Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

U.S. Department of Education (ED)

Office of Postsecondary Education (OPE)

Public Hearing on Federal Student Aid 2013

U.S. DEPARTMENT OF EDUCATION

OFFICE OF POSTSECONDARY EDUCATION

PUBLIC HEARING

THURSDAY

MAY 30, 2013

The Public Hearing convened in 

Toland Hall Auditorium at the University of 

California San Francisco, 533 Parnassus Street, 

San Francisco, California, at 9:00 a.m., Carney 

McCullough, Department of Education, Office of 

Postsecondary Education, presiding.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

PRESENT FROM THE DEPARTMENT OF EDUCATION:

CARNEY McCULLOUGH, Department of Education,

Office of Postsecondary Education

JEFF APPEL, Department of Education, Special

Assistant, Planning, Evaluation and

Policy Development

BRENDA DANN-MESSIER, Ed.D., Department of

Education, Assistant Secretary for

Vocational and Adult Education, Acting 

Assistant Secretary, Office of 

Postsecondary Education

JULIE MICELI, Department of Education, Deputy

General Counsel

PUBLIC COMMENTERS LISTED CHRONOLOGICALLY:

DEBBIE COCHRANE, The Institute for College

Access & Access

KATE ZULASKI, Commission on Massage Therapy

Accreditation

ROBERT SHIREMAN, Director, California

Competes: Higher Education for a Strong

Economy

JOHNNY GARCIA VASQUEZ, Commissioner, State of

California, California Student Aid

Commission

MARY LYN HAMMER, President and CEO, Champion

College Services, Inc

MEGAN RYAN, Supervising Attorney, East Bay

Community Law Center
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

MARGARET REITER

DAVID LONGANECKER, President, Western

Interstate Commission for Higher

Education

THOMAS BABEL, Vice President, Regulatory

Affairs, DeVry Inc.

NANCY COOLIDGE, Associate Director, Student

Financial Support, University of

California

ANTHONY J. GUIDA JR., SVP-External Affairs,

Education Management Corporation

RICHARD WINN, Executive Director, Western

Association of Schools and Colleges

RIGEL S. MASSARO, Policy & Legal Advocate,

Public Advocates, Inc.

LINDA WILLIAMS, Vice President, California

Community Colleges Student Financial Aid

Administrators Association (CCCSFAAA)

BRAD HARDISON, Financial Aid Director, Santa

Barbara City College

RUSSELL POULIN, Deputy Director, Research and

Analysis, WCET - WICHE Cooperative for

Educational Technologies

DAVID MARR, President, Blackboard Transact

RACHELLE FELDMAN, National Direct Student Loan

Coalition

TRACE A. URDAN, Senior Research Analyst -

Education, Wells Fargo Securities, LLC

SUZANNE MARTINDALE, Consumers Union

KRISTEN F. SOARES, President, Association of

Independent Colleges and Universities (AICCU)
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

ZAC DILLON, Young Invincibles

JULIANA FREDMAN, Attorney, Bay Area Legal Aid

ALICIA HETMAN, American Association of

University Women (AAUW)

ARMANDO TELLES, Veteran Advocate and Organizer

from San Diego

JOE RIDOUT, Consumer Action

DYLON BUSSER, Roots of Justice/IIRON Student
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

TABLE OF CONTENTS

ITEM PAGE

Brenda Dann-Messier ....................... 5

Debbie Cochrane ........................... 13

Kate Zulaski .............................. 26

Robert Shireman ........................... 30

Johnny Garcia Vasquez ..................... 40

Mary Lyn Hammer ........................... 47

Megan Ryan ................................ 58

Margaret Reiter ........................... 63

David Loganecker .......................... 74

Tom Babel ................................. 85

Barbara Coolidge ......................... 98

Tony Guida ............................... 120

Richard Winn ............................. 130

Rigel Massaro ............................ 135

Linda Williams ........................... 140

Brad Hardison ............................ 150

Russ Poulin .............................. 163

David Marr ............................... 176

Rachelle Feldman ......................... 187

Trace Urdan .............................. 197

Suzanne Martindale ....................... 204
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

Kristen Soares ........................... 212

Zac Dillon ............................... 218

Juliana Fredman .......................... 222

Alicia Hetman ............................ 227

Armando Telles ........................... 235

Joe Ridout ............................... 244

Dylon Busser ............................ 251
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 P-R-O-C-E-E-D-I-N-G-S

2 9:00 a.m.

3 MS. MESSIER: Good morning, 

4 everybody. 

5 My name is Brenda Dann-Messier and 

6 I'm the Assistant Secretary for the Office of 

7 Vocational and Adult Education, and the Acting 

8 Assistant Secretary for the Office of 

9 Postsecondary Education.

10 Before we begin, I want to thank our 

11 hosts here at the University of California in San 

12 Francisco, and I wanted to let you know that I 

13 am joined by many of my colleagues from ED, Jeff 

14 Appel from the Office of Policy and Evaluation, 

15 Julie Miceli from our Office of General Counsel, 

16 Carney McCullough from our Office of 

17 Postsecondary Education, Amy Wilson up there at 

18 the table, from our Office of Postsecondary 

19 Education, and many of our Regional Office 

20 colleagues. So, I want to thank them for being 

21 here.

22 I also want to thank our 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 interpreters for being here today, and I want to 

2 welcome all of you to the third of our four public 

3 hearings.

4 In today's global economy, a college 

5 education is no longer just a privilege for some, 

6 but rather, a prerequisite for all.

7 In the last year, 60 percent of jobs 

8 went to those with at least a Bachelor's degree, 

9 and 90 percent, to those with at least some 

10 college.

11 Over the next decade, as many as 

12 two-thirds of all new jobs will require 

13 education beyond high school.

14 This is why the President's plan for 

15 a strong middle class and a strong America calls 

16 for expanding the availability of postsecondary 

17 education or training for every American.

18 Providing every American with 

19 quality education is not just a moral 

20 imperative, but an economic necessity, and we 

21 want to make sure that all students, regardless 

22 of income, race or background, have the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 opportunity to cross the finish line.

2 These public hearings give us an 

3 opportunity to begin conversations with the 

4 higher education community on rules that will 

5 ensure that colleges and universities are giving 

6 students a high quality education that prepares 

7 them for the workforce and life-long success.

8 These hearings are meant to be 

9 comprehensive and will include discussions of 

10 topics like state authorization for online 

11 programs, issues surrounding institutions' 

12 management of Federal student aid funds, and how 

13 to define gainful employment.

14 This process builds upon previous 

15 steps to develop regulations that protect 

16 taxpayer’s funds and ensures that all students 

17 are able to access and afford a quality higher 

18 education.

19 We know college is one of the best 

20 investments anyone could make, but we want to 

21 ensure that students and taxpayers are investing 

22 in programs that prepare graduates with the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 skills and knowledge they need to compete for 

2 higher paying jobs.

3 The work of the people in this room, 

4 the contributions and feedback that we have 

5 received throughout the last four years has 

6 raised our awareness about a number of issues, 

7 and we're interested in learning more through 

8 these conversations.

9 Last year the Department held 

10 discussions about rules that will be designed --

11 rules that would be designed to prevent fraud and 

12 abuse of Title IV Federal Student Aid Funds, 

13 especially within the context of current 

14 technologies.

15 In particular, the Department 

16 announced its intent to propose regulations to 

17 address the use of debit cards for dispersing 

18 Federal Student Aid, as well as to improve and 

19 streamline the campus-based Federal Student Aid 

20 Programs.

21 As our interest in fraud and the use 

22 of debit cards continues, we're now considering 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 adding several other very important topics to 

2 the regulatory agenda. These include one, cash 

3 management.

4 The Department is interested in 

5 looking at the regulations governing when and 

6 how institutions disperse Federal student aid, 

7 how institutions invest and manage those funds, 

8 and other issues on this topic.

9 Two, state authorization for 

10 distance education programs. 

11 The Department had previously 

12 regulated on this issue, but a Court vacated the 

13 rule on procedural grounds in 2011. 

14 With that regulation no longer in 

15 place, the Department is interested in ideas for 

16 how to address the requirement that states 

17 authorize the institutions that provide 

18 distance education to its residents, when the 

19 institution is not physically located in the 

20 state.

21 Three, the state authorization for 

22 foreign locations of domestic institutions.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 The Department is interested in 

2 ideas for how foreign locations of domestic 

3 institutions should be treated under the state 

4 authorization regulations, since current rules 

5 do not specifically address foreign locations.

6 Four, clock-to-credit hour 

7 conversion.

8 Given concerns raised by 

9 institutions of higher education, the 

10 Department is interested in whether regulations 

11 governing the conversion of clock hours in a 

12 program to credit hours should be reviewed.

13 Gainful employment. Last June, a 

14 U.S. District Court vacated regulations 

15 defining what is meant for a program to provide 

16 gainful employment in a recognized occupation, 

17 but it affirmed the Department's authority to 

18 regulate in this area.

19 The Department is now interested in 

20 public input on other potential approaches to 

21 distinguish between successful and unsuccessful 

22 programs that seek to prepare students for 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 gainful employment, thoughts on what the best 

2 measures or thresholds should be and how best to 

3 construct an accountability system.

4 Campus safety and security 

5 reporting. 

6 The reauthorization of the Violence 

7 Against Women Act made some changes relating to 

8 the information institutions are required to 

9 collect and disclose, as part of the Clery Act.

10 The Department is now proposing to 

11 develop regulations to implement these new 

12 requirements.

13 The definition of adverse credit for 

14 the Direct PLUS Loan Program. 

15 The PLUS Loan Program requires that 

16 applicants not have an adverse credit history to 

17 receive a loan. 

18 What constitutes adverse credit was 

19 defined in regulations published in 1994, when 

20 credit conditions and consumer markets were 

21 different and loans were made through two 

22 different programs.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Since these conditions have 

2 changed, the Department is interested in 

3 comments on whether it would be appropriate to 

4 modify the definition of adverse credit and if 

5 so, what changes should be made.

6 Our last hearing on these subjects 

will be held June 4th 7 in Atlanta. Based on the 

8 comments gathered at the hearings, the 

9 Department will draft a list of topics to be 

10 considered by rulemaking committees.

11 It is likely that negotiations will 

12 begin this Fall and prior to that, we will issue 

13 a Federal Register Notice seeking nominations 

14 for negotiators.

15 I thank all of you for dedicating 

16 your time and expertise to this very important 

17 process. I look forward to a fruitful discourse 

18 and appreciate your contributions, and now, turn 

19 it over to my colleague, Carney McCullough.

20 MODERATOR McCULLOUGH: Thank you, 

21 Brenda. I get to be sort of your MC for the day, 

22 in terms of calling people to the table.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 As we indicated, if you could limit 

2 your comments to 10 minutes, I will be watching 

3 the clock. We have a full agenda today. Every 

4 slot is filled.

5 So, I'll have to -- may have to keep 

6 people on track, and we certainly appreciate it. 

7 Once again, want to thank our hosts 

8 here today, and thank you all for coming, and 

9 with that, I guess I would like to call Debbie 

10 Cochrane, first.

11 MS. COCHRANE: Good morning, 

12 everyone. Thank you so much for the opportunity 

13 to comment and also, to kick the day off.

14 I'm Debbie Cochrane with the 

15 Institute for College Access and Success, also 

16 known as TICAS. We will be submitting detailed 

17 written comments for the record. So, I'm just 

18 going to highlight some of the -- a few of the 

19 most pressing recommendations now.

20 Most urgently, the Department needs 

21 to move forward with regulating gainful 

22 employment. The need to do so is so much clearer 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 now than it was back in 2009, when the Department 

2 last initiated rulemaking on this issue.

3 Currently, more than 30 State 

4 Attorney Generals are now jointly investigating 

5 the for-profit college industry.

6 The 2012 report of the U.S. Senate 

7 HELP Committee's investigation included 

8 thousands and thousands of pages of 

9 documentation, that this industry needs greater 

10 attention and scrutiny, and the data released by 

11 the Department last year clearly demonstrates 

12 that the debt and loan repayment issues are huge 

13 problems at some of these programs.

14 Let me share some examples of what 

15 I mean.

16 The data show that students who 

17 enroll at Concorde career college, medical 

18 insurance specialist certificate program in San 

19 Diego have just a one in four chance of paying 

20 down their loan debt, and graduates' debt to 

21 discretionary income ratio is over 300 percent.

22 PCI College in Cerritos has a 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 medical stenography program where graduate debt 

2 to discretionary income ratio is over 400 

3 percent, and only 38 percent of their former 

4 students are paying down their debt.

5 Four-D College located in 

6 California's Inland Empire has three programs 

7 with repayment rates below 13 percent. Fewer 

8 than 13 percent of students' debt is being 

9 repaid.

10 With this new data, our eyes have 

11 been opened to the extent of the problem, but 

12 without a gainful employment rule in place, we 

13 aren't doing anything about it.

14 Students are still enrolling in 

15 these programs and taxpayers continue to 

16 subsidize them.

17 You must move forward with 

18 regulating gainful employment, so that both 

19 students and taxpayers have greater assurance 

20 that the career education programs they're 

21 investing in are worthwhile.

22 Importantly, the rule must also be 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 strengthened.

2 Under the final 2011 rule, all of the 

3 programs I just mentioned would continue to 

4 receive unlimited funding. It would not even be 

5 required to improve.

6 Last year, a Federal District Judge 

7 not only upheld the Department's authority to 

8 regulate in this area, but actually confirmed 

9 the need for it to do so, concluding, "Concerned 

10 about inadequate programs and unscrupulous 

11 institutions, the Department has gone looking 

12 for rats in rat holes, as the statute empowers 

13 it to do."

14 While the 2011 regulation didn't set 

15 high enough standards, its overall approach 

16 remains sound, provide consumers with important 

17 information about career education programs at 

18 all types of colleges, and stop taxpayer funding 

19 to programs that routinely leave students with 

20 debts they cannot repay.

21 Repayment rate and debt to income 

22 metrics do provide a reasonable gauge of how the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 programs former students, both completers and 

2 non-completers, fair after they leave.

3 Still, the Judge vacated the 

4 regulation, finding defects in two areas, but 

5 fortunately, we see the simple remedies to both 

6 of these defects.

7 First, the Court found that the 

8 Department gave insufficient rationale for 

9 setting the repayment rate at 35 percent, and it 

10 is difficult to defend a repayment rate so low.

11 There are numerous studies, 

12 regulations and laws on which a more appropriate 

13 higher threshold could be based.

14 For instance, Congress has 

15 determined that colleges where more than 30 

16 percent of borrowers default on their loans may 

17 lose access to aid. So, this suggests Congress 

18 presumes a sort of repayment rate of 70 percent.

19 The Department can address this, of 

20 course. 

21 The second concern about the 

22 inclusion of non-aid recipients and NSLDS by 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 simply not including those students.

2 Programs with median debt at zero 

3 already pass the rule and don't require intense 

4 scrutiny.

5 For programs with non-zero median 

6 debt, the majority of graduates will likely 

7 already be captured in NSLDS, because they 

8 borrowed.

9 So, the Department could keep the 

10 same debt to income ratios, with the same or 

11 stronger thresholds, but just base them on the 

12 graduates who borrowed.

13 So, those are straight-forward 

14 solutions that can and should be made to fix 

15 those problems, but the rule still does need to 

16 be strengthened.

17 At a minimum, the rule must provide 

18 incentives for weak programs to improve, so that 

19 programs that fail two of the three measures, 

20 like some of the ones I mentioned before, cannot 

21 just continue on business as usual.

22 The rule must provide relief to 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 students, when the programs they enrolled in are 

2 deemed inadequate for more Federal aid, by 

3 discharging the student’s relevant debt.

4 In the minimum, the rule must 

5 improve the program disclosures, particularly, 

6 the job placement and on-time completion rate 

7 definitions.

8 As important as it is, however, 

9 gainful employment is not enough. The 

10 Department also needs to prevent schools from 

11 evading other laws designed to protect students 

12 and taxpayers.

13 Specifically, the Department should 

14 add to the negotiating agenda rules to prevent 

15 students from evading the laws and cohort 

16 default rates or CDR's in 9010.

17 It has become very clear that some 

18 for-profit college companies are abusing 

19 forbearance and deferment, as tools to 

20 manipulate the school's CDR.

21 Now, avoiding default is always in 

22 students' best interests, but increasing their 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 loan balance and leaving them to default later 

2 on a higher loan balance, which are potential 

3 side effects of forbearance and deferment, is 

4 not in the students' best interests.

5 In most cases, students struggling 

6 to make loan payments are better served with 

7 counseling on how to repay their loans and the 

8 availability of income-based repayment, or IBR.

9 The Senate report thoroughly 

10 documents schools reliance on forbearance to 

11 avoid CDR sanctions.

12 Secretary Duncan recently sent a 

13 letter, disclosing that the Department's own 

14 investigation of forbearance abuse found that, 

15 "Some institutions are aggressively pursuing 

16 former students, to compel them to request 

17 forbearance from their loan servicer."

18 Further, many borrowers, "Express 

19 the view that they were pressured or forced to 

20 apply for forbearance and were not made aware of 

21 other options, such as deferment or the 

22 income-based repayment plan."
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 One borrower who was current in her 

2 payments was even offered a $25 gift card to 

3 complete the forbearance process. She was 

4 current in her payments, but still, pushed for 

5 forbearance.

6 Stronger rules could help to avoid 

7 this type of manipulation, which puts students 

8 at risk of both higher loan balances and 

9 defaults.

10 The Higher Education Act authorizes 

11 forbearance to be provided for the benefit of the 

12 student borrower.

13 The Department could, for instance, 

14 specify that certain types of patterns of 

15 forbearance, such as back-to-back forbearances, 

16 are rarely to students benefit, or the 

17 Department could require documentation for why 

18 IBR is not preferable to forbearance, before an 

19 extended forbearance is granted.

20 Also, current rules define as in 

21 default, any loan on which schools or 

22 contractors make a payment to prevent a 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 borrower's default.

2 The regulation does not specify that 

3 the payment must -- referenced, must be on the 

4 loan in question, and the provision of gift cards 

5 or other gifts of monetary value clearly seem 

6 like payments to prevent default.

7 So, if these types of payments 

8 aren't already prohibited under current rules, 

9 the Department should strengthen the rule, so 

10 they are.

11 It's not just CDR's that are being 

12 manipulated. Some colleges are manipulating 

13 their 90/10 rates, by delaying disbursement of 

14 student aid, irrespective of what students want 

15 and need.

16 The Department's sub-regulatory 

17 guidance, provided in the Federal student aid 

18 handbook specifies that disbursements are to be 

19 made to best meets students' needs and that aid 

20 must be provided to students in a timely manner.

21 Regulations should be amended to 

22 prevent such 90/10 gaining through disbursement 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 delays, either by amending disbursement 

2 regulations or be amending 90/10 regulations to 

3 specify that aid must be counted in college's 

4 revenue, as soon as it's eligible for 

5 disbursement.

6 Still, other companies are 

7 manipulating both CDRs and 90/10 by combining 

8 campuses for reporting purposes, so that these 

9 new campuses comply with the 90/10 rule or CDR 

10 thresholds. This too, must be stopped.

11 In all of these areas, we strongly 

12 urge that the Department consider where stronger 

13 regulations can help protect students and 

14 taxpayers' investments. 

15 The final topic I would like to speak 

16 about today is the participation rate index 

17 challenge and appeal processes.

18 By law, colleges where only a small 

19 share of students borrow are protected from 

20 sanctions based on their cohort default rate.

21 Losing eligibility for Federal 

22 grants and loans, which is the sanction that 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 colleges fear the most, takes three consecutive 

2 years of CDRs above 30 percent.

3 If the colleges' borrowing rate is 

4 low enough to use the PRI appeal for any of those 

5 years, they can avoid sanctions, but the 

6 Department won't tell the college that they're 

7 not in jeopardy until they feel like they're in 

8 -- at imminent risk of losing access to aid.

9 So, this renders this appeal much 

10 less helpful. Why make colleges wait until they 

11 fear an imminent loss of aid before telling them 

12 that they've never been in danger?

13 Most troubling, fears for CDR 

14 sanctions have led to some community colleges 

15 pulling out of the Federal loan program. 

16 Nationally, nine percent of all 

17 community college students do not have access to 

18 Federal loans, including more than 200,000 of 

19 them here in California.

20 Amending the Department's 

21 regulations on PRI appeals, to provide assurance 

22 in any year, would immediately help community 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 colleges feel more comfortable offering loans to 

2 their students.

3 Nothing in the statute prohibits the 

4 Department from accepting PRI appeals from 

5 colleges with low borrowing rates in any year, 

6 but the Department has pointed to current 

7 regulations as a borrower -- as a barrier to 

8 doing so. Thank you.

9 MODERATOR McCULLOUGH: Thank you. 

10 Thank you, Debbie. Kate Zulaski.

11 MS. ZULASKI: Good morning. Thank 

12 you for the opportunity to speak today. I am 

13 Kate Zulaski, Executive Director for the 

14 Commission on Massage Therapy Accreditation, or 

15 COMTA.

16 COMTA is a specialized accrediting 

17 agency, recognized by the Secretary. We offer 

18 accreditation for single purpose institutions, 

19 teaching massage therapy and/or aesthetics, as 

20 well as programs of these subjects taught within 

21 larger institutions.

22 These fields provide opportunity 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 for either a full-time career or a part-time 

2 flexible income.

3 Both fields of study are commonly 

4 regulated within a state, based on a certificate 

5 level of achievement, with a particular number 

6 of clock hours required for entry level 

7 practice, as defined by state certification or 

8 licensing Board.

9 However, minimum education for 

10 entry level practice, as defined by state 

11 regulation, is not necessarily considered ideal 

12 for a successful career in either field.

13 Many practitioners seek additional 

14 education to further develop their skills and 

15 offer advanced services in order to earn better 

16 wages.

17 In some cases, this may include 

18 earning an Associate degree in the field of 

19 study, or even continuing on to earn a Bachelor's 

20 degree in a related field.

21 Massage therapy in particular is 

22 often a stepping stone for students to start 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 earning income while they continue on to further 

2 study in advanced massage techniques or other 

3 healthcare fields.

4 These programs are offered in a 

5 variety of environments, including community 

6 colleges, as well as small, independently owned 

7 schools.

8 Under the current Section 668.8(k)2 

9 related to the clock to credit hour conversion, 

10 if proof of training in clock hours is required 

11 to practice professionally, then program must be 

12 considered a clock hour program for Title IV 

13 purposes.

14 This strict limitation has had a 

15 number of consequences, which tend to undermine 

16 the overall quality of education in our fields.

17 On behalf of the Commission, I 

18 respectfully request that the Department 

19 reconsider this section, and work to find a 

20 better solution for the issue it was intended to 

21 address.

22 Furthermore, as an agency that 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 requires all programs to demonstrate that 

2 specific curriculum competencies be 

3 consistently taught and assessed with students, 

4 COMTA supports efforts to emphasize evaluation 

5 of student competence, rather than emphasizing 

6 time spent in class.

7 We suggest that programs which teach 

8 an observable skill, such as massage or skin 

9 care, could be evaluated through direct 

10 assessment.

11 We encourage the Department to 

12 consider how direct assessment might be used 

13 with programs that have previously been 

14 restricted to clock-hours.

15 Also as a side note, please remember 

16 that any time regulations apply to for-profit 

17 schools, this also applies to very small 

18 independent small businesses, owned by a single 

19 person often. We represent a significant 

20 number of schools of this type.

21 I have very short remarks today. If 

22 you have any questions, I can answer them.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 MODERATOR McCULLOUGH: Thank you 

2 very much.

3 MS. ZULASKI: Thank you.

4 MODERATOR McCULLOUGH: Thank you, 

5 Kate. Robert Shireman. Good morning.

6 MR. SHIREMAN: Good morning, and 

7 welcome to San Francisco.

8 For the past 24 years, I have been 

9 working to improve college access and success in 

10 Government, in the Clinton and Obama 

11 Administrations, and at independent policy 

12 organizations.

13 Nearly four years ago, I sat at the 

14 Education Department table, in the initial 

15 program integrity rulemaking process, and I am 

16 pleased that 13 of the 14 topics that we raised 

17 at the time resulted in changes that are being 

18 implemented.

The 14th 19 rule, gainful employment, 

20 has been opposed by -- principally, by 

21 for-profit colleges. So, my comments today 

22 will focus on how the profit motive relates to 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 the need to regulate -- for regulatory 

2 oversight.

3 Almost everything that we are 

4 seeing, wearing and using right now in this room 

5 was developed and produced as a result of 

6 investors seeking a profit. 

7 This incredibly smart phone, that 

8 most of us have in our pockets, emerged not from 

9 any Government directive, but from competition 

10 to get me to spend money.

11 In the process, this product made 

12 other products nearly obsolete. It is a 

13 dictionary, encyclopedia, map, calculator, 

14 camera and even a Scrabble board. Anybody 

15 playing Scrabble right now?

16 Adam Smith called competitive 

17 markets the invisible hand, because when they 

18 work right, they almost magically steer toward 

19 addressing society's needs, not because the 

20 providers are benevolent, but because they want 

21 a profit. It happens without a grand plan.

22 For-profit entities are a major 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 component of education, even when the schools 

2 are public and non-profit. 

3 The buildings, the text books, the 

4 lab equipment, the hardware, the software, the 

5 beds and even the food are all developed and 

6 delivered through for-profit markets.

7 To argue that the profit motive is 

8 inimical to education is to deny our every day 

9 surroundings. That is why the case made by the 

10 CEOs of for-profit colleges can seem so 

11 compelling. They are not hampered by 

12 traditions of hundreds of years. They can bring 

13 in nearly unlimited capital to solve problems 

14 rapidly.

15 There is nothing holding them back 

16 from pursuing efficiencies, creating the 

17 potential to meet student and industry needs at 

18 lower costs.

19 But the big difference between my 

20 phone and a college degree is that I don't have 

21 to trust Samsung, that this is what Samsung says 

22 it is. I can tell that it's a working phone.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Unlike with other products, what is 

2 most valuable about a college -- about college 

3 is often nebulous and unpredictable.

4 Indeed, one of the most important 

5 goals of a liberal arts education is that it 

6 prepares, or perhaps propels is a better word, 

7 students to explore and expand the boundaries of 

8 knowledge and creativity. That is how we 

9 advance as a society.

10 Because the profit motive can get in 

11 the way of that quest by unrelentingly forcing 

12 a focus on calculatable efficiencies, higher 

13 education, education generally, has 

14 traditionally been provided by churches,

15 charities and public institutions, where the 

16 profit motive is muted.

17 A degree is whatever a college says 

18 it is. The founder of the University of Phoenix 

19 said, somewhat ominously, 15 years ago, "With an 

20 amorphous product like a college degree, 

21 investors can spend little on educating, 

22 maximize Federal aid and recruit students who 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 are least likely to be able to demand real value 

2 for the money.

3 Any college is capable of exploiting 

4 students and taxpayers, but the likelihood is 

5 greater when you have a conflict between the 

6 owners' financial interest and what makes for a 

7 quality education.

8 Kaplan University's CEO 

9 acknowledges this tension. At his for-profit 

10 institutions he can, in his words, rev up the 

11 recruitment engine, reduce investment in 

12 educational outcomes and deliver a dramatic 

13 return on investment.

14 Publically traded companies, he 

15 said in particular, create pressures to exploit 

16 the short-term opportunity for profits, that is 

17 inherent in this model, in a way that hurts 

18 students and taxpayers in the entire industry.

19 The problems are inherent in the 

20 for-profit model. These are his words, not 

21 mine.

22 Congress has long been aware of this 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 tension. The current statutory mechanisms for 

2 guiding the for-profit colleges to socially 

3 optimal ends, evolved from the approaches taken 

4 from the GI Bill, which were -- which were 

5 designed, quoting from 1976, "To prevent 

6 charlatans from grabbing the Veteran's 

7 education money."

8 Congress focused Federal funding at 

9 for-profit colleges, not on the importance of 

10 the amorphous pursuit of knowledge and 

11 development of leadership at traditional 

12 institutions, but instead, on the concrete, 

13 definable, measurable objectives of a subset of 

14 postsecondary education, job specific training.

15 The key to putting power of the 

16 profit motive to good use in the higher education 

17 is to give it clear targets, rather than thinking 

18 about the task of telling for-profit colleges 

19 what they should not do, tell them instead, what 

20 they need to prove, like a pharmaceutical 

21 company demonstrating that its new drug actually 

22 works.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 My regulatory recommendations focus 

2 on the three provisions of the Higher Education 

3 Act that apply specifically to for-profit 

4 college eligibility for federal funds, and I've 

5 written testimony that I will submit 

6 electronically, that includes details on four 

7 regulatory recommendations.

8 First, the gainful employment rule, 

9 the second part of it is about a recognized 

10 occupation.

11 The Department of Education should 

12 limit eligibility to job classifications that 

13 are backed by the actual employer categories.

14 The categories have morphed 

15 significantly from being job specific, to be 

16 very general, which undermines that, the 

17 specificity that makes it possible to oversee 

18 for-profit college involvement.

19 Doing -- making this change would 

20 increase programmatic integrity and 

21 accountability by reestablishing a more direct 

22 connection to an industry.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Second, in terms of gainful, to 

2 encourage for-profit colleges to achieve their 

3 real potential, the Department needs to gain 

4 higher than a 35 percent repayment rate, and in 

5 my recommendations, I recommend a structure for 

6 doing this.

7 Third, require colleges to 

8 demonstrate that Federal aid is not their only 

9 real customer. It is not a badge of honor that 

10 so many for-profit colleges can only seem to

11 attract the consumers who are the least 

12 informed. It is a sign of trouble, and it is the 

13 problem that the 9010 rule is supposed to 

14 address.

15 As the Senate Veterans Committee 

16 said in talking of the GI Bill version of the 

17 rule, if a college cannot attract non-subsidized 

18 students to its programs, it presents a great 

19 potential for abuse.

20 Colleges that feel the need to 

21 attract paying customers, employers or the 

22 students themselves, make themselves better 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 colleges. It changes what the college is about.

2 By the Department of Education's own 

3 data, shows that for-profit colleges with more 

4 un-aided students, have lower default rates 

5 among their aided students.

6 The Department needs to use this 

7 market tool, as well as my fourth 

8 recommendation, strengthening the Federal 

9 requirement, that the institutions demonstrate 

10 their ability to survive in the market for two 

11 years, before they are authorized to receive 

12 Federal funds.

13 In addition to these regulatory 

14 changes, the Department of Education should 

15 expand its information and monitoring efforts in 

16 the marketplace in three ways.

17 One, encouraging smart shopping 

18 behavior. The Department could do this by 

19 simply an email to all eight applicants, with a 

20 brief questionnaire and an electronic offer of 

21 information with the 1-800-FOR-FEDAID phone 

22 number.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Second, surveying students one year 

2 after they enroll in a college, and simply asking 

3 them, "Would you recommend this school to 

4 others," would produce data that the Department 

5 of Education could at least share with the 

6 schools, and provide to consumers.

7 Third, the Department should use 

8 shoppers to monitor the advertising, recruiting 

9 and enrollment practices of colleges.

10 The for-profit colleges know they 

11 are different. They are the ones who make the 

12 case about innovation and the power of the 

13 market. 

14 The Department of Education's task 

15 is to zero-in on how to steer that profit motive 

16 in the right direction.

17 The more for-profit colleges 

18 attempt to change the subject, rather than 

19 engaging in the substantive discussion about 

20 accountability, the more problems we should 

21 assume the colleges are hiding. 

22 The more they gang-up together, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 rather than having a variety of opinions, the 

2 more we must assume that they are all, rather 

3 than just some of them, in this business to 

4 exploit, more than to educate.

5 MODERATOR McCULLOUGH: Bob?

6 MR. SHIREMAN: One more line? The 

7 more rigorous the Department is in its 

8 expectations, the more successful it will be in 

9 creating a for-profit sector that does transform 

10 lives and provide real opportunities that 

11 benefit students and society. Thank you very 

12 much.

13 MODERATOR McCULLOUGH: Thank you.

14 MS. MESSIER: Thank you. 

15 MODERATOR McCULLOUGH: Johnny Garcia 

16 Vasquez.

17 MR. GARCIA VASQUEZ: Good morning. 

18 My name is Johnny Garcia Vasquez. I am here 

19 today representing the California Student Aid 

20 Commission, CSAC.

21 I was appointed to the Commission 

22 last year by Governor Jerry Brown. I am currently 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 a student at the University of California, 

2 Berkeley, and I am one of 15 members of the 

3 Commission and serve as Chair of the 

4 Commission's Student Impact Committee.

5 I want to take -- thank the U.S. 

6 Department of Education for this opportunity to 

7 speak about issues affecting students across the 

8 country and here in California.

9 But first, what is the California 

10 Student Aid Commission?

11 CSAC is the primary California state 

12 agency responsible for the delivery of State and 

13 Federal financial aid to students attending 

14 institutions of higher learning in the State of 

15 California.

16 The program is $1.5 billion this 

17 year, and over 250,000 students receive aid, and 

18 each year, more than $9 billion in State and 

19 Federal aid goes to students at postsecondary 

20 institutions in California.

21 Second, on behalf of the Commission, 

22 I am pleased to announce that California and CSAC 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 have led the way on establishing quality 

2 standards for institutional eligibility to 

3 participate in state grant programs.

4 For 2012 through 2013, California 

5 lowered the maximum cohort default rate CDRs to 

6 15.5 percent, and established a minimum 

7 graduation rate of 30 percent.

Each year on October 1st 8 , CSAC 

9 certifies the data from the Department, for the 

10 purpose of establishing eligibility for the next 

11 academic year.

12 We cannot over-emphasize the 

13 importance of accurate and timeliness of the 

14 State of California, as California's most 

15 vulnerable students are the recipients of the 

16 millions of dollars saved with these most stern 

17 thresholds.

18 Therefore, CSAC urges the 

19 Department to adopt regulations to interpret 

20 schools -- prevent schools from manipulating 

21 CDR's through the use of combining campuses for 

22 reporting purposes.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Moreover, CSAC urges the Department 

2 to develop regulations regarding one, gainful 

3 employment. 

4 We strongly encourage the 

5 Department to develop final gainful employment 

6 rules, as well as effective means for 

7 enforcement.

8 Struggling students with a lifetime 

9 of non-dischargeable debt and a second-rate 

10 education is adverse to the American promise of 

11 success through hard work.

12 Second, expand financial aid and 

13 financial literacy. 

14 We strongly support the President's 

15 proposal to expand the Federal Work Study 

16 Program and change the allocation formula to 

17 direct funds to institutions that serve the 

18 greatest numbers of low-income students, and we 

19 support the need for greater financial literacy 

20 for student borrowers at admissions, at the 

21 signing of the promissory note, as well as 

22 graduation.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Three, student aid debit cards. 

2 Disbursement using electronic funds transferred 

3 is widely used on many campuses and is a growing 

4 for-profit industry.

5 This process generates cost-savings 

6 for institutions and can be more timely -- a 

7 convenience for students.

8 The use of debit cards to access 

9 funds earning a lot of economical funds transfer 

10 presents opportunities and challenges, and 

11 regulatory guidance should focus on student 

12 needs, security, transparency and 

13 accountability.

14 The regulations need to provide 

15 better protection for students, and student 

16 funds like A) Students should be able to decide 

17 between economic -- electronic options for 

18 receipt of funds. B) Funds should be 

19 available without a fee. C) Institutional 

20 relationships with the debit card provider 

21 should be disclosed. D) Co-branding should be 

22 banded; for examples, college logos on debit 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 cards. E) Fee-free ATMs should be centrally 

2 located, and lastly, but most importantly, 

3 students should have to opt-in to receive a debit 

4 card, not the other way around.

5 From my experience, after 

6 completing my first year as a transfer student 

7 at UC Berkley and returning home for the summer, 

8 I went -- I enrolled in a lifetime fitness course 

9 at my former community college and received a 

10 debit card in the mail, even though I was no 

11 longer receiving any student aid from the 

12 community -- from that community college.

13 Now, almost the entire California 

14 Community College system currently uses debit 

15 cards, contracted with a single vendor to 

16 disburse financial aid. 

17 More choice and protections need to 

18 be provided to students, parents and taxpayers. 

19 In conclusion, I would like to once 

20 again, thank the Department for offering the 

21 California Student Aid Commission the 

22 opportunity to provide input for this important 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 regulatory effort.

2 As one of the Student Commissioners 

3 here in California, as a low-income student that 

4 comes from a single parent household, who is a 

5 first generation graduate -- almost graduate of 

6 the University of California, I can speak 

7 directly to the difficulties facing college 

8 students today.

9 The enormous rise in cost for 

10 attending school has not been met by 

11 corresponding increase in financial aid, and 

12 students are being forced to borrow more, while 

13 students of lesser means are being excluded.

14 Students are entitled to receive 

15 every dime of their financial aid dollars, while 

16 receiving quality and affordable education. 

17 Thank you for your time and 

18 consideration.

19 MODERATOR McCULLOUGH: Thank you 

20 very much. Megan Ryan.

21 Okay, Megan Ryan is not here. Okay, 

22 we'll skip her. Mary Lyn Hammer 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 MS. HAMMER: Good morning.

2 MODERATOR McCULLOUGH: Good morning.

3 MS. HAMMER: I didn't plan on going 

4 early. 

5 My name is Mary Lyn Hammer. I'm the 

6 President and CEO of Champion College Services, 

7 and we've been in business for 24 years, helping 

8 schools with their cohort default rates and with 

9 surveys to help schools also gain knowledge 

10 about their students, their graduates, their 

11 dropped students, and their employers, so that 

12 they can make good decisions about their -- the 

13 courses that they offer and what the students 

14 need.

15 I'm going to be submitting a 

16 detailed sheet in writing to the Department, but 

17 I wanted to highlight the most important things 

18 that I think need to be brought to the surface.

19 First of all, it's something that 

20 I've been asking for years. You guys have all 

21 heard about it, and I've been in meetings with 

22 some of you about it, is that we still need 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 information access for student loans, so that we 

2 can properly advise students.

3 This is primarily in the FFELP loans 

4 now. We probably could do some additions to the 

5 direct loans, as well, but it's primarily with 

6 the FFELP loans.

7 Secondly, we would like to have the 

8 ability to limit the amount of money that 

9 students can add to their debt.

10 I think it's a tragedy that certain 

11 institutions are not given that right, and that, 

12 you know, we have the ability to say to somebody 

13 that, "It's not in your best interest to take out 

14 this loan," but proprietary schools are 

15 prohibited from doing so, and I think it would 

16 be best for the students, to have that ability.

17 We would also ask that the 

18 Department take a good look at the contracts that 

19 they have with the Federal servicers.

20 A lot of the criteria and the 

21 contracts promote bad behaviors, and there is a 

22 lot of manipulating by the servicers, in order 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 to gain percentage of portfolios, and the 

2 students are the ones that pay the biggest price 

3 for those, and I'll give you a couple of 

4 instances of this.

5 We've actually spent a lot of time 

6 educating our students about accruing interest, 

7 about their best payment options, about having 

8 predictable payments, because some of the 

9 payment options are not good for the students.

10 Graduated repayment is one example, 

11 and if you look at it and compare it to mortgage 

12 loans, the ARM loans, those are the loans that 

13 are being foreclosed on, and have been 

14 foreclosed on.

15 My background before I did student 

16 loans at Champion, was in mortgage lending, and 

17 it was -- I was in Texas when the oil market 

18 crashed, and those were the exact same loans we 

19 were foreclosing on then. 

20 They're the loans we've been 

21 foreclosing on the last few years, and the 

22 structure of graduated repayment is very similar 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 to that, where the -- when the payments go up, 

2 it sets the student up for failure.

3 They are -- they can budget easier, 

4 when they have a standard repayment schedule. 

5 It's the best option for them, because they know 

6 what it is.

7 It's the same thing with IBR and ICR. 

8 The administrative burden for the student to 

9 apply for that on an annual basis is huge. If 

10 they make a mistake, it could take months to 

11 correct, and the payment changes. That is 

12 really hard for somebody to budget like that, 

13 especially when they're new to credit and new to 

14 borrowing.

15 So, it's hard for people who have 

16 credit for 30 years to do something like that, 

17 let alone students who don't have that 

18 knowledge.

19 So, we suggest that you take a look 

20 at some of those things, but on the servicing 

21 level, we actually have recorded phone calls, 

22 where the servicers are saying, "This is our top 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 initiative, and we're putting you in an IBR," and

2 the student is saying, "No, that's going to cost 

3 me too much money," because they understand 

4 accruing interest, and the student is saying, 

5 "No," and they put them in it anyway. It's not 

6 good.

7 There is another situation where 

8 there was a pilot program this year, and we 

9 figured it out because we had students going from 

10 delinquent status to forbearance status, to 

11 default.

12 What the pilot program was, is that 

13 the servicer was automatically putting students 

14 in an administrative forbearance without ever 

15 speaking to the student, and then if they didn't 

16 get a hold of the student, it was the last 60 days 

17 of delinquent status before default. If they 

18 didn't get a hold of the student, it went into 

19 default.

20 If they got a hold of them and got 

21 their acceptance of it, it remained in a 

22 forbearance status.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 So, the student and the schools 

2 believed that the loan was cured, and it wasn't, 

3 and so, there weren't any efforts on the part of 

4 the school to contact the students, or in our 

5 case, we were the ones contacting the students, 

6 because it appeared that the loan was current. 

7 That was what was reflected in the NSLDS. 

8 That's what came across on the reports, and we 

9 figured out the pattern and started questioning 

10 them, and they finally came clean with this.

11 At first, they said it was a pilot 

12 program, and they couldn't talk about any of the 

13 details, but we eventually got it out of them.

14 So, you know, the schools are being 

15 criticized for helping students exercise their 

16 rights, that are there by law.

17 Deferments and forbearances are a 

18 right that students have. You've asked us to 

19 educate the students, and we've done so, and the 

20 reflection is in the default rates.

21 The default rates are coming down. 

22 I can only speak to my own clients, but at 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Champion, our default rates are 15.2 percent 

2 lower than the national average for like 

3 institutions, and our repayment rates were 14.9 

4 percent higher.

5 So, you can do it and do it right, 

6 and some of the things that are going on with the 

7 servicing companies have nothing to do with the 

8 students, nothing to do with the schools, and the 

9 schools are penalized. The pilot forbearance 

10 program is one example.

11 Their incentives are based on their 

12 results, and if you look back at the history of 

13 the information that is released quarterly, you 

14 can see patterns where a servicer is going from 

15 last place, to first place, in a quarter.

16 You know, I am a numbers junkie, but 

17 taking millions and millions of students and 

18 moving the bar that quickly, it just doesn't 

19 happen without doing something that they

20 shouldn't be doing, and I don't believe that the 

21 schools should be penalized for all of those 

22 things.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 So, I really hope that you look at 

2 your contracts with the servicers, and do things 

3 that promote good behaviors.

4 The last thing I want to talk about 

5 is gainful employment, and like I said, I'm a 

6 numbers junkie, so, when all of the rates came 

7 out, I pulled down the spreadsheets, and the 

8 large spreadsheet had over 13,000 programs in 

9 it.

10 It wasn't what was publically 

11 released, but it had the devil of the details in 

12 it, and I started analyzing it initially, 

13 because I wanted to see if there was some tie-in 

14 between repayment rates and default rates, and 

15 there was absolutely no consistency.

16 But what I found was that the data 

17 in there didn't make any sense.

18 There are very specific repayment 

19 schedules that are supposed to be used for 

20 calculating the payments, and those payments are 

21 what is used to do the debt to earnings ratios.

22 So, here is some of what I found. 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Undergraduate certificate. The average 

2 payment reported and used for the calculation of 

3 those ratios was $14.85. That is on a $4,000 

4 debt, and it's supposed to be a 10-year 

5 repayment. It was defined very clearly in the 

6 regulations.

7 The actual payment on a 10-year 

8 repayment would be $46.35. Through all the 

9 ratios, they look pretty good based on $14.85.

10 Again, in the post-baccalaureate 

11 program, the payment was $15.25, when an actual 

12 payment for that program should have been 

13 $127.73.

14 Within post-baccalaureate 

15 certificate programs, you know, the media and 

16 what's said out there isn't matching the reality 

17 of what was reported.

18 The average proprietary debt was 

19 $8,391. That is the lowest of the debt for that 

20 category.

21 The highest is actually private 

22 schools, at $11,380.15, and the public sector 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 was $11,099.44. So, almost $3,000 higher than 

2 proprietary.

3 So, the reality is that proprietary 

4 debt really isn't all that outrageous, and on 

5 proprietary payments, for example, Bachelor's 

6 degrees, the regulations were defined to use a 

7 15-year repayment schedule.

8 The average debt was just under 

9 $8,000. The payments reported were $217.45. 

10 The correct payment would have been $70.87. 

11 Makes a big difference on the repayment and on 

12 the debt to income ratios.

13 So, what was reported was not 

14 accurate, and I'll give you a lot of details on 

15 this, and I'll be happy to explain it to you, 

16 because it is pretty complicated, if you're not 

17 the one that was the data junkie going through 

18 it. So, you guys can call me at any time about 

19 that.

20 But the payment -- the point being 

21 that it is important to teach students how to 

22 handle their debt and to make good decisions. 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 The schools are doing a good job of giving them 

2 those tools.

3 We had a client the other day said, 

4 "You guys aren't processing that many IBRs," and 

5 it's because the students are choosing not to 

6 take that schedule. They're choosing to take 

7 the standard repayment, where they know what it 

8 is, and they can budget for that.

9 MODERATOR McCULLOUGH: Mary Lyn, 

10 you're at time.

11 MS. HAMMER: Okay, thank you. 

12 MODERATOR McCULLOUGH: Thank you 

13 very much. Margaret Reiter? Megan Ryan? 

14 MS. RYAN: Good morning, everyone. 

15 My name is Megan Ryan. I am a supervising 

16 attorney at the East Bay Community Law Center.

17 EBCLC is one of the largest legal aid 

18 providers for low-income individuals in the San 

19 Francisco Bay area, and a primary provider of 

20 clinical education to students at U.C. Berkley 

21 Law School.

22 I direct our consumer protection 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 practice. I urge the Department of Education to 

2 implement a strong gainful employment rule.

3 In our clinics, we are seeing an 

4 increasing number of clients with student loans 

5 in default, following their attendance at a 

6 subpar for-profit college.

7 The debts are large, often grossly 

8 disproportionate to the economic benefit, if 

9 any, gained by attending these colleges. 

10 Though our clients want to repay 

11 these debts, many simply cannot afford the high 

12 monthly payments. Yet, we have found that 

13 private lenders will not work with poor 

14 borrowers to negotiate an affordable payment 

15 plan.

16 Our clients are unemployed or 

17 under-employed, despite the promises of 

18 lucrative jobs made by recruiters for these 

19 colleges, and they're frustrated and scared 

20 about their financial futures.

21 I really came here today to just 

22 introduce you to two of our many, many clients 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 from the past several months, who have ended up 

2 with large amounts of debt and no benefit from 

3 their education.

4 Christina has over $70,000 in 

5 student loan debt from a for-profit career 

6 education program, consisting of both Federal 

7 and private student loans. 

8 Christina makes a low wage and has 

9 been unable to keep up with all of her loan 

10 payments.

11 Christina defaulted on one of her 

12 private loans and was at risk of defaulting on 

13 others.

14 A debt collector sued Christina in 

15 June 2012, and I am working with her on that case. 

16 As she fought her lawsuit, she made efforts to 

17 get back into good standing on her other loans, 

18 but she was unable to negotiate sufficiently 

19 affordable repayment plans.

20 Unfortunately, Christina's total 

21 monthly loan payments were too high. Her income 

22 did not support her basic life necessities and 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 all of her loan payments.

2 Christina was recently served with 

3 two additional lawsuits for collection of 

4 private student loans. At age 32, Christina is 

5 facing possible judgments in three lawsuits.

6 If she loses these cases, she will 

7 be subject to wage garnishment and bank levies, 

8 likely for decades, since these loans cannot 

9 generally be discharged in bankruptcy, until the 

10 judgements are paid off.

11 Students need protection from 

12 career education programs that leave them with 

13 debt they cannot pay.

14 The second client I wanted to 

15 introduce you to is Tara.

16 Tara came to EBCLC, my organization, 

17 because she owed over $36,000 after attending a 

18 private for-profit college to earn her license 

19 to a vocational nursing degree.

20 Tara was unable to find work and was 

21 surviving on CalWorks Welfare, to support 

22 herself and her young child.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Not understanding that she had 

2 repayment options under the income based 

3 repayment plan, she defaulted on her Federal 

4 loan and her small income tax return was 

5 garnished.

6 While we were able to help her get 

7 on the IBR program, we were not able to give 

8 answers, to her dismay, that she owed so much 

9 money, despite being unable to find gainful 

10 employment.

11 Allowing programs where the 

12 majority of students cannot pay down their debt, 

13 to continue to in-debt students does a 

14 disservice to both students and taxpayers.

15 Programs that do not benefit 

16 students must -- should be shut down. The names 

17 in these stories have been changed, but the facts 

18 have not. These are the cases that I regularly 

19 see.

20 If the proposed gainful employment 

21 rule had been in effect, clients like Christina 

22 and Tara would not be saddled with debt and 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 disappointment.

2 I urge you to create a strong gainful 

3 employment rule, to protect students, so that 

4 their belief in upward mobility through 

5 education remains true, rather than ruined by 

6 crushing debt and professional stagnation. 

7 Thank you.

8 MODERATOR McCULLOUGH: Thank you. 

9 Margaret Reiter, please.

10 MS. REITER: Good morning. My 

11 remarks are based on my experience over 24 years 

12 of working as an investigator and prosecutor of 

13 consumer fraud, many of those cases involving 

14 for-profit schools, as well as my experience at 

15 the State and Federal level, in working with 

16 others to develop regulations and legislation in 

17 this sector.

18 Currently, I serve as the Vice Chair 

19 of the Bureau of Postsecondary Education 

20 Advisory Committee in California, and I have now 

21 also been updating every couple of years, a book 

22 for lay people who are in money trouble, and it 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 has a full chapter devoted to dealing with 

2 student loan debt.

3 So, my remarks are based on this 

4 variety of experience, and they are my own. 

5 They do not purport to represent any agency or 

6 committee, or anyone, other than myself.

7 I also would just say for time sake, 

8 I would really incorporate the remarks of Debbie 

9 Cochrane particularly, and also, those of Bob 

10 Shireman, because they dealt with and detailed 

11 some of the issues that need to be discussed.

12 In the Court decision that rejected 

13 the gainful employment rule, the Court went 

14 through and did a great service to us, in 

15 pointing out the original intent of gainful 

16 employment, and pointed out that Congress was 

17 relying heavily on the testimony of experts and 

18 members of the industry and others, who said 

19 among other things, that most students who take 

20 those training courses, in other words, 

21 for-profit training courses, complete their 

22 programs, and whether or not they complete, 95 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 percent obtain employment.

2 Therefore, it would be a good thing 

3 to include them in the student loan programs, 

4 because they would be able to repay their loans 

5 rapidly.

6 A substantial majority of those that 

7 obtained employment, obtained it in their field 

8 of study, and one of the representatives of the 

9 for-profit industry said that in almost every 

10 case, in almost every case, students would be 

11 able to repay their loans out of the increased 

12 income from their better educational status.

13 As a result, Congress included the 

14 for-profit schools in the loan program, and 

15 required as amended over the years, that there 

16 be gainful employment provided in recognized 

17 occupations.

18 If a person walked in off of the 

19 street and heard what we have today in this 

20 program, the short courses that have now morphed 

21 into much longer courses, the claimed 95 percent 

22 employment and the rapid loan repayment, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 compared to today's bloated training programs, 

2 grown overly long and garnishing -- garnering 

3 more Federal aid, the dismal student loan 

4 repayment rates, the high default rates, 

5 somebody who walked in and saw that and compared 

6 it to the original would say that we're crazy. 

7 We must be crazy to keep throwing down the rabbit 

8 hole, in this Alice and Wonderland world.

9 This is not the training program 

10 that Congress intended, when it talked about 

11 needing to prepare students for gainful 

12 employment.

13 This would all be considered an 

14 outrageous scandal, weekly fodder for the Sunday 

15 talk shows, if it had not continued for so long, 

16 and become so large, that we are near to this kind

17 of Alice in Wonderland world.

18 People who know I've been active in 

19 this area, sometimes ask me for their sons, 

20 daughters, nieces, nephews, if I could recommend 

21 a good for-profit school, and I have to tell them 

22 that there are probably undoubtedly, many of
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 them out there.

2 But the fact is, we don't have any 

3 standards to tell us which ones they are, and 

4 that is why it is so important that the 

5 Department, once again, make a strong effort to 

6 come up with a gainful employment rule, as well 

7 as a definition of job placement rates.

8 The gainful employment rule should 

9 resemble what Congress intended originally. 

10 Thirty-five percent repayment rate is such a far 

11 cry from what was intended, that it is just 

12 inconceivable that we would have that as our 

13 standard going forward.

14 I recognize that the Department 

15 realized that many schools could not meet a high 

16 standard, and therefore, came up with something 

17 that they thought would knock out -- not knock 

18 out too many programs. That cannot be a 

19 standard going forward.

20 The Department needs to consider 

21 some kind of a phase-in, so that programs today, 

22 that are not producing, can gradually get 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 themselves up to a standard, but then going 

2 forward, everybody should have to meet that high 

3 standard, and it should resemble what was 

4 intended to begin with.

5 Almost everybody can repay their 

6 student loans from the employment they're able 

7 to garner after these programs. Ninety-five 

8 percent of the people obtain employment, and so 

9 on.

10 In addition to the gainful 

11 employment, as I mentioned, we need to have 

12 uniform enforceable definition for job 

13 placement disclosures to students.

14 I know there was an effort to come 

15 up with them, and they decided it was too 

16 burdensome for the schools to actually have to 

17 collect that data, and I think that that's sort 

18 of looking at things backwards.

19 It is too burdensome for students to 

20 be able to figure out what is a good school, if 

21 they don't have that data. It's too burdensome 

22 for students to be saddled with these huge debts, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 when they wind up at a school that is not 

2 providing job placement.

3 It can be done. For over 20 years 

4 -- and for about 20 years in California, we had 

5 a rule that defined a uniform meaning for job 

6 placement. 

7 Schools collected the data, and 

8 frankly, it's not -- it would not be a burden, 

9 in that there are already many of them collecting 

10 it, and you know, you simply have a different 

11 computer report, depending on whether you report 

12 based on the criteria for the accrediting 

13 association or the state or the Federal.

14 It is, in this day and age, not a 

15 difficult proposition, to have to report things 

16 differently to the different states where you 

17 owe taxes, or the Federal Government. You're a 

18 computer program, you put in the data and it 

19 belches out the information that you need.

20 In addition, I would just mention 

21 briefly, there needs to be an adjustment to false 

22 certification regulations. 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 We had raised this in 2009, but it 

2 was not part of the original description of what 

3 was going to be discussed. 

4 The statute requires there to be --

5 loans to be charged -- discharged if a student's 

6 eligibility to borrow under this part was 

7 falsely certified by the eligible institution.

8 The regulations only deal with one 

9 type of false certification, but if you go 

10 through what the institution is required to 

11 certify, there are a number of things that it's 

12 required to certify, any one of which should 

13 allow a student to get their loan discharged, if 

14 that was certified falsely. 

15 That should be a topic that is taken 

16 up, because all these years, and continuing, 

17 while we don't have adequate regulations, the 

18 students are the ones who are suffering and 

19 having loans that they can't repay because they 

20 didn't get what they were supposed to.

21 The issue of debit cards, I agree is 

22 a very important one. From a consumer 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 perspective, the worst way to have your money is 

2 on a debit card. 

3 There are tons of issues with fees 

4 and all kind of things. The protections are not 

5 nearly as strong as they are, if you have it on 

6 a credit card or in some other means.

7 So, that is a huge worry, I think, 

8 for people that have huge amounts of student loan 

9 money on a debit card, unless there is some 

10 protection, when the debit card is lost, and 

11 also, that there is -- it's not a profit setter. 

12 This is not the point.

13 Students should not have to pay yet 

14 again, in order to get their student loan money.

15 Distance education, I agree is a 

16 topic that needs to be addressed. It needs to 

17 be addressed more thoroughly than it was last 

18 time, because there is still a giant loop-hole 

19 that says that, as I recall, that distance 

20 education has to be authorized by the state, if 

21 the state requires distance education to be 

22 authorized.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 So, it needs to be required to be 

2 authorized by the state, in all circumstances, 

3 and this can be dealt with in -- by means of 

4 reciprocal agreements with other states that 

5 allow distance education in the particular 

6 state, if it is -- meets the -- if the other state 

7 standards are at least as high as the state where 

8 it's being offered, standards are.

9 So, it's not like the state has to 

10 go out and inspect the school at a distant 

11 location, if the other state is doing a job 

12 equivalent to what the state would require.

13 It has to be that way, because 

14 distance education is becoming a much larger 

15 part, and if that is left without this kind of 

16 regulation, it's like creating a loop-hole, just 

17 like we have, you know, with the cohort default 

18 rates, where people figured out all kinds of ways 

19 to get around them, and everybody is going to 

20 distance education. So, that has to be central 

21 in what is regulated.

22 A couple of -- I also agree with the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 point on the manipulation of the CDR's and the 

2 90/10, which has already been addressed, and 

3 that needs to be addressed as far as it can be 

4 with regulation. 

5 There may be some aspects that can't 

6 be dealt with, with regulation, but the 

7 Department has very broad powers to consider 

8 that.

9 Then finally, the Department needs 

10 to correct its on-time completion definition 

11 that was put forth in the regulations last time.

12 We all understood, I think, that it 

13 meant that of 100 students who go to a school, 

14 start a school, how many of those complete the 

15 course on time, and the regulations that turned 

16 out is, of those students who actually complete 

17 the course, how many of them complete it on time?

18 So, if you have 100 students 

19 enrolling and five complete, and five of them 

20 complete on time, then your on-time completion 

21 rate is 100 percent, even though hardly anybody 

22 completes.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 This is very confusing and 

2 misleading for students. I think it does 

3 students a disservice, and that really needs to 

4 be corrected. Thank you very much.

5 MODERATOR McCULLOUGH: Thank you, 

6 Margaret. David Loganecker? Good morning. 

7 MR. LOGANECKER: Good morning. I 

8 am David Loganecker. I'm the President of the 

9 Western Interstate Commission for Higher 

10 Education. I have submitted more complete 

11 testimony, and will just give you a summary of 

12 what I was going to talk about.

13 This testimony focuses on only one 

14 aspect of the Federal regulation of higher 

15 education, that being the oversight of state 

16 authorization of distance education.

17 Rather than bring you a problem to 

18 solve, we bring you a solution to this issue, 

19 that has been worked out between the states and 

20 the higher education community.

21 The problem has been clear, relying

22 on a patchwork of 50 states, PLUS territories to 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 regulate independently, created a myriad of 

2 approaches to regulation, resulting in 

3 confusion for institutions, variable quality 

4 assurance, and substantial unnecessary expense 

5 associated with redundant efforts.

6 Yet, that has been our system of 

7 state regulation up to this point.

8 Through the rather remarkable and 

9 unique collaboration, three national efforts, a 

10 limited foundation funded effort by the 

11 President's forum and Council of State 

12 Governments, a collaboration of the four state 

13 regional compacts and the National Commission on 

14 Regulation of distance education, which was a 

15 collaborative effort of APLU and SHEEO, and was 

16 chaired by former Secretary of Education Dick 

17 Riley, these three groups have come together in 

18 great part, spurred by the Department's efforts, 

19 beginning nearly three years ago, to develop a 

20 new approach to state regulation, referred to as 

21 State -- as the State Authorization Reciprocity 

22 Agreement.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 SARA, which is what we call this new 

2 agreement, not because I have a daughter named 

3 Sara, but because it sort of fit.

4 SARA will provide a national 

5 framework for willing and able states to work 

6 together, to accept each other's authorization 

7 of institutions domiciled in their respective 

8 states. 

9 Now, notice I said 'willing and able 

10 states'. So, it does require that they have 

11 high standards.

12 So, what have we brought? Well, 

13 first, we established two guiding principles for 

14 our work.

15 First, while regulation is often 

16 necessary, it should not be excessive. 

17 Whatever we came up with had to follow the 

18 regulatory mantra that less is more and less is 

19 not enough.

20 Second, the concept of reciprocity 

21 requires trust, trust between the states that 

22 enter into reciprocity agreements and trust 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 between three major partners in the Federal 

2 triad, the accreditation community, the Federal 

3 Government and the states.

4 We know this, that this element of 

5 trust is not easy to swallow for everyone in 

6 higher education. 

7 Some folks are concerned that 

8 accrediting agencies have not provided adequate 

9 quality assurance. Others are concerned that 

10 the Department has been lax and somewhat 

11 antiquated in its assessment of financial 

12 responsibility, and some are concerned that not 

13 all states have taken this responsibility 

14 seriously in the past.

15 To address these concerns, we've 

16 devised a system in which the trust we rely on 

17 will have to be earned. We will closely work 

18 with accrediting agencies and with the Federal 

19 Government, to express concerns that arise, and 

20 to hold them as partners in this, accountable for 

21 their respective responsibilities.

22 We will accept the reciprocity 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 partners into the reciprocity projects, only 

2 states that live up to the standards of 

3 reciprocity that have been established in the 

4 consensus document around this, that was 

5 developed by the National Commission on the 

6 Regulation of Distance Education.

7 State authorization reciprocity 

8 agreement will work as follows.

9 First, the four regional compacts, 

10 that is the Midwestern Higher Education Compact 

11 MHEC, the New England Board of Higher Education 

12 NEBHE, the Southern Regional Education Board 

13 SREB, and the Western Interstate Commission for 

14 Higher Education WICHE, will establish regional 

15 SARA entities.

16 Second, these regional compacts, 

17 working directly with the National Commission 

18 and the President's forum and CSG, these are all 

19 the groups that have been working on this, will 

20 establish a national board to coordinate and 

21 harmonize the efforts of the four regional 

22 compacts.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 This will assure that the states 

2 participating in reciprocity within one of the 

3 compacts will meet the standards for reciprocity 

4 in all of the compacts. 

5 Thus, states within one will be 

6 recognized as reciprocal partners with states 

7 participating in another, and they will all meet 

8 reasonable standards.

9 The board will develop and maintain 

10 information systems, so that it will be the place 

11 to go to find out what institutions and states 

12 participate in these voluntary activities, and 

13 this National Board will make sure that the 

14 processes of the four regional compacts are 

15 compatible and consistent with the criteria 

16 established by the National Commission Report.

17 The next thing is, once you've got 

18 the compacts and the National Board, is that the 

19 states that wish to participate in SARA will seek 

20 membership in the state authorization 

21 reciprocity entity within its regional compact.

22 To be accepted, a state will have to 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 demonstrate that it's willing and able to meet 

2 the criteria that are required and the standards 

3 that are required, and those will include 

4 accepting national or regional accreditation as 

5 initial evidence of academic quality for 

6 approving institutions for participation and 

7 reciprocity.

8 It will require accepting a Federal 

9 financial responsibility rating of 1.5 or 1.0, 

10 with justification for such participation. 

11 It will -- and it will be -- it will 

12 provide an effective -- this will provide an 

13 effective state process for consumer protection 

14 -- or no, that they also have to assure that 

15 they're providing an effective state process, 

16 both with respect to initial institutional 

17 approval and ongoing oversight of those 

18 institutions, including following up on 

19 consumer compliance as required in current 

20 Federal law.

21 The states not only -- states not 

22 willing to accept these conditions, that will be
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 fine. This will be a voluntary system, and they 

2 don't have to participate if they don't want to. 

3 They would simply deal with things as they do 

4 together -- today.

5 Finally, degree granting 

6 institutions that will seek authorization, but 

7 if they don't want to play, that will be their 

8 prerogative.

9 The fourth and final area are 

10 institutions, and that is that finally, the 

11 institutions will need to seek the authorization 

12 from their state, just as they do today, with the 

13 exception that the institution will be

14 authorized in its home state and will not need 

15 to seek authorization in other states that are 

16 part of the reciprocity agreement.

17 Now, because this is a voluntary 

18 process, an institution wishing to participate 

19 -- not wishing to participate need not do so, if 

20 it doesn't wish to.

21 It would operate as it does today. 

22 It would need to require -- seek authorization 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 in all of the states, as it does today, but it 

2 could do that, if it wished to do so.

3 To finance this operation 

4 enterprise, the four regionals are seeking 

5 foundation assistance, to support the 

6 implementation of the plan, and we are quite 

7 optimistic that that funding will be provided.

8 We anticipate that the effort will 

9 be self-sufficient within four years, from dues 

10 paid by institutions for participating dues that 

11 will range from around $2,000 to $6,000 per year.

12 So, there is SARA, our solution to 

13 the state authorization for distance education. 

14 The four regional interstate 

15 compacts and our other partners look forward to 

16 partnering with the Federal Government and the 

17 accrediting community, in a rejuvenated and 

18 contemporized Federal triad for quality 

19 assurance in the regulation of higher education 

20 distance learning.

21 Thank you very much for the 

22 opportunity to share these ideas with you.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 MODERATOR McCULLOUGH: Thank you, 

2 David. We're running a few minutes ahead of 

3 schedule. Perhaps we have somebody else.

4 (Off mic comments)

5 MODERATOR McCULLOUGH: Okay, we're 

6 running a couple of minutes early. 

7 So, Nancy Coolidge, who would like 

8 to read Barbara Hobitzell's -- are you ready? 

9 You don't have to be, but if you're --

10 MS. COOLIDGE: Well, I'm combining 

11 it. We're both representing the University of 

12 California's system, and I have her testimony 

13 with me, but she's not here today. 

14 But I have mine, as well, I can just 

15 do it.

16 MODERATOR McCULLOUGH: Okay, do you 

17 want to go ahead now, or would you rather wait?

18 MS. COOLIDGE: I'll wait.

19 MODERATOR McCULLOUGH: Okay, that's 

20 fine. 

21 Tom Babel, would you like to go now? 

22 Okay, great, thank you, and then we'll take a 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 break after Tom's testimony.

2 If anyone who is here, has not signed 

3 in as a presenter, or who wishes to present, 

4 please see Amy and Eric in the back of the room. 

5 Thank you. Thanks, Tom.

6 MR. BABEL: Thank you. Good 

7 morning. Thank you, Carney.

8 As Carney said, my name is Tom Babel. 

9 I'm Vice President of Regulatory Affairs for 

10 DeVry. I am here to speak today on behalf of 

11 DeVry's U.S. institutions, Carrington College, 

12 Carrington College California, Chamberlain 

13 College of Nursing and DeVry University, and the 

14 95,000+ students that are currently enrolled in 

15 those institutions.

16 I'll combine my remarks to just two 

17 topics today, accountability framework as an 

18 alternative to the gainful employment 

19 regulations, as well as the negotiated 

20 rulemaking process itself. We'll submit a more 

21 comprehensive response in written form, next 

22 week.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Together, the four DeVry U.S. 

2 institutions have been preparing students to 

3 enter and advance in the workforce for 289 years. 

4 Our graduates can be found in 

5 healthcare, technology, business and education 

6 fields. They work for 96 of the Fortune 100 

7 companies, all of the U.S. Military branches, 

8 many Federal and State agencies, and countless 

9 mid-size and small businesses.

10 Their titles include dental 

11 hygienist, nurse, systems analyst, professor, 

12 as well as Chief Information Officer, President, 

13 General and commonly founder and owner.

14 Our students have always chosen our 

15 institutions for the career opportunities which 

16 followed from our educational programs.

17 The potential return on their 

18 educational investment was evidenced in the 

19 graduates that came before them, and it was and 

20 is evidenced in factual outcomes, so consider 

21 these results.

22 For years, the average first year 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 salary of a DeVry University graduate, somebody 

2 coming right out of school and going into the 

3 workplace, has approximated the total family 

4 income of a dependent student currently 

5 enrolled.

6 So, it's just taking that student 

7 and leaping them, in terms of financial 

8 security, to levels that their family never 

9 experienced before, either directly, their 

10 parents, or generations that preceded them.

11 Another example, under a metrics 

12 project, sponsored by the Gates Foundation with 

13 data reported from the Texas Workforce 

14 Commission, DeVry University graduates with a 

15 Bachelor's degree from our Texas campuses had a 

16 median earnings rate greater than $51,000, just 

17 one year after completion.

18 In a recent analysis released by Pay 

19 Scale, a salary information firm, three DeVry 

20 campuses ranked among the top 100 colleges and 

21 universities, that's just not private sector 

22 institutions, that's all institutions, in 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 return on investment of its graduates.

2 These outcomes, post-graduate 

3 employment outcomes are just one component of an 

4 accountability framework that DeVry has 

5 advanced to assure students and taxpayers are 

6 assured that the education that choose and 

7 sponsor will offer that -- will offer the high 

8 quality opportunities incumbent to the 

9 pre-eminent higher education system.

10 We understand the issues that frame 

11 the development of the gainful employment 

12 regulations, concerns that student's debt was 

13 not aligned with their expected earnings 

14 capacity after completion of their studies, and 

15 concerns that institutional motives were not 

16 aligned with student's educational objectives.

17 But the gainful employment metrics 

18 developed a control for those concerns, entirely 

19 missed the mark.

20 They are too narrowly focused, 

21 covering less than 20 percent of the student 

22 population and their use of proxies as an 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 assessment tool is just plainly bad science.

2 Post-educational employment 

3 outcomes and debt financing are critical factors 

4 that should be available to all student's 

5 consideration.

6 In its annual freshman survey, the 

7 Cooperative Institutional Research Program 

8 found that 88 percent of 2012 freshman chose to 

9 go to college to get a better job, and according 

10 to the College Board and TICAS, two-thirds of 

11 Bachelor degree recipients will borrow, and the 

12 average debt of those who do will exceed $26,000.

13 Despite the continued growth, 

14 modest as though it may be, 27 percent of 2012 

15 graduates are unemployed or under-employed 

16 today. That is 27 percent. That doesn't just 

17 -- that is not just the private sector. The 

18 private sector produces about six percent of 

19 Bachelor's degree recipients.

20 So, those -- that other 21 percent, 

21 at least that other 21 percent are coming from 

22 other institutions.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Debt loads and employment prospects 

2 are universal concerns that warrant protection 

3 for all students, and accountability covering 

4 all institutions and programs.

5 The original gainful employment 

6 rules used raw metrics to qualify programs. 

7 While simple to measure and simple to 

8 communicate, the very simplicity of those 

9 metrics fail to account for the complexities of 

10 the student population.

11 The use of such simple measures 

12 assures the qualification of the most selective 

13 and exclusive programs, while jeopardizing 

14 those serving best, the most at-risk students.

15 Not only are such assessments flawed 

16 and dangerous, they run counter to prevailing 

17 policy. 

18 A number of states recently, in 

19 developing performance funding mechanisms, the 

20 American Institutes for Research, the Gates 

21 Foundations have all recognized the importance 

22 of using input adjusted metrics for assessing 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 institutional outcomes.

2 The American Council on Education 

3 cautions any metrics used to evaluate 

4 institutions must account for the differences 

5 among college and universities.

6 So, we agree, the existing controls 

7 are inefficient -- or insufficient. 

8 Institutions should be accountable for their 

9 practices and outcomes. Reckless enrollment of 

10 those without a capacity to succeed, tax 

11 avoidance, manipulation of data to improve 

12 rankings and misreporting of crime statistics 

13 are behaviors that should not be tolerated.

14 These are behaviors that exist 

15 across all sectors and programs, not just those 

16 subject to the original gainful employment 

17 rules.

18 We believe the Secretary has the 

19 authority and mechanisms to punish those who 

20 engage in such behavior, and should use them 

21 accordingly, but we also believe that the 

22 existing authority and mechanisms are not 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 adequate in helping students make fully informed 

2 decisions and protecting taxpayers’ crucial 

3 investment towards higher education outcomes.

4 Towards those objectives, we 

5 propose an accountability framework built on two 

6 pillars, performance outcomes and standards of 

7 practice.

8 With regard to performance 

9 outcomes, we think that all institutions should 

10 be accountable to measuring, are their students 

11 learning, as demonstrated by passing licensor 

12 exams and other measures of attainment.

13 Are students progressing and 

14 completing their programs of study, whether at 

15 their original or at subsequent transferred to 

16 institutions?

17 Are students attaining their 

18 educational objective, meaning are they 

19 employed or have the gained admission to a higher 

20 level of education, and are students repaying 

21 their student loans?

22 Again, any assessment of 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 institutional programmatic performance, when 

2 used on a comparative basis, must account for the 

3 variation of the student populations being 

4 served by the measured institutions.

5 We recommend looking at very similar 

6 models, comparing actual performance to predict 

7 outcomes, developed by Tom Mortenson at the Pell 

8 Institute, as well as those developed by the 

9 American Institutes for Research.

10 We recognize that there are 

11 limitations on existing data today, that would 

12 stall the development of meaningful thresholds 

13 in these areas.

14 But several recent Bills have been 

15 introduced in Congress that will help close 

16 those gaps.

17 We're encouraged by this action and 

18 support their passage. In the interim, we 

19 believe the Secretary should begin building the 

20 mechanism to measure and publish these input 

21 adjusted performance metrics, and encourage 

22 institutions to self-measure and publish, where 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 able.

2 With regards to standards of 

3 practice, we believe there are fundamental 

4 practices and information that should be 

5 available to all students.

6 While we have significant concerns 

7 with their implementation, we support the 

8 fundamental concept of the financial age 

9 shopping sheet and college score card. 

10 Students should be provided with 

11 cost, expected debt, time to completion and 

12 projected employment or graduate school 

13 prospects, specific to their enrollment in a 

14 program of study, prior to the incurrence of any 

15 financial obligation.

16 A no-cost cancellation period 

17 should be made available to the most at-risk 

18 students, insulating them from a financial 

19 burden that they cannot afford.

20 Information on program progress, 

21 including remaining requirements and expected 

22 time, as well as cost and debt incurred and 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 remaining, should be readily available to 

2 students throughout their enrollment, and 

3 professional services to all students, with 

4 academic planning, career mapping and education 

5 financing should be readily available at all 

6 times.

7 While the cost of these services is 

8 not insignificant, the cost of not providing it 

9 is too many lost students, too many years spent 

10 in pursuit of a degree, too many defaulted loans 

11 and too much wasted funding.

12 Like services are available to 

13 almost any auto buyer. It's inconceivable that 

14 the same service and protections are not 

15 provided to our students and taxpayers.

16 Finally, I would encourage the 

17 Secretary to consider carefully, the structure 

18 of any negotiated rulemaking teams.

19 Negotiated rulemaking provides an 

20 incredible opportunity for the development of 

21 well-informed, meaningful and just regulation. 

22 To get there though, requires appropriate 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 representation, knowledge and skills at the 

2 table.

3 In the program integrity negotiated 

4 rulemaking, it was clear that that was not the 

5 case.

6 The agenda was too broad, covering 

7 nuance, academic topics, such as the appropriate 

8 assignment of credit hours to courses, to nuance 

9 financial aid regulations, covering 

10 disbursements in programs delivered in modules 

11 within a semester.

12 The most extreme example is a 

13 discussion of credit to clock hour conversion, 

14 of which only one team member, primary or 

15 alternate, had any experience.

16 Additionally, while much of the 

17 focus of the rulemaking was on private sector 

18 institutions, this sector had only one 

19 institutional seat at the table, reflecting a 

20 false presumption of homogeneity in this sector, 

21 and none of the student representatives, again 

22 either primary or alternate, had any experience 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 with the private sector institutions.

2 Without appropriate representation 

3 in both experience and expertise, any discussion 

4 is bound to default to anecdote an assumption.

5 It is imperative to the development 

6 of reason and sound regulation, that appropriate

7 representation and expertise be at the table, 

8 and we encourage the Secretary to consider such, 

9 when forming the teams and agenda. 

10 Thank you again, for this 

11 opportunity.

12 MODERATOR McCULLOUGH: Thank you 

13 very much. 

14 We will adjourn for a break now, 

15 until 20 minutes of 11. So, until 10:40 a.m. 

16 Thank you very much.

17 (Whereupon, the above-entitled 

18 matter went off the record at approximately 

19 10:30 a.m. and resumed at approximately 10:45 

20 a.m.)

21 MODERATOR McCULLOUGH: We will 

22 reconvene the hearing now. I'll give everyone 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 a minute to sit down.

2 Okay, yes, Barbara Hobitzell, 

3 excuse me, we're reconvened. 

4 MS. COOLIDGE: Yes, I'm Nancy 

5 Coolidge, and I'm substituting for Barbara 

6 Hobitzell. Barbara is -- and I together, are 

7 representing two different threads of interest 

8 at the University of California.

9 We work in the Office of the 

10 President, the System Office in Oakland, and we 

11 have 10 campuses around the state, and we have 

12 about 230,000 students enrolled in our main 

13 campus, not including our extended learning and 

14 extension programs. That is just the main 

15 campuses, the degree programs.

16 We are the smallest of the three 

17 public sectors in California. The largest is 

18 the Community College, with several million 

19 students, and the next is the California State 

20 College system. We are the smallest, and ours 

21 is a Carnegie One Research University.

22 But we have a fair amount of interest 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 in maintaining access for our students to 

2 Federal student aid, which is a critical element 

3 in financing low-income young people who come to 

4 us.

5 I'm here today to start with 

6 Barbara's testimony, which is largely about 

7 interests that have to do with the business side 

8 of the house.

9 Obviously, financial aid includes 

10 the disbursement of money, the handling of 

11 exit/entrance interviews in some cases. In 

12 many cases, they handle -- that part of our 

13 institution handles the recovery of 

14 institutional loans, some of which include 

15 Perkins loans, which are also Federal, the 

16 campus-based loans.

17 So, our most pressing issues are on 

18 the financial aid area, but we have a few in this 

19 area. So, let me start with those.

20 We are very interested in 

21 maintaining flexibility, as to how students 

22 receive their value from student aid. So, we 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 are looking for improvements in the cash 

2 management rules. 

3 We do not want to see any particular 

4 vehicle eliminated.

5 For example, there was a mention of 

6 the evils of cash cards, or debit cards. 

7 Anything can be misused and evil. Bank accounts 

8 that students themselves have, can be very 

9 overpriced, and that isn't to say there should 

10 be no standards.

11 We certainly use some of these 

12 instruments, but the students have access to 

13 cash, they have ways to replace lost cards, they 

14 have no fees or fees that are similar to what a 

15 bank account would have for various services

16 that -- for instance, if they want to transfer 

17 money to another place, there is a service charge 

18 for something. That would be true for a bank 

19 account.

20 But what we have negotiated for our 

21 students are excellent prices and services in 

22 connection with these, for which the university 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 experiences no revenue.

2 We agree that that creates a 

3 conflict of interest and should not be part of 

4 this, but just as a way to manage cash, most of 

5 our students do not use these. We use these for 

6 un-bank students. 

7 We have un-bank students, and we 

8 need something, and it's a very small group of 

9 students. It's not our fallback position. 

10 Almost all of our students want electronic funds 

11 transferred to their bank accounts, but we don't 

12 think that eliminating any particular way of 

13 managing cash makes sense.

14 I think that setting standards for 

15 the prevention of abuse makes sense, and we would 

16 like to see that negotiated in more detail.

17 We also would like to see de minimis 

18 practice -- I mean, de minimis amounts of refund 

19 money get better attention.

20 I worked years ago on negotiated 

21 rulemaking, where amounts were agreed upon that 

22 today, seem -- which at the time, seemed 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 reasonable for refunds, de minimis amounts, and 

2 now, they don't seem refund -- reasonable at all.

3 So, saying that a dollar is worth 

4 generating a refund, it may -- if a student 

5 requests a refund for one dollar or less, we 

6 certainly provide it, but we would like to see 

7 the de minimis amounts allowed, that when 

8 students are continuing with us, to be pushed 

9 over to their next term, so that we aren't 

10 generating these tiny balances to students.

11 I think there is a number of places 

12 where de minimis consideration of cash for --

13 involving -- potentially mixed with Federal aid, 

14 should be reconsidered, that we need to think 

15 about the amounts again.

16 We would like to see amounts for 

17 students who have small debts that are 

18 outstanding right now.

19 There is very tight rules about what 

20 can be used from this year's financial aid, if 

21 it's put on the student's account, that can pay 

22 off things that were debts the student acquired 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 in a prior term, and the level of amount is very 

2 low.

3 What we wind up doing is holding up 

4 aid and holding up registration, to get these 

5 things paid off, and that winds up being an 

6 administrative burden and a big hassle for the 

7 student.

8 We agree that these amounts should 

9 be small, that they should not make a big impact 

10 on the student's ability to function with the aid 

11 that has been carefully allocated for the 

12 current school year.

13 But we want to -- again, it's 

14 similar. We want to revisit the amounts and see 

15 if that can't be made more reasonable, given the 

16 current practices of students and the fact that 

17 almost all cash now is handled electronically.

18 Another topic on our business side 

19 of the house is that our software developers, 

20 believe it or not, are running into situations 

21 where the fact that there is only five digits of 

22 space for students to report on untaxed income 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 and other assets, the value of assets. We need 

2 at least six such spaces.

3 I know this seems very knit-picky, 

4 but what is happening is, some very well-off 

5 people are getting Pell grants, and we need to 

6 see that the layouts are made more appropriate 

7 for today's values.

8 Some of this is just updating. We 

9 want to make sure that if parents have untaxed 

10 income that exceeds $99,999, that they have a way 

11 to report it, and given the business write-offs 

12 that are significant these days, it's not 

13 impossible for a family with those kinds of asset 

14 amounts and those kinds of untaxed incomes, to 

15 actually qualify for need-based aid, and we 

16 didn't think that possible a few years ago, and 

17 we now see that it is. It's not frequent, but 

18 it's becoming more frequent.

19 So, again, this -- I have -- when I 

20 turn in the written version of this, which we'll 

21 do electronically, as per your directions, it 

22 will actually give the citation of the -- the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 reference edits in the technical manual, where 

2 we think -- that needs to be addressed. So, 

3 we're giving you the particulars of where our 

4 software people want help here.

5 We also want to emphasize that 

6 entrance and exit counseling is becoming a 

7 bigger deal.

8 We did a small pilot investigation 

9 of students who were given the standard entrance 

10 and exit activities, and then others, who were 

11 given intensive information at the point they 

12 needed it, when they were entering repayment, 

13 which was not at the time we do entrance and exit 

14 counseling.

15 The only meaningful memory that we 

16 could detect was happening when students had to 

17 make payments, had to make decisions.

18 The fact that we told them these 

19 things four or five years earlier, the fact that 

20 they were introduced to it, the fact that they 

21 knew the terms and what they meant, didn't seem 

22 to be meaningful in their decisions about 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 repayment.

2 The time and content of counseling 

3 needs to be re-thought. 

4 We're not suggesting the 

5 abandonment of all financial literacy at other 

6 points, but it doesn't seem to be retained and 

7 have a meaningful impact on borrower decision 

8 making, if it isn't made at the correct time, and 

9 messaged in a meaningful way for students.

10 We want to reconsider whether some 

11 of the -- that the current requirements are 

12 really serving much purpose.

13 I want to now move to the testimony 

14 that I've prepared to give in my own name, that 

15 I -- that has to do more with the financial aid 

16 side, and the truly biggest issues, University 

17 of California wants to see negotiated, has to do 

18 with -- and I heard this voiced by others, not 

19 always for the same reasons, quite the opposite, 

20 in fact.

21 But we want to see more attention 

22 paid to how students who are at the mercies of 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 the servicers, are handled.

2 The contracting that the Department 

3 of Education has with their paid servicers 

4 really needs more attention, and we are 

5 particularly concerned with students who are 

6 seeking to use their benefits and their 

7 entitlements to alternative repayment plans and 

8 to IBR, be able to do so more efficiently and more 

9 effectively.

10 It is still fundamentally a 

11 paper-based activity, even if one considers 

12 scanning to be electronic, scanning information 

13 and having it sent to the servicers still 

14 requires the servicers to connect it to the 

15 borrower.

16 The biggest issue we have is our 

17 borrowers saying, "We sent this, that or the next 

18 thing in," and they saying, "We didn't get it," 

19 even almost in real-time. These are gaps. We 

20 don't know why.

21 I have worked directly with some of 

22 the students seeking these kinds of resolutions, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 seeking alternative repayments, and found that 

2 the cumbersome and protracted nature of the give 

3 and take necessary, and this is particularly 

4 true for borrowers who have managed to get into 

5 IBR, and who come up on an anniversary date.

6 We need these anniversary dates for 

7 renewing IBR participation, to be made 

8 consistent with the way the IRS accepts 

9 submissions for tax filing.

10 We need -- even if it means an 

11 18-month gap, and the statute says it has to be 

12 annual, we need some kind of regulatory 

13 interpretation, that allows for a borrower who 

14 is renewing, to be able to point to his -- or give 

15 permission for his IRS information to be 

16 released, and that his renewal of his IBR status 

17 can be based on that, even if it doesn't coincide 

18 with his anniversary date technically, that that 

19 seems to be creating enormous workload for 

20 borrowers, but also for the staff of the 

21 servicers.

22 I think we could eliminate a huge 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 amount of this, if we could coordinate these 

2 dates, and borrowers -- I don't think borrowers 

3 would get away with huge incomes and small 

4 payments for very long.

5 I mean, I think that if that's the 

6 concern, we're not -- the Feds are not losing --

7 the Federal fiscal interest is not being hugely 

8 disadvantaged by this. This is really much more 

9 of an administrative issue.

10 We need to coordinate the 

11 anniversary dates with the tax filing dates.

12 We are very concerned about the 

13 borrowers who have resources to make small 

14 payments, and I think this was -- I'm echoing 

15 now, some of the previous speakers, being asked 

16 to make -- or being put in administrative 

17 forbearance, their interest accrues, they don't 

18 know what end is up. The borrowers are winding 

19 up with much bigger debt. 

20 We've even had -- I did a radio 

21 program on forum, where I talked about, you know, 

22 the good things about IBR and how borrowers could 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 find themselves in IBR if they sought it, and 

2 they were persistent about it, but I got a call 

3 -- I got actually two calls, from individuals 

4 saying, "It's a scam, it's a scam, because my 

5 debt increased," because they would end in 

6 negative amortization.

7 So, I think more information needs 

8 to be conveyed to the people who are being put

9 in forbearance and who are in IBR, if the amounts 

10 that they are required to pay are not sufficient 

11 to pay the interest they owe.

12 There needs to be a highlighted 

13 feedback system, so that even if they need that 

14 repayment and they choose that option, they 

15 understand that their debts will get bigger. 

16 They need to be given that information, so it 

17 doesn't feel as though, "I've been set up. The 

18 Government is now extracting more from me, than 

19 is appropriate." I think that that kind 

20 of information about negative amortization 

21 could be much better highlighted.

22 We're asking credit card companies 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 these days, to show what it would take, you know, 

2 37 years to pay off your $5,000 debt, and what 

3 it will cost you. 

4 I think that kind of model, which is 

5 fairly easy for people to understand, I'm not 

6 totally convinced that is the best, but it's a 

7 step in the right direction, to disclose to 

8 people, what you're now looking at.

9 So, the minute a student picks a 

10 repayment plan, they get that kind of feedback, 

11 "And oh, if you do this consistently, here is 

12 what this looks like."

13 So, we are collecting Federal data 

14 -- we are submitting Federal data that today, 

15 meets -- it seems to us, to be kind of ridiculous, 

16 and we're not submitting, although you're now 

17 starting to ask for more Federal data --

18 information submitted to you, that is 

19 meaningful.

20 But I think what we need to do is go 

21 back and realize that the FISAP particularly, 

22 collects information, that is just not useful to 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 the Federal Government at this point, or that you 

2 can already access, perhaps in a more accurate 

3 way, from other Federal sources.

4 So, I am asking for review of all the 

5 Federal reporting required of institutions, so 

6 that we can make sure that it's useful to you, 

7 and it isn't just routine for us.

8 There is things that you know better 

9 than we. These Pell grids that we make, seems 

10 that that sort of thing could be more easily done 

11 with data that is already submitted.

12 But we ask that you would look at --

13 and we would work with you to negotiate, but look 

14 at the other Social Security Administration, the 

15 IRS, the Department of Homeland Security, the 

16 Department of Labor have data that I think would 

17 be useful to the Department of Education, in 

18 making policy and making decisions, and right 

19 now, we're reporting to you, things that we think 

20 are like anachronistic, we'd like to stop.

21 Let's see, Perkins loans, the 

22 current Perkins loan program is under great 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 scrutiny by lots of parties. The Obama 

2 Administration wants to convert it to an 

3 unsubsidized program. 

4 The current statute is definitely 

5 dated, never was particularly effective, but the 

6 sunset language in the statute is unworkable.

7 It's very out of date. It's 

8 unworkable and other kinds of sub-regulatory 

9 guidance we have received need to be reviewed and 

10 negotiated.

11 We do not have anymore, a meaningful 

12 referral program, which is in statute. We can 

13 no longer refer Perkins loans to the Federal 

14 Government for assistance in recovery, and the 

15 assignment process is again, very labor 

16 intensive.

17 I know other members of the FSA staff 

18 have said how disappointed they are, that 

19 schools like mine haven't been better at 

20 assigning debt back -- old debt, uncollectible 

21 debt, back to the Federal Government, back to 

22 their resources, and we -- I think that is a 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 reasonable point, and we should do better.

2 But I also think that the process 

3 needs to be made more efficient, so that it is 

4 not quite the circus it is today.

5 Right now, there are deadlines that 

6 are very specific with the servicers who handle 

7 this, and if you send it in at a time when they 

8 aren't prepared to handle it, they send it back.

9 If you send it in and it -- each loan, 

10 each loan from each institution, for each 

11 borrower has to be given a cover letter and has 

12 to be sent on paper. There is no electronic 

13 process. 

14 This is a process that needs more 

15 attention, and we'd like to work with you because 

16 I think we could do better about getting these 

17 uncollectible debts off the books and back to 

18 you, but we definitely need relief on the 

19 administrative side, and I think from a 

20 political point of view, the Department of Ed 

21 needs to review the statute that is in place, to 

22 get something updated, in the event that they 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 really want the return of these assets.

2 I don't think right now, that what 

3 we've got on the books would result, if we stuck 

4 to it, in regulations that would be workable. I 

5 don't think we could really do it. Not only 

6 could we not do it, quite frankly, the people 

7 that you currently employ to accept assignments 

8 couldn't do it either. I'm pretty convinced of 

9 that.

10 The current -- now, we have a 

11 situation where an increasing number of our 

12 students at places like mine, that have big 

13 graduate populations, and that have students who 

14 need Federal loans, that didn't used to borrow 

15 at all are borrowing.

16 We'd like to ask that given we have 

17 an electronic FAFSA, that you design it in such 

18 a way that there is this point at which you start 

19 asking students for their financial 

20 information. You have a warning, "If you do not 

21 complete the following sections, you will not be 

22 considered for Pell grants or SEOG or Perkins 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 loans, or institutional, and possibly state 

2 aid."

3 "So, you must submit this 

4 information in order to be considered for that, 

5 but if you do not, you will be considered for 

6 unsubsidized student loans," or in some cases, 

7 it could be parent loans.

8 But I think we need -- now that we 

9 have an electronic form, it makes sense to not 

10 have every single FAFSA filer struggling with 

11 the financial data, because many -- it's not 

12 going to matter.

13 We have a -- none of our graduate 

14 students can get subsidized loans anymore, and 

15 we do have some of our graduate programs that use 

16 the information from the FAFSA, to award 

17 institutional aid.

18 So, the student would be warned, "If 

19 you don't do this." 

20 Now, if there are students who do not 

21 feel they're going to qualify or don't care, or 

22 whatever, but I think what we need is to give a 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 more flexible FAFSA, to make it more efficient 

2 for people to apply, and if they apply and don't 

3 get all the aid they want, they won't make that 

4 mistake twice, because I think that the state aid 

5 in California all depends on filing the 

6 information on the FAFSA.

7 So, we understand that almost all of 

8 our undergraduates are going to need to file the 

9 complete FAFSA, but I've been asked by my 

10 graduate and professional degree programs, 

11 where students are now using these loans, to 

12 please make a possible -- make it possible for 

13 them to give all the demographic information, 

14 and not have to fill out the financial 

15 information, since they are not going to 

16 qualify.

17 MODERATOR McCULLOUGH: Okay, 

18 Nancy, I'm sorry, your time is up.

19 MS. COOLIDGE: On Barbara's too?

20 MODERATOR McCULLOUGH: Yes, 

21 because you switched testimony. So, you said, 

22 "I'm now moving from Barbara to Nancy."
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 MS. COOLIDGE: And I did that on her 

2 time?

3 MODERATOR McCULLOUGH: Yes, yes.

4 MS. COOLIDGE: Okay, can I have my 

5 time now?

6 MODERATOR McCULLOUGH: No, no, no.

7 MS. COOLIDGE: No? I'm done, okay.

8 MODERATOR McCULLOUGH: You used up 

9 both. Sorry about that.

10 MS. COOLIDGE: Okay, we are 

11 interested in discussing other issues. So, and 

12 we will submit it in writing, and get more of it 

13 in writing.

14 MODERATOR McCULLOUGH: Thank you 

15 very much. 

16 MS. COOLIDGE: Thank you.

17 MODERATOR McCULLOUGH: Anthony 

18 Guida? 

19 MR. GUIDA: Thank you. I'm Tony 

20 Guida, here on behalf of Education Management 

21 Corporation, and I appreciate the opportunity to 

22 present some issues that we'd like to be 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 considered. Like others, we'll have a more 

2 detailed submission, and I just want to 

3 highlight three today.

4 One being the adverse credit history 

5 requirement, under PLUS Loans, some comments on 

6 gainful employment, and some briefs comments on 

7 state authorization.

8 Education Management's 

9 institutions, which include the Art Institute, 

10 Argus University, Brown Mackie Colleges and 

11 South University, and the Western State College 

12 of Law, serve more than 132,000 students in 32 

13 states.

14 Our colleges and universities to 

15 date, have graduated more than 350,000 students 

16 in fields such as law, pharmacy, healthcare, 

17 clinical psychology, education, the creative 

18 and culinary arts and many other fields.

19 We're proud of our record of student 

20 success, particularly with the largely ignored 

21 population of students who are considered 

22 high-risk of not completing their education, due 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 to the barriers and challenges they face.

2 We also agree with and fully support 

3 the Department's long term agenda, as indicated 

4 in the notice, to address the issues of access, 

5 afford-ability, quality and degree attainment. 

6 In fact, our institutions have 

7 collectively set a goal by 2020, to have one 

8 million graduates, to really focus in on degree 

9 attainment, and we will accomplish this by 

10 reducing the net cost of attendance that are 

11 attaining a degree, significantly improving 

12 student retention, and significantly improving 

13 the number of students who graduate with 

14 successful outcomes.

15 And just by example, Argus 

16 University's Art Institute of California has, 

17 over the last several years, reduced the net cost 

18 of attaining a degree by almost 10 percent. 

19 The Art Institutes have not 

20 nationwide had a tuition increase in more than 

21 two years, and we've recently announced through 

22 the Art Institutes, that they will not have a 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 tuition increase until 2015.

2 There -- in this vain, there are two 

3 issues that I think in the near term, can have 

4 a significant impact on the long term goals that 

5 were mentioned, either positively or 

6 negatively, and those are Parent PLUS Loans and 

7 the gainful employment rule.

8 Regarding Parent PLUS Loans, the 

9 Department's new strict and exacting 

10 application of the adverse credit history 

11 requirements, beginning in October 2011, has led 

12 to a significant increase in the denial rates of 

13 parents for both new and continuing students.

14 For continuing students, this means 

15 that parents with no change in their credit 

16 history have been denied, after having 

17 previously been approved for a PLUS Loan. 

18 For us, we've had thousands of their 

19 children who had no way to continue financial aid 

20 at our institutions, and they end up with debt 

21 and no degree, which is kind of the opposite of 

22 the long term goals that were announced in the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 notice.

2 During the -- for example, during 

3 the first year that these changes went into 

4 effect, the number of PLUS Loans originations 

5 declined by almost 20 percent across all of 

6 higher education, and I think that Art 

7 Institutes particularly, because we have a 

8 significant number of dependent students. In 

9 Historical Black Colleges and Universities, the 

10 percentages were much higher.

11 A similar year over year decline has 

12 occurred during a current -- the first nine 

13 months of the current award year, and 

14 unfortunately, the students it impacted are by 

15 and large, our best students. 

16 They're more likely to succeed 

17 because of their full-time status, their 

18 parental support, and things of that nature.

19 What we're asking is that the 

20 Department take a more sensible approach on the 

21 front end, of reviewing PLUS Loan applications, 

22 such as setting minimum thresholds for 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 charge-offs that result on adverse credit 

2 findings, like $500.

3 A lot of times, the adverse credit 

4 is being determined to exist in loans being 

5 denied for small doctor bills that have been 

6 charged off and things of that sort.

7 Further, because the current 

8 approach is having a significant impact now on 

9 the stated goals, we ask that the changes to the 

10 under-writing criteria be made immediately, as 

11 opposed to waiting for a negotiated rulemaking

12 session, that really won't take effect until 

July 1st 13 of 2015, and in this regard, I think it's 

14 important to recognize that the changes that 

15 resulted in the significant increase in denial's 

16 were done without any rulemaking session.

17 So, our view is that it can -- you 

18 know, some of the changes that maybe could be 

19 made to right the situation, could be done 

20 without a rulemaking session.

21 Regarding the gainful employment 

22 rule, we share the Department's goal of ensuring 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 that students enter into programs with a full 

2 understanding of the cost and the economic 

3 impact of their decisions to enroll.

4 That they receive a quality 

5 education, they achieve positive outcomes and 

6 they don't incur excessive student debt, and 

7 we've long been a component of enhanced 

8 disclosures that provide transparent cost debt 

9 and student outcome information, that allows 

10 students to make informed decisions.

11 If you look at the landing page of 

12 any of our campuses, for our 110 campuses, on 

13 each landing page is a consumer information 

14 button where all the information that needs to 

15 be provided is two clicks away for the student.

16 It's been recognized as a best 

17 practice, and it's something that, you know, we 

18 support and would encourage others to do, as 

19 well.

20 The prior gainful employment rule 

21 however, we believe incorrectly focused 

22 primarily on debt incurred by students, which 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 effectively predetermined program success, 

2 based on the ability to enroll students who were 

3 wealthy enough, that didn't have to borrow 

4 money.

5 As evidenced by the strong 

6 correlation between Pell eligibility under the 

7 prior gainful employment rule test and failure 

8 under the test, this approach would have reduced 

9 access to low-income, minority and under-served 

10 students, based on the factors that cause them 

11 to be disadvantaged in the first place.

12 If you pursue the gainful employment 

13 rule, we believe there is a proper balance 

14 between student access and student success, 

15 institutional accountability measures, that 

16 focus on progression through postsecondary 

17 education and eventual outcomes, including 

18 retention and completion, employment outcomes, 

19 debt repayment and return on investment from 

20 both the student and the taxpayers perspective, 

21 which should be the focus, and in our written 

22 submission, we'll provide more details in that 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 regard.

2 But really, instead of addressing 

3 concerns about student over-borrowing and 

4 isolation through a gainful employment rule, we 

5 believe the Department should work with 

6 Congress, through the HEA reauthorization 

7 process to develop a comprehensive and 

8 coordinated policy that applies to all of higher 

9 education, that requires transparency and 

10 accountability, that measures student outcomes 

11 that are normalized against the populations that 

12 are served, and it also reconciles the existing 

13 laws and regulations to make sure that any 

14 conflicts of the -- that are created during the 

15 rulemaking process are resolved.

16 We believe this is the best approach 

17 to achieve the long term goals of the Department, 

18 while at the same time, preventing a multitude 

19 of unintended consequences.

20 The last issue I wanted to talk about 

21 was state authorization, and not based on the 

22 call of the notice, the online piece, but the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 on-ground piece.

2 The Department has recently 

3 published a colleague letter, that provides that 

4 one-year extension of the state authorization 

5 requirement for those situations where the state 

6 has provided an institution with a letter that 

7 describes their efforts to come into compliance 

8 with the rule.

9 I mean, we're licensed in over 30 

10 states, and many states, several times over, 

11 because the vast majority of our students are 

12 Bachelor's degrees and above programs, and what 

13 we're finding is confusion, as to whether or not 

14 states comply or not.

15 The states aren't sure whether they 

16 need to do a letter, you know. 

17 A lot of them have had discussions 

18 with the Department over the last several years, 

19 and thought that they had gotten guidance and a 

20 lot of times, amended their laws to come into 

21 compliance, and only recently to find out that 

22 the current position of the Department is that 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 they may not be in compliance.

2 So, what we would ask is that the 

3 extension be granted for a year, without regard 

4 to whether there is a letter or -- and it would 

5 almost have to occur immediately, that the 

6 Department would publish its position on a 

7 state-by-state basis, on an agency-by-agency 

8 basis, as to whether or not the protocols and the 

9 procedures that are in place comply with the 

10 state authorization requirement. 

11 If not, there is going to be 

12 continuing confusion and our fear is a 

13 significant negative impact on student's 

14 eligibility, through no fault of their own.

15 Thank you for the opportunity to 

16 make these comments.

17 MODERATOR McCULLOUGH: Thank you. 

18 MS. MESSIER: Thank you.

19 MODERATOR McCULLOUGH: Richard 

20 Winn? Good morning.

21 MR. WINN: My name is Richard Winn. 

22 I'm the Executive Director of the Western 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Association of School and Colleges, Senior 

2 College Division. We accredit 170 or so 

3 institutions in California and Hawaii and 

4 Pacific Basin and beyond.

5 I want to speak very briefly, and 

6 very narrowly, about an issue that has really 

7 come to focus only in the last few days in full 

8 force, and in some respects, even within the last 

9 24 hours, relating to state authorization as it 

10 plays out in our distinctive and lovely State of 

11 California.

12 We represent 131 private 

13 institutions, that have been placed in a very 

14 difficult choice situation. 

15 Let me give you just a moment of 

16 context. Several decades ago, working with the 

17 California Legislature, California generated a 

18 position known as the WASC exemption, and this 

19 means that an institution that has been 

20 recognized by the State, once it becomes 

21 accredited by WASC, it is exempt from the 

22 jurisdiction of the state oversight group.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Subsequently, the state created 

2 what is known as the Bureau, which was designed 

3 specifically to prevent fraud and abuse among 

4 mostly unaccredited institutions, the kind that 

5 you've been hearing today, often are the 

6 problematic group.

7 This agency has struggled to 

8 preserve some sense of dignity within the state. 

9 It was actually defunded a few years ago, and 

10 left dormant for several years.

11 Now, has a small staff, operating in 

12 the Department of Consumer Affairs, and 

13 struggling to catch up with the backlog that 

14 accrued during their time away.

15 But as the only existing state 

16 recognizing agency, the state authorization 

17 mandate has required that institutions register 

18 with the Bureau, or run the risk of losing 

19 Federal aid, which is a very high stakes risk.

20 However, in urging institutions to 

21 register with the Bureau, in so doing, they are 

22 obligated to surrender the WASC exemption, and 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 this exposes them, these dignified, established 

2 WASC accredited institutions to be subject to 

3 the same kinds of jurisdictional oversight as 

4 are the under-accredited entities.

5 They are -- they were -- we saw an 

6 email circulating yesterday from the Bureau, 

7 stipulating that they must make a decision to 

8 either surrender their Title IV eligibility, or 

9 surrender their WASC exemption, and make this 

10 decision within 30 days, and it's an irrevocable 

11 decision. 

12 Once the decision to surrender the 

13 WASC exemption has been made, it is not 

14 recoverable.

15 This would subject these private 

16 institutions, including some of the best in the 

17 nation, to paying into the Student Tuition 

18 Recovery Fund, which is a fund designed to come 

19 to the aid of students when an unscrupulous or 

20 unsupported entity collapses and the students 

21 are left without a degree.

22 They would be subject to the various 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 kinds of regulations, which are very compliance 

2 oriented, that would apply to all entities in 

3 this -- including the unaccredited ones.

4 Our request very simply is a little 

5 more time, time to engage with Sacramento, to 

6 arrive at a clearer understanding, perhaps a 

7 more suitable arrangement that would qualify the 

8 state agency both under Federal policy and be 

9 appropriate to the kinds of institutions that 

10 WASC accredits.

11 Time to help our institutions 

12 understand what it means, what the implications 

13 are of the choices with which they are faced. 

14 Time to absorb the meaning of these various 

15 regulations, as they presently impact us.

16 As Tony mentioned a moment ago, 

17 there is a one-year reprieve, in terms of 

18 actually implementing, but the Bureau has made 

19 it clear that institutions must, by the end of 

20 June, declare which way they are going. 

21 We feel this is an unfortunate 

22 imposition on our institutions, and we would 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 hope that there would be some collaboration 

2 between the Federal office and the State office, 

3 to give us the breathing room to figure these 

4 matters out. Thank you.

5 MS. MESSIER: Thank you.

6 MODERATOR McCULLOUGH: Thank you. 

7 MS. MICELI: Thank you.

8 MODERATOR McCULLOUGH: Rigel 

9 Massaro, good morning.

10 MS. MASSARO: Good morning, and 

11 thank you for the opportunity to testify.

12 My name is Rigel Massaro, and I am 

13 a policy and legal advocate with Public 

14 Advocates. 

15 Public Advocates is a non-profit law 

16 firm and advocacy organization that has 

17 challenged the systemic causes of poverty and 

18 racial discrimination for over 40 years. So, 

19 all Californian's have the building blocks to 

20 thrive.

21 We're here to reinforce the message 

22 that taxpayer funded Federal financial aid 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 should not flow to wasteful career education 

2 programs, that leave students buried in debt 

3 they cannot repay.

4 We support a strong gainful 

5 employment rule, rules to prevent schools from 

6 evading current laws designed to protect 

7 students and taxpayers, and meaningful state 

8 authorization requirements.

9 Public Advocates' motto is 'making 

10 rights real'. We work to turn Constitutional 

11 rights and legal promises into opportunities for 

12 those most often closed out, short-changed or 

13 forgotten.

14 On Valentine's Day 2012, our 

15 President Jamienne Studley testified in 

16 Sacramento on California's oversight of private 

17 postsecondary education, saying, "In elementary 

18 and secondary education, we insist that the 

19 right to a public education means not just a 

20 school door each child can walk through, but a 

21 genuine and comparable opportunity for every 

22 child to learn."
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 If our goal were to provide 

2 low-income neighborhoods and individuals access 

3 to good banking services, we would not count 

4 opening more pay-day lenders a success.

5 The chance to go to institutions 

6 that graduate less than a quarter of their 

7 students or that place only a small number of 

8 students in secure jobs, does not count as 

9 success.

10 The goal of our higher education 

11 system is often described as providing access to 

12 college and career opportunities, but access 

13 alone is not enough. We have to ask access to 

14 what?

15 At Public Advocates, we are 

16 particularly committed to increasing access and 

17 successful completion for low-income students 

18 to quality programs. 

19 The most vulnerable students, first 

20 generation college goers, students of color, 

21 retooling workers and returning Veterans 

22 disproportionately and in growing numbers, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 attend career programs and so, do 

2 disproportionately in programs run by 

3 for-profit businesses.

4 To assure that career programs 

5 achieve sound outcomes and prepare students for 

6 stable family supporting jobs, we need a robust 

7 Federal regulatory framework, including a 

8 renewed gainful employment rule, reinforced by 

9 effective state oversight and complaint 

10 systems.

11 Last year's Federal District Court 

12 decision upheld the Department's clear 

13 authority to enforce this statutory gainful 

14 employment requirement. It recognized the 

15 Department was attempting to address a serious 

16 policy problem.

17 The Court described the 

18 Government's fully justified challenge in this 

19 vivid language.

20 "Concerned about inadequate 

21 programs and unscrupulous institutions, the 

22 Department has gone looking for rats in rat 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 holes, as the statute empowers it to do."

2 We need you to re-double your 

3 regulatory commitment to the search.

4 Even the initial modest gainful 

5 employment rule drove important changes to the 

6 benefit of students. 

7 Colleges shut down some of their 

8 weakest programs, reduced tuition to ensure 

9 students did not incur unmanageable debt, made 

10 efforts to ensure entering students were 

11 adequately prepared, and offered students trial 

12 periods before laying claim to their Federal 

13 aid.

14 But after last year's Court ruling, 

15 industry analysts made clear that if the 

16 Department doesn't promptly follow through with 

17 rigorous rulemaking, there is a real risk that 

18 companies will reverse these reforms.

19 In addition to supporting a strong 

20 gainful employment requirement for all career 

21 training programs, we recommend stricter 

22 provisions for reporting cohort default rates 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 and revisions to 90/10 calculations, to change 

2 the handling of Federal funds, other than Title 

3 IV.

4 The Senate Health Education Labor 

5 and Pension Committee's two-year investigation 

6 revealed that career programs, 

7 disproportionately for-profits, are postponing 

8 payments to students and placing them in 

9 forbearance or deferment, in order to manipulate 

10 their CDR's and the 90/10 calculations.

11 These practices are unconscionable 

12 and must be addressed.

13 Finally, the Department should 

14 insist that states shoulder their 

15 responsibility within the triad for clear, 

16 effective consumer complaint processes that 

17 cover all programs.

18 As the National Advisory Committee 

19 on Institutional Quality and Integrity's report 

20 reminded us, states have an important consumer 

21 protection and investigatory role to play, to 

22 ensure qualities within their -- quality within 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 their borders and nationwide.

2 Here in California, we are 

3 collaborating with the state and school 

4 communities to ensure that all private and 

5 postsecondary schools are state authorized for 

6 the information and protection of students and 

7 taxpayers.

8 Public Advocates is also promoting 

9 effective regulation of postsecondary 

10 institutions operating in California.

11 Last year, we helped shape and 

12 secure support for Assembly Member, now Senator 

13 Marty Block's Student Disclosure Bill AB2296, 

14 which Governor Brown signed last September.

15 This Bill strengthens student -- a 

16 school's performance disclosure profession --

17 requirements, to provide a fact based 

18 counter-weight to aggressive and all too often, 

19 misleading recruitment practices employed by 

20 schools with lavish marketing budgets.

21 It requires institutions regulated 

22 by California's Bureau for 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Private/Postsecondary Education to report 

2 accurate information about their performance, 

3 including the salaries of the school's 

4 graduates, and the share of the school's 

5 borrowers who defaulted on their student loans.

6 The rigorous measures in this 

7 statute could be a model for the Department and 

8 other states to use, in the quest for data, 

9 clarity and comparability to increase wise 

10 choices.

11 My comments today are situated in 

12 the unusual higher education marketplace, we 

13 have described before as characterized by 

14 information that is hard to verify and compare, 

15 severely limited state resources for public 

16 institutions, private companies profit 

17 imperatives, an open spigot of public funding, 

18 and disproportional enrollment by low-income 

19 and minority students in for-profit schools.

20 Even without red flags, a market of 

21 this type deserves careful monitoring by policy 

22 makers and advocates. As you know, however, the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 red flags are flying.

2 Many types of postsecondary

3 institutions can help meet the nation's need for 

4 college and career training, as long as they 

5 operate with integrity and transparency and 

6 provide students quality programs.

7 As we look ahead to regulatory and 

8 eventually statutory changes to better protect 

9 students and taxpayers, we encourage the 

10 Department to grapple with whether there are 

11 appropriate distinctions between non-profit 

12 charitable schools and businesses that provide 

13 training and education, that warrant tailored 

14 treatment.

15 While gainful employment is based on 

16 programs and not ownership, as Bethany Little of 

17 America Achieves suggested in the Washington 

18 hearing, it's time to recognize the difference 

19 between non-profit and education programs with 

20 responsibility to the public, and for-profit 

21 colleges owned by a company, traded on a major 

22 stock exchange or by a private equity firm, with 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 obligations to make a profit for owners and 

2 shareholders.

3 For too long, this issue has been 

4 obscured, as owners of for-profit colleges have 

5 asked policy makers, shouldn't the Department 

6 treat for-profits and non-profits the same? 

7 But this is a trick question.

8 By choosing to be for-profit, they 

9 are less regulated already. They have rejected 

10 the obligations of charitable organizations and 

11 significant regulation, specifically aimed at 

12 preventing abuse of vulnerable populations.

13 This difference brings us back to my 

14 opening point. As Civil Rights advocates, we 

15 insist that access must be to the quality that 

16 regulations are designed to ensure. Access 

17 without quality is no access at all.

18 We care, as we know you do, because 

19 so much is at stake for disadvantaged students, 

20 for the nation's economy, for the effective use 

21 of state and national education funds, and for 

22 responsible oversight of this burdening sector.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Together, we can assure that 

2 postsecondary access and quality are 

3 inextricably linked. 

4 The good news is that you have not 

5 only a big challenge and a serious 

6 responsibility, but also the tools, the 

7 recommendations and the chance now, to make an 

8 important difference for many students. Thank 

9 you.

10 MODERATOR McCULLOUGH: Thank you. 

11 Matt Haney and Raquel Morales. Okay, they have 

12 not signed in.

13 Okay, Margie Carrington and Linda 

14 Williams. Okay, very good. Good morning. 

15 MS. WILLIAMS: Good morning. What 

16 did I miss?

17 Okay, my name is Linda Williams and 

18 I represent the California Community Colleges, 

19 CCCSFAAA. We have 112 community colleges here 

20 in California, and we serve 2.4 million students 

21 here.

22 Most of our Federal aid dollars 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 actually don't support the institutions. They 

2 flow right through our campuses and right 

3 directly to our students, keeping that in mind, 

4 as we go forward with this discussion, or with 

5 this comment, as it relates to student loans.

6 California Community Colleges are 

7 the largest and lowest cost systems of higher 

8 education in the country, and we recognize the 

9 need for students to have the ability to receive 

10 Federal student loans.

11 Ironically, it's the only program 

12 that is an entitlement program. 

13 However, our colleges are held 

14 accountable for loan defaults, and we have very 

15 little control over the amount a student should 

16 receive while attending a California Community 

17 College. 

18 In addition, cohort default rates 

19 are not an accurate reflection of student 

20 borrowing for schools with relatively few 

21 borrowers, but continue to be represented to the 

22 public as a measure of institutional integrity.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 The following recommendations will 

2 help control fraud and abuse and are made in the 

3 interest of maintaining access while also 

4 maintaining program integrity, institutional 

5 compliance, providing students with appropriate 

6 support to receive their educational goals.

7 We would like for you to consider to 

8 allow institutions flexibility, field 

9 professional judgment and setting loan limits 

10 for segments of their student populations based 

11 on total indebtedness, protected future 

12 earnings and other factors. This will assist in 

13 the abuse of the student loan program.

14 Provide authority to deny loans on 

15 a much broader level. Allow loan repayment 

16 using payroll deductions. Provide an automatic 

17 waiver of reporting of the cohort default rates 

18 for institutions that meet the low participation 

19 rate index calculation.

20 Although statute requires a cohort 

21 default rate to be calculated for all schools, 

22 there are institutions that should be eliminated 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 from that report based on the basis that there 

2 are so few student borrowers, that the rates are 

3 misleading and meaningless.

4 I have a colleague who has two 

5 borrowers, one is in default. That is a 50 

6 percent default rate, and it's reported on their 

7 website. It's just not an accurate reflection 

8 of what is out there.

9 Satisfactory academic progress. 

10 This is an abuse piece.

11 Students are reaching their LAU 

12 limit before completing their academic programs 

13 due to the number of ESL units they're taking, 

14 not that we shouldn't offer ESL units, but the 

15 current regulations for financial aid 

16 eligibility restrict the maximum of 30 remedial

17 units, but allow institution to determine how 

18 ESL units will be treated for satisfactory 

19 academic progress.

20 We feel that SAP regulations should 

21 treat ESL units similar to remedial units, and 

22 be limited to 30 units, so that our students can 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 maximize their LAU's, and meet their transfer 

2 goals.

3 Our campus based programs. Campus 

4 -- change campus base allocation formula, so 

5 that schools who are truly serving low-income 

6 students, such as the California Community 

7 Colleges, receive funding to support the truly 

8 low-income student.

9 We strongly support the initiatives 

10 that the administration has taken to include 

11 this in their budget and reauthorization 

12 proposals.

13 Allow Federal work study jobs 

14 located on campus, child-care centers that serve 

15 students and staff to be included in the 

16 calculation of community service placements. 

17 Currently, a campus child-care 

18 center must serve some member of the community 

19 that are not associated with the institution, in 

20 order to be defined as community service.

21 However, the fact that these 

22 students are enrolled, they are also community 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 members.

2 State authorization program. This 

3 will be short and sweet, since this has been so 

4 addressed.

5 We support having the Federal 

6 Government step away from it, let the states --

7 we believe that the states required 

8 authorization for institution to deliver 

9 distance ed within their borders. They should 

10 be prepared to enforce those laws.

11 Cash management. The majority of 

12 our community colleges have a pass-thru or a 

13 third-party vendor that we use. We used to have 

14 more than one, but with the recent merger of 

15 Higher One with Sallie Mae, it's made some --

16 it's made some really big -- I can't think of a 

17 right word, that I would want recorded.

18 But anyway, so, you got it. Insert 

19 there.

20 Okay, most of our colleges use some 

21 form of a third-party refunding method, since 

22 the majority of financial funds are treated as 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 a pass-thru to our students. 

2 We recommend that the cash 

3 management regulation in Section 668.165(b) 

4 clearly require institutions that disburse 

5 funds via debit cards, to provide students with 

6 an alternative method of receiving funds, such 

7 as checks or electronic deposits.

8 Providing an alternative 

9 disbursement method addresses concerns of those 

10 students who may not have bank accounts or are 

11 uncomfortable with a debit card or not bankable.

12 We recommend that third-party 

13 vendors be prohibited from providing incentives 

14 or reward funds or services to institutions in 

15 exchange for doing business.

16 We also recommend that debit card 

17 vendors be prohibited from marketing products to 

18 students and be required to disclose 

19 partnerships or entities in which they have an 

20 interest that market products to students.

21 Then we have some additional 

22 recommendations.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Consumer information and 

2 requirements for disclosure has become so 

3 burdensome and numerous that the usefulness has 

4 become lost to the student.

5 We recommend research and focus 

6 groups be conducted to determine the information 

7 most useful to our students at the various types 

8 of institutions. 

9 We believe that this 'one size fits 

10 all' approach targeted to assist high school 

11 seniors and their parents select a college to 

12 attend does not really provide the best 

13 information for graduates -- for our entering 

14 students or re-entry students or other 

15 non-traditional students.

16 This is really big for our community 

17 colleges, because this next topic is taking away 

18 the much needed resources that we need to deliver 

19 aid to our students, and that's the return of 

20 Title IV.

21 Because we are a pass-thru school, 

22 the majority of us, we would like consideration 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 to be exempted from the return to Title IV, 

2 institutional repayment calculations when no 

3 tuition is charged to them.

4 The majority of our students are 

5 receiving a Board of Governor's fee waiver.

6 The liability to our colleges has 

7 compromised resources to needed -- that is 

8 needed to administer our financial aid programs. 

9 We would like to eliminate post-withdrawal 

10 disbursements, beyond the amount of 

11 institutional charges.

12 Consider allowed institutional 

13 charges reported to NSLDS as a grant 

14 over-payment. 

15 The abuse occurs when a student is 

16 allowed to attend new institutions, and not in 

17 the game, or they're not being held accountable, 

18 when all the is -- that we had to do is to have 

19 the institutions repay funds to the Department, 

20 and so, schools -- students are getting away a 

21 huge abuse there.

22 Limit to the use -- limit of use, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 limit the number of times a student can refer to 

2 NSLDS as an over-payment.

3 Eliminate module and clock hours, 

4 calculations for unit based accredited 

5 institutions. Whether a program is a clock hour 

6 or a credit hour program should be determined by 

7 the institution's accreditors.

8 That's it. Thank you. I 

9 appreciate it.

10 MODERATOR McCULLOUGH: Thank you.

11 Brad Hardison, would you be interested in 

12 presenting right now? We're waiting, the 

13 person who was scheduled a little later -- would 

14 you -- is that okay with you? Okay, thank you very 

15 much, Brad. Good morning. 

16 MS. MESSIER: Good morning. Thank 

17 you.

18 MR. HARDISON: Good afternoon. My 

19 name is Brad Hardison. I am the Financial 

20 Director at Santa Barbara City College, one of 

21 the 112 community colleges that are part of the 

22 California Community College system you just 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 heard about, which is the largest system of 

2 higher education in the nation, serving 2.4 

3 million students.

4 I worked in financial aid as an 

5 administrator for over 20 years, in the 

6 University of California system and the 

7 California Community College systems.

8 I am here today before you to comment 

9 on a number of topics, four to be specific, that 

10 are or should be addressed as part of the 

11 upcoming negotiated rulemaking committees.

12 The first topic I wish to address is 

13 cash management.

14 I understand that the Department of 

15 Education is considering modifying and updating 

16 the Department's cash management regulations. 

17 While I support many of the ideas of 

18 disbursing funds more quickly to students, I 

19 would be cautious and mindful about regulations 

20 in certain areas.

21 I believe that the students need to 

22 have a choice in the best disbursement option for 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 his or her situation, with transparency of 

2 information, including any fees for service.

3 Any efforts to require a school to 

4 use electronic disbursement through EFT or debit 

5 cards could harm some students who may have 

6 cultural issues about utilizing banking 

7 services.

8 Some students may also have 

9 difficulty in obtaining banking services due to 

10 prior experience with financial institutions.

11 I would suggest that any discussions 

12 about cash management regulations take into 

13 account these concerns, and allow flexibility to 

14 disburse to students through paper checks, and 

15 non-electronic means, as the situation 

16 warrants.

17 Financial aid is intended for 

18 students to assist him or her with the college 

19 costs. Unreasonable fees or lack of choice in 

20 disbursement options is counter to this notion.

21 Finally, regulations in this area 

22 should address the amount of Title IV aid that 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 an institution can use to pay for prior term 

2 charges, to more than $200 with the permission 

3 of the student.

4 Many of students do not understand 

5 why this amount is capped at $200. In some 

6 cases, our students cannot enroll for future 

7 semesters, since they may owe amounts slightly 

8 over $200 and have no means to pay the funds, 

9 except for the use of current term financial aid 

10 funds.

11 I understand there needs to be a 

12 limitation and I'm concerned about student using 

13 current year financial aid for past debts, but 

14 the amount may need to be revisited in light of 

15 current costs.

16 The next topic being considered from 

17 upcoming negotiated rulemaking committees I 

18 would like to address is gainful employment.

19 I support the Department's 

20 rationale behind gainful employment reporting 

21 and disclosure requirements.

22 As a member of a community college 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 that offers career, technical and vocational 

2 programs, to prepare our students for employment 

3 in his or her chosen field of study, I agree that 

4 our program should be held accountable, and not 

5 promise employment and/or burden our students 

6 with high loan debt, as a result of our program 

7 costs.

8 If we have programs that are not 

9 sufficient at delivering the education to assist 

10 students in his or her career goals, we should 

11 embrace wanting to make the appropriate changes.

12 While the final gainful employment 

13 regulations do not set high enough standards for 

14 career education programs receiving financial 

15 aid, its overall approach remains sound.

16 The repayment rate metrics includes 

17 the students who do not complete the program, and 

18 measures the extent to which they are repaying 

19 their Federal loans, while the debt to income 

20 metrics include only students who complete and 

21 measure the extent to which they consistently 

22 have excessive Federal and private loan burdens.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 I would however, encourage the 

2 Department to come up with reasonable measures, 

3 based on collected data, to determine the best 

4 approach for the effectiveness of the programs.

5 The debt to income criteria needs to 

6 be modified to address programs where the 

7 majority of graduates do not take out student 

8 loans. 

9 This would focus scrutiny on 

10 programs where debt loans may be problematic, 

11 since debt-free graduates cannot have 

12 problematic debt loans, and would have added 

13 benefits of reducing the administrative burden 

14 on schools, including many community colleges 

15 offering programs where the majority of the 

16 students do not borrow.

17 It is also important to be mindful 

18 about the reporting requirements, to make sure 

19 they do not -- they are not burdensome to 

20 institutions or duplicative of other data that 

21 may be available to the Department.

22 Another topic that needs to be --
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 that may need to be addressed at any upcoming 

2 negotiated rulemaking committee is fraud within 

3 the Federal financial aid programs.

4 I would be cautious about further 

5 regulation in this area until there is time to 

6 evaluate the effectiveness of measures put into 

7 place by the Department of Education for the 

8 2013/2014 award year, including custom 

9 verification and unusual enrollment history.

10 Other topics, such as cash 

11 management, may help address some of these fraud 

12 issues, as is related to tracking disbursements. 

13 Ultimately, the Department may need 

14 to look at regulations as it relates to 

15 verification of enrollment and attendance in the 

16 programs, to get at fraud issues where the 

17 student only attends enough or minimally to 

18 receive the Federal financial aid funds.

19 Finally, I'd like to raise a topic 

20 that is important to me as a financial aid 

21 administrator at a community college with a low 

22 percentage of our students in borrowing loans.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 This is the issue of the 

2 participation rate index, or PRI.

3 By law, colleges where only a small 

4 share of the students borrowed are protected 

5 from sanctions based on their cohort default 

6 rate.

7 This is an important protection for 

8 a community college in particular, where an 

9 average of just 13 percent of our students 

10 borrow.

11 However, the Department's process 

12 for administering the law is problematic and has 

13 led to some community colleges pulling out of the 

14 student loan program, based on inflated fears of 

15 their risk of sanctions.

16 The Department has pointed to 

17 current regulations as a barrier to improving 

18 the process. 

19 Specifically, the regulations 

20 should be modified to accept participation rate 

21 index, PRI appeals from colleges with low 

22 borrowing rates in any year, rather than forcing 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 them to wait until they're at eminent risk of 

2 losing their access to aid.

3 I appreciate the opportunity to 

4 share my comments with you today, and hope these 

5 topics and observations can be incorporated into 

6 upcoming negotiated rulemaking committees.

7 MS. MESSIER: Thank you.

8 MODERATOR McCULLOUGH: Thank you 

9 very much. 

10 Is Rachelle Feldman here? Has she 

11 checked in? No? Is there Russell Poulin? 

12 Would you like to go ahead and go now? Thank 

13 you. 

14 Well, thank you very much. We're 

15 hoping that the students that were supposed to 

16 be here, will make it. Thank you very much.

17 MR. POULIN: Good morning. My name 

18 is Russ Poulin, and I'm not a financial aid 

19 person.

20 I represent WCET, the WICHE 

21 cooperative for educational technologies. Our 

22 mission is to accelerate the adoption of 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 effective practices and policies, advancing 

2 excellence in technology, enhanced -- enhanced 

3 teaching and learning in higher education.

4 Our members are institutions, state 

5 agencies, multi-institutional consortia, 

6 non-profit organizations and corporations from 

7 throughout the United States.

8 WCET operates as a unit of the 

9 Western Interstate Commission for Higher 

10 Education, which is a non-profit Congressional 

11 compact of 15 western states.

12 My comments will address the 

13 following topics that were announced as being 

14 under consideration, including proposed 

15 regulations designed to prevent fraud, 

16 especially in the context of distance education, 

17 state authorization for programs offered 

18 through distance education or correspondence 

19 education, and state authorization for foreign 

20 locations of institutions located in the state.

21 Before moving to those items, I'd 

22 like to begin with an overall observation on the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 regulation of distance education.

2 In recent years, there has been 

3 considerable attention by members of Congress, 

4 their staffs, the U.S. Department of Education 

5 on the developments in distance education across 

6 colleges and universities of all types.

7 Given the growth of this type of 

8 learning, this such scrutiny is to be expected.

9 In creating regulations, there is 

10 tendency to bifurcate programs, courses and 

11 students into two categories, distance 

12 education and traditional education.

13 Such a dichotomy no longer fits the 

14 educational reality, as faculty are 

15 increasingly using technologies and traditional 

16 courses in courses of all types.

17 There are changes to the amount of 

18 activities and face-to-face -- in the amount of 

19 activities in face-to-face time, as courses 

20 become blended or flipped.

21 Instead of a bifurcation based on 

22 distance versus traditional, we now have a rich 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 array of combinations of how much technology is 

2 used in a course, and how much face-to-face 

3 instruction occurs in a course.

4 Likewise, students can choose to be 

5 distance one term, traditional the next or some 

6 sort of mixture in the following term.

7 WCET suggests a new policy framework 

8 regarding regulating distance education and 

9 educational technology, and this framework is, 

10 is that regulation should not differentiate by 

11 mode of instruction, unless the regulations are 

12 actually about the tools used in the mode of 

13 instruction.

14 Let me give you an example. It 

15 makes sense to regulate as to whether 

16 technologies themselves are accessible to those 

17 with handicaps. 

18 It does make sense to make financial 

19 aid distinctions based upon how the student 

20 receives instruction, and I'll give an example 

21 in a little bit.

22 Stop worrying about the inputs. We 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 apply the move to outcomes and competency based 

2 measures as a replacement for measures based on 

3 mode of instruction.

4 Now, onto the first issue that I 

5 mentioned, on preventing fraud in distance ed 

6 programs.

7 The problems have been well 

8 documented in the Office of Inspector General's 

9 2011 Advisory Report and two subsequent 

10 announcements about negotiated rulemaking.

11 WCET and its membership stand firmly 

12 behind the Department, in wishing to combat 

13 fraud in distance ed programs, and offer some 

14 specific details here.

15 First we suggest educating more 

16 higher education staff and faculty. Preventing 

17 fraud currently often falls on a limited number 

18 of financial aid and instructional technology 

19 staff or in IT staff.

20 While they bear the bulk of the 

21 burden, is often the faculty or other student 

22 service personnel who first note anomalies in 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 student behavior, their input would be helpful 

2 in creating campus early warning systems.

3 WCET encourages the Department to 

4 work with distance education organizations, to 

5 continue in identifying best practices and 

6 identifying fraudulent behaviors and 

7 disseminating them to key personnel, such as 

8 faculty and student support personnel.

9 WCET is interested in assisting with 

10 broader educational outreach to raise awareness 

11 of methods to a wider audience.

12 Second, we ask that you don't 

13 differentiate financial rules by mode of 

14 instruction. 

15 The Office of the Inspector 

16 General's report stated that since 2001, OIG 

17 raised concerns about the cost of attendance 

18 calculation for distance education students, 

19 because an allowance for room and board does not 

20 seem appropriate to these programs, which are 

21 largely designed for working adults.

22 Subsequently, a budget proposal 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 from the Administration included a proviso to 

2 eliminate room and board and miscellaneous 

3 expenses from the Pell Grant cost of attendance 

4 calculations for distance students.

5 WCET strongly objects to that 

6 recommendation. Result would be to punish the 

7 innocent.

8 While many distance ed students are 

9 working adults, many are traditional age 

10 students, as well. Adults might quit their jobs 

11 or reduce their workload to enroll in an online 

12 program.

13 Community students often fit the 

14 same working adult demographic profile, yet they 

15 would maintain eligibility for these same costs. 

16 This is simply inequitable and would have the 

17 greatest impact on those with the highest needs.

18 If the concern is about working 

19 adults, then the regulation should talk about 

20 working adults and how much they make.

21 Third, don't confuse financial aid 

22 fraud and academic integrity. Fraud is an 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 action of someone, usually in a fraud ring, using 

2 fake, appropriated or conspirator's identities 

3 to deceive an institution for financial gain.

4 Academic integrity is an act by a 

5 student whose identity is known, to obtain a 

6 better grade.

7 Fraud is a criminal act and many of 

8 the preventative measures are up front. 

9 Academic integrity is a violation of policy and 

10 requires ongoing vigilance.

11 In my comments that was submitted 

12 earlier, WCET has worked with several 

13 organizations, and just this week, published an 

14 academic integrity self-chart list to work --

15 help institutions work with faculty to curtail 

16 cheating.

17 While financial aid fraud and 

18 academic integrity have some similarities, be 

19 wary of 'one size fits all' solutions.

20 High barriers for proving a 

21 student's identity and applying for aid may be 

22 appropriate, but could have a chilling effect if 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 the student has to repeat it for each interaction 

2 with a course.

3 Fourth, WCET supports education 

4 recommendations on technical strategies to 

5 combat fraud. 

6 In their comments that they 

7 submitted last year, they talked about using 

8 their COMMIT Project, which would enable 

9 students to navigate the myriad of systems and 

10 service providers potentially involved in 

11 applying for admissions and financial aid, using 

12 only a single set of credentials.

13 More importantly, from the 

14 perspective of this discussion, it would extend 

15 such credentials on the basis of identity 

16 assurance on par with that of financial service 

17 in the industry. So, we recommend looking into 

18 the progress on that report.

19 On state authorization for distance 

20 education, WCET has been very active in 

21 educating institutional personnel on both the 

22 Federal and State regulations, and we created 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 the state authorization network, so that 

2 institutions could help each other in terms of 

3 staying in compliance.

4 Our first recommendation is to allow 

5 time for compliance, if you bring the regulation 

6 back. 

7 We did a survey earlier this year, 

8 and of the 206 responding institutions, 15 

9 percent, only 15 percent have all the approvals 

10 required, 52 percent have applied into one or 

11 more states, and a third have yet to gain 

12 approval in even one state, and this is just of 

13 the people who completed this survey. We 

14 imagine there is a lot of institutions that 

15 didn't complete it, and probably fit into that 

16 last category.

17 Additionally, states are not ready 

18 to handle another onslaught of applications, 

19 processes, and some states take a year or more, 

20 with budget constraints, compliance staffs, and 

21 the states have been cut.

22 Institutions may need at least two 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 years to be in full compliance, and a re-issue 

2 of the good faith effort bench-marks would be 

3 useful with more specificity on the definitions 

4 of each good faith step.

5 Next, support the state 

6 authorization reciprocity agreement. My 

7 colleague and boss, David Loganecker reported on 

8 that this morning. 

9 Since the language in the subsequent 

10 guidance from 609 was vacated, the Department 

11 had been strongly supportive of reciprocity, and 

12 the Department should re-state its support for 

13 such a reciprocal agreement.

14 I've been involved with all the 

15 efforts to create reciprocity. WCET fully 

16 supports WICHE's leadership in implementing the 

17 state authorization reciprocity agreement.

18 The final comments are really 

19 questions about the state authorization of 

20 foreign locations of institutions located in a 

21 state.

22 Other than appearing as part of the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 announcement for the new negotiated rulemaking, 

2 there has been little said about the concerns 

3 that the Department has about this issue.

4 WCET was able to confirm that 

5 foreign refers to locations in other countries. 

6 WCET members have these questions.

7 Will any provision arising from this 

8 discussion apply to distance education? Does 

9 this apply to students beyond Federal financial 

10 aid?

11 In conclusion, WCET has a long 

12 history of working on Federal policy issues. 

13 Recently, we have also begun partnering with 

14 other educational technology and continuing ed 

15 organizations, and sharing policy perspectives.

16 Some of the issues that arose from 

17 the original state authorization regulation had 

18 to do with those who composed the regulation, not 

19 fully comprehending the state of the art in 

20 distance education.

21 WCET would be happy to serve as a 

22 resource and to work with other partner 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 organizations, several of which I've named 

2 today, in helping to craft forward looking 

3 regulations. Thank you.

4 MS. MESSIER: Thank you.

5 MODERATOR McCULLOUGH: Thank you 

6 very much. 

7 Okay, with that, we will adjourn the 

8 hearing until 1:00 p.m., when we'll resume.

9 Now, that I've adjourned it, I will 

10 also tell you that our colleagues here have very 

11 nicely prepared a little handout. If you want to 

12 know where to get food, you can pick one up at 

13 the table. Thank you. 

14 (Whereupon, the above-entitled 

15 matter went off the record at approximately 

16 11:50 a.m. and resumed at approximately 1:00 

17 p.m.)

18 MODERATOR McCULLOUGH: We'll 

19 reconvene the hearing now with David Marr. Good 

20 afternoon.

21 MR. MARR: Good afternoon. Bear 

22 with me, I'm getting over a cold. I've heard 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 other people couching, as well. I'm not 

2 contagious, so, you're all safe.

3 MODERATOR McCULLOUGH: Good.

4 MR. MARR: But the end of the cold 

5 sounds worse than the beginning.

6 I'd like to begin by expressing my 

7 appreciation for the opportunity to contribute 

8 to this conversation.

9 My name is David Marr, and in the 

10 time allotted, I will address only one of the 

11 topics set forth in the Federal Register. 

12 Specifically, I will comment on the 

13 Department's intent to promulgate regulations 

14 under Sub-Part K, cash management and with 

15 respect to credit balance disbursements.

16 Many of those who have commented 

17 before in Washington, D.C. and other locations 

18 represent distinguished not-for-profit 

19 organizations. I personally have no such 

20 not-for-profit affiliation. 

21 However, I will offer a little bit 

22 of insight into my background to add context to 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 the conversation.

2 Over the past 20 years, I have served 

3 institutions of higher education in the area of 

4 audit, consulting and as a partner and managing 

5 director at KPMG. I am currently serving as the 

6 President of Blackboard Transact, Blackboard's 

7 second largest software company.

8 During my tenure at KPMG, I 

9 conducted audits under Title IV compliance, 

10 specifically OMB circular A133, as well as the 

11 Department's student financial aid audit guide, 

12 and over the years, became the firm's expert in 

13 Title IV compliance.

14 In addition, I was fortunate to be 

15 a fundamental contributor to the design and 

16 build of common origination and disbursement, 

17 also referred to as COD, the system the 

18 Department utilizes to disburse and reconcile 

19 financial aid for every Title IV eligible 

20 institution, as well as working on other 

21 financial systems at the U.S. Department of 

22 Education.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 At Blackboard, I continue to serve 

2 education institutions. Two years ago, after 

3 much research, we developed a credit balance 

4 disbursement program called Blackboard Pay.

5 Blackboard Pay was designed from the 

6 ground up, to meet the requirements of the most 

7 needy Title IV recipients, thus properly serving 

8 all Title IV recipients.

9 This meant ensuring financial aid 

10 was immediately available and aligned with the 

11 spirit and the intent of the Federal 

12 regulations.

13 Blackboard was designed 

14 specifically, Blackboard Pay was designed 

15 specifically with the idea of protecting 

16 students from fees of other companies and banks 

17 that charge, that are egregious and/or were 

18 never contemplated by the Department's cost of 

19 attendance guidelines.

20 Throughout these hearings, various 

21 members of the community have expressed concerns 

22 and/or recommendations related to credit 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 balance disbursements. Many of these 

2 recommendations were heart felt and well 

3 meaning, however, most did not contemplate their 

4 unintended consequences of denying access to 

5 lower cost alternatives for students.

6 Most recommendations accurately 

7 addressed symptoms, but not the problem. The 

8 problem at its root is the lack of definition as 

9 to what constitutes a responsible credit balance 

10 disbursement program.

11 If the Department would fully define 

12 the requirements of such a program, all of the 

13 issues/symptoms raised will disappear, as long 

14 as that program remains and is in compliance.

15 To that end, Blackboard requests the 

16 Department consider the following 10 

17 requirements as a framework of a responsible 

18 party -- a program, and I've provided all these 

19 comments.

20 Number one, 24-hour ATM access 

21 delivered by a major inter-bank network, that 

22 word is key, of surcharge free ATM's with a 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 nationwide presence. Thereby maximizing free 

2 and clear access for all students on campus and 

3 off campus, including those engaged in a 100 

4 percent distance learning and those not living 

5 in the institution's home state.

6 Number two, prohibition of 

7 non-sufficient funds, NSF fees of any origin.

8 Number three, prohibition of 

9 program-initiated PIN or signature based fees.

10 Four, free personal or counter 

11 checks. Five, reasonable and probable access 

12 to free cash -- check-cashing. This again, 

13 ensures the same free and clear access for both 

14 students on campus and off campus, as well as 

15 addressing the needs of those distance learners.

16 Six, prohibition of inactive 

17 account fees for periods less than nine months, 

18 from the date of the last account transaction.

19 Seven, if a program is in place, 

20 publishing the average and types of fees 

21 incurred by students for the most recent Title 

22 IV award year.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Eight, prohibition of the marketing 

2 of disbursement options by any program provider, 

3 other than the institution. I'm going to repeat 

4 that. Prohibition of the marketing of 

5 disbursement options by any program provider, 

6 other than the institution.

7 However, for banking compliance 

8 purposes, the names, logos and marks of the 

9 financial service provider shall be permitted to 

10 appear on the institution's information pieces, 

11 including the student ID card, and i.e., that 

12 would be the payment bug, either a Discover, 

13 Visa, Master Card, for compliance reasons, those 

14 have to be there.

15 Number nine, prohibition of the 

16 sharing of revenue or the receipt of other 

17 consideration by an institution from the program 

18 provider, including the bundling of non-program 

19 services or software by that program provider.

20 Number 10, disclosure by the 

21 institutions that are simple and transparent in 

22 their comparison of each disbursement option, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 including fee schedules, prior to students 

2 having to opt into that program.

3 So, those are the 10 tenets or 

4 framework components that we would ask that you 

5 consider.

6 Finally, I will delve into four 

7 others, more deeply, the first being debit 

8 versus pre-paid card.

9 Throughout the conversations, I've 

10 heard no distinction made between debit and 

11 pre-paid card programs, and thus, comments have 

12 been generalized, however, this is an important 

13 distinction, and the Department actually 

14 distinguishes this and makes a distinction 

15 between debit and stored-value cards, in DCL GEN 

16 05-16.

17 A stored-valued card is a pre-paid 

18 debit card that could be used to withdraw cash 

19 from an automated teller ATM, or to purchase 

20 goods from a merchant.

21 We distinguish a stored-value card 

22 from a traditional debit card in this 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 discussion, by defining a stored-value card as 

2 not being linked to a checking or savings 

3 account.

4 I would respectfully suggest that 

5 this definition is not fully formed. A pre-paid 

6 card can be linked to checks and counter-checks, 

7 such as we have done with Blackboard Pay.

8 However, it is still impossible to 

9 overdraft and charge non-sufficient fund fees.

10 The benefit of a pre-paid 

11 stored-value card is that it could offer all the 

12 consumer protections of another card program, 

13 while ensuring a student will never overdraft.

14 Without a responsible program 

15 guidance from the Department, any card and any 

16 banking program could be unintentionally or 

17 willfully fall short of the intent of the Title 

18 IV regulations. 

19 Second, the number of ATM's versus 

20 a surcharge-free network. This is too an 

21 important distinction.

22 Since the suggestion of further 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 mandating the number of on-campus 

2 surcharge-free ATM's will not solve the free and 

3 clear access problems, because most students 

4 will continue, 66 percent live off-campus.

5 Therefore, it becomes a technical 

6 quagmire of how many ATM's must be on campus.

7 A single ATM or a few ATM's on campus 

8 exclude the majority of the student population 

9 when spending all or most of their time off 

10 campus. This de facto is non-compliant with 34 

11 CFR 668.164.

12 Additionally, if a student lives on 

13 campus, the probability of a credit balance 

14 disbursement is greatly reduced since meal plans 

15 and housing are allowable charges to be 

16 maintained by the institution.

17 The best possible way to ensure 

18 maximum access for all students is to focus on 

19 the ATM network, by requiring providers to be a 

20 member of a significant inter-bank network of 

21 national surcharge-free ATM.

22 As an example, the All Point Network 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 has over 55,000 surcharge-free ATM's. 

2 To put this in perspective, this is 

3 four times the number of ATM's of the largest 

4 U.S. bank J.P. Morgan, and this is tens of 

5 thousands more than one of the major providers 

6 makes available without a fee, unless of course, 

7 those students upgrade to their more costly 

8 disbursement service.

9 Three, bundling of other software 

10 and services. Just as inducements were 

11 unacceptable during the FFELP days, they are 

12 equally so today.

13 A provider should be prohibited from 

14 this practice. The result is the defacto 

15 transfer of costs of the bundled items away from 

16 the institution and to the students via fees, 

17 generated from the vendor’s credit balance 

18 disbursement programs, fees that have to be 

19 ridiculously profitable to cover such bundling.

20 Therefore, to avoid this 

21 inducement, the purchase of additional items 

22 from a single vendor should not reduce the cost 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 of any item more than what is customary and 

2 reasonable for those items sold on a stand-alone 

3 basis.

4 Finally, checking -- am I at my time?

5 MODERATOR McCULLOUGH: Yes, you 

6 are. You're at time.

7 MR. MARR: Would you like me to 

8 stop? I'm sorry.

9 MODERATOR McCULLOUGH: Yes, no, I 

10 appreciate you giving it to us.

11 MS. MESSIER: That is 10 minutes. 

12 Thank you.

13 MR. MARR: Thank you for your time, 

14 and I appreciate the conversation.

15 MODERATOR McCULLOUGH: Thank you 

16 very much. Rachelle Feldman?

17 MS. FELDMAN: Good afternoon. My 

18 name is Rachelle Feldman. I am the Director of 

19 Financial Aid and Scholarships at the University 

20 of California Berkley, and I'm also an Executive 

21 Board Member of the National Direct Student Loan 

22 Coalition.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 I am speaking to you today on behalf 

2 of the Coalition, which is a grass roots 

3 organization of practicing financial aid 

4 administrators from all the higher education 

5 segments.

6 We're dedicated to the improvement 

7 and strengthening of the Federal Direct Loan 

8 Program and support the institutions and their 

9 students who rely on the Federal financial aid 

10 programs to make their education a reality.

11 So, I'd really like to thank you and 

12 the Secretary, for the opportunity to provide 

13 comments on Federal student loan programs that 

14 may be addressed in the negotiated rulemaking

15 process.

16 I have four topics I want to talk 

17 about, and I'll try to talk really quickly.

18 So, the first is that student 

19 borrowers need a seamless front end for loan 

20 servicing. Students continue to be confused 

21 about who services their direct loan, and there 

22 is a fear that the recent increases and cohort 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 default rates may be related to an individual 

2 student's ability to know and understand which 

3 servicer is holding their loan.

4 The sheer number of contractors with 

5 the non-profits in there, who service loans, 

6 exacerbates this issue.

7 While students might look up the 

8 name of their servicer on NSLDS, many don't take 

9 that extra step, and they're also confused by 

10 mail or email they receive that his branded with 

11 a bank's name and not the Department of Education 

12 or the direct loan program.

13 The technology today exists to have 

14 a one point of entry website and a one point of 

15 entry toll-free number, where students could 

16 log-in with information, be directed to their 

17 servicer without ever having to know who their 

18 servicer is.

19 Since the Department can always link 

20 the borrower to the servicer, other things such 

21 as customer satisfaction surveys and 

22 performance measures could still be done on the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 various servicers, without the student having to 

2 name the contractor.

3 The IRS works like this. Tax filers 

4 are assigned a private company, but we don't know 

5 who we're assigned to and everything is branded 

6 as the IRS or Internal Revenue Service.

7 This service improvement has the 

8 potential to simplify the process for borrowers 

9 and reduce administrative burden for financial 

10 aid office staff, who are spending increasing 

11 amount of times assisting former students 

12 navigate this unnecessarily complex loan 

13 servicing environment, and could help prevent 

14 defaults and delinquencies on student loans.

15 The second area is disbursement 

16 options, which the person who testified before 

17 me talked about a lot.

18 So, we think electronic 

19 disbursement of financial aid funds is widely 

20 practiced and expected by institutions and 

21 students alike, and the use of EFT has generated 

22 cost savings and efficiencies, while increasing 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 convenience for students.

2 As new electronic means of fund 

3 distributions are developed, such as debit 

4 cards, regulatory guidance of these instruments 

5 should focus on student needs, security, 

6 transparency and accountability.

7 Students should be able to decide 

8 between electronic options for receipt of funds. 

9 The access to those funds should be convenient 

10 and not limited. They should be available 

11 without any fees.

12 Institutional relationships with 

13 any provider should be disclosed, and guidance 

14 should prohibit inducements for the institution 

15 from that service provider.

16 We just wanted to note too, that 

17 given the rapid rate of technological and 

18 instrument advancement, regulatory guidance 

19 should be drafted to accommodate new 

20 technologies and new instruments as they come 

21 on.

22 The third area is reducing of 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 administrative burden for aid offices. The 

2 first area of that is the FISAP.

3 The FISAP is the current process 

4 used to request and report on Title IV campus 

5 based funds, and it needs to be revamped. Most 

6 of the data that is on the FISAP is currently 

7 available through other Department of ED data 

8 systems that could be matched. 

9 Much of the data, like the 

10 incumbents that have not changed over time, are 

11 not relevant in light of the current funding 

12 levels and the current allocation formula, and 

13 the categories of information collected are 

14 often out of date and of little value of analysis 

15 by Department of Education staff.

16 So, we think a process to review that 

17 and collect data that is meaningful and not 

18 available from other sources is overdue.

19 We also want to advocate for some 

20 performance based measures and accountability. 

21 Consideration for performance based regulations 

22 presents the opportunity for reducing 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 administrative burden for institutions, while 

2 simultaneously improving student outcomes.

3 We urge you to consider including 

4 performance or outcome based measures in the 

5 process to apply for Title IV eligibility, as 

6 well as at the annual FISAP.

7 There are currently important 

8 public policy goals that could be targeted as 

9 meaningful performance measures, such as 

10 average debt at graduation, institutional 

11 default rates or graduation and retention rates.

12 Examples of regulatory relief in 

13 areas where regulations are burdensome or in 

14 question of value also include a more sort of 

15 random list of items.

16 So, loan prorations for students 

17 completing the final term of a four-year degree 

18 program. This requirement reduces available 

19 resources when students are close to achieving 

20 their goal, and often creates an unnecessary 

21 burden that is contradictory to the goal of a 

22 high graduation rate.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Entrance loan counseling. We urge 

2 flexibility in offering counseling at various 

3 times in the students career, as meaningful 

4 counseling can often be offered at a more 

5 strategic time when it's more beneficial for 

6 borrowers.

7 Requirements for awarding SEOG are 

8 overly restrictive. Institutions have better 

9 knowledge about how to best serve their 

10 immediate students, and we think greater 

11 flexibility to move funds between the three 

12 campus based programs could help institutions 

13 serve their students well.

14 Increased flexibility that would 

15 allow a student to authorize use of refunds for 

16 prior year or incidental charges would be 

17 welcomed and relief for high performing 

18 institutions from some of the complex and 

19 onerous return to Title IV rules, for students 

20 who withdraw, especially from the modular 

21 programs.

22 Then finally, for graduate 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 students, few graduate students now receive need 

2 based funding with the subsidy on Federal loans 

3 eliminated, Federal Stafford Loans, and while 

4 income data is necessary for some students who 

5 are eligible for work study, Perkins or 

6 institutional aid, could skip-logic be used to 

7 eliminate all income questions from graduate 

8 students who are not requesting consideration 

9 for those types of aid?

10 My last topic, hopefully I still 

11 have time, is addresses the definition of 

12 adverse credit in the PLUS Program.

13 Over the last year, there have been 

14 some changes that seemed arbitrary in that, and 

15 so, we think that it's critical that any changes 

16 to the PLUS loan approval regulations keep the 

17 process consistent and predictable for 

18 borrowers.

19 We understand that measuring a 

20 family's ability to repay a PLUS loan is a 

21 complicated issue. That needs to balance a 

22 measure of that parent's ability to repay 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 against preventing excessive debt burden, which 

2 could force a borrower into default.

3 We urge you to ensure the consistent 

4 ability of a parent to borrower over all the 

5 years of a student's educational program, 

6 avoiding a situation where loan debt from the 

7 first year prevents the ability to borrow in the 

8 last one.

9 Lastly, the ability for a borrower 

10 to obtain a third-party endorser when credit is 

11 denied, as well as a school's authority to deny 

12 PLUS borrowing in limited and documentable 

13 situations should be maintained.

14 And I just have to add that finally, 

15 although much of the FFELP is statutory in nature 

16 and not really subject to this process, it's 

17 worth noting that one of the best ways to prevent 

18 loan debt is to have a robust need-based grant 

19 program, so, we urge anything you could do from 

20 the Department and to advocate for students in 

21 that way.

22 Thank you very much again, for the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 opportunity to present this testimony on behalf 

2 of the National Direct Student Loan Coalition, 

3 and I know the Coalition would be happy to 

4 participate in the negotiated rulemaking

5 process, and looks forward to it. Thank you.

6 MODERATOR McCULLOUGH: Thank you.

7 MS. MESSIER: Thank you.

8 MS. MICELI: Thank you.

9 MODERATOR McCULLOUGH: Trace

10 Urdan? Good afternoon.

11 MR. URDAN: Good afternoon. My 

12 name is Trace Urdan. I'm a Managing Director 

13 and Senior Equity Analyst for Wells Fargo 

14 Securities. I study and write about investment 

15 trends in private education for the benefit of 

16 both private and public market investors, and 

17 I've performed this role for the past 15 years, 

18 for various brokerage firms.

19 I'm here today to provide some 

20 perspective on what, in my opinion, was the 

21 deleterious effect of the 2009/2010 program 

22 integrity rulemaking process on the flow of 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 capital to the private education sector, and to 

2 encourage the Department to pursue a more 

3 transparent and equitable process, as it plans 

4 for its next round of rulemaking.

5 It's often asserted in the context 

6 of the publically traded education companies, 

7 that investors value only rapid, short-term 

8 growth and drive school operators to make 

9 decisions to goose enrollment and profits, at 

10 the expense of students and the public interest, 

11 but I believe that characterization is 

12 misguided.

13 Professional investors clearly 

14 favor growth, but value visibility and 

15 predictability in equal measure.

16 The experience of the publically 

17 traded postsecondary sector between January 

18 2009 and August 2010 offers an excellent 

19 illustration of this point.

20 During that period in which the 

21 sector topped enrollment margin and earnings 

22 records, its market capitalization collapsed 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 roughly 40 percent, destroying more than $13 

2 billion in value.

3 The story is well illustrated by 

4 looking at the PE ratio that is price divided by 

5 forward 12-month earnings, which considers not 

6 just the earnings expectations per se, but how 

7 highly investors value and will pay for those 

8 earnings.

9 In February 2009 when former Deputy 

10 Under-Secretary Robert Shireman, the widely 

11 acknowledged architect of the last negotiated 

12 rulemaking process and perceived critic of the 

13 for-profit postsecondary sector was named to a 

14 transitional position in the Department, 

15 postsecondary equities on a market-weighted 

16 basis traded at 22 times forward 12-month 

17 earnings.

By April 20th 18 when he was named to a 

19 permanent appointment, that figure had dropped 

20 to 17 times.

21 By May, when the Department 

22 announced that it would conduct negotiated 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 rulemaking in the area of program integrity, 

2 that figure had dropped to 15 times, and the 

3 level of concern had reached a point where Mr. 

4 Shireman felt obliged to conduct conference 

5 calls with investors in the press, to offer 

6 reassurance that the sector had not been 

7 specifically targeted.

8 Yet, by January when the first 

9 negotiated rulemaking session took place, with 

10 topics devoted almost exclusively to the 

11 for-profit sector, and yet, with only one 

12 representative out of 17 from that sector, the 

13 ratio had dropped to 12.5 times, again in spite 

14 of record profits.

15 By August 2010, when the draft rules 

16 were released, the ratio had dropped to eight 

17 times.

18 In the two years preceding the 

19 release of the draft rules, investors had lost 

20 roughly $13 billion.

21 One can fairly assert that much of 

22 the decline was the result of vocal critics of 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 the sector during this period, as well as 

2 independent investigations by the GAO that 

3 exposed recruiting practices that investors 

4 found distasteful.

5 One might also fairly argue that the 

6 prices being paid for education stocks preceding 

7 the gainful employment process were inflated by 

8 a false complacency regarding regulatory design 

9 and enforcement that needed to change.

10 Yet in spite of these fair points, 

11 I would argue that the traumatic two-year 

12 process of the negotiated rulemaking

13 unnecessarily chased capital out of the sector, 

14 ultimately causing harm to the process of 

15 privately funding capacity that our nation has 

16 come to rely on to supplement public education 

17 options that face limited resources.

18 Leaving aside the merits of the 

19 regulations or the level of animus informing 

20 their design, the simple lack of visibility and 

21 transparency, coupled with the enormity of their 

22 potential impact was for many investors, too 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 nerve racking to bear.

2 In addition to the collapse in 

3 market capitalization, it has contributed, in my 

4 opinion, to a volatility that persists in the 

5 sector today, which is anathema to most 

6 long-term institutional investors.

7 Today, in spite of three years of 

8 record enrollment and profit declines, 

9 postsecondary stocks traded approximately 14 

10 times forward 12-month earnings, a slight 

11 premium to the long-term S&P 500 average of 11.7 

12 times.

13 Though well below sector highs, this 

14 might be regarded as a more realistic evaluation 

15 that incorporates a more subdued and responsible 

16 pace of growth and more diligent regulatory 

17 oversight, but the process of dropping from 22, 

18 to eight, only to climb back to 12 was traumatic 

19 and ultimately, in my opinion, unnecessary.

20 Businesses and their investors 

21 value transparency and predictability, and 

22 while regulators might well resent the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 gamesmanship that can occur around a bright 

2 regulatory line, a fuzzy line creates a hostile 

3 investment environment, which in this case, I 

4 would argue, harms the long-term goals of the 

5 President regarding college completion.

6 With the beginning of a new 

7 negotiated rulemaking process, I would 

8 encourage the Department to make the process 

9 less opaque.

10 Why rulemaking immediately in 

11 advance of HEA re-authorization? Why an 

12 intricate -- re-introduction of gainful 

13 employment and what approach does the Department 

14 have in mind?

15 What will the framework be for 

16 selecting participants in the negotiation and 

17 who will decide on the group?

18 I would urge the Department, 

19 regardless of its plans for new regulation, to 

20 be as open and forthcoming as possible, with not 

21 only the proprietary school industry, but also 

22 with private and public market investors, so 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 that capital is not further discouraged from 

2 this sector, to the detriment of the long-term 

3 goals for building postsecondary participation 

4 and capacity for years to come.

5 Thank you for your time and 

6 attention.

7 MS. MESSIER: Thank you.

8 MODERATOR McCULLOUGH: Thank you. 

9 Suzanne Martindale? Good afternoon.

10 MS. MARTINDALE: Good afternoon. 

11 My name is Suzanne Martindale, and I am a staff 

12 attorney at Consumers Union, the policy and 

13 advocacy arm of Consumer Reports. I appreciate 

14 the opportunity to testify today on the 

15 Department's plans to engage in further 

16 negotiated rulemaking. 

17 I would also note that I am a student 

18 loan debtor. I have a lot of debt, more than you 

19 want to know, but I luckily went to wonderful 

20 schools. I went to Berkley, twice.

21 So, I knew that I was making an 

22 investment in my education that was going to pay 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 off. I was probably going to be getting a fair 

2 deal, because I was going to Berkley. 

3 Unfortunately, not everyone who enrolls in 

4 higher education in this country gets the same 

5 fantastic deal that I got, and that's why I'm 

6 here today.

7 For over 75 years, Consumers Union 

8 has advocated for fairness in the marketplace. 

9 We strive to promote transparency and choice, 

10 and we aim to give a voice to consumers whose hard 

11 earned money is put to work every day, to invest 

12 in their futures and stimulate our economy.

13 Education is one such investment, a 

14 very, very important one and is becoming ever 

15 more expensive.

16 Meanwhile, average household 

17 incomes are staying flat, unfortunately. As a 

18 result, more and more households in the U.S. must 

19 borrow to pay for higher education. It is no 

20 longer an exception to the rule. It is simply 

21 the norm.

22 Now, more than ever, then, choosing 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 a higher education program is an important 

2 financial decision, as well as personal, 

3 educational one.

4 This is why it's important to 

5 remember that an individual enrolling in school 

6 is not just a student, but a consumer of 

7 education services, and as a consumer, that 

8 student should be given a fair deal, and that's 

9 why a lot of us are here today, because we're 

10 concerned about that.

11 Given the financial stakes in 

12 today's market, students and their families 

13 deserve a good return on their investment. They 

14 deserve access to educational programs that 

15 translate into personal growth, and increased 

16 employability for the student, and increased 

17 productivity for the greater society.

18 Unfortunately, we know that that 

19 investment is at risk, especially when it comes 

20 to the for-profit sector of higher education, 

21 and numbers tell the story.

22 According to recent data from the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Department, for-profit colleges are enrolling 

2 13 percent of students seeking higher education, 

3 but contribute to 47 percent of student loan 

4 defaults.

5 Twenty-three percent of their 

6 borrowers default on their loans within three 

7 years of graduating or dropping out. 

8 Meanwhile, the Senate Help Committee estimates 

9 that these schools have consumed an estimated 

10 $32 billion in Federal taxpayer money from the 

11 last school year. That is roughly 25 percent of 

12 the total amount going to higher education 

13 programs.

14 Federal aid should only go to career 

15 education programs that effectively train 

16 students and prepare them for gainful employment 

17 in a recognized occupation. That was the plain 

18 language and intent of Congress, and we urge the 

19 Department to continue its important work, to 

20 implement and give effect to that intent.

21 It is imperative that the Department 

22 take steps to ensure that students and taxpayers 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 are not subsidizing ill-gotten profits for 

2 schools offering programs that do little more 

3 than put their students in debt.

4 For these reasons, we urge the 

5 Department today, again, to focus its next round 

6 of rulemaking on the development of a strong 

7 gainful employment rule.

8 Despite recent legal challenges to 

9 the Department's last round of negotiated 

10 rulemaking, the Courts have made clear, as 

11 others have said, the Department has the 

12 authority to define gainful employment.

13 The Department should also take 

14 steps to improve the rule. For example, by 

15 setting a stronger program repayment threshold.

16 If most formal students from a given 

17 program aren't actively paying down their debt, 

18 you have to ask, is that program sufficiently 

19 transitioning students into the job market, so 

20 as to justify the debt burdens it places on them?

21 We should also encourage the 

22 Department to hold schools to greater 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 accountability for failing to meet the metrics 

2 for gainful employment. A school that is not 

3 meeting two out of the three metrics, even in one 

4 year, is likely putting its former concurrent 

5 students at risk of suffering financial 

6 distress.

7 In addition, we urge the Department 

8 to take steps to prevent manipulation of cohort 

9 default rates. Others have made these points, 

10 about using student loan forbearance, 

11 deferments, consolidating different campuses to 

12 mask responsibility for the low performance of 

13 their programs.

14 We also want the Department to 

15 prevent the use of similar tactics to evade the 

16 90/10 rule, as others have said.

17 I would also encourage on the issue 

18 of campus debit cards, that the education 

19 continue to work with the Consumer Financial 

20 Protection Bureau, as we know that they are 

21 considering amending Regulation E to level the 

22 playing field between pre-paid cards and debit 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 cards. 

2 I think it would be very helpful, 

3 given the different types of arrangements that 

4 are possible in this space, that the Department 

5 ensure that the Consumer Bureau is also keeping 

6 in mind, some of these campus debit card 

7 arrangements, because we want to ensure that any 

8 consumer who is receiving funds on a debit card, 

9 whether it counts as a debit card linked to an 

10 account or some kind of pre-paid stored-value 

11 card, we want to ensure that there are consumer 

12 protections against fraud and theft and errors, 

13 as well as limitations on fees.

14 The time is now, in any case, to 

15 ensure that students and their families, as 

16 consumers of higher education services, are 

17 getting the benefit of their bargain, that an 

18 investment in higher education will put them on 

19 the path to the middle-class, provide financial 

20 security and open doors to advancement in 

21 society. 

22 We look forward to working with you 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 on your rulemaking in the future. Thank you 

2 very much.

3 MS. MESSIER: Thank you.

4 MODERATOR McCULLOUGH: Thank you. 

5 Kristen Soares? Zac Dillion. 

6 (Off mic comments)

7 MODERATOR McCULLOUGH: Has 

8 everyone who is speaking, checked in with Amy? 

9 Okay, then we will adjourn for --

10 let's see, we are running about 20 minutes. 

11 We're adjourned until 10 minutes of two, at which 

12 time, we'll see if anyone else has signed in to 

13 speak. Thank you.

14 (Whereupon, the above-entitled 

15 matter went off the record at approximately 1:30 

16 p.m. and resumed at approximately 1:50 p.m.)

17 MODERATOR McCULLOUGH: Now, reopen 

18 the hearing. Kristen Soares? Good afternoon.

19 MS. SOARES: Just go ahead and 

20 start?

21 MODERATOR McCULLOUGH: Yes, go 

22 right ahead.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 MS. SOARES: Great, thank you. 

2 Good afternoon. I am Kristen Soares, and am 

3 testifying today on behalf of the Association of 

4 Independent California Colleges and 

5 Universities, AICCU, representing over 75 

6 non-profit WASC-accredited institutions that 

7 educate over 320,000 students.

8 Members include traditional liberal 

9 arts colleges, major research universities, 

10 faith related institutions, women's colleges, 

11 performing and visual arts institutions, and 

12 schools of law, medicine, engineering, business 

13 and other professions.

14 AICCU serves as a unified voice on 

15 independent, private non-profit higher 

16 education in California.

17 My comments today address two topics 

18 related to state authorization.

19 First, state authorization for 

20 programs offered through distance education or 

21 correspondence education.

22 In response to a Court decision 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 issued last year, the Department is considering 

2 developing new regulations related to state 

3 authorization for programs offered through 

4 distance education or correspondence education.

5 Given the substantial work being 

6 done across the country in this area, AICCU 

7 believes it would be premature to develop 

8 Federal regulations.

9 Although the distance education 

10 regulation was struck down in Court, its 

11 issuance has had a marked effect and increasing 

12 awareness of the breadth and variety of state 

13 requirements affecting distance education 

14 providers.

15 The Department is to be commended 

16 for raising this important and timely issue, 

17 especially in this era of increased cross-border 

18 online education programs.

19 It is also underscored the 

20 complexity of addressing regulatory issues in a 

21 manner that is understandable to and affordable 

22 for institutions seeking to comply with state 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 requirements.

2 The difficulties of navigating 

3 these numerous and various requirements have 

4 spurred conversation regarding ways in which 

5 compliance can be simplified.

6 The most significant of these 

7 efforts is the work being done on the state 

8 authorization reciprocity agreement or SARA.

9 The President's forum, Council of 

10 State Governments, regional education boards, 

11 APLU and SHEEO, among others, have engaged in 

12 this effort for some time now.

13 A SARA framework has been developed, 

14 and while there is still much to do and much work 

15 to be done on some of the specific features, 

16 AICCU is supportive of this effort. Also, the 

17 California Higher Education Roundtable 

18 Inter-Segmental Coordinating Committee will 

19 soon be meeting to discuss how such an agreement 

20 might be implemented.

21 Given the work going on now and the 

22 high level of involvement of many individuals 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 with deep knowledge of state laws and practices, 

2 it doesn't seem to be appropriate to introduce 

3 new Federal requirements at this time.

4 We suggest that the Department defer 

5 regulatory action in this area, to allow the 

6 current work to proceed in a manner that will 

7 maintain flexibility.

8 At this point, it may simply not be 

9 possible to deliver uniform Federal 

10 requirements that capture all of the moving 

11 parts that will be required to establish a better 

12 means to regulate distance education providers.

13 Second, state authorization for 

14 foreign locations at institutions located in a 

15 state.

16 The second state authorization 

raised in April 16th 17 notice relates to 

18 authorization for foreign locations and 

19 institutions located in a state.

20 Given the incredible confusion that 

21 has been created by the general regulations 

22 related to state authorization, we urge the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Department not compound that confusion by trying 

2 to regulate foreign institutions at foreign 

3 locations of U.S. institutions via the states.

4 Experience with existing state 

5 authorization regulation has shown that states 

6 have chosen a variety of ways in which to 

7 recognize and regulate the institutions within 

8 their borders.

9 Super-imposing a vast or a vague set 

10 of Federal requirements for state activity has 

11 already led to massive confusion, with no 

12 discernible impact on improving program 

13 performance or integrity.

14 Equally troubling are the shifting 

15 and inconsistent interpretations of what the 

16 regulations require.

17 It is for these reasons that AICCU's 

18 National Association of Independent -- sorry, 

19 Independent Colleges and Universities NAICU, 

20 advocates for a repeal of existing state 

21 authorization regulation.

22 Attempts to expand this regulation 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 to incorporate rules related to state regulation 

2 of foreign locations would only compound the 

3 substantial problems and confuse -- confusion 

4 we're experiencing today -- experiencing today.

5 I appreciate having the opportunity 

6 to present these views today and thank you for 

7 your time.

8 MS. MESSIER: Thank you.

9 MODERATOR McCULLOUGH: Thank you. 

10 Zac Dillon?

11 MS. MESSIER: Good afternoon.

12 MR. DILLON: Good afternoon. My 

13 name is Zac Dillon, and I'm a recent graduate of 

14 Santa Clara University School of Law and a 

15 volunteer for the National Organization Young 

16 Invincibles, which advocates for young adults 16 

17 to 34, on issues impacting economic opportunity 

18 for this generation.

19 I'm here to urge the Department to 

20 put forth a strong gainful employment, to 

21 provide protection to students who end up in 

22 career education programs that receive Federal 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 funding, but that leave students with debts that 

2 they cannot repay.

3 Young Invincibles surveys online 

4 members of a member -- on a number of items, their 

5 financial aid experiences, their experiences 

6 paying back their loan debt, et cetera.

7 Its most recent survey had about 

8 9,500 respondents, of which 1,130, or about 12 

9 percent, said they had attended or currently 

10 attend a for-profit institution.

11 One student wrote a story to us about 

12 life in debt after attending a for-profit that 

13 offered sub-par educational opportunities.

14 In her own words, she told us, "I 

15 attempted loan forgiveness on the basis that 

16 most of the loans are for my time at a for-profit 

17 court reporting institute, which was closed for 

18 fraud, approximately a year after I left."

19 "Despite the fact that the exact 

20 fraud allegations were why I was unable to 

21 graduate, I was told that since I had left the 

22 school by the time they were closed for fraud, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 I could not obtain even partial forgiveness."

2 This student also wrote that she was 

3 unemployed and was forced to delay buying a 

4 house, car, and even starting a family because 

5 of the student debt she incurred. She says she 

6 does not foresee being able to start a family 

7 possibly ever.

8 Stories like these continue to come 

9 in, illustrating the importance of imposing 

10 standards on schools that will protect students 

11 from those schools that leave students with high 

12 debt and no ability to find a job that would 

13 enable them to repay their debts.

14 The data is also compelling. 

15 For-profits have just over 10 percent of student 

16 enrollment but account for half of the nation's 

17 federal student loan defaults. For-profits are 

18 very expensive, causing six to eight times more 

19 than nearby high quality public universities and 

20 community colleges.

21 Because of this high cost, students 

22 who earn bachelor's degrees at for-profits have 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 almost quadruple the debt of students at public 

2 universities and almost double the debt of 

3 non-profit private colleges.

4 More than 20 percent of students who 

5 attend a for-profit default on their loans 

6 within three years of entering repayment, 

7 compared to just over 10 percent of students at 

8 public colleges and only 7.5 percent of students 

9 who attend non-profit private colleges.

10 Because of this, we urge the 

11 Department to include strong, new, gainful 

12 employment standards as a part of the upcoming 

13 negotiated rulemaking.

14 While I would also like to stress 

15 that including the student and consumer 

16 perspective in these negotiations is key, 

17 because the student population is diverse, we 

18 request that you reserve adequate slots for 

19 negotiators representing students from all 

20 types of backgrounds. 

21 Thank you for opening the floor to 

22 this testimony, and thank you for your time.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 MS. MESSIER: Thank you.

2 MODERATOR McCULLOUGH: Thank you.

3 MS. MICELI: Thank you.

4 MODERATOR McCULLOUGH: Julianna 

5 Fredman?

6 MS. MESSIER: Good afternoon.

7 MS. FREDMAN: Good afternoon. My 

8 name is Julianna Fredman and I am a consumer law 

9 attorney at Bay Area Legal Aid.

10 Bay Area Legal Aid serves seven 

11 counties throughout the Bay Area. We are the 

12 largest legal services provider in this area.

13 We serve clients who are living at 

14 or below 125 percent of the Federal poverty rate. 

15 So, we're seeing pretty poor folks. 

16 We also run three clinics for 

17 debtors in the counties of Contra Costa and Napa 

18 each month, and so, we see a high volume of 

19 distressed borrowers. And I'm here to talk about 

20 how a strong gainful employment rate would 

21 positively impact our clients.

22 Okay, increasingly, we have clients 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 and clinic participants coming in with 

2 unmanageable student loan debts, the majority of 

3 which were taken to attend for-profit 

4 institutions.

5 These borrowers are all in default 

6 and unable to pay. Many of them have never had 

7 a single job in the field that the college 

8 supposedly trained them for. Still, others 

9 weren't able to complete their education.

10 One student was encouraged by school 

11 counselors at the for-profit institution to 

12 enroll in a program despite the fact that they 

13 knew she did not -- would not be able to obtain 

14 the degree or work in the field because the 

15 student did not have a GED or a diploma or a high 

16 school diploma.

17 She was unable to complete the 

18 course work and currently has federal student 

19 loans in default.

20 Clients come to us in crisis, so, 

21 they are in default and either unemployed or 

22 under-employed, and their tax returns are being 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 retained, their earned income credits are being 

2 retained, or their Federal benefits are being 

3 garnished to pay for the Federal student loans 

4 that they took out to attend these for-profit 

5 institutions that purported to prepare them for 

6 gainful employment.

7 Often, these loans, initially 

8 relatively modest, have been ballooning for many 

9 years, during which the client has never made 

10 sufficient income to make a dent in it. 

11 One client got a loan to attend --

12 a small loan to attend a for-profit beauty school 

13 many years ago for a couple thousand dollars, but 

14 she never got work in that field. The school 

15 actually closed a relatively short time after 

16 she attended, but not in time for her to be able 

17 to apply for that type of discharge.

18 That debt has ballooned to tens of 

19 thousands of dollars and she is now approaching 

20 old-age. She is almost legally a senior 

21 citizen, living solely off public benefits.

22 Another client is in his 50's. He 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 lives on fluctuating wages that averaged less 

2 than 80 percent of the federal poverty line and 

3 he came to us because his tax return was being 

4 withheld year after year for small loans that 

5 were also taken out many years ago.

6 As a consumer attorney, we know that 

7 student loans create a burden that other 

8 consumer debt does not. It can't be discharged

9 in bankruptcy, except for in extremely rare 

10 situations, and other discharges are extremely 

11 difficult to obtain, even when applicants are 

12 eligible, for instance receiving SSI for a 

13 permanent disability. It's still very 

14 difficult.

15 Again, this is an issue we are 

16 encountering in our consumer practice with 

17 increasing regularity. At virtually every debt 

18 clinic that I have held we have clients with 

19 defaulted student loans and a heightened 

20 standard for schools to show that their programs 

21 are likely to lead to gainful employment would 

22 directly impact the communities that we serve.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 It might increase the chances of 

2 people actually obtaining useful degrees when 

3 they take out loans rather than just acquiring 

4 mountains of debt. Thank you.

5 MS. MESSIER: Thank you.

6 MODERATOR McCULLOUGH: Thank you. 

7 MS. MICELI: Thank you.

8 MODERATOR McCULLOUGH: Nathan 

9 Breitling? No? Anybody else?

10 Okay, at this point, we will take a 

11 break until, let's say, 2:45 p.m.

12 So, the hearing is adjourned until 

13 2:45 p.m.

14 (Whereupon, the above-entitled 

15 matter went off the record at approximately 2:05 

16 p.m. and resumed at approximately 2:45 p.m.)

17 MODERATOR McCULLOUGH: All right, 

18 we will reconvene the hearing now. And, Alicia 

19 Hetman, good afternoon. 

20 MS. HETMAN: Good afternoon. I am 

21 Alicia Hetman and I currently serve as the 

22 California State President for the American 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Association of University Women, and I'm also a 

2 former National Board member and a former member 

3 of our Foundation Board.

4 On behalf of more than 165,000 

5 non-partisan members and supporters, over 1,000 

6 branches and 800 college and university partners 

7 of the United -- of the American Association of 

8 University Women, I would like to thank you for 

9 holding this important hearing about upcoming 

10 regulatory issues the Department of Education is 

11 considering.

12 AAUW will be submitting detailed 

13 written comments as well, but I appreciate the 

14 opportunity to speak to you today.

15 I am here to urge the Department to 

16 again undertake the issuance of strong gainful 

17 employment regulations to protect students and 

18 taxpayers.

19 In addition, we urge the Department 

20 to quickly negotiate and issue strong 

21 regulations regarding the changes to campus 

22 safety and security reporting included in the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Violence Against Women Act.

2 AAUW has weighed in time and time 

3 again about the importance of strong rules to 

4 ensure that career education programs that 

5 receive federal funds do not take advantage of 

6 students and taxpayers.

7 AAUW supports this work because we 

8 know that women struggle with student debt more 

9 than men.

10 Loan repayment is an even more 

11 significant burden for women, who earn less on 

12 average over the course of their lives than their 

13 male counterparts.

14 AAUW's new research report 

15 'Graduating to a Pay Gap: The Earnings of Women 

16 and Men One Year After College Graduation' found 

17 that the median student loan debt burden was 

18 slightly higher in 2009 for women than men.

19 Just over half of the women, 53 

20 percent, and 39 percent of men were paying a 

21 greater percentage of their income towards 

22 student loan debt than AAUW estimates a typical 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 woman or man can actually afford.

2 This is due in part to the persistent 

3 gender-wage gap, which, here in California, 

4 still stands at 85 percent.

5 This means that men in California 

6 earned on average $49,281 compared to women, who 

7 earned an average of $41,817 in 2011.

8 AAUW supported the sound framework 

9 that the original gainful employment rule used 

10 to achieve the goal of ensuring that schools 

11 offering federal financial aid to students did 

12 not burden their students with unmanageable 

13 debt.

14 We agree that the Department should 

15 use a combination of measuring debt to income 

16 ratios, repayment rates, and default rates, to 

17 understand which programs are failing their 

18 students and should be ended, which need 

19 improvement, and which are serving students 

20 well.

21 As you know, the data collected in 

22 the initial year of the rule found that 65 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 percent of the programs failed at least one of 

2 the tests and five percent failed all three 

3 tests.

4 While the Court struck down the 

5 original gainful employment rule, the decision 

6 made clear that the Department can issue 

7 regulations of this sort. Indeed, the concerns 

8 raised in the court case are easily addressed.

9 We urge the Department to move 

10 through the process quickly, to remedy the 

11 concerns and reinstate a gainful employment 

12 rule.

13 In the rule, a repayment rate of 35 

14 percent is required for a program to pass. AAUW 

15 stands by the need for such a threshold and would 

16 support a stronger one.

17 The idea that it is acceptable for 

18 65 percent of former students from a program to 

19 be unable to pay down their loans year after year 

20 is frustrating to those of us who hear from our 

21 work -- who hear from or work with students 

22 regularly.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Overall, there is no reason to 

2 weaken the gainful employment rule. With 193 

3 programs where students have borrowed at high 

4 amounts relative to their income or having 

5 trouble repaying and very likely to be in 

6 default, we must do something to ensure that 

7 federal taxpayer dollars do not continue to flow 

8 to those programs.

9 To respond to another issue that you 

10 all are considering addressing in upcoming 

11 rulemaking, AAUW urges the Department to quickly 

12 move to issuing rules around the new campus 

13 safety provisions.

14 This new law amends the Clery Act and 

15 the Higher Education Act and was included in the 

16 re-authorization of the Violence Against Women 

17 Act.

18 When campus environments are 

19 hostile because of sexual harassment, assault, 

20 or violence against students, students cannot 

21 learn and miss out on true educational 

22 opportunities.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 AAUW's own research revealed that 

2 two-thirds of college students experience 

3 sexual harassment.

4 In addition, a 2007 campus sexual 

5 assault study by the U.S. Department of Justice 

6 found that around 28 percent of women are targets 

7 of attempted or completed sexual assaults while 

8 they are college students.

9 AAUW supports change to the campus 

10 safety law. The new law will ensure that 

11 schools make public the procedures following 

12 instances of sexual assault on campus, report 

13 additional crime statistics, and improve their 

14 disciplinary process.

15 The Department of Education's 

16 rulemaking will need to address the new 

17 definitions included in the statute, make clear 

18 to schools how often certain ongoing activities 

19 must take place, and who is covered by the law.

20 The existing Clery Act framework 

21 regarding reporting of crime data is strong in 

22 this case, ensuring that all students are 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 covered. 

2 In addition, schools are already 

3 familiar with reporting this type of 

4 information.

5 In addition to reporting, schools 

6 will also be making public policies and 

7 procedures regarding instances of sexual 

8 assault, dating violence, domestic violence, 

9 and stalking. Key to these rules is the fact 

10 that every school may need to institute policies 

11 and procedures that are unique to their 

12 communities, but must at the same time ensure 

13 that all students are safe and they are in 

14 compliance with the law.

15 There are good examples of existing 

16 policies, procedures, and trainings out there. 

17 AAUW has developed a 'Program in a Box' for 

18 campus advocacy around this issue.

19 'Students Active for Ending Rape' 

20 works with students and schools to improve 

21 campus sexual assault policies, and the 

22 Department's own work around Title IX and the 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Resolution Agreements that stand as best 

2 practices for schools are all in place for a look 

3 at guidance.

4 Additionally, it is important that 

5 organizations that represent students and 

6 victims -- as well as advocates and experts on 

7 sexual assault, dating violence, stalking, 

8 bystander intervention and Title IX, for example 

9 -- be included in the negotiated rulemaking

10 process.

11 These groups may not traditionally 

12 be a part of negotiated rulemaking on financial 

13 aid or other issues being discussed today, but 

14 are an invaluable part of the conversation about 

15 these rules.

16 I thank you for this opportunity to 

17 testify.

18 MS. MESSIER: Thank you.

19 MODERATOR McCULLOUGH: Thank you. 

20 Armando Telles?

21 MS. MESSIER: Good afternoon.

22 MR. TELLES: Ladies and gentlemen, 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 and representatives of the Department of 

2 Education, I thank you for allowing me this time 

3 to speak to you regarding this bill, because, as 

4 a student and as a Veteran Marine Corp Veteran 

5 myself, I witness too often the struggles that 

6 veterans in transition experience, and in that 

7 transition, we seek havens where we can all 

8 recognize the fellow veterans, but more so, 

9 re-identify ourselves and our purpose, if not, 

10 how we're going to continue to serve our 

11 community.

12 And so, many of those places are on 

13 the college campuses. These are places and 

14 environments to where not only can we find 

15 members of our own breed, which is of a military 

16 breed, but more so, with the same kind of 

17 mind-sets and commitments to our future.

18 So, we rely heavily on the 

19 consultation of not only of our advisors and 

20 counselors at these learning institutions, but 

21 more so, through affiliated organizations that 

22 focus on the well-being and employment of 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 veterans.

2 As a representative myself of the 

3 American GI Forum here in California, as well as 

4 on behalf of the National Women Veteran's 

5 Association of America, I am here to speak to you 

6 about the experience that many of us are hoping 

7 to not allow happen to the next coming veterans 

8 that are coming home.

9 We have gone through struggles like 

10 many of our senior generations in trying to 

11 implement rules and standards in which should be 

12 allowed and only tolerated for veterans. But 

13 yet, we have this development of an agency, of 

14 an industry, that now education is for-profit, 

15 and it's by no means to discredit the for-profit 

16 status of any institution, as it is simply 

17 securing the future of those who attend those 

18 institutions.

19 As a community college student 

20 myself, I can only recognize and acknowledge the 

21 students who I've come to know, who have attended 

22 the for-profit schools and who eventually, after 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 accruing a lot of debt, still end up at the public 

2 -- through the public education for a couple of 

3 reasons.

4 For one, they are placed in programs 

5 that they are misled to believe that they are 

6 going to have adequate standards of training to 

7 be able to enjoy -- to enter the workforce.

8 Unfortunately, these kind of 

9 institutions are also recognized for the 

10 short-term period in which one can acquire their 

11 education.

12 However, a student like myself, who 

13 objectively recognized -- reflects on my 

14 learning strengths at home and on the computer 

15 does not suit me, but it suits many others.

16 However, those who commit to that 

17 discipline and that dedication to their 

18 education, whether it be online courses, if not, 

19 a fast-track course type, are being left with not 

20 only insurmountable -- with an amount of debt 

21 that is difficult to manage, but still loss of 

22 time, as well as side-tracked from what their 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 goals were in lieu of the distraction of being 

2 misled that their education was going to be worth 

3 something.

4 But today, I am here to specifically 

5 encourage the consciousness of how this is going 

6 to impact the student veteran, how by providing 

7 regulations that are going to secure not only the 

8 prosperity of their education that is acquired, 

9 but more so, to hold accountable to those who are 

10 in the service of serving veterans.

11 As a veteran advocate from San 

12 Diego, I can -- I am too familiar with the 

13 discussions of groups who have only a for-profit 

14 mentality when discussing the solutions to 

15 veteran's issues, where not only is that 

16 discussion should be non-partisan, but it should 

17 be no gain -- it should be to no gain other than 

18 to the veteran themselves.

19 We should not be in the business of 

20 trying to make money from the person who not only 

21 served his country, but more so who is trying to 

22 advance themselves in society, who very likely 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 has a family that they're trying to secure as 

2 well.

3 I, myself as a single parent, relate 

4 to the struggles and the time and the commitment 

5 I have given to classes that has taken not only 

6 time away from my children, but then the 

7 finances, in order to sustain that sort of 

8 pursuit. And when there has been a veteran, many 

9 of my fellow veterans come home and the first 

10 thing they want to do is simply transition, 

11 school seems to come to mind.

12 They are led to believe that the 

13 benefits that they have earned by providing 

14 their service is going to secure not only an 

15 adequate amount of education, but more so, that 

16 education is going to be applied to the next step 

17 of their lives after having committed to however 

18 long of a term, let alone experiencing and 

19 enduring whatever challenges they may have from 

20 the experience in the military.

21 The American GI Forum specifically 

22 focuses its empowerment of its veteran 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 population -- household, siblings, as well as 

2 the veteran themselves -- around education, the 

3 education in a conventional sense, whereas, it's 

4 in the classroom, but more so, the advocacy of 

5 peer-to-peer empowerment, the peer-to-peer 

6 education.

7 So, if a suggestion could be made 

8 regarding the regulations, as well as standards 

9 of what veterans should be provided for in these 

10 next couple years, I would encourage the 

11 development and the sustaining of programs that 

12 specifically engage veterans with each other, 

13 and the community.

14 These are ways to be able to not only 

15 maintain the level of enrollment at any one given 

16 institution, but it also empowers the learning 

17 environment. It develops a connective 

18 environment in which veterans, again, need. We 

19 need those kind of environments to know where --

20 know, no matter where we are, whether at home or 

21 in -- or on the college campus, that we can not 

22 only learn, but feel comfortable in doing so, and 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 when we're restrained by the financial 

2 challenges that many American's are across the 

3 nation, we are no different when it comes to our 

4 needs.

5 However, we've earned our right to 

6 be able to go to school. We have earned our right 

7 to have the benefits to be able to be applied to 

8 better ourselves, and in that process of 

9 learning, we must maintain a level of socialized 

10 general standard of what life can be, that in a 

11 place where we can learn, we should also be able 

12 to expand our horizons in the environment in 

13 which we are learning from.

14 For-profit schools have the benefit 

15 of being in the industry. For-profit schools 

16 have the benefit of being able to accrue whatever 

17 profits one can accrue. It's a matter of how 

18 those profits are going to be applied and how 

19 it's going to sustain the growth of any such 

20 institution. That as one voice of many, I do 

21 appreciate your time, and I understand this is 

22 just one of the many hearings that you have been 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 a part of in various states, and you have heard 

2 more than just one voice.

3 I am simply just one voice that 

4 specifically is here today, to thank you for your 

5 time on addressing these issues, but also, these 

6 -- to understand that these regulations is not 

7 to provide limits or restrictions. It's merely 

8 to provide the security that veterans have 

9 provided this country, and the veteran's pursuit 

10 of an education. Thank you.

11 MS. MESSIER: Thank you.

12 MODERATOR McCULLOUGH: Thank you. 

13 If anyone has not registered, that would like to 

14 speak, please see Amy.

15 (Off mic comments)

16 MODERATOR McCULLOUGH: Right, 

17 anyone who hasn't spoken, that would like to. 

18 If not, we will adjourn until 3:20 p.m. 

19 (Whereupon, the above-entitled 

20 matter went off the record at approximately 3:05 

21 p.m. and resumed at approximately 3:25 p.m.)

22 MODERATOR McCULLOUGH: We are 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 reconvening the hearing. If everybody could 

2 take a seat.

3 Joe Ridout?

4 MS. MESSIER: Good afternoon.

5 MR. RIDOUT: Good afternoon. 

6 Thank you for the opportunity to speak today.

7 My name is Joe Ridout. I am manager 

8 of consumer services for Consumer Action.

9 Consumer Action is a non-profit 

10 organization that empowers under-represented 

11 consumers nationwide to assert their rights in 

12 the marketplace and financially prosper through 

13 multi-lingual consumer education materials, 

14 community outreach, and issue focused advocacy.

15 Through our multi-lingual consumer 

16 hotline, we hear from many students who feel they 

17 were deceived by recruiting and admissions 

18 departments of for-profit postsecondary schools 

19 both about the value of their degrees and 

20 prospects for future employment in their field 

21 to study. Here is a sampling of some of the 

22 complaints we have received.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Dawn, a resident of Michigan, shared 

2 with us her experience at the University of 

3 Phoenix.

4 "When I applied for their Master's 

5 in psychology program, I was told that I would 

6 be able to obtain my license in the state I 

7 reside, Michigan."

8 "I was directed by the advisors to 

9 do a particular program, which I have 

10 completed."

11 "It was not until after graduation, 

12 when I found out that I would not able to get a 

13 license. PLUS, no other schools would take my 

14 credits so that I could go back and take the right 

15 course work."

16 "Not only am I now $23,000 further 

17 into debt, but I have to go back for another 

18 degree and I may lose my job, as licensor is 

19 required."

20 Ion Jones, also from Michigan, 

21 attended IADT, the International Academy of 

22 Design and Technology. His comments.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 "I was clearly led astray by the 

2 admissions and financial aid officers. They 

3 misinformed me about my financial aid options, 

4 accreditation, employment opportunities and 

5 ability to continue my education at other 

6 institutions."

7 "I was encouraged to take out 

8 student loans to pay for IADT even though I 

9 should have qualified for grants at other 

10 institutions since my parents are on welfare. I 

11 was not told this."

12 "I also discovered that I was unable 

13 to transfer my credits to another institution to 

14 finish my education, and my only options were to 

15 drop out with no degree or continue to rack up 

16 more debt at IADT."

17 "I still, to this day, have not 

18 finished my degree. There is no way I can pay 

19 back these loans of over $50,000. I feel that my 

20 rights have been violated, as I came from a 

21 vulnerable population and was taken advantage 

22 of."
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 "I believe that there should be a law 

2 to protect vulnerable populations, i.e., those 

3 on public assistance from predatory for-profit 

4 schools. IADT and Career Education Corporation 

5 should be investigated for fraud."

6 Finally, we have Rocko from 

7 Albuquerque, New Mexico, who attended Westwood 

8 University, and this is the college, as many of 

9 you know, infamous for encouraging its design in 

10 architectural drafting alumni to seek jobs as 

11 part-time bank tellers or to join the circus, as 

12 was detailed in a recent expose by the journal, 

13 Academe.

14 "I was promised everything, but had 

15 nothing delivered. They promised to help me 

16 find work. What they did was hand me three 

17 sheets of paper full of lists from jobs on 

18 Craig's List."

19 "The counselor then told me they did 

20 not have direct employers, like they had told me 

21 when I signed up."

22 "I continued going to school, but 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 then started calling potential employers from 

2 all over the U.S., and no one would take a degree 

3 from Westwood."

4 "Now, I owe the Government $15,000 

5 for three months of school and I cannot transfer 

6 my credits."

7 These are heart-breaking stories, 

8 and Consumer Action has heard from many other 

9 students who feel that they were similarly 

10 misled.

11 Their stories raise serious issues 

12 about the practices of many for-profit schools 

13 and lead us to make the following 

14 recommendations.

15 When it comes to Title IV funding 

16 eligibility, we feel that programs should not 

17 have to fail three out of three metrics before 

18 they face meaningful consequences.

19 Students, after all, are harmed 

20 whenever an institution fails any of the three 

21 metrics. Failing in two of the three measures 

22 should be more than enough for a program to face 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 restrictions on the number of students they can 

2 enroll or federal aid they can receive.

3 Any student, who in the context of 

4 his own studies failed two out of every three 

5 metrics, would soon face serious academic 

6 consequences. It should be no different in the 

7 case of consistently under-performing

8 for-profit colleges.

9 Additionally, in extreme cases of 

10 abuse or fraud by schools, current regulations 

11 should be modified to allow victims of these acts 

12 to discharge loans they assumed in the context 

13 of the fraud.

14 This would include programs that 

15 lack the proper accreditation necessary for 

16 future employment, that enroll students with 

17 criminal records in programs, preparing them for 

18 employment in a profession that will bar them 

19 from employment due to their criminal record, or 

20 that enroll non-English speaking students in 

21 program taught only in English.

22 When we have 86 percent of 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 for-profit college revenue coming from Federal 

2 aid, with just 28 percent of students graduating 

3 within six years, this barely resembles a 

4 meaningful path to education and advancement for 

5 students. It looks far more like corporate 

6 welfare dressed up in academic robes.

7 We urge the Department to issue 

8 strong regulations that will allow successful 

9 and honest institutions to thrive by holding bad 

10 actors accountable while protecting some of our 

11 most vulnerable students. Thank you.

12 MODERATOR McCULLOUGH: Thank you 

13 very much. Dylon Busser?

14 MS. MESSIER: Good afternoon.

15 MR. BUSSER: Good afternoon. My 

16 name is Dylon Busser, and I am a leader with Roots 

17 of Justice at the University of Illinois at 

18 Chicago in the IIron Student Network.

19 The IIron Student Network is a group 

20 of grass roots university-based social justice 

21 organizations from across Chicago.

22 The IIron Student Network is an 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 affiliate of the Community Organizing Network 

2 Iron and National People's Action.

3 Three weeks ago, I graduated from 

4 UIC with a Bachelor's of Science in biological 

5 sciences. Even though I received financial 

6 aid, won several scholarships, and worked every 

7 year during my undergraduate career, I graduated 

8 with over $25,000 in student loans.

9 This is in large part because 

10 tuition fees at UIC have approximately doubled 

11 in the last nine years.

12 I grew up in a single parent, single 

13 income household. My mom worked very hard to 

14 make sure that my two siblings and I had our basic 

15 needs met.

16 But setting aside money so that we 

17 could go to college was never in the cards for 

18 us, especially after the housing market crashed 

19 and we lost almost half of the value of our home.

20 During my senior year of high 

21 school, my world was turned upside down when my 

22 mom was diagnosed with Stage 4 breast cancer. I 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 knew the statistics, she had two, maybe three 

2 years left. 

3 Because it was the cheapest and the 

4 closest to my home, UIC was literally my only 

5 option. 

6 As my mom's medical bills piled 

7 higher and higher with each new drug regimen and 

8 hospital visit, I began taking on jobs that I 

9 could find around campus.

10 Taking these jobs was my only way to 

11 pay for books and other expenses, but it also 

12 meant that I was spending less time helping take 

13 care of my ailing mom. She died a year ago this 

14 March.

15 Since then, my sister and I have had 

16 to turn to extended family members for financial 

17 support.

18 UIC has spent the last decade 

19 skyrocketing their costs while cutting much 

20 needed services and programs for students. 

21 During my sophomore year, one of my best friends 

22 had her art education program cut, without any 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 warning, and had to transfer schools.

2 Ironically, her mom was also 

3 battling Stage 4 breast cancer, and when UIC cut 

4 her program, they also took away the one resource 

5 I had to cope with my situation.

6 Despite nearly a 100 percent 

7 increase in cost of attendance since 2003, my 

8 class sizes at UIC have gotten so large that 

9 instructors can't keep up with the work. 

10 Classrooms don't always have enough 

11 seats. Some of our science labs don't have 

12 basic safety equipment. Students do not have 

13 the support that they need from advisors and 

14 staff, and this is not because the university is 

15 short on cash. 

16 In fact, according to the most 

17 recent annual financial report released by the 

18 university and reviewed by an independent 

19 auditor, the University of Illinois system has 

20 amassed over $1 billion in unrestricted net 

21 assets.

22 It has become very clear to us that 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 the university is not investing our tuition and 

2 fees into our education. Although from 2004 to 

3 2011 the growth rate of upper level 

4 administrators exceeded the growth rate of the 

5 student population, the number of full-time 

6 instructors has remained stagnant.

7 Meanwhile, top level administrators 

8 received an average raise of more than $6,000 

9 this last year alone. This is unacceptable for 

10 a public institution, which has historically 

11 prided itself on being an affordable option for 

12 traditionally disadvantaged students.

13 I did not slack off in college. I 

14 graduated with honors. I worked as a tutor and 

15 a research assistant for several years, was the 

16 President of one of the largest student 

17 organizations on campus, and volunteered 

18 extensively.

19 One semester, I even helped the 

20 university with its promotional items by doing 

21 a series of camera interviews and photo-shoots 

22 on campus.
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 Minimum wage jobs took a lot of my 

2 time, time I could have spent with my mom. 

3 All the while, administrators are 

4 receiving large raises on already exorbitant 

5 salaries. 

6 We need regulations that ensure our 

7 universities are not acting like Wall Street 

8 corporations. We need them to be held 

9 accountable and we need to immediately address 

10 the rising cost of tuition.

11 Our universities are burying the 

12 future of this country in more than $1 trillion 

13 of student debt.

14 The negotiated rulemaking committee 

15 and the Department of Education should develop 

16 and implement regulations that hold colleges and 

17 universities receiving Title IV funding 

18 accountable for keeping tuition affordable and 

19 maintaining educational quality.

20 Institutions that fail to control 

21 costs and fail to put their students' interests 

22 above administrative excess and building 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 projects should not continue to rake in Title IV 

2 funding and drive their students into debt.

3 Additionally, because students make 

4 up 85 percent of the constituents at 

5 institutions that are receiving Title IV 

6 funding, it is imperative that students make up 

7 a majority of the voices on the negotiating 

8 rulemaking committee.

9 Because students are the ones facing 

10 this crisis, we want student organizations to 

11 make up at least three-quarters of the 

12 committee. 

13 The Department of Education has an 

14 obligation to ensure that the powerful interests 

15 of higher education are not preying upon 

16 students. Our voice, the student's voice, on 

17 this committee is the only way to make that 

18 happen. Thank you.

19 MS. MESSIER: Thank you.

20 MODERATOR McCULLOUGH: Thank you. 

21 With no other speakers signed in at this point, 

22 we will adjourn until someone comes that would 
Public Hearing on Federal Student Aid 2013 – Public Hearing May 30, 2013

1 like to speak or four o'clock.

2 So, we'll adjourn for now.

3 (Whereupon, the above-entitled 

4 matter went off the record at approximately 3:35 

5 p.m. and resumed at approximately 4:00 p.m.)

6 MODERATOR McCULLOUGH: We will 

7 reopen the hearing now. 

8 Is there anyone here else who would 

9 like to give testimony?

10 With that said, it is four o'clock, 

11 and I will close the hearing. Thank you very 

12 much, everyone. 

13 (Whereupon, the above-entitled 

14 matter concluded at approximately 4:00 p.m.)

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