```

[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]

 
                  PAYING FOR COLLEGE: HIGHER EDUCATION
                       AND THE AMERICAN TAXPAYER

=======================================================================

                             FIELD HEARING

                               before the

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                September 1, 2006, in Greeley, Colorado

                               __________

                           Serial No. 109-56

                               __________

  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

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
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_____________________________________________________________________________
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                COMMITTEE ON EDUCATION AND THE WORKFORCE

            HOWARD P. ``BUCK'' McKEON, California, Chairman

Thomas E. Petri, Wisconsin, Vice     George Miller, California,
    Chairman                           Ranking Minority Member
Michael N. Castle, Delaware          Dale E. Kildee, Michigan
Sam Johnson, Texas                   Major R. Owens, New York
Mark E. Souder, Indiana              Donald M. Payne, New Jersey
Charlie Norwood, Georgia             Robert E. Andrews, New Jersey
Vernon J. Ehlers, Michigan           Robert C. Scott, Virginia
Judy Biggert, Illinois               Lynn C. Woolsey, California
Todd Russell Platts, Pennsylvania    Ruben Hinojosa, Texas
Patrick J. Tiberi, Ohio              Carolyn McCarthy, New York
Ric Keller, Florida                  John F. Tierney, Massachusetts
Tom Osborne, Nebraska                Ron Kind, Wisconsin
Joe Wilson, South Carolina           Dennis J. Kucinich, Ohio
Jon C. Porter, Nevada                David Wu, Oregon
John Kline, Minnesota                Rush D. Holt, New Jersey
Marilyn N. Musgrave, Colorado        Susan A. Davis, California
Bob Inglis, South Carolina           Betty McCollum, Minnesota
Cathy McMorris, Washington           Danny K. Davis, Illinois
Kenny Marchant, Texas                Raul M. Grijalva, Arizona
Tom Price, Georgia                   Chris Van Hollen, Maryland
Luis G. Fortuno, Puerto Rico         Tim Ryan, Ohio
Bobby Jindal, Louisiana              Timothy H. Bishop, New York
Charles W. Boustany, Jr., Louisiana  [Vacancy]
Virginia Foxx, North Carolina
Thelma D. Drake, Virginia
John R. ``Randy'' Kuhl, Jr., New 
    York
[Vacancy]

                       Vic Klatt, Staff Director
        Mark Zuckerman, Minority Staff Director, General Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on September 1, 2006................................     1

Statement of Members:
    Mckeon, Hon. Howard P. ``Buck,'' Chairman, Committee on 
      Education and the Workforce................................     1
        Prepared statement of....................................     3
    Musgrave, Hon. Marilyn N., a Representative in Congress from 
      the State of Colorado......................................     4

Statement of Witnesses:
    DeMuth, Debra L., director, College Access Network and 
      CollegeInvest..............................................    32
        Prepared statement of....................................    33
    Gardner, Hon. Cory, Colorado State representative............    12
        Prepared statement of....................................    14
    Kobach, Kris W., professor of law, University of Missouri--
      Kansas City School of Law; senior counsel, Immigration and 
      Reform Law Institute.......................................     7
        Prepared statement of....................................     9
    Liddell, Dr. Marilynn, president, Aims Community College.....    35
        Presentation.............................................    37
    Polis, Jared, vice chairman and member at large, Colorado 
      State Board of Education...................................    17
        Prepared statement of....................................    19
    Shaw, Theresa S., Chief Operating Officer, Federal Student 
      Aid, U.S. Department of Education..........................    25
        Prepared statement of....................................    27

Additional Material Submitted:
    National Association for College Admission Counseling 
      (NACAC), prepared statement of.............................    46

     PAYING FOR COLLEGE: HIGHER EDUCATION AND THE AMERICAN TAXPAYER

                              ----------                              

                       Friday, September 1, 2006

                     U.S. House of Representatives

                Committee on Education and the Workforce

                              Greeley, CO

                              ----------                              

    The committee met, pursuant to call, at 9 a.m., in Panorama 
Room, University Center, University of Northern Colorado, 2045 
10th Avenue, Greeley, Colorado, Hon. Howard P. ``Buck`` McKeon 
(chairman of the committee) presiding.
    Present: Representatives McKeon, Musgrave.
    Staff Present: Amy Raaf, Professional Staff Member; Lindsey 
Mask, Press Secretary; James Bergeron, Director of Member 
Services and Coalition Outreach.
    Chairman McKeon. The Committee on Education and the 
Workforce will come to order.
    Thank you. We are holding this field hearing today to hear 
testimony on paying for college, higher education and the 
American taxpayer. With that, I ask unanimous consent for the 
hearing record to remain open 14 days to allow member 
statements and other extraneous material referenced during the 
hearing to be submitted in the official hearing record.
    Without objection, so ordered.
    Thank you all for joining us here today at this morning's 
hearing. I especially want to thank our witnesses for agreeing 
to testify, as well as my Education and WorkForce Committee 
colleague, a strong member of the committee, Congresswoman 
Musgrave, who is hosting us here today, and I really appreciate 
the invitation to come to this beautiful part of the country. 
You are blessed to live here.
    Ms. Musgrave. I believe that; yes.
    Chairman McKeon. The topic of today's hearing is rather 
self-explanatory. Paying for college, higher education and the 
American taxpayer.
    This title reminds us of the very real stake our Nation's 
working and taxpaying families have in U.S. colleges and 
universities.
    Institutions like the University of Northern Colorado are 
on the front lines in keeping America competitive with our 
global counterparts, and to do that, taxpayers at both the 
state and Federal levels have been asked to contribute to 
programs aimed at expanding college access.
    At the Federal level, our commitment to student aid is 
great and grows with each passing year. Last year, some $90 
billion in Federal dollars funded student aid programs, from 
loans and grants to work-study programs and education tax 
benefits.
    That is nearly triple what it was just a decade ago. 
Support for higher education has been a priority of our Nation 
for some time. More than four decades ago, when the Higher 
Education Act was enacted, the purpose of this hefty investment 
was clear--to expand college access. The goals remain the same 
today.
    However, faced with an increasingly competitive global 
economy in which postsecondary education is more necessary than 
ever, ensuring that Federal dollars are spent effectively and 
efficiently is a bottom-line issue for students, parents, and 
taxpayers alike. And that is really what today's hearing is all 
about--examining our record on efficiency and effectively 
utilizing taxpayer resources to fulfill our priority of 
expanding access to college.
    The congressional record on college access is one of which 
I am proud. As I noted, over the past 10 years, Federal student 
aid benefits have nearly tripled, and in just this year alone, 
we have taken unprecedented steps to reaffirm our commitment to 
college students and their families.
    For example, we reduced excessive Federal subsidies for the 
student loan industry, maintained current law written by 
Republicans and Democrats alike, in 2002 and 2003, to establish 
a low fixed rate for student loans, which will provide millions 
of students greater financial security in the years to come.
    Increased loan limits for students, so they can borrow more 
during their initial and most critical years in college. 
Provided additional grant money so more high-achieving, low- 
and middle-income high school students can attend college, and 
established a new scholarship program for high-achieving 
college students studying math, science, and critical foreign 
languages in college.
    All of those new student benefits are the law of the land 
right now. Earlier this year, the House also voted to make Pell 
grant funding available year around, to empower parents and 
students through ``sunshine'' and transparency in college costs 
and accreditation, and strengthen minority-serving institutions 
across the country.
    In short, on matters related to higher education, this has 
been a busy and a productive year. Each and every one of these 
new benefits we voted to establish this year fulfills our 
priority to expand college access, and, indeed, they represent 
an efficient and effective use of taxpayer resources.
    I will be eager to discuss these benefits with our 
witnesses later this morning.
    Unfortunately, some in Washington, and frankly, in many 
state capitals across the Nation as well, have championed 
policies that I believe reflect nothing less than misplaced 
priorities when it comes to college access.
    Our first panel of witnesses will testify on what I believe 
to be one of these policies.
    This summer, there has been a great deal of attention 
focused on the illegal immigration crisis our Nation currently 
faces. Much has been written about the House and Senate-passed 
bills to respond to the growing problem, and it is certainly 
not my intent to rehash every aspect of that debate at this 
hearing.
    However, since the hearing has been called to examine the 
use of taxpayer resources to expand college access, I believe 
one specific element of the debate does warrant closer 
attention.
    Buried deep within the Senate-passed immigration bill, 
commonly referred to as the Reid-Kennedy bill, is a provision 
to repeal a 1996 Federal law that prohibits states from 
offering in-state tuition rates to illegal immigrants, unless 
that state also offers the same benefit to all U.S. citizens.
    In essence, the Reid-Kennedy bill would provide a benefit 
meant for taxpayers, in-state tuition rates to illegal 
immigrants who, by definition, don't pay taxes.
    Understandably, the inclusion of this controversial repeal 
in the Reid-Kennedy bill has raised eyebrows among many Members 
of Congress, this one included.
    As we convene today to discuss the efficient and effective 
use of taxpayer resources to expand college access, I can't 
help but think that providing benefits for illegal immigrants, 
that aren't provided for all law-abiding American citizens, is 
neither efficient nor effective.
    Before us today are two panels of witnesses. The first will 
address the Senate's proposed expansion of in-state tuition for 
illegal immigrants, and the second will examine congressional 
efforts to expand college access for U.S. students.
    I thank both panels for joining us today and I am eager to 
hear their testimony on the matters before us.
    [The prepared statement of Mr. McKeon follows:]

    Prepared Statement of Hon. Howard P. ``Buck'' McKeon, Chairman, 
                Committee on Education and the Workforce

    Thank you all for joining us at this morning's hearing. I 
especially want to thank our witnesses for agreeing to testify, as well 
as my Education & the Workforce Committee colleague, Congresswoman 
Musgrave, for hosting me here in her district. It's a pleasure to be in 
Colorado.
    The topic of today's hearing is rather self-explanatory--``Paying 
for College: Higher Education and the American Taxpayer.'' This title 
reminds us of the very real stake our nation's working--and tax 
paying--families have in U.S. colleges and universities. Institutions 
like the University of Northern Colorado are on the frontlines in 
keeping America competitive with our global counterparts. And to do 
that, taxpayers at both the state and federal levels have been asked to 
contribute to programs aimed at expanding college access.
    At the federal level, our commitment to student aid is great--and 
grows with each passing year. Last year, some $90 BILLION in federal 
dollars funded student aid programs--from loans and grants to work-
study programs and education tax benefits. That's nearly TRIPLE what it 
was just a decade ago.
    Support for higher education has been a priority of our nation for 
some time. More than four decades ago, when the Higher Education Act 
was enacted, the purpose of this hefty investment was clear: to expand 
college access. The goal remains the same today.
    However, faced with an increasingly competitive global economy in 
which postsecondary education is more necessary than ever, ensuring 
that federal dollars are spent effectively and efficiently is a bottom 
line issue for students, parents, and taxpayers alike. And that's 
really what today's hearing is all about: examining our record on 
efficiently and effectively utilizing taxpayer resources to fulfill our 
priority of expanding access to college.
    The congressional record on college access is one of which I am 
proud. As I noted, over the past ten years, federal student aid 
benefits have nearly tripled. And in just this year alone, we have 
taken unprecedented steps to reaffirm our commitment to college 
students and their families. For example, we:
     Reduced out of control federal subsidies for the student 
loan industry;
     Maintained current law written by Republicans and 
Democrats alike in 2002 and 2003 to establish a low, fixed-rate for 
student loans, which will provide millions of students greater 
financial certainty in the years to come;
     Increased loan limits for students so they can borrow more 
during their initial--and most critical--years in college;
     Provided additional grant money so more high-achieving, 
low- and middle-income high school students can attend college; and
     Established a new scholarship program for high-achieving 
college students studying math, science, and critical foreign languages 
in college.
    All of those new student benefits are the law of the land RIGHT 
NOW. Earlier this year, the House also voted to make Pell Grant funding 
available year-round, empower parents and students through ``sunshine'' 
and transparency in college costs and accreditation, and strengthen 
minority-serving institutions across the country.
    In short, on matters related to higher education, this has been a 
busy--and productive--year. Each and every one of these new benefits we 
voted to establish this year fulfill of our priority to expand college 
access. And, indeed, they represent an efficient and effective use of 
taxpayer resources. I'll be eager to discuss these benefits with our 
witnesses later this morning.
    Unfortunately, some in Washington--and frankly in many state 
capitals across the nation as well--have championed policies that I 
believe reflect nothing less than misplaced priorities when it comes to 
college access. Our first panel of witnesses will testify on what I 
believe to be one of those policies.
    This summer, there has been a great amount of attention focused on 
the illegal immigration crisis our nation currently faces. Much has 
been written about the House and Senate-passed bills to respond to the 
growing problem, and it's certainly not my intent to rehash every 
aspect of the debate at this hearing. However, since the hearing has 
been called to examine the use of taxpayer resources to expand college 
access, I believe one specific element of the debate does warrant 
closer attention.
    Buried deep within the Senate-passed immigration bill, commonly 
referred to as the Reid-Kennedy bill, is a provision to repeal a 1996 
federal law that prohibits states from offering in-state tuition rates 
to illegal immigrants unless that state also offers the same benefit to 
all U.S. citizens. In essence, the Reid-Kennedy bill would provide a 
benefit meant for taxpayers--in-state tuition rates--to illegal 
immigrants, who by definition don't pay taxes.
    Understandably, the inclusion of this controversial repeal in the 
Reid-Kennedy bill has raised eyebrows among many Members of Congress--
this one included. As we convene today to discuss the efficient and 
effective use of taxpayer resources to expand college access, I can't 
help but think that providing benefits for illegal immigrants that 
aren't provided for all law-abiding American citizens is neither 
efficient nor effective.
    Before us today are two panels of witnesses. The first will address 
the Senate's proposed expansion of in-state tuition for illegal 
immigrants, and the second will examine congressional efforts to expand 
college access for U.S. students. I thank both panels for joining us 
today, and I am eager to hear their testimony on the matters before us. 
And with that, I yield to my Committee colleague and my host here in 
Colorado, Congresswoman Musgrave.
                                 ______
                                 
    Chairman McKeon.
    With that, and without objection, I yield to my good 
friend, committee colleague, and my host here in Colorado, 
Congresswoman Musgrave.
    Ms. Musgrave. Thank you, Mr. Chairman. It is wonderful to 
have you in Colorado, to show off our beautiful state, and to 
be here at the University of Northern Colorado. And I would 
also like to thank the witnesses. I appreciate you being here 
and the work that you have done, and the information that you 
will give us today, I am sure will be very valuable.
    Today, the Federal Government is investing tens of billions 
of dollars annually in direct aid to students and additional 
hundreds of millions of dollars are provided to colleges and 
universities.
    As a member of the House Education and Workforce Committee, 
I am proud to have worked on behalf of legislation that will 
improve student loan programs.
    I have supported two key pieces of legislation that were 
passed by Congress this year alone, the Deficit Reduction Act, 
and the College Access and Opportunity Act to reauthorize 
higher education programs.
    The Deficit Reduction Act that was enacted in February of 
2006 reauthorized mandatory spending programs under the Higher 
Education Act, and it established key benefits for college 
students and it saved American taxpayers billions by making 
college access programs operate more efficiently and 
effectively.
    Despite claims by critics that this bill cut or raided 
student aid, nothing could be further from the truth. Student 
aid increased under this resolution. Not a single student in 
America will receive less financial aid under this resolution.
    I also voted for $12.1 billion in new student benefits in 
this bill. Students will have more student aid available to 
them because of increased loan limits, reduced origination 
fees, and also reduced inefficiencies in a program.
    Within months of passing these provisions, the House backed 
the College Access and Opportunity Act to reauthorize remaining 
higher education programs. The College Access and Opportunity 
Act will restore the Higher Education Act to its original 
mission to provide access to college for low- and middle-income 
students. This bill will increase Pell grants, student aid, and 
college access. It would reduce red-tape for students and 
graduates, and removes barriers for non-traditional students, 
and increases transparency in college costs and accreditation.
    We are here today to look at how this legislation will 
impact students in Colorado and across the Nation. As Congress 
acts to improve these programs, it is also important that we 
continue to assess the cost to the program.
    I am proud that the Budget Deficit Act took steps to 
protect American taxpayers and increase the efficiency of these 
programs. As I understand, one of the largest costs to the 
student aid program is defaulted student loans.
    Last year alone, defaulted loans accounted for $25 billion, 
or 6 percent of student aid that was left unpaid.
    Additionally, the Federal Government must also invest money 
to track down funds that students have failed to pay.
    Last year, approximately $5.8 billion was recovered through 
default college activities.
    The Federal Government paid private collection agencies 
$252 million to perform these collection services. These are 
funds that could be used for current students.
    I am also appreciative that our panelists are here to 
discuss in-state tuition for illegal immigrants. There is 
currently a proposal before Congress to repeal Federal law that 
prohibits any state from offering in-state tuition rates to 
illegal aliens, unless the state also offers in-state tuition 
to all U.S. citizens.
    I oppose any proposal that would allow in-state tuition for 
illegal aliens, and I encourage the respectfulness of Federal 
immigration law. Such policy is unfair to legal aliens and out-
of-state U.S. citizens who pay the full cost of tuition.
    Taxpayers should not have to finance education for illegal 
aliens. Offering these incentives simply reward people for 
breaking the law. I think it is important that we put this 
information on the record and I am glad to have the witnesses 
here today to share their insight with us, and Mr. Chairman, I 
am proud of your record of investment in student aid, and the 
good work that you do in chairing the Education and Workforce 
Committee, and I am looking forward to hearing from our 
witnesses. Thank you, Mr. Chairman.
    Chairman McKeon. Thank you very much.
    As noted, we have two distinguished panels of witnesses 
today and we will begin by welcoming the first panel.
    First, we will hear from Professor Kris Kobach, currently 
teaching courses in constitutional law, American legal history, 
constitutional theory, jurisprudence and legislation.
    Prior to joining the law school, Professor Kobach served as 
counsel on immigration-related issues to then-Attorney General 
John Ashcroft.
    Professor Kobach serves as lead counsel in Day v. Sebelius, 
the case challenging the state law permitting illegal aliens to 
receive in-state tuition in Kansas, and serves as co-counsel to 
the similar lawsuit that was filed in California in 2005.
    He received his bachelor of arts degree from Harvard 
University, his doctorate from Oxford University and his J.D. 
from Yale Law School.
    Then we will hear from Colorado State Representative Cory 
Gardner, who was appointed to the Colorado legislature in June 
2005 to fill an open seat. The 63rd District of Colorado is 
made up of Adams, Cheyenne, Crowley, Kiowah, Kit Carson, 
Lincoln, Morgan, Washington and Yuma Counties.
    Prior to joining the state legislature, Representative 
Gardner served as U.S. Senator Allard's legislative director 
and general counsel, where he had oversight of the senator's 
policy and appropriations operation.
    Representative Gardner graduated summa cum laude from 
Colorado State University and received a J.D. from the 
University of Colorado.
    And finally on this panel we will hear from Mr. Jared Polis 
who was elected to the Colorado Board of Education in 2000 and 
currently serves as the vice chairman. Mr. Polis founded two 
charter schools and has helped to start several companies, 
including a company that developed a chain of movie theaters 
that screened first-run films dubbed or subtitled in Spanish in 
2001.
    In 2001, Mr. Polis created a program that distributes 
computers to low-income students through schools and nonprofit 
companies. He received a bachelor of arts degree in political 
science from Princeton University.
    I would like to remind the witnesses that we have a 5-
minute time on your testimony, and Amy has a little buzzer here 
that goes off when the 5 minutes are up. I think we will 
probably all be able to know when that time has arrived, and 
your full testimony will be included in the record.
    Professor Kobach.

   STATEMENT OF KRIS KOBACH, PROFESSOR OF LAW, UNIVERSITY OF 
               MISSOURI-KANSAS CITY SCHOOL OF LAW

    Mr. Kobach. Mr. Chairman, Congresswoman Musgrave, thanks 
for inviting me here. I just want to begin my testimony in 
1996, when the story really starts. Several states had 
considered providing in-state tuition access to illegal aliens, 
and Congress, foreseeing this possibility, passed the 
legislation that you are aware of, that says no state can do 
this unless they give in-state tuition to all U.S. citizens.
    The proponents of this bill in Congress reasoned that no 
state would want to do that because out-of-state tuition is a 
significant source of revenue. What they did not foresee was 
that some states might simply disobey Federal law entirely. And 
that is what has happened.
    In 1999, Representative Marco Firebaugh, in the California 
assembly, proposed a bill that would do exactly that, giving 
state tuition to illegal aliens. Governor Gray Davis vetoed 
that bill in the year 2000, saying in his veto message that 
Federal law prohibits us from doing it.
    The same representative reproposed his bill the following 
year and faced with a slightly different political environment, 
Gray Davis decided not to veto it in 2002. In the meanwhile, 
Texas had also passed a similar law. Today, eight more states 
have followed Texas and California's example of disobeying 
Federal law. Included in those states are some states very 
close by here. Kansas, Nebraska, Oklahoma, New Mexico, and 
others.
    So there are many questions involved here, some are policy 
questions, some are legal questions, but let us look at the 
scope of the problem.
    In small states like Kansas, the number of illegal aliens 
attending public universities with taxpayer-subsidized 
education is 221 last fiscal year. But in the bigger states, 
like Texas, the number is 5935 illegal aliens receiving 
subsidized college education, and in California, with its 
massive community college system, the number is approximately 
30,000 illegal aliens taking advantage of this benefit.
    Now the policy reasons why this is a bad idea I think are 
obvious. The first and foremost reason is that it discriminates 
against U.S. citizens.
    U.S. citizens from out of state are not lawful residents 
in, say, Kansas. Neither are illegal aliens. Their lawful 
residence is in another country. Yet these laws give the 
benefit of access to resident tuition to one set of people 
whose lawful residence is out of state but not to another, and, 
indeed, they discriminate against the U.S. citizens and in 
favor of illegal aliens. That is a slap in the face, I believe, 
to Americans who have played by the rules and follow our laws, 
and it is also a significant financial difference in treatment.
    As this committee certainly knows, the cost of a public 
education at a state school is now about $67,000 over 4 years. 
That is an increase of 41 percent over the last decade, and I 
believe that in an era of scarce resources, U.S. citizens 
should be first in line to receive taxpayer subsidies, 
certainly over aliens, and most certainly over illegal aliens.
    The size of the taxpayer burden also varies from state to 
state but it can be very significant. For example, in Texas, 
approximately 40- to $50 million of taxpayer money are spent 
subsidizing the education of illegal aliens at college level.
    The third reason, aside from taxpayer burden, and the 
unfairness of it, why this is bad policy, is that in all 10 
states, the state statutes include a clause that says if you 
are legally in the United States, if you possess a valid 
student visa, you have to pay out-of-state tuition. Let me 
repeat that. Legal aliens pay out-of-state tuition in all 10 
states. Only illegal aliens get access to in-state tuition. 
That is a horrible and perverse incentive.
    It rewards those aliens who violate the law and penalizes 
those aliens who actually follow our rules and get the 
appropriate student visa to attend college here.
    That is why, in July 2004, I became lead counsel in a suit 
in Kansas challenging this policy. I am also co-counsel in a 
similar suit in California. In neither case has the court ruled 
on the merits of the question. In the Kansas case, the District 
Court ruled on standing issues and the private right-of-action 
issues, and that is now before the 10th Circuit, here, in 
Denver. So we have yet to have a court rule on the merits of 
these challenges.
    But just when it looked like U.S. citizens would be able to 
vindicate their rights in court, the Senate steps in with 
Senate Bill 2611, which retroactively repeals the 1996 Federal 
law, not only repeals it but retroactively repeals it. In other 
words, not only giving an amnesty, in many forms, to various 
illegal aliens, but giving an amnesty to state legislatures who 
have violated Federal law, absolving them of any financial 
liability, absolving them of any violation of Federal law.
    And so this provision, buried deeply, and more than 600 
pages deeply into the Senate act, the DREAM Act provisions, is 
pernicious for that reason.
    It is also bad law because it creates a separate amnesty 
that is very easy to obtain. One need only reside in the United 
States for 5 years, of course illegally reside in the United 
States, and have come into the United States before the age of 
sixteen.
    Furthermore, once you get this amnesty, there's no pretense 
of a temporary status. You go immediately to a green card, a 
provisional green card, and then a final green card. And even 
stranger in this provision of the DREAM Act, the DREAM Act 
provisions of Senate Bill 2611, is a provision, section 624(f), 
that says as soon as you file an application, no matter how 
ridiculous the application is, no matter how obvious it is on 
the face of the application that you do not qualify, as soon as 
you file that application for the amnesty, all Federal law 
enforcement is prohibited from enforcing the law against you 
and deporting you.
    This is an invitation for frivolous applications and it is 
an open license to remain inside the United States illegally. 
Thank you.
    [The prepared statement of Mr. Kobach follows:]

 Prepared Statement of Kris W. Kobach, Professor of Law, University of 
 Missouri--Kansas City School of Law; Senior Counsel, Immigration and 
                          Reform Law Institute

    Mr. Chairman and Members of the Committee, it is an honor to appear 
before you today to discuss the issue of states offering in-state 
tuition rates to illegal aliens in violation of federal law, and the 
impact that Senate Bill 2611 would have in this area. I come before you 
today in my capacity as a Professor of Constitutional Law and 
Immigration Law. I am also a practicing attorney who litigates 
regularly in the area of immigration and federal preemption on behalf 
of the Immigration and Reform Law Institute. More specifically, I am 
the lead counsel representing the plaintiff U.S. citizens in the case 
of Day v. Bond, a challenge to Kansas's provision of in-state tuition 
rates to illegal aliens; and I am co-counsel for the plaintiffs in the 
case of Martinez v. Board of Regents, a similar case in California. 
Between 2001 and 2003, I served as Counsel to the U.S. Attorney General 
at the Department of Justice. In that capacity, I was the Attorney 
General's chief adviser on immigration law. However, my testimony 
should not be taken to represent the past or present position of the 
U.S. Department of Justice. I offer my testimony solely in my private 
capacity.
    As you know, buried deeply in S.B. 2611 are the so-called 
Development, Relief, and Education for Alien Minors (DREAM) Act 
provisions. Just before the Senate Judiciary Committee approved the 
first version of the bill on the evening of March 27, 2006, the DREAM 
Act was offered as an amendment. It passed on a voice vote and remained 
in the restyled ``compromise'' version of the bill that the Senate 
passed in May.
    The DREAM Act repeals a 1996 federal law that prohibits any state 
from offering in-state tuition rates to illegal aliens, unless the 
state also offers in-state tuition rates to all U.S. citizens. On top 
of that, the DREAM Act offers a separate amnesty to illegal alien 
students. In my testimony, I will explain why these provisions are not 
only bad policy, they are also profoundly unfair to U.S. citizens and 
lawful alien visitors who are being discriminated against by a handful 
of states that provide preferential treatment to illegal aliens.
The History of In-State Tuition Rates for Illegal Aliens
    To understand just what an insult the DREAM Act is to the concept 
of the rule of law, one needs to recall the events of the past ten 
years. In September 1996, Congress passed the landmark Illegal 
Immigration Reform and Immigrant Responsibility Act (IIRIRA). Open 
borders advocates in some states--most notably California--had already 
raised the possibility of making in-state tuition rates available to 
illegal aliens who attend public universities. To prevent such a 
development, IIRIRA's sponsors inserted a provision that prohibited any 
state from doing so, unless the state also provided the same discounted 
tuition to all U.S. citizens. It was written in plain language that any 
layman could understand:
    ``Notwithstanding any other provision of law, an alien who is not 
lawfully present in the United States shall not be eligible on the 
basis of residence within a State (or a political subdivision) for any 
postsecondary education benefit unless a citizen or national of the 
United States is eligible for such a benefit (in no less an amount, 
duration, and scope) without regard to whether the citizen or national 
is such a resident.'' 8 U.S.C. Sec. 1623
    Obviously, no state in the union would be interested in giving up 
the extra revenue derived from out-of-state students, Members of 
Congress reasoned, so this provision would ensure that illegal aliens 
would never be rewarded with a taxpayer-subsidized college education. 
What IIRIRA's proponents did not foresee was the willingness of some 
states to simply disobey federal law.
    However, that is precisely what happened. In 1999, Members of the 
California legislature pushed ahead with their plan to have taxpayers 
subsidize the college education of illegal aliens. Assemblyman Marco 
Firebaugh sponsored a bill that would make illegal aliens who had 
resided in California for three years during high school eligible for 
in-state tuition at California community colleges and universities. The 
bill passed both houses of the California Legislature.
    California Governor Gray Davis vetoed the bill in January 2000, 
stating clearly in his veto message that it would violate federal law: 
``Undocumented aliens are ineligible to receive postsecondary education 
benefits based on state residence. * * * IIRIRA would require that all 
out-of-state legal residents be eligible for this same benefit. Based 
on Fall 1998 enrollment figures * * * this legislation could result in 
a revenue loss of over $63.7 million to the state.''
    Undeterred, Representative Firebaugh introduced his bill again; and 
the California Legislature passed it again. In 2002, Governor Davis 
ignored his own veto message of 2000 and signed Firebaugh's bill 
offering in-state tuition rates to illegal aliens.
    Meanwhile, similar interests in Texas had succeeded in passing 
their own version of the same bill. Over the next four years, interest 
groups lobbying for illegal aliens introduced the same legislation in 
most of the other states. The majority of state legislatures rejected 
the idea. They were probably also aware that the Supremacy Clause of 
the U.S. Constitution prohibits state governments from violating 
federal law.
    Unfortunately, eight more states followed the examples of 
California and Texas. Today, the ten states that offer in-state tuition 
to illegal aliens are: California, Illinois, Kansas, Nebraska, New 
Mexico, New York, Oklahoma, Texas, Utah, and Washington.
    In relatively small states like Kansas, the number of illegal 
aliens receiving this taxpayer-subsidized tuition is in the hundreds. 
Last year in Kansas, 221 students who were unlawfully present in the 
United States received this benefit. However, in larger states where 
the benefit has been available for four years or more, the number is in 
the thousands. In Texas, approximately 5,935 illegal aliens were 
receiving in-state tuition benefits in 2005. And in California, with 
its massive system of universities and community colleges, 
approximately 30,000 illegal aliens are now receiving a taxpayer-
subsidized higher education.
Why Providing In-State Tuition to Illegal Aliens Is Bad Policy
    In all of the ten states that are violating federal law in this 
manner, the in-state tuition laws make for shockingly bad policy. There 
are many reasons that this is true, but three are particularly salient.
    First, these laws discriminate against U.S. citizens. Neither an 
illegal alien nor a nonresident U.S. citizen is normally entitled to 
in-state tuition rates at a state's institutions of higher education. 
This is understandable, because in-state tuition eligibility is a 
valuable public benefit. It is a taxpayer-provided education subsidy 
that is worth well over $10,000 a year at most public universities. 
States accordingly reserve in-state tuition benefits for their own 
residents. However, if a state makes this benefit available to illegal 
aliens (whose legal residence is in another country), the state is 
discriminating against U.S. citizens (whose legal residence is in 
another state).
    This is a slap in the face to the law-abiding American citizen from 
out of state. For example, consider a student from Missouri who attends 
Kansas University. That Missouri resident has always played by the 
rules and obeyed the law. Yet Kansas University charges him triple what 
it charges an alien whose very presence in the country is a violation 
of federal law. This discriminatory treatment is particularly harmful 
in a time when the price of a four-year college education is beyond the 
reach of many U.S. citizens. The average price of a four-year college 
education at a public university is now $67,000--an increase of 41% 
over the past decade. In an era of severely limited resources, U.S. 
citizens should be first in line to receive those resources; they 
should not stand behind aliens who are openly violating federal law.
    Second, providing this subsidy for illegal aliens places a heavy 
burden on taxpayers. In contrast to out-of-state students who pay the 
full cost of their education, students eligible for in-state tuition 
receive a significant financial boost at taxpayer expense. When the 
number of illegal aliens taking advantage of this subsidy is 
significant, the costs become staggering. In Texas, for example, 
taxpayers pay an estimated 40 to 50 million dollars every year to 
subsidize the college education of illegal aliens. In California, the 
cost to taxpayers is much higher than that.
    Third, these ten states are now encouraging aliens to violate 
federal immigration law. Indeed, under the terms of each of the state 
statutes, breaking federal law is a prerequisite that must be satisfied 
before the illegal aliens can receive the benefit. Each of the ten 
state statutes includes a provision that expressly denies in-state 
tuition to aliens lawfully attending college in the United States on an 
appropriate student visa (typically, an F, J, or M visa). An alien is 
eligible for in-state tuition only if he is breaking federal law by 
remaining in the United States.
    Aliens are sent this message: ``We encourage you to violate the 
law. If you actually obtain a valid visa to study here, we will 
penalize you by making you pay out-of-state tuition.'' This creates a 
perverse incentive structure in which the states directly reward 
illegal behavior and significantly undermine federal law.
    Imagine if a state enacted a law that rewarded state residents for 
cheating on their federal income taxes--by giving state tax credits to 
those who break federal tax laws. That is the equivalent of what these 
ten states have done. It is a direct financial subsidy to those who 
violate federal law.
Lawsuits to Protect the Rights of U.S. Citizens
    In July 2004, a group of U.S. citizen students from out-of-state 
filed suit in federal district court in Kansas to enjoin the state from 
providing in-state tuition rates to illegal aliens, on the grounds that 
Kansas is clearly violating federal law. Not only that, Kansas is 
violating the Equal Protection Clause of the U.S. Constitution by 
discriminating against them and in favor of illegal aliens. I am the 
attorney representing those U.S. citizens.
    The district judge did not render any decision on the central 
questions of the Kansas case. Instead, he avoided the merits of the 
issue entirely by ruling that the U.S. citizen plaintiffs lacked a 
private right of action to bring their statutory challenge and lacked 
standing to bring their Equal Protection challenge. His holding is 
currently being appealed in the U.S. Court of Appeals for the Tenth 
Circuit.
    Meanwhile, in December 2005, another group of U.S. citizen students 
filed a class-action suit in California state court. They too maintain 
that the state is violating federal law and the U.S. Constitution. 
Pursuant to a California civil rights statute, they are also seeking 
damages to compensate them for the extra tuition they have paid, over 
and above that charged to illegal aliens.
    These U.S. citizens are simply suing to enforce their statutory 
right not to be treated less favorably than illegal aliens when it 
comes to tuition rates. Congress gave them this statutory right ten 
years ago. In neither case, has a judge ruled on the merits of the 
issue. However, just when it looks like U.S. citizens might vindicate 
their rights under federal law and hold the wayward states accountable, 
S.B. 2611 offers the offending states a pardon. As I will explain, the 
DREAM Act would not only take away the U.S. citizens' right to equal 
treatment, it would effectively close the courthouse door and deny them 
the ability to vindicate their rights in court.
Senate Bill 2611
    The DREAM Act provisions, buried more than 600 pages into the 
Senate bill, grant an unusual reprieve to the offending states. The 
DREAM Act repeals the 1996 federal law that the ten states violated. In 
addition, Section 623 of the Senate bill states, ``The repeal * * * 
shall take effect as if included in the enactment of the Illegal 
Immigration Reform and Immigrant Responsibility Act of 1996.'' In other 
words, it is a retroactive repeal--as if the 1996 law never happened. 
In this way, the Senate bill expressly shields those states from 
liability for their past violations of federal law.
    This is no accidental turn of phrase. This retroactive repeal was 
inserted as a direct response to the lawsuits challenging the states 
that violated the 1996 federal law. In the California case, the legal 
challenge is a class action lawsuit on behalf of all U.S. citizens 
whose federal statutory rights have been violated. Those U.S. citizens 
are suing to recover the extra tuition that they paid, over and above 
the tuition charged to illegal aliens. The DREAM Act provisions of the 
Senate Bill are specifically designed to take away this federal 
statutory right from U.S. citizens.
    On top of this insult to the rule of law, the DREAM Act creates a 
massive independent amnesty in addition to the even larger amnesty that 
S.B. 2611 would confer. The amnesty presents a wide open path to 
citizenship for any alien who entered the country before the age of 16 
and who has been in the country for at least five years. As with the 
rest of the Senate bill, the guiding notion is: the longer you have 
violated federal law, the better.
    Beyond that, all the alien needs is a high school diploma or a GED 
earned in the United States. Alternatively, he need only persuade an 
institution of higher education in the United States--any community 
college, technical school, or college--to admit him.
    The DREAM Act abandons any pretense of ``temporary status'' for the 
illegal aliens who apply. Instead, all amnesty recipients are awarded 
lawful permanent resident (green card) status. The only caveat is that 
alien's status is considered ``conditional'' for the first six years. 
In order to move on to the normal green card, the alien need only 
obtain any degree from an institution of higher education, complete two 
years toward a bachelor's degree, or show that doing so would present a 
hardship to himself or his family members. And of course, the alien may 
thereafter use his lawful permanent resident status to bring in family 
members and may seek citizenship.
    Furthermore, the DREAM Act makes it absurdly easy for just about 
any illegal--even one who does not qualify for the amnesty--to evade 
the law. According to Section 624(f), once you file an application--any 
application, no matter how ridiculous--the federal government is 
prohibited from deporting him Moreover, with few exceptions, federal 
officers are prohibited from either using information from the 
application to deport the alien or sharing that information with 
another federal agency, under the threat of a fine of up to $10,000.
    Thus, an alien's admission that he has violated federal immigration 
law cannot be used against him--even if he never had any chance of 
qualifying for the DREAM Act amnesty in the first place. The DREAM Act 
also makes illegal aliens eligible for various federal student loans 
and work-study programs.
    The DREAM Act is a remarkably bad piece of legislation on many 
levels. But the most fundamental issue that it raises is the relation 
of the states to the federal government. Ten states have created a 
twenty-first century version of the nullification movement--defying 
federal law simply because they don't like what the majority in 
Congress decided. In so doing, they have challenged the basic structure 
of our Republic. The DREAM Act would pardon this offense and, in so 
doing, would encourage states to defy federal law in the future.
    One thing that we have learned in the struggle to enforce our 
nation's immigration laws is that states cannot be allowed to undermine 
the efforts of the federal government to enforce the law. The rule of 
law can be restored only if all levels of government are working in 
concert to uphold it.
                                 ______
                                 
    Chairman McKeon. Thank you.
    Representative Gardner.

 STATEMENT OF HON. CORY GARDNER, COLORADO STATE REPRESENTATIVE

    Mr. Gardner. Thank you, Mr. Chairman, Congresswoman 
Musgrave. Mr. Chairman, welcome to Colorado, the epicenter of 
the recent state immigration debate. Congresswoman Musgrave, I 
applaud you for your efforts to bring real solutions to a very 
complex problem.
    Today's hearing focuses on an important question: Should 
taxpayer dollars be used to provide state benefits for illegal 
immigrants, including in-state tuition?
    It is estimated that over 250,000 illegal aliens reside in 
Colorado. Between 1990 and 2000, the number of illegal aliens 
in the state increased by more than 100,000. Colorado now has 
the sixth highest percentage of illegal immigrants in the 
Nation.
    Estimates on the cost of illegal immigrants in Colorado 
hover around $1 billion per year. According to an analysis by 
the Joint Budget Committee, in 2003 and 2004, the Health Care 
Policy and Financing Agency paid on 8,542 delivery claims for 
non-citizens at a total cost of over $30 million.
    Over 40 percent of all births paid by Medicaid in Colorado 
were for non-citizens, both legal and undocumented immigrants.
    Earlier this year, I held a town meeting and was joined by 
several Hispanic high school students. They are students in a 
district that has, over time, over the past 10 to 15 years, 
been transformed by immigration in the state, growing from a 
very small percentage of minority students to a minority 
population approaching 50 percent.
    Because of Federal and state law, it is impossible to 
determine how many students in that district are legal versus 
illegal.
    The students were bright, articulate, and eager to learn, 
and the one question they wanted to know more than anything was 
whether or not I supported in-state tuition for illegal 
immigrants, and my answer to them was no. And we cannot afford 
any other policy. We must stem the tide of illegal immigrants 
coming into this state.
    We cannot give benefits to those who are here illegally, 
above and beyond the services and benefits that we are willing 
to offer to the lawful citizens of the United States.
    Not only does this grant preferential treatment to those in 
the country illegally. It also disrespects those who enter or 
who are attempting to enter the United States through legal 
processes.
    We cannot reward illegal activity, even if it is the result 
of decades of lax immigration enforcement. To do so is to 
create a system where the only expectation of the law is an 
expectation of little or no law enforcement.
    Proponents of in-state tuition for illegal aliens believe 
that to deny in-state tuition lacks compassion. To the 
contrary, there is no compassion in turning a blind eye on 
illegal immigration, allowing people to enter this country 
illegally, and watching them earn poor wages, and then give 
them an incentive such as in-state tuition, just so we can 
entice them to stay.
    Compassion is creating an immigration system that does not 
perpetuate poor conditions or education amnesty. It is a legal 
system that is efficient and secure. An efficient and secure 
legal system starts first with a secure border.
    It is difficult to determine how many undocumented students 
would take advantage of an in-state tuition policy, and 
therefore to estimate the cost of providing such a benefit. The 
Urban Institute estimates that there are 25,000 undocumented 
children in the K through 12 age group in Colorado.
    If in-state tuition were granted to illegal aliens, all 
students in the formula would presumably be eligible to receive 
the benefit as they progressed through the educational system. 
Taking our $3,000 college opportunity fund voucher, the stipend 
alone, over the next 12 years, that's roughly $75 million at 
today's rates.
    In 2003, 2004, and 2005, legislation was introduced in the 
general assembly to change Colorado law, effectively granting 
in-state tuition to illegal immigrants and attempting to change 
the residency requirements to conform to the stipulations of 
Federal law. The legislation failed all 3 years.
    In January of 2006, the Colorado attorney general issued a 
formal opinion addressing the Colorado statute on in-state 
tuition benefits and undocumented aliens. In that opinion, the 
attorney general confirmed that because current law bases in-
state tuition benefits on the documentation of a student's 
residency classification, undocumented aliens may not receive 
in-state tuition at Colorado institutions of higher education.
    In July of 2006, Governor Bill Owens issued a call for a 
special session of the legislature to deal with several 
immigration matters, including the provision of state benefits 
and services to illegal immigrants. As a result, house bill 
1023 passed the legislation and was signed into law. House bill 
1023 requires each agency or subdivision of the state to verify 
the lawful presence in the United States of each natural 
person, 18 years of age or older, who applies for a state or 
local public benefit, or for a Federal public benefit.
    The act makes it unlawful for any agency or political 
subdivision to provide a Federal or a state or local public 
benefit in violation of the statute.
    However, house bill 1023 contains language that some argue 
actually opens up a loophole and pays the way for state 
taxpayer-funded benefits to illegal immigrants.
    First, the law creates a new class of benefits for illegal 
immigrants under 18 by exempting them from the verification 
requirements.
    Second, house bill 1023 contains language that may be 
interpreted under Federal law as language that affirmatively 
provides for eligibility of state benefits, thus allowing state 
benefits to be conferred on those in the state illegally.
    So what does this mean in terms of in-state tuition in 
Colorado? It is a question that may have to ultimately be 
decided by the courts.
    An analysis by a lawyer within the attorney general's 
office concluded that although house bill 1023 may not directly 
apply to the college opportunity fund, that's our stipend 
program, this is a moot point since participation of 
undocumented aliens in that program is prohibited by Federal 
law.
    Taken together, though, if the residency requirement is 
changed in Colorado law, or in Federal statute, house bill 1023 
may be just enough for a court to interpret it as granting in-
state tuition for an illegal immigrant under the age of 
eighteen.
    As a matter of state policy, I believe it sends a misguided 
message to citizens and non-citizens alike, that we will allow 
a taxpayer-funded benefit, such as in-state tuition, to go to 
someone who is in violation of immigration laws.
    As a Nation, we should not promote policies that encourage 
illegal immigration and provide disincentives to those 
patiently working through the proper legal channels.
    The cost of education is increasing every day. It is 
difficult enough for us to provide for the educational needs of 
our own citizens, let alone those who are in the country 
illegally.
    We must not reward illegal behavior, nor should we 
institute policies that perpetuate it.
    Thank you, Mr. Chairman, and I'll be happy to answer any 
questions the committee may have.
    [The prepared statement of Mr. Gardner follows:]

 Prepared Statement of Hon. Cory Gardner, Colorado State Representative

    Thank you, Mr. Chairman and members of the Committee. Welcome to 
Colorado, the recent epicenter of the state immigration debate. 
Congresswoman Musgrave, I applaud you for your efforts to bring real 
solutions to a complex problem. This is a tough, complicated issue. 
Your leadership is to be commended.
    On the heels of an immigration special session, you convene at a 
time that finds the state searching for answers to a most important 
question: should taxpayer dollars be used to provide state benefits for 
illegal aliens, including in-state tuition?
    To fully understand the significance of today's hearing and what it 
means to this state, it is important to have at least a snapshot of 
Colorado demographics and economics. Over 4.5 million people live in 
the state, working in tourism, agriculture, technology and other 
sectors. It is estimated that somewhere between 250,000 to 300,000 
illegal aliens reside in Colorado. Between 1990 and 2000, the number of 
illegal aliens in Colorado increased by more than 100,000. Colorado now 
has the 6th highest percentage of illegal aliens in the nation.
    In a study commissioned by Defend Colorado Now and written by 
Donald Rice, the cost of illegal aliens in Colorado is estimated at 
more than $1 billion per year. The organization also reported that 
Medicaid paid approximately $64 million for services rendered to 
illegal aliens in Colorado. According to an analysis by the Joint 
Budget Committee staff, in FY 2003-04, Health Care Policy and Financing 
paid 8,542 delivery claims for non-citizens at a total cost of over $30 
million. Over 40 percent of all births paid by Medicaid were for non-
citizens--both legal and undocumented immigrants.
    The budget for the state of Colorado is roughly $15 billion. Of 
this total, over $2 billion is spent on higher education. Roughly 
200,000 in-state students attend state institutions, along with nearly 
35,000 out of state students. According to the Colorado Commission on 
Higher Education Student Unit Records Data System, which contains 
student data provided by the institutions, of the 235,592 students 
enrolled last year, 98.6% provided valid social security numbers. The 
other 1.4% includes students who have permanent resident card numbers 
or Visas, or may be undocumented aliens. Because federal and state laws 
do not expressly prohibit the admission of undocumented aliens to 
colleges and universities, there is the possibility that undocumented 
aliens are already accessing postsecondary services in the State of 
Colorado, regardless of the availability of in-state tuition.
    Earlier this year, I held a town meeting in my home town of Yuma, 
Colorado. Participating in the town meeting was a group of Hispanic 
high school students. They are students in a district that has, over 
the past 10 to 15 years, been transformed by immigration, growing from 
a very small percentage of minority students to a minority population 
approaching 50 percent. Because of federal and state law, it is 
impossible to determine how many students in the district are legal 
versus illegal.
    The students were bright, articulate, and eager to learn. And the 
one question they wanted to know more than anything--did I support in-
state tuition for illegal aliens. And my answer--no. To some, this 
answer seems harsh. But it is a policy to which we must adhere. We must 
stem the tide of illegal immigrants coming into this state. We cannot, 
as a state or a nation, give benefits to those who are here illegally, 
above and beyond the services and benefits that we are willing to offer 
to every person lawfully present in the United States. Not only does 
this grant preferential treatment to those in the country illegally, it 
also disrespects those who enter, or who are attempting to enter, the 
United States through legal processes. We cannot reward illegal 
activity even if it is the result of decades of lax immigration 
enforcement. To do so is to create a system where the only expectation 
of the law is an expectation of little to no law enforcement.
    House District 63 is bordered by Kansas and Nebraska. Citizens from 
my district are strongly opposed to in-state tuition for illegal 
aliens, often commenting, ``I can't take my child to Nebraska and 
receive in-state tuition, why should we grant in-state tuition for 
people who are in this country illegally?''
    Take for instance some of the students attending school in Wray, 
Colorado. The district has students who live just across the state line 
in Nebraska but attend school in Colorado because it is closer. 
Although the Nebraska student may be a legal U.S. citizen who 
eventually graduates from a Colorado high school, an in-state tuition 
policy for undocumented immigrants could have the effect of barring 
access to in-state tuition for the legal citizen from Nebraska while 
the undocumented classmate could attend college in Colorado at in-state 
tuition rates.
    Proponents of in-state tuition for illegal aliens believe that to 
deny in-state tuition lacks compassion. There is no compassion in 
turning a blind eye on illegal immigration, allowing workers to enter 
this country illegally, watch them earn poor wages, and then give an 
``incentive'' such as in-state tuition for them to stay here. 
Compassion is creating a legal immigration system that does not 
perpetuate poor conditions or education amnesty. It is a legal system 
that is efficient and secure. An efficient and secure legal system 
starts with a secure border.
    It is difficult to determine how many undocumented students would 
take advantage of an in-state tuition policy and thus to estimate the 
cost of providing such a benefit. According to Jenna Langer, Executive 
Director of the Colorado Commission on Higher Education, the cost of 
post-secondary educational services accessed by undocumented aliens 
would be covered in most instances by the student's payment of the out-
of-state tuition rate, unsubsidized by state tuition benefits, stipends 
or financial aid. Langer noted that it is possible that undocumented 
students may be obtaining the postsecondary benefits of in-state 
tuition, stipends or financial aid through false documentation or 
fraud. However, current documentation policies would keep most 
undocumented aliens from receiving state postsecondary educational 
benefits and there is no way to estimate the cost if fraud does occur.
    Because school districts do not inquire about a student's 
immigration status, estimating the number of undocumented students is 
difficult. However, two organizations, the Urban Institute and the 
Federation for American Immigration Reform have developed formulas to 
determine the number of undocumented immigrant children in Kindergarten 
through 12th grade (K-12) and the cost of such education. If in-state 
tuition were granted to illegal aliens, all students in the formula 
would presumably be eligible to receive the benefit.
    The Urban Institute, using data from the 2000 Census, has provided 
an estimate of 25,000 as the number of undocumented immigrant children 
in Colorado in K-12. The Institute's estimate was derived using the 
number of undocumented immigrants in Colorado in the K--12 age group, 
which is estimated at 22,000. The Institute then added 10 percent, the 
estimated undercount of undocumented children in the census, settling 
on a total of 24,000. Finally, recognizing a margin of error of plus or 
minus 20 percent, the Institute set the lower boundary of the estimate 
at 20,000 and the upper boundary at 28,000. Averaging these two 
numbers, they arrived at a final estimate of 25,000 undocumented 
children in the K--12 age group in Colorado.
    Although the Federation for American Immigration Reform does not 
provide an estimate of the number, it does provide an estimate of the 
cost of educating school-aged undocumented immigrants in its 
publication, ``Breaking the Piggy Bank: How Illegal Immigration is 
Sending Schools Into the Red'' (Attachment A). The Federation estimates 
that the cost of educating undocumented children and the U.S.-born 
children of undocumented immigrants in Colorado in 2004 was $564.1 
million. The methodology used in reaching this estimate is described in 
the publication as follows: ``[t]he 1.5 million school-aged illegal 
immigrants residing in the United States and their 2 million U.S.-born 
siblings can be divided among the states using government estimates of 
the illegal alien population. Using each state's per-pupil expenditure 
reported by the U.S. Department of Education, cost estimates for 
educating illegal immigrants in each state are shown * * *''
    In 2003, 2004, and 2005, legislation was introduced in the General 
Assembly to change Colorado law, effectively granting in-state tuition 
to illegal aliens and changing the residency requirements to conform to 
the stipulations of federal law. The legislation failed all three 
years.
    In January of 2006, the Colorado Attorney General issued a formal 
opinion addressing the Colorado statute on in-state tuition benefits 
and undocumented aliens. In that opinion, the Attorney General 
confirmed that because current law bases in-state tuition benefits on 
the determination of a student's residency classification, undocumented 
aliens may not receive in-state tuition at Colorado institutions of 
higher education.
    In July of 2006, Governor Bill Owens issued the call for a special 
session of the legislature to deal with several immigration matters, 
including the provision of state benefits and services to illegal 
aliens. As a result, House Bill 06S-1023 passed the legislature and was 
signed into law.
    House Bill 1023 requires each agency or political subdivision of 
the State to verify the lawful presence in the United States of each 
natural person eighteen years of age or older who applies for a state 
or local public benefit or for a federal public benefit. The Act makes 
it unlawful for any agency or political subdivision to provide a 
federal or a state or local public benefit in violation of the statute.
    However, House Bill 1023 contains language that some argue actually 
opens up a loophole and paves the way for state taxpayer funded 
benefits to illegal aliens. First, the law creates a new class of 
benefits for illegal aliens under 18 by exempting them from the 
verification requirements. Secondly, HB-1023 contains language that may 
be interpreted under federal law as language that ``affirmatively 
provides'' for eligibility of state benefits, thus allowing state 
benefits to be conferred on those in the state illegally.
    What does this mean in terms of in-state tuition? It is a question 
that may ultimately be decided by the courts. An analysis by a lawyer 
within the Attorney General's office concluded, ``Although [HB-1023] 
may not apply directly to the College Opportunity Fund Program, this is 
a moot point since participation of undocumented aliens in that program 
is prohibited by 8 U.S.C. Sec. 1623.'' The College Opportunity Fund is 
the college voucher program for in-state students. Taken together, if 
the residency requirement is changed in Colorado law or in federal 
statute, HB-1023 may be just enough for a court to interpret it as 
granting in-state tuition for an illegal alien under the age of 18.
    As a matter of state policy, I believe it sends a misguided message 
to citizens and non-citizens alike that we will allow a taxpayer funded 
benefit, such as instate tuition, to go to someone who is in violation 
of our immigration laws. As a nation, we should not promote policies 
that encourage illegal immigration and provide disincentives to those 
patiently working through the proper legal channels. The cost of 
education is increasing every day. It is difficult enough to provide 
for the educational needs of our own citizens, let alone those who may 
be in the country illegally. We must not reward illegal behavior. Nor 
should we institute policies that perpetuate it.
    Thank you, Mr. Chairman. At this time I would be happy to answer 
any questions that the committee may have.
                                 ______
                                 
    Chairman McKeon. Thank you.
    Mr. Polis.

  STATEMENT OF JARED POLIS, VICE CHAIRMAN, COLORADO BOARD OF 
                           EDUCATION

    Mr. Polis. Thank you, Mr. Chairman, and welcome to 
Colorado.
    Chairman McKeon. Thank you.
    Mr. Polis. And Representative Musgrave. My name is Jared 
Polis and I am the vice chairman of the Colorado State Board of 
Education, and I want to begin by thanking you for the 
opportunity to share my thoughts with you this morning.
    As you well know, there are significant good faith 
disagreements among Coloradans, like many Americans, on the 
issue of immigration. But there is one element of the 
immigration discussion where there seems to be substantial 
agreement and common ground, among Americans of all stripes, 
Republican, Independent and Democrat, progressive, moderate and 
conservative. And that relates to children.
    As the Supreme Court very eloquently noted in its 1982 
opinion, the rights and opportunities of children are a 
separate issue from the issue of their parents' immigration 
status.
    We should not, the Court said, quote, impose a lifetime of 
hardship on a discrete class of children.
    Within that context, I am here today to strongly urge the 
U.S. Congress to pass the DREAM Act, a bipartisan bill that 
would give a fair chance to undocumented students who were 
brought to this country as children, through no fault of their 
own, as early as age five or ten.
    Instead of punishing these students, the act would allow 
them to complete their education, provide them a path to 
citizenship, and improve our state and our country's 
competitiveness.
    This bill is not about immigration. It is about whether 
young people who have grown up here can complete their 
education or not.
    In Colorado, and nationally, we hear about the importance 
of preventing dropouts, closing the achievement gaps, and 
improving student achievement.
    My message to you in Congress is it is time to put action 
to these words. Pass this legislation, so our state and Nation 
can begin to meet these goals. Our state board and our school 
districts are accountable under No Child Left Behind. The DREAM 
Act would be a vital tool toward closing the achievement gap, 
particularly among Latino students in Colorado and nationally.
    The DREAM Act would do two things. First, and most 
importantly, it would provide a path to legal status for 
individuals who were brought to this Nation years ago, as 
children. To qualify, an undocumented person would have to show 
that he or she entered the U.S. at the age of 15 or less, at 
least 5 years before the bill was enacted, has good moral 
character and has graduated high school in the United States.
    Those who qualify would be granted a conditional status 
that would permit them to remain here legally for 6 years, 
during which they would have to either graduate from community 
college, complete 2 years toward a college degree or serve at 
least 2 years in the United States military.
    Second, it would eliminate a provision of Federal law that 
most of the earlier comments referred to, that places 
conditions on whether states use their own funds to provide in-
state tuition to undocumented students.
    If this provision is repealed, states will be permitted to 
decide for themselves, without Federal interference, whether 
it's beneficial for the state to permit such students to study 
in their colleges and universities at the in-state rate.
    The DREAM Act would not require Colorado or any other state 
to provide in-state tuition to undocumented immigrants. The 
choice would be up to each state.
    In Representative Gardner's remarks, he echoed his own 
position on this matter. I am urging you, in Congress, to leave 
these matters to the states and the state assemblies of the 
states.
    The Federal Government has failed miserably in securing our 
borders. The least it can do is allow states the flexibility in 
dealing with the impact of our failed border policy.
    By providing a path to legal status, the DREAM Act would 
help transform the lives of an estimated 65,000 students who 
successfully graduate from high school each year, but who are 
ineligible to work legally, join the military, or in 40 states, 
pay in-state college tuition at public colleges and 
universities.
    These students live on the margins of society and face 
limited futures because of their status, which is no fault of 
their own.
    Although they consider the U.S. their home and want to 
contribute to its future by serving in the military or giving 
back to their community as teachers, doctors, or engineers, 
undocumented students currently have no way to legalize their 
immigration status and get on with their lives.
    Critically, to many of these students, the United States is 
their only home and English is their only fluent language.
    Mr. Chairman, these students are to be admired. They have 
met the challenges of transitioning to a new country, a new 
culture and a new language, and they have avoided the 
temptations that have derailed some of their peers and they 
have persevered to graduate from high school.
    It is impressive, what many of them have accomplished, 
despite the barriers they have faced. Many are high achievers, 
including valedictorians, honor students, academic and athletic 
prize winners, team captains and class leaders.
    Colorado and the country's economic future will depend on 
our ability to educate all of our young people and send them 
into the workforce, which the DREAM Act would help us do.
    One of the items that I will be submitting into the record 
does talk about the contributions from state and local taxes in 
Colorado, paid in Colorado by undocumented immigrants, and we 
can refer the Chairman of the committee to similar studies that 
have been done at the Federal level about the tax impact of 
undocumented residents and the taxes that they do pay.
    In the absence of Federal action, many states have taken it 
upon themselves to keep immigrant youth in school. Texas, 
California, Utah, Washington, New York, Oklahoma, Illinois, 
Kansas, New Mexico and Nebraska are the 10 states that have 
enacted laws permitting undocumented students who have attended 
high school to pay the discounted rate.
    Mr. Chairman, I understand how hard it is to enact the 
needed comprehensive reforms on immigration policy. It is a 
complicated issue and reasonable minds can disagree about many 
of the issues and equities involved. The same cannot be said 
about the DREAM Act.
    It represents a simple acknowledgement that the failure of 
our Federal immigration policy and the mistakes of adults not 
ought be visited on children who have done nothing wrong, who 
have, in fact, done exactly what we as a society have asked--go 
to school, stay out of trouble, succeed.
    Congress should act to ensure that these students have an 
opportunity to legally pursue the American dream. It is the 
right thing to do and it is the American thing to do for our 
country and for these children's future. Thank you.
    [The prepared statement of Mr. Polis follows:]

 Prepared Statement of Jared Polis, Vice Chairman and Member at Large, 
                   Colorado State Board of Education

    Members of the committee, my name is Jared Polis and I'm the Vice 
Chairman of the Colorado State Board of Education. I want to begin by 
thanking you for the opportunity to share my thoughts with you this 
morning. As we all know, there is significant good faith disagreement 
among Coloradans, like many Americans, on the issue of immigration. But 
there is one element of the immigration discussion where there seems to 
be substantial agreement among Americans--Republican or Democrat, 
progressive or conservative--and that relates to children.
    As the Supreme Court eloquently noted in its 1982 opinion, the 
rights and opportunities of children are separate from the issue of 
their parents' immigration status. We should not, the Court said, 
impose ``a lifetime of hardship on a discrete class of children''. 
Within that context, I'm here today to strongly urge the United States 
Congress to pass the DREAM Act, a bipartisan bill that would give a 
fair chance to undocumented students, who were brought to this country 
as children through no fault of their own, as early as age 5 or 10. 
Instead of punishing these students, the act would help them complete 
their education, provide them with a path to citizenship, and improve 
our state's competitiveness. This bill is not about immigration--it is 
about whether young people who have grown up here can complete their 
education * * * or not.
    In Colorado and nationally, we hear about the importance of 
preventing dropouts, closing the achievement gaps, and improving 
student academic performance. Now, my message to you in Congress is: 
it's time to put action to these words--pass this legislation so our 
state and nation can begin to meet these goals.
    The DREAM Act would do two things:
    First, and most important, it would provide a path to legal status 
for individuals who were brought to this nation years ago as children. 
To qualify, an undocumented person would have to show that he or she:
     entered the U.S. at the age of 15 or less at least 5 years 
before the bill is enacted;
     has ``good moral character'' (a term of art in immigration 
law); and
     has graduated high school in the U.S.
    Those who qualify would be granted a ``conditional'' status, that 
would permit them to remain legally in the U.S. for 6 years, during 
which they would be required to graduate from a community college, 
complete at least two years towards a college degree, or serve at least 
two years in the U.S. military.
    Second, it would eliminate a provision of federal law that places 
conditions whether states us use their own funds to provide in-state 
tuition to undocumented students. If this provision is repealed, states 
would be permitted to decide for themselves without federal 
interference whether it is beneficial to the state to permit such 
students to study in their colleges and universities at the instate 
rate.
    The DREAM Act would not require Colorado or any other state to 
provide instate tuition to undocumented immigrants. The choice would be 
up to each state.
    By providing a path to legal status, the DREAM Act would help 
transform the lives of an estimated 65,000 students who successfully 
graduate from high school each year but who are ineligible to work 
legally, join the military, or, in 40 states, to pay in-state college 
tuition rates at public colleges and universities, or apply for 
financial aid. These students live on the margins of society and face 
limited futures because of their undocumented status. Although they 
consider the U.S. their home and want to contribute to its future by 
serving in the military or giving back to their community as teachers, 
doctors or engineers, undocumented students currently have no way to 
legalize their immigration status and get on with their lives. To many 
of them, the United States is their only home and English their only 
fluent language.
    Mr. Chairman, these students are to be admired. They have met the 
challenges of transitioning to a new country, a new culture, and a new 
language. They have avoided the temptations that derailed some of their 
peers and they have persevered to graduate from high school.
    It is impressive what many of them have accomplished despite the 
barriers they have faced. Many are high achievers, including 
valedictorians, honors students, academic and athletic prize winners, 
team captains, and class leaders; in 2004, there were 17 undocumented 
immigrant high school valedictorians in California alone.
    Colorado's economic future will depend on our ability to educate 
all of our young people and send them into the workforce, which the 
DREAM Act would help us to do.
    In the absence of federal action, many states have taken it upon 
themselves to keep their immigrant youth in school. Ten states have 
enacted laws permitting undocumented students who have attended high 
school and graduated from high school in their state to pay the 
discounted in-state tuition rate at state colleges and universities. 
The states are Texas, California, Utah, Washington, New York, Oklahoma, 
Illinois, Kansas, New Mexico, and Nebraska.
    Colorado is one of the states that have considered similar 
legislation but thus far it has not passed here. The bipartisan 
Colorado Commission on High School Improvement, which I was privileged 
to co-chair, recommended that Colorado residents be eligible for in-
state tuition regardless of their immigration status. This year the in-
state tuition for a full-time undergraduate student at CU-Boulder is 
$4,446 while the out-of-state tuition is $21,900; at UNC, the in-state 
tuition is $3,950, while the out-of-state is $12,530; the in-state 
tuition at Arapahoe Community College is $1,746 while the out-of-state 
is $8,284. The vast majority of undocumented students come from low-
income families that are unable to help them pay these tuition rates. 
If we want them to complete their education and contribute to our state 
up to their full abilities, then it is imperative that they not be 
charged above their means.
    Mr. Chairman, I understand how hard it is to enact the needed 
comprehensive reforms of our immigration policy. It is complicated and 
reasonable minds can disagree about many of the issues and equities 
involved.
    The same cannot be said about the DREAM Act. It is represents a 
simple acknowledgement that our immigration failures and the mistakes 
of adults ought not to be visited on children who have done nothing 
wrong, who have, in fact, done what exactly what we, as a society have 
asked: go to school, stay out of trouble, succeed.
    Congress should act to ensure that these students have an 
opportunity to legally pursue the American Dream. It is the right thing 
to do--for our country and for these children's future.
    I ask that the following reports be entered into the permanent 
record, along with my testimony.

Closing the Education Gap: Benefits and Costs (Vernez, Krop, and 
        Rydell, 1999), Rand Corporation
The Achievement Gap: Colorado's Biggest (Education) Problem, Donnell-
        Kay Foundation, Colorado Children's Campaign, Center for 
        Education Policy Analysis, and the Piton Foundation.
High School Reform in Colorado: Meeting the Expectations of a New Era. 
        The Colorado Commission on High School Reform. December 2005.
Closing the Achievement Gap: Focus on Latino Students. Color in 
        Colorado, AFT Policy Brief #17. March 2004.
Day, Jennifer Cheeseman. Eric C. Newburger. The Big Pay Off: 
        Educational Attainment & Synthetic Estimates of Work Life 
        Earnings. U.S. Census Bureau. July 2002.
    Thank you.
                                 ______
                                 
    Chairman McKeon. Thank you.
    In a congressional hearing, we will not have applause or 
reactions from the audience. We will just have to ask you to 
leave. So if you will please honor that. That is what we do in 
Washington. That is what we will do here.
    Thank you very much.
    Professor Kobach, let me ask you a question. If this 
retroactive amnesty were granted, would that complicate the 
issue of--what would you do about students that maybe receive 
these funds, are paid, a student paid out-of-state tuition, and 
then retroactively was granted in-state tuition? Would they be 
able to go back and ask for a rebate for any tuition they have 
paid?
    Mr. Kobach. Are you referring to an illegal alien student--
--
    Chairman McKeon. Yes.
    Mr. Kobach [continuing]. Or a U.S. citizen student? Well, 
it would depend on what a state chose to do. If the DREAM Act 
were passed as part of the Senate bill, then the states would 
have the option of a grant, so Colorado would then no longer 
have the Federal statutory barrier, that is in addition to all 
the policy reasons why, and tax reasons why Colorado might want 
to do. Colorado could then move ahead without a Federal 
statutory barrier.
    If someone were midway through their college career, 
presumably the bill would allow, if it is like most states, it 
would allow someone in their, say they are between their 
sophomore and junior year, to go ahead and acquire in-state 
tuition access or pay a lower tuition rate earlier.
    Now if a state wanted to retroactively give, you know, 
allow that student to go back and claim the extra tuition that 
he or she paid in his freshman or sophomore year, which is I 
think what you are asking, that would be possible under state 
law, under the U.S. Constitution or under most state 
constitutions.
    A retroactive benefit is not an ex post facto violation, so 
if a state wished to give sort of a retroactive state credit, 
it could. That would of course impose an even bigger burden on 
state taxpayers, but there is no barrier to a state doing that 
under the terms of the DREAM Act, as it opened up that option 
to them.
    May I respond to a point that was raised earlier by Mr. 
Polis?
    Chairman McKeon. Yes.
    Mr. Kobach. Talking about the constitutionality of this, he 
suggested that we leave it to the states, and that it would be 
best if we left the states the discretion to decide whether to 
give this incentive, this reward for illegal immigration.
    Under our Federal Constitution, immigration is not like a 
commerce power. It's not like other powers which are shared at 
different levels with the states. Immigration is a Federal 
plenary power and the U.S. Supreme Court has recognized this 
for many, many decades.
    As a result, the states cannot take the lead. The states 
can only act in the immigration arena in so far as Congress 
allows them an opening to act.
    So even if section 1623, the part of Federal law we are 
talking about here, were repealed, and states were free to 
grant in-state tuition to illegal aliens, there would be many 
other provisions saying states can't give public benefits to 
illegal aliens, which is found in 8 USC section 1621, states 
cannot enact so-called sanctuary city policies, which is found 
in 8 USC section 1644, notwithstanding the fact that some 
states have apparently ignored that.
    There are many provisions in Federal law that tell states 
what they can and cannot do, and that is proper, because if our 
immigration are to be solved, you have to have the states and 
the Federal Government operating in concert.
    If the Federal Government is trying to discourage illegal 
immigration, and the states are offering incentives, rewards 
for illegal immigration, such as the incentive that says don't 
go home and get a visa if you want to study here in Colorado. 
Stay here and we will give you a lower rate of tuition if you 
don't legalize your status.
    If the states are operating in the opposite direction, we 
will never solve our immigration problem.
    Chairman McKeon. Thank you.
    Representative Gardner, how is the state enforcing the new 
law that you just passed?
    Mr. Gardner. Thank you, Mr. Chairman. That is sort of a 
work in progress as we speak. There is a lot of confusion that 
is trying to be worked out in terms of who is and who is not 
required to verify. A lot of the verification requirements 
depend on the issuance to that agency or organization of state 
taxpayer dollars, and so the attorney general's office has 
issued some opinions in terms of who is and who is not supposed 
to be verifying.
    The agencies with the dollars that are issuing the 
programs, that are overseeing the issuance of benefits to the 
taxpayers, or to the people coming into their office, are the 
ones that are verifying whether or not they meet the 
requirements of House bill 1023.
    But again, there is still a little bit of confusion and 
problems in the system that are being worked through as we 
speak.
    Chairman McKeon. Thank you. My time is just about up but 
let me just say that over the last two decades, the cost of 
higher education has been going up at four times the rate of 
inflation, and the Federal Government has increasingly been 
putting more and more money into education. The state 
governments have been cutting their contribution to higher 
education.
    If they use more of their resources to pay for illegal 
aliens, then the Federal Government would have to even pick up 
more of this burden, or the students and their parents would 
have to pick up more, and I have a huge concern, because 48 
percent of low and middle-income students are not able to go to 
university right now because of cost, and if that were 
increased, more and more would be forced out of the opportunity 
to get a college education.
    My time has ended.
    Ms. Musgrave.
    Ms. Musgrave. Thank you, Mr. Chairman.
    Kris, I would like you to comment on section 624(f) in 
regard to--could you elaborate on that a little bit, as to how 
it ties the hands of Federal law enforcement.
    Mr. Kobach. Yes. There are some provisions of the DREAM Act 
that are particularly problematic, and section 624(f) is the 
one that says, if you just file the application, then you are 
prohibited from being deported.
    And not only that. That same section of the DREAM Act also 
includes a provision that says if a Federal officer shares 
information, perhaps in your application you have admitted that 
you harbored other illegal aliens or you smuggled other people 
in--if any Federal officer share the information in that 
application with anyone else in the Federal Government, someone 
who might wish to enforce the law against you, that Federal 
officer is penalized up to $10,000 per violation.
    So, you know, in an era when we are talking about how 
Federal agencies aren't talking together well enough, this 
would actually tie the hands, even further, of the Federal 
agencies, by saying we don't want you to talk to one another 
because we are going to make sure that this applicant cannot be 
deported, no matter how ridiculous and how patently unqualified 
the applicant is under the terms of the law.
    So it is a particularly pernicious provision and some have 
suspected that it might actually provide an incentive for some 
people to just apply for the DREAM Act amnesty, knowing full 
well they won't get it, but to give themselves a reprieve from 
immigration enforcement.
    It is a truly problematic provision.
    Ms. Musgrave. Thank you.
    Cory, would you talk about Yuma County and Phillips County, 
and some of those areas of Colorado where we routinely have 
some of our students go to another state to go to school, to 
high school, and how some of theirs come right into Colorado, 
it's just a few miles from a school, for instance.
    Mr. Gardner. Right. Thank you, Congresswoman Musgrave. I 
think the professor and Mr. Polis both touched on various 
issues regarding this question. The question is whether or not 
a person from out of state, whether they are a legal alien in 
this country or an out-of-state student, who may live in 
Kansas, come to Colorado and receive in-state tuition.
    In many of the bordering communities in Colorado, in my 
particular district, it is Ray, Colorado, Burlington, Colorado, 
and others, Holyoke, Colorado, Peetz, Colorado--students from 
Nebraska or Kansas may attend the high school.
    In fact they may live one or two miles within our bordering 
states, and so are very close, in fact the closest school 
district would be in Colorado. They may have attended Colorado 
schools, their entire K through 12 educational experience.
    Yet under many of the acts that we have seen, many of the 
provisions of this policies, even though they are legal U.S. 
citizens, even though they graduated in the same class as a 
undocumented student in there, that may be in their class as 
well, they would not have the privilege of in-state tuition, 
even though the went to the same school, the same process, the 
same time, graduated in the same class.
    Ms. Musgrave. Thank you.
    Dr. Kobach, you talked about two court cases. Could you 
tell me how those have originated. Have they come from students 
and families?
    Mr. Kobach. Yes, they have. Indeed, the two cases are Day 
v. Sebelius, which is now entitled Day v. Bond, that is the one 
in Kansas, and many, several of the plaintiffs in that case are 
residents of Colorado, I believe, it's a group of almost 20 
students from the states surrounding Kansas, that's in Federal 
court, a few of their parents are also litigants, and they are 
simply suing to enforce their right, under Federal law, to be 
given the same tuition or at least to not be paying any more in 
tuition than illegal aliens are charged in Kansas, and they are 
also suing under the Equal Protection Clause of the Fourteenth 
Amendment because they are being discriminated against because 
of their status as U.S. citizens.
    The court, as I mentioned, never got to the merits of the 
issue, ruled on the preliminary threshold questions of standing 
and private right of action. Hopefully, if we prevail before 
the 10th Circuit here in Denver, it would go back to the 
District Court.
    The case in California is a slightly larger group of U.S. 
citizens, students from all over the country who are attending 
California institutions of higher education. Interestingly, two 
of the plaintiffs in that lawsuit are the son and daughter of 
Congressman Brian Bilbray.
    He is a Congressman representing the State of California, 
yet his own children cannot get in-state tuition in California 
while illegal aliens in California can obtain in-state tuition.
    One final point on the perspective of the students here. It 
was suggested by Mr. Polis, that he made reference to the 
Supreme Court decision in 1982 of Plyler v. Doe, and that was 
the decision that says that states have to provide through 
public education, K through 12 to illegal aliens.
    And he implied that somehow the opportunities end once you 
no longer have access to that free education.
    On the contrary, there are many opportunities. One 
opportunity that every alien national has is to return of 
course to his home country where presumably there is subsidized 
higher education available.
    The second option is at the age of 18, when you begin 
committing your own separate violation of Federal law. Prior to 
the age of 18, you are not in violation of Federal law as a 
separate, deportable offense. After the age of 18, you have 
started committing the crime of unlawful presence. That 
individual could go back to his home country, stay with 
relatives and actually apply for a visa, do what millions of 
people around the world are trying to do. Apply for a student 
visa or a work visa and try to get on the legal track.
    I suggest that if we are truly compassionate, we encourage 
people to get on the legal track instead of offering them an 
incentive to remain in the United States illegally. If they get 
on the legal track, then that would demonstrate the kind of 
respect for the rule of law that I think would entitle them to 
consideration to become U.S. citizens.
    Ms. Musgrave. Thank you.
    Thank you, Mr. Chairman.
    Chairman McKeon. Thank you very much. That concludes our 
time for the first panel. Thank you for your participation. It 
is really appreciated. If you think of something else that you 
want to have in the record, you have 14 days to get it added to 
the record. Thank you very much.
    We will take just a short recess while we are waiting for 
the next panel to take their places.
    [Recess.]
    Chairman McKeon. The committee will please come to order.
    Thank you. We will now begin with our second panel. Again, 
we want to thank all of you for being here today.
    We will hear first from Ms. Theresa Shaw, who has served as 
the chief operating officer of the Department of Education of 
Federal student aid for the past 4 years. Prior to her current 
appointment, Ms. Shaw was the executive vice president and 
chief operating officer of Enumerate Solutions, Inc., a 
Virginia-based startup technology firm. she began her career 
working for Sally Mae, eventually advancing go the position of 
senior vice president and chief information officer prior to 
her departure in 1999.
    Ms. Shaw graduated with a bachelor of science degree from 
George Mason University and completed the executive development 
series at George Washington University.
    Then we will hear from Ms. Debra DeMuth, who was named as 
director of the College Access Network, the guarantee agency 
for the State of Colorado, in January 2006. She is also the 
director of College Invest, the nonprofit secondary market in 
Colorado, since 2000.
    Ms. DeMuth is on the board of directors of the Education 
Finance Council and involved in the College Savings Plan 
Network, and the National Council of Higher Education Loan 
Programs.
    Prior to her service with the College Access Network and 
College Invest, Ms. DeMuth served as the assistant deputy 
manager of aviation for finance at Denver International 
Airport.
    She has also worked as executive vice president and chief 
financial officer of Airport Integrated Systems and as senior 
audit manager with Coopers and Lybrand in Boston and Denver. 
Ms. DeMuth graduated from Colorado State University.
    And then we will hear from Dr. Marilynn Marcy Liddell. She 
has been the president of Aims Community College since 2003. 
Prior to this position, she served as president of Glen Oaks 
Community College, and the vice president of academic affairs 
at Morton College in Illinois.
    She has recently received a Fulbright scholarship and spent 
6 weeks in Germany. Dr. Liddell is the president of the 
American Association for Women in Community Colleges and serves 
on their task force for global education.
    She graduated from Drake University with a bachelor of arts 
and a master's of arts. She obtained her doctorate of education 
from the University of Houston and her PhD from Tristate 
University.
    Welcome, all of you. We will hear first from Ms. Shaw. You 
already heard about the 5 minute time limit.
    Ms. Shaw. Yes, sir.
    Chairman McKeon. Thank you.

 STATEMENT OF THERESA S. SHAW, CHIEF OPERATING OFFICER, OFFICE 
      OF FEDERAL STUDENT AID, U.S. DEPARTMENT OF EDUCATION

    Ms. Shaw. Thank you. Good morning, Chairman McKeon, 
Congresswoman Musgrave, members of the committee. Thank you for 
inviting me to testify today.
    I an Terri Shaw, the Department of Education's chief 
operating officer for Federal student aid, and I am very 
pleased to be here representing Secretary Spellings, the 
Department, and the very talented and dedicated Federal student 
aid team.
    The Department of Education's grant, loan and work 
assistance programs represent the largest source of student aid 
for postsecondary education in the United States.
    In fiscal year 2007, these programs will provide more than 
$82 billion in financial support to more than 10 million 
students and their families.
    Federal student aid, under the direction of the secretary, 
is charged with operational responsibility for oversight and 
administration of all of the Department's Federal student aid 
programs.
    As one of the Government's few performance based 
organizations, we are focused on rigorous oversight, efficient 
operations, reduced costs, and superior customer service, and 
we are proud of our recent achievements.
    In January of 2005, the General Accountability Office 
removed the Federal student aid program from the high risk 
list. Working with all of the participants in the program, the 
cohort default rate was reduced from an all-time high of 22.4 
percent to an all-time low of 4.5. Yearly defaulted loan 
recoveries increased from $38 million in 1993 to an estimated 
$1.8 billion in 2006, while related collection costs decreased 
by more than 50 percent.
    We continue to successfully manage dramatically increasing 
workloads with fewer staff, while controlling and containing 
budgetary impact.
    We dramatically transformed the aid application process 
from 100 percent paper to more than 90 percent Web-based, 
saving approximately $27 million annually in processing, 
printing and postage, and cutting processing time from weeks to 
days.
    Mr. Chairman, your invitation specifically asked me to 
comment on two issues, student access to the Federal student 
aid programs and cost reduction in the Federal student loan 
programs, and how they are impacted by the provisions of the 
Deficit Reduction Act of 2005, and specifically the Higher 
Education Reconciliation Act of 2005, or the HERA.
    HERA created two grant programs, the academic 
competitiveness grant or the ACG, for students who complete a 
rigorous high school program of study, and the National Science 
and Mathematics Access to Retain Talent, or SMART grant, for 
students who are majoring in math, science, technology, 
computer science, and in certain critical foreign languages.
    These programs will provide $790 million in additional 
student aid to students for the 2006-2007 academic year, and 
$4.5 billion over the year 5 years.
    Nationwide, we estimate 500,000 students will qualify to 
receive ACG and SMART grants.
    To date, almost 59,000 potentially eligible students from 
California and over 5600 students from Colorado have applied 
for ACG grants for this school year.
    These programs will encourage more students to take 
rigorous high school courses and to pursue these challenging 
majors to help ensure our Nation's security and economic 
competitiveness.
    The HERA included other provisions that also increase 
access for students and their families to the student aid 
programs.
    These provisions include increased annual loan limits, 
eligibility of graduate students for PLUS loans, reduced loan 
origination fees, and several changes for determining the 
illegality for Federal student aid, including change to family 
contribution and needs analysis calculations.
    Although not directly related to increased access, another 
noteworthy student and borrower benefit provided by HERA is 
expanded loan forgiveness for highly qualified math, science, 
and special education teachers serving low-income communities.
    Congress also included key provisions to allow active duty 
military personnel to be considered as an independent for 
determining Federal student aid eligibility, and to provide 
deferment of loan payment during active duty status.
    To provide these benefits, the HERA included a number of 
cost saving provisions. The recapture of excess interest paid 
to FFEL lenders, restriction on lender subsidies for loans made 
with proceeds of tax-exempt securities, reductions in default 
insurance paid to FFEL lenders, and a requirement for default 
fees, the insurance premium, to be deposited into a guarantee 
agency's Federal fund.
    Finally, as you know, Mr. Chairman, the secretary's 
Commission on the Future of Higher Education recently approved 
its final report, which will be formally presented to the 
secretary later this month for her review and appropriate 
action.
    I know Secretary Spellings looks forward to working with 
you, Mr. Chairman, Congresswoman Musgrave, and other higher 
education leaders across the country to continue this dialog on 
how to become more responsive to the needs of students, 
parents, educators and the business community.
    On behalf of the secretary, the Department and the Federal 
student aid staff, thank you for the opportunity to testify 
today and I will be happy to answer any questions.
    [The prepared statement Ms. Shaw follows:]

Prepared Statement of Theresa S. Shaw, Chief Operating Officer, Federal 
               Student Aid, U.S. Department of Education

I. Introduction
    Good morning. Chairman McKeon, Congresswoman Musgrave, and Members 
of the Committee, thank you for inviting me to testify today. My name 
is Terri Shaw and I am the Department of Education's Chief Operating 
Officer for Federal Student Aid, a position I have held since September 
2002. I am pleased to be here representing Secretary Spellings, the 
Department, and the Federal Student Aid staff to share with you some of 
our successes in elevating our performance, delivering tangible 
results, and transforming our workforce.
    The Department of Education's grant, loan, and work assistance 
programs represent the largest source of student aid for postsecondary 
education in the United States. In Fiscal Year 2007, these programs 
will provide more than $82 billion in financial support to more than 10 
million students and their families. In addition, Federal Student Aid 
directly manages a student loan portfolio of $90 billion and oversees a 
total student loan portfolio of nearly $402 billion.
    I should also note that funding for Federal Pell Grants has risen 
from $8.8 billion in 2001 to a proposed $13 billion for the coming 
fiscal year. In addition, the Department of Education will make or 
guarantee almost $62 billion in new student loans next year, a $4 
billion increase over last year. These increases continue the 
President's longstanding practice of offering historic levels of 
support for college students.
    Mr. Chairman, in the invitation you extended to me to testify 
today, you asked for comments on two specific issues: to address the 
impact of the Deficit Reduction Act on access by students to the 
federal student aid programs and to comment on issues related to cost 
reductions in the federal student loan programs. I will, of course, 
respond to that request, but I would first like to provide the 
Committee with some background information about Federal Student Aid 
within the Department of Education.
II. Who/What Is Federal Student Aid
    Created by Congress in 1998 under your leadership, Chairman McKeon, 
Federal Student Aid was the federal government's first Performance-
Based Organization, or PBO, and is specifically charged with 
operational responsibility for the administration and oversight of the 
federal student aid programs authorized under Title IV of the Higher 
Education Act of 1965. The authorizing statute provides that the 
purposes of the PBO are to improve service delivery, integrate business 
processes and systems, strengthen program integrity, reduce operating 
costs, and increase workforce and management accountability.
    As one of the government's few PBOs, Federal Student Aid upholds 
high standards of operational efficiency, innovation, customer care, 
and individual and organization performance with particular emphasis on 
modernizing the delivery of the federal student aid programs.
    Federal Student Aid is focused on:
     effectively managing the federal student aid programs;
     ensuring fair and effective oversight;
     delivering world-class customer service;
     developing award-winning products and services;
     providing service delivery at the lowest cost without 
sacrificing quality; and
     creating and fostering a work environment that not only 
attracts, develops, retains and rewards top performers, but also 
expects high performance and demands accountability.
    Federal Student Aid contracts with, manages, and monitors a number 
of private sector providers for our major business functions. We have 
created innovative contract solutions, including performance incentives 
and disincentives, to optimize the investment of taxpayer dollars and 
the return on that investment. While our federal employee staff numbers 
just over 1,000 and is located in Washington and in ten regional 
offices around the country, these private sector service providers add 
the support of more than 5,000 clerical, technical, and professional 
staff in locations all across the country from Utica, New York to 
Bakersfield, California.
III. Historical Perspective
    Prior to the establishment of Federal Student Aid as a Performance 
Based Organization within the Department of Education, the federal 
student aid programs were challenged with oversight and management 
issues, high student loan cohort default rates, and customers who were 
not satisfied with the service they were receiving. In 1990, the 
Government Accountability Office (GAO) found the federal student aid 
programs at high risk for fraud, waste, abuse and mismanagement. 
Financial management and internal controls were deemed deficient and 
unqualified audit opinions were not attainable. In 1990, student loan 
default rates had hit an all time high of 22.4 per cent. Customer 
satisfaction scores were not even measured, but if they had been, they 
would not have been positive.
    Federal Student Aid, with its specific statutory mandate, 
authorities, and flexibilities, was created to effect change. We demand 
and expect breakthrough performance and innovation from both our own 
employees and from our contractors that results in higher efficiency, 
greater productivity and a more satisfied customer. We are transforming 
our workforce and culture to be highly effective by: 1) ensuring 
clarity of vision, mission and values; 2) ensuring that staff at all 
levels firmly understand their individual and inter-dependent roles in 
attaining the vision and mission; and 3) most importantly, requiring 
high performance and individual and organization accountability.
IV. Accomplishments/Progress vs. Historical Perspective
            A. High Risk Removal and Clean Audits
    We are particularly proud of the Department's and Federal Student 
Aid's achievement of a major President's Management Agenda (PMA), GAO, 
and departmental objective of reducing the vulnerability of the federal 
student aid programs to fraud, waste, abuse, and mismanagement.
    As a result of Federal Student Aid's specific focus on reducing 
these vulnerabilities and our clear and sustained demonstration of 
results, in January of 2005, GAO removed the federal student aid 
programs from its High Risk List. Additionally, in March 2005, we 
achieved ``all green'' status on the PMA Scorecard used by the Office 
of Management and Budget (OMB) for monitoring agency progress and 
status. We have received unqualified audit opinions since Fiscal Year 
2002 with no material weaknesses noted since Fiscal Year 2003.
            B. Default Rate Reductions and Default Management
    We continue to make meaningful progress on reducing student loan 
default rates. On September 19, 2005, the Secretary announced that the 
2004 cohort default rate was 4.5 percent, an all-time low and a 
dramatic 80 percent reduction from the high of 22.4 percent in 1990. 
Additionally, the outstanding combined student loan portfolio for both 
the Federal Family Education Loan (FFEL) and Direct Loan programs has 
grown from $65 billion in 1990 to nearly $402 billion in 2005. As the 
outstanding portfolio has grown an astounding 518 percent over 15 
years, the defaulted loan share has decreased from nearly 17 percent of 
the portfolio in 1990 to just over 6 percent in 2005.
            C. Default Recoveries and Collection Costs
    As noted earlier, Federal Student Aid contracts with private-sector 
providers for our major business functions. One of these key business 
functions is the collection of defaulted loans that were made by, or 
assigned to, the Department of Education. Today, Federal Student Aid is 
the largest debt collection outsourcer in the federal government. We 
have approximately $18 billion in defaulted student loans currently 
under management with 17 contractors, including five small businesses 
through set-aside contracts. Our most recent contracts have several 
performance-based evaluation measures, making the contracts models for 
performance-based contracting in the federal government.
    Over the past several years, we have dramatically increased the 
recovery of defaulted dollars while significantly reducing the cost of 
that recovery. While yearly defaulted loan recoveries have increased 
from $38 million in 1993 to an estimated $1.8 billion in 2006 (47 times 
that of 1993), related collection costs have been reduced more than 50 
percent since 1993; from 33 cents for every dollar collected to about 
15 cents.
            D. Direct Operating Cost Reductions
    Federal Student Aid's ability to manage and control operating 
expenses is based on a philosophy of sound fiscal management and 
continuous process improvement practices that increase productivity and 
operational efficiencies as well as innovation in our products, 
services and supporting technologies. This has allowed us to 
successfully manage dramatically increased workloads and control and 
contain budgetary impact. Since Fiscal Year 2000, applications for 
federal student aid (the FAFSA) have increased 13 percent, the number 
of loans has increased 63 percent, Federal Pell grant recipients have 
increased 30 percent; and collection accounts under our management have 
increased 6 percent, all without corresponding increases in our 
operating expenses or staffing levels. In fact, we continue to shrink 
our direct operating expenses as a portion of Federal Student Aid' 
overall administrative budget, down from 54 percent in Fiscal Year 2000 
to 44 percent in Fiscal Year 2006, and we are operating at a staffing 
level 15 percent below that of Fiscal Year 2000. We measure the unit 
cost for all of our key delivery areas and annually set new performance 
targets for reduction, while maintaining or increasing the 
effectiveness in those areas.
    One notable example is the reduction in the direct unit cost for 
processing applications for federal student aid (the FAFSA), with more 
that 90 percent of applications submitted electronically rather than by 
paper. Our award winning electronic student aid application, FAFSA on 
the Web, not only provides families with an efficient and customer 
focused electronic application process, but also results in reduced 
costs saving approximately $27 million annually in processing, printing 
and postage costs.
    We continue to develop and use performance-based contracts to 
reengineer and operate our student aid application, loan servicing, and 
loan collection business functions and systems. We have retooled our 
largest contracts in the past several years so that taxpayers will save 
more than one billion dollars over the period of the agreements.
            E. Customer Satisfaction
    Independently collected customer satisfaction scores for our 
electronic FAFSA are comparable to corporations such as UPS, Mercedes 
Benz (DaimlerChrysler), and Amazon.com; Direct Loan Servicing scores 
are better than Wachovia Bank and similar financial services entities; 
Pell Grant and Direct Loan originations compare favorably to E-Trade.
    In addition, the Federal Student Aid Ombudsman, in its statutorily 
mandated customer advocate role, recently provided assistance to its 
100,000th customer.
V. Program Changes: Benefits to Students and Borrowers
    Mr. Chairman, allow me now to specifically respond to your request 
that I comment on the impact of the Deficit Reduction Act on access by 
students to the federal student aid programs. The relevant section of 
the Deficit Reduction Act is the Higher Education Reconciliation Act of 
2005, or the HERA. Included in the HERA were several provisions that 
directly address the issue of access by needy students and their 
families to our programs.
            A. ACG and SMART Grants
    The most obvious of the HERA provisions that increase access to the 
programs was the creation of two new grant programs that, in addition 
to providing increased grant funding to Federal Pell Grant recipients, 
address other issues of great importance to the nation. For students 
who complete a rigorous high school program of study, the Academic 
Competitiveness Grant, or ACG, Program provides additional funds of up 
to $750 to students for their first academic year of a degree program 
and up to $1,300 for their second academic year. This is in addition to 
Pell Grant money students are already receiving.
    The National Science and Mathematics Access to Retain Talent Grant 
Program, or the SMART Grant, provides up to $4,000 per year in new 
grant funding to students who are majoring in math, science, 
technology, computer science, and in certain critical foreign 
languages. These programs will help to encourage more students to take 
rigorous high school courses and to pursue these challenging majors to 
help ensure our nation's security and economic competitiveness.
    These programs will provide $790 million in additional student aid 
to students for the 2006-2007 academic year and $4.5 billion over the 
next five years. Nationwide, we estimate that approximately 500,000 
students will be eligible to receive ACG and SMART Grants for the 2006-
2007 award year.
    Secretary Spellings has taken a personal role in ensuring that the 
new grant programs are deployed on time so that eligible students are 
provided additional grant funding for the new school year that has just 
begun, or will soon begin, across the country.
    The improved operational, management and performance capabilities 
of Federal Student Aid that I described earlier enabled the Department 
and Federal Student Aid to implement, in collaboration with the states 
and our college and university partners, the two new grant programs in 
just five short months after they were enacted by the HERA.
    I would note that, to date, 552,562 potentially eligible ACG 
students have provided information to us so that their eligibility can 
be determined and funds delivered by their school. 58,670 of these 
students are from California and 5,683 are from Colorado. Thus far, 
schools have drawn down $5.5 million to fund SMART grants to an 
estimated 2,900 students.
            B. Other HERA Provisions
    The HERA, of course, included other changes to the federal student 
aid programs. Some of these HERA changes, such as increased loan limits 
and expanded loan forgiveness were included in the Administration's 
Fiscal Year 2006 Budget. The changes related to the student loan 
programs make them more efficient and cost-effective vehicles for 
helping students finance postsecondary education. In fact, much of the 
additional student aid funding included in the Pell Grant Program, the 
two new grant programs, and the increases in loan limits, resulted from 
these cost savings.
    Specifically, the following HERA provisions directly increase 
access for students and their families to the student aid programs:
     the new ACG and SMART Grants discussed earlier;
     increased annual loan limits in the FFEL and Direct Loan 
programs;
     eligibility of graduate students for PLUS Loans;
     reduced loan origination fees;
     the inclusion of additional expenses in a student's ``cost 
of attendance'' for the purpose of determining the student's 
eligibility for federal student aid;
     changes to the formulas for calculating a student's 
expected family contribution and thus increasing a student's 
eligibility for federal student aid;
     further simplification in determining eligibility for 
students from low income families including consideration of the 
receipt of other federal means tested benefit programs;
     active duty military personnel are now considered 
independent of their parents for determining eligibility for federal 
student aid;
     changes in the treatment of certain assets (small 
businesses, tuition savings plans, etc.) for determining eligibility 
for federal student aid; and
     modification of the ``drug conviction'' student 
eligibility requirement to clarify that only offenses that occurred 
while the student was receiving federal student aid would result in 
ineligibility.
    Other important benefits provided to students and borrowers by the 
HERA, although not directly related to increased access are the 
following:
     expanded loan forgiveness for highly qualified math, 
science, and special education teachers serving low-income communities;
     new loan repayment deferment for active-duty military 
personnel;
     loan discharges based on identity theft;
     reduced number of on-time payments a borrower who has 
defaulted on his or her loan must make before ``rehabilitating'' the 
loan;
     changes to the return of Title IV funds rules so that some 
students do not need to repay as much in grant funds when they withdraw 
from school; and
     increased borrower control over loans used to meet 
remaining institutional charges when a student withdraws.
VI. Cost Reduction in the Federal Student Loan Programs
    Additionally, in response to your request that I address issues 
related to cost reductions in the federal student loan programs, I 
first refer you to my earlier remarks about Federal Student Aid's 
mandate. As stated earlier, ensuring fair and effective oversight is an 
overriding focus of Federal Student Aid. This oversight means that not 
only do we do everything we can to make sure that these important 
student aid dollars go only to students who have met the statutory 
eligibility requirements, but also that our delivery partners comply 
with all requirements and that they perform their fiduciary 
responsibilities properly. These partners include, in addition to 
schools and colleges, the lenders, secondary markets, and guaranty 
agencies that help us deliver more than $43 billion annually in student 
loan funds under the FFEL Program. Among the activities and tools that 
Federal Student Aid uses to ensure FFEL partner compliance are on-site 
program compliance reviews, review of independent audited financial 
statements, performance scorecards and benchmarks, and data analysis 
and interrogation to identify potential risk areas for further review.
    Of course, the HERA legislation included a number of student loan 
cost savings provisions that, as noted earlier, helped fund increases 
in the Pell Grant Program, the two new grant programs, and increased 
loan limits in the FFEL and Direct Loan programs. Those provisions 
include the:
     recapture of excess interest paid to FFEL lenders;
     placement of restrictions on ``school lenders'';
     further limitation on special allowance payments for loans 
made under the ``9.5 percent'' rule;
     reductions in default insurance paid to FFEL lenders;
     requirement for default fee to be deposited into a 
guaranty agency's federal fund; and
     restrictions on a guaranty agency's use of consolidation 
as a collections tool.
VII. Closing
    Finally, as you know, the Secretary's Commission on the Future of 
Higher Education recently approved its final report, which will be 
formally presented to the Secretary later this month for her review and 
appropriate actions. I know she looks forward to working with you, Mr. 
Chairman, Congresswoman Musgrave and other higher education leaders 
across the country to continue this dialogue on how to become more 
responsive to the needs of students, parents, educators and the 
business community.
    Mr. Chairman, in closing I would like to summarize by restating 
that Federal Student Aid, under the leadership of Secretary Spellings 
has, and will continue to, effectively and efficiently administer the 
federal student aid programs in accordance with the statutory and 
regulatory requirements. We will do so with pride in our 
accomplishments as the government's first Performance-Based 
Organization and we will continue to meet our objectives of providing 
students and families with a world-class student aid delivery system 
with focus on reduced costs, rigorous oversight and superior customer 
service.
    I am honored to be part of Secretary Spellings' team at the 
Department of Education. Federal Student Aid's goal is to ensure that 
all eligible students and families can benefit from federally supported 
financial assistance for postsecondary education and we champion that 
goal and its value to our society.
    On behalf of the Secretary, the Department and the Federal Student 
Aid staff, thank you for the opportunity to testify today.
    I am pleased to answer any questions you may have.
                                 ______
                                 
    Chairman McKeon. Thank you very much.
    Ms. DeMuth.

 STATEMENT OF DEBRA L. DEMUTH, DIRECTOR, COLLEGE ACCESS NETWORK

    Ms. DeMuth. Good morning, Mr. Chairman, Congresswoman 
Musgrave. Thank you for this opportunity to testify about 
Colorado's efforts to make higher education more accessible and 
affordable.
    College Access Network is a division of the Colorado 
Department of Higher Education and it is the designated 
guarantor of student loans in the State of Colorado.
    Colorado faces three fundamental issues. Students need to 
be better prepared to succeed in college. The rising cost of 
education is putting additional demands on financial aid 
resources, and families need to have knowledge of and access to 
the resources available.
    Colorado not only recognized that it needed to improve in 
these areas but has already put a number of initiatives in 
place to move Colorado in the right direction.
    I will outline some of these today that support the changes 
made under the Deficit Reduction Act.
    The College in Colorado Scholarship was established to 
reward high need students who work hard to be academically 
prepared for a college education. Students must sign up in the 
8th and 9th grades, maintain a 2.5 GPA and complete a rigorous 
curriculum of classes.
    In the first 6 months, we have collected nearly 6000 
applications. This scholarship complements the grants that Ms. 
Shaw just discussed under the Deficit Reduction Act.
    In addition, launched in 2004, the College in Colorado Web 
site serves as a one-stop shop for students wishing to further 
their education past high school.
    CollegeInColorado.org resources include the career center, 
which helps students determine which careers best fit their 
interests and goals, the academic planning section which 
outlines Colorado's higher education admission requirements and 
helps students plan for them. The college search section, which 
offers information about Colorado and out-of-state higher 
education institutions. The financial aid section which 
describes available grants, scholarships work study and loans, 
and the pre-collegiate partnerships component which highlights 
a statewide network of resources to help Colorado middle and 
high school students plan, apply and pay for college.
    Nearly 550,000 people have visited CollegeInColorado.org in 
2005, and visits in 2006 are on track to exceed that, with more 
than 400,000 visitors through July of this year.
    Nearly 10,000 students have applied to college through 
CollegeInColorado.org since it was launched in 2002.
    College Access Network is honored to be one of just five 
state guaranty agencies that won approval to operate under 
Voluntary Flexible Agreements or VFAs. VFAs are designed to 
reward guarantee agencies for results and performance, and 
allows them to test innovative ways to improve the program for 
students and parents.
    Under our VFA approved in 2004, College Access Network has 
implemented innovative approaches to help borrowers avoid 
defaulting on their student loans.
    Working in partnership with the U.S. Department of 
Education, Colorado received approval to focus our efforts on 
delinquency prevention, and to shift our funding from default 
collection to collection efforts associated with keeping the 
borrower loans in good standing and out of default.
    College Access Network found that it is much more effective 
to use trained counselors to work intensively with borrowers, 
to avoid default in the first place.
    Lenders have agreed to provide notification of default up 
to 60 days earlier than required by law, to allow early 
intervention and maximize the time available to assist 
borrowers in knowing their options and developing a plan that 
addresses their financial constraints.
    If a borrower does default, the College Access Network 
outreach counselors focus on working with borrowers to 
rehabilitate their loans.
    Under our VFA, a borrower can reestablish good standing by 
making 9 monthly on-time payments. This significantly increased 
our success in getting loans rehabilitated and keeping the 
borrowers out of default, in contrast to requiring 12 monthly 
on-time payments.
    The alternative for borrowers is to consolidate out of 
default. We found, in Colorado, that 50 percent of our 
borrowers, that consolidated out of default actually would go 
into redefault. Under our VFA, we limited the defaulted loans 
that we could consolidate.
    College Access Network has decreased its cohort default 
rate from over 6 percent in 1998 to a draft rate of 2.7 percent 
in 2004.
    Both the shortening of the rehabilitation timeframe to 9 
months and the reduction in revenue a guarantee agency can 
receive on consolidating loans out of default were incorporated 
into the Deficit Reduction Act.
    This is a great example of Congress, Federal Government and 
state government working together for program improvement. At 
College Access Network, we share your goal of increasing access 
to higher education by reducing the financial hurdles students 
and families face.
    We look forward to continuing to work with the committee 
and the U.S. Department of Education to make college a reality 
for students.
    [The prepared statement Ms. DeMuth follows:]

Prepared Statement of Debra L. DeMuth, Director, College Access Network 
                           and CollegeInvest

    Good morning Mr. Chairman and Congresswoman Musgrave. Thank you for 
this opportunity to testify about Colorado's efforts to make higher 
education more accessible and affordable and the impact of the Deficit 
Reduction Act.
    College Access Network and CollegeInvest are both divisions of the 
Colorado Department of Higher Education. I serve as director of both 
entities, which were created by the Colorado General Assembly in 1979. 
College Access Network is the designated guarantor of student loans for 
the State of Colorado, with nearly $15 billion in loans under the 
Federal Family Education Loan Program (FFELP). CollegeInvest provides 
low-cost student and parent loans and the only 529 college savings 
plans that combine federal tax advantages with a Colorado state income 
tax deduction for all contributions. Although they both are affiliated 
with the State of Colorado, College Access Network and CollegeInvest 
operate without any subsidies from the state. In fact, revenue from the 
two entities supports various initiatives to improve access to higher 
education opportunities for Colorado residents. Specifically, 
CollegeInvest provides more than $500,000 a year in scholarships and 
college savings accounts while the Colorado Access Network provides 
$300,000 in college scholarships annually through participating higher 
education institutions. In addition, both entities have contributed to 
funding a $75 million scholarship fund--the College In Colorado 
Scholarship.
    In Colorado, intense interest has been focused on the issue of 
access to higher education opportunities, in part due to what is known 
as the ``Colorado paradox.'' While Colorado ranks near the top of all 
states for the number of college-educated adults, it ranks near the 
bottom in sending Colorado kids to college. While some states send 
nearly 60 percent of high school freshman to college within four years, 
in Colorado only 39 percent of high school freshman go on to college 
within that timeframe. When it comes to low-income or minority 
students, the numbers are especially sobering. Only 9 percent of the 
state's college-age Latino males are enrolled in college and Colorado 
ranks in the bottom quartile when it comes to sending low-income 
students to college.
    When the Deficit Reduction Act was enacted, much was written about 
its upsides and downsides for higher education. At the time, 
CollegeInvest noted that the law's impacts varied depending on one's 
specific circumstances and the longer term impacts of some of the 
changes are unknown. However, three fundamental issues remain true: 
students need to be better prepared to succeed in college, the rising 
cost of education is putting additional demands on financial aid 
resources, and families need to have knowledge of, and access to the 
resources available.
    Colorado has not only recognized that it needs to improve in these 
areas but it has already put a number of initiatives in place to move 
Colorado in the right direction. I will outline some of those today 
that support the changes made under the Deficit Reduction Act.
College In Colorado Scholarship
    Established in 2005, the goals of the College In Colorado 
Scholarship are to reward high need students who work hard to be 
academically prepared for a college education. Students sign up in the 
8th and 9th grades, and agree to maintain a 2.5 GPA and complete a 
rigorous curriculum of classes established by the Colorado Commission 
on Higher Education. If they are Pell-eligible, they receive up to 
$1,500 per year toward their cost of education for up to 5 years. While 
in college they must continue to maintain satisfactory academic 
progress and a 2.0 GPA.
    This program was initially funded with $50 million contribution 
from CollegeInvest, and subsequently received $25 million from the 
College Access Network. In the first six months, we have collected 
nearly 6,000 applications from high school students committing to the 
requirements of this program. The College In Colorado scholarship will 
work well with and complement the Academic Competitiveness Grant 
created under the Deficit Reduction Act.
College Access Initiative
    The College Access Initiative provision in the Deficit Reduction 
Act calls for each guaranty agency to provide access for students and 
families to a comprehensive listing of the postsecondary education 
opportunities, programs, publications, Web sites, and other available 
services. I am pleased to say that Colorado is ahead of the curve in 
this area, thanks to the College In Colorado statewide initiative.
    Launched in 2004, College In Colorado serves as a ``one-stop shop'' 
for students wishing to further their education past high school. A Web 
site (www.CollegeInColorado.org) provides resources to address the 
hurdles that Colorado students face when contemplating college: 
primarily the lack of financial resources, academic preparation and 
information.
    CollegeInColorado.org resources include the Career Center, which 
helps students determine which careers best fit their interests and 
goals; the Academic Planning section, which outlines Colorado's Higher 
Education Admission Requirements and helps students plan for them; the 
College Search section, which offers information about Colorado and 
out-of-state higher education institutions; the Financial Aid section, 
which describes available grants, scholarships, work study and loans, 
and provides a calculator to help students compare their expected 
income for a chosen occupation to the amount of student loan debt they 
may accrue; and the Pre-Collegiate Partnerships component, which 
highlights a statewide network of resources to help Colorado middle and 
high school students plan, apply and pay for college.
    College In Colorado is currently making some improvements to the 
Web site, including a comprehensive career and curriculum update and a 
re-structuring of the home page to make it more inviting, flexible and 
easier to navigate. These changes will help ensure that when someone 
visits CollegeInColorado.org with a question about planning, applying 
or paying for college, they will immediately know where to go for 
answers.
    Nearly 550,000 people visited CollegeInColorado.org in 2005 and 
visits in 2006 are on track to exceed that, with more than 400,000 
visitors through July of this year. Nearly 10,000 students have applied 
to college through CollegeInColorado.org since it was launched in 2002.
Enhancements to Guarantee Agency Effectiveness
    College Access Network is honored to be one of just five state 
guaranty agencies that won approval to operate under a Voluntary 
Flexible Agreement (VFA). VFAs are designed to reward Guarantee 
Agencies for results and performance and allows them to test innovative 
ways to improve the program for students and parents. Under our VFA, 
approved in 2004, College Access Network has implemented innovative 
approaches to help borrowers avoid defaulting on their student loans. 
Working in partnership with the U.S Department of Education, Colorado 
received approval to focus our efforts on delinquency prevention, and 
to shift our funding from default collection efforts to results 
associated with keeping borrower loans in good standing and out of 
default. College Access Network found that it is more effective to use 
trained counselors to work intensively with borrowers to avoid default 
in the first place. Lenders have agreed to provide notification of 
defaults up to 60 days earlier than required to allow early 
intervention and maximize the time available to assist the borrowers in 
knowing their options and developing a plan that addresses their 
financial constraints.
    Once a borrower does default, the College Access Network outreach 
counselors focus on working with borrowers to rehabilitate their loans. 
Under our VFA, a borrower can reestablish good standing by making 9 
monthly on-time payments. This significantly increased our success in 
getting loans rehabilitated and keeping borrowers out of default in 
contrast to requiring 12 monthly on-time payments. The alternative for 
borrowers is to consolidate out of default. We found that 50% of 
borrowers that consolidated out of default would redefault. In 
partnership with the Department of Education, under our VFA we limited 
the defaulted loans that we would consolidate. Our efforts and funding 
are based on our success in rehabilitating the loans. Thanks in part to 
these strategies; College Access Network was able to decrease its 
cohort default rate from over 6% in 1998 to a draft cohort rate of 2.7% 
in 2004.
    Both the shortening of the rehabilitation timeframe to 9 months and 
the reduction in revenue a guarantee agency can receive on 
consolidating loans out of default were incorporated into the Deficit 
Reduction Act. This is a great example of congress, federal government, 
and state government working together for program improvement. We 
appreciate the U.S. Department of Education's efforts to partner with 
us to continue to identify new ways of improving the program.
    At College Access Network and CollegeInvest we share your goal of 
increasing access to higher education by reducing financial hurdles 
students and families may face. We look forward to continue working 
with you and the U.S. Department of Education to make college a reality 
for more students.
                                 ______
                                 
    Chairman McKeon. Thank you very much.
    Dr. Liddell.

 STATEMENT OF DR. MARILYNN LIDDELL, PRESIDENT, AIMS COMMUNITY 
                            COLLEGE

    Dr. Liddell. Thank you very much, Mr. Chairman, and 
Congresswoman Musgrave. I appreciate you allowing me to come 
here to bring this down to the local level from the state level 
and the national level.
    As you know, community colleges have two rather distinct 
characteristics that separate us from our university 
colleagues.
    First, we focus on undergraduate teaching and learning 
rather than graduate training and research, and also the 
community college mission embraces open access.
    In light of these factors, then I would like to share with 
you the story about our financial aid realities at Aims 
Community College. total financial aid recipients increased to 
52.2 percent in last year's award year of 2005-2006. Some of 
the demographics about our students include 54 percent are 
female, 59 percent are full-time students, many of those 
working full time as well so that they can afford to go to 
school.
    32 percent plan to transfer to a 4-year college or 
university. More than half of them come right here to UNC. 36 
percent are enrolled in career and technical education 
programs, leading to a certificate or associate of applied 
science.
    In 2004-2005, almost half of the financial aid recipients 
had incomes of under 15,000. 1349 of these students received 
Pell grants in an average amount of $2350. They borrowed an 
average of $2298 in subsidized Federal direct student loans, 
and an average of $2690 in unsubsidized Federal direct loans, 
for a combined yearly average loan debt of $2415.
    Despite this, for last year, our default draft rate is 
under 10 percent.
    Pell grant recipients for 2004-2005, and 2005-2006, were 43 
percent first generation students. Loan recipients for the same 
were 41 percent first generation.
    In 2004-2005, 17.6 percent of Pell grant recipients were 
employed full time and 14.1 percent were employed part time.
    Direct loan recipients were employed at higher rates in 
both years. For 2004-2005, 24.2 percent of loan recipients were 
employed full time and 19.4 percent were employed part time.
    For 2005-2006, that increased to 30.3 percent full time and 
20.4 percent part time. Total borrowers of subsidized and 
unsubsidized Federal student loans increased by 15 percent from 
2004-2005 to 2005-2006.
    In its 2006 report, Grants For Students: What They Do, Why 
They Work, the Educational Policy Institute documents that an 
increase in available grant aid will help to recruit low-income 
students. These students, we find, process the cost-benefit 
ratio of postsecondary education differently than more affluent 
youth, and consequently are more in need of financial 
inducements to encourage enrolling and remaining in school.
    The larger question is where will such grant aid come from. 
Many priorities vie for Federal funding as the Federal deficit 
continues to rise.
    However, the deficit reduction act we believe is a positive 
one in as much as it limits the profit levels for lenders and 
only might be negative in terms of loss of the fluctuating 
percent of interest.
    The financial aid community is also supportive of the 
concept that most dollars should be channeled to neediest 
students. Colorado, as you know, is one of the states that has 
seen significant decreases in funding for the past years.
    That has caused our university colleagues to raise tuition 
significantly, in some cases 25 to 30 percent.
    As tuition levels rise and more restrictive enrollment 
policies are implemented at these 4-year institutions, we 
probably will see a corresponding increase in the number of low 
and middle-income students enrolling in community colleges. 
Indeed, we have seen evidence of that this year as our 
enrollments are up 5 percent.
    The picture at Aims Community College is reflected 
nationally. Nationwide, community colleges enroll 45 percent of 
all students in American higher education. 59 percent are 
women, and community colleges enroll 55 percent of all 
Hispanics attending college in the United States.
    66 percent of our funding comes from state and local 
sources. We know that preparation for college plays a key role 
in access and success, but student financial aid is also 
essential.
    In 2004,college enrollment in the year following high 
school graduation was 35 percent of those with incomes below 
10,000 and 75 percent, or more than twice that, for those with 
incomes between 75,000 and a 100,000.
    In 2005-2006, more than 2 million community college 
students received $4.3 billion in Pell grants. Despite this 
support an dour low tuition, our students are not immune from 
debt, and in 2004, 28 percent of community college associate 
degree recipients graduated with an average debt amount of 
$5800.
    Given this, community colleges, and indeed, all of American 
higher education support an increase in the maximum Pell grant 
to $4500 per year. We know that the maximum Pell grant 
increased dramatically in the last decade but we encourage 
Congress to consider the maximum grant being frozen at $4.050 
for the last 4 years.
    We have managed to keep our in-district tuition at Aims 
flat for the past 3 years and we hope to be able to continue to 
do that by having Federal and state subsidies for our students.
    Last, I would be remiss if I did not mention two community 
college priorities. One was certainly reflected in statements 
by my colleagues about the academic competitiveness grant. We 
would like to see part-time students made eligible for the new 
academic competitiveness grants, and also certificate students 
should receive these grants.
    Finally, helping students fund higher education must become 
and remain a top priority at the Federal level, if we wish to 
continue to provide access for students from all economic 
levels.
    Increases in grant assistance to the neediest students are 
a means to that end and modest increases in loan limits will be 
of some help, but ethically, we must ask the question, how much 
debt can we encourage or allow students to accumulate in 
exchange for higher education?
    Thank you. I also will be happy to answer any questions.
    [The presentation submitted by Ms. Liddell follows:]

    Presentation Submitted by Dr. Marilynn Liddell, President, Aims 
                           Community College

Aims Community College
    Greeley, Colorado
    Fall 2006 enrollment: 4518
            Aims Student Profile:
    Students at Aims Community College are increasingly applying for 
and receiving financial assistance. In award year 2004-05, 45.7 percent 
of students received some form of aid. Total aid recipients increased 
to 52.2 percent in award year 2005-06.
            Who are our students? Here are the demographics:
     Almost 54 percent are female.
     19 percent are 18-24.
     72 percent are white; 18.8 percent are Hispanic.
     59 percent are full-time students.
     84 percent are degree seekers.
     32 percent plan to transfer to a four-year college or 
university.
     36 are enrolled in career and technical education 
programs, leading to a certificate or Associate of Applied Science 
degree.
            Income and Financial Aid:
     In 2004-05, almost half of the 2406 financial aid 
recipients had income under $15,000.
     1349 of these students received Pell Grants in an average 
amount of $2350.
     They borrowed an average of $2298 in subsidized Federal 
Direct Student Loans and an average of $2690 in unsubsidized Federal 
Direct Student Loans for a combined yearly average loan debt of $2415.
            Additional demographic information:
     Pell Grant recipients for 2004-05 and 2005-06 were 43 
percent first generation.
     Loan recipients for 2004-05 were 41 percent first 
generation. That number increased to 42 percent for 2005-06.
     In 2004-05, 17.6 percent of Pell Grant recipients were 
employed full-time; 14.1 percent were employed part-time. For 2005-06 
full-time employed Pell recipients declined to 15.6 percent; part-time 
employed also declined to 12.9 percent.
     Direct Loan recipients were employed at a higher rate in 
both years. For 2004-05, 24.2 percent of loan recipients were employed 
full-time and 19.4 percent were employed part-time. Numbers for 2005-06 
increased to 30.3 percent employed full-time and 20.4 percent employed 
part-time.
     Total borrowers of subsidized and unsubsidized federal 
student loans increased by 15 percent from 2004-05 to 2005-06. Many 
students are eligible for both loans, but make different decisions 
about how to use that eligibility. Some accept only subsidized loans so 
they will not be responsible for any interest payment or accumulation 
while they are in school. Others need the entire amount they can borrow 
to meet school and living costs, so accept both loans.
            The Local View:
    In its 2006 report; Grants for Students: What They Do, Why They 
Work; the Educational Policy Institute documents that an increase in 
available grant aid will help to recruit low-income students. These 
students process the cost-benefit ratio of post-secondary education 
differently than more affluent youth, and consequently are more in need 
of financial inducements to encourage enrolling and remaining in 
college.
    The larger question is where such grant aid will come from. Many 
priorities vie for federal funding as the federal deficit continues to 
rise. However reducing financial aid to offset deficit budget will 
severely restrict access to post-secondary education for lower socio-
economic classes. That in turn will cyclically reduce the ability of 
future generations to earn sustainable wages, causing an additional 
drain on state funding for welfare.
    State budgets are also dependent on state economies and changing 
ideas of how financial aid funds should be allocated to schools. One 
encouraging concept in review now for Colorado is that of determining 
aid allocations based on the need levels of students at each eligible 
institution rather than on an archaic entitlement model.
    The financial aid community is supportive of the concept that the 
most dollars should be channeled to the neediest students. 
Institutional financial aid needs continued expansion, perhaps in 
conjunction with student support services to minority and low-income 
students. Institutional priorities such as recruiting and retention of 
qualified faculty, administrators and other personnel; maintenance of 
physical plant facilities, and development of new initiatives that 
respond to changing clientele needs and priorities also compete for 
dollars. As tuition levels rise and more restrictive enrollment 
policies are implemented at four-year institutions, we may see a 
corresponding increase in the number of low-and middle-income students 
enrolling in community colleges College Foundations and other 
philanthropic organizations recognize the need for student funds as 
well, but can't fill the void on their own.
            The National Picture:
    The picture at Aims Community College is reflected nationally. 
Nationwide, community colleges enroll 45% of all the students in 
American higher education. 59% are women, and community colleges enroll 
55% of all the Hispanics attending college in the U.S. 66% of our 
funding comes from state and local sources.
    We know that preparation for college plays a key role in access and 
success, but student financial aid is also essential. In 2004, college 
enrollment in the year following high school graduation was 35% for 
those with incomes below $10,000. 75% or more than twice that, for 
those with incomes between $75,000 and $100,000. High school graduates 
of high ability and low incomes are more likely to enroll in college 
than those with low ability and high incomes.
    In 2005-06, more than 2 million community college students received 
$4.3 billion in Pell grants. Despite this support and our low tuitions, 
our students are not immune from debt: in 2004, 28% of community 
college associate degree recipients graduated with debt; the average 
amount was about $5,880.
    Given this, community colleges and indeed all of American higher 
education support an increase in the maximum Pell Grant to $4,500. A 
significant increase in the Pell Grant was recently endorsed by 
Secretary Spellings's Commission on the Future of Higher Education, 
which called for a substantial increase in need-based financial aid 
generally.
    The maximum Pell Grant increased dramatically in the last decade, 
from $2,340 in Fiscal Year (FY) 1995 to $4,000 in FY 2002. 
Unfortunately, the maximum grant has been frozen at $4,050 the last 
four years. This is at a time when, due largely to funding reductions 
by state and local sources, community colleges tuitions have been 
increased.
    We all know that we have a large federal deficit, but we also know 
that there is no better investment than higher education. In 2005, the 
average high school diploma holder earned $31,600, the average 
associate degree holder earned $ 40,600, and the average B.A. holder 
garnered $51,000. For millions of students, federal student aid makes 
these degrees possible.
    Lastly, I would be remiss were I not to mention two community 
colleges priorities: Part-time students should be made eligible for the 
new Academic Competitiveness Grants, which needs a legislative change, 
and certificate students should receive these grants, which we believe 
is required by law but which has not been implemented by the Department 
of Education.
    Helping students fund higher education must become and remain a top 
priority at the federal level if we wish to continue to provide access 
to college for students from all economic levels. Increases in grant 
assistance to the neediest students are a means to that end. Modest 
increases in loan limits will be of some help as well, but ethically 
how much debt should we encourage or allow students to accumulate in 
exchange for higher education?

                                                 AIMS JUNIOR COLLEGE DISTRICT SCHEDULE OF FEDERAL FUNDS
                                                                   [FY02 through FY06]
--------------------------------------------------------------------------------------------------------------------------------------------------------
 Federal Grantor/Pass-Through  Federal                                  Fiscal Year
  Grantor/Program or Cluster     CFDA  ----------------------------------------------------------------------------  Aims Department     Funding Notes
            Title               Number      D02         03          04           05           06          Total         or Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
U.S. Department of Education:
    Pell Grant Program.......   84.063   1,953,366   2,418,356   2,758,822    3,173,441    2,794,918   13,098,903   Financial Aid      Funding Ongoing
                                                                                                                     Program
    Supplemental Educational    84.007      77,099      75,967      89,812       76,362       82,885      402,125   Financial Aid      Funding Ongoing
     Opportunity Grants.                                                                                             Program
    College Work-Study          84.033      31,202      26,023      22,254       49,996       34,370      163,845   Financial Aid      Funding Ongoing
     Program.                                                                                                        Program
    Federal Direct Student      84.268   2,200,237   2,871,658   3,780,736    4,621,033    5,242,404   18,716,068   Financial Aid      Funding Ongoing
     Loans.                                                                                                          Program
    English Language            84.195  ..........     104,939     302,199      375,422      279,195    1,061,755   Ft. Lupton Campus  Continuing in
     Acquisition--Career                                                                                                                FY07
     Ladder.
    Child Care Access Means     84.335      15,036      26,811  ..........  ...........       26,000       67,847   MECEC              Continuing in
     Parents In School.                                                                                                                 FY07
    Trio Student Support        84.042  ..........  ..........  ..........  ...........      146,290      146,290   Student Support    Continuing in
     Services.                                                                                                       Services           FY07
    Title V--Strengthening      84.031     411,725     327,201     309,162      281,672      247,317    1,577,077   Ft. Lupton Campus  Ended FY06
     Hispanic Serving
     Institutions.
    Title III--Strengthening    84.031  ..........     219,799     268,700      391,914      449,016    1,329,429   Strengthening      Continuing in
     Institutions.                                                                                                   Institutions       FY07
    Passed through Colorado
     Community Colleges:
        Perkins Vocational      84.048     353,400     298,894     309,912      303,874      344,596    1,610,676   Career &           Continuing in
         Education--Basic                                                                                            Technical Ed       FY07
         Grants to States:.
        School to Career        84.278     153,071         615  ..........  ...........  ...........      153,686   .................  Ended in FY03
         Partnership.
        School to Career        84.278      38,947          79  ..........  ...........  ...........       39,026   .................  Ended in FY03
         Lighthouse.
    Passed through Colorado
     Department of Education:
        Teacher Quality         84.336  ..........  ..........      21,244       28,493        5,945       55,682   Education Dept.    Ended in FY06
         Enhancement--UNC.
        Teacher Quality         84.336  ..........  ..........      50,956       65,237  ...........      116,193   Education Dept.    Ended in FY05
         Enhancement--Arapaho
         e CC.
    Passed through the
     University of Colorado:
        English Language        84.195  ..........  ..........       6,498        8,472        3,539       18,509   Education Dept.    Continuing in
         Acquisition--CO-                                                                                                               FY07
         TOP*ELA.
        Migrant Education--CU   84.149  ..........      23,357       4,474  ...........  ...........       27,831   .................  Ended in FY04
         CAMP.
    Passed through University
     of Northern Colorado:
        Disabilities.........   84.333  ..........  ..........      27,545       31,868       11,326       70,739   Supplemental       Ended in FY06
                                                                                                                     Instruct.
                                       ----------------------------------------------------------------------------
          Total U.S.           .......   5,234,083   6,393,699   7,952,314    9,407,784    9,667,801   38,655,681   .................  .................
           Department of
           Education.
U.S. Department of Health and
 Human Services:
    Head Start Partnership...   93.600     176,105     171,404     140,233       91,260      147,400      726,402   Education Dept.    Continuing in
                                                                                                                                        FY07
    Passed through Colorado
     Department of Education:
        Child Care &            93.575      24,389       7,656      23,219       30,496       29,460      115,220   Education Dept.    Continuing in
         Development Block                                                                                                              FY07
         Grant.
    Passed through Weld
     County Dept. of Social
     Services:
        Temporary Assistance    93.558  ..........  ..........      47,033      206,617        8,113      261,763   Health Prog.--     Ended in FY06
         for Needy Families.                                                                                         Bldg Lease
    Passed through Weld
     County Dept. of Social
     Services--United Way:
        Child Care &            93.575  ..........  ..........       9,624        4,354        4,290       18,268   Education Dept.    Continuing in
         Development Block                                                                                                              FY07
         Grant.
    Passed through Colorado
     Department of Public
     Health & Environment
        Centers for Disease     93.283  ..........  ..........  ..........  ...........        4,173        4,173   Welness Grant      Ended in FY06
         Control & Prevention.
                                       ----------------------------------------------------------------------------
          Total Department of  .......     200,494     179,060     220,109      332,727      193,436    1,125,826   .................  .................
           Health and Human
           Services.
U.S. Department of Labor:
    WIA Pilots,                 17.261  ..........  ..........  ..........  ...........       17,520       17,520   Ft. Lupton--Auto   Continuing in
     Demonstrations, &                                                                                               Prog.              FY07
     Research Projects.
    Passed through Weld
     County Division of Human
     Services:
        Employment Service...   17.207  ..........  ..........  ..........       22,486       32,514       55,000   C N A Program      Ended in FY06
                                       ----------------------------------------------------------------------------
          Total Department of  .......           0           0           0       22,486       50,034       72,520   .................  .................
           Labor.
U.S. Department of
 Agriculture:
    Passed through Colorado
     Dept. of Public Health
     and Environment:
        Child and Adult Care    10.558  ..........      17,674      22,303       20,698       19,484       80,159   MECEC              Continuing in
         Food Program.                                                                                                                  FY07
National Science Foundation:
    Passed through Colorado
     State Board of
     Agriculture--CSU:
        Northern Colorado       47.076  ..........      10,920      11,980  ...........  ...........       22,900   .................  Ended in FY04
         Community College/
         University Teacher
         Preparation
         Initiative.
        Exploring New           47.050      29,769  ..........  ..........  ...........  ...........       29,769   .................  Ended in FY02
         Frontiers in Spatial
         Information
         Management.
U.S. Department of Justice:
    Passed through Weld
     County Office of
     Emergency Management:
        State Homeland          16.007  ..........  ..........       6,189  ...........  ...........        6,189   Physical Plant     Ended in FY04
         Security Grant
         Program.
U.S. Department of
 Transportation:
    Passed through Colorado
     Department of
     Transportation:
        Building Highways/      20.205     153,776     138,395     124,444      196,292      187,554      800,461   Continuing Ed      Continuing in
         Building Careers.                                                                                                              FY07
U.S. Small Business
 Administration:
    Passed through Colorado
     Office of Business
     Development:
        Small Business          59.037      37,792      39,812      35,015       37,226       36,294      186,139   Continuing Ed      Continuing in
         Development Center.                                                                                                            FY07
-------------------------------------------------------------------------------------------------------------------
Total Federal Funds..........  .......   5,655,914   6,779,560   8,372,354   10,017,213   10,154,603   40,979,644   .................  .................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Chairman McKeon. Thank you very much.
    Well, I really appreciate your testimony. I have chaired 
the Subcommittee on Higher Education for almost the last 12 
years. You can see how much financial aid has increased during 
that time. I have had a big concern that students are 
graduating from college with a mortgage and no house. Ten years 
ago, they were graduating with an average loan of $8000. Now it 
has gone up to about $18,000, and heading up. And a few years 
ago, I introduced a bill, because of the concern I had for the 
ever-increasing cost of education, and I had my head handed to 
me because I was told that is cost controls.
    But what seems to be happening is--and I know some people, 
the schools say this is not so--but the more the Federal 
financial aid goes up, the more tuition seems to go up. And I 
know they say there's no correlation, but it is a big 
coincidence that that seems to happen.
    And so I have had a real concern about accessibility, about 
affordability, and about accountability in higher education, 
and that is what we really focused on and have been focusing 
on, trying to get this reauthorized, the Higher Education Act, 
and it seems like when I introduced that bill, there was a 
little bit of a lowering but then we are right back up to ever-
increasing costs again, and even though we keep putting more 
in, we have increased the Pell grant level. We have given a lot 
more students Pell grants and we have increased other Federal 
financial aid. The costs keep going up.
    So I think it is a problem that the Federal Government, the 
state government, parents, students, schools, everybody has to 
come together, to work together on this problem, because we 
need to do a better job of educating all of our population or 
we are not going to be able to compete on the worldwide scope.
    I took a congressional group to China last year and saw 
what they are doing over there, and it is scary, and we need to 
do all we can to be able to meet that competition.
    Ms. Shaw, the Deficit Reduction Act has been referred to, 
by some, as a raid on student aid. It seems like education 
really shouldn't be a partisan issue; but it is. Back in 
Washington, everything is partisan. And opponents have called 
this a raid on student aid.
    I would just like to ask you the question: Will students 
receive any less aid after the Deficit Reduction Act than they 
did before the Deficit Reduction Act?
    Ms. Shaw. Mr. Chairman, I think the clear answer to that is 
no. The HERA actually increased the amount of aid students and 
families will receive. The two new grant programs alone are 
going to provide $790 million in the first year and $4.5 
billion over the 5 year period after that. The annual loan 
increase has already been mentioned and the reduction in the 
loan fees. The changes in the needs analysis formulas will 
increase eligibility, especially grant eligibility to the 
neediest of students and families. So the answer to that is no.
    Chairman McKeon. Thank you. It is good to have that on the 
record because that was my feeling, that was my understanding 
when we worked on this bill, what we tried to accomplish. Also 
when we increased aid in the first part, you know, the first 2 
years, increasing aid, because we found that most students drop 
out in the first 2 years.
    Dr. Liddell, I spend a lot of time visiting schools. I 
visit a lot of community colleges. In California, the average 
age of the community college--we are not looking at, for the 
most part, 18, 19-year-old kids. The average age is up into the 
thirties.
    How is it at your school?
    Dr. Liddell. Oh, one of the statistics i didn't give you, 
Mr. Chairman, was that about 20 percent, right under 20 percent 
of our students are between 18 and 24. Our mean age for 
students at Aims is now about 25. It's dropped a little over 
the past four or 5 years, but we're right at 25. So you're 
correct. Many of them have families as well.
    Chairman McKeon. I think that is a good thing. We used to 
title the subcommittee as Postsecondary Education, Training, 
and Lifelong Learning. I thought that they made me Chairman 
because it took me 30 years to get through college. But I think 
it is important that people understand, the way our society is 
operating now, you can't get a static education, whether it be 
2 years, 4 years, or even a PhD, and then figure you are done 
for life. Life is changing, situations are changing so rapidly, 
that people are going to have to continue their education, and 
community colleges seem to be one of the best places where they 
can come back and pick up a class or pick up a degree that will 
prepare them for a different job or a different career, because 
their job or career has ended.
    So you are really performing a vital service here, in 
addition to giving a jump-start to students. I understand your 
tuition for your community colleges here is not a lot lower 
than for here, Northern Colorado, but in California the 
community college tuition is much lower, and I know that 50 
percent of students start at a community college, and that is 
good, because for the most part it is less expensive, they can 
stay at home, and they can go there and then move on to a 
university for a further degree. So you are performing a great 
service.
    Dr. Liddell. Thank you.
    Chairman McKeon. Ms. Musgrave.
    Ms. Musgrave. Thank you, Mr. Chairman.
    Ms. Shaw, you talked about the default rate and I believe 
you addressed it over a 14-year period, how it had gone down 
dramatically. Could you tell me what has taken place to cause 
this shift.
    Ms. Shaw. Actually, it is a number of things, and my 
colleague, here, Ms. DeMuth, mentioned one of them. A critical 
shift in emphasis on default prevention rather than default 
collection, and all the participants in the programs, schools, 
lenders, guaranty agencies, certainly the Department, all work 
together, and have worked together, to shift that focus on 
default prevention.
    We have many outreach efforts like our student loan 
repayment symposium, default prevention days. We have a 
partnership on debt management with the National Council of 
Higher Education, and there has been an incredible, and it is 
required now, emphasis on entrance and exit counseling for 
students, where when they are entering school, make sure they 
understand their Federal student aid and what that means, and 
as they are leaving school, they understand their obligation 
with respect to repaying their loan debts.
    In addition, there has been much better oversight, over the 
years, by the Department, leading to the removal of quite a few 
schools over the years. Since 1998, I believe it has been in 
the neighborhood of a 1000 schools from the programs for 
failure to comply with Title 4 regulations.
    So it is a number of those things, and those things all 
working together, that have led to the decrease.
    Ms. Musgrave. Thank you very much.
    Ms. DeMuth, are you aware of Colorado taxpayers are 
currently funding the education of illegal immigrants? And what 
are the documentation requirements that are needed to apply for 
financial aid in Colorado?
    Ms. DeMuth. I'm not aware that there are a significant 
number of illegal immigrants that are receiving financial aid. 
The programs that we run are the Federal programs. Under FFEL, 
they are required to complete the FAFSA application process, 
which goes through and documents their legal residency within 
the United States.
    As the previous panel discussed, in addition, the state 
legislature recently passed Bill 1023, that puts additional 
burden on us to verify that a student applying for the College 
Opportunity Fund actually is a legal resident of the United 
States, and we have implemented additional procedures, in 
addition to the FAFSA process, to ensure that those students 
are in fact legal residents.
    Ms. Musgrave. I just would like to ask you, Dr. Liddell, 
could you talk about the unique role that community colleges 
play in expanding educational opportunities.
    Dr. Liddell. I would be glad to do that. Community 
colleges' mission, part of their mission, as I mentioned 
earlier, is certainly open access. Its particularly strong draw 
is for those students who might not be academically or 
economically prepared to go on to a 4-year institution.
    One of our great strengths, I believe, is flexibility in 
programs. We are able to adapt and adopt curriculum at a much 
faster pace than perhaps our 4-year colleagues are able to do, 
and so some of the training that we provide for career and 
technical programs is absolutely outstanding.
    I would highlight, for example, Congresswoman, you 
mentioned the nursing hearings you had not too long ago. That 
is one of the very big strengths of community colleges.
    For example, we have a nursing program where nurses who go 
through a 2-year program can in fact sit for their RN after the 
period of time. We like to send a lot of them over here to UNC, 
and other places, to get their bachelor's and master's degree, 
so that they can come back and teach for us, because that is a 
huge issue.
    But community colleges provide an absolutely wonderful 
chance for those students who might not be prepared, in any 
way, to go to university first, and also, as Mr. Chairman 
mentioned earlier, a wonderful opportunity for adults who 
perhaps are downsized or outsized, or their career track is no 
longer there because of the changing dynamics of the labor 
force, to come back to community college and have an 
opportunity to get a whole new career.
    Ms. Musgrave. Thank you very much.
    Dr. Liddell. Thank you.
    Ms. Musgrave. Thank you, Mr. Chairman.
    Chairman McKeon. Thank you.
    Our time is up. I want to thank you for your being here, 
and for your comments, and we are going to, when we get back to 
Washington, try to finish up the reauthorization that we have 
been working on for 4 years.
    I don't know if we are going to have the time to be able to 
get it finished up. We passed the reauthorization in the House 
but the Senate hasn't had time yet to get theirs done. So we 
are running out of time for this session.
    But it is very important that we get this done. Education 
is so important, to be able to solve the problems, both the 
individual's problems and the Nation's problems, and I commend 
you for the work that you are doing to make this possible.
    I want to commend you, Ms. Musgrave, for letting us come 
here and holding this hearing, for arranging with the school. I 
met with the president this morning, earlier, and she gave me a 
little insight into the size of the school, $3800 a year 
tuition. That is fantastic. They are doing a great job of 
keeping the cost of education down. That is very important.
    And I appreciate the leadership that you are providing, 
both on the committee, and here, in your community, on 
education.
    With that, I would ask if you have anything further that 
you would like to add for the record, that we will have the 
record open for 14 days, and we would appreciate any other 
comments you have, and encourage you to work closely with us as 
we go through the full reauthorization process, whether it be 
before the end of the year or early next year. We would 
appreciate all the input that you have for us on that process.
    With that, we will adjourn this hearing. Thank you.
    [Whereupon, at 10:22 a.m., the committee was adjourned.]
    [The prepared statement of the National Association for 
College Admission Counseling follows:]

 Prepared Statement of the National Association for College Admission 
                           Counseling (NACAC)

    On behalf of the National Association for College Admission 
Counseling (NACAC), representing more than 9,000 college counseling and 
admission professionals, this testimony is submitted regarding in-state 
tuition for undocumented students. NACAC urges the committee to 
recognize the success of in-state tuition programs in ten states across 
the country, and urge immediate action on behalf of hundreds of 
thousands of undocumented children and young adults who have been 
effectively excluded from educational opportunity by an inconsistency 
in federal law. The Senate's immigration reform bill (S 2611) includes 
a legislative remedy (also known as the DREAM Act) that would allow 
states to provide in-state tuition for qualified undocumented students. 
Legislation sponsored by Congressman Lincoln Diaz-Balart (HR 5131) 
provides the same remedy.
    By holding hearings like the one in Greely, Colorado at this late 
stage of the legislative process, the House of Representatives has 
ensured that tens of thousands of students who have worked hard to 
graduate from high school in 2006 will effectively have no educational 
opportunity beyond high school. This lack of opportunity means real 
financial and academic losses to the states in which these students 
reside.
    As counselors and admission officers, NACAC members regularly 
encounter undocumented students who are prepared and willing to pursue 
higher education, but are unable to do so because of legal and 
financial barriers. These conditions represent a loss to the student, 
the college or university where they would have attended, and 
ultimately to American society.
    As established by the Supreme Court decision in Plyer v. Doe 
(1982), these children have broken no law and are entitled to 
elementary and secondary education in this country. Provisions in S 
2611, as well as the American Dream Act (HR 5131, sponsored by Rep. 
Lincoln Diaz-Balart) would allow these students to pursue higher 
education and become productive adults in the US workforce by providing 
clear, legal paths to higher education and to citizenship.
    The DREAM Act was conceived as a remedy for undocumented students 
who have legally attended and graduated from high school in this 
country, but for whom the law provided no clear paths to higher 
education or citizenship. The DREAM Act has enjoyed bipartisan support 
in the past, and similar legislation is in effect in ten states (CA, 
IL, KS, NE, NM, NY, OK, TX, UT and WA), with successful results.
    Passage of the DREAM Act as part of comprehensive immigration 
reform or stand-alone legislation would mean real benefits to thousands 
of students, the institutions they attend, the states in which they 
live, and the country as a whole. The DREAM Act would:
Restore Authority to the States
    The Supreme Court ruled in 1982 that undocumented minors are not 
responsible for their immigration status and are therefore entitled to 
elementary and secondary education. The DREAM Act would repeal a 
federal law that discourages states from providing in-state tuition to 
these students. This contradiction represents a wasted investment for 
the states, who have educated these students through high school but 
can't benefit from their tuition dollars or contributions to the 
economy or tax revenue.
Increase Educated Workforce
    Over 80% of the 23 million jobs that will be created in the next 10 
years will require postsecondary education (ACE, 2004). Currently, only 
36% of all 18-24 year olds are enrolled in postsecondary education 
(NCES, 2004). Providing clear, legal paths to higher education, 
citizenship and employment for undocumented students will have a 
significant positive impact on the workforce of the future. 
Additionally, research shows that a more educated workforce leads to 
increased earnings (and subsequent increase in state and federal tax 
return), lower crime and poverty rates, and fewer demands on public 
assistance programs.
Improve Access to College
    The DREAM Act would allow qualified undocumented students to be 
eligible for in-state tuition in the states where they graduated high 
school, providing they meet certain criteria, including national 
service and pursuing legal status. Currently thousands of undocumented 
students graduate from high school each year, many at the top of their 
class, who are prepared for and interested in pursuing higher education 
but cannot afford to do so. Because undocumented students are 
ineligible for state or federal financial aid, allowing their 
eligibility for in-state tuition would significantly improve college 
access. Research shows that access to financial aid improves college 
access for all students, from all socioeconomic backgrounds. 
Eligibility for in-state tuition would be the only financial aid option 
for undocumented students.
Increase Revenue for the States
    Ten states have passed legislation similar to the DREAM Act, and 
have not seen an influx of immigration, the displacement of other 
students in higher education, or a drain on the education system, as 
many critics have feared. The Texas Higher Education Coordinating Board 
conducted a study of their undocumented student population after 
enacting a law similar to the DREAM Act in 2001. The study showed a 
significant increase in postsecondary enrollment of these students--
nearly 10 times greater from 2001 to 2004, with most enrolling at 
community colleges. While the percentage undergraduate students in 
Texas that are undocumented is small (although Texas has the second 
largest population of undocumented individuals in the country), the 
study still showed several thousand students paying tuition to state 
institutions that would not have prior to the 2001 passage of the law.
    NACAC members are disappointed that the House of Representatives 
has chosen to hold field hearings rather than proceed with conference 
on S 2611 and HR 4437, or with progress on The American Dream Act, HR 
5131. While field hearings are going on, another graduating class of 
qualified undocumented students is barred from giving back to the 
American society in which they grew up; state institutions nationwide 
will lose thousands in lost tuition dollars; and the American workforce 
of the future is diminished.
    NACAC urges Congress to proceed to conference with the Senate on 
comprehensive immigration reform, and support the DREAM Act provisions 
contained in S 2611. Please contact NACAC's director of public policy, 
David Hawkins at [email protected] with any questions on college 
access and the educational and economic benefits of the DREAM Act.

                                 
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