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[House Report 113-205]
[From the U.S. Government Publishing Office]

113th Congress  }                                            {   Report
  1st Session   }          HOUSE OF REPRESENTATIVES          {  113-205

=======================================================================
 
       SUPPORTING ACADEMIC FREEDOM THROUGH REGULATORY RELIEF ACT 

                                _______
                                

 September 10, 2013.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Kline, from the Committee on Education and the Workforce, submitted 
                             the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 2637]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 2637) to prohibit the Secretary of 
Education from engaging in regulatory overreach with regard to 
institutional eligibility under title IV of the Higher 
Education Act of 1965, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Supporting Academic Freedom through 
Regulatory Relief Act''.

SEC. 2. REGULATORY RELIEF.

  (a) Regulations Repealed.--
          (1) Repeal.--The following regulations (including any 
        supplement or revision to such regulations) are repealed and 
        shall have no legal effect:
                  (A) State authorization.--Sections 600.4(a)(3), 
                600.5(a)(4), 600.6(a)(3), 600.9, and 668.43(b) of title 
                34, Code of Federal Regulations (relating to State 
                authorization), as added or amended by the final 
                regulations published by the Department of Education in 
                the Federal Register on October 29, 2010 (75 Fed. Reg. 
                66832 et seq.).
                  (B) Definition of credit hour.--The definition of the 
                term ``credit hour'' in section 600.2 of title 34, Code 
                of Federal Regulations, as added by the final 
                regulations published by the Department of Education in 
                the Federal Register on October 29, 2010 (75 Fed. Reg. 
                66946), and clauses (i)(A), (ii), and (iii) of 
                subsection (k)(2) of section 668.8 of such title, as 
                amended by such final regulations (75 Fed. Reg. 66949 
                et seq.).
                  (C) Gainful employment.--Sections 600.10(c), 
                600.20(d), 668.6, and 668.7, of title 34, Code of 
                Federal Regulations as added or amended by the final 
                regulations published by the Department of Education in 
                the Federal Register on October 29, 2010 (75 Fed. Reg. 
                66832 et seq. and 75 Fed. Reg. 66665 et seq.) and June 
                13, 2011 (76 Fed. Reg. 34386 et seq.).
          (2) Effect of repeal.--To the extent that regulations 
        repealed by paragraph (1) amended regulations that were in 
        effect on June 30, 2011, the provisions of the regulations that 
        were in effect on June 30, 2011, and were so amended are 
        restored and revived as if the regulations repealed by 
        paragraph (1) had not taken effect.
  (b) Certain Regulations Prohibited.--
          (1) State authorization and gainful employment.--
                  (A) In general.--The Secretary of Education shall 
                not, during the period described in subparagraph (B), 
                promulgate or enforce any regulation or rule not in 
                effect on the date of enactment of this Act for any 
                purpose under the Higher Education Act of 1965 (20 
                U.S.C. 1001 et seq.) with respect to--
                          (i) the State authorization for institutions 
                        of higher education to operate within a State; 
                        or
                          (ii) the definition or application of the 
                        term ``gainful employment''.
                  (B) Period of prohibition.--The period during which 
                the Secretary is prohibited from promulgating or 
                enforcing a regulation described in subparagraph (A) 
                shall be the period beginning on the date of enactment 
                of this Act and ending on the date of enactment of a 
                law that extends by not less than 2 fiscal years the 
                authorization or duration of one or more programs under 
                the Higher Education Act of 1965 (20 U.S.C. 1001 et 
                seq.).
          (2) Credit hour.--The Secretary of Education shall not, on or 
        after the date of enactment of this Act, promulgate or enforce 
        any regulation or rule with respect to the definition of the 
        term ``credit hour'' for any purpose under the Higher Education 
        Act of 1965 (20 U.S.C. 1001 et seq.).

SEC. 3. THIRD-PARTY SERVICE PROVIDERS.

  Section 487(a)(20) of the Higher Education Act of 1965 (20 U.S.C. 
1094(a)(20)) is amended by adding at the end the following: 
``Notwithstanding the preceding sentence, an institution described in 
section 101 may provide payment, based on the amount of tuition 
generated by the institution from student enrollment, to a third-party 
entity that provides a set of services to the institution that includes 
student recruitment services, regardless of whether the third-party 
entity is affiliated with an institution that provides educational 
services other than the institution providing such payment, if--
                  ``(A) the third-party entity is not affiliated with 
                the institution providing such payment;
                  ``(B) the third-party entity does not make 
                compensation payments to its employees that are 
                prohibited under this paragraph;
                  ``(C) the set of services provided to the institution 
                by the third-party entity include services in addition 
                to student recruitment services, and the institution 
                does not pay the third-party entity solely or 
                separately for student recruitment services provided by 
                the third-party entity; and
                  ``(D) any student recruitment information available 
                to the third-party entity, including personally 
                identifiable information, will not be used by, shared 
                with, or sold to any other person or entity, including 
                any institution that is affiliated with the third-party 
                entity.''.

                                Purpose

    H.R. 2637, Supporting Academic Freedom through Regulatory 
Relief Act, reduces the federal government's overreach into 
postsecondary academic affairs and helps increase access to 
higher education for our nation's most disadvantaged students. 
It protects the academic autonomy of colleges and universities 
and restores the authority of states and accrediting agencies 
over our nation's higher education system. The bill repeals the 
credit hour, state authorization, and gainful employment 
regulations and amends the statute to clarify the incentive 
compensation regulation. Additionally, the bill prohibits the 
U.S. Department of Education from issuing related regulations 
until after Congress reauthorizes the Higher Education Act.

                            Committee Action

    As the Committee on Education and the Workforce continues 
to evaluate the appropriate role of the federal government in 
education, we are committed to ensuring students are afforded 
the freedom to choose institutions of higher education that 
best meet their unique needs, and colleges and universities are 
protected from unnecessary and burdensome federal regulatory 
schemes.

                             112TH CONGRESS

Hearings

    On March 1, 2011, the Committee on Education and the 
Workforce held a hearing in Washington, D.C. on ``Education 
Regulations: Weighing the Burden on Schools and Students.'' The 
hearing was the first in a series examining the burden of 
federal, state, and local regulations on the nation's education 
system. The purpose of the hearing was to uncover the damaging 
effects of federal regulations that increasingly stifle growth 
and innovation, raise institutions' operating costs, and limit 
student access to affordable colleges and universities 
throughout the nation. Testifying before the committee were: 
Mr. Gene Wilhoit, Executive Director, Council of Chief State 
School Officers, Washington, D.C.; Dr. Edgar Hatrick, 
Superintendent, Loudoun County Public Schools, Ashburn, 
Virginia; Mr. Christopher B. Nelson, President, St. John's 
College, Annapolis, Maryland; and Ms. Kati Haycock, President, 
The Education Trust, Washington, D.C.
    On March 11, 2011, the Committee on Education and the 
Workforce Subcommittee on Higher Education and Workforce 
Training held a hearing in Washington, D.C. on ``Education 
Regulations: Federal Overreach into Academic Affairs.'' The 
purpose of the hearing was to discuss the most egregious and 
intrusive pieces of the U.S. Department of Education's program 
integrity regulations--the credit hour and state authorization 
regulations--and uncover their unintended consequences on 
states and institutions of higher education. Testifying before 
the subcommittee were: Mr. Ralph Wolff, President, Western 
Association of Schools and Colleges, Alameda, California; Mr. 
John Ebersole, President, Excelsior College, Albany, New York; 
Dr. G. Blair Dowden, President, Huntington University, 
Huntington, Indiana; and the Honorable Kathleen Tighe, 
Inspector General, U.S. Department of Education, Washington, 
D.C.
    On March 17, 2011, the Committee on Education and the 
Workforce held a hearing in Washington, D.C. on ``Education 
Regulations: Roadblocks to Student Choice in Higher 
Education.'' The purpose of the hearing was to explore the 
harmful consequences of the U.S. Department of Education's 
gainful employment regulation and discuss how these 
requirements impede college access, stifle job creation, and 
demonstrate federal overreach into the nation's postsecondary 
education system. Testifying before the committee were: Ms. 
Catherine Barreto, Graduate, Monroe College and Senior Sales 
Associate, Doubletree Hotels, Brooklyn, New York; Ms. Jeanne 
Herrmann, Chief Operating Officer, Globe University/Minnesota 
School of Business, Woodbury, Minnesota; Mr. Travis Jennings, 
Electrical Supervisor of the Manufacturing Launch Systems 
Group, Orbital Sciences Corporation, Chandler, Arizona; and Dr. 
Arnold Mitchem, President, Council for Opportunity in 
Education, Washington, D.C.
    On July 8, 2011, the Committee on Education and the 
Workforce Subcommittee on Higher Education and Workforce 
Training held a joint hearing with the Committee on Oversight 
and Government Reform Subcommittee on Regulatory Affairs, 
Stimulus Oversight, and Government Spending in Washington, D.C. 
on ``The Gainful Employment Regulation: Limiting Job Growth and 
Student Choice.'' The purpose of the hearing was to explore the 
harmful consequences of the U.S. Department of Education's 
gainful employment regulation and how the new requirements 
impede college access, stifle job creation, and continue the 
administration's federal overreach into the nation's 
postsecondary education system. Testifying before the 
subcommittees were: Mr. Harry C. Alford, President and Chief 
Executive Officer, National Black Chamber of Commerce, 
Washington, D.C.; Dr. Dario A. Cortes, President, Berkeley 
College, New York City, New York; Ms. Karla Carpenter, 
Graduate, Herzing University and Program Manager, Quest 
Software, Dane County, Wisconsin; and Dr. Anthony P. Carnevale, 
Director, Georgetown University Center on Education and the 
Workforce, Washington, D.C.

Legislative action--first session

    On February 17, 2011, the House of Representatives 
considered an amendment offered by Reps. John Kline (R-MN), 
Virginia Foxx (R-NC), and Alcee Hastings (D-FL) to H.R. 1, the 
Disaster Relief Appropriations Act of 2013. The amendment 
prohibited the use of funds by the U.S. Department of Education 
to implement and enforce the gainful employment regulation. The 
amendment was agreed to by a bipartisan vote of 289 to 136.
    On February 19, 2011, the House of Representatives passed 
H.R. 1 by a vote of 235 to 189. The amendment was not included 
in the conference agreement.
    On June 3, 2011, Reps. Virginia Foxx (R-NC) and John Kline 
(R-MN) introduced H.R. 2117, the Protecting Academic Freedom in 
Higher Education Act. The bill repealed the federal credit hour 
and state authorization regulations and prohibited the 
Secretary of Education from defining ``credit hour'' for any 
purpose under the Higher Education Act of 1965.
    On June 15, 2011, the Committee on Education and the 
Workforce considered H.R. 2117 in legislative session, and 
reported it favorably, as amended, to the House of 
Representatives by a bipartisan vote of 27 to 11. The committee 
considered and adopted the following amendment to H.R. 2117:
     Rep. Virginia Foxx (R-NC) offered an amendment in 
the nature of a substitute to add a short title to the 
legislation. The amendment was adopted by voice vote.
    The committee further considered the following amendments 
to H.R. 2117, which were not adopted:
     Rep. Raul Grijalva (D-AZ) offered an amendment to 
maintain the state authorization regulation's complaint process 
and the requirement for authorization by name. The amendment 
failed by a vote of 17-22.
     Rep. George Miller (D-CA) offered an amendment to 
prohibit implementation of the Act until the U.S. Department of 
Education's Inspector General certifies there are equal or 
greater protections in place related to program integrity under 
Title IV of the Higher Education Act. The amendment failed by a 
vote of 17-22.
     Rep. Rush Holt (D-NJ) offered an amendment to 
stipulate that the Act will be effective only if the maximum 
Pell Grant award is at least $5,550 for the 2012-2013 school 
year. The amendment was ruled out of order.
     Rep. Tim Bishop (D-NY) offered an amendment to 
strike the repeal of the federal definition of a credit hour. 
The amendment failed by a vote of 11-27.
     Rep. Tim Bishop (D-NY) offered an amendment to 
strike the prohibition on the Secretary of Education from 
defining credit hour in the future. The amendment failed by a 
vote of 16-22.

Second session

    On February 28, 2012, the House of Representatives passed 
H.R. 2117 by a bipartisan vote of 303 to 114. The bill was sent 
to the Senate and referred to the Senate Committee on Health, 
Education, Labor, and Pensions.

                             113TH CONGRESS

Hearing--first session

    On July 9, 2013, the Committee on Education and the 
Workforce held a hearing in Washington, D.C. on ``Keeping 
College Within Reach: Improving Higher Education through 
Innovation.'' The purpose of this hearing was to highlight 
innovation in higher education occurring at the state and 
institutional level and in the private sector, and discuss 
federal roadblocks to those innovative practices. Testifying 
before the committee were: Mr. Scott Jenkins, Director of 
External Relations, Western Governors University, Salt Lake 
City, Utah; Dr. Pamela J. Tate, President and Chief Executive 
Officer, Council for Adult and Experiential Learning, Chicago, 
Illinois; Mr. Burck Smith, Chief Executive Officer and Founder, 
StraighterLine, Baltimore, Maryland; and Dr. Joann Boughman, 
Senior Vice Chancellor for Academic Affairs, University System 
of Maryland, Adelphi, Maryland.

Legislative action--first session

    On July 10, 2013, Reps. Virginia Foxx (R-NC), John Kline 
(R-MN), and Alcee Hastings (D-FL) introduced H.R. 2637, 
Supporting Academic Freedom through Regulatory Relief Act. The 
bill, which includes the text of the Protecting Academic 
Freedom in Higher Education Act (H.R. 2117) and the Kline/Foxx/
Hastings amendment to H.R. 1 from the 112th Congress, repeals 
the credit hour, state authorization, and gainful employment 
regulations and amends the statute to clarify the incentive 
compensation regulation. Additionally, the bill prohibits the 
U.S. Department of Education from issuing related regulations 
until after Congress reauthorizes the Higher Education Act.
    On July 24, 2013, the Committee on Education and the 
Workforce considered H.R. 2637 in legislative session, and 
reported it favorably, as amended, to the House of 
Representatives by a bipartisan vote of 22 to 13. The committee 
considered and adopted the following amendment to H.R. 2637:
     Rep. Virginia Foxx (R-NC) offered an amendment in 
the nature of a substitute to change a subsection title in the 
legislation. The amendment was adopted by voice vote.
    The committee further considered the following amendment to 
H.R. 2637, which was not adopted:
     Rep. Tim Bishop (D-NY) offered an amendment to 
strike the prohibition on the U.S. Department of Education from 
issuing regulations related to state authorization, gainful 
employment, and credit hour. The amendment failed by a vote of 
13-22.
    Below is a summary of H.R. 2637.

                                Summary

    The Supporting Academic Freedom through Regulatory Relief 
Act eliminates the most burdensome ``program integrity'' 
regulations and prevents future federal overreach in 
postsecondary academic affairs. Specifically, the bill:
     Repeals the federal definition of a credit hour. 
It would also prohibit the secretary from defining ``credit 
hour'' in the future.
     Repeals the state authorization regulation, which 
forces states to follow federal requirements when deciding 
whether to grant an institution--including those offering 
online education programs--permission to operate within the 
state.
     Repeals the gainful employment regulation, which 
would levy reporting burdens on community and proprietary 
colleges and force administrators to seek federal approval 
before creating programs.
     Amends the statute to clarify the incentive 
compensation regulation to ensure third-party service providers 
are allowed to enter into tuition-sharing agreements with 
nonprofit colleges and universities to aid in the development 
of distance education platforms.
     Prohibits the U.S. Department of Education from 
issuing regulations on the state authorization and gainful 
employment regulations until after Congress reauthorizes the 
Higher Education Act and permanently prohibits the promulgation 
of a federal definition of credit hour.

                 BACKGROUND ON THE REPEALED REGULATIONS

Federal credit hour

    Under Title IV of the Higher Education Act of 1965, federal 
student aid is awarded to students based on the number of 
academic credits in which they are enrolled each term. 
Historically, the U.S. Department of Education has relied on 
accrediting agencies to oversee how an institution of higher 
education defines a credit hour and assigns a specific number 
of credit hours to each course. The new federal regulation 
creates a federal definition of a credit hour, under which an 
institution of higher education has only two ways to ensure its 
students are enrolled in classes and earning the required 
credit hours.
    Under the first option, an institution must base its credit 
hour on the ``Carnegie Unit,'' the traditionally accepted 
definition for one credit hour. Under this metric, one credit 
hour equals one hour of lecture and two hours of out-of-class 
work for approximately 15 weeks for one semester or trimester 
or 10 to 12 weeks for one quarter. Under the second option, an 
institution must demonstrate an equivalent amount of coursework 
for other academic activities, such as laboratory work, 
internships, and practice, as established by the institution.

State authorization

    Under the Higher Education Act of 1965, an institution of 
higher education seeking to participate in federal student 
assistance programs must be authorized to provide a 
postsecondary educational program within a state. Historically, 
the U.S. Department of Education allowed states to determine 
what requirements institutions of higher education must meet to 
carry out this requirement. The state authorization regulation 
mandates the following:
     Established by Name. States must establish an 
institution of higher education by name. The institution 
established by name must comply with all applicable state 
approval or licensure requirements, unless exempted by the 
state based on its accreditation or having been in operation 
for at least 20 years.
           Exemption if Institution is Established 
        as a Business or Charity. If a state establishes an 
        institution of higher education as a business or 
        charity (not established by name), the institution must 
        be approved or licensed to offer postsecondary programs 
        and may not be exempt from the approval process based 
        on accreditation, years in operation, or other 
        comparable exemption.
           Impact on Religious Institutions. States 
        may exempt religious institutions from state 
        authorization processes by nature of their religious 
        affiliation. A ``religious institution'' is narrowly 
        defined as one that is ``owned, controlled, operated, 
        and maintained'' by a religious corporation and awards 
        only religious degrees or certificates.
     Distance Education. An institution offering 
distance education courses must be able to document it is 
authorized by any state in which it would otherwise be subject 
to state jurisdiction. This provision raised questions as to 
whether online programs must be authorized in every state in 
which they have enrolled students. On June 5, 2012, the 
provision was struck down by the U.S. Court of Appeals for the 
District of Columbia because it was not a ``logical outgrowth'' 
of the rest of the proposed regulation. On April 16, 2013, the 
department announced in the Federal Register its intentions to 
re-regulate on this issue.
     Disclosure/Compliant Process. A college or 
university must disclose to current and prospective students 
information on filing complaints about institutions of higher 
education with an accreditor, a state approval or licensing 
agency, and any other appropriate state agency. States must 
have a process to review and act on complaints about 
institutions of higher education. Currently, all accreditors 
must have a process to review and act on complaints against 
institutions because they are responsible for institutional 
quality. The regulation requires states to duplicate this 
process.
    Because of continuing questions from states as to whether 
their laws are in compliance and confusion from institutions of 
higher education, the department conditionally delayed 
implementation of the state authorization regulation on two 
separate occasions. The regulation is slated to go in effect on 
July 1, 2014.

Gainful employment

    Under the Higher Education Act of 1965, proprietary 
institutions are permitted to participate in federal student 
aid programs as long as their programs prepare students for 
``gainful employment in a recognized occupation.'' Short-term 
programs offered at community colleges or other nonprofit 
colleges must also meet this requirement. The term ``gainful 
employment'' has been in the law since 1965, and Congress did 
not elaborate further when it reauthorized the law in 2008. The 
final regulation contains three separate components:
    Determination of Eligibility for Academic Programs: 
Programs are categorized as: (1) eligible for federal student 
aid; (2) eligible but restricted; and (3) ineligible for 
federal student aid based on debt-to-income ratio and loan 
repayment rate calculations.
     Debt-to-Income Ratio Calculation. The debt-to-
income ratio would be determined by examining the median annual 
loan payment made by students in the program compared to the 
average annual income of the same group of students over a 
three-year period. Two types of income would be compared to the 
median debt level of each program: actual income, which 
reflects the average annual income of students in a particular 
program, and discretionary income, which is defined as the 
difference between the average annual income of the program's 
students and 150 percent of poverty.
    Under the regulation, the debt-to-income ratio would be 
``reasonable'' if the median annual loan payment amount for a 
program's graduates is less than 12 percent of the average 
annual earnings for these same students and less than 30 
percent of the graduates' discretionary income. The income data 
required for this calculation would be provided to the U.S. 
Department of Education by the Social Security Administration 
at the program level rather than on a student-by-student basis.
     Loan Repayment Rate Calculation. The loan 
repayment rate would be based on the number of graduates in 
active loan repayment, defined by examining the average 
percentage of former students who have reduced the principal on 
their federal loans over a four-year period. Borrowers who are 
in a repayment plan in which their principal is not being 
reduced--which is common among new graduates--would not be 
counted as in repayment on their loans, despite the fact those 
borrowers would be in good standing and not in delinquency or 
default on their loans. For purposes of the loan repayment rate 
calculation, the department believes a program would have a 
``reasonable'' repayment rate if more than 35 percent of its 
former students (graduates and those who dropped out) are in 
repayment.
    New Programs: The U.S. Department of Education is required 
to approve every new program created at a proprietary 
institution prior to the start of enrollment and institutions 
must comply with a number of new reporting requirements.
    Disclosure: All proprietary institutions and the nonprofit 
colleges and universities that offer short-term programs are 
required to make public the following set of data elements, 
much of which is different from what the federal government 
collects on all institutions of higher education:
     Information Published on the Institution's Website
            Cost of the institutional program.
            Median debt of the students over the past 
        three years (including a separate identification of 
        federal loans, private loans, and institutional loans).
            Identification of the careers for which the 
        institutional program is providing training.
            On-time graduation rates.
            Job placement rates.
     Information Reported to the Department Annually
           Each student who completed the institutional 
        program.
           The date the student completed the 
        institutional program.
            The amount of private and institutional loans 
        received by the student.
    On June 30, 2012, the U.S. District Court for the District 
of Columbia upheld the department's authority to regulate on 
gainful employment, but struck down the loan repayment rate 
calculation because the standard was chosen arbitrarily. The 
court struck down the debt-to-income ratio calculation because 
it was so closely intertwined with the repayment rate standard. 
The court also struck down the new program requirement. 
Finally, the court held that institutions are not required to 
report any data to the department under the disclosure 
requirements, but are required to make data public. On April 
16, 2013, the department announced in the Federal Register its 
intentions to re-regulate on this issue. The negotiated 
rulemaking sessions are scheduled to start in early September 
2013.

Incentive compensation

    The Higher Education Act of 1965 prohibits institutions of 
higher education from paying any commission or bonus based on 
employees' success in recruiting students if those employees 
are engaged in student recruitment, admissions, or student 
financial aid. Regulations for this provision used to include 
12 ``safe harbors,'' or activities in which schools could 
engage without violating the incentive compensation ban. One of 
the safe harbors allowed for tuition-sharing agreements between 
institutions and third-party providers for recruitment 
activities. The U.S. Department of Education's incentive 
compensation regulation eliminated all allowable safe harbors.
    On March 17, 2011, the department released informal 
guidance in the form of a ``Dear Colleague Letter'' (DCL) 
delineating acceptable activities. To address concerns voiced 
by smaller colleges and universities who use third-party 
providers for a variety of services, the DCL clarified that a 
tuition-sharing plan between a college and a third-party 
service provider does not violate the incentive compensation 
prohibition as long as the payment compensates an entity 
unaffiliated with the college or university making the payment. 
To further clarify the department's position, the DCL provided 
several examples, one of which stated the third-party provider 
could not be affiliated with any other college or university, 
even if the affiliated college has nothing to do with the 
third-party entity providing the services.

                            Committee Views

    In late 2010 and early 2011, the U.S. Department of 
Education released several packages of regulations purportedly 
to improve the integrity of student financial aid programs, 
such as Pell Grants and federal student loans. Two of these so-
called ``program integrity'' rules--the credit hour and state 
authorization regulations--expand the reach of the federal 
government into issues that are traditionally academic or state 
affairs. A third regulation--the gainful employment rule--harms 
job creation and imposes federal cost controls on institutions. 
The final regulation--the incentive compensation rule--hampers 
the ability of nonprofit colleges and universities to move 
coursework online. These regulations, combined, increase the 
regulatory burden on institutions, impede innovation, and 
expand the federal footprint on college campuses across the 
country, making it difficult for colleges and universities to 
focus on their true mission of educating students.

History of examining regulatory red tape

    The committee has long championed bipartisan efforts to 
examine the regulatory burden imposed by the federal government 
on colleges and universities. In 2001, the committee introduced 
a first-of-its-kind, web-based tool to enable higher education 
stakeholders across the nation to participate in identifying 
ways to reduce red tape and bureaucracy for students, financial 
aid personnel, and colleges and universities. Known as the FED 
UP project, this bipartisan initiative, developed by Rep. 
Howard P. ``Buck'' McKeon (R-CA) and the late Rep. Patsy Mink 
(D-HI), was instrumental in fostering a more efficient and 
effective federal student aid system. The project solicited 
suggestions from the higher education community as to which 
provisions in the Higher Education Act, and corresponding 
regulations, should be changed or eliminated and why. More than 
3,000 responses were received from loan professionals, 
financial aid officers, students, higher education 
associations, and concerned citizens. Congress and the 
department used the suggestions from this project to streamline 
regulatory and reporting requirements in 2002.
    The Higher Education Opportunity Act (HEOA), the 2008 
reauthorization of the Higher Education Act, also included 
efforts to examine the federal regulatory burden on 
institutions of higher education. The HEOA required the 
Advisory Committee on Student Financial Assistance to solicit 
comments from personnel working at colleges and universities 
about federal regulatory burdens and how to address them.\1\ 
The HEOA also required the National Research Council at the 
National Academy of Sciences to conduct a study to examine the 
regulatory burden on institutions of higher education.\2\ The 
committee is currently awaiting the results from the National 
Research Council.
---------------------------------------------------------------------------
    \1\Higher Education Opportunity Act Sec. 492(a)(2)(F)
    \2\Higher Education Opportunity Act Sec. 1106
---------------------------------------------------------------------------

Recent efforts to examine regulatory red tape

    In the 112th Congress, the committee continued its efforts 
to streamline the federal regulatory burdens imposed on states, 
institutions of higher education, school districts, schools, 
and other entities impacted by the programs under its 
jurisdiction. In furtherance of this goal, the committee held a 
number of hearings that examined the regulatory burden imposed 
on schools, institutions, and students by the federal 
government. During these hearings, college presidents, 
accrediting agency heads, and students testified about the cost 
of complying with burdensome, overreaching federal laws and 
regulations. For example, during a March 1, 2011 hearing before 
the Committee on Education and the Workforce, Mr. Christopher 
Nelson, the president of St. John's College, testified about 
the harmful impact of excessive regulations on colleges and 
universities:

          The cost of compliance is large for institutions of 
        all sizes, but particularly so for a school of our size 
        that has no office of institutional research or staff 
        dedicated to support that function. This means that 
        literally dozens of people on our campus, myself 
        included, assume this burden as part of our daily 
        work.\3\
---------------------------------------------------------------------------
    \3\``Education Regulations: Weighing the Burden on Schools and 
Students,'' hearing before the House Committee on Education and the 
Workforce, 112th Congress, 1st Session (March 1, 2011) (oral testimony 
of Christopher Nelson).

    Mr. Nelson went on to discuss how the time spent by his 
faculty and other staff on reporting and compliance affects 
---------------------------------------------------------------------------
their ability to educate:

          When I step back from the mass of the more mundane 
        record-keeping, reporting, and compliance environment, 
        I try to see what the effect of all this is on our 
        principal task, fulfilling our educational mission for 
        the sake of our students. Every diversion or 
        distraction from these primary purposes weakens our 
        best attempts to achieve those ends.\4\
---------------------------------------------------------------------------
    \4\Ibid.

    Finally, he offered a worthwhile suggestion, ``As new 
requirements are created, get rid of some of the old at the 
same time. The concept would be something along the lines of a 
pay-go system for regulation that could be applied both to 
regulatory requirements and to data collection.''\5\ The 
committee believes this is a sensible suggestion that the U.S. 
Department of Education should consider as it enters into 
future negotiated rulemaking sessions to improve student aid 
programs. Our goal should be to reduce, not increase, burdens.
---------------------------------------------------------------------------
    \5\Ibid.
---------------------------------------------------------------------------

The credit hour regulation will shut down innovative programs for 
        students

    The committee believes the new credit hour regulation, 
which creates a federal definition of credit hour for the first 
time, undermines the traditional role of institutions of higher 
education and may be harmful to students and their colleges and 
universities. By imposing a restrictive set of new requirements 
when measuring coursework, the regulation will stifle 
innovative teaching practices being developed by colleges and 
universities around the country, including accelerated learning 
programs. This will shut down the programs unemployed or 
underemployed workers rely on to gain the skills necessary to 
get back to work, jeopardizing the nation's fragile economic 
recovery.
    The credit hour is at the heart of an academic decision. 
Institutions develop their credit hour policies and work with 
faculty to determine how many hours should be assigned to each 
course. Accrediting agencies then review each institution's 
policy and assignment of credit hours for the programs. Many of 
the agencies avoid strict standards to maximize flexibility in 
accounting for differing institutional policies and developing 
innovative ways to deliver educational content. During the 
March 11, 2011 hearing before the Subcommittee on Higher 
Education and Workforce Training, members heard from numerous 
presidents of institutions of higher education and accrediting 
agencies who will be forced to comply with the new federal 
credit hour regulations when they go into effect this year. Dr. 
G. Blair Dowden, President of Huntington University, stated:

          For the credit hour, I think the definition is . . . 
        confusing and how it relates to a variety of 
        educational experiences that we offer at the 
        institution including practicums and student teaching 
        experiences and many other experiences that don't 
        include the formula of seat time and that might be 
        difficult to find out an equivalency as proposed in the 
        regulations.\6\
---------------------------------------------------------------------------
    \6\``Education Regulations: Federal Overreach into Academic 
Affairs,'' hearing before the House Subcommittee on Higher Education 
and Workforce Training, 112th Congress, 1st Session (March 11, 2011) 
(oral testimony of G. Blair Dowden).

    Ms. Pamela Tate, President and Chief Executive Officer for 
the Council for Adult and Experiential Learning, highlighted 
the flaws to students of maintaining a seat-based federal 
definition of credit hour during a July 9, 2013 hearing before 
---------------------------------------------------------------------------
the Committee on Education and the Workforce. She stated:

          The main policy issue is that, currently, federal 
        financial aid programs like Pell grants and federal 
        loans support only traditional time-based learning. The 
        financial aid system under Title IV is not structured 
        for an outcomes-based and assessment-based approach to 
        postsecondary completion. It excludes assessment of 
        prior learning fees, even though these fees 
        significantly reduce the student's overall student loan 
        debt or the amount to be covered by Pell grants or 
        other educational benefits.\7\
---------------------------------------------------------------------------
    \7\``Keeping College Within Reach: Improving Higher Education 
through Innovation,'' hearing before the House Committee on Education 
and the Workforce, 113th Congress, 1st Session (July 9, 2013) (written 
testimony of Pamela J. Tate).

    Across the country, institutions like Huntington University 
and Western Governors University (WGU), which use a competency-
based model to award credit, are undertaking innovative and 
creative approaches to student learning. The committee believes 
the federal government should encourage more universities to 
adopt these models that are improving the higher education 
landscape. Under the federal credit hour regulation, WGU's 
competencies are relegated to exceptions, which could lead to 
accrediting bodies further questioning what they are doing and 
how they are doing it.
    While H.R. 2637, Supporting Academic Freedom through 
Regulatory Relief Act, repeals the federal definition of 
``credit hour,'' it leaves in place two other components of the 
credit hour regulation. First, it retains the requirements for 
accrediting agencies to review institutional policies on credit 
hour. Second, it leaves in place requirements for states to 
examine institutional policies on credit hour as the state 
decides whether to grant authorization to institutions of 
higher education to operate in their state. These two 
requirements were tentatively agreed to during the U.S. 
Department of Education's negotiated rulemaking session. While 
these remaining items still have challenges, the affected 
parties agreed to them in order to protect against potential 
fraud and abuse, and the Act does not change those regulations.
    Unfortunately, the federal definition of ``credit hour'' is 
the one issue on which the department did not abide by the 
tentative agreement reached by the negotiated rulemaking panel. 
In defense of this provision, the committee notes the 
department relies on an Inspector General report of the Higher 
Learning Commission (HLC) and its review of American 
InterContinental University,\8\ which was an isolated incident 
that does not represent a systemic problem in accreditation.
---------------------------------------------------------------------------
    \8\``Management Information Report--Review of The Higher Learning 
Commission of the North Central Association of Colleges and Schools' 
Standards for Program Length,'' Office of the Inspector General, U.S. 
Dep't of Education, May 24, 2010.
---------------------------------------------------------------------------
    During the March 11, 2011 Subcommittee on Higher Education 
and Workforce Training hearing, Rep. Rob Andrews (D-NJ) asked 
Ms. Kathleen Tighe, the department's Inspector General, whether 
the issues she found in reviewing HLC represented one limited 
incident or a systematic problem and questioned whether the 
federal definition is a solution in search of a problem.\9\ The 
Inspector General pointed out that she had concerns with HLC's 
practices, but that other accrediting agencies her office 
reviewed did not have similar problems. In his testimony before 
the subcommittee, Mr. Ralph Wolff, President of the Western 
Association of Schools and Colleges and one of the participants 
in the negotiated rulemaking session, pointed out that 
participants continually asked the department about the 
problems it was trying to solve. He noted the department kept 
relying on the isolated incident with HLC without citing any 
other examples, ``We asked repeatedly at the negotiated 
rulemaking, what is the scope of this problem so that we could 
help define a resolution. And we were never told what the scope 
was, beyond this one incident.''\10\
---------------------------------------------------------------------------
    \9\``Education Regulations: Federal Overreach into Academic 
Affairs,'' hearing before the House Subcommittee on Higher Education 
and Workforce Training, 112th Congress, 1st Session (March 11, 2011), 
p. 67.
    \10\Ibid. (oral testimony of Ralph Wolff).
---------------------------------------------------------------------------

The state authorization regulation will jeopardize college access and 
        completion

    The committee believes the new state authorization 
regulation imposes a one-size-fits-all requirement that will 
harm students and public and private colleges. In issuing the 
regulation, the federal government is overstepping its 
traditional role of utilizing the knowledge and expertise of 
states and accrediting agencies to measure and ensure 
institutional quality. The rule also infringes on the right of 
states to regulate their higher education systems and will 
likely require most, if not all, states to change how they 
currently authorize or license institutions of higher education 
to comply with the new requirements. For almost 50 years, the 
Higher Education Act included language that an institution of 
higher education participating in federal student aid programs 
must be authorized to provide a postsecondary educational 
program within a state.\11\ The state authorization regulation 
micromanages how states comply with this long-standing 
requirement.
---------------------------------------------------------------------------
    \11\Higher Education Act Sec. 101(a)(2)
---------------------------------------------------------------------------
    One of the more troubling aspects of the state 
authorization regulation is its consequences for distance 
education programs. Even though the requirement was struck down 
by the U.S Court of Appeals for the District of Columbia,\12\ 
the Secretary of Education announced\13\ his plans to re-
regulate on this issue in the near future. Under the previous 
regulation, institutions of higher education that offer 
distance education programs may be forced to seek authorization 
in each state in which the students it serves live, no matter 
how small its presence. These institutions may be forced to 
comply with authorization requirements in multiple states, 
including paying new fees, which will increase the cost of 
providing a high-quality postsecondary education. Ultimately, 
these innovative colleges and universities may decide to stop 
serving students in a particular state, thereby denying access 
to students. Rural states may be the most affected by this 
regulation and an institution's decision to forego 
authorization in states with limited populations.
---------------------------------------------------------------------------
    \12\Association of Private Sector Colleges and Universities vs. 
Arne Duncan. United States Court of Appeals for the District of 
Columbia Circuit. (June 5, 2012).
    \13\``Negotiated Rulemaking Committee; Public Hearings,'' 78 
Federal Register 73 (16 April 2013), pp. 22467-22469.
---------------------------------------------------------------------------
    The rapid expansion of distance education demonstrates 
colleges and universities are utilizing new technology to 
provide cost-effective ways to deliver postsecondary education 
to students, especially nontraditional students. The distance 
education component of the state authorization regulation could 
put this new, innovative tool in jeopardy, reducing options for 
students without the resources or time to attend a traditional 
college or university. Fewer students with access to 
postsecondary education mean fewer graduates entering the 
workforce with the skills necessary to meet local economic 
demands.
    During the March 11, 2011 hearing, the Subcommittee on 
Higher Education and Workforce Training heard from Mr. John 
Ebersole, President of Excelsior College, an online institution 
of higher education. In his testimony, Mr. Ebersole discussed 
the burden the state authorization regulation will impose on 
his institution:

          We do know we have put money in our budget for 
        compliance and we estimate that at our institution by 
        the time we hire the additional staff that will be 
        necessary to coordinate this and we pay the fees which 
        each of these states requires we are going to have an 
        annual recurring cost of somewhere between $150,000 and 
        $200,000 which when multiplied by the number of 
        institutions that offer online programs today, we are 
        talking about an additional cost which will eventually 
        be passed to students of $500 million.\14\
---------------------------------------------------------------------------
    \14\``Education Regulations: Federal Overreach into Academic 
Affairs,'' hearing before the House Subcommittee on Higher Education 
and Workforce Training, 112th Congress, 1st Session (March 11, 2011) 
(oral testimony of John Ebersole).

    In a letter sent to the committee on July 22, 2013, Dr. 
Robert Mendenhall, President of Western Governors University, 
discussed the cost the state authorization regulation has 
already had on his campus. He stated, ``Simply put, State 
Authorization has cost WGU more than $1,000,000 over the past 
two-years. Those precious dollars could have been spent much 
more effectively on students.''\15\
---------------------------------------------------------------------------
    \15\Mendenhall, Robert W., Western Governors University. Letter to 
Chairman John Kline, House Committee on Education and the Workforce. 
July 22, 2013. /edworkforce. house.gov/UploadedFiles/
Dr_Mendenhall_Support_Letter_for_H_R_2637.pdf>.
---------------------------------------------------------------------------
    The overriding consequence of the new regulation will be to 
put postsecondary education out of reach for students, many of 
whom are low-income or disadvantaged. In this tough economic 
climate, the federal government needs to put forward policies 
that improve college access and completion, thereby helping 
more skilled individuals enter the workforce. Instead, it is 
pushing policies that will deny students the ability to gain 
the skills necessary to succeed in the global economy.
    The Subcommittee on Higher Education and Workforce Training 
also heard during the March 11, 2011 hearing about the negative 
consequences the state authorization regulation would have for 
private or religious colleges. The new federal requirements 
could force states to exercise unprecedented authority over 
private colleges and universities, going far beyond granting 
the authority to operate as postsecondary institutions. Dr. G. 
Blair Dowden, President of Huntington University, highlighted 
his concerns with the new requirement, stating, ``My concern is 
that there appears to be no limits to what factors a state can 
consider when granting or withholding authorization and no 
mechanisms for appeal or due process.''\16\
---------------------------------------------------------------------------
    \16\``Education Regulations: Federal Overreach into Academic 
Affairs,'' hearing before the House Subcommittee on Higher Education 
and Workforce Training, 112th Congress, 1st Session (March 11, 2011) 
(oral testimony of G. Blair Dowden).
---------------------------------------------------------------------------
    He went on to discuss the extremely narrow definition of 
``religious institution'' included in the regulation and 
pointed out that most religiously affiliated institutions would 
not qualify for the exemption, consequently opening the 
institution up to unwarranted state interference:

        . . . the possibility exists that certain states may 
        use this new state authorization requirement as 
        leverage to achieve their own higher education policy 
        agenda at the expense of institutional missions. For 
        instance, a state could require a certain curriculum or 
        text books in order to gain authorization potentially 
        violating both the academic prerogatives and religious 
        convictions of the institutions.\17\
---------------------------------------------------------------------------
    \17\Ibid.

    These consequences clearly go beyond the existing federal 
requirement that states grant authority to operate as a 
postsecondary institution within the state, threatening the 
academic freedom and mission of private colleges and 
universities.

The Gainful Employment Regulation stifles job creation

    The committee strongly opposes the gainful employment 
regulation as an unprecedented attack on the proprietary sector 
of higher education that will limit student choice and 
jeopardize local economic and workforce development. Instead of 
working with Congress during the upcoming reauthorization of 
the Higher Education Act, the department proposed and finalized 
a regulation that contained a complex matrix of metrics 
involving debt-to income ratios and loan repayment rates. The 
regulation also gave unprecedented authority to the U.S. 
Secretary of Education to approve each new program created by a 
proprietary institution, taking away these institutions' 
ability to remain flexible to ensure their academic offerings 
meet the needs of the local economy. Finally, the regulation 
imposes new, burdensome disclosure requirements on all programs 
at proprietary institutions and select short-term programs at 
nonprofit institutions--information that is, in some cases, 
different from what colleges are already required to make 
public through the Integrated Postsecondary Education Data 
System (IPEDS).
    The committee notes the House of Representatives has been 
clear in its opposition to the promulgation of this regulation. 
On February 18, 2011, the House voted to prohibit the secretary 
from regulating on gainful employment by a strong bipartisan 
vote of 289 to 136, including members of the Republican and 
Democratic leadership. On July 13, 2012 and April 18, 2013, a 
bipartisan group of members sent letters urging the secretary 
to abandon his plan to re-examine the flawed gainful employment 
regulation and work with Congress. Despite these efforts and a 
federal court ruling striking down the bulk of the 
regulation,\18\ the department recently announced plans to 
convene a negotiated rulemaking panel to revise the regulation; 
the panel is expected to meet and begin consideration in 
September 2013. This shortsighted action will surely result in 
another round of legal proceedings and continuing instability 
for students at career colleges, most of whom seek the skills 
necessary to retain or access employment. The committee 
strongly urges the secretary to abandon his efforts to re-
regulate this flawed regulation and work with Congress to 
reauthorize the Higher Education Act. 
---------------------------------------------------------------------------
    \18\Association of Private Sector Colleges and Universities vs. 
Arne Duncan. U.S. District Court for the District of Columbia. (June 
30, 2012).
---------------------------------------------------------------------------
    While supportive of efforts to increase institutional 
transparency, the committee believes the federal government 
needs to streamline and develop consistent disclosure 
requirements across all institutions, not just proprietary 
colleges. As demonstrated by Mr. Alex Garrido, the student 
veteran witness who testified during the April 24, 2013 
Subcommittee on Higher Education and Workforce Training 
hearing, students do not utilize the vast federal resources 
available online when looking for a college. Instead they 
frequently visit the college, look at the website, and talk to 
friends when selecting their institution.\19\ Mr. Garrido 
stated, ``After selecting the schools I was interested in, I 
began to visit the campuses and speak to admissions advisors. I 
wanted to get a feel for the environments of each individual 
school and this is hard to gauge solely from school 
websites.''\20\
---------------------------------------------------------------------------
    \19\``Keeping College Within Reach: Enhancing Transparency for 
Students, Families, and Taxpayers,'' hearing before the House 
Subcommittee on Higher Education and Workforce Training, 113th 
Congress, 1st Session (April 24, 2013) (oral testimony of Alex 
Garrido).
    \20\``Keeping College Within Reach: Enhancing Transparency for 
Students, Families, and Taxpayers,'' hearing before the House 
Subcommittee on Higher Education and Workforce Training, 113th 
Congress, 1st Session (April 24, 2013) (written testimony of Alex 
Garrido).
---------------------------------------------------------------------------
    If federal policymakers hope to help students make informed 
decisions about their postsecondary pathways, then Congress 
needs to scale back the amount of information it requires 
institutions to disclose to the public and make sure that 
information is consistent and helpful to the consumer: students 
and families.
    As has been discussed at length since the rule's initial 
release, the gainful employment regulation has a number of 
unintended and harmful consequences for institutions, students, 
and working adults. Despite the claims of the administration 
and opponents of private sector education, the regulation will 
harm economic development in communities across the country. 
Many of the institutions harmed by this regulation are 
students' last hope as they try to gain new skills or update 
their skills to enter into the workforce. The true harm to 
students will come to those smaller to mid-sized institutions 
that do not have the same resources as bigger institutions to 
deal with the regulations. Many of these schools operate in 
areas that are underserved by other colleges and universities.
    During a joint hearing held on July 8, 2011 between the 
Subcommittee on Higher Education and Workforce Training and the 
Committee on Oversight and Government Reform Subcommittee on 
Regulatory Affairs, Stimulus Oversight, and Government 
Spending, Mr. Harry Alford, President and Chief Executive 
Officer of the National Black Chamber of Commerce stated:

          The black owned businesses that I represent rely on 
        graduates of proprietary colleges targeted by the 
        recent Gainful Employment Rule. These proprietary 
        colleges serve minority, low-income, and high-risk 
        students at much greater numbers than traditional four-
        year institutions and have more success doing it.\21\
---------------------------------------------------------------------------
    \21\``The Gainful Employment Regulation: Limiting Job Growth and 
Student Choice,'' joint hearing before the Subcommittee on Higher 
Education and Workforce Training and the Committee on Oversight and 
Government Reform Subcommittee on Regulatory Affairs, Stimulus 
Oversight, and Government Spending, 112th Congress, 1st Session (July 
8, 2011) (written testimony of Harry C. Alford).

    The committee believes students should have the ability to 
choose a higher education institution that best meets their 
unique needs. That choice should not be undermined by an 
arbitrary regulation proposed and enforced by federal 
bureaucrats.

The Incentive Compensation Regulation should encourage higher education 
        innovation

    The committee believes the U.S. Department of Education's 
effort to clarify the role of third-party providers in the 
incentive compensation regulation has hampered competition and 
picked winners and losers in the higher education marketplace. 
Independent third-party providers are permitted to engage in 
tuition-sharing plans with other universities, but affiliated 
third-party providers, including those held by private 
companies that may also own institutions, are not allowed to 
continue the business practice. Many of these affected third-
party entities help nonprofit public and private institutions 
develop online platforms for their courses; these institutions 
would not be able to afford such costs if a large up-front fee 
for services was charged. The statute must be changed to ensure 
the regulation and sub-regulatory guidance to not discourage 
innovation in higher education and instead restore competition 
in the postsecondary marketplace.
    The language included in H.R. 2637 is nearly identical to 
H.R. 2525, the Collaborative College Services Act, introduced 
by Reps. Matt Salmon (R-AZ) and Rob Andrews (D-NJ). The 
legislation would ensure all third-party service providers are 
treated the same in the eyes of the law, regardless of whether 
those providers are affiliated with another college or 
university.

Current protections against fraud and abuse

    The committee takes its responsibility to protect the 
accountability of federal funds seriously. The committee notes 
the Higher Education Act already includes numerous provisions 
to prevent waste, fraud, and abuse of federal student aid 
programs. The federal government--in partnership with 
accrediting agencies--conducts audits and program reviews. 
Institutions must stay below caps on cohort default rates and 
meet satisfactory academic progress standards, and report on a 
whole host of information regarding institutional and program 
quality. The law also makes clear states and accrediting 
agencies have an important role as part of the triad governing 
federal funds.
    While the ongoing conversations among states, accrediting 
agencies, and institutions may have started because these 
regulations pushed states and accreditors to pay more attention 
to their own duties, maintaining these burdensome regulations 
is likely to hamper innovation moving forward. Instead of 
setting a federal definition of credit hour, the U. S. 
Department of Education should leave it to accrediting agencies 
and institutions, which have a strong record of appropriately 
measuring academic quality. Rather than dictating to states how 
they must approve institutions to operate within their 
boundaries, the department should allow them to determine the 
best way to protect their citizens. Instead of singling out the 
proprietary sector for additional regulation, the department 
should increase transparency for all colleges and universities.

Conclusion

    Instead of protecting students from fraud and abuse, the 
credit hour, state authorization, gainful employment, and 
incentive compensation regulations are clear examples of 
federal overreach into the academic affairs of states, 
accrediting agencies, and public and private institutions of 
higher education. These unnecessary regulations will impose 
additional regulatory burdens on colleges and universities, 
which could lead to higher costs being passed down to low-
income and disadvantaged students. More importantly, students 
who are looking to gain the skills necessary to succeed in the 
workforce will be denied access to innovative instructional 
programs that will keep us competitive in the global economy.
    A broad array of organizations, representing a diverse 
group of colleges and universities, support this legislation 
because they know it promotes access to an affordable 
postsecondary education. The higher education institutions and 
organizations include the: American Council on Education, 
Association of American Universities, Association of Jesuit 
Colleges and Universities, Association of Private Sector 
Colleges and Universities, Council for Christian Colleges & 
Universities, Council for Higher Education Accreditation, 
Excelsior College, Middle States Association of Colleges and 
Schools--Commission on Higher Education, National Association 
of Independent Colleges and Universities, National Association 
of Student Financial Aid Administrators, New England 
Association of Schools and Colleges Commission on Institutions 
of Higher Education, North Central Association of Colleges and 
Schools--The Higher Learning Commission, Northwest Commission 
on Colleges and Universities, Rebuilding America's Middle 
Class, Southern Association of Colleges and Schools--Commission 
on Colleges, Western Association of Schools and Colleges--
Accrediting Commission for Community and Junior Colleges, 
Western Association of Schools and Colleges--Accrediting 
Commission for Senior Colleges and Universities, and Western 
Governors University.
    H.R. 2637, Supporting Academic Freedom through Regulatory 
Relief Act, ensures colleges and universities are able to focus 
their energy and resources on educating students. Congress and 
the administration should focus on increasing educational 
opportunities for students and streamlining federal regulations 
that inhibit innovation in higher education.

                      Section-by-Section Analysis

Section 1. Short title

    States the short title as the ``Supporting Academic Freedom 
through Regulatory Relief Act.''

Section 2. Regulatory relief

    Repeals the state authorization regulation.
    Repeals the definition of the term ``credit hour'' in 
regulation.
    Repeals the gainful employment regulation.
    Prohibits the Secretary of Education from issuing 
regulations on state authorization or gainful employment for 
the purposes of carrying out the Higher Education Act of 1965 
until such time when Congress reauthorizes the Act.
    Prohibits the Secretary of Education from defining the term 
``credit hour'' for the purposes of carrying out the Higher 
Education Act of 1965.

Section 3. Third party service providers

    Amends the statute to clarify the incentive compensation 
regulation to ensure third-party service providers affiliated 
with institutions of higher education are allowed to enter into 
tuition-sharing agreements with nonprofit colleges and 
universities to aid in the development of distance education 
platforms.

                       Explanation of Amendments

    The amendments, including the amendment in the nature of a 
substitute, are explained in the body of this report.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. H.R. 2637 repeals the credit hour, state authorization, 
and gainful employment regulations, amends the statute to 
clarify the incentive compensation regulation, and prohibits 
the U.S. Department of Education from issuing related 
regulations until after Congress reauthorizes the Higher 
Education Act.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This issue is addressed in the CBO letter.

                           Earmark Statement

    H.R. 2637 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of House Rule XXI.

                            Roll Call Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee Report to include for 
each record vote on a motion to report the measure or matter 
and on any amendments offered to the measure or matter the 
total number of votes for and against and the names of the 
Members voting for and against.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

         Statement of General Performance Goals and Objectives

    In accordance with clause (3)(c) of House Rule XIII, the 
goals of H.R. 2637 are to reduce the federal government's 
overreach into postsecondary academic affairs and help increase 
access to higher education for our nation's most disadvantaged 
students. The Committee expects the Department of Education to 
comply with these provisions and implement the changes to the 
law and regulations in accordance with these stated goals.

                    Duplication of Federal Programs

    No provision of H.R. 2637 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The committee estimates that enacting H.R. 2637 does not 
specifically direct the completion of any specific rule makings 
within the meaning of 5 U.S.C. 551.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the body of this report.

               New Budget Authority and CBO Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following estimate for H.R. 2637 from the Director of the 
Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 30, 2013.
Hon. John Kline,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2637, the 
Supporting Academic Freedom through Regulatory Relief Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Justin 
Humphrey.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 2637--Supporting Academic Freedom through Regulatory Relief Act

    H.R. 2637 would repeal three regulations previously 
published by the Department of Education and prohibit future 
rulemaking in those areas. It also would amend the Higher 
Education Act of 1965 (HEA) to permit institutions of higher 
education to make certain payments to third parties for student 
recruiting services. CBO estimates that enacting H.R. 2637 
would not have any significant impact on the federal budget.
    The bill would repeal regulations that require institutions 
of higher education to be authorized by the state or states in 
which they offer a curriculum. It also would repeal regulations 
that require certain institutions of higher education to meet 
benchmarks related to the repayment of student loans and debt-
to-income ratios of former students in order to be eligible to 
participate in the federal student aid programs (this rule is 
commonly referred to as ``gainful employment''). The bill would 
prohibit the department from defining or enforcing rulemaking 
related to these terms until the Congress extends the 
authorizations in the HEA for at least two years.
    A federal court invalidated portions of both of the rules 
described above, and the Department of Education has announced 
that it is restarting the negotiated rulemaking process to 
develop new rules. Thus, CBO assumes that neither rule is 
currently in effect and that repealing the rulemaking would 
have no impact. Finally, the bill would repeal a rule that 
defines the term ``credit hour'' and would prohibit the 
department from defining or enforcing rulemaking related to 
this term any time after the date of enactment of H.R. 2637.
    Enacting the bill could affect discretionary spending for 
Pell grants and direct spending for student loans and Pell 
grants; therefore, pay-as-you-go procedures apply. However, CBO 
estimates that the effects on both direct spending and 
discretionary spending would be insignificant for each year and 
over the 2013-2023 period. Enacting the bill would have no 
impact on revenues.
    H.R. 2637 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Justin Humphrey. 
This estimate was approved by Peter H. Fontaine, Assistant 
Director for Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 2637. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the Committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

HIGHER EDUCATION ACT OF 1965

           *       *       *       *       *       *       *

TITLE IV--STUDENT ASSISTANCE

           *       *       *       *       *       *       *

Part G--General Provisions Relating to Student Assistance Programs

           *       *       *       *       *       *       *

SEC. 487. PROGRAM PARTICIPATION AGREEMENTS.

  (a) Required for Programs of Assistance; Contents.--In order 
to be an eligible institution for the purposes of any program 
authorized under this title, an institution must be an 
institution of higher education or an eligible institution (as 
that term is defined for the purpose of that program) and 
shall, except with respect to a program under subpart 4 of part 
A, enter into a program participation agreement with the 
Secretary. The agreement shall condition the initial and 
continuing eligibility of an institution to participate in a 
program upon compliance with the following requirements:
          (1) * * *

           *       *       *       *       *       *       *

          (20) The institution will not provide any commission, 
        bonus, or other incentive payment based directly or 
        indirectly on success in securing enrollments or 
        financial aid to any persons or entities engaged in any 
        student recruiting or admission activities or in making 
        decisions regarding the award of student financial 
        assistance, except that this paragraph shall not apply 
        to the recruitment of foreign students residing in 
        foreign countries who are not eligible to receive 
        Federal student assistance. Notwithstanding the 
        preceding sentence, an institution described in section 
        101 may provide payment, based on the amount of tuition 
        generated by the institution from student enrollment, 
        to a third-party entity that provides a set of services 
        to the institution that includes student recruitment 
        services, regardless of whether the third-party entity 
        is affiliated with an institution that provides 
        educational services other than the institution 
        providing such payment, if--
                  (A) the third-party entity is not affiliated 
                with the institution providing such payment;
                  (B) the third-party entity does not make 
                compensation payments to its employees that are 
                prohibited under this paragraph;
                  (C) the set of services provided to the 
                institution by the third-party entity include 
                services in addition to student recruitment 
                services, and the institution does not pay the 
                third-party entity solely or separately for 
                student recruitment services provided by the 
                third-party entity; and
                  (D) any student recruitment information 
                available to the third-party entity, including 
                personally identifiable information, will not 
                be used by, shared with, or sold to any other 
                person or entity, including any institution 
                that is affiliated with the third-party entity.

           *       *       *       *       *       *       *

                             MINORITY VIEWS

                                Overview

    H.R. 2637 props open the door to waste, fraud and abuse 
within the Title IV system. The bill repeals three regulations 
that are intended to better ensure that students and taxpayers 
receive a quality education for their investment. It then 
restricts the Secretary of Education from issuing any new 
versions of these rules. It also codifies several loopholes in 
the nation's long-time ban on incentive compensation. Lastly, 
the bill fails to offer constructive solutions or alternatives 
to these measures to ensure the integrity of federal 
investments in higher education. Laws and regulations for the 
effective and efficient use of taxpayer dollars should be 
strengthened, not weakened or repealed, particularly in this 
tough budget environment.
    Now more than ever, the federal government has an 
obligation to students and taxpayers to ensure that there is a 
minimum standard of institutional eligibility for federal 
student aid. The cost of college continues to skyrocket; on 
average, in-state tuition and fees at a 4-year college 
increased by almost 4 percent a year in inflation adjusted 
dollars over the last decade.\1\ Additionally, more students 
are attending college and using federal student aid. In 2013, 
the Department of Education will provide over $170 billion in 
grants, loans, and work-study assistance to students at 
institutions of higher education.\2\ It is imperative that 
federal laws and regulations ensure adequate accountability at 
our institutions of higher education.
---------------------------------------------------------------------------
    \1\Trends in College Pricing 2012, The College Board.
    \2\Department of Education Budget Justifications.
---------------------------------------------------------------------------

The ``Triad'' Regulatory Structure in Higher Education and the Federal 
                                  Role

    Title IV of the Higher Education Act (HEA) authorizes the 
federal student aid programs and establishes a regulatory 
structure that includes three actors--the federal government, 
states, and accrediting agencies--known as the ``triad''. 
Because of concern about federal interference in school 
operations, curriculum, and instruction, the Department of 
Education (the Department) has relied on accrediting agencies 
and States to determine and enforce standards of program 
quality. The HEA recognizes the roles of the federal 
government, states, and accrediting agencies as providing a 
framework for a shared responsibility and for ensuring that the 
``gate'' to student financial aid programs opens only to those 
institutions that provide students with quality education or 
training worth the time, energy, and money they invest.
    Although the Department relies on accrediting agencies to 
assess and certify program quality at institutions, the 
Department does perform an important oversight role. In 
particular, the federal government has a direct role in 
ensuring that the student aid programs are properly used by 
institutions and students. As the funder and operator of more 
than $170 billion in student aid,\3\ the federal government has 
a responsibility to ensure that institutions have policies and 
procedures that protect federal dollars, and are acting in the 
best interests of students and the taxpayers.
---------------------------------------------------------------------------
    \3\Ibid.
---------------------------------------------------------------------------
    Two of the rules repealed by H.R. 2637, the federal 
definition of a credit hour and state authorization, are 
written in a way that respects the current triad structure, 
providing for greater accountability through consistent 
definitions while relying on institutions, accreditors, and 
states as strong partners in ensuring such accountability for 
federal dollars.

                  Federal Definition of a Credit Hour

    H.R. 2637 repeals the regulatory definition of a credit 
hour and prohibits the Secretary of Education from promulgating 
any future rules that define a credit hour.
    The HEA defines an academic year for an undergraduate 
program as requiring a minimum of 24 semester or trimester 
credit hours or 36 quarter credit hours in a course of 
study.\4\ The amount of student financial assistance that can 
be awarded is based on the number of credit hours earned, but 
the term ``credit hour'' is not defined in the HEA. Therefore, 
the credit hour is not only the basic unit of an academic 
program at an institution of higher education; it is also the 
basic unit underlying the distribution of federal student aid. 
Yet, prior to the October 2010 regulation, this term had never 
been defined for federal aid purposes.
---------------------------------------------------------------------------
    \4\Section 481(a)(2)(A) of the Higher Education Act of 1965, as 
amended.
---------------------------------------------------------------------------

      Inspector General Report on `Egregious' Credit Hour Policies

    A 2009 Alert Memorandum by the Department of Education 
Inspector General reported a lack of clear standards and 
policies in accounting for credit hours, as well as a 
questionable decision by one accrediting agency to accredit an 
institution which peer reviewers observed had ``egregious'' 
credit hour policies. The policy increased revenue to the 
institution, but raised the cost of higher education for their 
students, and for the taxpayer.
    Following the memorandum, the Department's Inspector 
General conducted reviews at three of the seven regional 
accrediting agencies and found the oversight of institutional 
assignment of credit hours insufficient at all three agencies. 
These three agencies accounted for more than 70 percent of the 
Federal student aid funds awarded in 2009-10. The potential for 
a small number of unscrupulous institutions to exploit this 
lack of minimum standards led the Department to regulate in 
this manner to safeguard taxpayer funds.
    The Inspector General testified in front of the Committee 
on two occasions, on June 17, 2010 and March 11, 2011, to 
discuss her findings in this matter. In both instances, she 
expressed the need for a federal definition of a credit hour in 
order to ensure that federal student aid dollars were protected 
from potential waste, fraud, and abuse.

               The Credit Hour Regulation and Innovation

    The definition of a credit hour for federal purposes is 
necessary, in part, because more than $150 billion of federal 
financial aid is awarded annually based on an individual 
student's enrollment, as represented in number of credits. The 
rule works to appropriately balance the need for accountability 
while providing the freedom for colleges to innovate and 
accommodate new technologies.
    The new regulations address vulnerabilities in the student 
aid programs that leave them open to fraud and abuse. The 
regulations are grounded in commonly accepted practice in 
higher education and do not intrude on core academic decisions 
made by institutions and their accrediting agencies. 
Additionally, the Department of Education took additional steps 
to broadly define a credit hour to provide more opportunities 
for colleges to experiment with new innovations and 
technologies. Experts have argued that some accreditors have 
been too conservative when allowing colleges to try new 
education models. The broadly defined credit hour definition 
opens the playing field for colleges to innovate.
    By repealing this moderate and flexible definition, H.R. 
2637 significantly undermines accountability, transparency and 
consistency in the awarding of federal student aid at a time 
when more students are attending postsecondary education, using 
more federal student aid, and institutions of higher education 
are growing and adapting to meet student demands.
    H.R. 2637 takes a step beyond repealing the particulars of 
federal definition set in the regulation. The bill would 
prohibit the Secretary of Education from ever providing a 
federal definition of a credit hour. This prohibition would 
hinder the Secretary from addressing current or future issues 
of waste, fraud, and abuse without an act of Congress. Such a 
restriction would greatly limit the Secretary's authority and 
ability to adequately and responsibly operate the federal 
student aid programs in the best interests of students and the 
taxpayers.
    The federal government must know families are getting what 
they paid for when borrowing thousands of dollars to pay for 
college. Democrats do not take this question lightly and this 
Congress must fully discuss the issue in the reauthorization of 
the Higher Education Act.

                          State Authorization

    In order for students at an institution of higher education 
to be eligible for Title IV funds, an institution must be 
legally authorized by a State to provide a program of 
postsecondary education.\5\ This requirement has always been a 
part of the HEA, though there have been few specifics in 
regulations. In its issuance of regulations on October 29, 
2010, the Department specified how it will determine whether an 
institution is authorized by the State.
---------------------------------------------------------------------------
    \5\Sections 101(a)(2), 102(b)(1)(A)(ii)(B), and 103(c)(1)(B) of the 
Higher Education Act of 1965, as amended.
---------------------------------------------------------------------------
    H.R. 2637 repeals the state authorization rule issued in 
October 2010. This repeal would completely eliminate the 
definition of state authorization, including consumer 
protection provisions stipulating that institutions are only 
considered to be authorized by a state if such state has a 
process to review complaints against the institution.
    H.R. 2637 would also prohibit the Department from 
promulgating or enforcing any rules related to state 
authorization until the successful reauthorization of the 
Higher Education Act. Such a prohibition would bind the hands 
of the Secretary from ensuring program integrity within the 
federal student aid program.

                           Gainful Employment

    The Higher Education Act specifies that in order to obtain 
access to Title IV funds, public, private and proprietary 
colleges that offer career programs are required to ensure 
those programs adequately prepare students for ``gainful 
employment in a recognized occupation''. However, a common 
definition of ``gainful employment'' had not been established. 
In regulations published in 2011, the Department established a 
three part test for measuring a program's effectiveness in 
preparing students for ``gainful employment'' in an effort to 
judge eligibility for Title IV funding. In addition, the new 
rules were designed to provide important consumer disclosures 
to help students make smart economic decisions given high 
college costs.
    By repealing gainful employment regulations, H.R. 2637 
would eliminate critical consumer disclosures currently in 
effect that help students make more informed decisions about 
where to attend school. The bill would also prohibit the 
Department from promulgating or enforcing any rules related to 
gainful employment until the successful reauthorization of the 
Higher Education Act. Such a prohibition would bind the hands 
of the Secretary from ensuring program integrity within the 
federal student aid program.

                         Incentive Compensation

    Incentive compensation allows colleges to reward college 
employees or individuals, through compensation or other means, 
for enrolling new students in their academic programs. Critics 
say it puts the financial interests of college employees or its 
partners before the needs of students. As a matter of 
transparency, when students discuss their enrollment with 
colleges they believe academic advisers are their advocates, 
not paid salesmen.
    Congress adopted the ban on incentive compensation in 1992 
with bipartisan cooperation, and has not acted to amend the 
statute since. The Bush Administration implemented a series of 
12 regulatory loopholes, often referred to as ``safe harbor 
provisions'' to the incentive compensation statute in 2002, 
clearly outside of congressional intent. Studies conducted by 
the Government Accountability Office (GAO), the media and the 
Senate Health, Education, Labor and Pensions (HELP) Committee 
have shown that far too often, unscrupulous colleges could use 
these loopholes to enroll students, encourage them to max out 
their financial aid and then fail to deliver on the value 
proposition of a good education. In 2011, the Department of 
Education brought the regulations back in line with the 
original legislative intent by eliminating the loopholes 
established in 2002.
    H.R. 2637 would codify several of the 2002 loopholes 
directly into the Higher Education Act, providing companies the 
opportunity to return to deploying commissioned recruitment 
schemes.

                          Democratic Amendment

    Committee Democrats strongly believe that the Secretary 
must be able to respond to waste, fraud and abuse. Taxpayers 
expect proper oversight of the nearly $170 billion investment 
into student aid they make yearly.
    The Democratic amendment, offered by Representatives Bishop 
(D-NY) and Hinojosa (D-TX), would strike the prohibition on the 
Department of Education from establishing protections for 
students and safeguards for taxpayer dollars. Committee 
Republicans rejected the common sense amendment by a vote of 
13-22.

                               Conclusion

    Now more than ever the federal government has an obligation 
to students and taxpayers to ensure that there is a minimum 
standard of institutional eligibility for federal student aid. 
H.R. 2637 fails to meet that goal by repealing three 
regulations that are intended to better ensure students and 
taxpayers receive a quality education for their investment, 
restricting the Secretary's ability to devise alternative 
measures, and codifying several loopholes in the nation's long-
time ban on incentive compensation. Furthermore, the bill fails 
to offer any constructive alternative solutions even while it 
ties the Secretary's ability to act, thereby leaving students' 
and taxpayers' dollars vulnerable to waste, fraud, and abuse of 
federal programs.
    At a time when the higher education market is in so much 
flux, and the demand for student financial aid is growing, 
program integrity should be a top priority. Instead, H.R. 2637 
moves backwards in accountability measures, lacks any 
alternative approaches, and fails to protect the nation's 
students.
    H.R. 2637 is opposed by the following organizations, which 
work on behalf of students, consumers, veterans, faculty and 
staff, civil rights and college access and affordability: Air 
Force Sergeants Association (AFSA); American Association of 
University Professors (AAUW); American Association of 
University Women (AAUP); American Federation of Teachers; 
Americans for Financial Reform; Association of the United 
States Navy (AUSN); Center for Law and Social Policy; Center 
for Responsible Lending; Consumer Action; Consumers Union; 
Crittenton Women's Union; The Education Trust; Initiative to 
Protect Student Veterans; The Institute for College Access & 
Success; The Leadership Conference on Civil and Human Rights; 
Iraq and Afghanistan Veterans of America (IAVA); League of 
United Latin American Citizens; Mississippi Center for Justice; 
National Association for Black Veterans, Inc. (NABVETS); 
National Association for College Admissions Counseling; 
National Consumer Law Center (on behalf of its low-income 
clients); National Consumers League; National Education 
Association; The National Guard Association of the Association 
of the United States (NGAUS); NCLR (National Council of La 
Raza); New Economy Project (formerly NEDAP); NYPIRG; Paralyzed 
Veterans of America; Public Citizen; Rebuild the Dream; Service 
Employees International Union; United States Student 
Association; U.S. PIRG; Veterans Education Success; VetJobs; 
VetsFirst, a program of United Spinal Association; Veterans of 
America; and Young Invincibles.
                                   George Miller.
                                   Ruben Hinojosa.
                                   Jared Polis.
                                   Timothy H. Bishop.
                                   Suzanne Bonamici.
                                   Frederica S. Wilson.
                                   John F. Tierney.
                                   Joe Courtney.
                                   Raul M. Grijalva.
                                   John A. Yarmuth.
                                   Gregorio Kilili Sablan.
                                   Susan A. Davis.

                                  
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