The Gainful Employment Regulation: Limiting Job Growth And Student Choice (Part 2 of 2)

The Gainful Employment Regulation: Limiting Job Growth And Student Choice (Part 2 of 2)

[Unofficial Transcript] [Ms. Foxx] We want to thank everyone for their
patience in the delay that we had because of votes. We appreciate your coming back today.
And I like to reward people being on time and doing what they are supposed to do, so
I think we will go ahead and ask Mr. Alford if he now would present his five minute testimony.
Thank you, Mr. Alford. [Mr. Alford] Thank you, Madam Chair. Committee
Chairs and distinguished members of this joint Subcommittee, thank you for allowing me to
testify today. I am President and CEO of the National Black Chamber of Commerce, which
represents the fastest growing segment of American small business, black-owned businesses. At the inception of the NBCC in 1993, there
were 300,000 black-owned businesses doing $33 billion in annual sales. Today there are
more than 1.9 million black-owned businesses doing over $138 billion in annual sales.

This
fantastic growth leads to a growing demand for a larger educated workforce. But a study by Stanford University shows unemployment
among all teenagers at 24.2 percent; among black teenagers, regardless of gender, the
rate is 41.6 percent; but among black teenage males the rate is a very dangerous 45.5 percent.
Nearly half of that population is unemployed. The percentage of these young people who will
be enrolling at the University of Southern California, Ohio State, etcetera, will be
very small, indeed. The best alternative is proprietary schools. The above is made all the more crucial when
you look at the educational access. The Bureau of Labor Statistics data shows that Americans
will less than a high school diploma have an unemployment rate of 14.7 percent; those
with a high school diploma, 9.9 percent; those with Associate degree or certificate, 8 percent;
and those with a Bachelor degree, 4.5 percent.

We can reach but one conclusion. It should
be the primary goal of the Federal Government to provide as many young minority Americans
as broad a range of educational opportunities as possible. Why is the Department of Education targeting
for-profit schools with a vengeance that will harm a certain segment of our population?
The gainful employment rule is a job killer. Incredibly, proprietary schools serve 52 percent
of these high-risk students, while nonprofit schools serve only 9 percent and public schools
serve a paltry 6 percent. Furthermore, 49 percent of the students enrolled at for-profit
are low-income, as opposed to just 18 percent; at public schools, also 50 percent of the
students attending for-profit colleges are minority students, compared to just 34 percent
at public schools.

So the problem at hand is that minority students
are already at a great disadvantage. And now the Department of Education has made it worse
by shutting down a major path to education and jobs. The Department of Education has
drifted over into a lane reserved for the Congress of the United States, making laws.
That the Department has created this rule is harmful enough. The process was definitely
flawed, if not corrupted. We want to draw your attention to questions that beg your
intervention. We know that secret meetings took place between
Department officials and Wall Street short-sellers that were placing heavy bets against the share
prices of for-profit schools. What was going on? We know that the Department assembled a covert
group of allies, including former employers of Department staff, short-sellers and competitors
of the for-profit industry, and that they traded secret information against the code
of the rulemaking process. The question is what was going on? We also know that Department officials elicited
negative information about for-profit colleges from the secret cabal, and the information
was provided even when it was deceptively collected. What was going on? We know that the Department relied heavily
on a now discredited GAO reported, but never withdrew this report from their process of
consideration.

What was going on? We know that the Department assembled a biased
rulemaking committed composed of a 16 to 1 ratio, meaning that there was no opportunity
for the industry and the minority students they represent to have a fair voice in the
proceedings. What was going on? We know that the Department was intent on
punishing proprietary colleges from the very beginning, even while America's higher education
challenges confront every type of institution. So what is the joint Subcommittee going to
do to address student debt, academic performance, and occupational preparation at every college
in our Nation? In conclusion, the gainful employment rule
is now the law of the land and will have grave consequences on hundreds of thousands of minority
students. We want to remind everyone that to qualify to public assistance programs,
proprietary schools must meet exactly the same academic standards set by the same accreditation
agencies as Harvard or Penn State.

The fact is that the opponents of proprietary schools
are really trying to mask the same concerns that all colleges share, such as student debt,
academic performance, and occupational preparation. The black employers that I represent hope
you will work together to find solutions to these vexing challenges, rather than make
a scapegoat out of for-profit schools. The biased and corrupt process which produced
this rule should be reversed through the Congressional Review Act or some other means. Thank you, and I look forward to your questions
and discussions. I yield eight seconds. [Ms. Foxx] You get the star, the gold star
for not going over your time today, Mr. Alford. Thank you very much for your comments and,
again, we appreciate your patience in waiting for us, and we are very happy that Mr. Kucinich
has joined us. I just want to make a couple comments, brief
comments, and then I am going to ask a couple of questions.

Then we will take turns, as
members of the Committee, asking questions of the panel members. I first want to read a statement that was
in the letter from Congressman Towns, who asked us to have this hearing because I think
it fits well into a comment that I would like to make based on Mr. Carnevale's comments.
In Mr. Towns' letter, he says, "Mr. Chairman, I know there is good faith disagreement as
to whether the GE regulations, as written, are right or wrong, needed or not needed.
But there is one principle on which we all should be in agreement, and that is a rulemaking
that allows non-elected government officials to establish policy and have the force of
law must be fair, unbiased, and transparent.'' And then he asks that we have this hearing
as soon as possible.

Mr. Carnevale, I was very interested. I am
a person who has had some experience in higher education and I was very interested in your
comments about the need to focus on programs and not degrees. I have long agreed with that.
I very much agree, I think even more so, that we should focus on skills, and not necessarily
on degrees. I don't agree with you that regulations make markets work better, necessarily, but
I do think that having information is very important, which is a big point that you made. And it seems to me that if that is true for
one sector of higher education, it is true for all sectors of higher education; that
we need students to have accurate information about the return on their spending or their
investment.

I don't think government makes investments, but people make investments;
they make investments in money and in time. Therefore, I think you made a great case for
the fact that if we are going to have regulations like these, they should certainly apply to
everyone. So I appreciate very much the comments that you made. I would like to ask Dr. Cortes a question.
As you know, the Department of Education recently made a number of changes to the final gainful
employment regulation.

Do these modifications allay your fears that the regulations are
going to negatively impact students attending proprietary colleges? Mr. Cortes. Chairwoman Foxx, I do believe
that even with the redefined rules, the rule itself is complex, difficult to manage from
both ends, from our institutional ability to carry the task of identifying and to getting
the data correctly. I think it is also very difficult from the Federal side to really
be able to coordinate the ability to gather all the data and then having a matrix that
allows them to determine and make decisions for institutions without having all the dots
connected. So I do believe that the rule, although it
is more flexible than it was in the original, it still doesn't have the transparency, it
doesn't have the connection that is needed for us in the trenches, as educators, to be
able to spend, as I said earlier, significant amount of time gathering data and our concern
about teaching and learning and providing the education that we need to our students.

We had taken significant amount of time at
Berkeley College alone to try to gather the details that we need by July 1st to be able
to comply with some of the laws that just came down, so I think institutions in our
sector in particular have been affected by this significant and targeted way in that
not all the institutions are treated equally, that this GE rule is only applied to the for-profit
institutions. I think it is unfair and not equitable. [Ms. Foxx] Do you want to say anything more
about the Social Security Administration data that the Department plans to use? I mean,
you touched on it in your comments.

And we only have about 30 seconds, so let me let
you keep that in mind. [Mr. Cortes] Absolutely. I think not only
the privacy of the data and the confidentiality of Social Security information, but again,
as I said earlier, I don't see how that database, along with the information that is being required,
is going to be able to be managed in a way that will maximize the ability to make choices
by the Federal Government to our institution's welfare and well-being. [Ms. Foxx] Thank you very much. Mr. Kucinich, I would like to recognize you
for five minutes. [Mr. Kucinich] I thank my friend, the gentlelady,
the Chair. I want to speak about the high default rates
at for-profit institutions. Staff, could you put up display chart number two, if it is
available? Thank you. According to the February 2011 data released
by the Department of Education, defaulters from for-profit colleges disproportionately
account for 48 percent of student loan defaults across all higher education sectors. It is
also true that 64 percent of the students at for-profit colleges are low-income minority
students.

Since these students are over-represented at for-profit schools, they make up the majority
of the default rates caused by for-profit institutions. Now, Dr. Carnevale, some for-profit colleges
have argued that their high default rate is due to the fact that they disproportionately
serve low-income minority students who are more likely to have financial stresses, and
there is an assertion that that is the reason why you end up with so many defaults. But
I am just wondering if a more accurate description of defaults is that low-income minority students
at these for-profit colleges are more likely to default because for-profit colleges have
tuition costs that are, in some instances, eight times greater than nonprofit public
colleges and thereby put those minority students who attend them in greater jeopardy just because
of the sheer amount of expense and debt that they have to incur.

I would like your response to that. [Mr. Carnevale] The social science on this
is interesting and somewhat surprising, frankly, to me. We ran these numbers and expected to
find, as we did, that there is a disproportionate affect on minorities and low-income students.
But when you run statistical tests to figure out what the cause is, what comes through
very clearly, and, again, it surprised me, was that the cost and the low wage rate is
the principal determinant of default. There does seem to be, in some ways, when data — [Mr. Kucinich] You want to explain that? When
you say cost and the low wage rate, what do you mean? [Mr. Carnevale] That is, the reason people
aren't paying the money back is they aren't making enough money to do it, which I know
is, in some sense, logical, but you never expect that in social science.

So it was really
very striking in the numbers. That is, the fact that people don't repay is because they
can't repay, and — [Mr. Kucinich] But let's look at another variable
here, which is a dependent variable, because when you look at the fact of the cost
that nonprofit colleges have for an education, there is multiples of that cost, as opposed
to other colleges. Wouldn't you agree with that? [Mr. Carnevale] Oh, sure. But one of the things
that — [Mr. Kucinich] You may not making enough money,
but the mountain you have to climb of debt is much larger if you are going to a for-profit
college. [Mr. Carnevale] Yes. And the size of the debt
does appear to have a direct relationship on repayment; that is, people are intimidated
by the debt, I guess is the way to say it. [Mr. Kucinich] But let's not miss the connection.
The size of the debt comes from the amount of money that people are charged for their
education.

[Mr Carnevale] Yes. This is part of this whole
discussion that really is sort of a couple horizons away. We are talking about, in the
end, in the short haul, whether the programs are worth it. But then there is a question
that we haven't really addressed yet, is should the programs be least cost. That is, you can
get two programs that are essentially the same thing; one in a community college will
end up costing you eight grand or nine grant, and a for-profit college cost you multiples
of that.

Should the government be concerned about the cost differential? That really doesn't
come up much in this debate. [Mr. Kucinich] Well, it is coming up now. [Mr. Carnevale] Yes, you have brought it up. [Mr. Kucinich] And I think that this Committee
is the proper forum for us to determine whether or not the low-income minority students who
are experiencing these high rate of defaults are in a situation where they are boxed in
by the extraordinary cost at for-profit colleges, because when you are coming from an inner
city background, that is where I came from, I can tell you that going to college is like
a dream and people will do anything to do it, including, Madam Chair, taking on extraordinary
expenses and getting over their heads and sometimes putting themselves in a position
where they are in debt for the next 10, 15 years of their life. But the default rate,
how do we deal with that? I want to thank the Chair for her indulgence
in giving me some extra time here. Thanks. [Ms. Foxx] Thank you, Mr. Kucinich. Mr. Petri. [Mr. Petri] Thank you very much, Madam Chairman,
and thank all the panelists for the effort that you made to be here today and to prepare
your testimony.

I had a couple questions of Ms. Carpenter.
First, I wondered if I could give you an opportunity if you had any reaction to the points made
by your fellow panelists, I would be interested in hearing them. [Ms. Carpenter] Thank you very much, Congressman
Petri. I do have some impressions. As a layperson, a parent, a graduate, clearly, I am thrilled
that there is more public discourse on the topic of educational reform as a whole. I
think it is a vital vehicle by which Americans of all socioeconomic sectors in our society
can use to attain their personal pursuit of the American dream. And given my experience in reentering the
workforce in a dramatically changed economic environment, transitioning from an industrial-aged
society, of a more nationally oriented business economy to one that is far more global, more
technologically advanced, clearly, we are living in times of transition and, once again,
as I stated in my testimony, we are now faced, as a Nation, in addressing the appropriate
responses in the educational forum to meet the demands and needs of our society and our
economy. So thanks to all of you for giving very important consideration to what the best
reform would be.

Beyond that statement, I would really defer
to other people who are more professionally invested in the process to speak specifically
to the issue of what is before us for the gainful employment regulation. I am not as
well informed as others on the panel who have given testimony, but clearly they have important
input for the panel. [Mr. Petri] When we met and you participated
in a little different panel in Madison, Wisconsin, you indicated that probably because of your
training at Herzing, but mainly because of your work with an international company where
you are dealing with hiring and evaluating possible employees or current employees all
over the world in high tech areas, your company was working computer programming and the like,
you said people — it was sort of a cry from the heart, if I remember, that people better
start waking up as to what is really going on and not be too self-indulgent and assume
that we will just continue in the future as it has been in the past.

I wonder if you could
expand that. You and other employers who operate not just
in the United States, but in other countries, have a perspective we ought to be learning
more about because you are dealing with young people who are looking for jobs, doing essentially
the same thing but whether they are from India or China or Africa or Europe. What is your
perspective on how well we are doing or whether that assessment is accurate, that we are a
little self-indulgent here? [Ms.

Carpenter] There are certain skill sets
that are in severe shortage within the tech sector in which I work, so, yes, we do work
with people in multiple countries in providing the research and development work that is
necessary for my company, Quest Software, which is a publicly traded company on the
NASDAQ based in Orange County, California. For them to be able to hire enough qualified
employees, we do employ people from all over the globe. I personally work on a research and development
group that writes enterprise level software. I have coworkers who reside in Russia, China,
New Zealand that I meet with weekly, sometimes daily, depending on where we are at in the
development cycle. Many of these individuals are working for an American corporation speaking
in a second language, English is our predominant language of the business, layered on top of
the very technical skills they have acquired.

It is critical that Americans wake up to realize
that in order to be successful in business, you will most likely be doing business with
people as coworkers from all over the globe. Therefore, our skill set in language skills,
cultural sensitivity skills, as well as the technical background, is really critical for
success. And how do we attain those things but through our educational institutions in
providing the curriculum and programs that are adept to train our workforce and still
lead the Nation in our economic and workforce development. Thank you. [Ms. Foxx] Thank you, Mr. Petri. Mr. Cummings? [Mr. Cummings] Thank you very much. I would like to thank our witnesses for being
here today. Your testimony has been extremely helpful. The thing that I, Ms. Carpenter,
as I listened to you, first of all, we are very proud of you and what you have accomplished.
You are not the person who we are most concerned about because you have done well. It is the
ones that don't make it. There is a description in the Bible, Jeremiah 15:9, that says, "Her
sun set while it was still day,'' meaning that
there are people who have opportunities and they still have life, but something happens
in their life that causes their dreams to die.

Those are the people that we are concerned
about. Their sun set while it is still day. On that note, Mr. Carnevale, when I look,
it says both the Senate Health Committee and the Education Trust have reported that for-profit
colleges often have tuition rates much higher than those of local colleges. These for-profit
tuitions can be as much as five times that of local community or four-year public colleges.
If a student chose to attend Berkeley, Dr. Cortes, a for-profit institution, to obtain
a two-year Associate degree, it would cost her about $41,400 in tuition fees. However,
if that same student chose to go to the City University of New York Community College in
Manhattan, it would cost her $6,496 over the two-year period for the same degree.

I want to go to you, Dr. Cortes, then I want
to come back to you, Dr. Carnevale. Dr. Cortes, what justifies Berkeley's tuition costing
nearly $35,000 more than a public community college? [Mr. Cortes] Thank you, Congressman Cummings,
for the question. Absolutely, I think the value of a Berkeley education consists of
small classes, faculty who are practitioners in the field, students who have the ability
to get a required internship as part of the requirement for graduation, the ability to
be placed in the job, faculty, as I said earlier, that are faculty doctorally trained, the ability
to have small groups of students working together in order to engage in their graduation.

But
more important I think is the ability for institutions like ours in the private sector
is about capacity. It is really to look at what President Obama has indicated that — [Mr. Cummings] And what do you do for retention?
Do you use any of that money that you make for retention? [Mr. Cortes] Absolutely. We invest over $37
million back institutionally to assist students through scholarships and grants to subsidize
the additional money that they don't have, besides what they get from Pell or Tap in
New York or Tag in New Jersey.

So we do invest significantly not only in our own income going
back to the students, because we know they need it. The average salary — [Mr. Cummings] But is that what most of these
schools do? [Mr. Cortes] Well, I can only speak for my
school. [Mr. Cummings] Right. And that is part of
the problem. I understand that and I appreciate that. [Mr Cortes] Sure. [Mr. Cummings] But, Dr. Cortes, you describe
much of your student population as being at-risk, is that right? [Mr. Cortes] Absolutely. The majority of our
students need significant remedial work. We instituted, for instance, this coming year,
a bridge program that will allow students to take courses for a period of about five
weeks. We don't charge any tuition, it is almost like a trial period. We allow the students
to make sure that they don't get into loans, that they are not paying tuition.

[Mr. Cummings] But 51 percent of your students
take on riskier loans, do they not? [Mr. Cortes] I am sorry? [Mr. Cummings] Fifty-one percent of your students
take on riskier loans, is that not correct? [Mr. Cortes] Well, I don't know if they are
riskier; they take loans. But the difference between what they cannot afford between Federal
and State aid and the $37 million that we give, that is what the students need to — [Mr. Cummings] Dr. Cortes, you understand
what I am saying, don't you? [Mr. Cortes] Sure I do. [Mr. Cummings] You understand that we are
concerned about people whose dreams are taken away and then they leave school with two bags,
one with nothing in it and the other with debt marked all over it. And then their dreams
are not deferred, but they are killed. You understand that, right? [Mr. Cortes] I understand that. [Mr. Cummings] And there are a whole lot of
them. So I hear people talk about minority students and how they feel so happy about
all these opportunities, but for every one that graduates there are seven or eight that
have fallen by the wayside, in many instances never to return to college.

Never. That is
criminal. Criminal. [Mr. Cortes] Absolutely. I am a product of
a public school New York City education and I am a product of a community college, so
I can speak from real life experience. I do believe that what we do in our sector, we
take students who are so much at risk, we are able to get students to a point of graduation. I will give you an example. In the great city
of Newark, New Jersey, where the high school dropout rates are over 50 percent, if we can
get four students out of ten to graduate from that great city of Newark, we are doing a
tremendous service to the city of Newark because those four students, without Berkeley in that
vicinity, in that local area, will not be going to college because they cannot go to
a community college, they are not going to the private institutions or the public because
of capacity.

[Mr. Cummings] Thank you, Madam Chair. And
the other six are left in debt. [Mr. Cortes] No, they are not. [Mr. Cummings] Well, what happens with them? [Mr. Cortes] They are not. They either — they
did not continue. They have to go back to work. Many of them have to exist by working. [Mr. Cummings] So the debt is extinguished? [Mr. Cortes] No. Many of the students who
enter will be able to complete. If I give the example of the four that graduated, the
other six are able to come back and return and finish their degree if they are able to
come back. [Mr. Cummings] Thank you, Madam Chair. [Ms. Foxx] Thank you, Mr. Cummings. Mr. Meehan. [Mr. Meehan] Thank you, Madam Chairman, and
thank you for the opportunity to participate in this hearing today on this. I think we
all share the concern of trying to assure that the funds that are forwarded to the students
are repaid, but I am struggling with the issue here in which we are treating the for-profit
institutions in one way and we aren't really analyzing the same effect in the not-for-profit
institutions.

I, for one, have benefitted from a number
of college students who are volunteering to work in my office because they can't find
jobs, and yet they are tens of thousands of dollars in debt. So if we are going to use
a standard, I am struggling with the regulation. We have now come up with rules and we are
going to determine, we are going to hold people accountable to a standard. Mr. Carnevale, I know you have discussed this
a little bit and tried to look at this issue. Is it fair for us to hold the not-for-profit
institutions in a different category than the for-profit if we are making these analyses
on a year-by-year basis, first, and then, second, a lot of kids come out, they struggle
for a year or two, then they get that first job.

Should we be doing this the next year
or should we be waiting three or four years to make this calculation? [Mr. Carnevale] The regulation essentially
gives the institutions four years, so it extends over a fairly lengthy period of time, and
the calculation in terms of loan repayment allows ten years for AA and some college,
15 for a BA, and 20 for selected programs like dental programs and so on. So in that
sense it is not, I think especially the amended regulation here, the way to think about this,
truthfully, is the brunt of this is aimed at program improvement. The penalty part of
this is very marginal, frankly; it is only 2 percent of the total, it is capped at 5.
This is essentially a device for moving programs toward higher labor market value, is in the
end what it is. The other point raised by Mr. Cummings is
that it is true, the institutions get three strikes on this; the students just get one.
That is, if you end up with a huge debt, first of all, whether you are default or not, you
are not likely to return to school, and they don't, we know that.

And that relates directly
to the size of the loan and the wages that the program leveraged that allows them to
pay it back. So it matters which program it was and then the other difficulty for the
students is you only get one bite at the apple, because you can't go back and get more debt
to go to school. [Mr. Meehan] Mr. Alford, would you respond
to this, because I think I have experienced, as I have visited institutions across the
range, from community colleges to my universities, too, some of the schools and the for-profit
schools. Many of the students in the for-profit schools are nontraditional students. In fact, this is one of the real opportunities
they have where somebody is reaching back to them and saying I am going to give you
a chance; I am going to give you a skill that you can then take and find a way to gain employment
in a very difficult market. And what I am concerned about is the potential that this
higher standard may lead to a situation where those kinds of schools will say, fine, we
are going to now stop reaching back to that student who is the least traditional, who
is the toughest reach, because that is the most likely to fail; let's just go find the
safe middle.

[Mr. Alford] Cherry pick. [Mr. Meehan] So would you please tell me what
your perspective is on that? [Mr. Alford] Yes. I think it would be have
a devastating consequence on the people I represent or businesses who try to hire people
from these communities. There are two big problems with my constituents. One is management
trainees. Our most successful businesses scour this Nation looking for good educated black
talent. Secondly is labor, the lower level; drugs. Can't pass a drug test. And that is
a requirement for any insurance policy. So those are the two major problems. And one thing that is unfair too, sir, private
for-profit schools have a higher tuition because they don't have Uncle Sam and the State government
and local governments giving them subsidies, tax-funded money. It is unfair to have a graph
that shows all this high tuition, but they don't charge that much. If you put the tax
subsidies in there, they would probably be more expensive than the for-profit schools.
Playing with numbers.

[Mr. Meehan] Thank you for making that point,
Mr. Alford. Madam Chairman, my time has expired. Thank
you. [Ms. Foxx] Thank you, Mr. Meehan. Mr. Braley? [Mr. Braley] I would like to make it clear
at the outset that the entire focus of every conversation we should be having about higher
education is whether students are achieving progress toward a degree at a reasonable rate
and whether the Federal dollars being invested in any of these institutions meets the expectations
of taxpayers who are providing that assistance, whether that is a for-profit college, a nonprofit
college, a private college, or a public institution. My nephew has attended a for-profit college,
got a degree and is working in a job that he loves.

And the question is not whether
there have been substantial successes colleges, because, Ms. Carpenter, your very presence
here shows that there have been. The question in this environment that all of us work in
is whether or not for-profit colleges are providing the type of results for the investment
we are making in them. So let's talk for a moment about that. My good friend, Senator Tom Harken, has been
doing a lot of analysis of this issue on his Senate Help Committee, and as a part of the
exhaustive study that his committee has done, there are some troubling findings. One of
them is that 63.4 percent of Associate degree students at publicly traded for-public schools
and 58 percent of Bachelor degree students at these schools drop out within a year, and
that almost every single one of those students, more than half a million in one year, are
left with substantial debt, and that a four-month stay at a for-profit college can leave a student
with $4,000 to $11,000 in debt.

Now, these are the facts. Even though for-profit
students make up only 10 percent of all higher education students, the schools receive 25
percent of Federal student aid. Even more alarming is the fact I mentioned earlier,
that 48 percent of all student loan defaults come from students who attend for-profit colleges,
and in many States that rate is greater than 50 percent. Mr. Carnevale, are you familiar with the data
that I just cited? Do you believe that the sector that we are here talking about today,
which has done good things by your own testimony, is doing a good job at being stewards of Federal
tax dollars given those results? [Mr.

Carnevale] I think the evidence that
is, when you get passed the anecdotal evidence, and there is anecdotal evidence on both sides,
that is, there are wonderful stories, we heard Ms. Carpenter today, and there are awful stories,
the data, which is more comprehensive, says quite clearly that there is an issue here
with public funds. That is, government doesn't want to buy planes that don't fly and in this
case, since the promise is an education program that will get you a job at a sufficient wage
to pay back the cost, in this case there is a very substantial share of programs that
simply don't do that, and those are highly concentrated in for-profit institutions at
the certificate and AA level, frankly.

[Mr. Braley] Well, and one of the other disturbing
things that came out of those findings in the Harken committee's investigation was that
there were schools who were getting a large number of online students, which is great
in terms of dealing with changing demands of students pursuing higher education, but
they had 1700 recruiters working for those schools and one placement officer. Do you
find that troubling? [Mr. Carnevale] I know from relationships
with particular for-profit institutions that naturally where they see growth in demand,
i.e., when the military benefits went up in the past few years, there was a huge increase
in recruiters for military personnel to move to for-profit colleges.

In the end, my bias
about that is if, in the end, they get a good education, a good job, I don't care. But there
is an issue here that they don't. And I must say another thing that no one speaks
to here today, but should be spoken to, is I went through college on the GI bill, so
did my two brothers. They are not included in this regulation, and one of the dangers
in this is if, because it is a private market oriented institution; it will take its profits
where it can. That is the way it is supposed to work. So if we shut down, using the current
regulation, a lot of the expansion in these programs that don't pay among the regular
population, there is a risk here that there will be a shift to the military, and personally
I have a problem with that. [Mr. Braley] Thank you. Ms. Carpenter, you mentioned you worked at
Trek Bicycle Company in Waterloo, Wisconsin, and I am from Waterloo, Iowa. You also mentioned
the Decorah connection with Luther College. One of the things that is concerning to me
is that the very school you attended and obviously got a great education, you are doing great
things and I commend you for that, but Herzing had a dropout rate of 53 percent for Associate
degree students and 48 percent of Bachelor degrees within the first year.

Were you aware
of that phenomena while you were a student on campus, and what would be your explanation
for why those dropout rates were so high? [Ms. Carpenter] On my campus in Madison, Wisconsin
and within my degree program, I find those numbers not to sync up with my personal experience.
Very few students, if any, dropped out of my Associate's degree program. As a matter
of fact, I only had — [Mr. Braley] These were Herzing's own figures
provided to the Senate Health Committee. So I am just asking you whether that was something
that you were aware of when you were — obviously it was not. [Ms. Carpenter] No, not within my degree program
and for the group of students that I graduated with. That was not my experience. [Mr. Braley] And one of the other disturbing
things about Herzing's website is there is a link on it to tuition, and instead of talking
about the actual cost of attending Herzing, it says, "Unfortunately, a simple comparison
of tuition price won't give you enough information to compare the true cost of attending school.''
Is it at all bothersome to you that your alma mater would not be willing to give students
who are considering enrolling there an opportunity to make comparisons of the various costs of
attending Herzing as opposed to some other school? [Ms.

Carpenter] I don't believe that Herzing
withheld that information; they certainly would encourage you to come in and speak with
an admissions counselor so that they could clearly identify the value for the tuition
that you do pay. I was absolutely well aware, as a consumer, what the cost would be. One
of the reasons that Herzing was a true value to me is that within my testimony I had mentioned
I attained an Associate's degree within a year and a half time, as opposed to the traditional
two years, based on block programming, based on the availability of course work. So I think that Herzing is doing a very intelligent
job of allowing themselves the opportunity on a one-on-one basis to sit down with prospective
students and explain how their program is differentiated, how they are different, differently
situated and valued, and giving potential students, prospective students all of the
facts to know what will my education at Herzing cost in comparison to other options, other
institutions for the same types of pursuits, same types of degree programs.

And the onus is on the individual consumer
shopping for their own education, and I think it is an advantage, as I mentioned, that Herzing
gives the opportunity to encourage their students to come in and talk about that one-on-one
and not rely on face value information on a website that doesn't tell the whole story. [Mr. Braley] Thank you. [Ms. Foxx] Ms. Carpenter, thank you very much. Mr. Braley, you get the prize for going over
the farthest. Mrs. Biggert. [Mrs. Biggert] Thank you, Madam Chairman,
and I thank the witnesses for being here and your patience while we had those pesky votes,
which seem to have taken an awfully long time. Thank you. My question will start with Dr. Cortes. I
have gone out to visit several of the schools and gotten some information, but when this
first came up we were talking about why doesn't disclosure work; why, if you want to know
how a program works in a school, for example, one of the schools that I went to, and I don't
have the numbers exactly, but they were all over 90 percent, and this was their school
of nursing, and 92 percent of all those enrolled graduated, 96 percent of them passed the certification
test, and 99 to 100 percent of those that had passed the certification found jobs.

Now, this seems to me that this then gives
a student or a consumer choice on where they want to go in looking at the programs, rather
than looking at the debt to income in determining whether there is value to students. Is this
something that you would see that would work or are there other things besides the way
that the gainful employment has been described, and is there something else that you think
would work? [Mr. Cortes] Thank you, Madam Biggert. I do
agree, I think it is all about, to a certain extent, consumer protection that we are looking
at. If you look at Berkeley College today on our website, not only you will get the
full tuition clearly stated, we have every single indicator of graduation rates, debt-to-default
rates, we have by degree, each degree, the level of graduation. We believe that transparency
is very important in our sector. We make clear that we have a code of conduct that talks
about not only academic excellence and student success, but then we put that information
very clearly that everybody can look and they can compare cost.

For instance, in the State of New Jersey,
for example, we have the lowest tuition increases of any of the institutions in the State of
New Jersey and, in fact, we have one of the lowest tuitions of all the private institutions
in New Jersey, which include, of course, Princeton and other private institutions. We have the
lowest tuition rates. So we do very clearly look at making sure that our students get
the information they need to make — [Mrs. Biggert] One of the things that really
impressed me, too, at these schools is how they worked with the local businesses so that
they were able to find jobs for the students.

The colleges had a rapport with these businesses.
Could you address that? [Mr. Cortes] Yes, absolutely. We work very
closely with the industry and the advisory from the corporate sector. Every degree has
an advisory board, so that means that for fashion, management, for accounting or finance
or marketing we work very closely with the business community for two reasons: we want
input to make sure our curriculum is up to date, that we look at the changes in the global
economy to make sure that we are training our students to get into the marketplace. But more important, we are making connections
with them in order for our students to get the internships that I mentioned earlier and
also for the ability to get them placed once they graduate.

As an example, someone mentioned
that there were only one career placement at some institutions. We have over 20 career
placement professionals making sure that our students from the beginning, from their freshman
experience all the way up to their senior year, get the level of advice and counsel
to make sure — [Mrs. Biggert] Thank you. Now I would just
like to ask, before my time, Mr. Alford, would you comment on this? [Mr. Alford] Yes, ma'am.

I think our biggest
concern, National Black Chamber of Commerce, is the whole process of this and the singling
out of for-profit schools. In a nutshell, what we want is a fair and transparent process.
As I learned in the military, leadership 101 is fair and impartial treatment for all, and
I think some are getting less evaluation, an unequal evaluation,
if I may use that term, than others, and it is quite clear. Community colleges have a lesser graduation
rate than for-profit schools, but you don't hear talk about that. I heard talk about the
Senate hearing that quoted the false GAO report even after it was divulged that it was false.
So it is not the process that I think makes this Country great. [Mrs. Biggert] Thank you. [Mr. Alford] I hope I answered your — [Mrs. Biggert] I agree with you. I yield back. [Ms. Foxx] Thank you very much. Mr. Miller? [Mr. Miller] Thank you very much for holding
this hearing, Madam Chair, and I want to thank the witnesses for testifying.

Mr. Carnevale, I think you sort of set the
stage when you talked about the changes in the economy and in the workplace and in the
requirements that have taken, both up and down, in terms of where you would get your
degree and certificates and the rest of that, and that is why many of us have been very
strong supporters of the for-profit sector in higher education and believe that they
do fill a need for many students, certainly adult students as they originally start off,
people who had to work full-time and also try to secure an education to acquire new
skills or a new job or what have you that they saw on the horizon.

admissions counselor

But sort of like the old saying, friends don't
let friends drive drunk, I have a lot of concern about a sector that I have been an advocate
for for a very long time in my 37 years on the Committee, that we have some outliers
here that are giving real heartache to the American taxpayer. And you can keep saying,
not you, Mr. Carnevale, but the panel and other members can keep saying that somehow
this only applies to for-profit. It doesn't only apply to for-profits. Of the
55,000 programs, of the 55,000 programs, as Mr. Hinojosa pointed out, 37,000 are in public
institutions and 5,000 are for non-profit and 13,000 for-profit. And for the public
institutions, they are there because this is the first President that raised issued
about the completion rates of two-year institutions, which are abysmal. They are outrageous. But
the suggestion that somehow this is just targeted for for-profit.

I was one of those who went
to the Administration and said that their original ruling was wrong, but the point is
this is the question. Then members of the panel suggested that this
high standard will force people to leave the field or to cut out nontraditional students.
This high standard is that 35 percent of your former students are successfully repaying
the principal on their Federal loans in their third and fourth year after they leave the
school.

What if you were a used car dealer and you
went to bank and said I want to borrow money, but 70 percent of my customers are going to
default? I don't think you would get a loan from the bank for your used car business.
But if you are in this business, 70 percent of your customers might default and you are
okay for the taxpayer to put up the money. And you only have to meet that in one out
of three years. One out of three years. And there is no penalty until you really screw
up. And this is a burden that apparently this industry just can't suffer. We are talking about maybe 2 percent of the
programs are going to be implicated here, and I suggest, as I had suggested to the industry,
you might want to look internally and think that you have some outliers here that you
should have dealt with within the various associations here. This is not whether we
support for-profit schools or we don't, because all of us have had experiences in our own
community, in our families of their successes.

This is about what is going on with respect
to the taxpayer. Mr. Alford, you asked about what is going
on with the Department and how they came about this rule. I would just say, anecdotally,
we have an investigation going on about what happened with short sellers now with the Inspector
General's Office. I would say if the Congress had listened to the short sellers prior to
the financial collapse, maybe this Nation would be in a different place today. But I want to ask what is going on with an
institution that says that they are going to double the volume of their private student
loans, as Corinthian College did, to $240 million and they expect 55 percent of their
private loan dollars to end up in default.

And their default rate on Federal student
loans doubled between 2005 and 2009 to 21 percent, and they recently told their investors
that they are going to manage their default rate by pushing borrowers most likely to default
into deferments, forbearance, and income-based repayment. I want to know what is going on
there. I want to know when Bridgeport Education buys
a college and takes the amount of money spent on education from $5,000 to $700 per student,
I know there are great savings on the Internet, but at the end of that process 64 percent
of their Bachelor degrees and 85 percent of their Associate degree students are withdrawing
from that institution. What is going on? Because when they withdraw
they have already given over part of their Pell, they have already given over part of
their student loans; their accounts are running down. I want to know what is going on when
that same institution then, which gets 86 percent of its money from the Federal taxpayers,
has 30 percent profit and 30 percent on marketing.

I want to know what is going on at the ATI
Career Institute in Texas when the State work board found that 300 of their employee graduates
had no jobs at all and 427 graduates were not employed as the Institute reported they
were, and the State cut off all of their WIA funding ,but they are still eligible for Pell
Grants and for student loans. I want to know what is going on. I want to know when the repayment rate for
four out of five of the profit schools receiving the most Pell Grants and the GI bill is 37
and 31 percent. I want to know what is going on. It is not a question of whether I support
private schools, for-profit schools or not. We sit on this sit of the dais on behalf of
the taxpayers who are on that side of the dais, and that is why we have these inquiries
and that is why we have a rule that probably does not much more than develop a lot of information.
And I think it will cause some people swimming at the bottom of the pool to swim a lot of
faster to try to stay off the bottom.

But I think that is a minimum, that is a minimum
that we can ask as members of Congress on behalf of the taxpayers. Madam Chairman, if I just might say, I would
just say this. We also want to ask what is going on when Indiana, Illinois, and California
and Florida have joined to look at for-profit institutions there. Indiana's attorney general
asking questions about institutions, Florida investigating eight institutions who violated
their unfair business practices, Iowa student default rates, Kentucky job placement recruitment
practices; Massachusetts, recruitment practices and student loan practices.

[Ms. Foxx] Mr. Miller, as you know — [Mr. Miller] There is an obligation — [Ms. Foxx] As you know, — [Mr. Miller] — very generous with the time
and I appreciate it. [Ms. Foxx] — you can put whatever your comments
are in the record. Dr. Roe? [Mr. Miller] I have seen the record; it doesn't
do so well. [Mr. Roe] Thank you. [Mr. Miller] But I appreciate the offer. [Mr. Roe] I think I won't give a speech; I
will try to ask some questions. I spent 24 years in school, not including
kindergarten, so I basically overdosed on school, and all in the public school system;
not in the private, not in the for-profit. Dr. Carnevale makes a great point: the whole
purpose is to get an education and hopefully find gainful employment once you leave that
institution that will pay. If the argument is here that it is too expensive
to go to school, I couldn't argue with that more. I served as a foundation board president
at the college where I attended and helped to raise money to help educate people that
were lower income, as I was when I went to college.

But to give you an example, if the gainful
employment rule is to be applied to everybody, I looked at Georgetown, a great university,
just before I came here. Forty-one thousand dollars is the tuition and $58,000 to go there
for a year. If you get a job teaching school somewhere after that is over, you can never
pay that back. If you are a police officer in Johnson City, Tennessee, where I am from,
you could never pay that back. I had a medical student's dad call me the
other day and said Dr. Roe, he said, my son has $212,000 in student loans and he is starting
his residency and he will make about $30,000 a year.

Just the interest on his student loan
is $1,200 a month, just the interest. He didn't have anything left to eat after that. So it
is not just for-profit universities; it is everybody school is too expensive. And I couldn't
agree with Dr. Carnevale, he makes great points. You should go to the school to get a job to
pay for something. The other thing I think that is a little misleading,
having been a foundation board president, is that when you compare the for-profits,
the bricks and mortar are not calculated in those tuition fees. All those multi-million
dollar buildings, as Mr.

Alford pointed out, that is not amortized into that cost. So it
is in the private tuition, it is amortized in the cost. Could you point that out? You
made a great point a minute ago, that you are not really comparing apples to apples.
Do you agree with that? [Mr. Alford] Absolutely, sir. [Mr. Roe] I think that — [Mr. Alford] I envision Ohio State, my alma
mater, University of Wisconsin, just humongous, paid for by taxpayers. [Mr. Roe] And Ms. Carpenter made a point of
some students, and many of them are not traditional students, in a much smaller classroom setting.
Your average freshman class at Ohio State or University of Tennessee in freshman English
is 2 to 500 students sometimes watching a video screen.

I have a problem with that. And it is true, when you get into a smaller
classroom setting, it is going to cost more money to do that, and I think, Ms. Carpenter,
you made a tremendous point: information is key. So you can go in and make an informed
consumer choice. That is what I did when I went. My choice was I didn't have the bus
money out of town, so I knew where I was going to go to school, but it was an informed choice.
And I think that is what you did, you made a very informed choice about what your needs
were.

Obviously, you were not an 18-year-old, as I was, 17, when you started college; you
had a little more of an idea about what you needed to do; I didn't. And graduation rates, Mr. Miller makes a tremendous
point on that, is that if you look in our own State of Tennessee, where you get a Hope
Scholarship to go to college, to junior college, to community college, or to a four-year school,
50 percent of our students in two years don't qualify after that, they lose their Hope Scholarship
because they are not succeeding academically. I think if we are going to do this gainful
employment rule, everybody should have to do the gainful employment rule.

If you are
going to set standards, and there is no question there probably are some bad actors out there
that are not living up and doing what they need to do, but everybody ought to have the
same standards in this Country. Mr. Alford made that, and thank you for your service
to our Country, by the way. Everybody ought to have to apply the same rules. If you are
going to do that, then private schools should, public schools should, and for-profit schools
should. Dr. Cortes, would you comment on that? [Mr.

Cortes] Yes, I do agree with you, Congressman.
As you know, not all for-profit institutions are alike. Do you know, for example, that
there are only 94 regionally accredited for-profit institutions in this Country and Puerto Rico?
That is an example of the differences. Berkeley College is a bricks and mortar; we own our
buildings; we pay taxes, local, Federal, and State.

We invest back into our community and
to our technology. When you look at our sector, we led the sector
in technology in distance learning. Not all our students — most people assume that for-profits
are all online colleges. They are not. Colleges like ours are 80 years changing lives in the
State of New York and New Jersey, and there are many family-owned businesses that are
for-profit that put a significant amount of money in the economic development of the region. In your folders you have a report that we
put together. In New York, Berkeley College, and in New Jersey was have invested in economic
development over $223 million in a given year, both about economic support to the economy,
jobs, student expenditures, building, construction. Those are the impacts that the private sector
institutions are offering and also offers access and choice for students. As you did when you chose your institution,
the students come to us because they see the flexibility, they see the quality of many
of our institutions, and they see the ability to get degrees that they cannot have in other
places.

In the State of New Jersey, for example, there are only two institutions that offer
fashion merchandise degrees and we are one of them. So they can't go to the public institutions
because they are full; then they come to us and we do a very good job. [Ms. Foxx] Thank you. [Mr. Roe] Madam Chairman, I want to thank
the panel for sticking around for our votes. I really appreciate you all doing that, indulging
us.

And thank you, you have been a great panel. I yield back. [Ms. Foxx] Thank you, Dr. Roe. Mr. Davis? [Mr. Davis of Illinois] Thank you very much,
Madam Chairman. I also want to thank the witnesses for being here. It seems to me that we are holding a hearing
in search of a problem that is not being addressed, and I say that only because the rules that
have been promulgated, that have been issued seem to be fair, seem to be balanced, provides
opportunity for correction, and I was one of those individuals who urged the Department,
as they were having discussions and looking at making new rules, to try and make sure
that they took into consideration the needs of all the institutions because I represent
a large number of for-profit institutions of higher learning. I also represent a large
number of public institutions of higher learning. So I want everybody to be treated fairly.

As a matter of fact, the philosopher Camus
is supposed to have said one time that I love my country, but I also love justice. So I
love every opportunity that we can find for access to higher education for our citizens. But I also love transparency. I love factual
information. I love serious analysis. I love good counseling and information that will
help lead individuals to the kind of choices that will not only improve the quality of
their lives, but will give them the resources to pay back whatever it is that they owe. Dr. Cortes, let me ask you. As you know, the
continuing resolution that the House leadership offered sought to cut Pell Grants for over
a million students by approximately $845 per student. Some Republicans have recently described
Pell Grants disparagingly, as a welfare handout, and highlighted it as in need of substantial
funding cut. How important are Pell Grants to your students? And would a loss or reduction
in Pell Grants harm access to higher education for your students and those who attend your
education? [Mr. Cortes] Thank you for the question, Congressman
Davis. Absolutely, I think the loss of any funds for the students that we serve is going
to impact their ability to access and to persist in college graduation.

I will give you an
example. Many of our students sometimes, in the middle of the year, come to us for additional
funding that we can provide as institutional aid in order to pay their books, in order
to get transportation to school, in order for them to pay their rent in their homes.
We are talking about students, which I mentioned earlier, with an average family income of
somewhere around $25,000. [Mr. Davis of Illinois] So it would be harmful
to your students. [Mr. Cortes] Very harmful, extremely harmful. [Mr. Davis of Illinois] Thank you. Let me
move on because my time is about to expire. Mr. Alford, let me ask you. I have had a great
time working with you and the National Black Chamber of College. I have a great deal of
affinity for the work that you do and for your organization, and I thank you for it.

[Mr. Alford] Thank you, sir. [Mr. Davis of Illinois] I was struck by your
testimony, though, at one point, where you suggest that for-profit schools are the ones
that truly are serving low income and minority students. So I ask what about the HBCUs, what
about the HSIs, what about the PBIs? What about these minority-serving institutions
that are public, are not for-profit and do a great job? [Mr. Alford] Yes, and I support them, and
they are at capacity. University of Wisconsin, when I graduated in 1970, its enrollment was
3 percent Black.

Today, 2011, its enrollment is 3 percent Black. University of California
system, each semester they have fewer and fewer Blacks matriculating at those schools.
So HBCUs, yes, sir, but they are a small percentage of the potential we have to educate our people.
The largest HBCU, Howard University is 11,000. You get from Southern at 10,000, Texas Southern
at 10,000, then you are down to four digits in any of those schools.

They couldn't house
a population of 40 million whose children need a higher education. [Mr. Davis of Illinois] I would certainly
agree with that and indicate that they still have capacity, though, that is unmet. But
let me thank you for your answer and thank you for participating. And I yield back, Madam Chairman. [Mr. Alford] Thank you, sir, as always. [Ms. Foxx] Thank you, Mr. Davis. Now I would like to recognize Mr. Towns. [Mr. Towns] Thank you very much, Madam Chair.
Let me also thank you for holding this hearing. I really appreciate you moving forward with
it.

And I want to thank the witnesses for being here and to say that I know that it
has been a long day and it has been a tough day for many of us in terms of conflicts,
but the point is that I am happy that you are here. Let me just say, as I listen to some of my
colleagues, I am sort of wondering are they thinking about the economic situation that
we face across the board. The top universities in this Country have people that are now unemployed
because of the fact there are just no jobs, and I think that sometimes when we look at
things we sort of forget about that.

When you look at the top universities, people coming
out, no jobs, and then we look at the situation that we discuss in terms of gainful employment,
and then we sort of ignore the fact that there is going to be some problems there when it
comes to jobs as well. Let me start by saying I support a fair, balanced
process. I really do. And, of course, I support a fair, balanced process and I support a good
government and I support educational choice. But I do not support poor quality institutions.
I do not support predatory practices.

And I do not support a regulatory process that
is not transparent. I believe that the Department's rules leave
many actors still capable of harming students. I also believe that the Department's rules
may adversely impact many quality programs and, in turn, hinder educational choice for
minorities. First, in the family college attendees and economic disadvantaged students, but I
also think there are some other areas that we need to look into. When you look at some of these athletic programs,
and it is known that there was one university that went for 10 years and did not graduate
one basketball player. I mean, nobody wants to talk about those kinds of things. I mean,
let's look at the real issues of education, if we are serious, across the board, rather
than just sort of looking at one thing and picking on it and staying with it.

I am also not certain that the process which
the Department came to the rule was entirely fair and balanced. I am not convinced of that.
I heard some of my colleagues saying it was fair and balanced. I am not sure of that.
There are a number of aspects that are currently undergoing review by the IG of the Department,
and until we have the final report how can we say? We won't be able to say it. I don't
see it until we get that information.

So I am just sort of cautioning my colleagues. Mr. Alford, let me just sort of raise this
with you very quickly. I share your concerns regarding the disproportionate impact that
this regulation will have on minority students, as well as your concern regarding the process
by which the regulation was crafted. I agree with many of my colleagues here today that
there are numerous good things being done by career colleges, though I also agree that
there are a few bad actors in the mix. Some are citing examples of questionable recruitment
practices, and I have heard all of that, and low retention rates. However, we need to look
at that also with the economic situation. If you are in school and then you have an
economic crisis in the family, what are you going to do? You are going to drop out. So I think that sometimes we just look at
these things and we sort of look at them with tunnel vision, and I don't think we can do
that. I think that we need to look and highlight in terms of a lot of people that as a result
of these institutions have been able to go on and live a very decent and make a major
contribution to many people, and I think we should not forget that.

So, Mr. Alford, what do you suggest that we
do, real quickly? [Mr. Alford] I think we need to go back and
review this in a fair, transparent process, one that is open. I think when a short seller
writes an article, subprime goes to college, and he is talking about the gainful employment
rule, how they are going to make this happen and they are going to make big money, I think
something is wrong with that. And that same individual can go into the inner circle of
a Federal agency and talk to executives of a Federal agency and make suggestions? Talking
about Mr. Eiseman. It stinks and something should be done about that, I think. I think
we need to go back and punt and reevaluate this. [Mr. Towns] My time has run out, Madam Chair,
and I would like to just ask unanimous consent that the statement by Mr. Alcee Hastings from
the State of Florida be included in the record. [Ms. Foxx] Without objection. Thank you, Mr.
Towns.

[Mr. Towns] Yield back. [Ms. Foxx] Mr. Bishop? [Mr. Bishop] Thank you, Madam Chair. Appreciate
you holding the hearing, and I apologize for arriving so late. Another committee I was
on had a markup. But this is an issue that I am very interested in. Let me start. Ms. Carpenter, I read your testimony.
I found it very moving, and I congratulate you and Herzing University on doing such a
good job. There was one particular statement that you made that I just want to highlight.
You say my Associate's degree from Herzing University has proven to be of high value
to me and my employer.

My employment history with Quest Software is but one example that
proves that fact. I know you know this, but I think it is important
to say for the record that if such a statement could be made, even in much more modest form,
by your fellow graduates, Herzing University or any other university that graduates students
who can say that have absolutely nothing to fear from this regulation. Nothing. So congratulations.
I am glad your experience went well. And what this regulation is designed to deal with,
as Mr. Miller said, are the outliers, not those who are doing the work of providing
access to a higher education and to help people get the American dream. And I am glad you
are on your path to the American dream. I want to pick up on where Mr. Miller's questioning
was. This regulation, in my view, and I was one who urged the Department to withdraw the
first pass at this; I felt that it was an unfair regulation and I, frankly, applaud
the Department for going back and having several iterations of this.

I won't engage you, Mr.
Alford, on whether or not the process was transparent, but I think reviewing 90,000
comments, I think that is something that is not to be taken lightly. But here is the environment in which we are
in. This regulation says that if 35 percent of an institution's former students in years
3 and 4 of their repayment status make at least one payment, that is an institution
that is satisfying the gainful employment regulation. I find it impossible to believe
that someone can consider that regulation to be an onerous or arbitrary or unfair regulation.
And let me put it in the context that we are in.

Here is the context that we are in. The budget
resolution that passed the House of Representatives, if it were to ever take on the force of law,
let us hope it does not, would cut the Pell Grant maximum to $3,000, from $5,550 to $3,000.
If we don't act, we will have no Perkins Loan Program come 2014. H.R. 1, which, frankly,
thankfully, will never take on the force of law, eliminated SCOG. So here is the Republican
vision of Title IV, Student Financial Aid Programs: no Perkins, no SCOG, a $3,000 Pell
Grant maximum, and work study at its current level. That is the Republican vision; that
is what they voted for. Now, I ask you, in that context how long do
you think the Federal Government will be willing to guaranty $90 billion a year of student
loans if in years 3 and 4 we consider it onerous, impossible to achieve of a 65 percent default
rate in years 3 and 4? I would suggest to you that the underpinning of the finances
of the for-profit sector and, frankly, every other sector, which is the guaranteed student
loan program, we are not going to be able to count on that guaranteed student loan program
if we are looking at that level of default.

And yet that is in fact what this regulation
contemplates. So I would urge anyone who is taking the position
that this is somehow excessive, to asset it in that context, because I think all of us
have the same goal here, which is to see to it that students of modest means get a chance
to go to college. I am a former college administrator; I am a former financial aid director. I have
spent my entire adult life dealing with the issues of access and affordability; they mean
a great deal to me. And I am very fearful that if we are not careful,
careful stewards of taxpayer money, then that money is going to go away. So I view this
regulation, frankly, as a modest means of the Congress and the Administration discharging
its responsibility to be careful stewards of taxpayer money.

So I just would ask you
to look at it in that context. Let me then go — I am sorry, my time has
expired, Madam Chair, and I appreciate your indulgence. Thank you. [Ms. Foxx] I want to thank you, Mr. Bishop. I will point out to you a note that Congressman
Roe has just handed to me, that points out that in 2006 the amount spent on Pell Grants
was $12.4 billion, and the amount scheduled to be spent on Pell Grants for 2012 is $49
billion. [Mr. Bishop] Would the gentlelady yield? [Ms. Foxx] Let me go on to the next — I am
just putting out a fact there to you. [Mr. Bishop] I was going to put that fact
in context. [Ms. Foxx] Okay. If I could, let me recognize
Congresswoman Speier.

I would like to finish this up no later than 2:00, if at all possible. [Ms. Speier] Madam Chair, thank you very much,
and I want to thank all of the witnesses who are here. Again, we all apologize for the
frantic pace that we operate under; it doesn't make a lot of sense from time to time. I think this is a very important hearing,
but I have to tell you at the outset I think what the Department of Education has recommended
is embarrassingly small. I would challenge any of my colleagues to go back to their districts
and say to their constituents that we are funding many for-profit colleges at 90 percent.
Now, mind you, if we are funding you at 90 percent, you are government schools. The University
of California is a public institution and the funding from the State is less than 20
percent.

But you are for-profit schools and 90 percent
of your money, in some cases, is coming from the Federal Government. And I might also point
out that in one of the colleges that was highlighted, Bridgepoint Education, 29 percent of their
spending in 2010 was for marketing and 30 percent was for profit. So only 40 percent
of the money at that institution was spent on students. I would challenge any of us to
go back to our districts and say this is good government. This Committee is about dealing with waste,
and I would suggest to you, as Mr. Bishop did earlier, that if you can't make this — I
mean, this is embarrassingly low as a standard, and if you can't make these standards, then
you shouldn't be in business because, frankly, you are government- operated institutions,
you are funded by the government; and if you can't make these very modest standards, then
you shouldn't be in business.

Now, here is where my concern is. This reminds
me of the financial meltdown. This reminds me of subprime loans. This reminds me of the
same institutions that targeted low-income people for subprime loans to get into loans
they shouldn't get into, and then they went belly up and the Country went belly up. One
of the institutions has said that it is looking at student profiles for recruitment; welfare
moms with kids, pregnant women, recently divorced, low self-esteem, vocational rehabilitation,
experienced a recent death, physically and mentally abused, drug rehab, fired or laid
off. That is the target populations that some of these institutions, these for-profit institutions,
are seeking candidates from. Now, my concern is since these actual standards
don't apply to the military, to veterans, that is what is going to happen.

We are going
to have some outliers, I am not suggesting that you are, but some outliers going out
and targeting our veterans. And we have already had cases. Frontline recently did an evaluation
and actually said to a Marine sergeant, who was enrolled at the Art Institute, told the
recruiter they suffered from PTSD, was insured, that the college had special tutoring programs
for veterans, and he later flunked out of his photography degree program for being unable
to finish the work and receiving no help from the college.

Former Marine Wade Cutler and
Guardsman Brad Seliga, also in the Frontline report, who were hired by Ashford University
specifically to recruit fellow veterans, both of whom quit in disgust with the ways veterans
were being suckered out of their GI bill benefits. Now, my question to Mr. Carnevale, do you
think that we are going to see an engagement by these for-profits to focus on veterans
because they are not going to be subject to these modest standards that are being suggested
by the Department of Education? [Mr. Carnevale] Well, I don't want to make
this a character assault on people who run these institutions, but I used to run for-profit
operations and I can tell you I would; that is, I would go after the populations where
the money was and the regulation wasn't. In the end, I have no problem with that. My problem would be what is the outcome, unless
we start judging these things by the outcome.

It is good that for-profits chase after abused
women. If they serve them, that is fine. And that is what I think this regulation does,
it demands that we use outcome standards to judge the use of public funds efficiently.
And if we don't start looking at efficiency in post-secondary education, there is going
to be no more equity, because we can't afford it. [Ms. Speier] Thank you, Mr. Carnevale. I might
also point out that the University of Phoenix received over $84 million in post-GI bill
benefits and it increased its recruiters to the military from 91 in 2003 to over 452.
So I am putting word out to all the for-profits.

I am going to watch what happens to the profiles
of veterans in your programs because we need to protect them, and we are not going to have
them waste their great GI bill benefits on institutions that don't deliver. I yield back. [Ms. Foxx] Thank you, Ms. Speier, and you,
of course, can put anything in the record that you would like. Ms. Waters? [Ms. Waters] Thank you very much, Madam Chair.
I am very appreciative for you allowing me to take part in this hearing today. I have
a long history dealing with private post-secondary private schools. I come from the California
State legislature, where I created a whole body of law relative to private post-secondaries
and private schools based on my experiences in South Los Angeles. I ran job training programs there and I watched
the recruitment methods, I watched the kind of messaging that was done by many of these
private post-secondary institutions and private colleges, where they raised the hopes and
dreams of a lot of poor people who certainly did not realize any careers or real jobs from
the Pell Grant money that they allowed to be spent in these institutions, and it was
disheartening, and that is why I spent so many years on this.

I do believe that this potential scandal is
going to be bigger than the subprime housing meltdown scandal, where many of our homeowners
were tricked into mortgages and loans that resulted in foreclosures. I have, over the
years, involved myself with any number of these institutions, Corinthian, ITT, Kaplan,
on and on and on, and the record is replete with what they have done. I take particularly
exception to this messaging that talks about how well you are doing for minorities and
how, if you are not offering opportunities for minorities, they are not going to be able
to be educated or to have careers or jobs. I think, Mr. Alford, you stated that gainful
employment regulations will harm minority students. But students attending these institutions
are already being exploited. Students at for-profit institutions represent 12 percent of all higher
education students, 26 percent of all student loans, and 46 percent of all student loan
dollars in default. How would you propose that we protect these students from being
saddled with debt and low prospects for job opportunities? And how is it that these very,
very mild conditions of gainful employment that was just described by Ms. Speier is going
to harm the private school industry? Mr.

Alford? [Mr. Alford] I have a lot of relatives that
have grown up in your district and those who received education, many from for-profit schools,
are doing well, raising families, and living prosperous lives. Those relatives of mine
around 73rd and Hoover and going further into South Central, who did not receive education,
are either dead, in jail, or on welfare. Education is the key. So I don't think hurting an opportunity,
a vehicle to educate someone is a productive thing to do. [Ms. Waters] I don't know what you just said.
I was listening for some facts. I thank you for sharing with me that little vignette about
what happened in your family. [Mr. Alford] It was real, ma'am. It is real. [Ms. Waters] But you have no facts, so it
does not resignate at all.

I want to ask a little bit — well, I have
something here. I understand there has been a lot of talk about the rulemaking process.
I would like to submit the list of program integrity negotiators for the record. The
negotiated rulemaking included several different types of stakeholders, all of whom stood to
be impacted by the rule. The following communities of interest were
represented: students, consumer advocacy organizations, two-year public institutions, four-year public
institutions, private nonprofit institutions, private for-profit institutions, college presidents,
admissions officers, business officers, financial aid administrators, regional accreditators,
national accreditors, workforce development officers, lending community representatives,
test publishers, and State higher education officials.

I would like to submit that to the record. [Ms. Foxx] Without objection, Ms. Waters. [Ms. Foxx] And I will point out to you that
your time is up. [Ms. Waters] Thank you very much. I appreciate
the opportunity. I am sorry I was not, Madam Chair, to get into all of this discussion
about short selling, because I really do want to reveal something about what has taken place
in that whole area. I yield back the balance of my time. [Ms. Foxx] Feel free to put other pieces in
the record. We have all done our best to express our appreciation
to the members of the panel for the disjointed hearing that we had today. We appreciate your
being with us on a Friday afternoon.

Some of you came from long distances and we understand
the hassle of coming here to Washington any time, but particularly when you come from
long distances. I don't know if you are going to try to get away on a Friday afternoon,
but we do want to thank you very much for coming and hope you will return sometime under
a little more relaxed situation. With that, the Committee stands adjourned. [Whereupon, at 1:50 p.m., the subcommittees
were adjourned.].

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