I have to say I can hold for the forum there, 

6 but I have a couple of other things I'd like to 

7 address.

8 As most of you know, community colleges 

9 around the country offer associate degrees in 

10 science, associate degrees in the arts, short-term 

11 certifications, and many of us now are offering 

12 four-year degrees. Miami-Dade is presently 

13 offering degrees in nursing, degrees in education, 

14 K-12, exceptional education, and the STEM areas in 

15 high school. And we have a four-year degree in 

16 public safety management and several others that 

17 are on the way.

18 And what the institution tries to do, 

19 particularly around persistence and completion, but 

20 as an entity in the community, our effort is to be 

21 in the fabric of the community, and the community 

22 depends on community colleges across the country. 

23 And the population of students that attend, as most 

24 everybody knows, in our case, we are big and our 
djj 160

1 door is open to the community. We have over 70,000 

2 credit students and 170,000 students overall at 8 

3 campuses. And with a bow to Phoenix and probably 

4 several others, we are the largest place-bound 

5 institution in the country.

6 We have the largest number of Hispanics 

7 and African Americans. Over half of our students 

8 are the first in their families to attend college. 

9 In our case, 39 percent of our students live in 

10 poverty. Sixty-one percent are low-income and that 

11 sounds extreme, but I'm willing to guess that the 

12 statistics at other schools around the country are 

13 similar. Seventy-five percent of our students are 

14 underprepared for college. 

15 When they arrive, they are greeted with as 

16 best as possible an environment that helps them to 

17 succeed. We put a tremendous amount of effort into 

18 persistence and retention. And, at this point, 

19 we're gratified because the statements made just a 

20 few days ago by the Chief of Staff to the President 

21 that there would be the possibility of resources 

22 for community colleges as an untapped resource in 

23 the educational system is quite welcome.

24 The state funding, as everybody knows, is 
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1 weak. The tuition at our school is around $1,700 

2 for a full load. Community colleges around the 

3 country average around $2,300 for a full-time 

4 yearly cost. But state funding, in many cases, we 

5 are--our funding is easily a third of what the 

6 state university receives. So the comments of 

7 Mr. Emanuel are heartening to us to see that the 

8 efforts, particularly around persistence and 

9 retention, will be--we might get some help there.

10 I did want to make one comment around an 

11 issue beyond persistence and completion, and that 

12 has to do with the verification of information on 

13 student aid applications. As everybody knows, this 

14 is cumbersome--it's a long application--and we would 

15 like to recommend a tie-in with IRS and Social 

16 Security databases to provide verification 

17 information. And if discrepancies are apparent, 

18 then other steps can be taken, but that data can 

19 help a great deal. 

20 And I want to make reference to 

21 communication that was sent to Secretary Duncan and 

22 to Under Secretary Kanter about a platform that 

23 we've come in contact with, that's active in several 

24 states, that integrates personal information, tax 
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1 information, and then distributes it electronically 

2 to a range of state and federal benefits, and 

3 exports the information to the FAFSA, simplifying 

4 the FAFSA. And I believe at some point later in 

5 the day, someone is going to make some presentation 

6 on that kind of an operation, on that kind of a 

7 platform.

8 That's really all we had to say today and I 

9 look forward to tomorrow, and thank you for the 

10 chance.

11 MR. MADZELAN: Yes, thanks, Ted. I'm 

12 looking forward to tomorrow as well since I'll be 

13 chairing the--or at least leading the persistence 

14 and completion forum. Thank you.

15 Harrison Wadsworth, International 

16 Education Council.

17 MR. WADSWORTH: Thanks very much. My name 

18 is Harrison Wadsworth. I'm Executive Director of 

19 the International Education Council (IEC), a non20 profit association of the international 

21 institutions who participate in the Federal Family 

22 Education Loan Program. And we thank you for this 

23 opportunity to offer suggestions for streamlining 

24 the process for international study, while 
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1 maintaining the necessary safeguards to avoid fraud 

2 and abuse.

3 Many American students who study in the 

4 U.S. or abroad depend on student loans to finance 

5 their education. And I'm sure everybody is grateful 

6 that I'm not talking about program integrity issues. 

7 We're talking about the other committee, the Foreign 

8 Schools Committee.

9 The IEC represents and assists 

10 institutions of higher education outside of the 

11 United States that wish to participate in the U.S. 

12 federally supported student loan program. The 

13 members of the association believe that 

14 international friendship and understanding between 

15 people of all nationalities is best built on a 

16 foundation of personal relationships developed 

17 during academic studies, friendships that often 

18 remain strong for life.

19 On June 10, 2009, the House of 

20 Representatives approved the Senator Paul Simon 

21 Study Abroad Foundation Act as part of the 

22 Formulations Authorization Act for Fiscal Years 

23 2010 and 2011. This bill is intended to establish 

24 an innovative public-private partnership to create 
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1 a more globally informed American citizenry.

2 The bill was just one of over 20 pieces of 

3 legislation that has been introduced in the last 

4 six months to encourage and enhance America's global 

5 leadership in opportunities through the 

6 international education experience. However, this 

7 effort is undermined by the sometimes unreasonably 

8 difficult rules that continue to be applied to 

9 foreign schools that are willing to participate in 

10 the U.S. Federal Student Loan Programs. 

11 Congress and the Higher Education 

12 Opportunities Act approved certain changes in the 

13 law designed to ease these impediments. Other 

14 improvements, we believe, can be achieved by 

15 changing administrative policies. We urge the 

16 Department to negotiate commonsense changes in the 

17 regulations that will implement the HEOA and, in 

18 general, expand the ability of foreign schools to 

19 serve American students.

20 As you know, the foreign school loan 

21 default rate is extremely low: 2.2 percent for the 

22 2007 cohort, there's a draft rate--that's the draft 

23 rate, and that's the lowest of any category of 

24 institutions and far lower than the 6.9 percent 
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1 overall rate. Clearly, students at foreign schools 

2 are doing well and deserve to have the support they 

3 need to finance their education.

4 The foreign school community is committed 

5 to working cooperatively with all postsecondary 

6 industry participants and representative 

7 organizations and, most importantly, with the 

8 Department in fulfilling the promise of educational 

9 access and choice.

10 The foreign schools community is grateful 

11 for the opportunity to focus on regulations 

12 affecting our constituency. I think this may be 

13 the first time. Is this the first time that I--in 

14 my memory, at least, which isn't that long. This 

15 community is, however, in the unique position of 

16 having few local experienced representatives within 

17 a reasonable travel distance of the proposed 

18 hearings and meetings.

19 IEC has been an effective advocate for 

20 foreign schools in Washington for a number of 

21 years, and we encourage the Department to approve 

22 IEC and foreign school representatives as 

23 participants in the Negotiated Rulemaking Committee 

24 on foreign school issues.
djj 166

1 IEC has some specific proposals for the 

2 negotiation that I'm going to go into now. First, 

3 regarding distance learning, technology has become 

4 an integral part of all aspects of higher 

5 education. There are few programs available to 

6 students that do not use some form of online 

7 communication or learning. While we appreciate the 

8 Secretary's goal of encouraging students to 

9 experience foreign cultures through residence 

10 abroad, we feel that some students meeting that 

11 expectation are being unfairly restricted in their 

12 educational goals by the prohibition on taking any 

13 distance education coursework within a program of 

14 study at a foreign school.

15 We believe that there are internal 

16 conflicts within the law that should be resolved in 

17 regulation, and we encourage the negotiators to 

18 consider alternative approaches that recognize as 

19 legitimate a situation where a student may have to 

20 travel or take a class, even a single class, via 

21 distance education to complete a degree.

22 Financial and compliance audit 

23 requirements is the second area I wanted to raise 

24 and propose for the agenda. The Higher Education 
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1 Opportunity Act allows the Secretary to waive 

2 financial and compliance audit requirements for 

3 international institutions participating in the 

4 Federal Family Education Loan Program whose loan 

5 volume per year is less than $500,000, and to 

6 modify the requirements for schools with more loan 

7 volume. These audits can be extremely costly to 

8 obtain on an annual basis: $100,000 or more for 

9 the financial audit and, as was mentioned earlier, 

10 $10,000 to $15,000 for the annual compliance audit.

11 A school quickly finds it cost-prohibitive 

12 to participate in the U.S. Federal Loan Programs 

13 due to these requirements alone. Meanwhile, 

14 foreign schools maintain, by far, the lowest 

15 lifetime default rate of any sector on these same 

16 loans, the bottom line indicator that these 

17 students are obtaining a quality education.

18 We propose that the negotiations include 

19 waiver and/or modification of the compliance and 

20 financial audit requirements and, specifically, we 

21 suggest modifying the regulations as follows:

22 Waive the requirement for annual 

23 compliance audits for foreign schools with less 

24 than $1 million in loan volume or require that the 
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1 audits be submitted less often, such as every 5 

2 years. And modify the requirement for financial 

3 audits so that institutions of any size are 

4 permitted to submit an audit that is done according 

5 to their home country's accounting standards. And 

6 that last is, of course, critical to continue 

7 participation of foreign schools in many countries 

8 around the world.

9 Turning to the Multi-Year Master 

10 Promissory Notice, as mentioned earlier 

11 international institutions boast the lowest cohort 

12 default rates of all institution types, a proven 

13 indication of successful oversight of the Federal 

14 Loan Programs by the financial aid staff at these 

15 institutions. We request the regulations reflect 

16 this by allowing all institutions that wish to do 

17 so, domestic or foreign, to participate in the 

18 serial feature of the NPN, unless individually 

19 prohibited by the Secretary.

20 Turning to medical school eligibility, 

21 changes were made to the rules regarding the 

22 eligibility of foreign medical schools for loan 

23 programs. These changes include increasing the 

24 required passage rates for students who take the 
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1 U.S. Medical Licensing Examination and modifying 

2 the rules regarding the establishment of a clinical 

3 training program in the United States. We also 

4 expect that a study by the ECFMG may be available 

5 for review by the time these negotiations commence 

6 sometime in September or whenever that may be.

7 Foreign medical schools provide an 

8 important means of training U.S. doctors to ensure 

9 that there are enough of them to meet the health 

10 care needs of the United States. I think this is 

11 particularly true in the case of general 

12 practitioners, where we are facing a shortage in 

13 this country and are going to be dependent on 

14 doctors that are trained in foreign medical 

15 schools. Clearly these issues should be included 

16 on the agenda for the negotiations and I think I'll 

17 just add to that about the shortage. I think it's 

18 desirable to have Americans able to go abroad and 

19 get training and come back rather than be dependent 

20 on foreign nationals, who are foreign trained, in 

21 this country for our future need for physicians.

22 Nursing schools. Foreign nursing schools 

23 are permitted to be eligible for participation in 

24 the Federal Loan Program subject to certain 
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1 conditions. The exact parameters of these 

2 conditions should clearly be a topic for 

3 negotiation. And of concern is the possibility 

4 that some currently eligible schools may lose their 

5 eligibility, and that clearly ought to be a topic 

6 for discussion.

7 Finally, the last topic I'll want to raise 

8 for now is future changes to the Federal Loan 

9 Programs. The Obama Administration has proposed 

10 major changes to the student loan programs in the 

11 budget for Fiscal Year 2010. We know that Congress 

12 is currently in the process of considering 

13 legislation that could adopt some of these 

14 proposals, including requiring that all student and 

15 PLUS loans be originated via the Ford Direct Loan 

16 Program, as of July 1, 2010. If Congress acts 

17 before the completion of this Negotiated 

18 Rulemaking, we ask that that committee agenda be 

19 modified to include regulatory changes that will 

20 permit continued participation of foreign schools 

21 in the loan programs. As you know, currently, 

22 foreign schools are only permitted to participate 

23 in the FFEL Program, and so they need eligibility 

24 yet to--legislative issue to make them eligible for 
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1 the Direct Loan Program. There will be a number of 

2 administrative issues, though, involved in allowing 

3 them to be able to participate.

4 I'll associate myself with remarks that 

5 Mike Woods from New Zealand made earlier with that 

6 regard. We also suggest that the Department make 

7 provisions for extending the negotiations by an 

8 extra session, if necessary--sorry, Dan--to smooth 

9 foreign schools' transition to the new loan 

10 program. In other words, better to go ahead and do 

11 and take care of this problem now rather than have 

12 to have yet another Negotiated Rulemaking next year 

13 that's--or additional sub-regulatory guidance, or 

14 whatever, that needs to be done to take care of 

15 these schools.

16 In conclusion, IEC appreciates the 

17 Department's consideration of this testimony and 

18 offers itself as a resource to the Department on 

19 these and other issues that the Department may 

20 consider in the Negotiated Rulemaking process. And 

21 thank you for listening.

22 MR. MADZELAN: Thanks, Harrison.

23 Pauline Abernathy, the Institute for 

24 College Access and Success.
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1 MS. ABERNATHY: Good afternoon and welcome 

2 to Philadelphia. My name is Pauline Abernathy and 

3 I'm Acting Director for Policy and Strategy at the 

4 Institute for College Access and Success, a non5 profit policy research organization working to make 

6 higher education more available and affordable for 

7 people of all backgrounds. Thank you for the 

8 opportunity to testify today. My comments 

9 summarize our more detailed written comments.

10 We believe the program integrity issues 

11 proposed by the Department are important and would 

12 benefit from the review to protect both the 

13 investments of taxpayers and students. However, 

14 our specific comments focus on financial aid 

15 communication and process issues in which we have 

16 particular expertise.

17 First, we encourage the Department to 

18 examine current verification policies and practices 

19 to ensure students receive the aid for which they 

20 are eligible when they need it and to reduce the 

21 burden of verification for both students and 

22 schools. We've heard a lot about this today 

23 already.

24 Although no school is required to verify 
djj 173

1 more than 30 percent of its applicants, some 

2 schools verify 100 percent. While this practice 

3 may reflect genuine concerns about compliance and 

4 stewardship, an extensive process can reduce access 

5 to needed aid and reduce a student's odds of 

6 academic success. We encourage the Department to 

7 consider both the extent and processes of 

8 verification used by colleges and look at ways to 

9 reduce the burden on both students and schools 

10 while still protecting program integrity.

11 For example, as others have testified 

12 today, pre-populating the FAFSA with data that 

13 applicants have already provided through the tax 

14 system would dramatically simplify the verification 

15 process for both students and schools. 

16 Next, we urge the Department to review the 

17 financial aid information that schools are required 

18 to provide with the goal of making the information 

19 much more useful for students and families while 

20 also reducing the burden for schools.

21 The Department currently requires colleges 

22 to provide a wide range of financial aid 

23 information to current and prospective students. 

24 However, despite the large number of required 
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1 exposures throughout the aid process, the timing, 

2 volume, and content of all this information is not 

3 necessarily helpful to parents and students. We 

4 urge the Department to review all of these 

5 requirements with the goal of providing the 

6 information students and parents really need to 

7 make informed decisions, and doing so in a truly 

8 consumer-friendly way.

9 We also urge the Department to revise the 

10 Student Aid Report, or SAR, to provide clear and

11 prominent answers to the most basic questions 

12 applicants have, such as how much aid they are 

13 actually eligible for. We understand that last 

14 month the Department began providing Pell Grant 

15 estimates and loan eligibility information on the 

16 Student Aid Report, which is an encouraging step in 

17 the right direction.

18 We also encourage the Department, also, to 

19 develop recommendations to approve financial aid 

20 award letters, so recipients can easily compare the 

21 cost of attending different colleges. We have 

22 analyzed more than 100 award letters and too many 

23 do not provide the basic information students and 

24 parents need to understand and compare their 
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1 financial aid options. For example, some aid award 

2 letters don't include the entire cost of attendance 

3 or don't clearly distinguish gift aid from loans, or 

4 federal student loans, from non-federal private 

5 loans.

6 We also urge the Department to use the 

7 certification process to ensure that students 

8 considering risky private loans make the most of 

9 their federal aid options first. About one-quarter 

10 of American students with private loans do not 

11 receive Federal Stafford Loans, which are more 

12 affordable and have more repayment options and 

13 consumer protections.

14 Anecdotal evidence suggests that 

15 counseling students that are considering private 

16 student loans is an effective way to ensure that 

17 they use federal loans before turning to private 

18 loans. For example, after Barnard College began 

19 requiring financial aid counseling for prospective 

20 private loan borrowers, private loan utilization 

21 dropped a staggering 73 percent in one year. And 

22 that was before the financial problems in the 

23 markets.

24 Although we strongly support legislation 
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1 to further strengthen the certification process, 

2 the self-certification process mandated by HEOA has 

3 a potential to help reduce the use of risky private 

4 loans. The Department, we urge you to encourage 

5 colleges to counsel students about private student 

6 loans, to ensure they take out federal loans first. 

7 And we urge the Department to work closely with the

8 Federal Reserve to develop the self-certification 

9 form for private loans as specified in the HEOA.

10 In addition, we urge the Department to 

11 improve and integrate the income-based repayment 

12 and Public Service Loan Forgiveness loan 

13 regulations. All current rules and regulations 

14 related to federal student loans need to be 

15 reviewed and updated in light of the availability 

16 of IBR and public service loan repayment and 

17 forgiveness options. This includes rules governing 

18 disclosures and entrance and exit counseling.

19 We appreciate the Department's efforts to 

20 ensure that the new IBR and Public Service Loan 

21 Forgiveness Programs function as Congress intended. 

22 However, there are a few areas of the regulations 

23 still that need to be addressed to fulfill this 

24 objective.
djj 177

1 One, to avoid penalizing borrowers who 

2 enroll in IBR and later decide to leave the 

3 program, we encourage the Department to revisit the 

4 regulatory language to ensure that individuals 

5 leaving IBR will not pay more than they would have 

6 under a standard 10-year plan and will not be 

7 forced to repay their loans in less than a 5-year 

8 payment period as prohibited by statute. This will 

9 remove an unfair penalty for borrowers who enroll 

10 in the IBR program and later need to exit. It will 

11 also remove an unnecessary administrative burden by 

12 simplifying the process of enrolling in repayment 

13 plans upon exiting IBR.

14 We also encourage the Department to 

15 simplify and remove the inequity in the definition 

16 of full-time employment for public service loan 

17 forgiveness. The CCRAA defines a public service 

18 job specifically as a full-time job, but does not 

19 define "full-time." In its final regulations 

20 governing the program, the Department defined full21 time as the greater of an annual average of at 

22 least 30 hours or the number of hours the employer 

23 considers full-time. This dual definition creates 

24 both unnecessary administrative complexity and 
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1 inequity for individuals whose employers consider 

2 full-time to be more than 30 hours. Borrowers will 

3 have to submit proof of their employers' definition 

4 of full-time and the Department will have to 

5 collect and verify this information for each 

6 borrower. There's no statutory language that 

7 requires this dual definition. Defining full-time 

8 as 30 hours per week for all applicants would 

9 greatly simplify program administration and ensure 

10 that all borrowers are treated equitably.

11 Our next recommendation regards confirming 

12 employment and loan payment for eligibility for the 

13 Public Service Loan Forgiveness Program. The 

14 program is supposed to encourage people to serve 

15 their country and community in government and non16 profit jobs. However, the final rules published by 

17 the Department do not provide a mechanism for our 

18 borrowers to find out up front if a particular job 

19 will count. Instead, the rules require borrowers 

20 to fully document 10 or more years of employment 

21 and loan payment history, and then submit it to the 

22 Department after the fact. This is an unreasonable 

23 burden on borrowers and undermines the purpose of 

24 Public Service Loan Forgiveness.
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1 Giving borrowers clear information up 

2 front will provide an incentive to continue in 

3 public service and ultimately meet the forgiveness 

4 requirements. It will also reduce the number of 

5 borrowers applying to the Department for loan 

6 forgiveness before it is appropriate.

7 The term "standard repayment plan" is one 

8 that is used differently in various contexts, which 

9 has created a tremendous source of confusion for 

10 borrowers and, based on our recent inquiries, even 

11 for some customer service staff at the Department 

12 and major lenders. Ensuring that the term 

13 "standard repayment plan" is defined clearly and 

14 used consistently will minimize confusion and 

15 questions by borrowers and make the Federal Loan 

16 Program run more smoothly.

17 To ensure that IBR is an avenue to 

18 rehabilitation, as CLS--Community Legal Services--

19 just testified, the same rights for borrowers in 

20 default that are available through the Income 

21 Contingent Repayment Program should also be 

22 available through income-based repayments, so that 

23 IBR's affordable payments can provide an avenue to 

24 rehabilitation.
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1 Finally, we recommend the Department 

2 provide technical assistance to schools on cohort 

3 default rates. Our research has revealed that some 

4 colleges do not participate in the Federal Student 

5 Loan Program out of fear that their cohort default 

6 rate would be, or appear to be, high. In fact, 

7 almost a quarter of all community colleges 

8 enrolling at least 1 million students do not 

9 participate in the Federal Loan Programs, forcing 

10 needy students to resort to riskier, more expensive 

11 options such as private student loans and credit 

12 cards.

13 We understand the Department plans to 

14 change the way cohort default rates are displayed 

15 to address the fear of appearing to be subject to 

16 sanctions beginning with the Fiscal Year 2007 

17 cohort default rates. This would be a significant 

18 step towards ensuring all students have access to 

19 federal student loans. We recommend that the 

20 Department also provide technical assistance to 

21 schools that are close to the minimum sanction

22 levels and working to lower their default rates, as 

23 well as to community colleges interested in 

24 learning more about the rules.
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1 Thank you for the opportunity to provide 

2 input today.

3 MR. MADZELAN: Deanne Loonin, National 

4 Consumer Law Center?

5 MS. LOONIN: I guess it's the right height. 

6 Yep, okay.

7 Good afternoon and thanks for inviting all 

8 of us, I guess, to the public hearing. I'm Deanne 

9 Loonin and I'm an attorney with the National 

10 Consumer Law Center, and I also direct our Student 

11 Loan Borrower Assistance Project.

12 Basically, we're a non-profit organization 

13 and we focus on consumer issues that affect low14 income consumers. And the project that we have, 

15 the Student Loan Borrower Assistance Project, has a 

16 number of components. We have a website, we have 

17 publications, but what I want to focus on today 

18 and, actually, what I'm going to focus on mostly in 

19 the short time I have here, is the work that we do 

20 directly with borrowers and what we hear from those 

21 borrowers.

22 We do direct representation work, mostly 

23 through Legal Aid offices near where our office is, 

24 which is in Boston. We have a website that has 
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1 general information. It's really meant to be self2 help information to help fill in the gap in 

3 resources for borrowers. And then we also have a 

4 LISTSERV with most of the legal aid lawyers that 

5 are out there that actually handle student loan 

6 cases, government lawyers, private lawyers. And we 

7 do case consultations with those lawyers on a 

8 regular basis, so we hear from them and consult 

9 with them on their cases as well.

10 We also submitted detailed written 

11 testimony, so I'm basically just going to summarize 

12 a few things and, first of all, say we support the 

13 items that were in the agenda and also have some 

14 additional items we would like the Department to 

15 consider. We hope--certainly hope--to participate 

16 --either us or somebody else representing Legal 

17 Aid, but certainly to have the Legal Aid client's 

18 voice at the Negotiated Rulemaking table.

19 I wanted--even though I have a number of 

20 issues I want to focus on program integrity and 

21 then mention just a couple of other issues. And 

22 really, coming from--sort of speaking for my 

23 clients here, I wish that my clients could be here. 

24 I wish that more borrowers could come and speak. 
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1 We, frankly, don't have the resources to bring them 

2 and it's very difficult for them to come here. I 

3 hope that there is a way, perhaps, that the 

4 Department can speak to more borrowers in some sort 

5 of other forum and hear their voices.

6 I did submit some statements from some of 

7 my clients and some of the other former students as 

8 part of the testimony, and there are a lot more 

9 where that came from.

10 One of the things, really, that sort of--

11 and this is where the connection to program 

12 integrity--a common denominator in my work over the 

13 years with Legal Aid-eligible clients who have 

14 student loan debt is that a large percentage of 

15 them attended proprietary schools, proprietary 

16 vocational schools. And, you know, what I actually 

17 did to test that, also, is just my--look through my 

18 most recent files from the last year, and about 

19 half of the clients I've seen, as I've said, in the 

20 greater Boston area, Legal Aid-eligible clients, 

21 had attended proprietary schools. And, you know, 

22 they have a range of issues, but they come in 

23 generally because they cannot deal [with] their 

24 student loan debt. All of them are in default with 
djj 184

1 their student loans. 

2 When I thought about that, none of those 

3 clients had obtained a job in the field that they 

4 were trained for or supposed to be trained for. 

5 Some of them had completed the program and some of 

6 them hadn't, so it's a mix. But I thought back to 

7 my years, also, in Legal Aid in Los Angeles. And 

8 just from my direct representation of clients--I 

9 represented hundreds of clients--I've never had a 

10 client who went to a proprietary school and got a 

11 job in the field that they were supposed to be 

12 trained for.

13 So, one of the recommendations connected 

14 to that, clearly, in our recommendations is to 

15 focus on outcome data to figure out a way to, first 

16 of all, make information about job placement and 

17 salaries more transparent. And we did a report a 

18 few years ago--and we've done this in other 

19 situations where we've had testers basically go--not 

20 to sign up for schools, but just to get, you know--

21 see if we can get the information about completion 

22 rates and job placement rates. In most cases, we 

23 were unable to get--our testers were unable to get 

24 information. I would think that transparency 
djj 185

1 should be, hopefully, the least controversial topic 

2 of all the topics here, that borrowers should be 

3 given information about the outcome data. 

4 But just being given the information isn't 

5 enough. We want transparency and some sort of 

6 standardization of the definition, including the 

7 definition of gainful employment, auditing of the 

8 data to make sure that the data's actually accurate, 

9 and the enforcement of penalties when there are 

10 problems.

11 Otherwise, what we run into is a really 

12 haphazard picture where people are given random 

13 information. I put some information in our 

14 testimony. Just as one example, this is a client I 

15 recently had who signed up for a beauty school and 

16 instead of being given average salary information 

17 for students who had attended that school, she was 

18 given a packet of information about the kinds of 

19 salaries that certain hairdressers make. There was 

20 an article about Julia Roberts' hairdresser. You 

21 know, there was an article about $300 haircuts. 

22 And my sense is, I'm not completely well-versed in 

23 the hairdressing field, but that those are the 

24 outliers, generally, in terms of the salaries that 
djj 186

1 people make. So it's an effort to give some salary 

2 information, but what I'd like to see is 

3 standardization.

4 And, I guess, really in response to the 

5 comment about encouraging people that somebody made 

6 earlier, we certainly agree that our clients should 

7 be encouraged, but we also need a dose of realism 

8 here. Realism about what the stakes are if they do 

9 sign up for particular courses because this is 

10 where we come in. There is just almost no margin 

11 for error when you sign up for a high-priced 

12 school. If you don't succeed, either because of the 

13 school or because of situations of your own, you're 

14 not going to be able to deal with the debt. And 

15 the private loans have added a whole new wrench, 

16 really, to that, really raised the stakes even just 

17 that much further.

18 So, we mentioned some other issues in our 

19 testimony that I won't get into here that we support 

20 looking into, including incentive compensation. 

21 The high school diploma issue, interestingly, we 

22 agree with the idea of defining it in a 

23 standardized way. We also would like to have the 

24 Department consider having admission requirements 
djj 187

1 beyond a high school diploma, requirements that are 

2 tied to particular fields, so that, hopefully, we 

3 can sort of help address the problem of borrowers 

4 who are not able to benefit, but who do have high 

5 school diplomas, are sort of not admitted 

6 improperly to schools.

7 The other issues that I just wanted to 

8 mention briefly that are not related to program 

9 integrity are, again, presented in more detail in 

10 the testimony, but I want to echo the Community 

11 Legal Services about collection agencies. What we 

12 would like to see is the Department of Education to 

13 take the same--the lead from the IRS in this case. 

14 I wouldn't always say that, but in this case they 

15 just terminated their contracts with private 

16 collection agencies recently, ruling it to be a 

17 failed experiment, and we think that the Department 

18 should do the same.

19 We find--I could give you example after 

20 example and I won't do that now, although I will say 

21 that I did alert a number of Department staff 

22 recently to an experience that I had. This is, you 

23 know, me calling on behalf of my client to a 

24 private collection agency that is contracted with a 
djj 188

1 number of guarantee agencies as well as with the 

2 Department, that after they--a representative hung 

3 up on me the second time, you know, I'd had it. And 

4 I was really--I was just calling to help figure out 

5 whether we could set up a repayment plan in lieu of 

6 a hearing for my client. And I know it's not 

7 something that I relish doing, having to deal with 

8 the initial sort of reactions I get from collection 

9 agencies, but I can handle it much better than my 

10 clients can, and most clients don't have 

11 representation.

12 The main principle here is that we've let 

13 the collection agencies do a lot of what I consider 

14 to be really the more inherently government 

15 functions, like really doing some of the dispute 

16 resolution work. And we have found that that has 

17 just been a failed experiment. It doesn't work.

18 The other--we'd like to see really--if I 

19 could say there's one thing I've learned from 

20 working with clients over the years, for the 

21 federal student loans there is almost always 

22 something that we can do for most of our clients, 

23 but the communication is the biggest barrier. And 

24 actually being able to assert their rights is the 
djj 189

1 biggest barrier, getting them to learn about their 

2 rights and being able to get them to exercise those 

3 rights.

4 The other two points, the non-program 

5 integrity points that we mention in our testimony, 

6 is to revisit some of the fair hearing procedures 

7 for the various collection actions. Standardize 

8 them so that, for example, for wage garnishment, 

9 your borrowers are specifically allowed to raise 

10 hardship as a defense. However, if they want to 

11 request a hearing in response to offset, sometimes 

12 hardship is considered and sometimes it's not. So, 

13 basically, we want to see that standardized in the 

14 regulations so that regardless of the type of 

15 collection action, borrowers have the same rights.

16 And the last issue--which, again, the 

17 community legal services David mentioned very 

18 eloquently, so I'll just mention briefly--which is 

19 rehabilitation. We did, I know, in the last 

20 session of Negotiated Rulemaking addressed some 

21 rehabilitation issues and there are some issues I 

22 think perhaps need statutory amendment, but we 

23 believe there are some that can be addressed 

24 through regulations. And I also understand that 
djj 190

1 perhaps legislatively there might be a solution to 

2 the current problem with there being no buyers for 

3 rehabilitation. But we also feel like, you know, 

4 we'll see and if it's not addressed through 

5 legislations, that that is something that can be 

6 addressed through the regulatory process. It 

7 really is a travesty that there's all of these 

8 borrowers who've successfully rehabilitated their 

9 loans are really stuck in limbo through no fault of 

10 their own, through the credit conditions, and we'd 

11 like to see them get back on their feet 

12 financially.

13 The other main point with rehabilitation 

14 is to have some standardization in the definition 

15 of reasonable and affordable. I've mentioned this 

16 in previous sessions, but we haven't gotten to it 

17 yet so I'm mentioning it again. We just feel like 

18 it's connected to the collection agency problem 

19 where often we're dealing with a collection agency 

20 in terms of trying to figure out what is a 

21 reasonable, affordable payment amount for our 

22 clients. And if there was some presumption of 

23 tying reasonable, affordable, for example, to the 

24 IBR formula, that we wouldn't have to have such a 
djj 191

1 haphazard process in that situation.

2 So, again, I hope that you'll have a chance 

3 to look through the rest of our testimony and I 

4 appreciate the opportunity to speak. Thanks.

5 MR. MADZELAN: Thank you.

6 Yvonne Oberhollenzer, Australian Education 

7 International (AEI). If you could help me with 

8 your last name, I'm not--

9 MS. OBERHOLLENZER: You had it the first 

10 time, sir.

11 MR. MADZELAN: Oh, I wasn't quite sure 

12 about how many accents I needed. How many 

13 syllables.

14 MS. OBERHOLLENZER: Good afternoon. My 

15 name's Yvonne Oberhollenzer, and I'm here 

16 representing Australian Education International 

17 North America, from the Australian Embassy in 

18 Washington, D.C.

19 AEI North America's role is to promote a 

20 greater awareness of the quality of Australian 

21 education and to assist American and Australian 

22 institutions in the development of relationships 

23 that may include one or all of student mobility, 

24 faculty interchange, and research linkages.
djj 192

1 AEI North America appreciates the 

2 opportunity to testify on behalf of Australian 

3 universities and in consultation with the British 

4 Council, the Embassy of Canada, and the Embassy of 

5 New Zealand, who have all attended these hearings 

6 today.

7 Every year some 15,000 Americans exercise 

8 an option to study in Australia. The majority of 

9 these students study for a semester or less. 

10 However, many of these students undertake full 

11 degrees at both the undergraduate and postgraduate 

12 levels.

13 The full-degree students often study in 

14 Australia because the education they undertake 

15 represents a closer match to their research 

16 interests than might be available in America. Many 

17 of these students use support provided through the 

18 Federal Student Loan Program. An option to study 

19 in Australia or other international destinations 

20 expands the range of study programs available to 

21 American students and often enables a closer match 

22 with the student's academic interests.

23 American students who have undertaken an 

24 Australian education experience, similar to their 
djj 193

1 Australian counterparts who have studied in 

2 America, represent a pool of knowledge about each 

3 country that underpins the Australia-America 

4 bilateral relationship and often promotes 

5 educational research, commercial or people-to6 people linkages that continue throughout their 

7 lives.

8 AEI North America recognizes the efforts 

9 made by the U.S. Department of Education to assist 

10 foreign schools with the implementation of the FFEL 

11 Program and, particularly, the implementation of 

12 the foreign school's team. AEI North America also 

13 appreciates the administrative flexibility extended 

14 to foreign schools through the exemptions included 

15 for foreign schools in the Higher Education 

16 Reauthorization Act. Those exemptions that waive 

17 requirements for crime statistic reporting, tax 

18 verification, and adhering to U.S. financial audit 

19 standards recognize the different situation faced 

20 by foreign schools, while nonetheless maintaining 

21 appropriate levels of accountability for funds 

22 provided through a U.S. Government program.

23 AEI North America encourages the U.S. 

24 Department of Education to ensure that American 
djj 194

1 students wishing to study overseas continue to have 

2 access to loans under all Federal Student Loan 

3 Programs. Approximately 21,000 American students 

4 are enrolled in full-time, full-degree 

5 undergraduate and postgraduate programs at 

6 international universities of which 2,409 are 

7 enrolled in Australian institutions--or were 

8 enrolled in Australian institutions in 2008.

9 Federal loans provide these students with 

10 the opportunity to study at their school of choice. 

11 The Obama Administration has proposed to eliminate 

12 the FFEL Program and move completely to the William 

13 W. Ford Federal Direct Loan Program. At present, 

14 American students are able to use FFEL loans to 

15 attend international institutions. However, they 

16 are not able to receive such loans from the Direct 

17 Loan Program.

18 As such, should the proposed reforms be 

19 implemented, we ask the U.S. Department of 

20 Education to ensure that American students wishing 

21 to study in Australia and at other international 

22 destinations continue to have access to federal 

23 loans through the Direct Loan Program.

24 In addition, the Direct Loan Program uses 
djj 195

1 the common origination and disbursement system to 

2 originate and disburse student loans. Given that 

3 international institutions are not familiar with 

4 this system, we encourage the U.S. Department of 

5 Education to provide support to international 

6 universities to ensure a smooth transition to the 

7 new system and uninterrupted access to loans to 

8 those American students already studying overseas 

9 and to new students for whom the overseas study 

10 option represents the greatest academic and 

11 research return.

12 In summary, we ask that the U.S. 

13 Department of Education ensures that American 

14 students are able to access loans through the 

15 Direct Loan Program to study overseas by providing 

16 international universities with access to the 

17 program and maintaining the current exemptions for 

18 foreign schools; and also provide that the U.S. 

19 Department of Education provides training and 

20 support to international universities on how to 

21 administer federal student loans through the Direct 

22 Loan System, similar to the training provided to 

23 U.S. institutions.

24 AEI North America appreciates the 
djj 196

1 Department of Education's consideration of this 

2 testimony and we would be very happy to follow up 

3 with the Department on these and other issues 

4 raised through the Negotiated Rulemaking process.

5 Thank you very much.

6 MR. MADZELAN: Thank you.

7 Tom Netting, HEAHL Coalition.

8 MR. NETTING: Good afternoon.

9 MR. MADZELAN: Hello.

10 MR. NETTING: I want to start my comments 

11 this afternoon by actually asking that we can make 

12 sure that amend this morning's presentation. I 

13 inadvertently said that I was, in one instance, 

14 representing the community colleges and in the 

15 other instance representing the Cosmetology School 

16 Association. My testimony this morning was on 

17 behalf of the American Association of Cosmetology 

18 Schools. I hope David Baime, a colleague and 

19 friend of mine, will get a kick out of the fact 

20 that I was inadvertently representing their crew as 

21 well as my own.

22 This afternoon I'm here representing the 

23 Higher Education Allied Health Leaders (HEAHL)

24 Coalition, one of the organizations in Washington, 
djj 197

1 D.C., that represents the interests specific to the 

2 proprietary institutions of higher education 

3 offering allied health-related education and 

4 training.

5 I'm proud to be here today on behalf of the 

6 HEAHL Coalition and want to again express the 

7 desire on behalf of my portion of the proprietary 

8 community in support of all of the program 

9 integrity provisions that the Department has put 

10 forward in their May 26 notice to the entities.

11 We are very much in support of the 

12 President's and the administration's ambitious, yet 

13 attainable goal of having the highest proportion of 

14 college graduates in the world by 2020, and the 

15 President's acknowledgement that in order to achieve 

16 this goal that our workforce will indeed need to 

17 reinvent itself.

18 Even more importantly, HEAHL and its 

19 membership share in the belief that through the 

20 process like this addition of Negotiated 

21 Rulemaking, that we must make sure that potential 

22 students have choice and access to the information 

23 which will enable them to choose the best 

24 educational program to meet their individual 
djj 198

1 educational needs. Not surprisingly, HEAHL and its 

2 membership believe that the best way for students 

3 and taxpayers alike to achieve these choices is not 

4 to pigeonhole them into programs or specific 

5 educational tracks, but to provide students with 

6 the broadest array of academic choices upon which 

7 for them to make their own individual decisions.

8 In our view, data and information provided 

9 to the potential student, their families, and the 

10 taxpayers are a critical portion of the equation. 

11 And we should all want to know which institutions 

12 and programs stand the best chance of providing 

13 significant return on investment. These returns 

14 should be quantifiable in terms of both time and 

15 expenses for the students, the taxpayer, and the 

16 federal government. And must be bolstered by the 

17 most important consideration: the realistic 

18 employment expectations upon successful completion 

19 of the program.

20 These expectations must be based upon 

21 reliable placement data and verification of the 

22 ability of the graduates to meet the workforce 

23 demands of employers. HEAHL can assure you that 

24 our membership has the capacity and the capability 
djj 199

1 to assist the President and the administration in 

2 their pursuit of these goals as long as we are not 

3 limited or prohibited from doing so. To that end, 

4 HEAHL is looking forward to partnering with the 

5 Department and the administration in the 

6 development of regulations through this process and 

7 in broader public policy discussions and subsequent 

8 negotiations to ensure that the regulations help 

9 achieve these intended goals.

10 My colleagues have talked specifically 

11 about the issues that have been presented by the 

12 Department. I have those in my prepared testimony, 

13 but I will not discuss them today. What I will 

14 discuss is the addition of four additional issues 

15 that we would like to see included in the next 

16 round of Negotiated Rulemaking, two of which have 

17 been presented earlier today by myself and others.

18 One, the inclusion of cohort default rate 

19 appeals as a portion of this round of Negotiated 

20 Rulemaking. As stated earlier by myself and 

21 others, there is significant concerns with regard 

22 to the economy and with regard to employment rates 

23 and the ability for individuals to find qualified 

24 employment right now as well as the collapse of the 
djj 200

1 lending markets that are going to lead to problems 

2 with cohort default rates. We would urge the 

3 Department to consider once again reviewing 

4 possible economic and other appeals rights under 

5 cohort default rates.

6 Second, a new issue, financial 

7 responsibility. HEAHL respectfully requests that 

8 the Department consider revisions to the financial 

9 responsibility regulations, either in whole or in 

10 part. Our membership recognizes that the 

11 Department has limited resources at the current 

12 time and is looking for contractors with expertise 

13 to assist with this process. We would like to 

14 discuss whether or not it is appropriate to add 

15 this topic to the current round of negotiations 

16 and, if not in its entirety, consider the possible 

17 consideration of de minimis smaller provisions, 

18 with the goal of looking to a broader review and 

19 Negotiated Rulemaking on financial responsibility 

20 in the future.

21 As previously noted, professional judgment 

22 and the ability of institutions to help prevent 

23 borrowers from borrowing beyond their needs has 

24 been discussed on a considerable basis today. We 
djj 201

1 echo the sentiments of a number of individuals and 

2 their presentations earlier today.

3 My final issue is regarding provisional 

4 certification and change of ownership. HEAHL

5 highly recommends the Department consider adding 

6 the review of provisional certification regulations 

7 to the list of topics for consideration. Our 

8 membership would respectfully recommend that the 

9 time has come to reevaluate several areas of these 

10 regulations in light of changes brought about by 

11 both the HEOA and also the changes that have come 

12 about in terms of the way in which institutions 

13 seek to make good on changes of ownerships and the 

14 ability to expand institutions.

15 Thank you.

16 MR. MADZELAN: Thanks, Tom.

17 Well, we are scheduled to take a break in 

18 about 5 minutes or so, so why don't we do that now 

19 and still come back at 2:40? That will give you a 

20 little bit more than a 10-minute break. See you at 

21 2:40.

22 [Brief recess.]

23 MR. MADZELAN: Okay. We'll reconvene this 

24 afternoon with Albert Gray, ACICS.
djj 202

1 Did you leave a copy out front, too? 

2 Okay.

3 MR. GRAY: Good afternoon, Panel and 

4 ladies and gentlemen. My colleague, Tony Beda 

5 [ph.] has just handed you our written testimony, 

6 which I will summarize briefly this afternoon for 

7 you.

8 I am Al Gray. I'm the Executive Director 

9 and the CEO of the Accreditation Council for 

10 Independent Colleges and Schools (ACICS). I'm 

11 relatively new to ACICS. In fact, I just recently 

12 learned how to spell it. I don't always get it 

13 right even now. But I'm not new to accreditation. 

14 For the past 15 years, I've been involved in 

15 leading accreditation programs, national 

16 accreditation programs that impact or have an 

17 impact on public health and education.

18 ACICS represents quality assurance and 

19 institutional integrity for nearly 600,000 students 

20 in 46 states who are enrolled in approximately 760 

21 institutions around the country that are accredited 

22 by ACICS. We're recognized by the Department of 

23 Education as well as by the Council on Higher 

24 Education Accreditations.
djj 203

1 We have substantial resources to support 

2 in a very robust manner our high-quality 

3 accreditation programs. Those resources include a 

4 professional staff of over 37, headquartered in 

5 Washington, D.C., working with over an $8 million 

6 budget to accomplish our objectives. But more 

7 importantly, we work with over 750 professional 

8 educators, people who work in the education 

9 business and who act in a role of what we call 

10 evaluators for purposes of accrediting programs and 

11 institutions for ACICS. Those are highly trained 

12 professionals and practicing educators. And 

13 interestingly, they not only serve ACICS, but many 

14 of them are involved in accreditation roles in 

15 other accrediting organizations such as some of the 

16 regional accrediting organizations. So it's a 

17 significant resource, but a resource that's cross18 trained and that works broadly in the accreditation 

19 world.

20 I do appreciate the opportunity today to 

21 visit with you and to present this testimony.

22 We clearly support the Department's 

23 interest in clarifying rules that balance and 

24 protect the interest of the taxpayer, students, and 
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1 proprietors of career education. Our particular 

2 interests are with three issues at least today that 

3 we want to talk about by the Department and would 

4 like to review with the Department and with 

5 postsecondary education stakeholders in this 

6 audience. Those three being: satisfactory 

7 academic progress, gainful employment in a 

8 recognized occupational field, and institutional 

9 integrity in states that lack licensing authority 

10 for career colleges.

11 Let me start by talking about satisfactory 

12 academic process. This is an area where you should 

13 be considering the role of national accreditation. 

14 ACICS accreditation assures continuously improving 

15 quality of career college educators. Now, as I 

16 said, I come out of a history of accreditation, 

17 some very strong programs that were very sensitive 

18 to public health and educational issues. And I 

19 realize, as does ACICS, that accreditation is 

20 really a three-legged stool. It's provision of 

21 standards and monitoring compliance with standards; 

22 it's providing quality assurance, and this is an 

23 equally important aspect; and then, of course, 

24 accountability for the educational provider to the 
djj 205

1 community and to the students. In that regard, ACS 

2 enforces clear, rigorous, quantitative standards to 

3 ensure that the contact between faculty and student 

4 is of sufficient duration and quality to produce a 

5 quality educational outcome.

6 At this point, I was going to read our 

7 126-page set of criteria into the record, but I 

8 decided that would be too exciting for this group.

9 [Laughter.]

10 MR. GRAY: But in all seriousness, the 

11 standards apply to all aspects of the educational 

12 program. And keep in mind, we are accrediting 

13 programs ranging from certificate, diploma, two14 year degree, four-year bachelor's degree, and 

15 master's degrees. So these standards have to be 

16 very closely tailored to the actual needs that go 

17 with providing proper education at those various 

18 degree levels. These standards apply to such 

19 things as lecture format, demonstrations, 

20 laboratories, externships for the students, and 

21 mixed modes of delivery of education--distance 

22 education, on-ground education. The standards are 

23 applied routinely through on-site audits. And any 

24 institutions that don't comply go through 
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1 sanctions. Ultimately, of course, if they can't 

2 come up to the accreditation standard, 

3 accreditation would be denied or withdrawn.

4 More importantly, the institutions are 

5 provided strong incentives to modify practices to 

6 improve quality continuously so that students gain 

7 incremental and continuous maximum benefit for the 

8 time and money invested in their educational 

9 experience. Furthermore, ACICS standards reflect 

10 that as a more--as more instructional activity 

11 migrates to the online and distance education 

12 platforms, we will provoke substantive dialogue 

13 about the best way to ensure that students are 

14 deriving educational value from these alternative 

15 and innovative venues of instruction.

16 Now let me turn to the second area that we 

17 want to just provide some brief comments on, and 

18 that is defining gainful employment. Again, 

19 national accreditation is key here. We don't 

20 believe that it's necessary to have standards by 

21 regulation. Rather, by enforcing strong standards 

22 and requirements through accreditation, we can 

23 ensure outcomes, and we currently do at ACICS and 

24 national accreditation encourage outcomes that lead
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1 to job placement in fields directly related to the 

2 course of study. We require at ACS mandatory 

3 reporting of all annual job placement rates for all 

4 institutions, documentation that will withstand 

5 audit scrutiny, and enforcement and sanctions in 

6 the event placement rates would fall below these 

7 ACICS standards.

8 We send a strong message to our schools 

9 that goes beyond compliance and includes 

10 substantive dialogue about best practices, sharing 

11 best practices, to prevent graduates and job 

12 seekers from falling between the cracks, 

13 particularly recognizing the economic constraints 

14 that we're currently facing and certainly have an 

15 impact on how we develop what are considered to be 

16 best practices from the placement rate viewpoint.

17 Thirdly, let me talk about institutional 

18 integrity where there are not licensing authority 

19 in the states at the present time. ACS is proud of 

20 its strong ongoing relationship with the state 

21 regulatory interests in California, which, as you 

22 know, at this point does not have state oversight 

23 and licensing authority for career colleges, 

24 although there is a bill to bring that about. 
djj 208

1 During that timeframe where such oversight does not 

2 exist, ACS has continued to work to enforce high 

3 standards and work closely with the California 

4 regulatory agencies in that regard. ACICS has 

5 required all of its accredited institutions in 

6 California to voluntary comply with the standards 

7 of the expired Vocational Education Act. So even 

8 though the act has expired, the standards, in our 

9 view, are still appropriate standards and we work 

10 closely with the state of California in making sure 

11 our accredited institutions comply with those as a 

12 minimum standard.

13 ACICS continues to work with the state 

14 policymakers in California and other states in 

15 regards to state regulatory authority and the 

16 overall state regulatory infrastructure.

17 In closing, I'll just bring up one more 

18 subject which is, we think, very important, near 

19 and dear to our hearts in the national 

20 accreditation world. I'll reiterate, because we've 

21 spoken about this before, the importance of ACICS--

22 or the importance to ACICS of a focus by the 

23 Department of Education on the ability of students 

24 to transfer academic credit in order to complete 
djj 209

1 their studies at another institution if they wish 

2 to do so.

3 The lack of transferability of academic 

4 credit is a persistent issue and appears to be 

5 defiant of resolution by the education enterprise 

6 and policymakers up until now. The Department and 

7 rulemaking negotiators made good progress on this 

8 issue recently, but I would urge the Office of 

9 Postsecondary Education to remain vigilant and to 

10 remain persistent in requiring fidelity by all 

11 institutions to the transfer of credit policies 

12 that are articulated in the Higher Education 

13 Opportunity Act of 2008.

14 Again, thank you very much for this 

15 opportunity to provide our remarks to the Panel. 

16 And let me say we are very willing to serve in the 

17 future and any appropriate manner to work with the 

18 Department on these matters. Thank you.

19 MR. MADZELAN: Thank you.

20 Irv Ackelsberg?

21 MR. ACKELSBERG: Thank you. My name's Irv 

22 Ackelsberg, and I'm a consumer lawyer in 

23 Philadelphia. I've been specializing in consumer 

24 protection for my entire career, most of which was 
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1 spent during my 30 years with Community Legal 

2 Services, the publicly funded civil aid 

3 organization that you've already heard from earlier 

4 this afternoon.

5 During the last seven or eight years with 

6 CLS, I was primarily immersed in protecting low7 income communities from subprime mortgage brokers 

8 and lenders who were prospecting for home equity. 

9 We've certainly heard a lot about them recently. 

10 But before the subprime mortgage scandal, in the 

11 1990s, my main professional focus was the on 

12 previous consumer fraud pandemic, the one wrought 

13 by proprietary trade schools. During those years, 

14 I represented hundreds of financially abused 

15 individuals, who, having sought the dream of 

16 bettering themselves and finding good-paying, 

17 satisfying work and trusting the promises of 

18 federally financed quality education, signed trade 

19 school enrollment agreements only to find 

20 themselves at the end without work and burdened 

21 with hopelessly unaffordable and non-dischargeable 

22 student loan obligations.

23 The financial aid reforms that eventually 

24 emerged following that last fraud pandemic did, 
djj 211

1 like today, in the aftermath of many investigations 

2 and corporate bankruptcies, help some. The rules 

3 against commissioned salespeople, the 90/10 Rule, 

4 and especially the default triggers for financial 

5 aid decertification all provided consumers and the 

6 taxpayers with some measure of protection from the 

7 proprietary trade school industry. But the risks 

8 to both consumers and taxpayers remain very much in 

9 play.

10 As long as we continue to allow the profit 

11 motive to coexist with higher education, we will be 

12 forced to contend with the overpriced, low-value 

13 vocational programs whose marketing and lobbying 

14 budgets will always overwhelm their underfunded 

15 public counterparts. For that reason, as it 

16 considers anew the higher education regulatory 

17 framework, the Department must remain vigilant to 

18 the new ways that for-profit schools will devise to 

19 abuse the financial aid system. I would like to 

20 mention two areas that, from my experience and 

21 recent conversations, suggest that you should pay 

22 attention, two areas in which I believe that 

23 warrant your attention.

24 The first of these concerns the 
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1 Department's monitoring of satisfactory progress 

2 statistics, one of the measures that proprietary 

3 trade schools depend on to maintain the flow of 

4 financial aid dollars. During the last year, I've 

5 interviewed--I interviewed a former trade school 

6 teacher who worked for one of the major chains and 

7 who explained to me the way in which he was 

8 constantly pressured to pump up the satisfactory 

9 progress numbers. He said, and this description to 

10 me was based not only on his experience in this--at 

11 this particular school, but with another employer 

12 as well: Teachers are routinely pressured to mark 

13 students present who are absent, to pass students 

14 who cannot do the work, and to change statistics 

15 after they're already done. A visit every few 

16 years by an accrediting commission is useless in 

17 catching this.

18 So, as the Department learned in the 

19 1990s, it cannot assume that the accrediting side 

20 or the regulatory structure will deal with this. 

21 We need better detection devices and tougher 

22 compliance consequences in the financial aid system 

23 to address this problem.

24 The second issue I want to mention is the 
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1 growing importance of private, subprime student 

2 loans in the business model of the trade schools. 

3 This was alluded to in earlier testimony this 

4 afternoon. While you do not regulate the private 

5 loans, you must become aware of the ways in which 

6 the federal system is used to facilitate widespread 

7 financial aid abuse of students.

8 Last year, I interviewed a young former 

9 student who briefly attended a residential 

10 automotive program offered by another chain. 

11 Attracted by the sales pitch offered by the 

12 recruiter, who came to his home, he and his mother 

13 decided to visit the school before he enrolled. 

14 While there, they met with a financial aid 

15 official. The federal portion of the financial aid 

16 package was described in great detail, as it was 

17 supposed to. Forms were signed and disclosures 

18 provided. Very little information, however, was 

19 provided regarding the private loan component, 

20 which actually represented three-quarters of the 

21 aid package.

22 In response to the mother's explicit 

23 questions about interest rates, the financial aid 

24 officer said she didn't know, but encouraged them 
djj 214

1 not to be concerned. By the time her son enrolled, 

2 details concerning the private loan were still 

3 unknown and still undisclosed. When the disclosure 

4 from the private lender finally arrived, her son 

5 was already in attendance at the school. She was 

6 shocked to learn that the $17,000 private school 

7 loan carried an adjustable rate starting at 16 

8 percent.

9 Eventually, the financial weight of that 

10 obligation convinced both mother and son that the 

11 wisest course was to withdraw from the program. 

12 But I'm convinced that this sequence was not 

13 accidental and that the school financial aid office 

14 used the federal aid as a cover to hide the real 

15 facts and to lull the family into enrolling.

16 While these subprime private loans are 

17 themselves outside the Department's regulatory 

18 control, the Department can and must do something 

19 to require all financial aid packages, if they 

20 include federal assistance, to be fully disclosed 

21 prior to enrollment, including the contemplated 

22 terms of any private loan in the package. 

23 Moreover, there should be a right to cancel any 

24 enrollment partially financed by federal aid until 
djj 215

1 after full disclosure is provided.

2 My final comment goes to the theory and 

3 structure of Negotiated Rulemaking itself. I was a 

4 participant in the very first Negotiated 

5 Rulemaking. I believe it was back in 1992. This 

6 was after students and consumer advocates were 

7 added to the negotiating table, the table of so8 called stakeholders, as a last-minute decision. 

9 Most of the tables had already been filled by the 

10 schools, the banks, the guaranty agencies, and even 

11 the collection companies, in other words, those in 

12 the education and financial aid business. Now, 

13 obviously we were outgunned at the table and 

14 resulting regulations, while an incremental 

15 improvement over the past, were not as good as they 

16 should have been.

17 For the students, the supposed 

18 beneficiaries of the system, they can't expect a 

19 give-and-take among financial stakeholders to 

20 produce a result grounded in their best interests. 

21 It just can't happen. Now--so while it's important 

22 for students and consumer advocates to be at the 

23 table, it is also critically important that the 

24 Department itself be on their side, not a mere 
djj 216

1 referee among unequals.

2 Thank you.

3 MR. MADZELAN: Thanks.

4 Michael Golden, Solutions for Progress.

5 MR. GOLDEN: Good afternoon. I'm not used 

6 to not having to push this down.

7 Thank you for inviting us here today to 

8 help discuss ways to help students, particularly 

9 mature students, to persist in their education and 

10 complete as soon as possible, so that they can help 

11 move themselves and their families out of poverty 

12 and into more stable economic circumstances. I'm 

13 here to talk a little bit more about a single 

14 platform that was referred to in earlier testimony 

15 to help students file financial aid forms, FAFSA, 

16 taxes, and work support benefits.

17 It has been said that the less time 

18 students spend slinging hamburgers means more time 

19 for classes and study. It means they complete 

20 their education sooner and are eligible for better 

21 jobs. It means they move their families up the

22 ladder from sustainability to successful economic 

23 integration. I won't spent too much time in 

24 describing where students find themselves 
djj 217

1 currently, but it is worth spending a quick moment 

2 just to review that.

3 A typical community college student, the 

4 average age is 24. Forty-seven percent are under 

5 24; 35 percent are over 30. Fifty-nine percent are 

6 women. Sixty-one percent are independent--

7 classified as financially independent. Eighty

8 percent work while enrolled and work on average 32 

9 hours per week. Twenty-six percent of students are 

10 at or below 125 percent of the federal poverty 

11 level. Forty-seven percent receive some financial 

12 aid, mainly grants. Thirty percent have dependent 

13 children. And two-thirds are part-time students.

14 As you well know, these students face 

15 significant economic challenges, but they are also 

16 eligible for a wide range of programs decades old 

17 that have been passed and supported with 

18 appropriations by many Congresses. These programs 

19 were designed to help people with low means to 

20 raise themselves out of poverty. They include

21 programs specifically for education, such as Pell 

22 Grants, as well as the Earned Income Tax Credit; 

23 Supplemental Nutrition Assistance Program, formerly 

24 known as food stamps; Medicaid and SCHIP for 
djj 218

1 children; and child care subsidies.

2 We all know that, particularly in these 

3 times, many community college students are 

4 literally one paycheck from disaster. And they cut 

5 it even closer with respect to being able to stay 

6 in school. I mean, disaster doesn't necessarily 

7 just mean complete loss, but it also can just mean 

8 a short piece of leaving school, because their 

9 margin for error and their margin even for 

10 misfortune is extremely thin. Taken together, 

11 these programs can substantially increase the 

12 resilience of these students in completing their 

13 educations.

14 A typical student, for example, may have 

15 income roughly of $14,000 a year at a low-wage job. 

16 She faces rent, food, transportation, health care, 

17 child care, and taxes--costs that we have estimated 

18 for this student at more than $19,000, an immediate 

19 deficit of $5,000 before schooling costs can even 

20 come into account. The educational institutions do 

21 their best to help, of course, but there is 

22 currently very little they can do to connect their 

23 students with these benefits. It's difficult 

24 enough for them just to verify FAFSA information so 
djj 219

1 these students can receive Pell Grants and other 

2 financial aid assistance. But they cannot work 

3 around the inevitable delays of paperwork much less 

4 bypass the silos in the work support system. But 

5 making FAFSA easier and getting these work supports 

6 would be two important benefits for these students, 

7 substantially aiding them in completing their 

8 educations.

9 We believe that integrating FAFSA, tax 

10 filing, and access to nutrition and health benefits 

11 with the college registration process will 

12 significantly increase both persistence and 

13 completion for students by substantially increasing 

14 the resources they use to pay for school and to 

15 support their families while enrolled. That's why 

16 we created the Benefit Bank, a web-based platform 

17 service that helps low- and moderate-income people 

18 file their taxes, file for FAFSA, and maximize 

19 their tax credits and other work supports through 

20 an expert system. We estimate that this same 

21 student, if she receives the benefits for which she 

22 is currently eligible, can dramatically improve her 

23 ability to persist and complete her education by 

24 increasing her economic resources dramatically.
djj 220

1 For the case above, the student begins 

2 with about $14,000 in gross income. She will be 

3 eligible for the Earned Income Tax Credit, a cash 

4 value for her of approximately $4,000. In 

5 addition, she is eligible for SNAP with a value of 

6 about another $4,000; health care for herself and 

7 her children, an actuarial value of about $3,000, 

8 but a significant emotional and financial risk 

9 benefit; and child care subsidies of about $4,000. 

10 She may also be eligible for low-income heating and 

11 energy assistance, state tax credits, and others, 

12 but this is just an example.

13 So while she's currently out there working 

14 right now on the edge earning $14,000, she doesn't 

15 know it, but she's currently eligible for work 

16 support benefits that will essentially double her 

17 effective income to a value of about $29,000. And 

18 in my testimony it has exhibits attached for you to 

19 show that.

20 Integration of these functions will bypass 

21 the silos that exist currently in ways that allow 

22 institutions to be more efficient with their own 

23 resources while helping their students more. In 

24 the benefit bank, for instance, once a student has 
djj 221

1 completed his or her taxes, which are then filed 

2 electronically, the information that's already been 

3 entered and gathered will be transferred directly 

4 over into the FAFSA form. The expert system can 

5 then raise to the surface whatever information is 

6 still missing. And then once that information is 

7 completed, can file FAFSA electronically, reducing 

8 errors while increasing speed and confirming that 

9 the information is the same as that that was filed 

10 with the Internal Revenue Service, eliminating the 

11 verification issue.

12 Integration of these functions through 

13 expert technology can support the institutions in 

14 their work, making their efforts more efficient and 

15 more effective with their own resources. At the 

16 same time, they can use their own technological 

17 processes that are already existing--their 

18 registration process, for instance--to connect 

19 their student with educational and other outside 

20 supports.

21 It will increase the resources available 

22 to their students, both educational resources 

23 through FAFSA, but also other resources for 

24 themselves and their children that make them more 
djj 222

1 stable. They'll reduce the amount of debt they 

2 carry to complete their education. They will 

3 virtually eliminate the substantial risk of 

4 catastrophic debt often related to health care 

5 costs. And they'll be able to spend more time in 

6 classes and studying, performing better in their 

7 classes, and completing their educations sooner. 

8 In short, technological integration will result in 

9 efficiencies for the community colleges in 

10 providing financial aid; will increase student 

11 persistence; will enable them to more rapidly 

12 compete--complete their educations. The community 

13 colleges will increase their success rate where it 

14 counts: raising generations out of poverty through 

15 education.

16 Thank you.

17 MR. MADZELAN: Thank you.

18 Mary Catherine Scarborough, British 

19 Council.

20 MS. SCARBOROUGH: Good afternoon. My name 

21 is Mary Catherine Scarborough and I work for the 

22 British Council. We're the United Kingdom's 

23 international organization for educational and 

24 cultural relations. In the United States, we 
djj 223

1 increase the availability and quality of resources 

2 for students interested in study abroad, 

3 undergraduate and postgraduate degrees at U.K. 

4 universities. We also serve as the Cultural 

5 Department for the British Embassy in Washington, 

6 D.C.

7 Today, I am joined by representatives from 

8 New Zealand, Australia, and Canadian embassies. 

9 And in Denver, you heard from another Canadian 

10 colleague from the consulate there.

11 For your consideration, we provide the 

12 information in support of changes that would enable 

13 foreign institutions to become eligible for the 

14 Direct Loan Program, ensuring American students 

15 enrolled in higher education at foreign 

16 institutions can continue to afford the education 

17 of their choice. To support the inclusion of 

18 foreign institutions we provide the following 

19 information.

20 Currently, foreign institutions are 

21 eligible to apply for participation in the Federal 

22 Family Education Loan--FFEL--Program. The 

23 potential discontinuation of FFEL, allowing 

24 American students access to federal aid while 
djj 224

1 enrolled at foreign institutions, would limit the 

2 ability of Americans to experience full-degree 

3 international education. According to the U.K.'s 

4 Higher Education Statistical Agency, HESA, in 2007-

5 2008, 12,800 American students studied at U.K. 

6 universities for undergraduate and postgraduate 

7 education.

8 Currently, foreign institutions do not 

9 have the ability to administer federal aid without 

10 FFEL. Including these institutions in the Direct 

11 Loan Program will ensure that American students can 

12 continue to receive federal aid at foreign 

13 institutions. Therefore, in the coming months, we 

14 will support modifications of the Higher Education 

15 Act, which would allow for inclusion of foreign 

16 institutions in the Direct Loan Program.

17 Thank you for your time and consideration.

18 MR. MADZELAN: Bob Collins, Apollo Group.

19 MR. COLLINS: Good afternoon. My name is 

20 Bob Collins. I'm the Vice President of Student 

21 Financial Aid for the Apollo Group. I've been an 

22 active financial aid professional for over 28 

23 years. I've been with the Apollo Group since 2000, 

24 March of 2000.
djj 225

1 I provided earlier testimony in Denver, 

2 which I submitted in writing today. My comments 

3 are scribbled on this piece of paper.

4 The University of Phoenix is one of the 

5 most highly regulated schools in the education 

6 sector. We operate in 38 states and have a 

7 physical presence there, so we have all of the 

8 state regulatory requirements. We're regionally 

9 accredited by the Higher Learning Commission. And 

10 since we operate in all of these states, all of the 

11 other regional accrediting agencies have the 

12 opportunity to visit our campuses and--located 

13 within their regions as well. We have four 

14 programmatic accreditations in business, nursing, 

15 teachers, and counselors.

16 We're a publicly traded company, so, 

17 therefore, we have the Securities Exchange 

18 Commission Sarbanes-Oxley requirements. We have an 

19 annual independent compliance audit performed by an 

20 external big accounting firm. We have internal 

21 audits. We have state program reviews and we have 

22 Department of Education program reviews.

23 Today you heard many of the same tired 

24 accusations against the University of Phoenix that 
djj 226

1 make great headlines, but are lacking in factual 

2 integrity. It is unfortunate that as a public 

3 company many financial investors make their living 

4 from shorting the Apollo Group stock. Apollo Group 

5 is the parent company of the University of Phoenix. 

6 But to be clear, the University of Phoenix is 

7 focused on student outcomes, not on the financial 

8 investors who may be trying to short Apollo stock.

9 Let me start by clearing the record about 

10 the University of Phoenix 2003 Program Review 

11 Report. There's no question that the report is 

12 filled with accusations and strong rhetoric. But 

13 not contained in the report is the University's 

14 vigorous rebuttal to its contents. We did settle 

15 with the Department as we had no desire to enter 

16 into a protracted dispute with our primary 

17 regulator. However, the settlement did not require 

18 that we change any policies or practices because we 

19 were, in fact, abiding by the law.

20 Following our settlement, the Arizona 

21 Private Postsecondary Education Board decided to 

22 conduct their own investigation to see if the 

23 contents of the 2003 Program Review Report had 

24 merit. Following their exhaustive investigation, 
djj 227

1 the State Education Board voted unanimously to 

2 dismiss the matter, finding no violation of statute 

3 or rules.

4 The second issue that frequently comes up 

5 are graduation rates. As you know, the IPEDS

6 database requires that institutions report only 

7 those students with no prior college experience. 

8 As disclosed in our consumer information, this 

9 first-time, full-time IPEDS definition is not 

10 representative of our student population.

11 The University of Phoenix student brings a 

12 significant level of prior college work. The 

13 University of Phoenix completion rates are 

14 comparable to conventional four-year colleges and 

15 universities: 27 percent of University of Phoenix 

16 students graduate at associate degree level, which 

17 is the same as the national rate; 38 percent of 

18 University of Phoenix students graduate at 

19 bachelor's level compared to 43 percent nationally; 

20 and 60 percent of the University's students 

21 graduate at the graduate level versus 61 percent 

22 nationally. And in comparison of students who 

23 enter college with risk factors that often 

24 contribute to their dropping out, the University of 
djj 228

1 Phoenix rates of completion for bachelor's degree 

2 are substantially higher than for institutions 

3 overall. These rates have been verified by 

4 external parties again and again.

5 With respect to the previously mentioned 

6 OIG audit, for those aid administrators who are in 

7 the room, if you've ever had the participate in one 

8 of those, they arrived on campus in March of 2004, 

9 spent about an academic year. And this was not a 

10 random sample of student files. This was an entire 

11 database of all of our student record systems. The 

12 period of time that they were auditing was from 

13 September of 2002 to March of 2004.

14 They looked at two areas. The first one 

15 was related to disbursements and, in August 2005, a 

16 report was issued. The report states, "Except for 

17 two areas, we concluded that University of Phoenix 

18 had policies and procedures that provide reasonable 

19 assurances that the institution properly makes 

20 initial and subsequent disbursements to students 

21 enrolled in Title IV-eligible programs." Except 

22 for two areas, and those were nominal, I think 

23 there were six students where we had refunded less 

24 than $20,000 back to the programs.
djj 229

1 Regarding the return to Title IV, I quote, 

2 this report was issued in December of 2005. The 

3 OIG, "We concluded that the University of Phoenix 

4 had policies and procedures that provided 

5 reasonable assurance that the institution properly 

6 identified withdrawn students, appropriately 

7 determined whether a return to Title IV calculation 

8 was required, returned Title IV funds for withdrawn 

9 students in a timely manner, and used appropriately 

10 methodologies for most aspects of calculating the 

11 return to Title IV." For most aspects.

12 I really get to appreciate the regulatory 

13 process because in February of 2004, there as a 

14 "Dear Colleague" letter that was issued, a rather 

15 extensive "Dear Colleague" letter. And in it there 

16 was some sub-regulatory guidance with respect to 

17 return to Title IV for non-term programs of which 

18 the University of Phoenix is a model. Some would 

19 argue that it promulgated new regulation, this 

20 "Dear Colleague" letter; I'm not going to go there.

21 In February of 2004, without any notice, 

22 we were heads-down. We were conducting a software 

23 system enhancement, which is routine about that 

24 time of year. We were preparing for the new aid 
djj 230

1 year regulations. We had just completed a program 

2 review and out comes a 24-page "Dear Colleague" 

3 letter.

4 We did our best to implement that as 

5 quickly as possible in light of everything that was 

6 going on, and we did. In fact, the OIG did confirm 

7 that our new policies and procedures that we 

8 adopted in December were compliant, in December of 

9 2004, of that year. So from March 1 to December, 

10 that's how long it took to implement this new 

11 guidance.

12 So only to say these--the regulatory 

13 process is critical. There's public hearings. 

14 There's Negotiated Rulemaking. There's a Notice of 

15 Proposed Rulemaking with a public comment period. 

16 And then final regulations are posted in the 

17 Federal Register. And then there's a master 

18 calendar to allow institutions enough time to 

19 implement all of these changes.

20 Finally, I'd like to point out that the 

21 University of Phoenix is here for the same reason 

22 all of you are: We want to ensure that, in the 

23 end, our regulatory processes are fair and balanced 

24 for all types of institutions and, most 
djj 231

1 importantly, that they serve the students who 

2 should be able to attend the schools that best meet 

3 their needs.

4 Thank you.

5 MR. MADZELAN: Thank you.

6 Well, if you'll give me a moment, I will 

7 check out--we'll check outside to see if we have 

8 anyone additional signed up. That is it for my 

9 list at the moment. We are scheduled to be here 

10 until 4 o'clock. So if you'll just hold tight for 

11 a moment or two, we'll see if we have anyone else.

12 I'm told we have no one else signed up. 

13 So, what we will do is we will recess and rather 

14 than reconvene at any particular time, I will just 

15 say we'll reconvene at the call of the Chair. And 

16 we will be here until 4 o'clock. Okay.

17 [Recess.] 

18 MR. MADZELAN: It is now 4 o'clock and we 

19 have received no additional indication or no 

20 additional persons have asked to speak this 

21 afternoon. So we are now closing this session of 

22 the Negotiated Rulemaking Hearing.

23 Thanks to all who participated.

24
djj 232

1 [Whereupon, at 4:00 p.m., the hearing was 

2 adjourned.]