U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

93-631 PDF 2004

H.R. 4283, COLLEGE ACCESS 

AND OPPORTUNITY ACT

HEARING

BEFORE THE

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

May 12, 2004

Serial No. 108-58

Printed for the use of the Committee on Education and the Workforce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

or 

Committee address: http://edworkforce.house.gov 

(II)

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN A. BOEHNER, Ohio, Chairman

Thomas E. Petri, Wisconsin, Vice Chairman 

Cass Ballenger, North Carolina 

Peter Hoekstra, Michigan 

Howard P. ‘‘Buck’’ McKeon, California 

Michael N. Castle, Delaware 

Sam Johnson, Texas 

James C. Greenwood, Pennsylvania 

Charlie Norwood, Georgia 

Fred Upton, Michigan 

Vernon J. Ehlers, Michigan 

Jim DeMint, South Carolina 

Johnny Isakson, Georgia 

Judy Biggert, Illinois 

Todd Russell Platts, Pennsylvania 

Patrick J. Tiberi, Ohio 

Ric Keller, Florida 

Tom Osborne, Nebraska 

Joe Wilson, South Carolina 

Tom Cole, Oklahoma 

Jon C. Porter, Nevada 

John Kline, Minnesota 

John R. Carter, Texas 

Marilyn N. Musgrave, Colorado 

Marsha Blackburn, Tennessee 

Phil Gingrey, Georgia 

Max Burns, Georgia 

George Miller, California 

Dale E. Kildee, Michigan 

Major R. Owens, New York 

Donald M. Payne, New Jersey 

Robert E. Andrews, New Jersey 

Lynn C. Woolsey, California 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Ron Kind, Wisconsin 

Dennis J. Kucinich, Ohio 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Susan A. Davis, California 

Betty McCollum, Minnesota 

Danny K. Davis, Illinois 

Ed Case, Hawaii 

Rau ́l M. Grijalva, Arizona 

Denise L. Majette, Georgia 

Chris Van Hollen, Maryland 

Tim Ryan, Ohio 

Timothy H. Bishop, New York

Paula Nowakowski, Staff Director 

John Lawrence, Minority Staff Director 

(III)

C O N T E N T S 

Page

Hearing held on May 12, 2004 ............................................................................... 1

Statement of Members: 

Boehner, Hon. John A., Chairman, Committee on Education and the 

Workforce ....................................................................................................... 2

Prepared statement of ............................................................................... 5

Grijalva, Hon. Raul M., a Representative in Congress from the State 

of Arizona, Prepared statement of ............................................................... 76

Hinojosa, Hon. Ruben, a Representative in Congress from the State of 

Texas, Prepared statement of ...................................................................... 69

Hoekstra, Hon. Pete, a Representative in Congress from the State of 

Michigan, Prepared statement of ................................................................ 74

Question submitted for the record ........................................................... 77

McCollum, Hon. Betty, a Representative in Congress from the State 

of Minnesota, ‘‘Editorial: Gentrification/Too Much on U.S. Campuses’’, 

submitted for the record ............................................................................... 72

Miller, Hon. George, Ranking Member, Committee on Education and 

the Workforce ................................................................................................ 5

Norwood, Hon. Charlie, a Representative in Congress from the State 

of Georgia, Prepared statement of ............................................................... 76

Porter, Hon. Jon, a Representative in Congress from the State of Nevada, 

Prepared statement of .................................................................................. 77

Statement of Witnesses: 

Boyle, Jim, President, College Parents of America, Washington, DC .......... 8

Prepared statement of ............................................................................... 12

Response submitted for the record .......................................................... 77

Grayer, Michael, Recent Graduate, Virginia College, Jackson, Mississippi 28

Prepared statement of ............................................................................... 31

Letter submitted for the record ................................................................ 83

Martin, Dr. Dallas, President, National Association of Student Financial 

Aid Administrators, Washington, DC ......................................................... 13

Prepared statement of ............................................................................... 16

Additional statement submitted for the record ....................................... 79

Response submitted for the record .......................................................... 78

Reed, Dr. Charles, Chancellor, California State University System, Long 

Beach, California ........................................................................................... 22

Prepared statement of ............................................................................... 25

Wasserman, Rebecca, President, United States Student Association, 

Washington, DC ............................................................................................ 17

Prepared statement of ............................................................................... 21

Response submitted for the record .......................................................... 78

Additional materials supplied: 

American Medical Association, Statement submitted for the record ........... 56

Corrigan, Dr. Robert A., President, San Francisco State University, Statement submitted for the record ..................................................................... 38

National Consumer Law Center, Center for Law and Social Policy, and 

The Workforce Alliance, Statement submitted for the record ................... 41

(1)

H.R. 4283, COLLEGE ACCESS AND 

OPPORTUNITY ACT 

Wednesday, May 12, 2004

U.S. House of Representatives 

Committee on Education and the Workforce 

Washington, DC 

The Committee met, pursuant to notice, at 10:35 a.m., in room 

2175, Rayburn House Office Building, Hon. John Boehner (Chairman of the Committee) presiding. 

Present: Representatives Boehner, Petri, McKeon, Castle, Ehlers, 

Isakson, Biggert, Osborne, Porter, Musgrave, Blackburn, Gingrey, 

Miller, Kildee, Owens, Andrews, Woolsey, Hinojosa, Tierney, Kind, 

Kucinich, Wu, Davis of California, McCollum, Grijalva, Majette, 

Van Hollen, and Bishop. 

Staff present: Kevin Frank, Professional Staff Member; Sally 

Lovejoy, Director of Education and Human Resources Policy; Alexa 

Marrero, Press Secretary; Catharine Meyer, Legislative Assistant; 

Krisann Pearce, Deputy Director of Education and Human Resources Policy; Alison Ream, Professional Staff Member; Deborah 

L. Samantar, Committee Clerk/Intern Coordinator; Kathleen 

Smith, Professional Staff Member; Kevin Smith, Communications 

Counselor; Jo-Marie St. Martin, General Counsel; Ellynne Bannon, 

Minority Legislative Associate/Education; Tom Kiley, Minority 

Press Secretary; Ricardo Martinez, Minority Legislative Associate/

Education; Alex Nock, Minority Legislative Associate/Education; 

Joe Novotny, Minority Legislative Assistant/Education; and Lynda 

Theil, Minority Legislative Associate/Education. 

Chairman BOEHNER. A quorum being present, the Committee on 

Education and the Workforce will come to order. We are holding 

this hearing today to hear testimony on H.R. 4283, the College Access and Opportunity Act of 2004. For those guests who we don’t 

have room for in the room, we have an overflow room upstairs in 

2257. So for those who didn’t make it into the main hearing room, 

it is being broadcast upstairs in the overflow. 

Under Committee Rule 12(b), opening statements are limited to 

the Chairman and ranking minority member. If other members 

have opening statements, they will be included within the hearing 

record; and with that, I ask unanimous consent for the hearing 

record to remain open for 14 days to allow member statements and 

other extraneous material referenced during today’s hearing to be 

submitted for the official hearing record. Without objection, so ordered. 

2

STATEMENT OF HON. JOHN A. BOEHNER, CHAIRMAN, 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

Good morning, and thank you all for joining us today to discuss 

the College Access and Opportunity Act, a bill I am pleased to have 

offered last week with Chairman McKeon to expand college access 

for low- and middle-income students. 

I firmly believe current and future students should be our No. 1 

priority in distributing Federal higher education aid. That was the 

purpose of the Higher Education Act when it was originally enacted more than three decades ago. And the purpose of our bill is 

to restore that focus as the law is reauthorized. 

Our plan will expand access to higher education for millions of 

low- and middle-income students. It will do so by strengthening 

Pell Grants, student aid, student access programs, and minority 

serving institutions. It will reduce loan costs, fees, and red tape for 

students and graduates. It will remove barriers for non-traditional 

students, including the so-called ‘‘90-10 Rule’’ that is hurting minority and low-income students. It will empower parents and students through ‘‘sunshine’’ and transparency for consumers in college financing and accreditation. 

Millions of low- and middle-income students today face the possibility of being denied access to higher education. Americans overwhelmingly believe that these students and their families should 

be the first in line when Federal higher education aid is distributed. The Federal law today reflects a different set of priorities. An 

increasing share of aid is flowing not to incoming low- and middleincome students struggling to achieve a higher education but to 

former students who have already received an education and entered the workforce. Federal law also allows lenders and banks to 

keep excess subsidies they earn from student loans instead of returning to the government so it can be used to support access for 

these same low- and middle-income students. 

If we truly believe college access for incoming low- and middleincome students should be the Federal Government’s first priority 

in higher education aid, we will not allow these misplaced priorities 

to stand. 

The independent General Accounting Office recently warned 

Congress that the cost of fixed interest rate consolidation loans is 

ballooning, threatening to devour billions in resources over the next 

7 years that could be used to support college access for students 

who haven’t received an education. To avert this problem, GAO has 

recommended to the Congress that we switch consolidation loans to 

a variable interest rate. Bipartisan experts have told this Committee that following GAO’s recommendation would free up $21 billion over the next 7 years that could be used to expand college access for low- and middle-income students. If consolidation loans are 

left on autopilot, the cost to low- and middle-income students will 

be $21 billion in lost opportunities. 

The GAO’s warning has not fallen on deaf ears in this Committee. In fact, I am pleased to say it has drawn bipartisan concern. A majority of the members on both sides of the aisle have either introduced, sponsored, or cosponsored bills to move the consolidation program to a variable rate. The bill that I have introduced with Chairman McKeon would do the same. 

3

Unfortunately, the GAO’s warning also comes during an evennumbered year, and that brings political temptation to the table. 

One of the first to fall victim was former Education Secretary Richard Riley, who was dispatched back in March by opponents of 

President Bush to attack this Committee for even listening to the 

GAO’s warning. His attacks were later echoed by another Democrat 

party member, presumptive Democrat nominee for President John 

Kerry. 

Now interestingly, not long ago, these same folks were singing a 

different tune. In the early 1990’s, when Secretary Riley and President Clinton designed the Direct Loan Program, they chose variable rates for direct consolidation loans, not fixed rates. In 1997, 

when President Clinton and Secretary Riley sent Congress their 

plan for reauthorizing the Higher Education Act, they proposed 

making all consolidation loans variable rate. And Secretary Riley’s 

own Department of Education at the time said variable rate consolidation loans would be better for borrowers. 

A 1997 document issued by Secretary Riley’s Department noted, 

‘‘The interest rate on FFEL consolidation loans would be changed 

to a variable rate comparable to the rate applicable to Direct Consolidation Loans under the Clinton plan.’’ It went on to say, ‘‘By extending the favorable terms currently available only to borrowers 

of Direct Consolidation Loans to borrowers of FFEL Consolidation 

Loans, these amendments would reduce the cost for, and provide 

greater flexibility to, these FFEL borrowers.’’ 

Now with all due respect to Senator Kerry and Secretary Riley, 

it would appear that some of my colleagues across the aisle were 

for the idea of variable rate consolidation loans before they were 

against it. 

Now some have also pointed to a recent study by the Congressional Research Service examining how borrowers would be impacted by variable rates on consolidation loans. Proponents claim 

that the CRS findings are evidence that variable rates will increase 

the cost for borrowers. What they don’t mention is they are talking 

about a different set of borrowers. Our bill doesn’t affect anyone 

who currently has a consolidation loan, and those are the people 

the CRS analysis examines in a hypothetical analysis. 

No one can accurately predict what the future interest rates are 

going to be. What we can do is examine past history. And new information from CRS does just that. 

In a report that was issued just last week, CRS found borrowers 

in 14 of the last 18 years would have fared better under a variable 

rate than under the fixed rate structure currently in place. Specifically, since 1986, the first year that we had a consolidation loan 

program, borrowers most often would have paid less in interest if 

their student loans had been under the variable rate structure that 

we are proposing. 

We also know that students today are paying the lowest rates in 

history, about 2.82 percent. They are able to pay this low rate because rates are in fact variable. In 2006, under the current law, interest rates will be fixed for the FFEL Program and at 6.8 percent, 

a rate more than double the amount students are paying today. 

And opponents of our legislation support keeping this fixed rate in 

tact despite the fact that costs will double for these borrowers if inVerDate 0ct 09 2002 13:31 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 H:\DOCS\93631 EDUWK PsN: NNIXON
4

terest rates stay relatively low. The 6.8 percent rate is not a cap 

that some opponents claim, it is a fixed rate that would be imposed 

on all student loan borrowers for the life of the loans, locking borrowers out of lower rates in the future. 

Providing fairness for low- and middle-income students will require more than simply reforming consolidation loans and allowing 

borrowers to take advantage of variable interest rates. The bill we 

have introduced also addresses concern about excessive lender 

earnings on the Federal student loan programs. The bill would 

eliminate excess subsidies certain lenders can now collect and require lenders to return billions in excess interest earnings to the 

Federal Government, freeing up resources that could be better 

spent expanding access for current and future students. 

With tuition skyrocketing at colleges and universities across the 

nation, we owe it to students and their families to have an honest 

debate about the barriers to college access, and to come together 

with solutions. The bill Chairman McKeon and I have offered is an 

attempt to do just that. And I look forward to today’s discussion, 

and I am hopeful that it will pave the way for bipartisan action in 

this Committee that will make a difference for those very students 

that we are trying to help get into the college and university of 

their choice. 

With that, I would like to yield to my colleague and friend, Mr. 

Miller. 

[The prepared statement of Chairman Boehner follows:]

5

Statement of Hon. John A. Boehner, Chairman, Committee on Education 

and the Workforce

STATEMENT OF HON. GEORGE MILLER, RANKING MEMBER, 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

Mr. MILLER. Thank you, Mr. Chairman, and thank you for holding this hearing today. Every 5 years, Congress has the opportunity to rewrite the higher education laws to better expand access 

to college education and to make college more affordable for lowand middle-income students. Unfortunately, the College Access and 

Opportunity Act doesn’t even come close to living up to its name. 


93631.001
6

Just at a time when millions of low- and middle-income students 

and their families are struggling to cover college costs, this bill actually forces students to pay thousands of dollars more for their 

college loans, caps the maximum Pell Grant, and fails to provide 

meaningful relief from rising tuition prices. 

While higher education has long served as the best opportunity 

for a better life for millions, students and their families across the 

country are now wondering whether they will be able to pay for a 

high-quality college education. As student tuition continues to soar, 

too many students are taking on huge loan debt and working long 

hours that hurt their academic studies and overall college experience or forgoing college altogether. 

Broad access to an affordable college education is not simply a 

matter of individual enrichment and advancement, but an integral 

component of this nation’s overall economic health. Closing the gap 

in college preparation rates between low- and high-income young 

adults would create $250 billion in new economic growth and $85 

billion in additional tax revenue to our nation. 

Despite the need to expand access to an affordable education, college is fast becoming a pipe dream for too many students. States 

are cutting support for higher education and pushing higher tuition 

and fees on to students and their families. 

In addition to budget cuts and rising prices, millions of students 

are taking on high debt levels that discourage college attendance 

and encourage default—which costs taxpayers billions of dollars. 

Over the past 10 years, student loan debt has nearly doubled to 

$17,000 and about one-fifth of full-time working students spend 35 

or more hours per week on the job just to cover college costs. At 

the same time, student aid is falling further and further behind the 

cost of a college education. In fact, last year the maximum Pell 

Grant was worth $500 less in real terms than the maximum grant 

in 1976 and 1976. 

It is imperative that we return to the original premise of the 

Higher Education Act of 1965, that no college- qualified student 

should be denied a college education because he or she lacks the 

financial resources. 

Unfortunately, while the bill before us today includes some good 

provisions, such as reducing the student origination fees, reducing 

some of the excessive subsidies to banks, overall it makes college 

more expensive and reduces college opportunities. The Access and 

Opportunity Act pushes higher prices onto students just at the 

time when students need the help the most, as tuition continues 

to rise and debt soars. 

Despite the fact that an estimated 40 percent of all borrowers 

graduate with unmanageable debt levels, the Republican bill denies 

students the ability to choose to lock in low interest rates for their 

student loan consolidation. Consolidating at a low-fixed rate has 

made student loans that have helped millions of low- and middleincome students manage their debts and make ends meet, both 

while they are in school and out of school. 

According to an analysis by the Congressional Research Service 

(CRS), eliminating this benefit will force the typical borrower to 

pay $5,500 more for his or her student loans. And I do not think 

7

you can regard the life cycle of the cost of borrowing to these students while they are in and out of school. 

The Republican bill also caps the current authorized maximum Pell Grant at $5,800 through 2011, despite the fact that last year’s 

maximum Pell Grant award was, as I said, $500 less than 1976 

and 1977. 

The bill raises the interest cap on student loans, a cap which my 

colleagues agreed to just a few years ago. And, as a result, millions 

of students will be forced to pay hundreds of dollars more in their 

college loans. 

It completely eliminates a key provision to protect students and 

taxpayers against fraud and abuse in the student aid program 

without providing additional safeguards. We all strongly support 

the career colleges in the private sector in the higher education 

system but for-profit institutions should have some of their own 

money on the table to protect the consumers, the students, and the 

taxpayers. 

In addition, the bill allows limited Federal funds, which have 

been reserved solely for nonprofit institutions to be made available 

to for-profit entities, without increasing the funds to this program. 

As a result, funding long reserved for community colleges, Hispanic 

Serving Institutions and Minority Serving Institutions will be cut. 

Despite double digit increases, the bill also fails to adequately 

address the tuition process. 

While I support the provisions to eliminate the lender floor rate 

of return on student loans to reduce excess bank subsidies, I believe that this is only one piece of a puzzle to return the programs 

to their original intent, which is to boost college opportunities for 

students. 

At a time of rising college costs, high unemployment and little 

job growth, we should not be forcing students and their families to 

pay more for college education. We should not and we cannot afford 

to take this path. And I urge my colleagues to reject this bill as 

it is presently drafted. 

I would hope that we would be able to make sure that all parties 

to the student loan community, if you will, that all of these issues 

are put on the table so that we can apportion out the cost and the 

savings of this program to all parties who participated. And I look 

forward to this hearing. 

Chairman BOEHNER. As you can see, we are all on the same page 

now. 

Before I introduce our distinguished panel of witnesses, let me 

welcome back to the Committee the distinguished former Chairman, retired Chairman of this Committee, the Honorable Bill 

Goodling. Bill, welcome back. 

[Applause.] 

Chairman BOEHNER. It is my pleasure to introduce our witnesses 

today. Our first witness will be Mr. Jim Boyle. Mr. Boyle currently 

serves as the president of College Parents of America, a nationwide 

organization dedicated to advocating on behalf of, and serving as 

a resource for, the country’s current and future college parents. Mr. 

Boyle has nearly 25 years of experience in politics, trade associations, media business, and the financial services industry. College 

Parents of America is a not-for-profit membership organization 

8

serving current and future college parents through a mix of advocacy, information resources, and access to discounts on products 

and services. 

We will then hear from Dr. Dallas Martin. Dr. Martin currently 

serves as the president of the National Association of Student Financial Aid Administrators, an organization composed of 3,100 institutions and 9,300 financial aid professionals. And prior to his 

current role, Dr. Martin served as director of program planning 

and administration for the Division of Student Assistant Programs 

with the American College Testing program, as well as serving a 

number of years as a college and university administrator and educator. 

We will then hear from Ms. Rebecca Wasserman. Ms. 

Wasserman currently serves as president of the United States Student Association, an organization founded in 1947, which represents students on Capitol Hill with the White House and the Department of Education. She is a recent graduate of the University 

of Wisconsin at Madison, where she studied political science and 

social welfare. 

Then we will hear from Dr. Charles Reed. Dr. Reed currently 

serves as the chancellor of the California State University System, 

the country’s largest senior system of public higher education. He 

provides leadership to 44,000 faculty and staff and 409,000 students on 23 campuses and seven off-campus centers. Prior to his 

current position, Dr. Reed served as the chancellor of the state university system of Florida. 

We will then hear from Mr. Michael Grayer. Mr. Grayer recently 

earned his accountant assistant diploma from Virginia College in 

Jackson, Mississippi, overcoming numerous obstacles along the 

way. After graduating from high school in 2000, Mr. Grayer attended a local community college for a semester but was forced to 

withdraw due to inadequate transportation and limited financial 

resources. With assistance from the Federal Student Loan Programs, Mr. Grayer enrolled in Virginia College and earned his diploma in December of 2002. Currently he serves as an auditor and 

regional manager for the Security Life Insurance Company. He also 

successfully owns and operates Maxell Communications. He is the 

chief executive officer of three Subway stores and is the president 

and founder of Trinity Financial Solutions, a tax preparation and 

accounting firm. 

I want to thank all of you for your willingness to come today, and 

we look forward to your testimony. 

Mr. Boyle, you may begin. 

STATEMENT OF JAMES A. BOYLE, PRESIDENT, COLLEGE 

PARENTS OF AMERICA 

Mr. BOYLE. Good morning, Mr. Chairman, Mr. Miller, and other 

members of the Committee. My name is Jim Boyle, and since July 

2003, I have been president of College Parents of America, a national association with two categories of membership: individuals, 

both current and future college parents, and institutions, which 

generally consists of schools that we believe we can supplement 

their parent relations activities. 

9

A little over 2 years ago, when I first heard of the existence of 

the association that I am now privileged to lead, it struck me that 

when it came to the debate over the reauthorization of the Higher 

Education Act, one group which deserved a seat at the policy table 

had been ignored, namely, parents. So that is one of the many reasons why I am pleased to be invited to testify before you today, not 

only on behalf of our members but of all current and future college 

parents. Thank you for the opportunity. 

Following is a summary of the views of College Parents of America on your proposed legislation: 

We strongly agree with your overall goal of making college accessible and affordable for all Americans, consistent with the principles of the Higher Education Act since its passage nearly 40 

years ago. While the attainment of a college education is much 

more widespread today than it was in 1965, we have reached a precarious place when it comes to Americans and their perceptions of 

whether college really is possible for all. 

Across the continuum of the socioeconomic spectrum, from the 

most needy to the most wealthy of Americans, a dangerous notion 

is developing, a mis-perception that college is becoming out of reach 

for all but the most affluent. From my personal experience, growing 

up in a working class suburb of Detroit, I understand how such a 

misperception can develop. I was a first generation college student 

in the late 1970’s, as was nearly everyone in my neighborhood who 

chose to continue their post-secondary education, not a very high 

percentage to begin with. While most of my peers lived at home 

and attended Wayne State University or Lawrence Tech or Oakland Community College, I was fortunate to have a college guidance counselor to helped me to see beyond the confines of the Detroit area, and who enabled me and my parents to realize that financial aide made every school in America within reach. 

Through a combination of Pell Grants, institutional aid, a National Merit Scholarship, earnings from work study and other jobs 

and student loans, I was able to attend and graduate from Northwestern University in 4 years, an experience that was fulfilling and 

life-changing. 

Young people growing up in Detroit, or anywhere else today, 

should still know that thanks to Federal, state, and institutionbased aid, low- and middle-income students can afford college. 

There are many provisions in your bill that help families to understand college is possible and which give them specific tools to 

pursue their higher education goals. Your proposal to make the 

Pell Grant available year-round is an important step in the right 

direction, as is your gradual elimination of the origination fee for 

student loans. 

In 1981, I was a recent college graduate working as a staffer for 

a California Member of Congress when that fee was put in place 

as a temporary deficit reduction measure. Twenty-three years later, 

the ‘‘O’’ fee is still in place, and it is time to phase it out. 

Your modest proposal of raising loan limits for first and second 

year students is also a step in the right direction, especially considering just how many years it has been since those limits were increased. I recommend, however, that you look at the possibility of 

creating greater borrower flexibility within the context of the overVerDate 0ct 09 2002 13:31 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6602 H:\DOCS\93631 EDUWK PsN: NNIXON
10

all loan limit rather than set year by year maximums. This flexible 

borrower account approach would allow for better financing options 

if family circumstances change while a student is in college and he 

or she is forced to turn to additional personal borrowing to meet 

school costs. 

There are a few other provisions of the proposed bill that I would 

like to touch on before hearing the other witnesses and taking your 

questions. 

First is your proposed new variable rate structure for consolidation loans in order to make those loans consistent with the structure for Stafford loans that you propose. I suppose it would be easy 

for me to stay out of this crossfire on this issue, as parents generally are not involved with their son’s or daughter’s financing decisions in the post-college years, or at least not as much as they are 

involved during college. But you have been right, Mr. Chairman, as 

have your colleague from the other side of the aisle, Mr. Andrews, 

to make the point that the future cost of the Consolidation Loan 

Program has the potential to be an enormous financial drain, 

thereby inevitably putting downward pressure, or at least a lid, on 

funds available to students currently attending or planning to attend college. 

I would like to touch on the issue of transparency for college 

costs. I believe that families do want and need more and better information about the rate of tuition increases in general, the difference between sticker price and net price, as well as statistics on 

those specific schools that are successful, or not, at keeping prices 

low. 

While the college cost issue reaches across all 50 states, families 

should know that many, but not all, states have trimmed a portion 

of their own budgets allotted to higher education. 

On a host of budget issues, state legislators are often quick to 

point a finger at Washington and say, ‘‘It is the fault of Congress,’’ 

when less than expected funding is made available for this initiative or that. But when it comes to support for higher education, you 

have every right to point out that state support has been falling 

as a percentage of university budgets for 20 years, in good economic times and in bad. To be fair, in recent years the actual dollars of state support for higher education have increased but so 

have enrollments. 

Speaking of enrollment, it is essential to note the oncoming college attendance surge, a result of the baby boom echo. When my 

sixth-grader, Griffin, who is seated here behind me with my wife, 

Kelly, and younger son, Tucker, graduates, I hope, from high school 

in 2010, he will be part of the second largest graduating class in 

U.S. history, slightly smaller than the class of 2009, and both larger than any in the Baby Boom years. 

This coming rise in the college-age population raises the stakes 

for this year’s reauthorization. Assuming you can move a bill 

through this year, with accompanying action by the Senate, it is 

likely under this best-case-scenario, that the legislation will not be 

in force until at the earliest 2005 to 2006, which means that the 

policies you are looking to put in place today will hardly affect parents of today’s college students but will instead greatly affect parents of today’s sixth through eleventh graders. 

11

The actions you take—or not—this year will impact American 

families for the next five to 6 years. And in each of those upcoming 

years, more families will be affected because the college-age population is projected to grow through at least 2012. 

Part of the transparency debate will focus on how best to get information into the hands of parents. It seems that whenever there 

is talk about this issue, the proposed solution centers on four 

words: ‘‘COOL Web site needed.’’ The reasoning seems to be that 

a new and improved Department of Education Web site will be the 

answer when it comes to providing the college preparatory information they crave. To those four words, I will respond with four of my 

own: ‘‘Remember the digital divide.’’ It may have narrowed a bit 

since the last 1990’s but it has not gone away. Survey after survey 

reveals that those who are most likely to need information about 

financial aid options are the least likely to have it. A COOL Web 

site will not address this issue. 

I strongly suggest that you mandate the U.S. Department of 

Education to implement a national advertising campaign, principally utilizing the wide reach mediums of television and radio, to 

accomplish two goals: provide context on the costs and benefits of 

college; and to let people know about the widespread availability of 

financial aid. 

Many of you may have your own COOL Web sites to serve your 

constituents or to promote your re-elections this fall. I am certain 

that such sites are only a small part of your communications strategy, not the be all and end all for dissemination of key messages. 

When it comes to key messages on access and affordability of college, a COOL Web site should be seen as a means, not as an end. 

That is the end of my prepared statement, and I thank you for 

including me on behalf of College Parents of America in today’s 

hearing. 

Thank you. 

[The prepared statement of Mr. Boyle follows:]

12

Statement of Jim Boyle, President, College Parents of America, 

Washington, DC


93631.002
13

Chairman BOEHNER. Thank you. 

Dr. Martin. 

STATEMENT OF A. DALLAS MARTIN, JR., PRESIDENT, NATIONAL ASSOCIATION OF STUDENT FINANCIAL AID ADMINISTRATORS 

Dr. MARTIN. Thank you, Mr. Chairman, Mr. Miller, and members 

of the Committee on Education and the Workforce. I am Dallas 

Martin, and I am president of the National Association of Student 

Financial Aid Administrators. And I am pleased today to have the 

opportunity to comment upon the positive changes that H.R. 4283 

makes to the Title IV student aid programs. 

We recognize the Committee’s charge to develop a revenue neutral bill and appreciate the difficult choices that had to be made to 

focus limited resources on current and future college students rather than individuals who have completed their post-secondary education. In an ideal world we would like to address the needs of all 

individuals. But with limited available funding, our highest priority 

as an association is to ensure access for current and low-income 

and middle-income students. 

We are pleased to see that H.R. 4283 includes a number of the 

student aid proposals that we and others in the higher education 

community advanced. We are particularly pleased that the bill reduces the loan origination fees for students in both the FFEL and 

Direct Loan Programs, that it provides an interest only 2 year repayment plan option for borrowers who may have difficulty in 

meeting their repayment obligations. And it also continues the authorization for all of the time-proven Title IV student aid programs. 

We are also delighted that the bill eliminates both the 30 day 

delay disbursement requirement and the multiple disbursements 

requirement for schools with default rates of 10 percent or less. 

And we are also pleased that the bill clarifies the student aid rules 

on drug-related offenses and expands the use of program funds to 

promote financial and economic literacy. 

In addition, let me comment on several specific proposals. 

NASFAA supports the change proposed in the legislation to establish a market-based, variable interest rate for FFEL direct and consolidated student loans. 

In the recommendations that we sent you last year, we proposed 

that all Stafford loans, including consolidation loans, would continue to have a variable interest rate capped at 6.8 percent. While 

H.R. 4283 retains the current 8.25 cap as opposed to the 6.8 which 

we proposed, we still believe that the change to a variable rate for 

all future borrowers establishes a system that will treat all borrowers more equitably. If the variable interest rate was currently 

in effect, all borrowers would have the advantage of participating 


93631.003
14

in the current low student loan interest rate environment. Similarly, in the future when interest rates rise, as they inevitably will, 

all borrowers again will be equally affected but will never have to 

pay a rate that is greater than 8.25. I would suggest that compared 

to other credit instruments that this change will help to ensure 

that the Federal Stafford Loan Programs provide students and parents with the best financing option. 

NASFAA is also pleased to see that H.R. 4283 increases the annual subsidized loan limits for first and second year undergraduate 

students in both the FFEL and Direct Loan Programs. And I assume that your budgetary limitations prevented the Committee 

from considering the proposals that we advanced to make adjustments to upperclassmen and graduate and professional students as 

well. 

While the proposed modest increases are certainly welcome, we 

would hope that the Committee as it continues work on this bill 

would give careful consideration to making the annual and aggregate loan limit changes that we support, which have been put forth 

in H.R. 4102 introduced by Congressman Rob Andrews. We also 

would strongly encourage the Committee to give serious attention 

to the new consolidation rate structure that is included in 

H.R. 4102, which would provide a variable subsidy to borrowers 

based upon the relationship between the borrower’s total monthly 

loan payments and their total income. This change would clearly 

help lower income borrowers who have high student debt. 

We would also ask that the Committee give consideration to including H.R. 4283 two other of NASFAA’s earlier recommendations. One, which would allow individual institutions, if it so desires, to implement lower loan limits on a school-wide class level 

or academic program basis and a second recommendation which 

would eliminate the provision mandated that the school also loses 

eligibility to participate in the Pell Grant program if the school 

loses eligibility to participate in FFEL or Direct Loan Programs 

due to high defaults. 

We also note that H.R. 4283 includes a proposal to modify the 

allocation of funds formula that is used to distribute Federal funds 

to institutions under the campus-based programs. This proposal is 

a modified version of a recommendation that NASFAA had advanced last year. The campus-based allocation formulas have been 

at the center of policy discussions over the past 25 years and people’s views on whether the current formula should be modified depend in large part on when an institution began participating in 

one of the campus-based programs and in which state that institution is located. 

Earlier modifications to the formula established a base guarantee 

to provide protection to participating institutions who had been in 

the program for a considerable period of time and who had made 

significant institutional investments to properly administer the 

programs. But the formula also established a fair share concept 

that would ensure that funds remaining after meeting base guarantees would be distributed to institutions based upon the amount 

of that institution’s students’ needs in relationship to the needs of 

students at all other participating institutions. 

15

Unfortunately, the rather static funding of these programs over 

the past decade has prevented newer institutions which should 

have benefited from the fair share formula from keeping pace with 

institutions who student bodies have similar economic enrollment 

profiles. The provisions in H.R. 4283 would gradually reduce the 

base guarantee protection currently granted to certain institutions, 

thus freeing up additional dollars to distributed according to the 

fair share formula to all eligible institutions. While this change will 

shift dollars from some institutions to others over time, the provisions in H.R. 4283 provide institutions with adequate lead time to 

prepare for these changes. 

We recognize that institutions across the country have different 

and strongly held views on whether the current formula should be 

modified. But the approach contained in this bill will help to ensure that the monies allocated under the three campus-based programs will be equitably distributed to the neediest students in all 

participating institutions across the country. 

In conclusion, let me say while we have attempted to focus our 

analysis upon the Title IV student aid provisions contained in 

H.R. 4283, and we will continue to analyze the bill and provide you 

with additional comments, I should also note that there are many 

other significant changes included in the bill that have a dramatic 

impact upon institutions of higher education. While I don’t have 

time or feel qualified to comment upon many of those proposals, I 

would strongly encourage the members of this Committee to carefully consider and analyze the thoughtful comments and suggests 

that others in the higher education community will undoubtedly 

make. 

I look forward to working with the Committee and would be 

happy to respond to your questions when appropriate. 

[The prepared statement of Dr. Martin follows:]

16

Statement of Dr. Dallas Martin, President, National Association of Student 

Financial Aid Administrators


93631.004
17

Chairman BOEHNER. Thank you, Dr. Martin. 

Ms. Wasserman. 

STATEMENT OF REBECCA J. WASSERMAN, PRESIDENT, 

UNITED STATES STUDENT ASSOCIATION 

Ms. WASSERMAN. Thank you. Mr. Chairman, Ranking Member, 

and members of the Committee, and to all the students that were 

able to be here and apparently went through a lot to get here, I 

thank you for this opportunity to discuss H.R. 4283, the College 

Opportunity and Access Act. 

I am here today representing the United States Student Association and the over 1 million students that we represent. USSA is 

the nation’s oldest and largest national student association, representing students in D.C. since 1947. 

My testimony on behalf of USSA addresses several key provisions in H.R. 4283 that will directly impact millions of low- and 

middle-income college students. While we believe that some provisions in this bill will help students, overall we oppose the College 

Opportunity and Access Act, as it will force millions of low- and 

middle-income students to pay more for college, deny free speech 

rights to students across the country, and re-open the doors to 

fraud and abuse in our student aid programs. 

In short, this bill does not create the access or opportunities the 

title claims and in fact may block students from the doors of higher 

education. Most importantly, it represents a missed opportunity for 

this Congress to prioritize higher education and address the growing crisis as colleges and universities become less and less affordable. 

We do applaud Chairmen Boehner and McKeon for retaining the 

current cumulative loan limits for undergraduate students. Far too 

many students are taking on huge loan debt to finance their college 

education. And while this provision allows students to borrow several thousand dollars more for college, it does not raise the limits 

in a careless manner. The typical undergraduate student graduates 

with nearly $19,000 in college loan debt, double that of the typical 

graduate in 1997. 

In addition to soaring individual debt, there has been a seismic 

shift in the dependence on student loans as the primary finance 

mechanism to pay for college. Thirty years ago, student loans accounted for about 30 percent of all Federal student aid, while 

grants accounted for 70 percent. Today these figures are almost reversed. Student loans account for nearly 70 percent of all Federal 

student aid, while grants account for just 22 percent. 

When students are forced to finance their higher education 

through unmanageable student debt, there is no real access. It conVerDate 0ct 09 2002 13:31 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6602 H:\DOCS\93631 EDUWK PsN: NNIXON

93631.005
18

tinues a cycle of poverty for low-income students and limits their 

ability to give back to the economy of our country through purchasing a car, a home, or even taking a lower paying, public interest career path. 

While we are disappointed that the student loan tax, or the origination fee, has not been fully eliminated, we do believe that reducing this tax from 3 percent to 1 percent over the reauthorization 

period is a positive step. 

While USSA believes that maintaining the cumulative loan limits and reducing the origination fees are important steps to making 

college more affordable for millions of low- and middle-income students, overall the College Opportunity and Accessibility Act will actually force millions of low- and middle-income students and their 

families to pay thousands of dollars more for their college loans 

and education. 

First, we are very disappointed that the Act fails to raise the 

maximum Pell Grant award. Last year’s maximum Pell Grant was 

worth $500 less in real terms than the maximum award nearly 30 

years ago. Despite the declining buying power of the grant, rising 

tuition prices and the growing financial need of students, 

H.R. 4283 fails to increase the maximum Pell award. To the more 

than 5 million students who depend on Pell Grants to make college 

possible this is a real step backwards toward making college a reality. 

We are also troubled that the Act eliminates the current lowfixed rate consolidation benefit for student borrowers. According to 

a recent Congressional Research analysis, eliminating this benefit 

will force the typical student to pay nearly $5,500 more for their 

college loan. Denying student borrowers the choice to lock in a lowfixed interest rate makes college more expensive, just as tuition 

levels rise, state aid is being cut and students are facing double the 

loan debt they faced just 7 years ago. As a result, H.R. 4283 will 

eliminate college opportunities and make college even more expensive. 

Consolidation is an important tool that helps low- and middle-income students manage their debt and makes college affordable. 

Congress should not deny student borrowers this benefit now when 

they need the help the most. 

While we share the concern that the cost of the Consolidation 

Loan Program has the potential to increase significantly over the 

next decade, we are shocked that the leadership of this Committee 

has decided to bend the will of the big lenders and deny low- and 

middle-income students the choice to lock in a low-fixed interest 

rate. 

The fact of the matter is that the big lenders that participate in 

the student loan program do not like the consolidation program because they are forced to pay fees to participate and because it increases competition in the market, as most students, but not all, 

can shop around to find the best deal and service for their loans. 

Due to low interest rates in the past few years, more and more students have consolidated their loans, increasing the likelihood that 

these students will switch lenders. The lenders that hold the lion’s 

share of the total outstanding student loan debt would like to 

eliminate the current low-fixed rate benefit in order to do away 

19

with the competitive market so that they can protect their portfolios and their profit margins. 

The elimination of the current low-fixed rate benefit in 

H.R. 4283 comes as lenders in the student loan program continue 

to earn huge profits. According to a recent issue of Fortune Magazine, Sallie Mae is the second most profitable company in the 

United States, with a 37 percent return on their revenues in 2003. 

To give people context, the median return for the 500 biggest companies in the U.S. was 5 percent in 2003. In addition, according to 

a U.S. News & World Report article, in 2002, Sallie Mae’s chief executive, Albert Lord, pocketed nearly $34 million in salary, bonus, 

and stock option payments. 

It is important to remember that the student loan programs were 

created to provide low-cost loans to students and to increase access 

to a college education, not to set a program where lenders take 

home big profits on federally subsidized and guaranteed loans. 

Rather than forcing low- and middle-income students to pay thousands of dollars more for their college loans, Congress ought to 

completely eliminate excessive profits to lenders in the student 

loan programs and use the savings generated to make college more 

affordable for students. 

We believe that the step that H.R. 4283 takes to reduce excessive lender profits is a critically important step and hope to see it 

followed by more good work to ensure that we are spending taxpayer revenues on increasing college access, not increasing profit 

margins of lenders. 

It is troubling that this bill reduces excessive lender profits and 

then simultaneously raises the cap on student loan interest rates. 

According to projections from the Congressional Budget Office, this 

change will raise student loan interest rates and force student borrowers to pay hundreds of dollars more over the life of their loans. 

At a time when so many students and their families are struggling 

to pay for college, we should not be pushing higher costs on to lowand middle-income families. 

In addition to raising the cost of college for the typical student 

by thousands of dollars, H.R. 4283 will strip students of their free 

speech rights on college campuses with the so-called Bill of Academic Rights. It is incredibly problematic for Congress to create 

provisions that could force our college and university administrators in doing excessive oversight of the official and unofficial activities of students. We cannot have officials in Washington, D.C. regulating the content of our classrooms. This intrusive oversight disrupts local control and challenges the mission of educational institutions. 

We are also concerned that H.R. 4283 will put the students and 

the student aid programs at risk by repealing a key fraud and 

abuse protection, the ‘‘90-10’’ rule that was enacted more than a 

decade ago. Congressional hearings in the 1990’s documented extensive abuses in the student aid programs, primarily by for-profit 

schools, which cost taxpayers billions of dollars. Among the abuses, 

Congress found that schools set tuitions at artificially high levels; 

closed without warning leaving students with no degree and loan 

debts; disbursed funds to ineligible students, and provided inadequate instruction. 

20

In response to the rampant fraud and abuse, Congress enacted 

a set of safeguards, including the ‘‘90-10,’’ formerly ‘‘85-15’’ rule, 

limited correspondence and telecommunications courses and prohibited bonuses and incentive payments to school employees and 

recruiters to stop the scams. These safeguards have been essential 

to curbing fraud and abuse in student aid programs. A full repeal 

of this safeguard could once again put students and the student aid 

programs at risk. 

Last, we support your movement toward the repeal of the drug 

provision in the financial aid form, which has already denied over 

128,000 students access to Federal financial aid. However, a partial 

repeal is not enough. We must pass a full repeal to guarantee access to education for all students, and education is the best rehabilitation. 

To close, on behalf of USSA and the students who represent, we 

urge you to support changes to the current law that will make college more, not less, affordable to low- and middle-income students. 

USSA supports significantly raising the maximum Pell Grant, retaining the student choice to lock in a low-fixed rate consolidation 

benefit, lowering interest rates on student loans, protecting student 

autonomy and retaining safeguards to protect against fraud and 

abuse in the student aid programs. 

Thank you. 

[The prepared statement of Ms. Wasserman follows:]

21

Statement of Rebecca Wasserman, President, United States Student 

Association, Washington, DC


93631.006
22

Chairman BOEHNER. Thank you. 

Dr. Reed. 

STATEMENT OF CHARLES B. REED, CHANCELLOR, 

CALIFORNIA STATE UNIVERSITY SYSTEM 

Dr. REED. Chairman Boehner, Ranking Member Miller, and distinguished members of this Committee, good morning, and thank 

you for your invitation to testify. 

The 23-campus California State University System is the largest 

university system in the United States. We have over 409,000 students this year. Access is our mission. We award almost 5 percent 

of all the bachelor’s degrees in this country, and almost half of the 

bachelor’s degrees in California. Also, we have a largely non-traditional student population where 20 percent are first generation college students, 40 percent come from households where English is 

not the main language spoken, and more than one-third of our students work full time. The average age of our students is 24, and 

most or almost 50 percent of our students are classified as independent students. We, the California State University System, look 

like the future of higher education and what higher education is 

going to look like in 2015 and beyond. 

I would like to use my time this morning to briefly address five 

key points from my written testimony beginning with the Pell 

Grants. The Pell Grant program is essential to preserving college 

opportunity for disadvantaged students and is perhaps the single 

most important financial aid program in the California state university. One hundred and sixteen thousand of our students reVerDate 0ct 09 2002 13:31 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 H:\DOCS\93631 EDUWK PsN: NNIXON

93631.007
23

ceived over $316 million in Pell awards last year, averaging $2,700 

per student. 

Both H.R. 4283 and H.R. 3180 contain provisions to allow students to receive a second Pell Grant in a given year for summer 

study. I want to thank Representative McKeon and Miller for their 

support for this concept. Year-round study helps students complete 

their academic degree sooner which reduces student borrowing and 

allows institutions to use their resources much more efficiently. 

However, we must ensure that schools that serve the most disadvantaged students are allowed to participate in year-round Pell. 

The proposed standard of at least 30 percent of students graduating within 4 years will not recognize institutions like the California State University that enroll many non-traditional students. 

A standard of 30 percent of students graduating within 6 years 

would be a much better way to serve these students. 

Second, campus-based funding formulas. We applaud 

H.R. 4283’s efforts to eliminate the use of a base guarantee in the 

funding formula for the campus-based programs. The base guarantee concept adversely impacts new campuses because it uses enrollment calculations from the first one or 2 years of a program’s 

participation. When you start, you start small with 1,000 to 2,000 

students but today we have three of those institutions that are well 

over 12,000 students. 

I should note that the CSU is affected by this proposal from both 

ends, having added three new campuses since 1990 but also have 

several campuses that would lose resources if the base guarantee 

were eliminated. We have talked about this as a group of presidents, and we support your bill. We just ask that you accelerate 

that timetable. We are for fairness and we think that the distribution ought to be based upon institutional need. 

Third, student loans. H.R. 4283 proposes to gradually reduce 

student loan origination fees to 1 percent. I should note that in the 

past Representative Miller has also advocated for the elimination 

of origination fees. Given the importance of these programs to CSU 

students, I strongly support any movement in this direction. 

H.R. 4283 would also increase the amount first and second year 

students could borrow while maintaining the aggregate borrowing 

caps. While we are all concerned with students’ increase in debt 

burden, the proposed increases would improve overall flexibility for 

needy students and may reduce reliance on more costly alternative 

loan programs. 

Fourth, early outreach and student support. The CSU joins the 

higher education community in support of TRIO and GEAR-Up as 

separate and complementary programs. These programs are vital 

to preparing under-represented students for college and they reduce the need for remediation which saves students and institutions time and money. I have spent many hours in the classroom 

in the 7th grade to see our GEAR-Up program working to help 

these students prepare for the future that they want to attend college. 

Fifth, Hispanic-Serving Institutions. Last but not least, issues relating to Hispanic-Serving Institutions are particularly critical in 

California, which is the home to approximately one-third of the nation’s Latino population. The California State University supports 

24

many of the proposals of the Hispanic Association of Colleges and 

Universities, and especially one that would create a new competitive graduate education component for HSIs under Title V. 

Again, thank you for allowing me to testify this morning. I trust 

that you will feel free to contact me or members of my staff as they 

continue this important discussion. 

Thank you. 

[The prepared statement of Dr. Reed follows:]

25

Statement of Charles Reed, Chancellor, California State University System, 

Long Beach, California


93631.008
26


93631.009
27


93631.010
28

Chairman BOEHNER. Thank you, Dr. Reed. 

Mr. Grayer? 

STATEMENT OF MICHAEL GRAYER, RECENT GRADUATE, VIRGINIA COLLEGE, JACKSON, MISSISSIPPI, ON BEHALF OF THE 

CAREER COLLEGE ASSOCIATION 

Mr. GRAYER. Mr. Boehner, Mr. Miller, and members of the Committee, it is an honor to be with you this morning. I am here to 

share my story of how I achieved the dream of a college education. 

Before I begin, I would like to state for the record that I am only 

one of thousands of career college students who have overcome obstacles to achieve educational goals. In February, my achievements 

were recognized by the Career College Association as one of the 

seven recipients of the First Annual Graduate Recognition for Excellence, Achievement and Talent—or GREAT—Student Awards. 

My fellow winners and I exemplify what can be accomplished when 

determination, commitment, and discipline are combined with Federal student assistance programs. 

It is a privilege to speak to you today on behalf of the Career College Association and the more than 1 million students educated by 

the for-profit education sector each year. 

I was reared in a single-parent home in Jackson, Mississippi. In 

the eighth grade, I was enrolled in the Piney Woods School, a historically black boarding school in Mississippi. After failing the 

ninth grade, I did eventually graduate from high school, which, unfortunately, exhausted my mother’s financial resources. However, 

making the adjustment back to my home was difficult because of 

the financial situation. I enrolled in a local community college, but 


93631.011
29

the experience ended after one semester due to financial concerns 

and lack of transportation. 

Several months later, I landed a job at local cellular outlet and 

quickly climbed the ranks to management. Then came the horrific 

events of September 11th. Our company’s business declined, leading to the loss of my job. I started selling cellular accessories to 

make money and eventually opened my own cellular outlet store. 

The expenses were high and the revenue was low and it also was 

not personally fulfilling so I decided to go back to school because 

I was wasting my time and my talent, and I needed to make a 

change. 

While watching an ad 1 day about Virginia College in Jackson 

and the programs that they offered, and due to my prior experience, the business program which they had that focused in accounting caught my attention. I took a leap and enrolled in Virginia College. 

Like many of my fellow Virginia College students, I received Federal financial aid, including Pell Grants and student loans. Without 

this support, I would have not have been able to graduate from Virginia College with a diploma in accounting. Federal student aid 

helps to ease the burden of many students in my situation when 

they are faced with where to go to college. I am blessed to have 

a family which is supportive of all my aspirations, including college, which helped ease some of that burden. Not every student is 

that lucky. However, at Virginia College, 80 percent of my fellow 

students are eligible for Pell Grants, 82 percent are independent, 

and 47 percent have dependents of their own. And more than half 

of the students have an expected family contribution of zero, meaning they are completely dependent on student aid to achieve their 

educational dreams. 

Some current provisions of the Higher Education Act stand in 

the way of assisting students like myself from achieving all they 

are meant to achieve. The 90/10 rule, which requires for-profit institutions like Virginia College to prove 10 percent of their revenue 

comes from non-Federal aid, is one example. If a school enrolls too 

many of the poorest students, those students with a zero expected 

family contribution who could receive a full Pell Grant and the 

maximum student loans, that institution could be in violation of 

the 90/10 rule. 

The separate definition of higher education institution currently 

applied to for-profit colleges has outlived its purposes. Students 

should not have access denied based on their choice of an authorized, accredited, eligible institution of higher education. I am an example of this. I was unable to succeed at a community college for 

a variety of reasons. Virginia College, however, offered the program 

and support I needed to graduate from college. 

Federal Pell Grants helped me to go to college, but Pell Grants 

alone did not cover the cost of my tuition. To do this, I also took 

out Federal loans. Higher Pell Grant awards would help more students like me go to college, and enable many of them to do so with 

decreased loan burden. However, for those students who would not 

be eligible for an increased Pell Grant, higher student loan 

amounts will help them achieve their dreams. 

30

Most of the students at Virginia College, including myself, attend 

year-round and complete more than one academic year of work in 

an award year and therefore are able to finish our education more 

quickly. If we could get more than one Pell Grant award in a single 

year, our loan burden would decrease. This would be as important 

for those of us in a diploma program as for those who are seeking 

a bachelor’s degree. 

I am an example of what a career college graduate can achieve 

with the help of student aid programs. Since graduating, I have 

been employed as a regional manager and the head auditor for a 

publicly traded insurance company, Security National Life. I am 

also the CFO of my stepfather’s three Subways in Jackson, Mississippi, and I am the founding president of Trinity Financial Solutions, a tax-preparation and accounting service that currently employs 15 individuals, including another graduate of Virginia College. 

In closing, I urge you to pass H.R. 4283, the College Access and 

Opportunity Act of 2004. And I will be happy to answer any questions you may have. 

[The prepared statement of Mr. Grayer follows:]

31

Statement of Michael Grayer, Recent Graduate, Virginia College, Jackson, 

Mississippi

Chairman BOEHNER. I want to thank all of our witnesses for 

their testimony and their insight into the Higher Education Act 

and how we can improve access for America’s students. 

Mr. Boyle, what do you hear as the biggest concern from parents 

regarding access to higher education? 

Mr. BOYLE. Anxiety and uncertainty about the process. I think 

even for families who are in need of financial aid, many families 

are not aware that financial aid options are available and not taking advantage of them. Guidance counselors are wonderful people 

but there are not enough of them. There is only one guidance counselor for every 491 high school students on average across the U.S. 


93631.012
32

so there is no way they can reach everyone. And then for those who 

have more resources, who may be college graduates themselves, a 

lot of scratching of their heads and saying that, ‘‘Gee, the process 

is so different now than it was when I went to college,’’ and not 

understanding and not having a resource to turn to to guide them 

through the process is frustrating to them. 

Chairman BOEHNER. Dr. Martin, you represent financial aid administrators, your organization gets those who jump through the 

hurdles and actually apply and you get to deal with them. But I 

think the point that Mr. Boyle makes is that sticker shock is driving a lot of students and their families away from even considering 

the possibility of trying to go to college. 

Dr. MARTIN. I think, Mr. Chairman, unfortunately in the day 

that we live today with the media they love to play upon the most 

expensive, the highest cost institutions. And every time I see something about college costs, it always focuses upon that top 3 to 4 percent of institutions that are the most expensive in the country. And 

many families, unfortunately, who are not as sophisticated and 

maybe first generation believe that that is the cost for all colleges. 

And that is not the case. We have many fine institutions across 

this country, all the way from our community colleges, state colleges, universities, public and private, and along with financial resources that are available from local, Federal, state and institutional monies, that there is a way to help people to do that. 

And part of it, I agree with Mr. Boyle, is simply having a campaign so that families and students understand clearly what is 

available and where to go to get straightforward information. And 

I think that would be more helpful than anything I can think of 

to try to raise awareness about post-secondary education. 

Chairman BOEHNER. Ms. Wasserman, you said in your testimony 

that you were for those provisions in the bill that reduced origination fees and for the increase in loan limits. How would you propose paying for that, considering you don’t want consolidation loans 

to go to a variable rate? 

Ms. WASSERMAN. Well, I think two things. One is, to follow up 

on the questions you just asked, I think that there is some real 

sticker shock, because the cost is too high for a lot of institutions. 

While there is a varying level of cost to college, I do think the reality is for a lot of working families and a lot of first generation 

students the cost is too high. So when we are looking at this reauthorization, we are looking at it as an opportunity to really make 

steps to make college more affordable and more accessible. 

And so for us the reduction in origination fees is important but 

keeping the fixed rate on consolidation, making sure that when 

someone is applying to school, they know that they are going to be 

able to attend school and graduate with manageable debt that they 

can then consolidate and pay manageable monthly payments on. 

Chairman BOEHNER. Do you represent graduates as well? 

Ms. WASSERMAN. This sort of attempt to separate the students 

applying from the student that graduates to me just doesn’t make 

sense. The reality is it is the same person— 

Chairman BOEHNER. Hello, hello. 

Ms. WASSERMAN [continuing]. That is applying for school— 

Chairman BOEHNER. We have Mr. Grayer right here, a graduate. 

33

Ms. WASSERMAN. Right, a graduate, yes. 

Chairman BOEHNER. A successful graduate. Mr. Grayer, were 

you able to pay your student loans? 

Mr. GRAYER. Say it again, sir? 

Chairman BOEHNER. Are you able to pay and afford your student 

loans? 

Mr. GRAYER. I pay them, but they are not manageable. 

Ms. WASSERMAN. They aren’t manageable, and that is a great example of the reality; for a lot of us it is incredibly difficult to be 

paying our loan debt. And we have to make it more affordable for 

students to get through school and then make payments on that 

debt and be able to support our economy, to be buying a home, to 

be picking a career path that we want— 

Chairman BOEHNER. Well, do you think that it is fair—let me 

ask you this question. Do you think it is fair that according to the 

GAO, if we continue the consolidation program at a fixed rate, it 

is going to cost $21 billion in additional taxpayer subsidies for 

graduates over the next 7 years, as opposed to taking that $21 billion and reducing origination fees and increasing loan limits to try 

to increase access for low to middle-income students? 

Ms. WASSERMAN. Those small provisions, reducing origination 

fees from 3 percent to 1 percent, allowing flexibility in the loan limits, I think are important, but the reality is that we need to increase the Pell Grant. Real access isn’t going— 

Chairman BOEHNER. No, no, the question was do you think it is 

fair, because this is the real issue that we are going to get in. And 

for those of you that come to this Committee often, you know that 

I try to speak English. And the fact is that we have a budget-neutral environment that we are in and we are trying to find some 

way to increase access for low to moderate income students. 

Now I know some of my colleges, and I have read your testimony, 

Ms. Wasserman, think that every day is Christmas and that I am 

Santa Claus. 

Mr. MILLER. Nobody thinks you are Santa Claus. 

Ms. WASSERMAN. No. 

Chairman BOEHNER. Santa Claus is sitting next to me, I am 

sorry. The fact is that we have to make hard decisions here. And 

from a fairness standpoint it seems to me that asking graduates 

who may have received the Pell Grant, may have received a student loan, may have had their interest paid while they were in 

school, had a 6-month deferment of any payment after they graduated, and were then allowed to consolidate their loans in many 

cases, I think that we have done, we are doing an awful lot for 

those who have been through school. And I am trying to grapple 

with the issue of what is fair for graduates as opposed to incoming 

students, who may not have the financial ability to attend a college 

or university of their choice. 

I have gone way over my time. Mr. Miller? 

Ms. WASSERMAN. Well, Mr. Chairman? 

Chairman BOEHNER. Yes, go ahead, go ahead. 

Ms. WASSERMAN. Chairman Boehner, I think it is important to 

look at fairness, but I think it is also about priorities. And the reality is that with this reauthorization we are asking, the students 

are asking for higher education affordability to be prioritized. And 

34

for that we need to not only retain the fixed rate on consolidation, 

but we need to do the other things I mentioned in my testimony, 

because we find money when we make priorities. We found money 

for tax cuts. We found money for other things in this Congress, and 

we need to make sure to find money for higher education. 

Chairman BOEHNER. Mr. Miller? 

Mr. MILLER. Thank you, Mr. Chairman. It is rather fascinating 

that when we get to education we are in a budget- neutral situation. We are not in a budget-neutral situation on the military budget, on the agriculture budget, on the public works budget, on the 

transportation budget. Nowhere else are we on a budget-neutral 

situation, except when it comes to education. 

If we were in a budget-neutral situation, we wouldn’t have a $500 billion deficit this year, next year, and the year after. So they 

have obviously decided that it is a higher priority to reach in, either to the tax cuts or to the deficit, for all of these other purposes. 

But it is not a high priority for the Republican leadership here for 

the education of America’s young people. 

So when we are told to pick and choose between students who 

have graduated and students who are in school, with all due respect to the same students, because when people make a decision 

about will I be able to borrow this money, pay it back, what is the 

life cycle cost of this, just like anybody in business would, of this 

loan, and will I be able to become a teacher or a nurse or a policeman or a lawyer or a doctor, all of these things go into that calculation. And you decide yes or no. 

But you don’t just all of a sudden because you have graduated 

in a situation where those are no longer a matter of concern. You 

borrow money over a period of time and you ask yourself, that is 

why we have disclosure forms, when you borrow money against 

your house, they say the total cost of this loan is $1,800,000 and 

you go, ‘‘Jeez, I didn’t know this house was worth that much.’’ 

No, that is the cost of the loan. When you buy your car, they tell 

you what the cost of the loan is. And people say, ‘‘Oh, I don’t want 

to pay that much, maybe we ought to be looking at something else.’’ 

And so the problem with this legislation is we sort of have a half 

of a higher education bill. We ought to put everything on the table. 

I don’t know, maybe the students will think that the 6-month 

deferment isn’t worth as much as the consolidated fixed rate and 

then make some tradeoffs. We keep picking sort of low-hanging 

food or what is politically doable here, as opposed to constructing 

a program that now is in the middle of a dramatically escalating 

cost of higher education to students. 

This bill doesn’t meet that test in terms of doing that. You have 

done some good things in this legislation, but we have also left out 

the consideration of a whole range of issues and topics. And when 

a student has to think this process is going to cost me another 

$5,000, I think it is a difference in considerations. So that is that. 

I want to hear your points on the Pell Grants. I didn’t understand, Mr. Boyle, you didn’t address the Pell Grant in your oral 

testimony. Can you tell me where your association is? Are you for 

the cap that is in this bill between now and 2011 on Pell Grants? 

Mr. BOYLE. I addressed the year-round Pell Grant. 

Mr. MILLER. I know, but are you for the cap? 

35

Mr. BOYLE. I would like to see Pell Grants higher in the ideal 

world, but I think that the basic reality is— 

Mr. MILLER. Do you support the cap, what is it? 

Mr. BOYLE. I would like to see it higher. 

Mr. MILLER. So you don’t support the cap? 

Mr. BOYLE. No. 

Mr. MILLER. OK. Dr. Martin? 

Dr. MARTIN. I would like to see the $5,800 and say, ‘‘Such sums 

thereafter’’ if we have to do it that way. 

Mr. MILLER. So you would not support the cap? 

Dr. MARTIN. I would like to see the flexibility go up when we 

have the funds to do it. Grants are the most important thing. That 

is our highest priority has been grants. 

Mr. MILLER. Ms. Wasserman? 

Ms. WASSERMAN. I don’t support the caps. 

Mr. MILLER. Dr. Reed, Chancellor Reed? 

Dr. REED. I testified that the Pell program was the most important program to the California State University students. I would 

like to see it increased. 

Mr. MILLER. Again, we are in this configuration. Somehow we 

can’t help those students who need it the most in this calculation. 

And I just think that those of us on this Committee really have got 

to put together a comprehensive bill. To put a cap on the Pell at 

this point when we think we are looking at continuing escalation 

of these costs is just to tell a lot of students at the bottom they are 

not going to be able to make it in this situation. 

We are starting to see some of this in the California system already, are we not? 

Dr. REED. We are. We are trying to hold our costs down as much 

as we can. We entered into an agreement yesterday with the Governor that, one, that our increase in fees would be tied to personal 

income increases in California, although there was an emergency 

provision except when the state’s budget goes down. But then that 

was even capped at 10 percent. 

So there is tremendous sensitivity to what you are saying, Congressman Miller. And, as I said, the Pell is the single most important—116,000 of our students are Pell students in the CSU. 

Chairman BOEHNER. Will the gentleman yield? 

Mr. MILLER. Yes. 

Chairman BOEHNER. Not all of us are for increasing the Pell. 

Now we have a dual process in here for those who aren’t aware 

that we authorize and then we appropriate. The current authorization, maximum authorization for Pell is $5,800. We are at $4,050 

as the maximum award that is appropriated. Now for every $100 

increase in the maximum award, the cost to the Treasury is $400 

million. And as this wave of students continues to approach, that 

number is going to be a half a billion dollars for every $100 increase. 

Now one of the things that you have all heard me say as members of the Committee is that I am not for some silly authorization 

level that is not realistic. I think it is duplicity. I think what we 

ought to do is to try to have the authorization numbers and the appropriation numbers as close as possible so that people aren’t misled into thinking that we are going to do something— 

36

Mr. MILLER. Oh, we will never be misled again after the other 

bill. 

Chairman BOEHNER. Turn your microphone on. 

Mr. MILLER. We will never be misled again after No Child Left 

Behind. Don’t worry about that. 

Chairman BOEHNER. Georgie. 

Mr. MILLER. Well, we won’t. We now know that it doesn’t work 

that way. But reclaiming my time, this Committee ought to be saying to the appropriators, to the Congress, and to the nation, this 

is what an education policy should be if you are going to take care 

of the wave of students, the students of little income who are fully 

qualified to go to college so that they can participate, this is what 

we should be doing. That is why we are called the policy Committee. 

If the appropriators don’t want do this, I guess they won’t do it. 

If the administration, this administration, other administrations, 

past administrations don’t want to do it, obviously they won’t do it. 

But we ought to be setting forth in law the means by which you 

can achieve an education policy that addresses the full spectrum of 

American students and families that are looking for this opportunity. 

As I said, I think you have done good things in this bill. I don’t 

want this to become a partisan fight. I think this bill is terribly important. But I don’t think that we have in a comprehensive fashion 

addressed all of the possibilities where we can reapportion some of 

these costs in a more fair fashion. That is all I am trying to say. 

And I don’t say that as throwing down the gauntlet or any of the 

rest of this. I think that we have got to work our way through it, 

but we have got to recognize that this landscape has changed dramatically. A lot of it, we are struggling to figure out how we can 

get the states to belly up to the bar here with a little bit more responsibility and participation. 

So this isn’t meant as a broadside. It is just I think you see some 

glaring problems here that are going to be huge, and certainly in 

the Pell Grant area. We have got do deal with this now. We have 

got to deal with it this fiscal year. I just don’t think this bill meets 

that test, Mr. Chairman, and it is not because it hasn’t been a good 

faith effort and it is not because people haven’t worked hard. I just 

don’t think we are there yet. 

Chairman BOEHNER. Well, I would just suggest to my colleague 

and my friend that this is the first hearing on the first proposal. 

This is the beginning of what will be a very long process. 

Mr. MILLER. Mr. Chairman, let me say this for the record. This 

is a rather unusual experience in the Congress of late where we actually have a bill that is in writing and then we have people come 

in and publicly comment on it, and I want to thank you for that, 

because I think that is the way we will end up. All of these witnesses have varying views on different subject matters. That is the 

manner at which we will arrive at a bill where people have a 

chance to pull it apart, look at it, and then hopefully, we can come 

back together and take this advice. 

And I would also like to ask unanimous consent to insert in the 

record some statements by the president of my alma mater, Dr. 

37

Corrigan, and the National Consumer Law Center, if I might, who 

also are testifying to this particular bill. 

Chairman BOEHNER. Without objection, so ordered. 

[The information referred to follows:]

38

Statement of Dr. Robert A. Corrigan, President, San Francisco State 

University, Submitted for the Record


93631.027
39


93631.028
40


93631.029
41

Statement of the National Consumer Law Center, the Center for Law and 

Social Policy, and The Workforce Alliance, Submitted for the Record


93631.024
42


93631.025
43

Mr. MILLER. Thank you. 

Chairman BOEHNER. The Chair recognizes Mr. Petri. 

Mr. PETRI. Thank you very much, Mr. Chairman. As we struggle 

to find the resources to meet our obligations to help provide access 

to education for students, I wonder if I could ask the panel members to turn their attention for a minute to the Direct and Guaranteed Student Loan Programs. About a third of the loans are direct 

and two-thirds are guaranteed student loan programs. The General 

Accounting Office has reported that in a number of years, the Direct Loan Program has netted money, not cost money to the Treasury. The Office of Management and Budget said of the Direct Loan 

Program recently, ‘‘Significantly lower direct loan subsidy rates call 

into question the cost-effectiveness of the guaranteed program 

structure, including appropriate level of lender subsidies.’’ 

And on May 3rd, the Wall Street Journal reported that next year 

the Direct Loan Program will, according to its analysts’ estimates, 

make $500 million for the Treasury and the Guaranteed Program 

will cost $7 billion to the Treasury. Now if that is anywhere near 

true, we have an opportunity to come up with some money to meet 


93631.026
44

some obligations in both the loan and other areas. Would any of 

you care to comment on the implications of those figures? 

Dr. MARTIN. Mr. Petri, I am not an economist, but I have read 

different reports that have been done throughout the years about 

the differences between the Direct Loan Program and the FFEL 

Program and which is more costly and which saves the government 

money and so on. I don’t have a firm answer to that because I have 

read too many different things depending on the spin that has been 

put on those particular reports, and I am not smart enough to be 

able to break that down. I think it is a good question that you ask. 

I do think as an association we strongly support maintaining 

both programs for choice. I also think that the bill that is before 

us now that looks us and recaptures some of what many of us believe are some excessive earnings out there in the programs is a 

step in the right direction. I know that my colleagues in the lending community probably aren’t happy with that provision, but I 

think it is reasonable and fair to ensure that those dollars are coming back in so that we can continue to support need-based student 

financial assistance. 

Dr. REED. I cannot speak for those government figures. I can 

share with you, though, that in a 23-university campus, 23 campuses, we support keeping both programs. Eleven of our 23 universities are in the Direct Lending and 12 are in the guarantee. What 

we have seen is better services to students because we do have 

both, and we think that competition has made both programs better. Therefore we would support both. 

Mr. PETRI. In that connection, the President’s budget indicated that it costs taxpayers approximately 69 cents to lend $100 through 

the direct program and $10.51 to lend $100 to a student under the 

guaranteed loan program. Do you think that competition makes 

sense if you could get the $10? 

Dr. REED. I don’t know that those are the correct figures. I know 

you are quoting something. 

Mr. PETRI. It is just our President. 

Dr. REED. But I can tell you that both programs work. Both programs work very well. If there are greater efficiencies, we should 

really strive to get those so that we can put those funds back into 

students’ hands so that they can be the beneficiaries of that. 

Ms. WASSERMAN. Congressman, I think that that is an important 

question and I don’t have necessarily a better answer to that specific question, but I do think that as we ask those questions we 

need to ask why—we support Direct Lending, we think it is a really important program—why is it being attacked in states like New 

York and Oregon and California where you see Direct Lending Programs under attack? 

So I think we should be looking at how we can at least support 

the Direct Lending Program as we figure out where those monies 

are going and how to support both, possibly. 

Mr. MCKEON [presiding]. Thank you. Mr. Kildee? 

Mr. KILDEE. Thank you, Mr. Chairman. First of all, I would like 

to acknowledge the students who are in the back of the room for 

being here today. I know some of you have come at some expense 

to your academic needs and your other needs. I really appreciate 

it. Your presence itself today provides great testimony to this ComVerDate 0ct 09 2002 13:31 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 H:\DOCS\93631 EDUWK PsN: NNIXON
45

mittee. So we deeply appreciate you being here. Your presence is 

effective, let me tell you. You are really the customers of education 

and we should be focusing on you. That is our primary responsibility so thank you again. 

Mr. Boehner has said that the cost of keeping the fixed rate rather than changing it to a variable rate would cost $21 billion over 

5 years, emphasizing that we should be budget-neutral. One of the 

reasons that I guess we have to be budget-neutral is that this administration and Congress, not with my vote, gave up $2 trillion 

of revenue over the next 10 years, $2 trillion. That is $2,000 billion. 

We are talking about $21 billion. Now you can’t separate your 

votes on taxes and your votes on authorizations and appropriations. I voted against those $2 trillion in tax cuts because I knew 

it would get ourselves in these types of situations where we now 

have to short change students. 

Now I didn’t go get a lot of applause back home when I voted 

against $2 trillion in tax cuts, but I think it was the right thing 

to do. I think our future is students. So the $21 billion, if that is 

the right figure which Mr. Boehner is using, is a small part of 

$2,000 billion, which we gave up in revenue. We could certainly use 

some of that revenue to fund these programs. 

So always bear in mind that how a person votes on taxation is 

just as important as how the person votes on authorizations and 

appropriations. You can’t separate the two. 

Ms. Wasserman, thank you very much for being here. This bill 

sets the maximum Pell Grant at $5,800 and freezes it there for the 

next 6 years. That figure, $5,800, Mr. McKeon and I put in place 

for this year and the reauthorization in 1998. 

That was a very pleasant reauthorization in 1998. President 

Clinton used that authorization room, to raise the maximum Pell 

Grant from about $2,300 to $3,750. That is what it was when he 

left office. President Bush has raised it during his last 3 years 50 

bucks, 50 bucks. That is almost an insult, 50 bucks, where President Clinton raised it from $2,300 to $3,750. We gave him room, 

and I think we need more room. We set policy, as the ranking 

Democrat of this Committee said, we set policy here. We look at 

the needs and then the appropriation Committee can say how 

much money we have left and how should we set our priorities. 

But can you expand upon the need to raise the maximum Pell 

Grant and the effects it could have over the next 6 years for students? 

Ms. WASSERMAN. I think it is critical when we look at this reauthorization, students really do look at it as an opportunity, an opportunity to create real access. We all, I think when we went down 

the line, said the Pell Grant is one of the most important ways that 

we are going to create access. For this reauthorization to keep the 

maximum at the same level that it was set back in 1998 is ignoring 

all the realities we know to be true. We have more students going 

to school, more of them are low-income, tuition is rising, and we 

are going to be shutting doors to people from going to school if we 

don’t at least increase the maximum and create room for the Pell 

Grant in the appropriations process to get the full funding that it 

needs. 

46

Mr. KILDEE. I think we asked all four witnesses, but didn’t get 

down to Mr. Grayer yet on raising the Pell Grant. Would you also 

agree that the Pell Grant cap should be raised? 

Mr. GRAYER. Say that again? 

Mr. KILDEE. Would you also agree with the other four witnesses 

that the Pell Grant cap should be raised? 

Mr. GRAYER. Yes, I think it should be raised. 

Mr. KILDEE. Thank you. 

Mr. GRAYER. But I would also like to state that earlier I misunderstood the question, I do not have a problem paying my debts. 

Mr. BOYLE. May I add something on the Pell Grant? 

Mr. KILDEE. Yes, sure. 

Mr. BOYLE. I think it is important for families to recognize of 

course that the Pell Grant is a foundation grant for financial aid 

awards. And so the people that are receiving Pell Grants, when 

they receive their financial aid award, they are receiving institution-based aid and institutions have stepped up to the plate over 

the last 10 years and provided additional funds in order to make 

college costs more reasonable for families. 

And so if the focus is only on Pell Grants and the fact that they 

are stuck at a certain level, I think that that can help to create a 

misperception by the public that that is the only source of availability of financial aid. There are many sources of availability of financial aid. 

Mr. KILDEE. But the Pell Grant is a basic fundamental help for 

those students so they will not be burdened with loan debt. 

Ms. WASSERMAN. Sadly, I think to respond to Mr. Boyle, instead 

of a focus only on the Pell Grant, what we are seeing is no focus 

on the Pell Grant, right? Because we are not increasing the maximum authorization at all. 

Dr. MARTIN. Mr. Kildee, could I also speak to this issue? Because 

I understand, as someone that has watched this program since its 

inception, I realize that we have always had a higher maximum 

than what we have ever funded. And I understand Mr. Boehner’s 

concern about having a mark out there that is unrealistic and gives 

false expectations. But I also think it is important that we have to 

recognize that this is a foundation program. And I do agree that 

we have shifted dramatically in this country over the last 20 years 

from reliance upon grants to student loans. And maybe that is the 

reality of what we have to deal with. 

But I would say to the Committee, and regardless of where we 

set the maximum and so on, and I have my own views on that, but 

let me suggest another policy decision that was a part of our recommendation that I think also addresses and goes to what the 

issue is with Pell Grants. Pell Grants is the foundation program for 

the neediest students in this country. And one of the recommendations that we had was is that at least fund the negative EFC. 

So if you have a student that their expected family contribution 

is in the negative, and we currently calculated down to $750, that 

student should be entitled to that difference on that negative 

amount. So if they had a negative EFC of $500, that means that 

that student in two semesters would get an additional $250 the 

first semester and $250 the other. That ensures that those limited 

47

increases are going to the neediest students that are enrolled in 

our post-secondary educational institutions. 

Mr. KILDEE. Thank you. 

Mr. MCKEON. Let me just real quickly ask you each a real quick 

question. Would you all like a Cadillac? Mr. Boyle? 

Mr. BOYLE. No. 

Mr. MCKEON. What would you like? 

Mr. BOYLE. I would like a very nice Chrysler car. 

Mr. MCKEON. OK, we will give that to you. 

Dr. MARTIN. Whatever gets me to where I am going. 

Mr. MCKEON. Would you like one? 

Ms. WASSERMAN. Accessible education. 

Dr. REED. A Ford. 

Mr. GRAYER. A Cadillac. 

Mr. MCKEON. One very honest guy, thank you very much. I 

think we are all talking the same way. We all would like to have 

a whole lot of things. In fact, I guess if the human persona, if we 

ever get to the point where we have everything we want, then what 

are we here for then? What is our goal? What pushes us for more? 

We had a study done by the Student Financial Aid Commission 

and they showed that over the last 20 years the cost of education 

has been going up at four times the rate of people’s ability to pay 

for it. And that means that by the end of this decade, 2 million students that we would like to provide education for are not going to 

be able to get that. So what we are trying to do, it would be nice 

to have unlimited funds, we do not have unlimited funds. And the 

Chairman that sits in this chair I think tried to address that situation very well. We are given a budget, we have a number that we 

can work with. And then we try to say if given that budget, where 

do we want to put our emphasis? And when the Higher Education 

Act was passed in 1965 the purpose was to provide access to as 

many people as possible. And that is what we are trying to do. 

So we are trying to put our resources on the front end rather 

than the back. 

Now there has been some things said about Pell Grants. You can 

do a lot of things with numbers. And that philosophy of trying to 

help more people have access, yes, the maximum has been $5,800. 

It has not changed for the last few years. But we have been able 

to give over a million kids more a Pell Grant. 

So you have got two things. You can increase the maximum and 

pay more to some students or you can keep the maximum the same 

and give more aid to more students. But it has gone up almost in 

the time I have been Chairman from $6 billion to $13 billion. That 

is the number. The money is there and it is helping more students. 

Chancellor? 

Dr. REED. Mr. Chairman, may I just say this. You have a most 

difficult job, and I want to recognize that, because you are trying 

to balance politics, reality, budgets, deficits, taxes. 

Mr. MCKEON. And a war. 

Dr. REED. And a war. OK, I don’t want to go there. 

Mr. MCKEON. Except that it was talked about— 

Dr. REED. But that is a part of your reality, OK. 

Mr. MCKEON. Right. 

48

Dr. REED. Now what I want to say for America and America’s 

public policy, I am very concerned, as a person that has spent 

about 30 years in higher education and in politics, about what is 

happening in America. What I see is if you are middle class or better, economically a little better off, and frankly not very smart, 

your chances of getting a college education are very good. If you are 

real bright and economically not very well off, you have an 80 percent chance of not getting a college education, because you can’t afford it. And there are more and more haves and have nots in this 

country. And so what your public policy debate really is is how do 

you balance this? 

Now, I don’t know. Maybe what the authorization ought to do is 

to continue knowing that you are not going to fully fund Pell at any 

time, but you ought to set the bar so that it continues to move, so 

that there is this obligation, hope, that you can do that. And then, 

as this country can afford it, you fund what you can for the largest 

number of the most needy students, because they are the ones that 

need access in this country. 

Mr. MCKEON. We have a markup going down at the other end 

of the building in the Armed Services Committee, which I also 

serve on, and in that Committee we are very careful to authorize 

what we think will be appropriated. We work very carefully. Here 

it has had a history of not doing that at all. I am sure at the end 

of the day we will probably be doing what you suggest. My time 

is out and the Chairman has returned, and I will give him back 

the chair. 

Before I do that, could I just make one quick little—for Ms. 

Wasserman, you made a comment about we are giving up our freedom of speech. I would like you to look at the bill and read pages 

19 and 20 and if you can, for the record, find anything in there that 

takes anything of freedom of speech, would you please insert that 

in the record, give me an answer in writing? 

Ms. WASSERMAN. You want an answer in writing? 

[Answer not received.] 

Ms. WASSERMAN. I can talk a little bit about it now. I think that 

the concern is that it creates this Federal oversight of our classrooms and our activities, both official and unofficial, and will restrict our ability—I have read the bill, and I think that it will restrict the options and things such as funding, who we are bringing 

to speak on our campuses. I think the oversight on this is very 

problematic. We are looking at the Federalization of higher education on our campuses. 

Chairman BOEHNER. We have a series of votes on the floor. We 

are going to take questions from Ms. McCarthy, who is next on our 

list on the other side. And at the conclusion of her questioning, we 

will recess the Committee until approximately 1:15 for the series 

of votes that we have on the floor. 

The Chair recognizes the gentlelady from New York for 5 minutes. 

Mrs. MCCARTHY. Thank you, Mr. Chairman. I am hoping that as 

we go through this hearing and work together, that we will be able 

to accommodate an awful lot of the issues that have been brought 

up today. I also want to say hello to Mr. Goodling. It is good seeing 

you in the audience. 

49

Chancellor Reed, I read your whole testimony, and with all the 

things that you were saying today, your recommending addressing 

the severe nursing strategy, my background is a nurse, so we have 

always had this shortage, but now it is at a crisis level we now 

face. By allowing mandatory loan forgiveness for nurses serving in 

the shortage areas, Mr. chancellor, I am going to be introducing a 

bill next week, H.R. 934, Teacher and Nurse Support Act, that encourages individuals to enter and continue in the teaching and 

nursing professions by amending the Higher Education Act to provide loan forgiveness and loan cancellations to teachers and nurses. 

To be eligible, the teachers must be employed full-time for teachers 

and teaching for five consecutive complete school years at a school 

that is at an under-served school district. Nurses must be full-time 

nurses for five consecutive complete years in a clinical setting or 

as a member of the nursing facility at an accredited school of nursing. I will be sending you that information. I would like your input 

on it. 

But in your testimony also you talked about Trio and GEAR-Up. 

I am very involved in those programs back at home, but I have also 

been working very hard on Project Grad, which basically is going 

into a school in my district that was taken over by the state and 

what we are doing is partnering with businesses. They are putting 

up the money for scholarships for these kids if they keep a 2.5 average in leadership skills and everything else like that. 

When we started the program in my district 3 years ago, we 

thought we would have a hard time getting these kids together to 

get into this program because they have been, the only thing I can 

say is they have given up hope most of the time. Now we are seeing 

overwhelmingly these kids studying, raising their marks, because 

they actually have a chance of thinking about going to college and 

that is our step on doing that. 

So I hope this Committee will also look at Project Grad. It is 

working. We have programs out there that are working and we are 

hoping to finally, we are starting at the high school but we are 

working our way down now. But with the Trio and the GEAR-Up 

programs that are already in the grade schools, we think that in 

the end we are going to save an awful lot of money, especially for 

the kids that need special services. 

So with that, you also talked about students to pursue course 

work in careers in the fields such as science, technology, engineering, and mathematics. And I am hoping that you might consider 

also having nurses in those programs. People don’t understand 

nursing is a lot of math and it is a lot of science. So I think they 

should be qualified. 

And with that, going with the Pell Grants, that is going to be a 

big debate and I know that. All of us here wish that we could have 

the money to make sure that every child that wants to go to college—but I agree with you on the digital divide. A lot of my schools 

in the minority area don’t even have computers in the school. Don’t 

even have computers. So with that— 

Dr. REED. Congresswoman McCarthy, I look forward to reviewing 

and reading and commenting on your legislation. One of the things 

that we have tried to do in the California State University in the 

nursing area is to build partnerships with our large hospitals who 

50

are now providing in a partnership with us scholarships for nurses 

who will agree to work for that hospital for a period of 5 years and 

they will forgive their 4 year nursing scholarship to our institutions. We have a $15 million agreement between Long Beach Memorial, which owns several hospitals in southern California, and 

the California State University/Long Beach. I would strongly recommend that if the Federal Government could also be a part of 

this, you could do it in a matching, partnership way. 

Mrs. MCCARTHY. Thank you. We will look into that. Does anyone 

have any comments? Great. 

Chairman BOEHNER. The Committee will stand in recess until 

approximately 1:15. 

[Recess.] 

Chairman BOEHNER. The Committee will resume its hearing on 

H.R. 4283. And the Chair recognizes the gentleman from Nebraska, Mr. Osborne. 

Mr. OSBORNE. Thank you, Mr. Chairman. And I would like to 

thank those of you for coming and thank you for sticking around 

while we had this lengthy series of votes. One thing that I would 

like to mention to you that has occurred to me is that there is a 

real world cost of money. So if somebody is out of school, maybe 

they are a doctor, maybe they are somebody who has gone into 

business, and they have got credit card debt where they are paying 

15 percent. They have got a car payment of 6 or 7 percent, house 

payment of 6 or 7 percent. And they also have a student loan payment of 3.4 percent or whatever. It doesn’t take a genius to figure 

out which one they are going to pay off and which one is going to 

ride. 

And so it just seems to me that there is a basic fairness issue 

here. And naturally we would like to give students a break forever 

and ever. And I guess one of the solutions that I keep hearing here 

is, ‘‘Well, we just need more money,’’ and certainly that would be 

great. 

But even if we doubled the amount of money, at some point it 

seems to me we would still be making a basic choice. We would be 

saying are we going to help those who have already graduated from 

school or are we going to begin to help more incoming students? At 

some point that is the fundamental choice that you have to make. 

And so I guess everybody on this Committee would like to have 

more money available, and yet I hear complaints all the time about 

the Federal deficit. And so it kind of depends on what you are interested in. And so you want to maybe double the amount of money 

spent on education but you don’t want to see the Federal deficit go 

above $500 billion. As a matter of fact, you would like to see it 

down to zero. 

Same thing is true in the military spending. Same thing is true 

in Medicare. Whatever you talk about, it is the same deal. So there 

is a balancing act here that is going on. 

And I used to work with young people, most of whom were from 

lower socioeconomic situations. And many of them were walk-on 

football players. And they had to rely on Pell Grants and they had 

to rely on student loans. 

One of the concerns that I had that I would like to ask you 

about. Let’s say that you doubled the cost or the Pell Grant from 

51

$4,000 to $8,000, do you feel that all of that would go to the student or do you feel that it might result in higher cost of education 

to some degree? I realize it is not a one-to-one relationship, but it 

seems like the more the Federal Government spends, the more rapidly the costs accelerate. And that has been a concern. And I would 

like to have you comment on it. Maybe I am totally out of touch 

with reality, but maybe there is something to that. 

So any or all of you that would like to comment on that, I would 

appreciate hearing from you. 

Dr. MARTIN. Mr. Osborne, I have seen a couple of analyses previously that have asked the very question that you have just 

raised, and that is, if we increase grant aid, does it correspondingly 

result in an increase in the cost of education. And the studies I 

have looked at would suggest that it does not. And I think probably 

in large part because of what you said, that there is not a direct 

correlation because it doesn’t go to all students. 

I think what Mr. Boyle said earlier this morning in the testimony is also important to note. And I think one of the things that 

we have observed, and I think he correctly pointed out, is that unfortunately in many of the states their policies toward low tuition, 

particularly in public institutions have shifted. And many of them 

have moved now to a policy of either modest or high tuition along 

with additional student aid to try to make up to keep access available for those students. And while there is certainly growth in 

many of the state programs, unfortunately states with the other 

pressures and so on, most of them have not been able to keep up. 

And so that probably has contributed as much as anything to part 

of the cost. 

In terms of the first part of what you were talking about, you are 

correct. All of us from time to time have to make very difficult 

choices because we have limited dollars. We will never have all of 

the money that all of us would like to have. 

And therefore if we are going to have to have limited dollars, the 

question is is what are the priorities? And I think the thing we 

have wrestled with this within my membership extensively. We are 

very, very concerned about the level of indebtedness that many of 

our graduates have when they leave our institutions. On the other 

hand, we also would like to believe, and strongly believe, and there 

is evidence to support this, that those students when they graduate 

are in a much stronger position and are able to earn more money 

over a lifetime without that education. 

And so it is a very positive investment. Our main concern is trying to make certain that with the limited funds that we have the 

first priority ought to go to keep the doors open for future students 

who without those funds would not be able to enter those institutions at all and even avail themselves of that opportunity. 

I recognize, I fully recognize that when you talk about changes 

or something and somebody says, ‘‘Hey, maybe I am going to have 

to pay an additional $5,000 on my loan,’’ we are talking about an 

amount there that is going to be amortized over about a 20-year 

period. And when I figured that out, it comes out to about $23 a 

month difference in terms of the payment for that person. 

Now I am sorry that that person has to do that, and all things 

being equal, I would rather they don’t have to. But that is about 

52

what our average graduates were talking about in order to ensure 

that we have the money at the front end to do some of the improvements, some of the enhancements to this bill of trying to make the 

loan programs fair and better, reducing the origination fees, giving 

students the amount of money so they don’t have to go out and borrow through private loan programs, through separate initiatives, 

giving students and addressing issues on repayment, when they 

are having problems with that so that they have got additional 

time. It takes money to do those things, too. And I think that has 

been the focus of the bill. I would like to see it expanded even further. 

One of the things that I like very much about Mr. Andrews’ bill 

is also on the back end with the consolidation, he provides some 

sensitivity depending on the relationship of your student loan to 

your income as a debt, to kind of look at that, to try to be sensitive. 

But it also doesn’t allow for somebody that is making $100,000 to 

suddenly lock in at a very low rate. And so we have got to find a 

balance here, and I think you are exactly correct. 

Dr. REED. Congressman Osborne, I support what Dr. Martin 

says. In this country today if you are a high school graduate, your 

lifetime earnings are projected by the Department of Commerce 

and Labor to be about $1.2 million over your lifetime. If you are 

a college graduate with a baccalaureate degree, your earnings are 

going to be $2.1 million. So therefore those earnings are about a 

million dollars more. If you have to set priorities, which you do, our 

priority is to help those students that are in school or are going to 

come to school. If in the loan consolidation business, you are going 

to have some savings, then let’s put that into the students that are 

in school and help them. 

No. 2, back to what I said earlier, I would like to see this Committee talk a little bit more about how can we assure that Pell 

loans consolidation, whatever you are going to do, helps the lowest 

income students, the students whose families struggle the most. 

Now that is very difficult and ‘‘fair’’ has lots of different definitions 

as to where you draw that line. But I think that focus needs to be 

debated and talked about. 

No, I don’t think increasing Pell will drive the cost of higher education up. There is a big spotlight on higher education. In California I can tell you that we went almost 10 years and never increased fees a penny, actually we reduced them 10 percent in 1997 

and 1998 when I first came to California. 

Now here is America’s problem: health care, corrections, all of 

these competing matters, transportation in the states are more 

competitive for the state revenue than they have ever been before. 

Therefore, higher education has a much harder time than they 

have ever had. So it has been maybe a little too easy to shift some 

of the state’s responsibility. It is really the state’s responsibility to 

pay for access to higher education and not shift as much in fees to 

students as the states have done in the last four or 5 years. 

Ms. WASSERMAN. Congressman, I have to say that I think that 

this talk about separate priorities, the students coming in the door 

or the students that have graduated, again, I will say that I don’t 

think that it makes sense, because I think then we are getting 

them in the door under false pretenses. If then they are saddled 

53

with unmanageable debt when they leave, then that isn’t access. 

And pretending we are prioritizing the ability to get people in the 

door, it is just a false pretense. 

The reality is they won’t be able to come in the door because they 

are going to know that they cannot sustain those payments when 

they graduate. It will discourage the same students that are worried about applying now because of sticker shock from worrying 

about how they are going to make those payments, how they are 

going to get through school. And I think that any proposals we look 

at, we need to look at any of the needs analysis proposals to make 

sure that they are really going to work for low-income students. So 

that means that if you are making a salary of $23,000, that you 

are not going to be stuck with, again, huge unmanageable payments. 

Mr. OSBORNE. Well, my time is up and I will yield back, but I 

would like to say also that the argument is true, we are in a static 

economy but we are in a dynamic economy, so incomes rise and 

fall, taxes, interest rates rise and fall, and it doesn’t seem to be 

wise to me to lock in something in a dynamic economy. 

I yield back, Mr. Chairman. 

Chairman BOEHNER. The Chair recognizes the gentleman from 

New Jersey, Mr. Andrews. 

Mr. ANDREWS. Thank you, Mr. Chairman. I would also like to 

thank the panel of witnesses for an outstanding job and for your 

patience in waiting while we had a series of votes. 

I have never been involved in a legislative process that was 

worth doing that did not involve compromise. And I have never 

been involved in a compromise that didn’t make someone unhappy 

about something. And I think the choice that is in front of this 

Committee is whether we are going to leave the status quo in 

place, which I think is unacceptable because it is not dealing with 

the stress and anxiety of rising college costs and shrinking affordability, or whether we are going to find the most equitable and intelligent way to reach a compromise. 

I think, and I think Chairman Greenspan agreed when he was 

here a couple of weeks ago, that a better choice would be for us to 

extend Pell Grants and pay for it by scaling back a part of the tax 

cut. Unfortunately—or fortunately, depending on how you look at 

it, that is not a decision within the purview of this Committee. 

What is within the purview of this Committee is what to do about 

the student loan law. And I do hear consensus on the panel today 

that reducing or abolishing origination fees is a worthy goal. I 

think I hear consensus that expanding options for student repayment by income contingent repayment and other flexible repayment mechanisms is a worthy goal. I think I hear a consensus that 

offering loan forgiveness to people who go into critical professions 

such as nursing and teaching is a worthy goal. All of those worthy 

goals, each of those worthy goals costs money, and it is our job to 

balance off how to do that. 

I agree with the very difficult and controversial proposition that 

switching from fixed rate consolidation to variable rate consolidation is the right choice. I think it is the right choice. I only think 

it is the right choice if the $20 billion or so that is saved by making 

that switch is dedicated to helping students. And I would choose 

54

to dedicate it by abolishing origination fees on subsidized loans and 

I would choose to dramatically expand repayment flexibility. And 

I would also choose to means test the question of who gets a fixed 

rate and who doesn’t. I think a compromise that we need to look 

at is whether certain students who have high debt and low-income 

should still get a cap on the interest rate they pay, and I think we 

should also look at other methods of achieving that same goal. 

One of the areas that I did hear some division of opinion from 

our students or student and recent graduate I wanted to ask them 

about, because I think your groups are ultimately the ones who 

matter most. I think I heard Ms. Wasserman say that she and her 

group are very concerned about raising borrowing limits because it 

could put people further into debt. And I heard Mr. Grayer say 

that he supports higher loan limits so a student can choose to borrow more, and I assume he has to. I think I also heard Mr. Grayer 

say he would rather there be more grants but if a student has to 

borrow, the student has the right to borrow. 

Ms. Wasserman, why is Mr. Grayer wrong? 

Ms. WASSERMAN. I think that we are working within a political 

climate right now where we are seeing a bill right now that has 

no increases in the Pell maximum, right? And under this bill, I am 

looking at the prospect of raising loan limits is really frightening 

at the idea of adding to the -- we are talking an average student 

debt of $18,900. 

Mr. ANDREWS. Can I give Mr. Grayer a chance to -- Mr. Grayer, 

do you think that you should make the choice as to whether to borrow more money or someone else should? Do you think that you 

should make that decision for yourself or do you think that we 

should do so by putting limits in the law? 

Mr. GRAYER. I think it depends personally on the individual’s 

personal financial situation, because the decision that I will make 

based on my finances is not necessarily the decision that another 

student may make based on their finances. So I think then, too, 

when you have a difference in markets, depending on where you 

are located, I think that personally I would not give a definite answer to that question but say the issue should be a case by case. 

Mr. ANDREWS. Mr. Grayer also testified that he believes that the 

repeal of the 90/10 rule would permit more schools to open their 

doors to low-income students. And, Ms. Wasserman, you oppose repeal of the 90/10 rule. Who is right, you or Mr. Grayer? 

Ms. WASSERMAN. I think it is important not to pit myself against 

Mr. Grayer. Mr. Grayer has— 

Mr. ANDREWS. But, ma’am, you took two different positions. You 

pit yourself against him. Is he right or are you right? 

Ms. WASSERMAN. I think that his story is very important when 

we look at the reality; this is an important story, to look at how 

someone was able to get through this college process, which is difficult and hard to finance. And I think we heard that. I think the 

repealing of the 90/10 rule, when you look at the abuses of the past 

and the scams of the past, is a dangerous step. And that we do not 

want our for-profit schools entirely financed by Federal funding. I 

think that is what we are saying. 

Mr. ANDREWS. Are the students at Mr. Grayer’s school members 

of your association? 

55

Ms. WASSERMAN. They are not. 

Mr. ANDREWS. Did you poll the members of your association for 

their position on this issue? 

Ms. WASSERMAN. Excuse me? 

Mr. ANDREWS. Did you poll the members, the million members 

of your association, for their position on this issue? 

Ms. WASSERMAN. We don’t poll them. They vote and give their 

opinion on how they feel about for-profits being federally funded 

completely. And we are very worried about the abuses and scams 

in the past and figuring out how to create opportunities now. 

Mr. ANDREWS. Right. 

Ms. WASSERMAN. And create real access. 

Mr. ANDREWS. Are there members of your association who are 

students at proprietary schools? 

Ms. WASSERMAN. No. 

Mr. ANDREWS. OK, thank you very much. 

Mr. MCKEON [presiding]. Thank you. Mr. Ehlers? 

Mr. EHLERS. Thank you, Mr. Chairman. And let me just briefly 

before I get into my questions yield for a moment to the gentleman 

from Georgia for a unanimous consent request. 

Mr. GINGREY. I thank the gentleman and apologize for not being 

here for most of this very, very important hearing, which I am intensely interested in. Of course we are in the process of marking 

up the 2005 Defense Authorization Bill, and so you guys know how 

busy we are there. 

Mr. Chairman, I would like to ask unanimous consent to have a 

statement from the American Medical Association in support of 

H.R. 4283 submitted for the record, if there is no objection. 

Mr. MCKEON. No objection, so ordered. 

[The provided material follows:]

56

Statement of the American Medical Association, Submitted for the Record


93631.014
57

Mr. GINGREY. Thank you, Mr. Chairman. 

Mr. EHLERS. Reclaiming my time, I would like to just ask about 

a feature that there has been some discussion on, and that is the 

benefit for the 2 year interest only repayment option for borrowers 

if they request it. And I want to evaluate whether this is a positive 

or a negative thing. I will start out with Dr. Dallas Martin, and 

anyone else that wishes to answer may do so. 

Dr. MARTIN. Mr. Ehlers, let me say that I think we find that 

many times students when they first leave school are moving to a 

new location, establishing a new career, there is obviously cost associated with that of getting an apartment, maybe buying a new 

wardrobe that is a little more appropriate for your new career than 

what we were able to wear in college. In many cases, students may 

be buying a new automobile or something for transportation, et 

cetera. And then on top of that they also have their loan payments, 

not to mention the deposits that they put down for utilities and so 

on and moving into a new place. 

And so it is very difficult sometimes getting off to that start. But 

we have found that if you give students, and technically in the law 

currently there is a provision that if you are behind you can go to 


93631.015
58

the whole of your loan and talk about forbearance. The problem is 

many students don’t realize that that option is available to them 

and so subsequently they get into trouble, begin to default before 

they learn that there was an option to help them out of this. Now 

they are not trying to be irresponsible of not repaying their debt. 

They just don’t have the means. 

And so we think that by making this up-front, making certain 

that every student knows that he or she is available for this option, 

doing it in a way so that they are least paying the interest on the 

loan so we are not going to end up with negative amortization, we 

think that that will be a positive benefit to assist students as they 

are coming out, getting established and then having the means to 

take over their credit responsibilities in a reasonable way. 

Mr. EHLERS. Thank you. Does anyone else wish to comment on 

that? 

Dr. REED. I would say to use that very sparingly, to be very careful, because that is just going to add additional debt later on for 

the students, and so being very careful I think is best. 

Mr. BOYLE. I would agree, and I think it speaks to the issue of 

financial literacy, which all the studies show that there is a tremendous degree of financial illiteracy among college students and 

graduates. And so without proper information about what interest 

only repayment means and advice on that, people get themselves 

into trouble. And with credit card marketing on campus, students 

may be doing interest only repayment and not know it by paying 

just the minimum payment on sometimes multiple credit cards 

that they take out and be digging themselves into a financial hole. 

Mr. EHLERS. I would just have two responses to that. First of all, 

once again, to illustrate the need for some improvement in our elementary and secondary education programs to increase financial 

literacy. Second, I would be very interested to find out whether the 

students’ financial illiteracy is any greater than that of the population at large. And I suspect that it is not. That they are probably 

better off than many of their parents on that score. 

Dr. MARTIN. I would suggest, Mr. Ehlers, that if you looked at 

all of the students that have taken advantage of the current climate to consolidate their loans with such low interest rates, it suggests to me that they are pretty savvy when it comes to financial 

literacy, maybe more so than most of our parents—not our parents, 

but we as parents. 

Mr. EHLERS. I suspect you are right. One other comment that I 

would like to enter into the record at this point on the previous discussion. And I have served as a professor for some 22 years and 

frequently would have students come to me and say, ‘‘Well, I am 

not sure I can continue in school.’’ And I would say, ‘‘Why not?’’ 

‘‘Well, my debt is getting too large.’’ 

And I proceeded to give them a short sermonette to the effect 

that I always encouraged them to continue in school, I encouraged 

them to borrow whatever they were able to borrow under the student loan program. I said it is the lowest interest rate you are ever 

going to have and it is the best investment you can make of any 

money you are ever going to have. And once you get out of school 

and graduate you may have $10,000, $20,000 in loans. That is 

probably the lowest debt level that you will have for 20 or 30 years 

59

because you are going to buy a car and you will probably owe 

$10,000 at least on that, mortgage for a house, $100,000 to 

$300,000. It is going to make your student loan look so minuscule 

by comparison and particularly the interest rate. And it is the only 

investment you can make that is going to help you pay off all your 

other loans. 

And I think we just have to keep that perspective here. The student loan is the best deal that anyone can ever have because it increases their learning power and it is a lower rate than almost anything else. And let’s not lose sight of that as we discuss the loan 

picture. 

Thank you, Mr. Chairman. I yield back. 

Mr. MCKEON. Thank you. Mr. Bishop? 

Mr. BISHOP. Thank you, Mr. Chairman. And let me thank the 

panel for your comments here today. 

I have a rather broad question, and I should say that I come at 

this issue from the perspective of someone who spent 29 years as 

a college administrator before I came to the Congress and I spent 

seven or eight of those years as the director of financial aid. And 

my question is this, the fundamental premise of this bill is that it 

is a revenue-neutral bill. So my question is primarily to Mr. Boyle 

and to Dr. Martin and to Dr. Reed is in terms of how we order our 

national priorities, do you accept that fundamental premise? And 

if you don’t, why have you not come to us telling us that this is 

simply unacceptable? Why have you not come to us and tell us that 

higher education deserves to be a much higher priority than a revenue neutral proposition? 

And then I guess my more specific question is we have heard two 

statistics. Dr. Reed talked about a well-qualified student of limited 

means has an 80 percent chance of not going to college. And a Federal commission estimated that because of financial considerations, 

over four million people will not have access to higher education 

over the next decade. And so my specific question is do you believe 

that this bill as currently written is going to appreciably cut into 

either of those numbers? Start with Dr. Martin? 

Dr. MARTIN. Mr. Bishop, if you take the assumption that this bill 

as written being revenue neutral, does it move the bar up to help 

students? The answer is, at least in looking at the Title IV programs, the answer is yes, I think there are some improvements. 

Does it go to where we would like to see it go? Absolutely not. Do 

we believe that education ought to be a higher priority in this country? Absolutely. No doubt about it. We have talked about this for 

years in terms of trying to deal with this and so on. But you and 

I live also in a realistic world where there are changes in budgets 

and deficits and politics and all the other kind of things that deal 

with it. 

Let me say, though, that this Committee, which is an authorizing 

Committee, and this is an authorization bill, in my opinion there 

are two areas in this bill that this Committee, if it wishes to direct 

more money to education, you can either make changes along the 

lines of some of the other things that we have talked about and expansion, including Mr. Andrews’ bill, on the loan programs because 

they are entitlements and will be funded. You can add real benefits 

60

to students, both in terms, conditions, limits, all the other things 

that you want to debate. 

You also in my opinion, while you can set a Pell Grant authorization level at a certain level, we still have to go to appropriations 

and get it. The proposal that we put forward on the negative expected family contribution however if it was enacted would take 

that money from the current appropriations that are out there and 

it would least direct that to the poorest of the poor. Those are two 

areas where I think this Committee can make a difference. 

Mr. BISHOP. May I interrupt for a second? 

Dr. MARTIN. Yes, you may. 

Mr. BISHOP. With reference to assisting the poorest of the poor, 

which I would wholeheartedly endorse, how would you characterize 

or what is your position on the proposal in the bill to make at least 

a portion of Pell merit-based? 

Dr. MARTIN. My association has not taken a formal position on 

this, but let me give you a personal opinion, if I may. 

I think all of us want to try to ensure that students in high 

schools today are taking a rigorous curriculum to make certain that 

they are properly prepared to pursue post-secondary education. I 

think the idea of trying to recognize or provide some benefit to 

those students that do that is fine. 

My objection is, and while I understand that probably if this is 

enacted the state Scholars Programs will grow in the other states, 

but currently it is only in effect in 13 states. 

If I had my choice, what I would do is I would say this is that 

rigorous curriculum, which the state scholars support, and I would 

say to children in high schools across this country that if you 

achieve that curriculum and come out of it regardless of what public school districts you are in or what state or whatever, you are 

entitled to that additional bonus just like everybody else. And right 

now it will be limited and also you can have somebody with a minimum Pell Grant that would be eligible for a maximum $1,000. 

Even under the proposal that I have proposed of the negative EFC, 

the maximum that any student could get, which are the poorest of 

the poor, would only be $750, because that is where we have the 

negative EFC. 

Dr. REED. Congressman Bishop, one, there are many, many good 

things in this bill, and so we do support this bill. And I hope that 

you do that in your way of compromise. So it is a good bill for the 

many good things that are in there. 

No. 2, in part of my work life I was the chief of staff to the Governor of Florida for 8 years, and that was probably the single best 

education I ever received. What you are asking us who are biased, 

yes, I want you to put everything that you can in higher education. 

But as elected officials representative of this nation, I also know 

that you have to balance that because there are a lot of people who 

need health care. There are a lot of children who need services, a 

lot of elderly. I want to ride on good highways. I live in Los Angeles 

and you know what that is like. 

So it is a balance. What I worry about a lot is that higher education is about second or third on everybody’s list and it is not first. 

Yes, I would like to see it be first because of what I think it can 

61

do for the citizenship of this country. But I realize that you have 

got to balance that and I trust you all in that balance. 

No. 2, the merit part I would oppose. The merit-based financial 

aid programs in this country have grown in the last 10 years at an 

enormous rate. I have a record, if you want to go back and look 

at it, I opposed the merit-based financial aid program in Florida 

when I was chancellor. The only thing that I can say today is all 

of my friends now are calling me up saying, ‘‘You said so, you were 

right. What a mistake.’’ And what it has done it has tied the hands 

of the legislature. And I don’t want to see you tying your hands the 

way those programs were tied. 

Now, coming back, figuring out what the gentleman said earlier 

about how we can help the most needy students is the most important thing that you can do because if we can help them and help 

them get an opportunity to get a baccalaureate degree, then they 

will help this country by paying more taxes and contributing more 

to their communities. 

Mr. BOYLE. On the issue of merit-based versus aid based on 

need, this week’s Chronicle of Higher Education has a survey of a 

1,000 parents and 34 percent right now are claiming that their 

families are receiving merit-based scholarships. But of those parents who are on their way to college, doing my math here, 72 percent expect that their son or daughter will be getting an academicbased scholarship. And so part of I think our collective role is to 

educate families that we all have very special children but they 

may not be eligible for academic-based scholarships. 

And I think that returning to the system of 20 years ago where 

aid is based on need and it is much cleaner and it is a much more 

understandable system and if someone is able to meet the entrance 

requirements of a university, then they should be able to get the 

aid that they need. 

Mr. BISHOP. Thank you, Mr. Chairman. 

Chairman BOEHNER. The Chair recognizes the gentlelady from 

Minnesota, Ms. McCollum. 

Ms. MCCOLLUM. Thank you, Mr. Chair. I have been reading the 

bill so I have a couple of questions, but I think I am going to basically direct them to the Chair to get me some information. But I 

think you also might have some light to shed on these issues. 

So, Mr. Chair, I have been going through here and I have noticed 

numerous, numerous reports that the colleges have to be filling out 

to comply with, academic achievement, information to the public, 

and there are consequences to them for not fulfilling these reports. 

Many of these reports are in statute. Some of these are an expansion to statute. And I am wondering if we ran any kind of cost 

analysis on average what it is going to cost the higher education 

institutions to comply with this law? 

Chairman BOEHNER. There are no new reporting requirements 

for institutions of higher education until 2008 and only for those 

institutions who have increased their tuition at more than twice 

the rate of inflation for the 3 years leading up to that. 

Ms. MCCOLLUM. Thank you, Mr. Chair. Reclaiming my time, 

2008, so because it is a projected increase to the colleges for doing 

these reports in 2008, I am just to ignore and not have any information on what it is going to cost the colleges? 

62

Chairman BOEHNER. These are for only institutions who raise 

their tuition and fees at more than twice the rate of inflation. 

Ms. MCCOLLUM. Thank you, Mr. Chair. On the GAO study, because I wasn’t part of the working group that put this bill together—it is on page 29 of the bill—it says that ‘‘They shall conduct a study of policies and procedures of institutions increasing 

their costs.’’ That is one of the studies I referred to. There is nothing in here I see that asks GAO to state what the individual states 

have done where the colleges are located, if they have cut their 

support for financial aid or their support to the institution. And I 

have a question as to whether or not under—well, are books included in here with what is going on with textbooks? Because I 

hear that from students all the time with what is going on with 

their textbooks. Is that considered part of the total cost of the education under the report? 

Chairman BOEHNER. I think we are only looking at tuition and 

fees. 

Ms. MCCOLLUM. Well, you need the books to take the class. I 

think maybe we need to take a look at that. And if we are really 

going to be holding the colleges accountable for what is happening 

or the technical schools accountable for what is happening to their 

tuition, I think we have to look at what the states are doing. 

The states have been negligent for the large part, and maybe Dr. 

Martin would like to expand on this some more, for being involved. 

I know in my state 20 years ago, when the Federal Government 

was on hard times and the state was on hard times, we cut higher 

education. And they talk about all the increases on higher education. Well, folks, all the increased on higher education don’t 

match what has happened in the last 20 years with inflation to 

higher education. 

So we are not talking about where the base should be had it 

never been cut. And I think that holding schools accountable for 

fees that they can control is legitimate. When the state of Minnesota cuts higher education 14 percent, the U of M is opening its 

doors to the freshmen class and for those returning 6 months later, 

it is kind of stuck. And I don’t think that that is fair not to include 

that, and maybe someone from the panel would like to elaborate 

on that. 

Chairman BOEHNER. Well, if the gentlelady would yield, and I 

won’t take this off your time, but I agree with you entirely. The 

states for the last 25 years have systematically shifted their responsibility in higher education from themselves onto the backs of 

the Federal taxpayers. And if you look at the explosive growth both 

of Pell Grants and of student loans, you will see that we are picking up a far greater share and it hasn’t slowed down at all, especially over the last 10 years. And if you look out over the next 10 

years, you will see that the Federal Government’s share of the cost 

of higher education will continue to explode exponentially. 

Anyone on the— 

Ms. MCCOLLUM. Mr. Chair, you made my point why we need to 

include it. Dr. Martin? 

Dr. MARTIN. I think Dr. Reed made this point earlier in terms 

of doing it, and he probably has more experience about this than 

I do because of his position, but we have seen a shift in terms of 

63

many states adopting policy positions that have moved from a philosophy of several years ago of low tuition, particularly in statesupported colleges and universities, to modest to middle to even 

high tuition with the idea that we will make the difference so that 

we still have access by increasing out state aid programs. The unfortunate part of that is is as we have gone into that policy, in 

many cases the state aid has not kept up proportionately to the 

other costs. 

And you are right, when we cut back on that and change that, 

I agree with Dr. Reed that there are a lot of competing priorities 

out there in statehouses across the board. And quite honestly higher education frequently is on the tail end of those priorities, unfortunately. And the reason is because they still recognize that many 

people will still pay the price because of the benefits and so they 

can get away with raising tuition and fees in public institutions 

easier than they can in not addressing other kinds of priorities that 

the state has, including many of the unfunded Federal mandates 

that have been imposed on them even by the Federal Government. 

So it is a balancing act. It is very, very difficult. And we recognize it. But I would agree with you on this that if we don’t begin 

to pay some attention to doing this, as we keep going in this kind 

of imbalanced direction, and we keep depending only upon credit 

financing to do this, to finance higher education, we are going to 

do a terrible disservice to this country, and particularly when you 

look at the changing demographics and the wave of people coming 

forward. And if we do not spend the resources to provide education 

and skills to those people, this country will lose the prominence 

and the richness and many of the virtues that we have today. 

Chairman BOEHNER. The Chair recognizes the gentleman from 

Georgia, Mr. Isakson. 

Mr. ISAKSON. Thank you, Mr. Chairman. Dr. Reed, I apologize 

that I was not here to hear personally your testimony or that of 

the other panelists; however, I read your testimony and I wanted 

to particularly thank you for your comments with regard to distance education. I thought you put it very succinctly about the environment we were in in 1998 and the one we find ourselves in 

today, which is a sea change. 

I would like to ask you, however, are you comfortable with the 

accountability and administrative procedures governing distance 

education today as it now exists? 

Dr. REED. Well, if I said no I would be indicting myself. And I 

don’t want to do that. Yes, I am. It can get better. It will get better, 

because we are kind of learning as we are doing, and I think that 

that is what we will need to continue to do. And I think, back to 

Congressman McCollum’s first statement, this Committee could 

look at all of the reporting that is required by those of us in higher 

education and help lower some of the administrative cost burdens 

but also keep in place the kinds of accountability that we really 

need to have and report to you so that we are responsible and accountable for your resources. 

Mr. ISAKSON. Thank you. I noted your comment about the accrediting agencies, too, and although you included them in the same 

statement with yourself, my observation is they have come light 

years in the past two or 3 years in terms of accreditation of disVerDate 0ct 09 2002 13:31 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00067 Fmt 6633 Sfmt 6602 H:\DOCS\93631 EDUWK PsN: NNIXON
64

tance learning and are really up to speed now I think compared to 

where there was some reluctance to even address it five or 6 years 

ago. Is that correct? 

Dr. REED. That is correct, and we will see that get better. I am 

proud that the Western Association of Schools and Colleges has led 

that effort but so have all the other regional accrediting organizations really improved in the last couple of years. 

Mr. ISAKSON. And my last question, and pardon me for concentrating just on that subject but it is one I have had a great interest 

in for some time, I have felt three or 4 years ago when we really 

started investigating this that this would allow us to reach so 

many of what I call non-traditional students and also had the distance learning and also had the promise of alleviating some of the 

enrollment and some of the overcrowding problems experienced in 

some of our colleges and universities. Is that in fact now a reality? 

Dr. REED. That is in fact a reality. I have pushed as hard as I 

can as the chancellor of the university system to see our faculty 

maybe only have to have their students come to class instead of 3 

days a week, 2 days. And that other day through the use of technology, through the lab, through video, that they could then use 

that to be a part of their learning experience and enrich what they 

have done. This morning I was sharing another story about distance education. The movie industry in California is desperate for 

animators. And not to make cartoons but that is the way movies 

are being made. Well, all of the industry came together and asked 

the California State University to help them out and if they would 

contribute money, but what they have ended up doing is contributing staff. 

And so the folks at Disney, the Spielbergs, have donated their 

staff, who by television, by computer, by the Web are teaching students in San Jose today how to be animators. And they are very 

successful. They are producing more animators than some of the 

institutions in the LA Basin and are very proud just because of the 

kinds of students that San Jose has. 

So it is working and it can get better. 

Mr. ISAKSON. Well, my last, and this is really a comment, we 

were doing a lot of the stuff on the 15 percent rule and the 12-Hour 

rule and some of the other things that were impediments really for 

distance learning. We had a lot of faculty members at universities 

who were very reluctant to embrace it because of the relationship 

with a student and not having the face to face time. I recently had 

a professor at a university in Georgia comment that he had fought 

it for so long because he felt like it deprived students of access 

until he remembered that when he got home at night he would just 

take his phone off the hook and his students couldn’t get him but 

he cannot deny his e-mail, they can get him any time they want 

to. 

So I thought that was an interesting comment in terms of the 

faculty and student relationship. 

Thank you, Mr. Chairman. 

Chairman BOEHNER. The Chair recognizes the gentleman from 

Massachusetts, Mr. Tierney. 

65

Mr. TIERNEY. Thank you, Mr. Chairman. I thank all of you witnesses for your testimony today. I apologize for missing some of it, 

but I found it to be very forthcoming and direct and helpful. 

Dr. Reed, because you are involved in managing a campus I 

wanted to ask you a question. We talk in this bill about tuition 

hikes compared to the Consumer Price Index. I have a little experience with higher education situations and it strikes me that the 

Consumer Price Index and what it measures in terms of products 

in the basket might not even be close to what institutions experience, energy costs, security, technology, and facilities. 

I had an alternative with other members here, Ms. McCollum 

and others, that would have asked the Department of Education to 

establish a higher education price index that we hoped would be 

more reflective of the kinds of costs that colleges and universities 

experience. Do you think that is worth pursuing? Do you think 

there is in fact a disparity between the CPI and the real index that 

would affect colleges and universities? 

Dr. REED. I do think it is worth pursuing. I don’t know what all 

is included in the price index of higher education. 

Mr. TIERNEY. But do you think it is different than the regular— 

Dr. REED. But I do want you to know that I entered into an 

agreement yesterday with the Governor of California, as my colleague at the University of California did, where we have agreed 

to tie our future fee increases to a personal income increase of the 

citizens of California. 

Mr. TIERNEY. So if I am correct, your tuition can’t increase any 

more than the rate of income? 

Dr. REED. Personal income. 

Mr. TIERNEY. That was at a mean rate of income or an average? 

Dr. REED. It is an average. 

Mr. TIERNEY. So when Mr. Schwarzenegger makes another 

movie, that thing can go up like crazy? 

Dr. REED. Yes, that is right. 

Mr. TIERNEY. I think you got taken there. I don’t want to say 

anything, Dr. Reed, but you were taken to school on that one. 

Dr. REED. And there was a provision in there if there is some 

huge emergency we can increase fees up to 10 percent but it is 

capped at that. But the real focus was back on the tie to the personal income. 

Mr. TIERNEY. Thank you. The campus-based aid issue, and I 

open this up for anybody who wants to address it or whatever, does 

anybody have any evidence that institutions are currently getting 

any part of the campus-based aid to students who do not have an 

unmet need? 

Dr. MARTIN. No, the students that receive the campus-based aid 

have to be eligible to meet the criteria, Mr. Tierney. So, no, there 

is no student getting money now that is not eligible. 

Mr. TIERNEY. That is my point. So when I read this bill I have 

the real concern that it is going to result in some students not getting the aid they need and others getting aid that they need. And 

it seems like we are getting into a beg your neighbor type of situation on that. So I just wanted to clarify that point and make sure 

that we are all on the same page. 

66

The proprietary schools issue. There is a lot of concern that we 

put in protections against fraud and abuse some time in the 1980’s 

because of the scandals that were out there and now there is some 

indication in the National Student Loan Data System that in 2001 

reports that proprietary schools for that year, 2001, had an overall 

default rate on student loans of 9 percent contrasted with a 5.3 

percent for public colleges and 3.5 percent for private colleges. 

Should we still have a concern about the possibility of a fraud and 

abuse in proprietary schools if we abolish the 90/10 rule? And if we 

do still have that concern and if we still do abolish the 90/10 rule, 

what other protections might you recommend we put in place to alleviate any concern about fraud and abuse? 

Dr. MARTIN. Mr. Tierney, I don’t know about the 90/10 thing, let 

me make a comment about the differences I think on the default 

rates. If you look at everything I have ever read about default rates 

is there is a tendency of people who have higher incomes are more 

likely to be able to pay their loans off more rapidly and are less 

likely to default than people that have modest means. If you look 

at the economic make-up of students who are enrolled in different 

sectors of higher education, there is a relationship if you looked at 

community colleges or say proprietary institutions and that they 

probably have a higher proportion of lower income students in their 

institutions than would certain other sectors. 

This doesn’t mean, this doesn’t mean that people that have modest economic means are not serious or responsible about paying 

back their debts. It is not an unwillingness to repay. In many cases 

they find themselves after they are out with lower paying jobs or 

whatever, that they don’t have the ability. And so there is a higher 

propensity of some of those people not to be able to manage their 

debt. 

Mr. TIERNEY. May I interject something, Mr. Chairman. Do I 

have your allowance to do that? I know I am a little over my time. 

But aren’t we talking about the whole universe of these students 

all being financially eligible to get these loans so they are all pretty 

much in that financial category? So a lot of the institutions may 

have more of a student, these students we are talking about whose 

payment rates are being judged are pretty much the same kettle 

of fish here. They are all eligible financially for these loans so they 

are all pretty much in the same circumstance. So I am not sure I 

follow your logic when you compare the institutions. 

Dr. MARTIN. I was just trying to compare, maybe I misunderstood you, Mr. Tierney, but I understood that you were talking 

about differences of what are the default rates by sectors in postsecondary education? 

Mr. TIERNEY. I did, but basically I think I don’t draw that to be 

that because a school might have a lot of wealthier kids and than 

some poorer kids that that somehow leads to them not having a 

payment schedule because all the kids getting the loans are in the 

same economic area. It seems to me that those protections work 

and even with those protections in place, we are finding a higher 

default rate on these proprietary schools because of the way they 

are structured than we do in the public and the private institutions 

on that. And I see Dr. Reed nodding a little bit there. You might 

want to help me out here if I am not explaining it clearly enough. 

67

Dr. REED. Yes, I think you are correct. I think it is a part of the 

due diligence and the responsibility of these institutions and I 

think the more you make the information you have public, the better. California State University, we are mostly poor students. Our 

default rate is 3.7 percent. I want it to get better. But it is something that my board pays attention to and makes us report publicly. And I think the more we can do that, the better. 

Mr. TIERNEY. And do you have a comment on how we would, if 

we were going to remove the 90/10 rule of proprietary schools, how 

would we then ensure against fraud and abuse if they are already 

higher than your institution and others like it? 

Dr. REED. I don’t know. 

Mr. TIERNEY. OK. 

Chairman BOEHNER. If the gentleman would yield? 

Mr. TIERNEY. Mr. Chairman wants to be a witness? 

Chairman BOEHNER. Well, I want to be helpful. When there were 

serious problems in the 1980’s with certain types of institutions, 

Congress slapped multiple layers of accountability on these institutions where the abuse was coming from. And many of us believe 

that 90/10 is inhibiting schools from going into very poor neighborhoods and offering students a chance in those neighborhoods. 

And if you look around the country, you will see a lot of institutions that were once there, in large urban centers especially, are 

no longer there. And I believe and others believe that the accountability provisions still in the law are more than sufficient to prevent the abuse that we saw back in the 1980’s and early 1990’s in 

that 90/10 is in fact overlapping and redundant and frankly unnecessary. 

Mr. TIERNEY. Reclaiming my time, and I appreciate that. I pretty 

much knew what your theory was and I was sort of giving you that 

in my question just for argument sake. Assuming that you get rid 

of the 90/10 rule and looking at the facts of saying either with the 

90/10 rule proprietary schools aren’t doing anywhere near as well 

as public colleges and private colleges, my real question what other 

protections do we put in place because in my estimation the existing ones aren’t enough if the ones we put in the 1980’s still aren’t 

doing the job, the existing ones aren’t enough, what would you substitute for the 90/10 if you wanted to get rid of the 90/10 and that 

was really where I was going. 

So I was almost willing to give you your argument that you think 

that those might be the wrong set of situations there but clearly 

something is needed to do a better job than we are doing now. And 

if you take away the 90/10, I didn’t know if anybody had any suggestions of what they thought we might replace it with in order to 

try to bring those numbers down. Ms. Wasserman, you do. 

Ms. WASSERMAN. Yes, I think I know that there has been work 

by the National Consumer Law Center and the Workforce Alliance 

to look at things like doing a non-partisan study to figure out 

where the fraud and abuse lies because some statistics are that 

just in 2003 the Department of Education’s Inspector General made 

public seven audits documenting serious fraud and abuse in school 

administration of Federal aid. Those schools had to return over $50 

million to the Department, lenders and students. 

68

So there is fraud and there is abuse. And we do need to find out 

more about that. I think keeping the rules that we have, keeping 

the protections that we have and then doing the research to figure 

out what are those other things that we can do, are positive steps 

that we should look at in this reauthorization. There are still 

schools that are closing. In 2002, over 100 computer training 

schools closed in 23 states. Of those schools, only 25 provided advance notice. So there are real issues, and I think we do have to 

make sure that students are protected. 

Mr. TIERNEY. I thank the witness. Mr. Chairman, I thank you for 

your indulgence. 

Chairman BOEHNER. The Chair recognizes the gentleman from 

Texas. I am sorry, Dr. Reed has got to catch a plane and so, Dr. 

Reed, you are excused. We don’t have to go through all the reasons, 

but the Chair recognizes the gentleman from Texas, Mr. Hinojosa. 

Mr. HINOJOSA. Thank you, Mr. Chairman. I ask for unanimous 

consent that my opening statement be allowed to be entered into 

the record. 

Chairman BOEHNER. Without objection. 

[The prepared statement of Mr. Hinojosa follows:]

69

Statement of Hon. Ruben Hinojosa, a Representative in Congress from the 

State of Texas


93631.030
70

Mr. HINOJOSA. Thank you. I am sorry to see Chancellor Reed 

have to leave but I will ask my questions then to possibly Dr. Martin and the other gentleman. 

I thank you all for coming to testify today. Your testimony in 

support of strengthening, actually it was Chancellor Reed who gave 

testimony in support of strengthening Hispanic-serving institutions, HSI’s, establishing a graduate program for HSI’s is one of 

the top priorities for the Congressional Hispanic Caucus and to the 

Hispanic community from West Coast to East Coast and some of 

the territories. 

Could you please discuss the implications for higher education 

research and industry if we do not raise the level of advanced degree attainment in the Hispanic community, Dr. Martin? 

Dr. MARTIN. Mr. Hinojosa, I fully support obviously trying to 

make certain that we do what we can to ensure that we have equal 

participation in our society from all people. And I think to the degree, if you look at who goes on to obtain higher education graduate professional degrees, obviously we have a lot of under representation not only in the Hispanic community but within some 

of our other minority communities in this country. 

I have long believed that anything that we can do to strengthen 

that and recognize maybe some additional need-based aid in the 

graduate and professional areas is important. While this particular 

provision is not the topic that necessarily falls under our association directly, I think that it is a good idea to address this issue, 

to see what we can do to strengthen those institutions and to provide that kind of support for those individuals. 

Mr. BOYLE. I agree. At the suggestion of the GEAR-Up group, we 

participated in Feria Educativa Fair in South Florida in December 

and were literally besieged by hundreds of Latino parents who 

were wanting more information about how they could better understand the process of preparing, applying to, and financing of college. And we at our group of College Parents of America are actively hoping that we can secure necessary funding to put our Web 

site into Spanish and to work with partners to create a greater distribution of Spanish language material. 

Mr. HINOJOSA. Well, I want to say that in the 8 years that I have 

been in Congress I have seen the increases that have occurred in 

trying to get more HSI’s to be able to get designated and monies 

so that they can do the recruitment and tutoring and mentoring 

and retention and seeing how this bill only increases the minimum 

grants for the HBCUs from $500,000 to $750,000, it seems like the 

experience I have had two or 3 years where we have been getting 

crumbs increases for the HSIs that we are getting right back to 

where we were 10 years ago where there was a great deal of neglect for the Latino community, and I think that that is a serious 

mistake in this legislation. 

Also, I see that the question that I asked is not being addressed 

in ways that will give us more professors at the universities where 

we have an acute shortage of professors, and especially Latino professors. And if we are to be able to take care of the needs of this 

very fast-growing ethnic group, I think that this legislation is lacking in order to meet the needs of what we need for higher eduVerDate 0ct 09 2002 13:31 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6602 H:\DOCS\93631 EDUWK PsN: NNIXON
71

cation and would like to have this young lady’s—sorry, I can’t see 

your name from here, but I would like to have your comments. 

Ms. WASSERMAN. I think that that is a critical point and in a bill 

that has this Bill of Academic Rights talking about diverse viewpoints and intellectual pluralism being important, for us, when we 

look at the bill, we are looking are what are the ways we are going 

to have real increased diversity points in our campus and that is 

going to be to support the increase of Latino students on campus 

and that is what is attracts those students is becoming the professors of the future. And it is supporting HSIs, it is supporting 

HBCU’s, it is finding ways to support other programs that our outside of this reauthorization process like affirmative action, that we 

support those programs that we think will make the difference in 

who is in our classrooms and who goes on to reach higher level degrees. 

Mr. HINOJOSA. Well, it seems like all of you agree but I don’t 

hear that you all are making a strong statement that this bill is 

short of what we need for the next 6 years. And unless you speak 

up, I don’t see that Congress is going to wake up to the fact that 

there are over 2.5 million Latino students and another 2.5 who 

would like to get into college simply because we don’t have enough 

professors. Classes close like this once they open them for registration because we don’t have enough professors and we have got to 

have Master’s and Ph.D.’s to be able to teach at the university 

level. So I need to hear your community to really rise and speak 

up so that the shortfall that occurs in the new reauthorization act 

that that gap is closed so that we can indeed serve all those who 

are qualified and wanting to go to college. 

So with that, I yield back the balance of my time. 

Chairman BOEHNER. I want to thank all of our witnesses for 

your patience and our audience for your patience during our interruption today. We appreciate your valued testimony, and I expect 

that the Committee will have another hearing probably after members return from the Memorial Day district work period and begin 

to delve a little more deeply into some of these subjects that were 

talked about today. 

Ms. MCCOLLUM. Mr. Chair? 

Chairman BOEHNER. Ms. McCollum. 

Ms. MCCOLLUM. I would like to add in an editorial from the Minneapolis Tribune which talks about access to higher education. 

Chairman BOEHNER. Without objection, so ordered. 

[The provided material follows:]

72

Editorial from the Minneapolis Star Tribune, Submitted for the Record by 

Hon. Betty McCollum


93631.023
73

Chairman BOEHNER. Mr. Kildee? 

Mr. KILDEE. I just want to thank all the witnesses. We have had 

a very good panel today. You have responded to our questions very 

well. All of you have done well. I do think, Ms. Wasserman, you 

responded and reacted well to tough and hard questions on both 

sides of the aisle, and I commend you for that. 

Ms. WASSERMAN. Thank you. 

Chairman BOEHNER. This hearing is now adjourned. 

[Whereupon, at 2:30 p.m., the Committee was adjourned.] 

[Additional material submitted for the record follows:]

74

Statement of Hon. Pete Hoekstra, a Representative in Congress from the 

State of Michigan


93631.031
75


93631.032
76

Statement of Hon. Charlie Norwood, a Representative in Congress from the 

State of Georgia

Statement of Hon. Raul M. Grijalva, a Representative in Congress from the 

State of Arizona


93631.016 93631.013
77

Statement of Hon. Jon Porter, a Representative in Congress from the State 

of Nevada

Question from Hon. Pete Hoekstra, Submitted for the Record 

Please explain the primary sources of revenue and funding for your organization. 

What percentage of your budget is composed member dues? Please also include 

other sources that comprise more than 10 percent of your annual operating budget, 

including the approximate percentage contribution made by each alternative source. 

Response of Jim Boyle, President, College Parents of America, Submitted 

for the Record 

College Parents of America’s primary sources of revenue and funding are member 

dues and partner fees. 

Member dues are comprised of both individual and institutional monies. Individual members, generally parents of current or future college parents, pay an annual fee of $36.50, or may join for up to five years at a discounted price of $109. 

There are currently more than 1300 active individual members. Institutional members, generally comprised of colleges and universities (with a handful of school districts and/or independent secondary schools), pay an annual fee of $495. There are 

currently 68 active institutional members. 

Partner fees are negotiated with companies who wish to serve the current and future college parent market, and who see College Parents of America as a viable 

partner for accomplishing their objectives. Current partner fees range as high as 

$90,000 per year to as low as $495, with a share of revenue gained through the 

partnership always part of the equation. There are currently 10 signed corporate 

partners, with several others in negotiation. 

As of June 2004, approximately 40 % of total revenues this year have been derived from member dues, with slightly more than 60 % of that figure coming from 

individuals and the remainder from institutions. During this year to date, therefore, 


93631.033
78

approximately 60 of total revenues have been derived from fees paid by corporate 

partners. 

Response of Dr. A. Dallas Martin, President, National Association of 

Student Financial Aid Administrators, Submitted for the Record 

In response to Congressman Hoekstra’s question, NASFAA Operating Budget for 

the 2003–04 fiscal year is $6,103,000. 

The Association has seven primary sources of revenue and funding which are listed below with the percentage derived from each.

Association Membership Dues–50%

Association Conference Registrations–12%

External Advertising, Exhibitors, Sponsors–18%

Association Publications and Subscription–6%

Association Training Sessions and Materials–5%

Association Investment Income–5%

Association Development Activities–4%

If you need further information, please let me know.

Sincerely,

Dr. A. Dallas Martin 

Response of Rebecca J. Wasserman, President, United States Student 

Association, Submitted for the Record 

The Honorable Pete Hoekstra 

United States House of Representatives 

2234 Rayburn House Office Building 

Washington, DC 20515

06/04/2004

Dear Representative Hoekstra,

The United States Student Association (USSA) is almost entirely funded by dues 

from membership campuses through their student governments. 59% of this year’s 

operating budget comes directly from campus and state student association dues. 

The only other income item that is over 10% of our budget is the income received 

from our two annual conferences, our National Legislative Conference in Washington, DC and our National Student Congress held on a different college campus 

each year. These two conferences’’ combined revenue accounts for 24% of our income. Overall, membership dues and conferences account for 83% of our income. 

I hope this gives some insight to the budget of our organization.

Thank you,

Rebecca J. Wasserman 

President, USSA 

79

Additional Statement of Dr. Dallas Martin, President, National Association 

of Student Financial Aid Administrators, Washington, DC, Submitted for 

the Record


93631.017
80


93631.018
81


93631.019
82


93631.020
83

Letter from Michael Grayer, Recent Graduate, Virginia College, Jackson, 

Mississippi, Submitted for the Record

Æ


93631.021 93631.022