In order for students attending a college to receive Title IV funds, a college must, among other requirements, be (1) licensed or otherwise legally authorized to provide higher education by a state, (2) accredited by an agency recognized for that purpose by the Secretary of the U.S. Department of Education (Education), and (3) deemed eligible and certified to participate in federal student aid programs by Education. This is commonly referred to as the triad. Under the Higher Education Act, Education does not determine the quality of higher-education institutions or their programs; rather, it relies on recognized accrediting agencies to do so. As part of its role in the administration of federal student aid programs, Education determines which institutions of higher education are eligible to participate in Title IV programs. Education is responsible for overseeing college compliance with Title IV laws and regulations and ensuring that only eligible students receive federal student aid. As part of its compliance monitoring, Education relies on department employees and independent auditors of schools to conduct program reviews and audits of colleges. Moreover, for-profit colleges participating in federal student aid programs must enter a program participation agreement with Education that, among other things, requires the college to derive not less than 10 percent of revenues from sources other than federal student aid (known as the “90/10 Rule”). According to Education, over 2,000 for-profit colleges participate in Title IV programs. In August 2009, we reported that students who attended for-profit colleges were more likely to default on federal student loans than were students from other colleges. Additionally, our August 2010 testimony on for-profit college recruiting practices found that some colleges failed to provide clear information about program duration and cost and exaggerated applicants’ potential salary after graduation, and made other deceptive statements. The Stafford Loans are the largest source of federal financial aid available to postsecondary students. In academic year 2009-10, 35 percent of undergraduate students participated in the program, which provided an estimated $56.1 billion dollars to eligible students through subsidized and unsubsidized loans. To qualify for a subsidized loan, students must have a financial need as determined under federal law. A student’s financial aid need is determined by a formula that subtracts a student’s expected family contribution (EFC) and certain other estimated financial assistance from their total cost of attendance. In contrast to subsidized loans, students can receive unsubsidized loans to pay for educational expenses regardless of their financial need. Depending on their educational expenses and level of financial need, a student may be eligible to receive both subsidized and unsubsidized loans, which is generally referred to as a combined loan. Student eligibility for grants and subsidized student loans is based on student financial need. In addition, in order for a student to be eligible for Title IV funds, the college must ensure that the student meets the following requirements, among others: (1) has a high-school diploma or a recognized equivalent (such as a General Educational Development certification), or completes a secondary-school education in a home-school setting as recognized under state law, or is determined to have an “ability-to-benefit” from the education by a method approved by Education or a state, or the college; (2) is working toward a degree or certificate in an eligible program; and (3) is maintaining satisfactory academic progress once in college. Completion of the Free Application for Federal Student Aid (FAFSA) is the first step in securing federal financial assistance. After Education processes an applicant’s FAFSA, a report is sent to the applicant or made available online. This report includes the applicant’s EFC, the types of federal aid for which the applicant qualifies, and information about any errors—such as questions the applicant did not complete—that Education identified during FAFSA processing. Colleges send applicants award letters after admission, providing students with types and amounts of federal, state, and institutional aid, should the student decide to enroll. As required by law, a college must make available upon request to prospective and enrolled students a statement of any refund policy with which the college must comply; the requirements for the treatment of Title IV funds when a student withdraws; and the requirements and procedures for officially withdrawing from the college. In addition, Education guidance states that a student should be able to estimate how much federal student aid he or she will retain and how much he or she will return upon withdrawing. Finally, a student or prospective student should be informed that if he or she withdraws, charges that were previously paid by federal student aid funds might become a debt that the student will be responsible for paying. Once students have completed or withdrawn from colleges, the Higher Education Act requires that schools provide exit counseling (which may be provided electronically), typically within 30 days, for all students with federally guaranteed loans. According to Education, this counseling is a critical requirement in explaining to borrowers both their rights and responsibilities. In requiring students to be advised of both the wide array of repayment options available and the negative consequences of default, such as adverse credit reports, delinquent debt collection, and litigation, the law seeks to facilitate repayment and prevent defaults. In addition, during the exit interview, colleges must require that the student submit to the institution the following information: the borrower's expected permanent address; the name and address of the borrower's expected employer; the address of the borrower's next of kin; and any corrections needed in the institution's records relating to the borrower's name, address, social security number, references, and driver's license number. The experience of each of our undercover students is unique and cannot be generalized to other students taking courses offered by the for-profit colleges we tested or to other for-profit or nonprofit colleges. During the course of our testing at the selected colleges, we documented our observations related to the following phases of the student experience: enrollment, cost, financial aid, course structure, substandard student performance, withdrawal, and exit counseling. In addition, on the basis of our observations for the courses we tested, 8 of the 15 colleges appeared to follow existing policies related to academic dishonesty, exit counseling, and course grading standards. At the 7 remaining colleges, we found mixed results. For example, at least one issue was identified in which college staff or an instructor appeared to act in a manner inconsistent with college policies, federal regulations, or course grading standards; whereas others acted in a manner consistent with such policies. Of the 7 colleges, as discussed below, instructors at 2 colleges appeared to act in a manner inconsistent with college policies regarding academic dishonesty, instructors at 4 colleges appeared to act in a manner inconsistent with course grading standards, and 3 colleges appeared to act in a manner inconsistent with federal regulations on exit counseling. More specific details on Colleges 1 through 15 can be found in table 2. Enrollment: We attempted to enroll undercover students at 15 colleges, and were successful in enrolling at 12. Two colleges (Colleges 13 and 14) declined our student’s request for enrollment based on insufficient proof of high-school graduation. In both cases, we attempted to enroll using a fictitious home-school diploma, but were told that the college would not accept our home-school credentials. We also attempted to apply using a fictitious diploma from a closed high school, but were rejected becausethe school was considered to lack accreditation. College 15 stated that it did not accept any home-school credentials but accepted our fictitious closed-school diploma and allowed us to begin class, but rescinded our acceptance after 1 week of classes, stating a lack of high-school accreditation as the reason for expulsion. We were not billed for the 1 week of class that we finished, nor did the school appear to receive any student loans on our behalf. In all 3 instances where our fictitious students were ultimately rejected, we were encouraged to pursue a GED in order to be allowed to enroll at the college. At College 10, our student requested part-time enrollment, meaning that the student would take two courses per term. However, we found three courses that were fully accessible to our student through the school’s online student portal website over our single enrollment term. The third class was clearly noted in our activity and grade report as being scheduled for completion during that term. Once our student had completed the class, we were informed by college staff that by accessing the class, the student had effectively converted to being a full-time student. We were further told that our student would be charged for full- time attendance, although the school had only processed financial aid paperwork for the student as a part-time student. All 12 accepted students did not select any elective coursework during their enrollment period. Students were automatically enrolled in courses selected by the school by their schools’ administrative staff and were informed of course start and end dates as they were enrolled. However, College 4 scheduled self-paced courses for our student on a revolving enrollment basis, wherein the student was enrolled in as many as four courses concurrently with the requirement that all coursework be completed and submitted prior to the specific course end date. College personnel stated that they could not provide us with an advance schedule including course start and end dates; they could only provide us with the start and end dates for those courses in which we were currently enrolled or a list of the courses that are required to complete a portion of our selected degree program (without start and end dates). For one class in which we enrolled at this college, the student’s advisor provided us with an incorrect course end date, which resulted in our student missing a key deadline to submit assignments. Cost and Financial Aid: All of our students were eligible for federal student aid in the form of subsidized and unsubsidized student loans and submitted the appropriate documentation to the school in support of this (i.e., FAFSA).