H.R. 1992, THE INTERNET EQUITY 

AND EDUCATION ACT OF 2001

HEARING

BEFORE THE 

SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS 

OF THE 

COMMITTEE ON EDUCATION AND 

THE WORKFORCE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

HEARING HELD IN WASHINGTON, DC, JUNE 20, 2001 

Serial No. 107-20 

Printed for the use of the Committee on Education 

and the Workforce

U.S. GOVERNMENT PRINTING OFFICE 

 77-908 pdf WASHINGTON : 2002

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

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ii

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN A. BOEHNER, Ohio, Chairman 

THOMAS E. PETRI, Wisconsin GEORGE MILLER, California 

MARGE ROUKEMA, New Jersey DALE E. KILDEE, Michigan 

CASS BALLENGER, North Carolina MAJOR R. OWENS, New York 

PETER HOEKSTRA, Michigan DONALD M. PAYNE, New Jersey 

HOWARD P. “BUCK” McKEON, California PATSY MINK, Hawaii 

MICHAEL N. CASTLE, Delaware ROBERT E. ANDREWS, New Jersey 

SAM JOHNSON, Texas TIM ROEMER, Indiana 

JAMES C. GREENWOOD, Pennsylvania ROBERT C. “BOBBY” SCOTT, Virginia 

LINDSEY O. GRAHAM, South Carolina LYNN C. WOOLSEY, California 

MARK E. SOUDER, Indiana LYNN N. RIVERS, Michigan 

CHARLIE W. NORWOOD, JR., Georgia RUBEN HINOJOSA, Texas 

BOB SCHAFFER, Colorado CAROLYN McCARTHY, New York 

FRED UPTON, Michigan JOHN F. TIERNEY, Massachusetts 

VAN HILLEARY, Tennessee RON KIND, Wisconsin 

VERNON J. EHLERS, Michigan LORETTA SANCHEZ, California 

THOMAS G. TANCREDO, Colorado HAROLD E. FORD, JR., Tennessee 

ERNIE FLETCHER, Kentucky DENNIS KUCINICH, Ohio 

JIM DeMINT, South Carolina DAVID WU, Oregon 

JOHNNY ISAKSON, Georgia RUSH D. HOLT, New Jersey 

BOB GOODLATTE, Virginia HILDA L. SOLIS, California 

JUDY BIGGERT, Illinois SUSAN DAVIS, California 

TODD RUSSELL PLATTS, Pennsylvania BETTY McCOLLUM, Minnesota 

 PATRICK J. TIBERI, Ohio 

 RIC KELLER, Florida 

 TOM OSBORNE, Nebraska 

JOHN ABNEY CULBERSON, Texas 

Paula Nowakowski, Chief of Staff 

John Lawrence, Minority Staff Director

SUBCOMMITTEE ON 21st CENTURY COMPETITIVENESS 

HOWARD P. “BUCK” McKEON, California, Chairman

JOHNNY ISAKSON, Georgia, Vice Chairman PATSY MINK, Hawaii

JOHN BOEHNER, Ohio JOHN F. TIERNEY, Massachusetts 

MICHAEL N. CASTLE, Delaware RON KIND, Wisconsin 

SAM JOHNSON, Texas RUSH D. HOLT, New Jersey 

LINDSEY O. GRAHAM, South Carolina DAVID WU, Oregon 

MARK E. SOUDER, Indiana LYNN N. RIVERS, Michigan 

FRED UPTON, Michigan BETTY McCOLLUM, Minnesota 

VERNON J. EHLERS, Michigan ROBERT E. ANDREWS, New Jersey 

BOB GOODLATTE, Virginia RUBEN HINOJOSA, Texas 

TOM OSBORNE, Nebraska 
iii

Table of Contents 

Table of Contents............................................................................................................ 1 

OPENING STATEMENT OF CHAIRMAN HOWARD P. “BUCK” McKEON, 

SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, COMMITTEE ON 

EDUCATION AND THE WORKFORCE, U.S. HOUSE OF REPRESENTATIVES . 2 

OPENING STATEMENT OF VICE CHAIRMAN JOHNNY ISAKSON, 

SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, COMMITTEE ON 

EDUCATION AND THE WORKFORCE, U.S. HOUSE OF REPRESENTATIVES . 5 

STATEMENT OF STANLEY O. IKENBERRY, PRESIDENT, AMERICAN 

COUNCIL ON EDUCATION, WASHINGTON, D.C.................................................. 9 

STATEMENT OF LORRAINE LEWIS, INSPECTOR GENERAL, U.S. 

DEPARTMENT OF EDUCATION, WASHINGTON, D.C........................................ 12 

STATEMENT OF RICHARD J. GOWEN, PRESIDENT, SOUTH DAKOTA 

SCHOOL OF MINES AND TECHNOLOGY, RAPID CITY, SOUTH DAKOTA ... 15 

STATEMENT OF OMER E. WADDLES, EXECUTIVE VICE PRESIDENT, ITT 

EDUCATIONAL SERVICES, INC., ON BEHALF OF THE CAREER COLLEGE 

ASSOCIATION, INDIANAPOLIS, INDIANA........................................................... 17 

STATEMENT OF JOSEPH S. DiGREGORIO, VICE PROVOST FOR DISTANCE 

LEARNING, CONTINUING EDUCATION AND OUTREACH, GEORGIA 

INSTITUTE OF TECHNOLOGY, ATLANTA, GEORGIA....................................... 19 

APPENDIX A - WRITTEN OPENING STATEMENT OF CHAIRMAN HOWARD 

P. “BUCK” McKEON, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE WORKFORCE, 

U.S. HOUSE OF REPRESENTATIVES ..................................................................... 39 

APPENDIX B - WRITTEN STATEMENT SUBMITTED FOR THE RECORD BY 

RANKING MEMBER PATSY MINK ON BEHALF OF CONGRESSWOMAN 

BETTY McCOLLUM, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE WORKFORCE, 

FROM STEVE SHANK, CHANCELLOR, CAPELLA UNIVERSITY, 

MINNEAPOLIS, MINNESOTA.................................................................................. 43 

APPENDIX C - WRITTEN OPENING STATEMENT OF VICE CHAIRMAN 

JOHNNY ISAKSON, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE WORKFORCE, 

U.S. HOUSE OF REPRESENTATIVES ..................................................................... 55 
iv

APPENDIX D - WRITTEN STATEMENT OF STANLEY O. IKENBERRY, 

PRESIDENT, AMERICAN COUNCIL ON EDUCATION, WASHINGTON, D.C. . 59 

APPENDIX E - WRITTEN STATEMENT OF LORRAINE LEWIS, INSPECTOR 

GENERAL, U.S. DEPARTMENT OF EDUCATION, WASHINGTON, D.C........... 71 

APPENDIX F - WRITTEN STATEMENT OF RICHARD J. GOWEN, PRESIDENT, 

SOUTH DAKOTA SCHOOL OF MINES AND TECHNOLOGY, RAPID CITY, 

SOUTH DAKOTA ....................................................................................................... 81 

APPENDIX G - WRITTEN STATEMENT OF OMER E. WADDLES, EXECUTIVE 

VICE PRESIDENT, ITT EDUCATIONAL SERVICES, INC., INDIANAPOLIS, 

INDIANA ..................................................................................................................... 91 

APPENDIX H - WRITTEN STATEMENT OF JOSEPH S. DiGREGORIO, VICE 

PROVOST FOR DISTANCE LEARNING, CONTINUING EDUCATION AND 

OUTREACH, GEORGIA INSTITUTE OF TECHNOLOGY, ATLANTA, GEORGIA

..................................................................................................................................... 111 

APPENDIX I - LETTER SUBMITTED FOR THE RECORD BY RANKING 

MEMBER PATSY MINK, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE WORKFORCE, 

FROM DR. JULIET GARZA, CHAIRPERSON, ADVISORY COMMITTEE ON 

STUDENT FINANCIAL ASSISTANCE, WASHINGTON, D.C............................. 123 

APPENDIX J - REPORT TO CONGRESS ON THE DISTANCE EDUCATION 

DEMONSTRATION PROGRAMS SUBMITTED FOR THE RECORD BY 

RANKING MEMBER PATSY MINK, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE WORKFORCE

..................................................................................................................................... 127 

APPENDIX K - QUESTIONS SUBMITTED FOR THE RECORD TO U.S. 

SECRETARY OF EDUCATION RODERICK PAIGE BY RANKING MEMBER 

PATSY MINK, SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, 

COMMITTEE ON EDUCATION AND THE WORKFORCE ................................. 172 

APPENDIX L - RESPONSES SUBMITTED FOR THE RECORD BY U.S. 

SECRETARY OF EDUCATION RODERICK PAIGE TO QUESTIONS 

SUBMITTED BY RANKING MEMBER PATSY MINK, SUBCOMMITTEE ON 

21ST CENTURY COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE 

WORKFORCE ........................................................................................................... 176 

APPENDIX M - LETTER SUBMITTED FOR THE RECORD BY CHAIRMAN 

HOWARD P. “BUCK” McKEON, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE WORKFORCE, 

FROM SECRETARY OF EDUCATION RODERICK PAIGE, U.S. DEPARTMENT 

OF EDUCATION, WASHINGTON, D.C. ................................................................ 182 
v

APPENDIX N - WRITTEN STATEMENT SUBMITTED FOR THE RECORD BY 

CHAIRMAN HOWARD P. “BUCK” McKEON, SUBCOMMITTEE ON 21ST

CENTURY COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE 

WORKFORCE, FROM DR. RON CHENAIL, VICE PRESIDENT FOR ACADEMIC 

AFFAIRS, NOVA SOUTHEASTERN UNIVERSITY, FORT LAUDERDALE, 

FLORIDA ................................................................................................................... 186 

Table of Indexes.......................................................................................................... 195 
1

Hearing On “H.R. 1992, the Internet Equity and Education Act of 2001” 

____________________

Wednesday, June 20, 2001 

U. S. House of Representatives 

Subcommittee on 21st Century Competitiveness 

Committee on Education and the Workforce 

Washington, D.C. 

 The Subcommittee met, pursuant to notice, at 10:33 a.m., in Room 2175, Rayburn 

House Office Building, Hon. Howard P. “Buck” McKeon [chairman of the 

Subcommittee] presiding. 

 Present: Representatives McKeon, Isakson, Ehlers, Mink, Tierney, Holt, Wu, 

Rivers, Andrews, and Hinojosa. 

 Also present: Representative Hilleary. 

 Staff present: George Conant, Professional Staff Member; Blake Hegeman, 

Legislative Assistant; Sally Lovejoy, Director of Education and Human Resources 

policy; Patrick Lyden, Professional Staff Member; Michael Reynard, Deputy Press 

Secretary; Deborah L. Samantar, Committee Clerk/Intern Coordinator; Mark Zuckerman, 

Minority General Counsel; James Kvaal, Minority Legislative Associate/Education; Joe 

Novotny, Minority Staff Assistant/Education; and Brendan O'Neil, Minority Legislative 

Associate/Education. 

Chairman McKeon. A quorum being present, the Subcommittee on 21st Century 

Competitiveness will come to order. 
2

We're meeting today to hear testimony on H.R. 1992, the Internet Equity and 

Education Act of 2001. I'm going to limit the opening statements to the chairman, the 

ranking minority member, and a designee from each side. Therefore, if other members 

have statements, they will be included in the hearing record. 

 With that, I ask unanimous consent for the hearing record to remain open 14 days 

to allow member statements and other documents referenced during the hearing to be 

submitted in the official hearing record. 

 Without objection, so ordered. 

OPENING STATEMENT OF CHAIRMAN HOWARD P. “BUCK” 

McKEON, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE 

WORKFORCE, U.S. HOUSE OF REPRESENTATIVES 

 I want to welcome our witnesses here today and thank them for taking the time to 

appear before the Subcommittee. I also want to thank Representative Isakson for 

introducing H.R. 1992, the Internet Equity and Education Act of 2001. As Co-Chair of 

the Web-based Education Commission, he took a lead in discovering regulatory and 

statutory impediments to expanding access to higher education programs through the 

Internet, especially for non-traditional students. In addition, he has provided a great deal 

of leadership to this committee, and it is great to serve with him. I appreciate the work 

that he does on the Subcommittee and the Full Committee. 

 In the early 1990s, Congress and the administration enacted a number of reforms 

aimed at fighting abuses in our federal financial aid programs. Examples of these abuses 

include correspondence courses that offer little value to the student, or recruitment 

practices in which bounty hunters were paid on a per head basis to bring students into a 

particular school. In order to end these abuses, Congress and the administration may 

have ultimately imposed a straightjacket on all of higher education where handcuffs on a 

few bad actors may have sufficed. 

 This legislation we're considering today will remove the straightjacket while 

maintaining program integrity and implementing some of the recommendations of the 

Web-based Education Commission. 

 First, it will remove the burden of the “12-hour rule.” Under the 12-hour rule, 

institutions are required to keep literally hundreds of thousands of additional attendance 

records every year, just to show that their students attended certain types of work 

sessions. This legislation does not eliminate the safeguards that exist in the law under the 

12-hour rule. Rather, it would hold programs for non-traditional students, which do not 

meet on a standard quarter or semester basis, to the same standard as their more 

traditional counterparts. 
3

Second, it makes exceptions to the 50 percent requirement by allowing a limited 

number of institutions to offer more than 50 percent of their courses by 

telecommunications or to serve more than 50 percent of their students through 

telecommunications courses. Eligible schools will have to be already participating in the 

student loan program and have student loan default rates of 10 percent or less for the 

three most recent years. 

 Third, H.R. 1992 helps address some of the confusion regarding incentive 

compensation provisions. Under current law, an institution may not compensate an 

individual either directly or indirectly for the enrollment of students in an institution. 

 In one recent instance, an institution was fined $187 million for violating this 

provision; and as a result, the institution was forced to close and to put approximately 

9,000 students on the street. 

 We've been told that schools have little guidance in complying with this 

provision. In cases where guidance has been issued, it often conflicts with or contradicts 

guidance that has been issued to a different institution. In other words, schools truly don't 

know if they are in violation of the law or not. The legislation we're considering will 

allow reasonable business practices, while continuing prohibitions that prevent potential 

students from being taken advantage of. 

 It is rare when all sectors of higher education agree on an issue. However, there is 

a clear consensus that the incentive compensation issue needs to be fixed, and that it 

needs to be fixed sooner, rather than later. 

 Finally, distance education provides a tremendous opportunity to greatly expand 

access to postsecondary education to those who may otherwise be unable to participate. 

So it would be a shame to waste this potential because of outdated notions and 

regulations. Basically, what we're really trying to do is play catch-up with what's 

happening in the real world. 

 This legislation provides a needed first step to ensuring that a postsecondary 

education is available to all who want to pursue it. At the same time, it does not diminish 

or undo needed integrity provisions in the law. 

 In closing, I want to thank the ranking minority member of the Subcommittee, 

Mrs. Mink, for her work on this legislation. This truly has been a bipartisan process. 

 As we go forward with this process, I look forward to working with all of my 

colleagues on both sides of the aisle to increase access to higher education for all 

Americans. 

 I now yield to the distinguished ranking member of the Subcommittee, Mrs. 

Mink, for the purpose of making an opening statement. 
4

WRITTEN OPENING STATEMENT OF CHAIRMAN HOWARD P. “BUCK” 

McKEON, SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, 

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

REPRESENTATIVES – SEE APPENDIX A 

Mrs. Mink. Thank you very much, Mr. Chairman, and I would like first to welcome all 

of the witnesses who have taken their time to come here to give us the benefit of their 

knowledge and experience about a problem that we are confronted with as a nation, 

prompted in large extent by the rapidity in which we have been overtaken by technology 

and its explosion, not simply as a business tool, but here we find as a tool for obtaining 

education and learning, necessary certificates in order to advance in job placements, and, 

really, opening up a very, very large area for student participation. And we should be 

welcoming this enlargement. It's a very exciting time in which we live. 

 This is not only an opportunity for young people, it is for the people in middle age 

and senior citizens, as well, who are constantly looking for educational opportunities. So 

I think it's very appropriate that the majority and the Chairman, in particular, has started 

this Congress with an investigation of what we can do to enhance the ability of people to 

access the computer for training and educational purposes, while, at the same time, 

making sure that we have adequately protected the students who are enlisting the 

computer as their educational device and making sure that where the federal investment 

is also being conjoined into this enterprise, that the taxpayers' investments in this 

educational effort is well protected. 

 The students make a large investment in obtaining a loan and if their education 

has been faulty or inadequate or lacking the promises that were made to it, then it is the 

student who has to bear the burden, not only the failure of the educational experience, but 

also the obligation that they undertake to repay back the loan to the Federal Government. 

 So it is on that stand that these hearings, I believe, begin at a very appropriate 

time, and, hopefully, the Committee will have a chance to inquire deeply into the 

questions that arise. 

 Student financial aid is really the bulwark of federal participation in the 

educational experience at the higher levels. Without it, we would not be the dynamic, 

progressive country that we are. We wouldn't be in the position of global leadership. So 

we take this step forward into technology education as a real challenge and opportunity 

for our country as a whole. 

 There are a number of cautions which I hope that we will raise during these 

hearings and perhaps pursue under extensive investigations after these hearings. I am 

aware that the Department has a report on the 12-hour rule, which should be coming out 

soon. We should await what that report says. We also should have the Department's 

advice and guidance on incentive compensation, which is a major part of the concerns 

that I bring to the table on this issue. The Distance Learning Demonstration Program is 

in only the second of its five year test and we're only beginning to obtain information 

from that exercise, and we certainly ought to await its findings and recommendations. 
5

So I think with all those caveats, we are still obliged to have a very open mind on 

this issue, and, today, we embark upon that inquiry, to see what the universe holds for us 

as a nation, and, specifically, what the responsibilities of this committee is to our 

colleagues in the Congress and certainly to the departments that are managing this 

program. 

Mr. Chairman, I look forward to the testimony today and I ask unanimous consent that 

the written testimony of Steve Shank, chancellor of Capella University, be placed in the 

record at an appropriate place. This is the request of Congresswoman Betty McCollum. 

 Thank you. 

Chairman McKeon. Without objection, so ordered. 

WRITTEN STATEMENT SUBMITTED FOR THE RECORD BY RANKING 

MEMBER PATSY MINK ON BEHALF OF CONGRESSWOMAN BETTY 

McCOLLUM, SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, 

COMMITTEE ON EDUCATION AND THE WORKFORCE, FROM STEVE SHANK, 

CHANCELLOR, CAPELLA UNIVERSITY, MINNEAPOLIS, MINNESOTA – SEE 

APPENDIX B 

Chairman McKeon. Several members of this subcommittee have co-sponsored this bill, 

but I would like to give the sponsor of the bill, Mr. Isakson, an opportunity to speak on 

this legislation. I now recognize Mr. Isakson for five minutes, to make his opening 

statement. 

OPENING STATEMENT OF VICE CHAIRMAN JOHNNY ISAKSON, 

SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, 

COMMITTEE ON EDUCATION AND THE WORKFORCE, U.S. 

HOUSE OF REPRESENTATIVES

Mr. Isakson. Well, thank you very much, Mr. Chairman, and, at the outset, let me thank 

you for your opening statement, which was a very articulate explanation of exactly what 

House Resolution 1992 does. I also want to thank Ranking Member Patsy Mink for all 

the input that she has had and for raising the concerns that she has raised, which, 

obviously, we've given great thought to in the design and the preparation of this bill. 

 I want to also thank the members of the panel who are here to testify today, some 

of whom I've come to know recently, and some of whom I met in my work with the 

Commission. One is a dear contributor of the Georgia Institute of Technology, an 

outstanding individual in his own right, who will be introduced a little bit later.

Additionally, I want to, Mr. Chairman, if I can, point out Mr. David Buyer - if he'll raise 

his hand in the audience - who was the staff director and really the spearhead behind the 

Web-based Education Commission, which released its report on December 19, 2000. 
6

I was pleased to serve as Vice Chairman of that Commission and under Chairman 

Kerrey from Nebraska, who was truly a joy to work with during the course of that work. 

It was one of the more enlightening things I've ever had happen to me in terms of public 

service. Our mission was to investigate what was happening with regard to the role of 

distance learning and education and it did not take long for us to learn that we in 

government were way behind higher education throughout this country and K-12 in many 

areas in terms of the delivery of quality content over distance learning and the use of the 

Web.

 At our visit to Georgia Tech, which took place early last year, we saw 

demonstrations of the classroom of the future. There, technology is integrity with 

instruction and can be delivered over miles with the type of interaction that is just 

incredible and at a price tag that is falling all the time. 

 I also learned, much to my surprise, that Georgia Tech delivers a master's in 

electrical engineering totally over the Web and the Internet. In addition, other institutions 

of higher learning, like MIT and Stanford, consult and collaborate, as well, to see to it 

that the finest quality content education in the United States of America is deliverable 

through high technology and that residency or seat time, which used to be the guiding 

principle of higher education in terms of attendance and participation, was irrelevant. 

 One of the most important things we learned is that in America today what was 

thought to be a non-traditional student 10 or 15 years ago is becoming a more traditional 

student every day. The number of adults over the age of 40 enrolling in postsecondary 

higher education has gone up 235 percent in the past 20 years. I know, from visiting 

college campuses, technical schools and programs in my own state that many, many 

Americans are going back to higher education to retool themselves to be employable in 

the 21st century; much of this is accomplished through distance learning. Non-traditional 

students have families, they have children, they have jobs, they have requirements, and 

the Internet allows the opportunity for them to learn anytime, anyplace, and anywhere. 

This is being demonstrated in higher education institutions in this country, to a very high 

degree of quality. 

 I am by no means unaware that the 50 percent rule and the 12-hour rule and, 

subsequently, the changes that came about on compensation for student loans all were 

derived to address perceived problems. I understand that abuses have taken place, and 

nothing in this bill portends or even contemplates opening a door to anybody who would 

deliver anything other than a first rate education. Nor would it open a door to any 

institution that would have anywhere in terms of a very negative default rate on student 

loans themselves. We worked very hard to ensure that while we open the door for the 

expansion of the Internet and education in America, we did not open the door for any 

abuse by virtue of the changes in these rules. 

 So, again, I want to thank the members of the panel for being here today, and for 

their participation, which I know will be enlightening. I want to thank Chairman 

McKeon for all of his support in this effort, and ranking member Patsy Mink for her 

support and her effort in trying to bring about a rule that's modernized. 
7

I will close with this, Mr. Chairman. If you read the Web-based Education 

Commission Report and you read pages 91, 92 and 93, which set about the 

recommendations we're dealing with today, there's a quote from someone who testified at 

our hearings that said, “If we, in America, continue to focus on `seat time' as the rulemaking procedure for education, we're focusing on the wrong end of the student.” I think 

that was a very good quote and I think very appropriate to this hearing, and I thank the 

Chairman for the time. 

WRITTEN OPENING STATEMENT OF VICE CHAIRMAN JOHNNY ISAKSON, 

SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, COMMITTEE ON 

EDUCATION AND THE WORKFORCE, U.S. HOUSE OF REPRESENTATIVES – 

SEE APPENDIX C 

Chairman McKeon. Thank you. 

 I now recognize Mr. Tierney for five minutes to give an opening statement. 

Mr. Tierney. Thank you, Mr. Chairman. I won't use five minutes - just to say I thank 

Mr. Isakson for bringing this legislation forward, and the Chairman for having these 

hearings, and I, too, am just concerned that we make sure that we do not open up this 

avenue for a return to fraud and abuse that we had in the past, and I'll be anxious to hear 

the witnesses address just how each of these provisions will, in fact, maintain the 

integrity of the previous statute, while still moving us forward in modernization in the 

way people get educated. 

 So I'll look forward to the testimony and thank all of you for joining us today. 

 Thank you, Mr. Chairman. 

Chairman McKeon. Thank you for your statement. 

 I want to welcome our distinguished panel again today. 

 Before I begin, I would like to turn over the time to Mr. Isakson, who will 

introduce two of the witnesses, and I will introduce the other three. 

Mr. Isakson. Thank you, Mr. Chairman. It's a real pleasure to introduce Dr. Richard 

Gowen of the South Dakota School of Mines and Technology, the president of that 

institution and the former president of South Dakota State University, but, more 

importantly, an invaluable participant in the Web-based Education Commission. One of 

the wonderful parts of this job is you get to meet a lot of wonderful people, and meeting 

Dick was indeed a pleasure and an honor for me and I'm delighted that he could come 

here and testify today. 

 I can tell you, as one that probably had to come up on the learning curve further 

than anyone on the Web-based Commission, that his extensive knowledge and hands-on 

application of techniques with regard to distance learning and the use of the Web in 

technology and education will lend tremendously to this hearing as it did to the 
8

Commission's report and I appreciate Dick being here today. 

 And Dr. Joseph DiGregorio is, fortunately, a resident of Atlanta, Georgia. He is 

the vice president of Distance Learning at the Georgia Institute of Technology, who 

hosted our Commission, in I guess it was about March of last year, about a year ago, a 

little over, where we saw some unbelievable demonstrations of the practice of distance 

learning and education from K-12 through postsecondary education that's being done at 

the Georgia Institute of Technology. 

 I want to thank Dr. Wayne Club for his tremendous support in hosting the 

Commission at Georgia Tech and for the invaluable information they provided to us. 

And, Doctor, we want to welcome you here today, and, as a Bulldog, I'm happy to have a 

Yellow Jacket here any time we can. 

 Thank you, Mr. Chairman. 

Chairman McKeon. Our first witness this morning will be Dr. Stanley Ikenberry. Dr. 

Ikenberry has been president of the American Council on Education, in Washington, 

D.C., since 1996. He started about the same time as I became chairman of the Higher 

Education Postsecondary Education Committee. It's been an honor to work with him. I 

know he will be leaving his post soon and we will miss working with Dr. Ikenberry in 

that position. 

 ACE is an organization that seeks to promote higher and adult education. Prior to 

arriving at his current position, he served as president of the University of Illinois. In 

addition, he held senior positions at Penn State and administrative and research positions 

at West Virginia University and Michigan State University. He holds a Ph.D. from 

Michigan State University. 

 Next, we will hear from Ms. Lorraine Lewis. We had the opportunity to visit the 

other day and get to know each other a little bit better. Mrs. Lewis is the Inspector 

General of the United States Department of Education here in Washington, D.C., and 

prior to being sworn in as Inspector General, in 1999, Mrs. Lewis served as the chief 

legal advisor to the director of OPM. In addition, she served as General Counsel with the 

U.S. Senate Governmental Affairs Committee. She holds a J.D. degree from Harvard 

University.

 Mr. Omer Waddles is Executive Vice President of ITT Educational Services, Inc., 

in Indianapolis, Indiana. ITT is a provider of technology-oriented postsecondary degree 

programs. Before arriving at his current position, Mr. Waddles served as President of the 

Career College Association, an association of approximately 750 proprietary schools of 

higher education. He also served in a variety of positions developing the federal 

legislative and regulatory processes affecting higher education in the United States, 

including work as Minority Counsel on the Senate Committee on Labor and Human 

Resources. I guess now you'd be in the majority committee. In addition, he was counsel 

to the former senior advisor to the U.S. Secretary of Education. Mr. Waddles holds a J.D. 

from Petit College of Law at Ohio Northern University. A very distinguished panel -

we're fortunate to have you here today. 
9

We'll hear first from Dr. Ikenberry. 

STATEMENT OF STANLEY O. IKENBERRY, PRESIDENT, 

AMERICAN COUNCIL ON EDUCATION, WASHINGTON, D.C. 

Mr. Ikenberry. Thank you, Mr. Chairman. I thank you and the members of this 

committee - 

Chairman McKeon. Is your mike on? 

Mr. Ikenberry. Okay. I think we're doing it. 

 Thank you, Mr. Chairman, and thanks to the members of this committee, not just 

for the opportunity to testify before you all on this important piece of legislation, but for 

your leadership, generally, to advance access and quality in higher education in this 

country. I can't think of anything that's more important, both to the citizens of the United 

States, and also to the future of our country. I thank you for the contribution you make in 

that regard. 

 The American Council on Education, as you mentioned, Mr. Chairman, represents 

1,800 2- and 4-year public and private colleges in the United States, and we believe this 

legislation is necessary to allow higher education in this country to begin to catch up with 

the enormous changes that are taking place in both the way in which higher education 

opportunity is delivered and the way citizens are able to gain access to it. 

 As a bit of background, you mentioned my earlier service at the University of 

Illinois for some 16 years. During that time, the University of Illinois, through support 

both from the state and from the National Science Foundation, developed a center called 

the National Center for Supercomputing Applications, and out of that endeavor 

developed MOSAIC, which was the first Web browser. I don't think anybody at the 

university at that time had the faintest idea of what was going to happen in terms of that 

new technology. But we do know now, looking back, that that growth has been quite 

phenomenal. 

 Nationally and internationally, the number of computers connected to the Web 

grew from 1 million in 1992, to some 60 million in 1999, and that number is obviously 

quite in excess of that today. The percentage of U.S. households that are connected with 

access to the Internet was 2 percent in 1994, and it is now estimated to be in excess of 

one-third of all households today; and two out of three Americans has access to the 

Internet somewhere, be it at home, work, school or elsewhere. 

 Some see this as a technology revolution in higher education. Some see it as an 

evolution. But whether you just think of it as a revolution or an evolution, it is clearly 

transforming the way colleges and universities offer educational opportunity. I believe 

this new era is leading us into what could very well be one of the most exciting eras in 

American higher education. 
10

Distance education and on-campus instruction, in fact, are beginning to converge.

The new “in” term now is distributed education that is intended really to encompass both 

of these worlds, distance learning, if you will, and on-campus application of technology. 

The bricks and mortar that the past has embraced have been described by some now as 

clicks and mortar, rather than bricks and mortar. 

 Here's just a few indications of the trend. The number of courses offered by twoand four-year institutions increased from something less than 25,000 courses, in 1995, to 

more than double that number, 52,000 courses, in 1998. Again, that number is 

undoubtedly larger today, in 2001. Enrollments have doubled from about 750,000, in 

1995, to 1.6 million, in 1998. Again, that trajectory is beyond that today. 

 I don't think I need to tell you, Mr. Chairman, or the members of the Committee, 

that higher education institutions, by our nature, tend to be conservative institutions. 

We're not particularly rapid to change on a number of matters. And while more are 

enthusiastic about the potential of distance education, nearly all of our institutions believe 

that we need more information about student learning outcomes, about governance 

issues, intellectual property right issues, economic feasibility, sustainability, quality 

accountability, and a host of other complex issues. 

 But we are learning on all of these things as we move forward in this new era. 

The fact is that things are changing much more rapidly than many of us in the field would 

ever have begun to imagine. 

 But as we move forward, the experimentation that is occurring must be supported 

by policies that preserve the integrity of the federal student aid system and that do not 

unduly constrain innovation at the same time. We think both of these things, as 

Congressman Isakson pointed out, can be managed hand-in-hand. 

 Candidly, the challenge we face is to build in sufficient flexibility into the statute 

to make federal student aid available to students who are using these new and exciting 

learning options without creating new avenues for scam artists and opportunities for fraud 

to gain a new foothold. No one wants to recreate the problems that damaged the student 

loan programs so badly in years past and marred the public's view of higher education. 

But I have no doubt that this is the balance that this bill introduced by Congressman 

Isakson seeks to strike. 

 H.R. 1992 addresses three specific problems we think are very important to move 

us ahead in this field. 

 First, the bill proposes to eliminate the restriction that prevents an institution from 

conducting more than 50 percent of its courses via distance education. That arbitrary 

number is increasingly hard to defend. 

 Second, the bill would relax, a bit, the incentive compensation provision that 

makes it impossible to award merit pay and increases to any individual engaged in 

admissions and financial aid. This, too, we think will add flexibility if it's done properly. 
11

And, third, the bill will eliminate an obsolete regulation called the 12-hour rule, 

that, for some institutions of higher education, establishes a kind of federal standard for 

classroom instruction. Arguably, I think that standard is probably a half century out of 

date, but it is certainly out of date in the 21st century. 

 A question has been raised as to why these changes ought to be made now, and if 

I may, Mr. Chairman, I'd like to address that issue head on, particularly since we're just 

two or three years away from beginning the reauthorization of the Higher Education Act. 

I think there are three very persuasive reasons why we should act now. 

 First, the Department of Education has not been able to make these changes as a 

part of the normal regulatory process, and when that regulatory process is not responsive, 

I think legislative action becomes the logical and appropriate alternative. But, second, 

and in many ways more importantly, by making the changes now the Congress and the 

higher education community will have two years, at least, to monitor and assess the 

impact of these changes before we go into the reauthorization of the Higher Education 

Act. As a result, we can, at that time, make any mid-course corrections or refinements 

that seem to be indicated as a result of the experience that we gain with these changes 

over the next two years. 

 And, third, we need to make the changes now because distance education, frankly, 

is changing much more rapidly than any of us could possibly have imagined, even five 

years ago. 

 If changes are not made now, we're going to wait until after the higher education 

reauthorization, and, most likely, until after the rule-making process concludes 

subsequent to reauthorization. That could easily mean that we'd see no relief for four or 

five or more years, and that's not good in a sector of higher education. It is a sector of 

society that is changing so rapidly, as this particular sector is changing. 

 So, Mr. Chairman, let me say in closing that the higher education community did 

not propose these changes in the gate-keeping provisions in the last reauthorization. We 

thought, at that time, we lacked sufficient experience, sufficient information in this area, 

and it simply wasn't clear to us where the changes in technology were going or where the 

growth of the Web would lead. And, in addition, we had a considerable concern for 

maintaining the integrity of the Title IV programs. All of that combined to cause us to 

cling to the status quo, unusual as it is for us. 

 We still don't know all of the answers on this front, but we do know the trajectory. 

That trajectory tells us that our institutions are doing remarkable things to improve access 

to education and to improve the quality of education. They demonstrate this both on 

campus and off campus, and by using these new technologies creatively. So we believe 

the time has come to respond and to loosen some of these strictures that inhibit the new 

educational ventures. 

 I want to close, Mr. Chairman, if I may, coincidentally, by quoting Chairman 

Greenspan, who just this morning, apparently, was testifying before the Department of 

Labor's 21st Century Workforce Summit. He made the following quotation - if I could 

close with it – “The higher education system must remain sufficiently flexible to meet the 
12

needs of a changing society.” I think that's precisely what this legislation is all about. It 

is about flexibility and closely monitored flexibility that I think will equip the higher 

education community and the Congress to craft a much more responsible, sensible piece 

of legislation when reauthorization of the higher education bill comes up a few years 

from now. 

 I thank you for your leadership on this, and we look forward very much to 

working with you and your colleagues on this matter. 

WRITTEN STATEMENT OF STANLEY O. IKENBERRY, PRESIDENT, AMERICAN 

COUNCIL ON EDUCATION, WASHINGTON, D.C. – SEE APPENDIX D 

Chairman McKeon. Thank you very much. 

Ms. Lewis? 

STATEMENT OF LORRAINE LEWIS, INSPECTOR GENERAL, U.S. 

DEPARTMENT OF EDUCATION, WASHINGTON, D.C. 

Ms. Lewis. Thank you, sir. 

Mr. Chairman and members of the Subcommittee, thank you for this opportunity to 

discuss issues concerning H.R. 1992 and your desire to increase access to postsecondary 

education, while maintaining the integrity of our Student Financial Assistance programs.

My testimony today will focus on the questions we believe should be answered before 

changes are made. 

 There have been great advances in technology and in the growth of the Internet 

since the major amendments to Title IV in 1992. In addressing these changes, it is 

important that the policy decisions of the future be informed by the lessons of the past. 

We believe there are two guiding principles: one, changes that encourage innovative 

educational program delivery must also ensure accountability of taxpayer dollars and 

preserve the integrity of the SFA programs; two, all students should receive an 

appropriate amount of instruction to justify the amount of SFA funds awarded. Simply 

put, we need to know what we are paying for. 

 With regard to the 50 percent rule, in the 1980s and early 1990s, the work of my 

office identified numerous problems with institutions offering correspondence only 

programs that resulted in many schools being terminated from the SFA programs. The 

Department had difficulty in determining the appropriate program length due to a lack of 

scheduled instructional hours. Excessive awards of SFA funds were common. Thus, the 

1992 amendments established the current rule that limits an institution's correspondence 

courses and students to 50 percent of its total courses and students. 
13

We believe that in revisiting that limitation, certain policy issues should be 

considered.

 First, whether the criteria for recognition of accrediting agencies should require 

that they have specific standards for evaluating the quantity and quality of distance 

education programs. We performed a review of the management controls for distance 

education by accrediting agencies and state agencies. Our report, issued in September, 

2000, found that inconsistencies exist in these oversight agencies' standards to evaluate 

distance education. Congress should consider whether to require that recognized 

accrediting agencies have specific standards for distance education. 

 The second issue in this area concerns the similarities between correspondence 

courses and certain courses offered through telecommunications. Some 

telecommunications programs delivered via the Internet require a student merely to 

complete lessons in Web sessions or return them via electronic mail. This appears very 

similar to correspondence courses provided through the U.S. mail. Nonetheless, students 

enrolled in correspondence courses are considered only half-time students for awarding 

SFA funds, while students in telecommunication courses are considered full-time 

students.

 Another issue is whether the cost of attendance should be calculated in the same 

manner for distance education programs as for residential programs. Institutions must 

establish the cost of attendance budget in calculating the amount of eligible SFA awards.

For students engaged in correspondence courses, this budget does not include an 

allowance for room and board. For students enrolled in telecommunications programs, 

there is no similar limitation and they can be eligible for the same amount of SFA awards 

as students in residential programs. Their need for a budget that includes an allowance 

for room and board should be examined. 

 Moving on to the 12-hour rule: the amendments of 1992 mandate that an 

undergraduate academic year be a minimum of 30 weeks of instructional time in which a 

full-time student is expected to complete at least 24 credit hours. The Department faced 

difficulty in applying this requirement to programs measuring student progress in credit 

hours, but not using a semester, trimester or quarter system. Therefore, it adopted the 12-

hour rule in an attempt to assure consistency in the amount of instruction between 

programs for the amount of SFA funds awarded. It is based on the assumption that a fulltime student attempting 12 credit hours in a semester would have 12 hours of scheduled 

instruction per week. 

 The proposal to abolish this requirement raises the following issues: first, should 

the term “instruction” be defined? Neither the Act, nor the implementing regulations, 

define what constitutes instruction. Providing a statutory definition of instruction would 

help clarify for the Department and the higher education community the appropriate 

amount of SFA awards for various methods of education delivery. 

 Further, should student study groups be included as instruction? In our audit 

report on the University of Phoenix, issued in March, 2000, we found that the institution's 

residential programs offered much less classroom instruction than programs provided by 

traditional term-based institutions because they included study groups as instruction to 
14

meet the 12-hour rule. In institutions providing traditional residential classroom 

education in semesters, a student generally would be provided three hours of scheduled 

classroom instruction for 15 weeks or 45 hours of classroom instruction for a 3 credit 

hour course. The University of Phoenix provided only 20 hours of classroom instruction 

for a 3 credit hour course. 

 Congress should consider whether it intends to allow institutions to award the 

same amount of SFA funds for providing 20 versus 45 hours of classroom instruction. 

Similar issues arise in measuring the amount of distance education via 

telecommunications.

 And, finally, with regard to the prohibition on incentive compensation, in the 

1992 amendments, Congress expanded to all SFA programs the prohibition on the use of 

incentive compensations based on success in securing enrollments or financial aid. The 

prohibition was designed to protect students from the high pressure tactics used by 

recruiters to enroll students in programs for which they may not have been prepared or 

did not want. The students were saddled with unwanted debt at increased cost to the 

taxpayers.

 The proposed modification to this restriction raises questions of Congress' intent.

Merely removing the term, “indirectly,” from the current provision does not, at this point, 

clarify what types of recruiting activities and compensation plans will be permitted and 

those that will remain unallowable. Adding the term, “nonsalaried,” to the provision on 

prohibited incentive payments, at this point, does not clarify what types of payments will 

be permitted. 

 This language possibly might be interpreted to permit institutions to make salary 

adjustments monthly, or even weekly, based on prior success in securing enrollment, a 

practice that would not be allowed under the Department's current guidance. And 

recognizing that this is the very beginning of a legislative process, these are the types of 

questions that we recommend be addressed through the course of the legislative process. 

 And, finally, the legislation continues to ban an institution from paying an entity 

based on enrollment success. The bill limits this ban to entities “directly engaged in 

student recruiting or admission activities.” Congress should clarify what types of 

contractual arrangements would be covered by this ban. 

 I appreciate the opportunity to ask these questions. I look forward to working with 

you and the Department and other members of the community in addressing them along 

the way, and I'd be happy to answer any questions that you have. 

WRITTEN STATEMENT OF LORRAINE LEWIS, INSPECTOR GENERAL, U.S. 

DEPARTMENT OF EDUCATION, WASHINGTON, D.C. – SEE APPENDIX E 

Chairman McKeon. Dr. Gowen? 
15

STATEMENT OF RICHARD J. GOWEN, PRESIDENT, SOUTH 

DAKOTA SCHOOL OF MINES AND TECHNOLOGY, RAPID CITY, 

SOUTH DAKOTA 

Mr. Gowen. Thank you, Mr. Chairman and members of the Committee. Thank you for 

the opportunity to testify on behalf of H.R. 1992, the Internet Equity and Education Act 

of 2001. It is a privilege to speak as one of the commissioners of the Web-based 

Education Commission. I am also the President of the South Dakota School of Mines 

and Technology. 

 The Commission was established by the Higher Education Amendments Act of 

1998. Former Senator Bob Kerrey chaired the Commission. Representative Isakson 

served as the vice chairman of the Commission. Representatives Bingaman and Fattah 

and Senator Enzi served as members of the Commission. 

 The Commission held five hearings, beginning on February 2, 2000. We received 

electronic testimony through our Web site and interacted with hundreds of people across 

America. The Commission found the Web to have the potential to provide true 

educational equality for all citizens by enabling each person to learn and develop to the 

fullest extent of their individual ability. The report of the Web-based Education 

Commission to the President and the Congress of the United States contains the 

recommendations that the 16 member bipartisan commission determined to be of critical 

importance for the use of the Web to improve education. 

 The Commission heard concerns about a range of issues that limit the ability to 

achieve the educational potential of the Web. Among these issues were concerns for the 

financial aid regulations that initially were intended to protect students in postsecondary 

education, but now have the effect of limiting the access of students to education 

throughout the Internet. Three specific federal financial aid issues were brought to the 

Commission's attention: the 12-hour rule, the 50 percent rule, and the federal prohibition 

on providing incentive compensation in college admissions. 

 When Congress amended the Higher Education Act in 1992, it added a specific 

definition of an academic year that prescribed at least 30 weeks of instructional time. 

Full-time undergraduate students in traditional academic programs are expected to 

complete at least 24 hours in that time period to be eligible for the maximum amount of 

financial aid. 

 However, the law was silent on establishing an academic workload requirement 

for students enrolled in Title IV eligible programs offered in a non-traditional time 

segment. In 1994, the United States Department of Education issued formal regulations 

defining a week of instructional time to mean 12 hours of “regularly scheduled 

instruction, examinations or preparation for examination” for programs that were not 

offered in standard terms. 
16

One effect of this 12-hour rule is to limit the ability to provide students access to 

innovative, self-paced learning opportunities available now through the Internet. The 

Commission was urged to recommend changes in the 50 percent rule that requires Title 

IV eligible institutions to offer at least 50 percent of their instruction in a classroombased environment. In seeking, correctly, to halt abuse in the Student Financial Aid 

program, these rules have the unintended effect of curtailing educational opportunity 

among thousands who seek financial aid for college, but who do not otherwise fit into the 

mainstream definition of a college student. 

 Please consider these statistics. The span from 1970 to 1993 saw a 235 percent 

growth in students older than age 40. Many of these students are served through nontraditional programs. Over the same period, the traditional college student cohort, 18 to 

24, increased by only 35 percent. Forty percent of these traditional college students 

receive financial aid as opposed to only 17 percent of the undergraduates older than 40.

Regrettably, these regulations deny students access to the powerful capabilities now 

available through the Web to provide learning experiences that can be individualized to 

respond to the specific needs of each student. 

 The Commission received testimony concerning the prohibition of colleges and 

universities that participate in federal Student Financial Aid programs from paying any 

commission, bonus or other incentive payments to third party entities based directly or 

indirectly on success in securing enrollment of students. Enacted to protect students 

against abusive recruiting tactics, this law is now interpreted to apply to the enrollment of 

students via “Web portals.” Federal regulations permit an institution to use its own Web 

site to recruit students. However, if the institution pays a Web portal to provide the same 

service and that payment is based on the number of prospective students visiting the site 

who ultimately apply or enroll, the institution is at risk of losing Title IV eligibility. 

 The Commission was told that higher education groups have asked the 

Department of Education to consider changing regulatory language, reflecting the 

growing reliance on higher education on Web portals. However, the Department has 

concluded that this provision could only be changed through new legislation. 

 As a commissioner of the Web-based Education Commission, I believe the 

clarification and enhancements to expand the opportunities for higher education 

contained in the Internet Equity and Education Act appropriately addressed the financial 

aid issues and concerns presented to the Commission. The proposed replacement of the 

12-hour rule and the proposed modification of the 50 percent rule will encourage 

institutions with demonstrated ability to provide traditional education opportunities to 

expand their course and program offerings to provide anytime, anywhere, and any paced 

learning through distance delivery techniques. 

 On behalf of the many persons and organizations who have provided testimony to 

the Web-based Education Commission, it is a privilege as a member of the Commission 

to endorse and encourage the enactment of H.R. 1992, the Internet Equity and Education 

Act of 2001. 

 I thank you for the opportunity to appear before you today, sir. 
17

WRITTEN STATEMENT OF RICHARD J. GOWEN, PRESIDENT, SOUTH 

DAKOTA SCHOOL OF MINES AND TECHNOLOGY, RAPID CITY, SOUTH 

DAKOTA – SEE APPENDIX F 

Chairman McKeon. Thank you. 

Mr. Waddles. 

STATEMENT OF OMER E. WADDLES, EXECUTIVE VICE 

PRESIDENT, ITT EDUCATIONAL SERVICES, INC., ON BEHALF 

OF THE CAREER COLLEGE ASSOCIATION, INDIANAPOLIS, 

INDIANA

Mr. Waddles. Thank you, Mr. Chairman, for this opportunity to come before the 

Committee and to offer testimony. 

 As you introduced me, I am with ITT Educational Services. I also represent the 

Career College Association in my testimony and its 963 members, who represent over a 

million students. 

 It's a pleasure to be able to step back into this role. To have at one time been the 

counsel and staff director for the predecessor to this subcommittee, with Chairman Ford, 

it's good to be able to come back and revisit. And sometimes, as I was mentioning to 

Terry Hartle, before this, seek redemption on dealing with some of these issues, as I sat 

here in 1992 and helped put these rules together. 

 They were real issues that we were dealing with at that time and they're real issues 

today that we must continue to grapple with. But I think this legislation, H.R. 1992 - how 

appropriately titled - is a step in the right direction and I congratulate Congressman 

Isakson for his leadership and his work on the Committee in leading to this point. 

 So much of the testimony that has been given already has covered many of the 

areas that I have included in mine and you can see in my written testimony. And I 

congratulate Ms. Lewis on her questions because I think they go to the heart of issues that 

we do need to deal with as the Committee moves forward, and in these early stages of the 

legislation.

 But as I sit here and I mark through my prepared remarks because they are being 

mentioned one after the other, I sit and I look at these four portraits of chairmen that have 

gone before and I've had the opportunity, myself, to work with each one of them in 

various roles. Each one of them taught me and others that access and quality are the two 

issues that we have to continually look at, and I hope you see as a theme throughout my 

testimony. Whether it's the rural hills of Kentucky or Los Angeles' inner city, or in York, 

Pennsylvania, or in the suburbs of Detroit, the same issue echoes each time. It's access to 

quality, quality education. But is it only for the good of society that we look for these 

items? It's not, and in primarily the early part of my testimony, I try to lay out that there 

has been an explosion in electronic education. However, it only mimics a larger 
18

explosion in the economy as a whole. Right now, .coms seem to be grabbing the 

headlines, but that's not the real story for what has changed the economy as we see it 

today. The reality is that 90 percent of the information technology jobs that are going on 

out there, and are being created, are in traditional economies and are in traditional 

businesses.

 The ITAA, the Information Technology Association of America, has said that 

there will be 425,000 information technology jobs that will go unfilled this coming year. 

META, another consulting group, predicts it to be 600,000. Even in light of the 

economic changes that are occurring every day, it's a downturn, but the change has taken 

place. Now it is up to us, as providers, to respond to that and to provide the skills and the 

education and the opportunity for individuals to pursue those changes. 

 The Departments of Commerce and Labor say that people will change careers at 

least five times. We've seen numbers go as high as seven or eight times in their career.

Well, how do they change those careers without having the opportunity to seek that 

lifelong learning opportunity that is now just a matter of fact? Employers will be sending 

people back to school. Individuals will be seeking ways to ensure their success as they 

go forward. 

 Each of the items that we're talking about today, whether it's the 12-hour rule that 

I think has been a well-intended and well-used element, but its time has passed, and now 

we need to go past the issue of process, the same with the 50 percent rule. 

 The use of the 10 percent default rate is a good step. In my testimony, I say, as 

we go forward, whether it's in reauthorization or other revisits, we need to look at the 

issue of quality, not just process. You're good in your ability to provide distance 

education if you're at 9.9 percent. You're not as good if you're at 10.1 percent on the 

default ledger. It's the blunt instrument that Congresswoman Mink and others and I have 

looked at for many years, but we had to use something. As the words were used back 

when we were using things, heads had to roll and blood had to flow. This was due to the 

fact that we had to change the respect for the issues related to higher education. 

 But now we're at a different time and I ask that you look at this not isolated. We 

look at the issue of incentive compensation and we say, “Well, if we take that back, does 

that mean that we no longer have the ability to ensure quality?” That is not the only item 

that is out there in this highly, heavily regulated world that I now stand in on the other 

side of the ledger. And which I run an operation, as the chief operating officer, of a 400 

million dollar organization that serves over 29,000 students in 28 different states. 

 That means I have 28 different regulatory bodies that I need to deal with, and deal 

with appropriately. We have never, even though we have been investigated at various 

times, just like any college, any university, we've never had a finding, a material finding, 

from the Department of Education or the Inspector General or others. We're very proud 

of that because we're very conservative and we're very focused on what we do. What do 

we do? We provide education, quality education. 
19

That's what I think these elements will allow us to move forward in doing. These 

changes are needed, but again, this is only a first step as we go forward. I think that there 

is the triad that we must rely upon: the states, the accrediting bodies, the Federal 

Government. Each of them needs to be activated and they are more aggressive. Each of 

them contributes. And in the area of distance education, they each must be challenged to 

come in to the 21st century and apply rules that are real and are effective and are not 

delayed in the way that they're given, so that there is clarity as to what we must do out in 

the field. We just need to know, and that's what the field wants to have. 

 I thank you very much, Mr. Chairman, for the opportunity to come before the 

Committee. It's been an exciting moment for me to have this chance to sit on this side of 

the table and to provide testimony. I'll look forward to answering any questions and 

helping as we go forward. 

WRITTEN STATEMENT OF OMER E. WADDLES, EXECUTIVE VICE 

PRESIDENT, ITT EDUCATIONAL SERVICES, INC., INDIANAPOLIS, INDIANA – 

SEE APPENDIX G 

Chairman McKeon. Thank you. 

Dr. DiGregorio. 

STATEMENT OF JOSEPH S. DiGREGORIO, VICE PROVOST FOR 

DISTANCE LEARNING, CONTINUING EDUCATION AND 

OUTREACH, GEORGIA INSTITUTE OF TECHNOLOGY, 

ATLANTA, GEORGIA

Mr. DiGregorio. Thank you for providing Georgia Tech with the opportunity to speak 

this morning on issues we believe are of vital importance to all of us involved in 

providing high quality credit courses and degree programs to distant students throughout 

the nation. 

 The full context of what I would like to say today is contained in the written 

information that I've given you, the written statement, but I'd like to condense that into a 

five minute presentation for the purposes of this hearing. 

 I would first like to commend and congratulate Congressman Isakson for his 

vision and foresight in proposing amendments to the Higher Education Act of 1965 that 

will greatly expand student access to higher education via modern telecommunications 

technologies. If the United States is to remain economically competitive and also 

maintain its position as a worldwide leader in postsecondary education, we need to 

implement policies that will make education available to all citizens of the nation. 

 As the global leader in the development and dissemination of education programs 

through innovative technologies, the United States cannot afford to exclude any of its 

citizens by keeping in place roadblocks that restrict access to lifelong learning and 
20

training. Georgia Tech believes that the enactment of H.R. 1992 will make it easier for 

many postsecondary schools to provide educational opportunities to an increasing 

number of our citizens. 

 As described in testimony I presented in August, 2000, to the Web-based 

Education Commission, Georgia Tech believes that policy makers should focus on 

assisting producers and consumers of Web-based education and on eliminating barriers 

that could prevent the Web-based education market from reaching its full potential. We 

believe that the role of the government should not be to control or direct Web-based 

education, but, rather, to advise, facilitate, support and provide incentives and resources 

to both Web-based education producers and consumers. 

 In its landmark report to the President and the Congress of the United States, the 

Web-based Education Commission called for “revising outdated regulations that impede 

innovation and replacing them with approaches that embrace anytime, anywhere and any 

pace learning.” We believe that H.R. 1992 will begin the implementation of this 

important recommendation of the Commission by providing an expansion of Internetbased educational opportunities for postsecondary students through the elimination of 

some of the barriers existing under current law. Georgia Tech strongly supports the 

broadening of opportunities for on-line education within the context of maintaining the 

integrity of federal student aid programs. 

 Two regulations that H.R. 1992 will address are, of course, the 50 percent rule 

and the 12-hour rule. These rules were originally directed towards concerns about 

correspondence education and are now applied to modern methods of distributing 

education through electronic technologies. They make no provision for modern virtual 

universities such as Georgia Tech, or for self-paced on-line courses that rely less on faceto-face instruction than do traditional courses taught in campus classrooms. 

 The Department of Education's Distance Education Demonstration Program, 

which has been referred to earlier here, allows a select group of institutions to ignore the 

50 percent rule, the 12-hour rule, and four other federal rules that inhibit access to 

distance learning, while still providing federal financial aid to students. It is a promising 

indicator that less regulation can expand educational opportunities via new technologies 

and delivery systems. 

 We believe that the 50 percent rule hinders the development of legitimate, quality 

distance education programs and student access to higher education through these 

programs. Likewise, the 12-hour rule imposes unnecessary constraints upon student 

access to federal financial aid for credit courses and degree programs delivered in nontraditional settings. Such constraints hinder innovation and flexibility in the offering of 

academic programs. 

 Perhaps the greatest benefit to be gained from the enactment of H.R. 1992 will be 

increased access to postsecondary education for disadvantaged students and/or underrepresented groups. These students frequently cannot take at least 12 hours of instruction 

per week due to family, job, health and other commitments, and thus do not qualify for 

full financial aid. The elimination of barriers to financial aid for these students will 

certainly narrow the so-called digital divide by providing needed educational
21

opportunities to begin or advance careers and to contribute and participate in the 

economic successes of our nation. 

 The number of non-traditional students enrolled in postsecondary schools has 

grown significantly over the past decade and will certainly continue to increase. Federal 

policy should encourage, not impede, this growth. To be competitive in a knowledgebased economy, the United States must increase quality-based, responsibly-managed 

education and training programs for a larger percentage of its citizens and provide 

opportunities for those citizens who, for whatever reason, cannot currently obtain 

educational access. H.R. 1992 is directed towards expanding access for all citizens. We 

commend the Committee for taking important steps toward helping the nation achieve 

these goals. 

 Again, we thank you for providing our institution the opportunity to comment on 

these vitally important issues and applaud the introduction of H.R. 1992. On behalf of 

Georgia Tech, I pledge our continued commitment to work with this committee and 

within the higher education community to improve the delivery of high quality on-line 

educational opportunities for all citizens in our nation. 

WRITTEN STATEMENT OF JOSEPH S. DiGREGORIO, VICE PROVOST FOR 

DISTANCE LEARNING, CONTINUING EDUCATION AND OUTREACH, 

GEORGIA INSTITUTE OF TECHNOLOGY, ATLANTA, GEORGIA – SEE 

APPENDIX H

Chairman McKeon. Thank you very much. 

 We have over 7,000 postsecondary schools in the country, and to try to sit here 

and pass rules that deal with each and every one of them, and interpret those rules, is 

something that is constantly frustrating to me. Especially, in a time where such rapid 

change is taking place. 

 And just listening to the panel, you can see the outstanding leadership that we 

have represented here that is represented all across the country. We have tremendous 

leadership out there in schools, tremendous teachers, and professors. Great things are 

happening and I think our main focus should be to not get in the way. This is, I think, 

good efforts to pull back in some of the areas that we know are in the way. 

Dr. Ikenberry, your organization has participated in this report that has been talked about 

that the Department of Education will be issuing on the 12-hour rule. Some have 

questioned whether we should wait for that report before acting on the issue. In your 

testimony, you said we should do it now. Could you briefly describe the process you've 

been through and do you think that we should wait for that report or should we move as 

quickly as we can in these areas? 
22

Mr. Ikenberry. I really do think that the opportunity is to move now. I think the biggest 

incentive to move now is what we'll learn over the next two or three years as these new 

regulations are applied. We won't know all the answers this time around, but we won't 

know all the answers four or five years from now either. But I think by making some 

changes now, by monitoring them very carefully, and by setting up some evaluative 

procedure that enables us to capture the learning that is out there, I think that four or five 

years from now, when you and your colleagues are reauthorizing the Higher Education 

Act, you can, at that point, come up with a much more useful piece of legislation than if 

we do nothing right now. 

 The other incentive to move now is, very frankly, every place I go across this 

country and, frankly, around the world, have literally an explosion in this area happening. 

There are so many exciting, creative things that are being done by many institutions that 

you and other members of this committee know well, and many, frankly, that most of us 

haven't heard of. 

 There's a lot of experimentation going on. We need to not get in the way of that - 

I think your comments are quite appropriate - and we need to let a few flowers bloom, 

then come back at the time of reauthorization to assess what we have learned. If we need 

to go further, we can go further. But if we need to pull back a little bit, at that time, that 

will also be the opportunity to do so. 

Chairman McKeon. The comments I made earlier about the straightjacket that we 

probably could have taken care of by using a rifle approach instead of a shotgun approach 

also has me concerned that we pass - somebody does something to take advantage of the 

system and we pass a law that affects everybody. And we have just so few people that 

are doing it, but it then throws a barrier out there for everybody. 

Ms. Lewis, on incentive compensation, your testimony states that the law prohibits 

basing compensation solely on the number of students that enroll as a result of recruiting 

activities. That is not quite accurate. The law bans payments, commissions, bonuses, or 

other incentive payments based on recruiting success. Nowhere does it say 

“compensation” or, in effect, ban salary payments. 

Have you created a policy against allowing salary payments for recruiting, and are you 

enforcing such a policy? 

Ms. Lewis. No, sir. I appreciate any comments on the testimony, but certainly we always 

intend to accurately reflect the law, and I do not set policy. The policy, of course, is set 

by you and the Congress and the implementing regulations of the Department. Certainly 

what we intend is to point out what the large ban that came from significant abuses years 

ago was intended to prohibit incentive payments for the result of enrollment or an award 

of financial aid. 

Chairman McKeon. Thank you. 

Ms. Lewis. And certainly that was the intention in the testimony. 
23

Chairman McKeon. Thank you. 

Dr. DiGregorio, some have questioned how different on-line and other distance education 

courses actually are from correspondence courses. Given the programs that you offer, 

would you care to elaborate on the difference between correspondence and on-line 

courses? 

Mr. DiGregorio. I certainly would, and there's no easy answer to that question because 

on-line distance learning is a lot more difficult to define than is a typical correspondence 

course.

I think my definition would be that the typical correspondence course is really 

vertical education, where there is a transfer of information and knowledge between the 

instructor and the student, back to the instructor, back to the student. Whereas on-line 

education tends to be a more horizontal process of learning, learning interactions among 

students, between students, between students and other experts in the field, between 

students and resources that are available on the Web, such as libraries, bibliographies, 

and so forth. 

 We at Georgia Tech use state-of-the-art streaming audio and video technologies 

and we synchronize with slides, simulations, and other multi-media, to take advantage of 

the Web-based courseware that's currently available to make this a horizontal learning 

process rather than a teaching process. I think the mind-set change that needs to be made 

in this country is that education in the future, thanks to the technologies we're talking 

about, is less involved with teaching and more involved with learning. 

 So I think the correspondence courses fit the mold of what we've been doing for 

over 800 years, horizontal - sorry - vertical education. The future is really the horizontal 

education involving a lot of learners facilitated by an instructor rather than taught by an 

instructor. 

Chairman McKeon. Thank you very much. 

Mrs. Mink? 

Mrs. Mink. Thank you very much, Mr. Chairman. 

 This has been a very interesting panel. The overview conclusion one has to arrive 

at is that everybody is interested in reaching for the expansive potential in education that 

comes from technology. 

 Everyone is agreed that we must maintain high quality education over the Web. 

My question to whoever wishes to respond is, given that everyone's objective is 

maintenance of high quality, how can we be assured that the education that is being 

afforded over the Internet maintains that standard of high quality if we eliminate the 12 

credit hour rule and the 50 percent requirement? 

 Yes, Mr. Waddles? 
24

Mr. Waddles. Congresswoman Mink, I think it's a fair question that we do need to 

continually remind ourselves of, but I think it goes back to, as I mentioned in my 

testimony, the triad. I think that the responsibility is not just shouldered by the 

Department of Education and the law that may have the 12-hour rule associated with it or 

the 50 percent or the incentive comp, it's the quality of the program that the_ 

Mrs. Mink. Who determines that quality? 

Mr. Waddles. The accrediting body that that school is accredited by is charged with 

going in, looking at that curriculum, looking at the delivery mechanism, looking at the 

teachers that provide it, looking at the entire environment that supports it to say, does this 

meet their standards? 

Mrs. Mink. This is a national accrediting body that you're referring to? 

Mr. Waddles. I'm referring to the accrediting bodies that accredit each of our institutions 

as we speak right now, the same ones. Not necessarily going to a different one, but 

looking at the north centrals, the regionals, the nationals and saying, “You must” - and 

many of them are already developing rules and regulations that institutions who are 

pursuing this arena of distance education must adhere to. 

 Now that said, this is, again, the evolution or the revolution process that's going 

on in the states, as well. That's another part of the triad that has to look at it. 

 We just announced this past week that we're entering into E-Learning, providing, 

hopefully in the third quarter, a project management electronic commerce bachelor's 

degree, 100 percent on-line. We partnered with Pearson Publishing to be able to provide 

that - Blackboard, Inbenet, and others that are part of our process. We had to go to the 

state of Indiana. We're applying to ACICS, our national accreditor, to look at it. 

 The state of Indiana, in their rules and regulations, their first thing that they had to 

check off on a box was, well, we need to go see the facility. Well, there isn't a facility in 

distance education. They realize that. They had to do a letter stipulating that. They then 

realized they have to start changing, evolving their rules and regulations as they look at it. 

 The issue of distance education still comes back to the quality of the education, 

the quality of the relationship that occurs in that learning process. 

Mrs. Mink. What assurance do we have in this legislation that this quality examination is 

going to be conducted before we eliminate the 12-hour and the 50 percent? 

Mr. Waddles. The same assurance that you have right now with regular education that 

they're looking at every day. 

Mrs. Mink. Mr. Ikenberry? 
25

Mr. Ikenberry. Yes, I thought the important change here, the paradigm shift, if you will, 

that applies not just to distance learning, but to all of higher education, is a move away 

over the last 10 years from evaluating quality on the basis of process to trying to evaluate 

quality on the basis of learning outcomes, what students actually know and are able to do.

Now -

Mrs. Mink. Well, do we have in process the capability of making those examinations, 

and how do we decide? The history that I come from is the era where we had 

considerable difficulty and we had all sorts of institutions arising hither and yon, offering 

education to people which they could not fulfill, and where the students were saddled 

with enormous debt for an education that proved to be worthless. 

 So knowing that this whole field is going to just burst in our eyes, literally, I want 

to make sure that this ingredient of quality, which you're all assuming, is going to be 

maintained, and that we're not opening the Pandora's box and inviting everyone into this 

field, and find ourselves in great jeopardy of harming the students. I realize that all of 

your institutions are going to survive. Great. But what about the students and what about 

the taxpayers? 

Mr. Ikenberry. I commend you for your pressing on this issue, and it is not an easy job.

It is not an easy task to assess outcomes and what a student actually knows and is able to 

do as opposed to counting seat time and other process factors. But it is that commitment 

to assess outcomes and genuine quality that the accrediting groups across the country and 

college and university leaders generally are struggling toward. And, of course, at the 

elementary and secondary education level, we've just adopted a piece of legislation that 

attempts to do precisely that measurement of learning outcomes for youngsters in the 

elementary and secondary schools as well. 

 So I think there is a shift not to count simply the hours of instruction that you've 

had in a seat or the hours per week, but to try to move more in the direction of measuring 

and assessing the actual quality of the learning outcomes. It isn't easy, but that's the 

challenge that we think is the response, not just to technology, but to all of education. 

Mrs. Mink. May I have one more final question? I have my red lights on. 

Chairman McKeon. You have about two or three people who want to still answer that 

last question. 

 [Laughter.] 

Mrs. Mink. Oh, okay. 

Mr. DiGregorio. I'd like to address that question also, if I may? 

Mrs. Mink. It's up to you. The red light is on. 

Chairman McKeon. I think it's a good question. We should give him a chance to 

answer it. 
26

Mr. DiGregorio. It's an absolutely fine question, in fact. But I'd like to approach it from 

a different point of view, and perhaps a controversial point of view. 

 I don't think it's the accrediting agencies that are going to be the final determinant 

of quality in this new era of education. Education is a $700 billion a year business in this 

country, ranking it second only to health care in percentage of gross domestic product.

And, as such, I think it will be the marketplace that will be the final judge of quality in 

education, not accrediting agencies, not government agencies. I don't think it's something 

that can be - quality cannot be dictated. Those who provide the best quality programming 

at the most reasonable price and the best student services will be the ones that survive in 

this new market. We have to look at ourselves as producers of a commodity and students 

as consumers of that commodity. And if we present that commodity at a fair price and 

high quality, we will win. We will survive. Others will not. I think that will be the final 

judge.

Mr. Waddles. And just to build off of that, I think that's an excellent point, but I also 

believe that we're not changing the doorway. The barriers to entry into higher education 

and participation in Title IV were built up back in the 1992 and 1986 reauthorizations, 

and improved after that. We're not changing those barriers. The players that are in the 

space are the players that are now adhering to the financial responsibility requirements 

that are adhering to the 90/10 rules, which are adhering to all of these other elements. 

They still have to do that. That's part of the assurance of quality. We're not just opening 

the door and saying, “Anybody that wants to can come in and provide this.” 

Mr. Gowen. Your provisions that you have put within the Act that require substantial 

development and demonstration that you are a traditional institution and that you do meet 

the financial aid requirements, the 10 percent but there's also a factor that is coming into 

play in technology. In today's Internet activities, we now can move towards the individual 

learner and there is the opportunity to bring quality into focus by inviting the individual 

learner to do what we all do in the marketplace. We judge whether we have been served 

well or not. 

 One element that is now available on the Internet is to provide the user the 

opportunity to go back and to, in effect, rate whether they have received the service in an 

instant involvement. That's a change in which you now have feedback that those who are 

involved in education can find out whether others have found it to be useful or not.

That's quite a change in our technology and it's quite a change in education. It will 

change the way those of us who provide education interact with our students. 

Chairman McKeon. Thank you. 

Mr. Isakson? 

Mr. Isakson. Thank you, Mr. Chairman. This accreditation issue is very important and I 

want to ask a couple of questions just for the edification of everyone, because I had to 

learn all of this myself at the hearing. 
27

Number one, Dr. Ikenberry, isn't it true that accreditation, rather than being 

uniform in this country, is, in fact, regional and by discipline more than it is across the 

board? 

Mr. Ikenberry. That's absolutely correct. In fact, the diversity in quality assurance 

accreditation in this country reflects the same diversity of our institutions. So we have 

regional accreditors for the various geographic regions of the country, and there are 

probably 50 or more disciplinary accreditors in law, business and chemistry, you name 

the field. And through the community, we have the Council on Higher Education 

Accreditation that's designed to try to oversee the accreditors, if you will. 

Mr. Isakson. Ms. Lewis, isn't it true that you can't get a student loan unless you're going 

to an accredited institution? 

Ms. Lewis. Yes. 

Mr. Isakson. It's very important, Mrs. Mink, for all of us to understand this whole 

accreditation issue. The loan program, its prerequisite is that the institution be accredited. 

So I mean we're not talking about preventing people from going to nonaccredited 

courses. They can't do that now. 

Dr. DiGregorio, I want to thank you because you made an outstanding 

observation, which I'm going to maybe comment on more than ask a question. 

 We all need to understand that this bill solves what has previously been the 

insoluble for many Americans, and those Americans are people who are economically or 

physically disadvantaged. This bill isn't about people that have the financial means to go 

to the University of Georgia, Georgia Tech, UCLA, Cal Berkeley or Michigan. This is 

about people who never even thought they could get a college education because of the 

limitations of time, distance and money. 

 At Georgia Tech - I want to give them a plug - they have one of the finest 

research areas in learning for the disabled that you have ever seen, and we cannot forget 

that there are many disabled Americans who never had the hope of having a job because 

of their disability. Now, because of the use of technology in employment, they have the 

ability to have very meaningful employment through technology where their disabilities 

previously would not have allowed them to do that. And in the case of fixing these rules 

and affording that opportunity, many of the Americans we in Congress run for to help, 

the disadvantaged and the disabled, are the ones that are benefiting from this. 

Ms. Lewis, I want to ask you another question. 

Ms. Lewis. Okay. 

Mr. Isakson. And we had a nice conversation yesterday and I really enjoyed it and 

learned a lot from you. 

Ms. Lewis. Thank you. 
28

Mr. Isakson. These rules, many of them, came about in reaction to fraud, waste and 

abuse, the great trilogy of American politics. And you just shared with me yesterday the 

difficulty in going out and determining what was really going on. You had to put people 

on airplanes, fly them to schools, go on an interview, and go through filing cabinets. 

 It seems to me that the Internet offers you a better way to monitor what kind of 

coursework is going on, what is really happening, than contemporary education in terms 

of going to the bricks and mortar location. Because you could enroll an investigator in a 

course of study, they could start pulling it down, and, all of a sudden, if it was a fraud, or 

if, in fact, what it was purported to be wasn't there, you could more quickly find it 

through the same distance learning that's being approved than you could ever find it by 

going and investigating colleges and universities on their campuses. Am I wrong? 

Ms. Lewis. I don't think you're wrong. I think in the large scheme, the after the fact 

investigative or audit work is always labor-intensive and time-consuming. Our testimony 

looks to raise the question on the issue of quality. We did a management information 

report and issued it to the Department, in September of 2000, that identified, based on 

surveys of 29 accrediting agencies in 50 states, that there are inconsistencies and 

concerns, high levels of concerns, about how to assess outcomes, curricula, information 

about the institution. 

 So our thought is that, as you go through the legislative process and set the policy, 

that the issue of addressing the quality, which is the accrediting agency's issue and 

responsibility, be thought about now. Are they prepared? Some states have enacted 

laws. Some states have not. So we look to identify that. At this present time, there's a 

high level of concern in that community about how to go about assessing. 

 Ultimately the other question we raise goes to the quantity of education or 

instruction. And those questions, which in large part connect to the financial aid that is 

ultimately awarded or that persons are eligible for - what is the appropriate amount of 

instruction that justifies that large federal investment in that instruction? 

Mr. Isakson. Thank you. 

Chairman McKeon. Thank you. 

Mr. Hinojosa? 

Mr. Hinojosa. Thank you. 

 First, I want to thank and commend Chairman Buck McKeon and my good friend 

and colleague, Johnny Isakson, for inviting this education panel to testify before our 

committee. I find it very interesting and I am very pleased that there is an effort through 

this legislation, H.R. 1992, to try to improve access to higher education for all Americans 

in our country. I am also very pleased and I will try to work very closely with the authors 

of this legislation because I too want to fight the fraud and abuse that has prevailed in the 

last 20 years in higher education through proprietary schools and some colleges and 
29

universities.

 I am wanting to address a question, first, to Lorraine Lewis. 

Ms. Lewis. Good morning. 

Mr. Hinojosa. And if any of the other members of the panel wish to address the 

question, I would welcome your answer. 

 I looked at the summary of the demonstration programs and it indicates that all 

participants experience growth in their programs. However, minorities did not seem to 

make any gains in participation. Why is that? Or do you think there is less availability to 

minorities, women and minorities? I don't understand why they are not shown in the 

report, nor that there is work being done to ensure that this distance learning is available 

to them. 

Ms. Lewis. Sir, I don't have any information coming from work of the Office of 

Inspector General that I can speak to on that issue. Perhaps the Department of Education 

itself might be in a better position. But, at this point in time, I might have to defer to my 

colleagues on the panel relating to that. 

Mr. Hinojosa. I'll ask Mr. Waddles if he can address it? 

Mr. Waddles. I think one of the clear elements as we're in the initial stages of the 

development of this is its access. It's the issue of does someone have the financial 

resources to have the tools to access distance education? Do they have the computer? 

Do they have the on-line access point? I think those are elements that we are still in the 

process of overcoming as we look at who is distance most available to? 

 I think that as more households have computers and have on-line access, the more 

you'll see minorities and the disadvantaged use this tool as an available one for their 

education.

Mr. Hinojosa. Mr. Waddles, you may not know this, and then you might. But in the last 

two years, the Department of Education and the Department of Agriculture made 

available lots and lots of money through E-rate to be able to hook up many of our 

computers in schools and libraries throughout the country. I know that in my case, 

representing an area that is very poor, we received a lot of money, millions of dollars, and 

we were successful in hooking them up. 

 I'll give you an example. Odem, Edroy, Sinton formed a little cluster, three little 

rural schools, and they have excellent computer technology that has resulted over the last 

two years. They are offering distance learning through Del Mar Community College, in 

Corpus Christi, and some of the students are graduating with 24 hours, credits, you know, 

that go towards an associate degree or a four year university degree. 

 You need to find out where they are throughout our_especially the regions of the 

country that have double digit unemployment or twice the national unemployment rate, 

and see how we can bring them into this type of access, because it is definitely the way to 
30

go. I'm just surprised that in the materials that I've read during the last hour, you're not 

making enough of an effort to women and minorities, especially as it says here that many 

are 30 to 40 years old and they are naturally looking for jobs that will take them from just 

hourly rates of six or seven hours - rather, 6 or $7 per hour, to the ones that pay 10 or $15 

an hour, so that they can improve the quality of life for their children. 

Mr. Waddles. I think it's going to be a critical part of the evolution of this tool. And 

that's what it is; it's a delivery mechanism that will have to continue to evolve. But I 

think in communities and in society, we will see more access points created. I think 

you'll see boxes that are only dedicated to Internet access as opposed to having all of the 

peripherals related to it, that will make that more accessible. But it's critical. 

 As you'll see in my testimony, I think that's one of the strongest arguments for 

making distance education more available, whether it's in rural areas or it is for the 

disadvantaged or disabled. I think that it is an additional tool for that, but it has to be 

done again. And we've said it over and over again, but it has to be done in a quality way 

that can be measured. 

Mr. Hinojosa. Well, it is my opinion that there are already in place the technology, the 

equipment, the hook-up to the Internet. All of that is now available in many parts of the 

country, and I wish that we could, Mr. Chairman, try to provide them the information 

necessary so that we can try to expand this. 

 And, again, my closing comments are that this H.R. 1992 is excellent and I would 

like to work with you. 

Chairman McKeon. Thank you very much. 

Mr. Wu? 

Mr. Wu. Thank you, Mr. Chairman. 

 With respect to the narrow confines of H.R. 1992, I agree with the gentleman 

from Georgia, my friend, Johnny Isakson. But I would like to engage this panel in some 

of the broader comments which I've heard during the course of the discussion here. It 

concerns me deeply that beyond the bounds of this specific legislation, we're using words 

like, “Well, accreditation will be much less relevant and the marketplace will determine 

outcomes.” I'd like to engage on that topic and one other one. 

 My concern about this is, if we really are talking about a paradigm shift to a 

market-based education system, first of all, I'd like to inquire as to whether that really is 

feasible or not, because we have been on a nonmarket education basis for a very long 

time, and all the evidence seems to point that education is not a very good profit-making 

activity or else we would not have a public education system for part of it and we would 

not have the need for charitable contributions to support other parts of our education 

system. 
31

And if we really are talking about a paradigm shift to a profit-making, marketbased education system, then we really need to work out whether, A, that's feasible, and 

B, whether that is desirable, because I would submit to you that perhaps_perhaps some of 

the prerequisites for people participating in a self-governing, democratic society, that the 

ability to achieve that minimum bar should not be a market-based system, that that is 

something that we would provide as a public good. That's one set of discussions. 

 I'm going to turn it over to you all to discuss that as soon as I get to topic number 

two, which is the paradigm shift from an input-based education system to an outcometested system. I'm speaking now as someone who has represented education institutions, 

research institutions, tried to help them with distance learning, and it's been a tough row 

to hoe for a very well-intentioned set of institutions. But, at the same time, I think that 

we need to be cognizant of the limitations of distance learning. 

 It is true that it will bring quality education to those who are not otherwise able to 

come to a Georgia Tech or an Oregon State. But I doubt that those are the limits of your 

marketing efforts. There must be something to be said for the traditional paradigm where 

we bring scholars and students into close proximity and some of those purposes are for 

classic classroom learning, but most of the education, I suspect, that happens in 

traditional settings doesn't happen in the classroom, but happens as a result of other 

interactions which are possible in bringing people into close proximity. 

 If we are to move to this new paradigm of distance learning and outcome testing, 

well, I hope that we also work up some reasonable approximations of that kind of 

proximity-based learning. I'd like to turn it over to you all to discuss those two 

challenges.

Mr. DiGregorio. Since I made the original comment about it becoming a market-based 

commodity, I think I'd like to respond. 

 Is it feasible, is it desirable are the two questions you asked. I don't think that 

there is even a question of feasibility. I think it's going to happen. Whether it's desirable 

or not is something to be determined. 

 I think the reason why education has not been market-based - market-driven over 

the last 800 years or so is because it's never been a discipline or a commodity that was 

easily deliverable to people who needed the product. What the technology does is allow 

companies, for-profit companies, to deliver a product, a good product, to consumers as 

they never have been able to do before. Higher education has always been the purview of 

educational institutions because we have had places where people could come to receive 

an education, and if they couldn't come there, they couldn't get an education. 

 The technology allows us to distribute that education worldwide and therefore not 

just higher education institutions are involved in delivery, it's for profit educational 

institutions that are seeing that they also can deliver a quality product at a reasonable 

price. Thus it becomes a competitive environment that I call a market-based economy. 
32

I think it's going to happen. The numbers are big. The growth rate is phenomenal. 

I think the competition is good for traditional higher education. But I think it will be, 

eventually, the consumer that determines who is delivering a quality product and who is 

not. And I realize these are controversial statements. Not all academics agree with what 

I say, by the way, and probably some on our panel wouldn't agree either. 

Mr. Waddles. I guess since I'm one of the ones that represent the for profit sitting here at 

the table, being with ITT Education Services and the Career College Association. There's 

a couple of points that I would respond with: there is a for profit education world out 

there that can see this as a viable way to deliver education and assure quality at the same 

time, and that the two can go hand-in-hand. 

 I would challenge the idea that education has not, over that 800 years, been 

market-based. The whole apprenticeship guild process that occurred back in Europe, et 

cetera, was based on what the market was needing. It may not have been the Oxfords or 

at the highest level as it evolved through Europe, but it was market-based and it was 

education. There were various elements that grew through that. 

 I think that one of the things that we take pride in what we do is that we have 

employers in every one of our schools, 70 around the country - and I know this is similar 

to many others that are in our space, as well - they comprise our advisory board. They 

tell us what is needed, what kind of educational skills are important to what they do. 

 Many times, what we're hearing is, we need people that can communicate with 

each other, we need people that can stand up in front and lead, we need people that can 

read well, we need people that can do the various math components, the very basics of 

education. But they also want specifics on skills. Then we try to craft our curriculum 

around that so that it's accredited, state-approved, fits within the federal guidelines, and is 

market-driven. 

 I think, in my view, the accrediting bodies are not irrelevant. They're absolutely 

critical to the success of this process. There will be outcome-driven measurements, as we 

talked about in the second item, but I also think you have to have it at the front end as 

well. You can't just open the door and say, “Whatever you provide, we'll measure you at 

the end.” You've got to have standards, predisposed ideas as to what that learning will 

comprise, and then you also have to measure all the way through that process to see if 

you're attaining those goals. I think that's a critical element to this new evolutionary 

educational process. 

 Distance education is not an end all. We have 70 schools. Bricks and mortar are 

going to be part of our future forever. It's critical. Some students learn best in that 

environment. Others may have the access and learn better in a different environment. 

Some students learn best at Georgia Tech. Others will learn best at ITT Tech. That's the 

wonderful array that this nation's higher education provides. We think that it's all 

necessary. It's all part of what the plate has to hold. 

Mr. Gowen. The questions you raised at the Web-based Education Commission 

hearings, we heard a wide range of issues, very similar to what you just raised here. But 

we also observed several things occurring. The technology that now exists is so much 
33

different than the way we traditionally have delivered education that it opens new 

paradigms, new opportunities. We're in a transition time. We find there are many, many 

institutions rushing to somehow convert what they currently do by using technology. But 

we also find there are leadership institutions that are moving ahead, and recognizing that 

we're shifting from a time of teaching to a time of learning and an opportunity for people 

to develop a different approach to education. 

 Part of the Web-based Commission's recommendations were to call for a new era 

of research to begin to understand how this type of technology changes the way we learn.

Many of the things that we have seen occurring in the place-bound education are now 

changing. There will still be traditional education. Our goal is to keep the best of what 

goes on in our classrooms in traditional education, but to use the technology to provide 

that capability to any time, anyplace, anywhere, in a learning mode that is different than 

the teaching mode we've existed in. That's a very, very fundamental shift, it is ongoing, 

and there will be continued changes over these next years. It's a very, very exciting time, 

and we're just beginning to touch the tip of that iceberg. 

Mr. Wu. Dr. Ikenberry? 

Mr. Ikenberry. I just wanted to thank you for raising two, I thought, very insightful 

comments, and I think both are very well taken. 

 On the market side, I think we ought to make clear that even though higher 

education in the United States is probably more market-driven than higher education in 

any other part of the country in the sense that both federal and state systems of financial 

aid give students a tremendous option of choices and alternatives. Therefore, students do 

have a choice. So the market does express itself. 

 I for one, and I suspect my colleagues would join me, wouldn't say for one 

moment that the market alone is the final arbiter of quality. That's why both the integrity 

of institutions and providers of learning options and the strength of a system of 

accreditation in the United States are very important elements in that package, and I think 

you were quite proper to raise that point. 

 On the traditional approaches to teaching and learning, as opposed to technology, 

I think it's important we not pit these two options one against the other in the sense that 

probably the greatest application of technology right now is occurring on campus as 

opposed to off campus. What the results are beginning to show is that it isn't all 

traditional learning, on the one hand, or all technology, on the other hand, that's most 

effective. It is, in fact, a combination of the two where you have the human interaction of 

the classroom joined with the technology. So I think that I wouldn't pit one against the 

other.

 At Illinois, we taught one half of the chemistry lab, for example, through 

technology. What we found is we had higher retention in chemistry at the end of the 

freshman year. We had fewer dropouts. We had higher achievement than we did through 

the traditional method. But it was a combination of the two, technology and traditional 

instruction.
34

Mr. Wu. Mr. Chairman, if I could just close on a - 

Chairman McKeon. I think we've gone quite a bit over already. We do need to get to 

Mr. Andrews. 

Mr. Wu. Thank you, Mr. Chairman. 

Chairman McKeon. Thank you. 

Mr. Andrews? 

Mr. Andrews. Thank you, Mr. Chairman. I thank the panel for their testimony. I regret 

not being present for it personally, but I've had the chance to read each of your 

statements. I appreciate them very much. 

 Let me strongly endorse the legislation that you and Mr. Isakson have put 

forward. As one would expect, it is very thoughtful and very beneficial and I look 

forward to working with you to enact it. 

 Ten years ago, we did the_nine years ago_we did the 1992 reauthorization.

Default rates for student loans were incredibly high. It was costing the taxpayers $5.3 

billion a year. Those default rates have fallen to single digits, about 7 percent now, and 

the cost has fallen to the billion dollar range, perhaps below. And that is because the 

Committee struck a good balance between the need to ferret out unscrupulous lenders and 

operators and schools and the need to preserve the extension of higher education to 

people in all communities and all parts of the economic ladder. 

 I think we, largely, struck the right balance in 1992, and I think that your 

legislation here strikes the right balance, as well. It's one of the reasons I want to support 

it. But I am aware of the fact that there's been another change since 1992. It's a very 

positive one. That's that welfare roles across the country are down by more than half. 

 Now I think there are three reasons for that. One is the growth in the economy 

has created many new jobs that needed to be filled. I hope that continues. The second is 

that the welfare reform law that we worked together and enacted in 1997, I think has 

helped to facilitate this change. The third is the very widespread availability of career 

education in the urban and rural low income communities of the country that are typically 

homes to persons on public assistance. 

 I think that this bill is an important step to energizing and continuing the role of 

that sector of higher education, but I know that there are other issues out there that also 

need to be addressed. I'm sure that all the panelists would have something to say about 

this, but I wanted to ask Mr. Waddles, specifically, if I could, about some of the concerns 

that career education institutions have about some other policies under the Higher 

Education Act, particularly in the area of refunds and the area of some of the other 

financial rules that are well-intended, I think, to protect taxpayers, but perhaps have 

overshot the mark and created some difficulties. 
35

These are some areas I'd like to see the Committee consider and I wonder if Mr. 

Waddles could discuss some of the problems that are existing in terms of delivery of 

these education services to students. 

Mr. Waddles. Well, I think what you're referring to, Mr. Andrews - and it's good to see 

you again - is that there are - and I don't think it's unique just to career colleges. I think 

that there are elements that have been passed at various times, such as the latest refund 

policy that has a particular impact on career colleges, where the accrediting body or state 

requires you to take attendance, and the issue of changing refund policies and how much 

has to be paid back if you are accredited under one area that requires attendance versus 

another that doesn't. I think that those are issues that will continue to be looked at. 

 I think that one of the elements that goes to that is, whether it's refunds or default 

rates or financial responsibility regulations or the 90/10 rules, all of those elements are 

part and parcel to the business of operating the school, and people have adapted well.

And I think that you've seen the education provided over the last 9 years adapt to that.

Yet it still gets in the way of the efficiency of the education. Some levels, though, you 

have to have for levels of quality assurance, to make sure that we don't return to the old 

days of charlatans. But I don't think that's a possibility under the working relationship 

that we have and the empowerment of the triad. 

 But I think one of the things that we have seen, and I haven't had a chance to 

mention, is negotiated rule-making. One of the elements that we in the community 

believe is very important is, as we go forward with these changes that we're talking about 

here, that don't have to always have legislative activity, is a real bipartisan - and when I 

say “bipartisan” I mean the Department of Education and the community - ability to step 

into a room and have negotiated rule-making that comes out with an agreed-upon process 

as opposed to a voicing of opinion, that at the end of the day, someone else makes that 

decision.

 I think that goes to the heart and soul of some of the issues that you're talking 

about. Some of them are necessary, but it's a matter of how you implement them and 

how you craft the rules and regulations around them. I think these - whether it's the issue 

of compensation, incentive compensation, there's been a great deal of questioning as to 

how do you apply it? 

 The Inspector General, I think, has tried to look at the law and there's a limitation 

to what to interpret when the regulation simply mimics what the law says. That's it. 

Whatever the law said, that's what the regulation is. So the rest of it is left up to us to 

say, “Well, we'll have to interpret as best we can.” It's the clarity that comes with that 

which is always helpful to us as we try to implement, at all levels of higher education. 

Mr. Andrews. Thank you. Thank you, Mr. Chairman. 
36

Chairman McKeon. I want to thank the witnesses. I think this has been a very good 

discussion and I think you've been very good at answering the questions that were asked. 

You gave us some things to really think about. 

Mrs. Mink, did you have any closing comments? 

Mrs. Mink. Mr. Chairman, if I might ask on behalf of the minority if it would be 

appropriate to inquire of the witnesses various questions that we don't have time to ask 

and submit those questions to them and that their responses, together with the questions, 

might be inserted in the record, since we do have the 14 day leeway to do that? 

Chairman McKeon. Fourteen days? 

Mrs. Mink. Fourteen days, yes. I ask unanimous consent for that opportunity. 

Chairman McKeon. No objection. So ordered. 

Mrs. Mink. I also have two insertions in the record, which I would like to have at this 

point: the Advisory Committee on Student Financial Assistance, Dr. Juliet V. Garcia, 

and the interim report of the Distance Demonstration Project from the Department of 

Education. Thank you. 

Chairman McKeon. No objection. So ordered. Put those in the record. 

 Thank you very much. 

Mrs. Mink. Thank you very much. 

LETTER SUBMITTED FOR THE RECORD BY RANKING MEMBER PATSY 

MINK, SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, COMMITTEE 

ON EDUCATION AND THE WORKFORCE, FROM DR. JULIET GARZA, 

CHAIRPERSON, ADVISORY COMMITTEE ON STUDENT FINANCIAL 

ASSISTANCE, WASHINGTON, D.C. – SEE APPENDIX I 

REPORT TO CONGRESS ON THE DISTANCE EDUCATION DEMONSTRATION 

PROGRAMS SUBMITTED FOR THE RECORD BY RANKING MEMBER PATSY 

MINK, SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, COMMITTEE 

ON EDUCATION AND THE WORKFORCE – SEE APPENDIX J 

QUESTIONS SUBMITTED FOR THE RECORD TO U.S. SECRETARY OF 

EDUCATION RODERICK PAIGE BY RANKING MEMBER PATSY MINK, 

SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, COMMITTEE ON 

EDUCATION AND THE WORKFORCE – SEE APPENDIX K 

RESPONSES SUBMITTED FOR THE RECORD BY U.S. SECRETARY OF 

EDUCATION RODERICK PAIGE TO QUESTIONS SUBMITTED BY RANKING 

MEMBER PATSY MINK, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE WORKFORCE – 

SEE APPENDIX L 
37

Chairman McKeon. And we will ask, also, if you do get questions submitted from other 

members of the panel, we would certainly appreciate it if you would respond to those. If 

you think of something else, in addition to your written statement and the comments 

you've made here today that you would like to get to us, we will put that in the record. 

As Mr. Isakson moves forward on this legislation, I'm sure he would be open to any of 

your comments and suggestions, and we appreciate your support and help in this. 

LETTER SUBMITTED FOR THE RECORD BY CHAIRMAN HOWARD P. “BUCK” 

McKEON, SUBCOMMITTEE ON 21ST CENTURY COMPETITIVENESS, 

COMMITTEE ON EDUCATION AND THE WORKFORCE, FROM SECRETARY OF 

EDUCATION RODERICK PAIGE, U.S. DEPARTMENT OF EDUCATION, 

WASHINGTON, D.C. – SEE APPENDIX M 

WRITTEN STATEMENT SUBMITTED FOR THE RECORD BY CHAIRMAN 

HOWARD P. “BUCK” McKEON, SUBCOMMITTEE ON 21ST CENTURY 

COMPETITIVENESS, COMMITTEE ON EDUCATION AND THE WORKFORCE, 

FROM DR. RON CHENAIL, VICE PRESIDENT FOR ACADEMIC AFFAIRS, NOVA 

SOUTHEASTERN UNIVERSITY, FORT LAUDERDALE, FLORIDA – SEE 

APPENDIX N 

 With that, the Subcommittee stands adjourned. 

 [Whereupon, at 12:20 p.m., the Subcommittee was adjourned.] 
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Table of Indexes 

Chairman McKeon, 1, 5, 7, 8, 9, 12, 14, 17, 19, 21, 22, 23, 25, 26, 28, 30, 34, 36, 37 

Mr. Andrews, 34, 35 

Mr. DiGregorio, 19, 23, 25, 26, 31 

Mr. Gowen, 15, 26, 32 

Mr. Hinojosa, 28, 29, 30 

Mr. Ikenberry, 9, 22, 25, 27, 33 

Mr. Isakson, 5, 7, 26, 27, 28 

Mr. Tierney, 7 

Mr. Waddles, 17, 24, 26, 29, 30, 32, 35 

Mr. Wu, 30, 33, 34 

Mrs. Mink, 4, 23, 24, 25, 36 

Ms. Lewis, 12, 22, 27, 28, 29