[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
EXAMINING FOR-PROFIT COLLEGE
OVERSIGHT AND STUDENT DEBT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ECONOMIC AND CONSUMER POLICY
OF THE
COMMITTEE ON OVERSIGHT
AND REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
MAY 22, 2019
__________
Serial No. 116-29
__________
Printed for the use of the Committee on Oversight and Reform
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COMMITTEE ON OVERSIGHT AND REFORM
ELIJAH E. CUMMINGS, Maryland, Chairman
Carolyn B. Maloney, New York Jim Jordan, Ohio, Ranking Minority
Eleanor Holmes Norton, District of Member
Columbia Justin Amash, Michigan
Wm. Lacy Clay, Missouri Paul A. Gosar, Arizona
Stephen F. Lynch, Massachusetts Virginia Foxx, North Carolina
Jim Cooper, Tennessee Thomas Massie, Kentucky
Gerald E. Connolly, Virginia Mark Meadows, North Carolina
Raja Krishnamoorthi, Illinois Jody B. Hice, Georgia
Jamie Raskin, Maryland Glenn Grothman, Wisconsin
Harley Rouda, California James Comer, Kentucky
Katie Hill, California Michael Cloud, Texas
Debbie Wasserman Schultz, Florida Bob Gibbs, Ohio
John P. Sarbanes, Maryland Ralph Norman, South Carolina
Peter Welch, Vermont Clay Higgins, Louisiana
Jackie Speier, California Chip Roy, Texas
Robin L. Kelly, Illinois Carol D. Miller, West Virginia
Mark DeSaulnier, California Mark E. Green, Tennessee
Brenda L. Lawrence, Michigan Kelly Armstrong, North Dakota
Stacey E. Plaskett, Virgin Islands W. Gregory Steube, Florida
Ro Khanna, California
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan
David Rapallo, Staff Director
Richard Trumka, Subcommittee Staff Director
William Cunningham, Chief Counsel and Senior Policy Advisor
Joshua Zucker, Assistant Clerk
Christopher Hixon, Minority Staff Director
Contact Number: 202-225-5051
------
Subcommittee on Economic and Consumer Policy
Raja Krishnamoorthi, Illinois, Chairman
Mark DeSaulnier, California, Michael Cloud, Texas, Ranking
Katie Hill, California Minority Member
Ro Khanna, California Glenn Grothman, Wisconsin
Ayanna Pressley, Massachusetts Chip Roy, Texas
Rashida Tlaib, Michigan Carol D. Miller, West Virginia
Gerald E. Connolly, Virginia
C O N T E N T S
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Page
Hearing held on May 22, 2019..................................... 1
Witnesses
Panel I
Robert J. (RJ) Infusino, Former Student, Illinois Institute of
Art
Oral Statement............................................... 4
Christopher Madaio, Assistant Attorney General, Consumer
Protection Division, Maryland Office of the Attorney General
Oral Statement............................................... 6
David Halperin, Attorney and Counselor
Oral Statement............................................... 8
Ms. Lindsey Burke, Director, Center for Education Policy, The
Heritage Foundation
Oral Statement............................................... 9
Panel II
Diane Auer Jones, Principal Deputy Under Secretary, Department of
Education
Oral Statement............................................... 31
* The prepared statements for the above witnesses are available
at the U.S. House of Representatives Repository: https://
docs.house.gov.
INDEX OF DOCUMENTS
----------
The document listed below is available at: https://docs.house.gov.
* Table 4, Overall College Completion Rates by Student
Characteristics, 2016, from ``The College Completion Landscape:
Trends, Challenges, and Why It Matters'', by Bridget Terry
Long, 2018; submitted by Rep. Foxx
EXAMINING FOR-PROFIT COLLEGE
OVERSIGHT AND STUDENT DEBT
----------
Wednesday, May 22, 2019
House of Representatives,
Subcommittee on Economic and Consumer Policy,
Committee on Oversight and Reform,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:05 p.m., in
room 2247, Rayburn House Office Building, Hon. Raja
Krishnamoorthi (chairman of the subcommittee) presiding.
Present: Representatives Krishnamoorthi, DeSaulnier, Hill,
Pressley, Tlaib, Connolly, Cloud, Grothman, Roy, Miller, and
Jordan.
Also present: Representatives Shalala, Bonamici, and Foxx.
Mr. Krishnamoorthi. The Subcommittee on Economic and
Consumer Policy will come to order. Without objection, the
chair is authorized to declare a recess of the committee at any
time. This hearing is entitled: ``Examining for-Profit College
Oversight and Student Debt.''
I now recognize myself for five minutes to give an opening
statement.
During the height of the Great Recession of the late
2000's, enrollment at for-profit colleges tripled. This was not
a coincidence. Americans around the country searched for ways
to make themselves more competitive for employment. By 2010,
enrollment at for-profit colleges peaked at just over 2 million
students, and revenue grew over 600 percent. In President
Obama's second term in office, the bubble began to burst.
The collapse of Corinthian Colleges and ITT Tech in 2015
and 2016, respectively, initiated a rash of collapses that we
continue to see today. Just in the past six months, Education
Corporation of America and Dream Center Schools have closed,
leaving students languishing and looking for answers. At the
heart of these collapses are students determined to improve
their career and life prospects through the promise of higher
education.
One such student is with us today, Robert J., also known as
RJ, Infusino, is a student from my district in Illinois. In
2015, RJ enrolled at the Illinois Institute of Art, seeking a
degree in audio production. RJ's anticipated graduation date
would have been May 2019. That's this month. This month, as
students on college campuses across the country put on their
caps and gowns and proudly walk across the stage to collect
hard-earned degrees with friends and family cheering them on,
RJ, unfortunately, will not be joining them.
RJ will not be joining them because, like so many students
that attended predatory colleges, he was deceived. RJ's school
lied about their accreditation status, setting him back
academically, and endangering his financial health and future.
Unfortunately, RJ's story is all too familiar. Hundreds of
thousands of students have been lied to by predatory for-profit
colleges about job placement rates, salary prospects, tuition
costs, and program quality. The statistics are alarming.
According to the National Center for Education Statistics, also
known as the NCES, only 26 percent of students who enroll in
four-year, for-profit institutions, graduate within six years.
In comparison, across all institutions, the national average
six-year graduation rate is 60 percent. Forty-seven percent of
defaults, almost half of all defaults, are attributed to
students that attended for-profit college, despite the fact
that only 13 percent of students attend these types of schools.
One of the stated missions of the Department of Education
is to promote student achievement and increase the
accountability of Federal education programs. But Secretary
Betsy DeVos' Education Department has been derelict in its
duties to combat the rampant and flagrant abuses of predatory
institutions, and the enabling accreditors who let them sell
worthless degrees.
On average, Title IV Federal funding accounts for 70
percent of for-profit college revenue. Almost $250 billion,
that's a quarter of a trillion dollars, almost 20 percent of
all student debt owed is attributed to for-profit colleges that
directly profit from government funding. Yet, the Department
refuses to enforce gainful employment rules meant to ensure all
schools are actually setting up their students for success in
the job market.
Just as alarming is that the Department refuses to fight on
behalf of students who have been defrauded and deceived by the
exact industry it will not hold accountable. Since June 2018,
the Department has not processed a single borrower defense
claim, which provides much-needed loan forgiveness to students
who have been defrauded by institutions of higher learning. In
the interim, the number of claims at the Department has gone up
50 percent, and now exceeds 158,000 claims.
Folks, that's 158,000 claims that have not been addressed.
These are borrower defense claims, claims by students who have
been defrauded.
Let me be clear. Inaction is complicity. Students and
American taxpayers demand and deserve better oversight that
holds all institutions accountable. I am hopeful today's
hearing will give us insight into why the Department has lapsed
its responsibility to enforce accountability standards that
would prevent fraud, waste, and abuse, by predatory for-profit
institutions.
I look forward to today's discussion with the sincere hope
that the Department will begin to chart a new course that
establishes an American education system based on transparency,
accountability, equity, and results.
With that, I would like to also acknowledge the presence of
the ranking member of the Education and Labor Committee,
Congresswoman Foxx, and--hi, Dr. Foxx--and Congresswoman
Shalala. Hello. Without objection, the gentlewoman from North
Carolina and Florida shall be permitted to join the
subcommittee on the dais and be recognized for questioning
witnesses.
The chair now recognizes the ranking member, the
distinguished member from Texas, Mr. Cloud, for five minutes
for his opening statement.
Mr. Cloud. Thank you, Chairman. And I don't know about
distinguished but I appreciate it. Thank you. Thank you,
Chairman, for holding this important hearing today and thank
you for all our witnesses for your thoughtful testimony. I
especially want to thank Mr. Infusino. I am happy that you are
here providing a firsthand account of your experiences. I am
sure that these experiences are shared by many other students
as well.
There is no difference between the majority and minority on
holding bad actors accountable. The law is the law, and when
individuals, schools, or companies violate the law, we should
all want to hold them accountable. The difference lies in if
the force of government should be used to eliminate certain
choices and opportunities. Should we treat education
opportunities evenly, or should Washington decide what's best
and use government to accomplish the desired outcome? I say the
former.
In a Nation as big and diverse as ours, we should seek to
expand opportunities that match local educational and
employment needs. Do we really believe that Washington and
those in this room are more capable of determining what is an
appropriate style of learning, or can we take a humble step
back and acknowledge that individuals can make the best choices
for themselves? This hearing is titled ``Examining For-Profit
College Oversight and Student Debt.'' I wish we were here
discussing today--I wish what we were discussing today was
examining our educational system and making structural
improvements and addressing the student debt.
Traditional college education services serve some quite
well. There are a number of reasons why an individual would
choose a traditional college experience, a wide variety of
classes, athletic events, a great way to display knowledge,
social opportunities. These are just some of the reasons.
And while this choice might work for some, it does not work
for others. Tuition is expensive, it takes several years to
complete and, unfortunately, within six years of starting
college, less than 55 percent of students graduate. In addition
to that, there are also many different ways individuals learn.
And technological advancements, distance learning, and new
models of education are challenging an education system that,
in many ways, is a holdover from the industrial revolution.
What I am concerned that this hearing may turn into is the
demonizing of certain type of educational opportunity, when we
should be focused on finding areas of improvement in all higher
education. The goal we should be focused on is helping people
find educational opportunities that lead to jobs, and provides
upward mobility for them and their families, and affords them
the opportunity to be productive members of this society.
I hope we can stay focused on identifying areas of higher
education that need improvement. Let's all remember that the
issues we see in for-profit colleges are not new. This is an
issue that predated this Congress and this administration, and
for-profit closures have been rising dramatically over the past
decade, from 50 in 2009 to 448 in 2016. This is not one solved
by regulating a specific sector of postsecondary education out
of existence which has gainfully employed a number of people.
It is solved through the power of choice and transparency.
Students are free to choose where they attend, whether it be
public, nonprofit, private nonprofit, or for-profit. Exercising
individual choice is one of the strongest forces in our
economy. Thankfully, this is also backed up by the rule of law
and the justice system.
Hear what I'm saying, the genuine problems facing the
students that were affected by school closures are real, and we
should look at ways of ensuring all students have the
information about all the schools available that they need to
make wise decisions. What I'm also saying is that regulating
away a class of schools that, in many cases, provide
educational benefits to a segment of students that have
historically been underserved may not be the proper action.
In government, business and schools, there have been and
always will be bad actors, and we should ensure that they are
held to full account. As we have seen, many of the actions in
question are making their way through litigation. I hope we
have a productive discussion today and afford everyone the
opportunity to have their proposals heard. Once again, thank
you for being here, witnesses.
And I yield back.
Mr. Krishnamoorthi. Thank you, Mr. Cloud. Today, we are
joined by four witnesses: First, RJ Infusino, a former student
of the Illinois Institute of Art; Christopher Madaio, Assistant
Attorney General for the Consumer Protection Division of the
Office of the Maryland Attorney General; David Halperin,
attorney and counselor with the Republic Report; and Lindsey
Burke, Director for the Center for Education Policy at the
Heritage Foundation.
If the witnesses would please rise, I will begin by
swearing you in. Do you swear or affirm that the testimony you
are about to give is the truth, the whole truth, and nothing
but the truth, so help you God?
Let the record show that the witnesses answered in the
affirmative.
Thank you and please be seated. The microphones are
sensitive, so please speak directly into them. And you'll
notice that there is a timing device in front of you. Green
means go; yellow does not mean slow down, it means speed up;
and then red means stop. Without objection, your written
statements will be made part of the record.
With that, Mr. Infusino, you are now recognized to give an
oral presentation of your testimony for five minutes. Thank
you.
STATEMENT OF ROBERT J. INFUSINO, FORMER STUDENT, ILLINOIS
INSTITUTE OF ART
Mr. Infusino. Good afternoon, Chairman, and members of the
committee. My name is Robert J. Infusino, and I am a former
student of the for-profit Illinois Institute of Art in
Schaumburg, Illinois. Thank you for inviting me here today.
This is my first visit to Washington, DC, and this should
be an exciting and fun day, but the truth is, I am here because
my life has been turned completely upside down by a college
that cared more about profit than students.
The Illinois Institute of Art started recruiting me when I
was still in high school. I had no real understanding of how
college worked then, or of the differences between for-profit
and not-for-profit colleges. In my senior year, I applied and
was accepted immediately. I was so excited. When I toured the
school, I explained that my dream was to do sound design for
video games. They told me that they had an audio class
specifically for video games, and they would get me a job, an
internship, and, ultimately, a job. But there was no such
class. My internship was in an insurance sales office and it
was a total waste of my time, and the promised connections to
the industry did not exist.
In 2017, my school was sold to a nonprofit called the Dream
Center. The Dream Center told us that its nonprofit status
would lower tuition and improve everything, but the Dream
Center only made things worse. Within a few months, faculty
started leaving and were replaced with new instructors who did
not know the course material. I never understood why a small,
nonprofit charity took over the school, but I decided to make
the best of it and focus on my studies.
Then last year, a few days before returning to what should
have been my last summer break, I checked my email and my heart
sank. I found messages saying that the school was not
accredited, and it was closing at the end of the year.
Mr. Chairman, and members of the committee, this was one of
the worst days of my life. I felt like the world was crashing
down around me and everything that I had done at the school was
just going away.
When I returned to campus, it was chaos, and I did
everything I could to find answers, but got nowhere. During one
meeting, I learned that the school knew about its lost
accreditation six months before they bothered to tell students.
They knew but did not tell us. They just kept taking our money
for worthless credits.
At this point, I could not trust the Dream Center, and the
Department of Education was only sending me to a website. My
classmates and I had to figure out everything by ourselves.
Eventually, I came to realize I only had two bad options:
First, I could apply for a closed school discharge, but it
would not get back the thousands of dollars my dad had already
paid out of pocket for tuition, and I would have to give up my
dream of becoming an audio engineer.
My other option was to transfer. After extensive research
and stress, my only realistic options were other for-profit
colleges. I did not want to make the same mistake twice, but
what else was I supposed to do?
I should have been graduating next month. Instead, I'm
spending an extra year in school, which means I am delaying the
start of my career and taking on thousands more in student
loans. On top of all this, the Dream Center signed an agreement
with me promising $5,000 in tuition assistance after I
transferred to a new school. But two months ago, the Dream
Center emailed me to say I would not get the money. Along with
several of my classmates, I sued the Art Institute and Dream
Center for its lies about accreditation. Back in March, my
attorneys at the National Student Legal Defense Network wrote a
letter to the Department asking that my loans and those of my
fellow students be discharged. And I have a copy of this letter
with me today. The Department has not even responded to my
lawyers and I don't understand why.
I never would have thought to question the intentions of a
college. And I believed the Department was here to serve
students like me, but I don't have much trust in higher
education anymore. It feels like I'm being punished to follow
my dreams. I hope that, by testifying today, that the
Department of Education will do what is right for students, and
I hope that by sharing my experience, I can help prevent this
from happening to people like me. Thank you.
Mr. Krishnamoorthi. Thank you, Mr. Infusino.
Mr. Madaio.
STATEMENT OF CHRISTOPHER MADAIO, ASSISTANT ATTORNEY GENERAL,
CONSUMER PROTECTION DIVISION, MARYLAND OFFICE OF THE ATTORNEY
GENERAL
Mr. Madaio. Thank you, Mr. Chairman, and members of the
committee. I have four areas to bring to your attention today:
No. 1, the Department of Education refuses to communicate with
state attorneys general to help defraud its students. state AGs
are especially active with enforcement actions against for-
profit schools, because of the demonstrated pattern of unfair
and deceptive conduct at those businesses.
My written testimony lists 17 notable cases, such as Career
Education Corporation, Ashford University, ITT Technical
Institute, and the Dream Center Schools, cases that the
attorneys general have brought against for-profit institutions.
We have found evidence that these schools routinely pressure
students into enrolling, lie about whether credits can
transfer, and deceive students about their chances of getting a
job.
AGs want to share evidence with the Department so that the
Department can decide whether to cancel debt belonging to
students who attended schools that AGs have investigated, sued,
and settled with. But we are unable to reach anyone. They don't
return our calls. They don't reach out to us after we announce
a settlement. No one at the Department has even responded to
our letters trying to have a dialog. And there has been
reporting that says the Department staffers have been
instructed not to even talk to state AG offices.
The Department could open the lines of communication with
state AGs, but it refuses to do it. Ms. Diane Auer Jones, if
you are here and listening, please, I ask you, reestablish the
collaboration between the Department and state AGs, and let us
work together to protect students.
No. 2, the Department refuses to help students affected by
recent school closures. Investigations by state AGs led to the
discovery and admission by the school that the Dream Center
Schools deceived students, as you just heard, about the loss of
accreditation. That means that students enrolled and paid for
worthless credits.
The Department could use the borrower defense rule to
cancel debt incurred by students whose enrollment was based on
a lie, but it refuses to do it. The Department could make the
closed school discharge available to more students who are
affected by misconduct of the Dream Center Schools, but it
refuses to do it.
No. 3, the Department refuses to use the rules on the books
to protect students. The Department misused student data from
the Social Security Administration, and now claims that it
cannot enforce the gainful employment rule. The Department
could try to work out an agreement with the Social Security
Administration to get the data it needs to protect students
from low-quality schools that leave them with high debt and low
earnings, but it refuses to do it.
After the Department lost a court case and had to implement
a new version of the borrower defense rule, it could have taken
steps to ensure that the financial responsibility portions of
the new rule are in place, so that students are protected and
taxpayer money is protected, but it refuses to do it.
The Department could fully discharge the loans of students
who attended Corinthian Colleges, which the Department has
already determined that those students were lied to about their
ability to get a job, but instead, the Department conceived an
arbitrary plan to cancel only a part of the debt if a student
found any job, even one outside their field of study, which is
often all students who went to Corinthian can find, because
many employers don't feel that Corinthian was a quality school.
A student who was lied to, in order to get them to enroll at a
school, should not have any loans hanging over their head.
Another court has determined that the Department's
preferred method of partial discharge is legally flawed, and it
prohibited the Department from implementing it. The Department
could give up on this plan and grant full cancellation to
students, but it refuses to do it.
The Department also delayed the implementation of another
rule that protects students at online schools, and recently
lost yet another court case, and now is required to implement
that rule starting next week. The Department could have taken
steps to ensure that schools will comply with the rule, and
ensure that all online programs have state authorization before
receiving Federal funds, but it refuses to do it.
And No. 4, the Department refuses to help disabled
veterans. I end on this one, because it's the saddest one. Over
42,000 totally and permanently disabled veterans are carrying
more than $1 billion in student loan debt, and are eligible to
have that debt canceled. The Department wants veterans to file
an application, which many of them are unable to do because
they are totally and permanently disabled. But the Department
knows which veterans qualify for loan relief and it could
automatically cancel that debt if it wanted to, but for reasons
I will never understand, Ms. Auer Jones and the Department
refuse to do it.
Thank you for your attention to this important matter, and
I look forward to answering your questions.
Mr. Krishnamoorthi. Thank you, Mr. Madaio.
Mr. Halperin, you are on the clock.
STATEMENT OF DAVID HALPERIN, ATTORNEY AND COUNSELOR
Mr. Halperin. Thank you, Mr. Chairman, Ranking Member
Cloud, and members of the committee. I hope every Member of
Congress agrees with these three principles: First, government
should be vigilant against waste, fraud, and abuse with
taxpayer dollars; second, if government commits taxpayer
dollars, there should be real performance standards to make
sure we get what we pay for; third, government investment
should not make the intended beneficiaries worse off than when
they started.
The Federal investment in student grants and loans as
applied to for-profit colleges has flunked all three tests for
decades. There are good programs and great teachers and
students in for-profit higher education, but many schools have
engaged in deceptive recruiting, financial aid fraud, and more.
The Department of Education's failure to establish strong rules
has meant a race to the bottom. The more colleges abuse
students, the more money they make. The predatory behavior has
been documented by the Senate HELP Committee and many other
investigations.
In 2011, I met Rashidah Smallwood, a religious woman who
was fired as a financial aid administrator at ITT Tech in Texas
after she refused to cooperate with what she believed to be
systematic fraud. In 2014, I met Laurie McConnell, a librarian
at Everest College, part of Corinthian Colleges in California.
She was heartbroken, trying to tutor a student who was
intellectually disabled, severely so. Everest had enrolled him
in a criminal justice program because he wanted to be a police
officer.
Last year, honest employees at Dream Center Education
Holdings called me to say the company was lying to students
about the lost accreditation of some campuses, and improperly
mixing their newly nonprofit schools with for-profit companies
owned by Dream Center executives. With all the abuses, outcomes
have been abysmal for many students, veterans, single parents,
immigrants, people who just wanted a chance to improve their
lives.
A 2016 study found for-profit college students earned less
after leaving school than they did before they enrolled, and
many students face crushing student debt. The Obama
Administration finally acted. It issued the gainful employment
and borrower defense rules to curb predatory practices. It
ended recognition of ACICS, accreditor of many of the worst
schools. It refused to recognize the predatory CollegeAmerica
chain as nonprofit after concluding the conversion benefited
only the prior for-profit owner. Secretary DeVos has canceled
all of these pro-student reforms and more.
The industry claims there are no bad schools anymore.
That's false. They claimed the same 10 years ago. Trying to
escape the stigma their bad behavior created, some for-profits
have converted to nonprofit, but they retain for-profit
companies that hold lucrative contracts and keep a grip on
management. The troubling Purdue-Kaplan deal is one example.
With the Dream Center, the Department first approved the
change of ownership, but eventually lost faith and sought new
owners. All of this was done behind closed doors, and was
mismanaged. Students didn't know anything until their campuses
were closing. The recent shutdowns of for-profit Education
Corporation of America and Vatterott were also debacles, with
students locked out, their futures in doubt. These for-profit
schools enrolled new students until the bitter end, banking as
much taxpayer cash as they could.
Another school, Grand Canyon, with Department consent,
converted to nonprofit. This year, the school's president, who
is also CEO of Grand Canyon's for-profit arm, bragged to Wall
Street that money was flowing in, because prospective students
love to hear that the school is nonprofit.
Yet another chain converting is Ashford University, which
has faced multiple law enforcement investigations for deceiving
students. And then, finally, there is for-profit Career
Education Corporation, which recently boasted 2018 was a
watershed year, the best income in a decade. Their predatory
practices have led to numerous law enforcement actions,
including $1.5 billion settlement this year with 49 state
attorneys general. Secretary DeVos' two top higher education
aides, Robert Eitel and Diane Auer Jones, both worked as senior
executives at Career Education Corporation through 2015, and
they have each worked for other predatory schools. And I would
be glad to answer your questions when the time comes.
Mr. Krishnamoorthi. Thank you, Mr. Halperin.
Ms. Burke, you have five minutes.
STATEMENT OF LINDSEY BURKE, DIRECTOR, CENTER FOR EDUCATION
POLICY, THE HERITAGE FOUNDATION
Ms. Burke. Thank you, Chairman Krishnamoorthi and Ranking
Member Cloud. My name is Dr. Lindsey Burke. I'm the Will
Skillman Fellow in Education Policy at the Heritage Foundation,
and I oversee the Center for Education Policy. I appreciate
your invitation to be here today to discuss for-profit higher
education and student debt. The views I express in this
testimony are my own and should not be construed as
representing any official position of the Heritage Foundation.
The higher education system in America needs significant
reform, but targeting proprietary institutions is not the way
to improve outcomes sector-wide. For-profit colleges are
finding success because they are helping a segment of students
who have historically been underserved by traditional
universities. The real problem afflicting higher education
today is the vast amount of taxpayer resources being poured
into the system. That's the issue that deserves oversight.
Singling out one sector that is meeting the needs of students
is not the issue.
So I want to discuss three issues today. The first is the
gainful employment rule. The Department of Education is working
to overhaul the gainful employment regulation put into place
during the Obama Administration that targeted for-profit
colleges, requiring their graduates to achieve certain
government-defined, debt-to-earnings income ratios. The gainful
employment rule was clearly designed to affect certain types of
schools, as it was not applied evenly across all institutions,
suggesting that the rule's application to for-profit schools
was more about politics than prudent policy. For example, among
certificate programs, just 45 percent of students pursuing a
certificate at a public college had earned it within three
years. That figure rises to 70 percent for students at for-
profit colleges.
The second issue I'd like to discuss is the 90/10 rule,
another regulation that targets the for-profit sector. The
rationale behind the rule, which dates back to 1992 and began
as an 85/15 rule, has merit. Quality higher education
institutions should be able to secure non-Federal sources of
revenue from a variety of sources. Yet, as with gainful
employment, the 90/10 rule only applies to the for-profit
sector. If the Federal Government applied the 90/10 metrics to
all schools of higher education, which would be the fairer
application of the rule, 80 percent of public two-year colleges
would fail the test, as would an estimated 40 percent of four-
year colleges.
Although the percentage of colleges that would fail the 90/
10 rule if applied evenly is still a matter of dispute, it is a
proportion above zero, prima facie evidence that the rule as
currently applied allows some traditional schools off the hook,
while penalizing similarly situated for-profit colleges.
Instead of layering on more and more regulations to contain a
taxpayer exposure problem that Washington created in the first
place, Congress should cut, rather than expand, and at the very
least, significantly cap Federal student loans.
Finally, I'd like to discuss how career and technical
colleges and for-profit colleges play a vital role in our
higher education ecosystem. Nationally, college prices are more
than three times higher today than they were during the 1987-88
academic year. Yet, one-third of college graduates are
underemployed in jobs that don't require a bachelor's degree,
suggesting, as economist Richard Vetter puts it, that we are
malinvested. Indeed, 57 percent of Americans say that higher
education is not a good value proposition, and 75 percent say
that it's too expensive for the average American to afford. So
we need career and technical colleges. They provide us with
plumbers and electricians, with construction supervisors and
nurses. We need for-profit colleges. They provide us with
experts in cybersecurity, information analytics, and logistics,
all of which are vital to our economy.
So the bottom line is this: For-profit colleges tend to do
a better job recruiting nontraditional students, such as part
time, low-income and older students, as well as women and
minority students. Many students seek out these colleges as a
means of establishing a meaningful, long-term career in a
critical field. The government should not penalize them for
that choice. Improving excellence and driving down cost
requires structural reforms to the entire sector, not the least
of which is cutting off the open spigot of Federal aid to
universities. The higher education sector needs improvement
across the board. Singling out one type of school simply based
on tax status is not the way to get there.
Thank you, again, for affording me the opportunity to
testify at this hearing. I look forward to your questions.
Mr. Krishnamoorthi. Thank you, Ms. Burke.
I now recognize myself for five minutes of questions. First
of all, I want to thank everybody for contributing to today's
discussion. Mr. Infusino, I am especially grateful to have your
voice here representing so many students who have been
defrauded and deceived by certain for-profit institutions. This
issue hits home, as you are not the only constituent of the
district I represent in Illinois's Eighth District, who has had
their lives turned upside-down by the closure of the Illinois
Institute of Art, which was owned and operated by Dream Center.
I want people to understand the struggle students face when
their schools collapse. Mr. Infusino, your testimony states
that you did not discover Illinois Institute of Art's
unaccredited status until around July 5, 2018, because staff
did not inform students until summer break had already begun.
Is that right?
Mr. Infusino. That is correct.
Mr. Krishnamoorthi. Describe to us your feelings when you
discovered your hard work in courses taken the entire previous
semester were not accredited.
Mr. Infusino. I was upset. Honestly, I felt lied to and I
was just--it was probably one of the hardest things for me to
wrap my head around, because you do all this work and then it
just turns out that it wasn't--now it's not going to show that
I worked so hard in these classes.
Mr. Krishnamoorthi. Do you know how much money your family
paid for that time that was unaccredited?
Mr. Infusino. I do not have an exact number, no.
Mr. Krishnamoorthi. It was in the thousands of dollars?
Mr. Infusino. Yes, it was.
Mr. Krishnamoorthi. Well, I can only imagine the panic,
anger, and betrayal that you and your family felt. No one ever
should be forced to feel that way simply for attempting to
improve their life and job prospects.
Can you walk us through what options you had to pursue your
degree after you read the July 5, 2018 email?
Mr. Infusino. So I had two options: That was to receive a
closed school discharge, and that was applicable to me because
I was still enrolled at the time when making these decisions.
But that would leave me still--it would leave my father out
thousands of dollars paid out of pocket. So, I decided that
that was not going to be the choice for me. But--and so, there
were limited colleges that would actually accept my credits,
because the Art Institute's accreditation agreement with a
couple of--like a handful of schools would--only like two or
three of them would have actually got me a similar degree.
So, I had decided to go with the school now that I
currently am at, because it only gave me about a year left of
school. It added an extra year, and it was all online, so I can
work.
Mr. Krishnamoorthi. And I guess what were the promises that
Illinois Institute of Art made to you when they were recruiting
you from high school?
Mr. Infusino. They had explained that their internship
program would get us into the heart of the media industry. And,
of course, with me not knowing much about the industry at the
time, I said, Sure. Why wouldn't they know? Why wouldn't their
internship program get me into the audio industry? But this
absolutely was not the case.
Mr. Krishnamoorthi. Let me ask you this: So Diane Auer
Jones is going to appear before our panel in the next hour.
What is the question that you would ask her if you had a
chance?
Mr. Infusino. One question of mine is why hasn't the
Department responded to our letters from my lawyers? And what
is the Department going to do about our loans? Because this has
just been in the air for years, and I'm already adding onto my
loan right now going to school.
Mr. Krishnamoorthi. And what is your loan total now, do you
know?
Mr. Infusino. I don't know offhand, no.
Mr. Krishnamoorthi. Okay. Mr. Madaio, what questions would
you ask Diane Auer Jones at this point?
Mr. Madaio. I would say, first, will you work
collaboratively with the state AGs to help students, and will
you consider and discharge the full loans for students who have
been lied to and deceived into attending schools?
Mr. Krishnamoorthi. So you're saying that right now the
Department is not acting on any of those moves or requests for
discharge of loans for defrauded students?
Mr. Madaio. Yes. It's my understanding they have not acted
on any for months, and there are over 158,000 outstanding.
Mr. Krishnamoorthi. Thank you, Mr. Madaio.
I'd like to correct the record briefly. I believe a witness
statement may have--I believe in a witness statement, a witness
may have misspoken. The gainful employment rule applies to
nondegree programs at public and nonprofit colleges. I just
want to make sure that's clear.
Okay. With that, I will recognize Dr. Foxx for questions
for five minutes. Dr. Foxx, the clock is on.
Ms. Foxx. Thank you very much, Mr. Chairman. I appreciate
it. And I appreciate all the witnesses being here today.
Ms. Burke, this hearing is designed by my Democrat
colleagues to target one specific sector of the postsecondary
education system, and I appreciate your bringing data that
talks about all segments. The strategy may be politically
convenient for them, but it tells me and the American people
they do not care about the vast majority of students getting
served by public and not-for-profit colleges and universities.
I'm interested in examining the practices of all
institutions of postsecondary education. This conversation
about reform is incomplete, unless we make sure all
institutions are held accountable and producing positive
outcomes for all students. So a real problem for too many
Americans is the rising cost to college and the burden of
student loan debt. Could you please elaborate on how we, as a
Nation, got to a point where over 40 million borrowers owe $1.5
trillion in student loans?
Ms. Burke. Thank you, Representative Foxx. And that's a
great question, and insightful. We should be thinking about how
policies across the board, particularly as promulgated at the
Federal level, have impacted higher education writ large. And
those policies have done exactly what you just outlined, they
have gotten us into a position where we are $1.5 trillion in
student loan debt. That is a number that should keep everyone
up at night, and that is a number that has been exacerbated
through this policy, unfortunately, of subsidizing higher
education at a rate that is just breathtaking from the Federal
level.
It was prescient back in 1987, when then-Education
Secretary Bill Bennett suggested that this exact issue would
come to bear, and it has, that when you spend profligately at
the Federal level, that that will encourage colleges and
universities, as he put it, to raise their tuitions
profligately. And that is exactly what has happened. We have
seen the cost of college greatly exceed the rate of inflation
over the past three to four decades. We have seen the cost of
college greatly outpace wage earnings. And all of that should
suggest to all of us that this policy of continuing, to quote
Dr. Richard Vetter, of dumping money out of airplanes onto
universities from the Federal level, have not made college
costs cheaper for average families.
And then I would also just say, if I could, that you're
right in identifying that these are issues that affect students
sector-wide. Low graduation rates are not an issue that we see
only in one sector and not another. If you pull up the Federal
college scorecard today, and if you filter the results by
public universities only, and by graduation rate, you will find
three dozen public universities with graduation rates in the
single digits. That's an issue across the board.
Ms. Foxx. Say that again. Three dozen, 36----
Ms. Burke. Thirty-six.
Ms. Foxx [continuing]. schools that have graduation rates
in the single digits.
Ms. Burke. Yes, ma'am.
Ms. Foxx. That needs to be talked about more. A followup
question: What effect would capping student loans, particularly
the Grad and Parent PLUS loans, have on students, institutions
of higher education, and the economy?
Ms. Burke. Well, I think the immediate effect would be
twofold: It would be a little fiscal restraint at the
university level; and it would greatly limit another issue that
should trouble everyone, which is the amount of taxpayer
exposure that is currently out there to this $1.5 trillion in
outstanding student loan debt.
There is a report that came out in 2015 from the Federal
Reserve Board of New York that looked at subsidies in higher ed
and their impact and Grad PLUS in particular and these Federal
subsidized student loans are egregious drivers of those
increases. They found that for every dollar in subsidized
student loans, universities raised their tuition 60 cents. So
eliminating that, making space for private lending to reemerge
would help both students and taxpayers.
Ms. Foxx. Thank you very much. One more followup question:
It seems to me institutions have a lot to gain by enrolling
students, but have very little incentive to help students
complete their education programs and earn a good-paying job
after graduation.
What would the advantages be if Congress instituted a skin-
in-the-game proposal that required all institutions to share in
the risk of student loan repayment outcomes?
Ms. Burke. That's a great question, and I think that there
is merit to proposals like that that are on the table that
actually says to colleges and universities, You are responsible
for ensuring that, not only your students learn an adequate
amount from the time they enter to the time they leave, but
they actually leave prepared to enter the work force.
Transparency is another good way to get there.
Ms. Foxx. Mr. Chairman, the clock didn't start working when
I started, so I'm going to yield back my time to be fair. Thank
you.
Mr. Krishnamoorthi. Thank you so much, Dr. Foxx, for your
fairness. Thank you.
Let me recognize Congresswoman Hill for five minutes.
Ms. Hill. Thank you, Mr. Chairman.
I want to make a quick distinction based on the previous
comments. Only 25.6 percent of for-profit students at four-year
colleges graduate within six years, 25.6. However, that number
is 60 percent for all other schools. So there is obviously a
very important distinction. Let me move on.
Mr. Madaio, can you please explain what the gainful
employment rule is, just very briefly, and what it was designed
to do and the people that it might benefit?
Mr. Madaio. Yes. The gainful employment rule, first, I want
to emphasize, it's designed because the Higher Education Act
says that for-profit schools have to have programs that lead to
gainful employment, for-profit schools and other certificate
programs at publics and nonprofits, as the chairman mentioned.
So that's what the HEA says. That's why all for-profit
programs fall under the gainful employment rule. It's designed
to protect students from going into a bad program in the first
place, instead of only helping them afterwards. And I should
point out one point, that since the failures, it's been
calculated that 350,000 students took on $7.5 billion in
student loan debt from programs that have failed the metric.
Ms. Hill. Thank you. So not sending Federal funds to
worthless programs seems like a pretty commonsense idea. So how
many schools has the Department of Education cutoff funding to
under the gainful employment rule?
Mr. Madaio. Zero.
Ms. Hill. Great. Is that because no schools would fail the
test set by the rule?
Mr. Madaio. No. 743 programs failed the test when the
numbers came out.
Ms. Hill. Can you explain the steps that the Department of
Education has taken to stop the rule from going into effect?
Mr. Madaio. Yes. The Department has kind of taken a two-
track approach. It's attempting to rescind and revoke the rule
and get it off the books, but until it can do that, it's tried
multiple ways to either delay the implementation of certain
parts of it, or just ignore the enforcement that it's required
to do on other parts of it.
Ms. Hill. So to me, it's clear that the prevention of this
rule going into effect benefits the for-profit schools. Is
there any possible explanation for how killing the gainful
employment rule helps students?
Mr. Madaio. It does not help students. It's either
protecting schools, or it's hurting students.
Ms. Hill. And can you explain what the borrower defense
rule is?
Mr. Madaio. Yes. The borrower defense rule is put in place
to protect students after fraud occurs and discharge potential
loans, and also protect taxpayers from fraud.
Ms. Hill. Can you just give a quick example of how schools
defraud students?
Mr. Madaio. Sure. So during recruitment, schools--and we
have found this in our investigations in our cases. There's
boiler-room type high-pressure sales that involve, what they
call ``the pain funnels,'' what schools use to emphasize the
pain in students' lives.
They deceive them about how much money they can make after
graduating, about their chances of getting a job, called a job
placement rate. How many students get a job, deceive them
whether credits can transfer, where often credits cannot
transfer to other schools from for-profits.
Ms. Hill. So it's basically false advertising?
Mr. Madaio. Correct.
Ms. Hill. And the Department of Education has tried to kill
that rule, too?
Mr. Madaio. Yes. It's tried to change that rule as well,
yes.
Ms. Hill. So the Department of Education has not succeeded
yet in killing this one, so it's on the books and enforceable.
Is that right?
Mr. Madaio. Yes.
Ms. Hill. Any idea when the Department of Education last
ruled on a borrower defense claim?
Mr. Madaio. I believe it was July 2018.
Ms. Hill. And do you know how many outstanding borrower
defense claims the Department of Education has before it?
Mr. Madaio. I believe approximately 158,000.
Ms. Hill. Oh, my gosh. Can you give us an example of a
college with a large number of students who should have their
borrower defense claims granted?
Mr. Madaio. Yes. The Corinthian Colleges chain, Everest
University. This is one the Department has already
investigated, already found that it lied to students when it
recruited them about the job placement rates.
Ms. Hill. And has the Department of Education given a
reason why it will not grant relief to these students, to these
defrauded students?
Mr. Madaio. The Department has not provided any reason, no.
Ms. Hill. So 158,000 students are waiting on the Department
of Education to do its job. The Department of Education's
refusal could force any number of these students to miss their
rent, or even their next meal. When Ms. Jones appears on the
next panel, I sincerely hope she can explain why the Department
of Education refuses to do its job and is hurting thousands of
students in the process.
Thankfully, state attorneys general have stepped up to help
students in the Department of Education's absence. Has the
Department of Education taken any actions that have hurt your
ability to help students, however?
Mr. Madaio. Yes. The Department has basically shut off all
contact with state AGs. So when we find evidence and we bring
them in cases, or we settle with schools, that evidence is
basically ignored and the schools can continue on doing what
they're doing even after they settle cases with us.
Ms. Hill. So the Department of Education has been so
derelict in its duties, that states attorneys general,
including Attorney General Frosh, have been forced to sue the
Department of Education to do its job, and enforce the gainful
employment rule and borrower defense rule. It's sad that it's
come to that, but thank you for trying to help students.
Mr. Madaio, Mr. Halperin, I invite each of you to share one
piece of advice that you might have for Ms. Jones. Hopefully,
she is listening.
Mr. Halperin. What I find remarkable is all the Department
decisions seem premised on the idea that students are con
artists who will take advantage of the Department if they grant
debt relief, or provide other ways for students to have their
rights protected, when all the evidence is that the fraud has
been by schools, a large number of for-profit schools.
Mr. Madaio. And I would just say that it's within your
discretion to cancel loans, all the loans for students who were
lied to to go to a school, and the Department should do that.
Ms. Hill. Thank you. I yield back.
Mr. Krishnamoorthi. Thank you, Congresswoman Hill.
Congresswoman Miller, you have five minutes.
Mrs. Miller. Thank you, Chairman Krishnamoorthi and Ranking
Member Cloud. And thank you all for being here today.
Dr. Burke, today, only a quarter of students are repaying
both the interest and principal on their student loans.
Department of Education data clearly demonstrates that all
sectors of higher education have poor performances, poor
graduation rates, high default rates and high debt to earnings.
Don't you agree that we should hold all institutions
accountable for poor outcomes?
Ms. Burke. I do.
Mrs. Miller. I fully support governmental efforts to hold
bad actors accountable. We know from the college scorecard data
that oversight and accountability is necessary for institutions
in all sectors of higher education. Do you agree that we should
apply accountability across all higher education sectors,
particularly including debt to earnings, since students face
challenges regardless of what kind of school they go to?
Ms. Burke. As long as these regulations are in place, they
should be applied neutrally across the board to all
institutions.
Mrs. Miller. Recent research has shown that just 12 percent
of students enrolled in a certificate program at a for-profit
would have had access to a similar program at a nonprofit
institution. It seems that for-profit schools can fill an
important void in our postsecondary education system. Do you
agree?
Ms. Burke. I would agree with that.
Mrs. Miller. If these type of certificate programs no
longer exist, what options are available to students?
Ms. Burke. And this is the issue. Other institutions are
selective in their admissions, and selective, as it suggests,
means that not everyone will get in. So closing down a single
sector, or promulgating rules that only target a single sector,
will hurt those students and their opportunities writ large.
Mrs. Miller. Correct. For-profit colleges are responsible
for about half of all two-year computer science and information
technology degrees in the United States. If there are less for-
profit colleges, would the result be a major skills gap in the
American work force?
Ms. Burke. Yes. And this is an issue for the work force
writ large, that we have a gap when it comes to things like
cybersecurity and technology, and everything that you've just
outlined. And this is a critical area that these institutions
are filling that may not be filled otherwise.
Mrs. Miller. Thank you. I yield back my time.
Mr. Krishnamoorthi. Thank you, Congresswoman Miller.
Congresswoman Shalala, you are on the clock.
Ms. Shalala. Thank you very much. We've heard discussion
about the Dream Center for-profit chain closure today. I
understand some of these schools were sold off right before the
collapse to a nonprofit organization called the Education
Principal Foundation and a related for-profit corporation named
Studio Enterprises, which is providing extensive services to
these schools.
Mr. Halperin, can you explain this arrangement and your
understanding about how it came to pass?
Mr. Halperin. Well, the arrangement was that the Education
Principal Foundation, a nonprofit organization, would own the
schools, many of the former Dream Center Schools, and the
Studio company would get the lucrative contract to service the
schools in various ways and make money from the student aid
that was coming in.
Now, what wasn't said when all of this was announced was
that a private equity lending firm in New York, called Colbeck
Capital Management, was behind both the foundation and the for-
profit company that would be servicing it. If they were proud
of that arrangement, why didn't they tell us? I don't know.
But how it came about, I double-checked my source today
inside the Dream Center world, and he texted me the following
email, and it says the following. This is from December 2018,
and it says--this is within the Dream Center organization,
which is falling apart and ready to close schools--``I just got
a call from Diane. We have been summoned to a meeting on
Wednesday from 1 to 5 to resolve the transaction. Once and for
all, the Department wants to resolve the situation. We want the
lenders there. We want Colbeck there. We want Dream Center.''
And according to my source inside of this organization, spoke
to today, again, reaffirmed that the Department said, You have
to make this deal. All the Title IV money will now go through
the head of Colbeck, this private equity firm in New York, and
you have no choice. And that's when Brent Richardson, who was
the head of the Dream Center Education Holdings, said, Well,
then, I resign. So that's how I understand it went down.
Ms. Shalala. So Diane Auer Jones played an integral role in
that transaction?
Mr. Halperin. I'm very confident that's the Diane that's
referred to in the email.
Ms. Shalala. I understand that there's a trend of for-
profit schools trying to convert to nonprofit status. Can you
explain how that works? In my state, for example, when they
made the conversion they leased the building----
Mr. Halperin. Yes.
Ms. Shalala [continuing]. from the for-profit. In other
words, it wasn't quite so nonprofit.
Mr. Halperin. Yes. Ms. Shalala, you are referring to Keiser
University.
Ms. Shalala. Exactly.
Mr. Halperin. A powerful political person in your state,
Art Keiser, who transformed his school in the same way that
CollegeAmerica--to which I referred earlier--did, which was to
sell the school to a nonprofit organization at a very high
valuation. This was such an outrageous valuation that The New
York Times ran a front page story on those two transactions.
In other cases, a new nonprofit is set up. But in all of
these cases, either the former for-profit owner, or somebody
else, is continuing to make big money. The school, as I said,
with Grand Canyon can advertise, Hey, students, we're a
nonprofit, but, in fact, they're still functioning and
structured as a for-profit.
Ms. Shalala. It seems very fraudulent.
Ms. Burke, can I ask you a question? Since I've chaired a
lot of accreditations of universities, including, most
recently, Boston College, the organization ACICS, which has
been reinstated by the Secretary, does not seem to have the
same standards for their national accreditation of these
schools that we're talking about today, that the regional
organizations do.
The regional organizations have a very rigorous standard
and review, including the institution spending a year preparing
the data, and then they bring in teams. I've done Berkeley,
I've done colleges in the South, and, most recently, Boston
College, as I indicated. I don't see any of that in the
accreditation of the schools that we're talking about.
Ms. Burke. So there are, indeed, differences between the
national and the regional accreditors. But if accreditation is
an issue, I would argue that it is not fulfilling its role of
quality assurance across the board, which is what it should be
doing.
When we have public and nonprofit universities that have
extremely low graduation rates themselves, when students are
exiting all of higher education, again, not confined to one
sector, with high levels of debt, when we have $1.5 trillion in
outstanding student loan debt, and when employers across the
board are increasingly reporting that their employees are not
prepared to enter the work force after going through higher
education, I would argue, again, that accreditation, as
currently structured, is not fulfilling its job, for any of the
institutional sectors; and that job should be quality
assurance, and that's what it's falling down on.
Ms. Shalala. Well, that certainly is not my experience of
the kind of outcome measures that accreditation at the regional
level currently have.
I yield back.
Mr. Krishnamoorthi. Thank you, Congresswoman.
Congressman Roy, you have five minutes.
Mr. Roy. Thank you, Mr. Chairman, I appreciate it.
Thank you all for being here today, and taking part in this
important subject. I apologize. I missed the first part of
this. It's not unusual around here. I had competing hearings. I
had five hearings today. So I've been running around. But I
appreciate you all being here.
A question that I wanted to explore a little bit for you,
Ms. Burke. Is it true--and I apologize if this is rehashing
anything that was said before I got here--that the data I have
is that there are more than 44 million borrowers who have
collected over $1.5 trillion in student loan debt in the United
States. That was a 2016 number. Does that sound about right?
Ms. Burke. Yes, there's $1.5 trillion outstanding in
student loan debt.
Mr. Roy. I guess what I've been trying to wrestle with--I
have three degrees: University of Virginia twice, Texas, paid
my way partway through school, scholarship help, some athletic
scholarship help, but still had debt. And I got through--went
to two relatively affordable institutions, the public
universities in both states, Virginia and Texas.
What I'm trying to wrestle with is the value proposition of
higher education today. And I've got a nine-year-old and an
eight-year-old, and I can't say today that in a decade that I
will suggest to them that the value of going to any one of our
top, fill in the blank, U.S. News and World Report or otherwise
institutions of higher learning is worth the price.
And what I'm trying to wrestle with is, our, I think,
collective goal of ensuring that people can be educated and
have opportunities and pursue their dreams and so forth, but
the best way to do it in the 21st century world, where we want
to have lots of different options, lots of different
opportunities, and not be saddled with just what we understand
is the education that we've always understood, right? I mean,
University of Virginia, I love it, right? Great history. Thomas
Jefferson and a lot of wonderful components to it. Great big
beautiful brick buildings and so forth. UT, the same way, lots
of other institutions.
There's a lot of cost to all of that. And in a world in
which you can get just as educated pretty quickly, looking at
the lectures of some of the best minds in the world through
online means and other ways, I guess this is--I'm filibustering
half of my own time here. I just wanted to ask: How do you
visualize 21st century education and now even 22d century
education as we start to look ahead? And how do we break this
down? We can go back and forth about student loans, and who's
paying for what and all that, but we ought to be much more
creative, I would think, about how we're making this work, and
how accreditation and how we view all this, how this comes
together. So if you could maybe expound on that a little bit.
Ms. Burke. Thank you for that question. And I did my
master's at UVA as well so I have an infinity for UVA. And
you're absolutely right, the nature of education from K-12
through higher education is changing; and it's something,
unfortunately, that Federal policy, both in terms of
accreditation and how you can access Federal student loans and
grants, has not kept up with. To quote one of my professors at
UVA, Dr. Keith Williams, he notes that college costs are higher
than at any other point in time at a time when access to
knowledge is cheaper than at any other point in human history.
And so we have to ask ourselves, Why is this the case? This
is an issue that we have created through this robust, overly
robust system of Federal subsidies. And until we think about
reconfiguring that system, I think, in a way that actually gets
to some of these structural issues, then we're not going to see
that cost go down.
And so I would recommend two things in particular: One
would be reconfiguring accreditation so that we actually
decouple accreditation from Title IV funds, from Federal
financing, to enable the mid-career switcher or the single
mother or, you know, whoever it might be that cannot spend four
years in a traditional brick-and-mortar college to enable them
to actually take their grant aid to individual courses, and
courses of study, and really customize their higher education
experience. And at the same time, we need to cutoff that open
spigot of Federal student aid. Until we cap that, we are going
to continue to see colleges raise their tuitions blithely.
Mr. Roy. Really quickly, because then I want to get--Mr.
Halperin, you were shaking your head. I want to get your
perspective on it. A quick answer, Ms. Burke, do you think that
we are encouraging people through student loans to go to
schools that aren't necessarily a match for their particular
skill sets or interests, in terms of driving people to four-
year institutions instead of maybe perhaps other alternatives?
Ms. Burke. Yes, 100 percent.
Mr. Roy. Mr. Halperin, you were nodding during some of
this. I just wonder if you have any thoughts on it, and then
I'll yield back.
Mr. Halperin. I agree with much of what the two of you just
discussed. My issue is why--and I sometimes agree with Ms. Foxx
and others. Why are we talking about the for-profit college
sector? But the reason is, because we created a monster with
the for-profit college sector. Why are we even talking about
sending money to schools that have been sued repeatedly by
state attorneys general for fraud, that have shown repeatedly
that they leave students with overwhelming debt.
Those bad actors, not all for-profits, but the bad ones
should be out of the system so that higher ed experts like Ms.
Burke could focus on the actual hard questions in higher ed,
the very questions you are raising. But why we are spending
time on fraud is because the fraud is going on. As we sit here,
students are being deceptively recruited into programs that
will ruin their financial futures. I would love to move on and
talk about the real issues in higher ed.
Mr. Roy. No disagreement on getting rid of bad actors, just
to be clear.
But thank you, Mr. Chairman.
Mr. Krishnamoorthi. Thank you, Congressman Roy.
And let me, just before I go to Congresswoman Tlaib, Mr.
Halperin, can you also commit to submitting that correspondence
that you referred to earlier, the email correspondence to the
subcommittee to be entered into the record?
Mr. Halperin. Yes, once it's stripped of certain markings,
because the person who sent it to me does not want to be named.
I think ultimately, you should bring the Dream Center folks
here and ask them what happened.
Mr. Krishnamoorthi. I understand. Thank you.
Congresswoman Tlaib, you have five minutes.
Ms. Tlaib. Thank you so much, Chairman. In 2015, Corinthian
Colleges was the largest for-profit school in the country.
Since its collapse, documents obtained through FOIA show that
the college marketing and advertising plan was tailored
specifically to low-income people and single mothers of color.
The internal documents described these potential students,
get this, quote, ``desperate for a better future and afflicted
with 'low self-esteem.' '' This is pretty appalling. Internal
strategies such as these reflect another example of corporate
greed and the willingness to use whatever means to exploit
students. When only 25.6 percent of students who enroll in
four-year for-profit institutions graduate with six years and
even then, employment prospects are grim, but you know what
isn't grim is the increased profit margins of these for-profit
colleges.
Mr. Madaio, as an assistant attorney general, what more
should the Department do federally or in collaboration with
state AGs to combat fraud and deception within industry,
especially when they target communities of color?
Mr. Madaio. I think the most important thing is actually
investigating, looking into it, collecting the documents that
the states collect, reviewing the group discharge applications,
which are basically an application that a state AG can file on
behalf of a large group of people and saying, here's a pattern
and practice that we have investigated. Here's ways you could
do your own investigation, but the bottom line is we need to
figure out that there was fraud here and if there was fraud
there, to discharge the full amount of debt.
Ms. Tlaib. Thank you. Mr. Halperin, it is my understanding
that a significant number of for-profit schools have engaged in
serious misrepresentation that we've been talking about. Can
you provide some specific examples of some of those
misrepresentations, and explain how they hurt the students?
Mr. Halperin. Well, many, many schools that have been sued
by state AGs for the kinds of things that Chris talked about,
these schools are set up to separate students from their money,
and from our taxpayer money, to get them to sign up. So a
student will come in, like Mike DiGiacomo, a friend of mine who
lives in Massachusetts. He was an Army veteran. He came home
from service, and he went to a school and said he wanted to
design video games. That's what a lot of young people say. And
they said, Great, we have a program in that. But when he got
there, they didn't. They had a program in graphic design. And
he stayed in that program and they kept saying, Video games are
coming. This school was called Gibbs. It was owned by Career
Education Corporation, the same company that Ms. Jones worked
for until 2015.
So Mike stayed in this program. On graduation day, he paid
all the money and he had not learned anything about how to
design video games. His internship was with an architect, and
he did the architect's laundry while the architect went
mountain biking with his girlfriend.
So, Mike got his degree. He was so disgusted on graduation
day that he mopped the floors of Shaw's Supermarket, where he
was still working. Then he thought, Well, what am I going to do
with these credits? I'm not a graphic designer.
He was recruited by another school, the New England
Institute of Art. That sounded like a good school. Guess what?
That was one of the art institutes that RJ went to that was
owned then by a predatory company, by EDMC, and later by the
Dream Center, and now those schools are owned by Studio. And
there again, they promised him he would be a video game
designer, and they kept not having the programs that really
helped him.
Finally, one day they called him in the office and they
said, You're going to have to take out one more big private
high-interest loan, or you're not going to be able to stay
here. And he said, that's it, I'm done. Mike is now trying to
support his family. He lives in Boston. All of that education
never got him a thing to help him with his career. He owes
approximately $100,000 for that educational experience that was
worthless to his life.
Ms. Tlaib. No, I couldn't agree more how outrageous it is.
Under the prior administration, the Department of Education
determined that ACICS was not fulfilling its role as an
accreditor and stopped recognizing it. Ms. Jones, who we will
hear from shortly, authored a decision reversing that decision
and acknowledging that ACICS is an accreditor. Can you explain
how that decision hurt schools or students?
Mr. Halperin. ACICS was the accreditor of Corinthian, of
ITT, of some of the EDMC schools, of many of the worst schools,
more alphabet soup, ATI, schools that were caught defrauding
students, systematically stealing their money, lying to the
government about job placement and about financial aid. So when
the Obama Department of Education finally said, Look, we're
tired of rubber-stamping these accreditors, that was a
momentous moment. It's not like the Obama Department was doing
everything that students wanted. The industry lobbyists had a
lot of sway with them and pushed them back from doing good
things.
So that decision said that accreditor is out of business
and schools are going to have to find another accreditor. And
it also sent a message to other accreditors, you've got to
straighten up.
Ms. Tlaib. Thank you so much. And I have a resident who
attended Michigan Computer Institute in Southfield, was shut
down in 1992. She currently is burdened with $30,000 debt from
a school that shut down while she was in attendance. She has no
degree, certificate, or any diploma to show for it. What does
she have? A $30,000 bill. It's truly mind-boggling. And I
appreciate the chairman having this hearing.
The misrepresentation on the quality cost and job placement
rates is, alone, something that I think and hope that this
administration will take very seriously in trying to fight for
these students and these people and our communities that are
impacted directly. Thank you so much, Chairman.
Mr. Krishnamoorthi. Thank you, Congresswoman Tlaib.
Next is our ranking member, Mr. Cloud. You have five
minutes, sir.
Mr. Cloud. Thank you all, again, for being here. Thank you,
Chairman. Mr. Infusino, I just want to thank you for being
here. I know coming to Congress can be pretty intimidating, and
you're demonstrating courage in being here, specifically with
your circumstance, so I appreciate that.
Obviously, I think there is unanimous support. We want to
punish bad actors. Bad actors need to be punished, there's no
doubt about that. I think it's even better if we can protect
students at the beginning. But we are in a challenging
environment in that industry is changing. The world we live in
is changing. One of the major issues we have now from an
employment standpoint is we have almost full employment, and
we're lacking in skilled trades. We do need more tech schools.
We need more education opportunities that are outside the four-
year traditional university approach. As has been discussed,
there's major debt that has been accumulated with students, and
the job placement in traditional four-year institutions isn't
all that stellar either.
How do we provide good information in this environment? The
thing that I'm concerned about is our government has a tendency
to fix things with a big broad brushstroke instead of fixing
the issues. We saw this in the too-big-to-fail fiasco, where
instead of punishing the bad banks, we punished everybody. And
so community lending and small banks are suffering.
So how would you recommend that we address this issue in a
targeted way that fixes the problem without prohibiting schools
that are doing it right, that are providing opportunities for
minorities, that are providing opportunities for skilled
trades, that are doing these sort of things, that we
desperately need in our economy, and not just for our economy,
for the sake of those individuals who need opportunities for
growth and development and upward mobility? How do we do that?
If you can, Ms. Burke, Mr. Halperin, you can each speak to
that.
Ms. Burke. Thank you. So just a couple of points. If you
look at BLS data, the median wage for construction supervisors
is around $70,000 per year; for plumbers, it's around $56,000 a
year; electricians, $59,000 a year. So I say that just to
mention that your point is well-taken, that these are jobs that
are vital in the economy, and that it is just something we need
and that the market is rewarding. Speaking of the market, I
would say that that is the best way to deal with most of these
problems. Let the market determine program pricing and student
borrowing.
And then, finally, I would say what I mentioned earlier, as
long as these regulations exist, whether it is gainful
employment rules, the 90/10 rule, whatever it might be, that we
need to apply them across the board. If transparency works--and
transparency does work--then it should be applied to all
universities, not just a sector because of that sector's tax
status.
Mr. Halperin. Mr. Cloud, as I said at the beginning, all
members should be against waste, fraud, and abuse and against
programs that leave students worse off than they start. I
submit to you that is what the Obama gainful employment
borrower defense rules did. They are very modest rules. Only 10
percent of career education programs and for-profit programs
flunked the first round of the gainful employment test in a
sector that has a lot of poor performing schools.
These were hard-fought rules where there was a lot of give-
and-take between the industry lobbyists who were here, and my
colleagues who were here. And we went back and forth. We did
not get anything like what we thought was appropriate to
protect students. These are modest rules, and what they say is
the money should go to the schools that are helping students
and programs and not go to schools and programs that aren't.
That's all we've asked.
And I submit if you take a look at those rules, what's
really going on is that the industry is saying, with all the
money they get from taxpayers to hire lobbyists, we don't want
any accountability. And it is not a free market program; it's a
government program, there should be performance standards. And
I truly think that's what the Republican Party ought to
believe.
Mr. Cloud. Well, even in a market approach, the market
approach works when you have a full idea of what the product
is. And, so, transparency is a key essential element of a
market approach.
A couple questions here: The gainful employment rule, if it
were to be applied, is there a reason it should not be applied
then to degree programs as well? And, I think the question that
we have is why is it being isolated to certain sectors? And
then, in the sense of transparency on the front end, if there
is a way almost like a food labeling law for schools and
universities, what things would you think should be on that
list?
Mr. Halperin. Well, as Mr. Madaio said, the rule is based
on a statute that talks about gainful employment. That only
mentions--the statutory authority for the rule comes from a
provision that only mentions for-profit programs and
certificate programs and other institutions. So it doesn't just
single out for-profits.
And the other reason to do it that way, is because the
evidence is that there has been fraud and abuse in that sector.
The other sectors, you do not have so many students. Yes, we
have a debt crisis we need to fix, but you don't have students
coming in and saying, We were lied to. We were deceived. And
that is what the for-profit college industry, many of the bad
actors are set up to do, to systematically take students who
are the first in their family to go to school, and don't know
what they're getting into and say to them, This is your dream,
This is your opportunity, sign now or there won't be any real
room, this is a selective school. And that's when they sign and
that's when their lives get ruined.
Ms. Burke. Again, I would direct everyone to the single-
digit public school outcomes on the Federal college scorecard.
Higher education, again, needs reform across the board, not
just one sector.
But to answer your question directly, no, I mean, we should
not have a gainful employment rule that only singles out one
sector, based on its tax status. And yes, it is in Title I of
the HEA that that language is there. But currently, HEA is
under reauthorization right now, so it's a great opportunity to
revisit some of that.
Mr. Krishnamoorthi. Thank you. Thank you, Mr. Cloud.
Congressman Connolly, you have five minutes.
Mr. Connolly. Thank you very much.
Ms. Burke, I'm having trouble understanding the point
you're making. You went to UVA?
Ms. Burke. I did.
Mr. Connolly. As did my daughter. So UVA was constantly
singled out for defrauding students, for false advertising, for
doctoring documents, for lying to the Federal Government about
financing and other methods. Is that correct?
Ms. Burke. Not that I'm aware of.
Mr. Connolly. No, not that you're aware of. But the
institutions we're talking about most certainly have been
accused of all of that, and yet you, in answer to Ms. Foxx,
want us to believe there's a false equivalence. They ought to
all be treated the same. That's your testimony?
Ms. Burke. I'm saying that the rule should be applied
across the board.
Mr. Connolly. Why would we do that if one is a problem and
the other is not? Why wouldn't we try to protect consumers by
distinguishing between the two?
Ms. Burke. Because we're not, because we don't apply the
rule universally.
Mr. Connolly. No, you're missing the point. When we see a
problem with one category and not the other, why wouldn't we be
logically in our right to distinguish in the law so that we are
dealing with the problem Mr. Infusino had and you didn't.
Ms. Burke. No one is dismissing that there is waste and
fraud and abuse in higher education, and that there are bad
actors in every sector.
Mr. Connolly. Yes, that's your testimony, which you
continue to repeat a false equivalency, it's a problem across
the board. As a matter of fact, it is not. We just heard Mr.
Halperin say, No, there's a distinction to be made here. And
that's why it's reflected in the law.
And what you would do, if you had your way, is have us
dilute that law so that, in fact, we couldn't protect people
like Mr. Infusino from being defrauded by these institutions.
Ms. Burke. If I had my way, I would cut out the Federal
subsidies altogether, to actually drive down costs and fix a
lot of these broader systematic issues.
Mr. Connolly. Yes, and I wanted to go on to that too. If
you had your way, if I understood you correctly, in response to
Ms. Miller, you'd cap, or actually reduce or eliminate student
loans?
Ms. Burke. Yes.
Mr. Connolly. Would you do the same for GIs when they're
returning from service?
Ms. Burke. So that was a pre-1965 issue and it was, in
fact, the first time the Federal Government really got involved
in student lending. One could say it was a toehold to student
lending. But what we know for sure is that post-1965, separate
from the GI issue, that that accelerated it.
Mr. Connolly. What about the GI issue, because we updated
the GI bill actually during George W. Bush's administration. In
fact, it was a colleague from Virginia, Mr. Webb, who took
great pride in that. So, I mean, we upgraded that. Should we
get rid of GI loans for education for returning veterans
because after all, according to your testimony, presumably, it
contributes to the problem.
Ms. Burke. Servicemembers have put their lives on the line
for our country and----
Mr. Connolly. But that's not the issue. Excuse me. I only
have a little bit of time. Forgive me for interrupting. But, I
mean, that's really not the issue, is it? The issue isn't who
put their lives on the line. The issue is the infusion of money
that is contributing to the problem, according to your
testimony. Money is money. Whether it goes to GIs or whether it
goes to students like Mr. Infusino, it's corrupting the system,
it's filling the funnel that you say contributes to the
problem.
Ms. Burke. The problem exceeds any sort of targeted option
for our servicemembers, where there is a national security
rationale for the Federal Government being involved. We spend
more than $100 billion a year on these Federal subsidies, and
that's driving the high tuition costs.
Mr. Connolly. Ms. Burke, are you at all familiar with how
institutions game the system at the expense of returning
veterans? I mean, my lord, you want to look at that problem. I
mean, it's hardly problem-free. They exploit veterans all the
time. I could give you, in my own experience, a gazillion
examples. I have to deal with it, in terms of my constituents.
Mr. Madaio, you are shaking your head yes.
Mr. Madaio. Yes. I mean, in 2012 state attorneys general
settled with what's called a lead generator, that was
essentially lying to students and saying, Here, the gibill.com,
come to these. And the only options it gave students were for-
profit schools, because it was employed by for-profit schools
to do that.
Mr. Connolly. That's right. Mr. Halperin, you are also
shaking your head yes.
Mr. Halperin. After they shut that down, I pointed out--I
testified at the FTC--that army.com was still running. That
army.com, no matter what you said you wanted to do with your
life, they said Grantham University is the right school for you
that. Was a for-profit school. Army.com was owned by a
fraudulent lead generator that eventually the FTC did shut
down, and many more. All over the web there's websites that
say, do you want home heating assistance? Do you want a job? Do
you want food stamps? And all they are is a way to get you on
the phone with a recruiter for a for-profit college.
Mr. Connolly. So, Mr. Chairman, my time is up. Ms. Foxx,
when she began her questioning, actually characterized
Democrats' motive in today's hearing. Let me return the favor.
If we listen to the Heritage Foundation testimony and heed it,
we are protecting people who are defrauding our students all
across the United States.
I yield back.
Mr. Krishnamoorthi. Thank you, Congressman Connolly. I just
want to add that not only veterans, but everyone deserves a
quality postsecondary education.
With that, I want to recognize Congresswoman Pressley for
five minutes.
Ms. Pressley. I want to thank you, Mr. Chairman, for
holding this important hearing. During my eight-year tenure on
the Boston City Council, prior to being elected to Congress, I
held one of the first hearings in the Commonwealth of
Massachusetts on the deceptive practices of for-profit
colleges, and shed light on the irreparable harms posed by many
in this industry.
I am proud that my home state of Massachusetts, thanks to
the tireless work both, respectively, of Attorney General
Martha Coakley, initially who was my partner in this effort,
and now my dear friend and partner in this effort, Attorney
General Maura Healey, have consistently led the charge against
this predatory industry and in support of the students and
families that have been harmed.
This industry raked in record profits at the expense of the
hopes and dreams of many of our most vulnerable communities.
The statistics are staggering. Black and Latino students make
up less than 30 percent of all students, of college students,
yet they comprise almost half of all students at for-profit
colleges. This is no coincidence.
In fact, before the Corinthian College chain collapsed in
2015, records show that it spent nearly $650,000 to directly
market communities of color on networks like Black
Entertainment Television, BET. For-profit colleges even went so
far as trying to affiliate themselves with HBCUs to appropriate
the historical significance of these institutions for the sole
purposes of exploiting the very communities those institutions
serve.
As a result of loopholes, these schools have lined their
pockets with 100 percent of Federal taxpayer dollars, while
consistently failing to meet quality benchmarks and
demonstrating a pattern of breaking state and Federal laws. And
while this industry runs rampant, the administration makes no
attempt to rein them in.
Mr. Madaio, in the absence of this administration's
leadership to protect students from this predatory industry,
can you speak to how states and municipalities are stepping up
and specifically what we're seeing from attorneys general. And
I would also be curious--when I did that first hearing, it was
to make an appeal to the city of Boston--at the time the mayor
was Tom Menino--to replicate what I considered to be a
successful program in New York, a know-your-risk consumer
awareness campaign, but I was unable to get that done. So could
you just speak to what's happening with attorneys general and
municipalities and what's working?
Mr. Madaio. Yes. Attorneys general, obviously, have an
enforcement arm so they can perform investigations, find those
schools that are targeting people of color, targeting the
single parents and targeting them with the lies and deception.
And, of course, states now finally have to, because the Federal
Government has totally stepped back in setting up protections
for students for state laws.
Of course, there's only so much they can do. A lot of
students say, Well, I went to the school because the Federal
Government was giving it money, so I assumed it was good. So
states can try to do something. Some states have put tuition
recovery or bond programs in place to protect when students pay
out of pocket, like Mr. Infusino's father did, and if a school
closes, they could actually get money back. States set up other
required programs and could do things to protect students, and
they slowly are.
Ms. Pressley. Do you feel that this administration is
actively working to undermine any of these states' efforts?
Mr. Madaio. Well, yes. I mean, the Department has made its
intention clear that it feels like states are preempted from,
for example, enforcement for laws or enforcement actions
against student loan servicing companies, which have been
routinely sued or, you know, evidence has come to light that
they are committing unfair deceptive trade practices against
consumers.
Ms. Pressley. Well, it's even more appalling when you
consider that Secretary DeVos, a person Forbes referred to as
a, quote/unquote, ``the Queen of debt''--what an awful
moniker--has been slow or unwilling to provide debt relief to
those who took out these loans, based on deceptive marketing.
Mr. Halperin, what immediate steps can the Department of
Education take to prevent for-profit schools from preying upon
our most vulnerable Americans?
Mr. Halperin. They can stop the two rulemakings that I went
to a meeting about yesterday, pleading with the White House,
and the Office of Management and Budget and the Department of
Education, don't get rid of this gainful employment rule that
says if you leave students year after year in overwhelming
debt, you have to get out of the Title IV program. They can
stop canceling the borrower defense which gives students relief
and start granting the relief to which students are entitled.
They can turn their enforcement unit back on again that was
created to crack down on fraud that they shut down. And they
shut down cooperation between the Department and all the other
agencies that were concerned with these issues. They can say to
the accreditors, like ACICS, we're not going to approve you if
you approve fraudulent schools. They can reject these bogus
conversions to nonprofit status.
And the Secretary should stop saying that the Obama rules
mean that all students need to do is raise their hands under
the Obama rules to get free money.
Ms. Pressley. Reclaiming my time.
Mr. Halperin. Stop looking to students as crooks.
Ms. Pressley. Thank you for your passion and for being so
prescriptive. I'm grateful. Unfortunately, the Department of
Education has sided with corporate interests and schemes that
have led to the suffering of veterans, single mothers, and
others, that simply seek to improve their life's prospects. It
is unconscionable that we have been delayed in processing over
158,000 borrower defense claims of defrauded and deceived
students.
And I yield.
Mr. Krishnamoorthi. Thank you, Congresswoman Pressley.
I want to recognize Congressman Roy for one minute, and
then we'll conclude.
Mr. Roy. Mr. Chairman, I appreciate that. Thanks for that
little extra minute, because I just wanted to give Ms. Burke
one chance to kind of respond. There were a couple issues there
that caught my eye--or my ear, I should say.
No. 1, I assume, Ms. Burke, you agree that we should tamp
out fraud wherever it exists, right?
Ms. Burke. Absolutely.
Mr. Roy. Regardless where it's happening, and particularly,
where it's happening the most, okay, agreed?
Ms. Burke. Absolutely.
Mr. Roy. No. 2, with respect to the GI bill. Is it not a
false equivalency to compare the GI bill to overall Federal
loans, because you are talking about 1 percent of the
population for a population that volunteered to put their lives
on the line for the country, and it's a part of the package to
recruit them to do that for the country?
Ms. Burke. Yes.
Mr. Roy. And that is a very different magnitude than the
billions we're talking about, trillions for all of the people
in loans generally?
Ms. Burke. That is correct.
Mr. Roy. And then, No. 3 and finally, isn't it your point
that with respect to the larger issue of large institutions,
including my alma maters, Virginia and Texas, the sort of
silent killer of this enormous expense wrapped into these big
institutions and what that means to get to $1.5 trillion and
that we need to oversee that, is that not what you're getting
at? Then I'm finished.
Thank you, Mr. Chairman.
Ms. Burke. Yes, it is. And the stigma that that is the only
pathway to upward mobility is to go through traditional four-
year brick-and-mortar.
Mr. Krishnamoorthi. Well, with that, I'd like to thank our
witnesses. And I agree--we can close on one sentiment of
agreement, which is that we all agree that we should have
quality postsecondary education.
Well, we're going to allow for one last questioner here,
Mr. Grothman, for five minutes.
Mr. Grothman. Yes. What we're talking about, people winding
up worse after college. First of all, I'd like to ask Mr.
Infusino a question. How big is your college debt right now?
Mr. Infusino. Come again?
Mr. Grothman. Pardon?
Mr. Infusino. Come again? I did not hear you.
Mr. Grothman. How big is your student debt right now?
Mr. Infusino. I don't have an exact number.
Mr. Grothman. About. Like is it $5,000, $2,000?
Mr. Halperin. Are you referring to my student loans?
Mr. Grothman. Correct.
Mr. Infusino. Close to $30,000.
Mr. Grothman. Okay. One of the things I think they ought to
do, and I am going to ask both Mr. Halperin and Ms. Burke
whether she feels we should do something like that, because
actually it was suggested by one of my local for-profit
colleges is, do you feel it would be appropriate to have
colleges sign off before people do take out student loans, so
somebody can see whether the amount of loan being taken out is,
say, unnecessarily large? Do you think that's a good thing to
have done?
Ms. Burke. Yes. As I mentioned earlier, I do think that
there is merit in ideas like having skin in the game for
universities to think about whether or not down the road, they
are on the hook for some proportion of defaults.
Mr. Grothman. I'm not just saying skin in the game. That
they would sit down with the student, say, you know, not only
how much is the tuition, how much are the books, how much
should you be working outside of class?
Ms. Burke. Well, and I would even go a step further and say
it would be nice for the Federal Government to actually clarify
some of those metrics as well, that if you are attending an
online university, for example, that something like Federal
data should not assume that you have cost of living expenses on
campus and inflate the cost. So there are things both at the
institution level, and at the Federal level that could help
with some of those issues.
Mr. Grothman. Mr. Halperin, I'll ask you again. Do you feel
that is a good thing?
Mr. Halperin. Mr. Grothman, I do think schools should be
counseling students not to over-borrow. I've heard a lot of the
schools that are not such good schools complain that the
students over-borrow, but the truth is a lot of schools say to
students, if you come here, you'll have more money to borrow,
and you can get a TV. They use the over-borrowing as a
recruiting tool, and that is a fact, and that's been
documented.
Ms. Burke. And that's an issue across the board.
Mr. Grothman. The question I have, though, then, is should
we require universities to sign off on the amount of student
loans that people are taking out?
Mr. Halperin. I think that is probably a good idea. I would
have to look into all the details of it, but in general, I
think it's a good idea when schools have good intentions that
they are guardians for students and look out for things like
that.
Mr. Grothman. Okay. And do you feel that way as well?
Ms. Burke. So we have continued over the years to layer
more and more regulations onto universities. I'm not confident
that yet another regulation is the way to drive down college
costs. I would argue that instead, we need to think about those
structural systematic issues, like limiting the amount of
Federal student aid that flows into the system. That's a better
long-term solution.
Mr. Grothman. Well, that would be a better way to do it,
wouldn't it? If we had counselors saying, you don't need
$15,000 this year, you only need $7,000, wouldn't that kind of
be a way to do it?
Ms. Burke. Potentially. I'm just not sure at the Federal
level that we could figure out the perfect way to get there.
Mr. Grothman. Okay. I'll yield the remainder of my time.
Mr. Krishnamoorthi. Thank you, Mr. Grothman.
Okay. Well, first of all, thank you to all the witnesses
for your very helpful testimony today. Without objection, all
members will have five legislative days within which to submit
additional written questions for the witnesses to the chair,
which will be forwarded to the witnesses for their responses. I
ask our witnesses to please respond as promptly as you are
able.
This panel is now adjourned for a two-minute recess before
our next panel begins. Thank you so much.
Ms. Burke. Thank you, Mr. Chairman.
[Recess.]
Mr. Krishnamoorthi. Good afternoon. In the words of my
baseball hero, Ernie Banks, let's play, too. I'd like to thank
the first panel for their testimony and for contributing your
thoughts to the vital issues we're discussing today.
Now we welcome our final witness, and we thank her for her
patience. That's Principal Deputy Under Secretary of the
Department of Education, Diane Auer Jones.
If the witness would please rise, I will begin by swearing
you in.
Do you swear or affirm that the testimony that you are
about to give is the truth, the whole truth, and nothing but
the truth, so help you God?
Let the record show that the witness answered in the
affirmative.
Thank you, and please be seated. The microphones are
sensitive, so please speak directly into them. As I mentioned
earlier, with our timing system, green means go; yellow means
not slow down but speed up; and then red means stop. Without
objection, your written statements will be made part of the
record.
With that, Secretary Jones, you are now recognized to give
an oral presentation of your testimony for five minutes.
STATEMENT OF DIANE AUER JONES, ACTING UNDER SECRETARY OF
EDUCATION
Ms. Jones. Thank you very much. Good afternoon, Chairman
Krishnamoorthi, Ranking Member Cloud, and members of the
committee. Thank you for the opportunity to appear before you
today to discuss our goals to strengthen postsecondary
education, including improving accreditation and working to
address the problems that arise when schools close.
My work at the Department calls upon all of my experiences
in higher education, starting with my personal experience as a
first-generation college student. It also includes my work as
an instructor and an administrator at public, private, as well
as proprietary institutions, and it includes the years I spent
in Federal Government working on science and education policy.
In my case, I worked as a nursing assistant and a waitress,
and took student loans in order to pay my way through college.
I know the challenges that nontraditional students face, not
because I've read about them, but because I've experienced
them. I've lived them. And I spent almost a decade teaching,
supporting students, and advising other first-generation
college students at the Community College of Baltimore County.
The Department is working hard to develop policies and
procedures, in partnership with accreditors and state
authorizing agencies, to guide institutions and students
through orderly teach-outs, and to provide sufficient oversight
to ensure that students get what they were promised. Sadly, we
learn something new from each situation, but the experiences
students tell us about allow us to do better the next time.
Mr. Infusino's testimony points out the complexity of
closed school situations, and I agree that it can be very
difficult for a student to decide what pathway will best serve
his or her needs. So, in that vein, I want to use the rest of
my five minutes to respond to his concerns and provide
information that may be helpful to him and to all students who
go through a school closure.
While it is true that the current regulations provide
closed school loan discharges for students who were enrolled at
the time of closure, or who left the school less than 120 days
prior to the campus closure, what we call the lookback period,
there are special circumstances under which it can be extended.
We agree that no student should be required to continue
attending a school if they do not wish to participate in the
teach-out just so that they can hit the 120-day mark. For
students who selected to participate in a teach-out plan
offered by their closing institution, it is important to know
that if the institution did not meet the terms of the plan the
student is still eligible for a closed school loan discharge.
The scholarship would be considered an important part of the
plan, and part of the institution's promise. The point of a
teach-out is to expand a student's options and opportunities,
not limit them. And we will hold schools accountable for
meeting the terms of all teach-out plans and agreements.
The Department is reviewing all of the circumstances of the
recent closures, and in particular, the circumstances
surrounding the Art Institute of Chicago and the Illinois
Institute of Art. Let me be clear that it is the Department's
position that those schools were accredited throughout the
period between the change of control in January, and the
closure in December 2018. Otherwise, the schools could not have
participated in Title IV programs.
We will continue to work with students who were part of the
school closures, and if those students have questions, they
should contact Federal student aid. We never want a student to
feel like they are out there on their own navigating these
difficult and challenging situations. And I might add, many
students call me personally and send me personal emails, and I
respond or return the calls to each.
We are proud of the negotiated rulemaking effort that
resulted in consensus and that addressed a number of the
challenges that were revealed during the recent school
closures. The consensus position will go through a public
comment period, and based on the results of those comments will
be published as a final rule. I cannot predict what will be in
the final rule, but in response to your questions today, I can
share what was in the consensus document.
We clearly have more work to do, but we recognize the
problems and are seeking solutions. As we learned through our
successful rulemaking effort, in spite of sometimes significant
differences of opinion, when we put the needs of students
first, we can find points of agreement and serve their best
interests.
I look forward to discussing the Department's work with
you, and responding to your questions. Thank you.
Mr. Krishnamoorthi. Thank you, Ms. Jones. We're going to go
slightly out of order here. I want to recognize Ms. Bonamici,
Congresswoman Bonamici, who is waiving onto our committee for
questions, to begin the question line. Congresswoman Bonamici,
you have five minutes.
Ms. Bonamici. Thank you very much, Chair Krishnamoorthi and
Ranking Member Cloud, and thank you, Ms. Jones. Thank you for
allowing me to be with you today.
When Secretary DeVos appeared before the Education and
Labor Committee last month, I asked her about the Department's
misguided decision to reinstate ACICS, an accreditor that has
overseen some of the largest collapses of institutions of
higher education in American history. This decision directly
led to student harm and those students, along with taxpayers,
deserve answers. The Department of Education's decision allowed
at least 85 predatory schools to take advantage of more than
110,000 students.
So let's look at one ACICS-accredited school in particular,
the Education Corporation of America, or ECA. In April 2018,
Secretary DeVos temporarily reinstated ACICS, and then ACICS
provided accreditation for ECA campuses, which kept the school
operating. And at the time, the ECA campuses had not obtained
accreditation from a new agency.
Then in December 2018, two weeks after the Department
recommended to fully restore ACICS, ECA, which was the largest
college chain accredited by ACICS, collapsed. Without
accreditation, ECA could have had a planned shutdown. Thousands
of students would not have been lured to attend a financially
troubled school, those enrolled would have saved the time and
money they wasted, and the Federal Government would have saved
money on loan discharges.
In December, a few weeks after ECA collapsed, Senator
Warren, Chairman Cummings, and I sent letters to ACICS and to
ECA. The findings of our document request were extremely
disappointing, and revealed the industry's lack of use of
teach-out agreements.
And I notice, Ms. Jones, you were talking about teach-outs.
Can you explain the difference, both in the requirements of a
school that is closing, and in the way a student is affected in
a teach-out agreement versus a teach-out plan?
Ms. Jones. Absolutely, Congresswoman. First, I'd like to
begin by saying that the Department reviewed the ACICS
situation because the courts remanded the decision back to the
Department. So it was not the administration that decided to
change the decision of the prior administration, but, in fact,
it was the courts that determined that the prior administration
failed to review 36,000 pages of evidence.
And so it was remanded back to the Secretary. And you are
correct that I read the 36,000 pages, plus tens of thousands of
more pages in a 2018 supplement, and, yes, made a
recommendation based on the evidence in those documents. So
that is why ACICS was reinstated. The courts made that decision
and remanded the decision back to us.
In terms of teach-out agreements versus teach-out plans,
there is a significant difference. So a teach-out plan is when
an institution is planning to close, or if an institution is in
a fragile situation or showing signs of financial instability,
the accreditor will require a teach-out plan, and that includes
things like----
Ms. Bonamici. I don't want to interrupt you, but I need to
reclaim my time because I need to get another question in.
In general, we have heard of too many cases where the
teach-out plan was a link to a website or some other predatory
school that may themselves shut down. So would you agree--and I
know you know the difference. Would you agree that a teach-out
agreement better serves the interests of students than a teach-
out plan? And that's a yes-or-no question.
Ms. Jones. Well, ma'am, a teach-out agreement is a contract
between two institutions. The Department can't force a teach-
out agreement. I would agree with you that our teach-out plans
need to be more robust. Unfortunately, the consensus decision
of the negotiated rulemaking panel did just that.
Ms. Bonamici. But would you agree that a teach-out
agreement better serves students than a teach-out plan? I'm not
asking you whether the Department can be part of it. I'm asking
you is a teach-out agreement better for students than a teach-
out plan?
Mr. Infusino. When it is possible to get a teach-out
agreement, we always hope that they come through. We always
hope that a school can find a teach-out----
Ms. Bonamici. Thank you. So let me ask you this: The
Department has outlined forthcoming regulations that you stated
will include, quote, ``financial triggers,'' close quote, that
will require colleges to file a teach-out plan with an
accreditor. So teach-out agreements provide a stronger safety
net. So shouldn't your forthcoming regulations require teach-
out agreements, not simply teach-out plans?
Ms. Jones. Well, ma'am, the regulations that you speak of
are still--we have to go through a public comment period. So
they're not final. So I can't comment on what will be in the
final regulations. But the consensus agreement was that
accreditors could and should require teach-out plans earlier.
The other thing we did is----
Ms. Bonamici. My question isn't about teach-out plans. It's
saying, shouldn't the regulations require teach-out agreements,
not just a teach-out plan that could be a link to a website?
Ms. Jones. So the consensus language does call for
accreditors to try to get teach-out agreements and to encourage
institutions to enter into them. We cannot force teach-out
agreements. These are contracts between two institutions,
oftentimes involving financial arrangements that cannot be
forced by us or an accreditor.
So absolutely, we want schools to seek them sooner, but we
can't force them. We can't require them.
Ms. Bonamici. And I see my time is expired. I just want to
say I hope that you and the Department will do more to protect
the students and the taxpayers.
And I yield back.
Mr. Krishnamoorthi. Thank you, Congresswoman. I know that
votes have been called. We're going to try to get a little bit
more questioning in here before we go to votes, adjourn, and
then come back.
So, Congressman Grothman, you have five minutes.
Mr. Grothman. Would you mind if I yield my time to
Congresswoman Foxx?
Mr. Krishnamoorthi. Okay, sure. Dr. Foxx, you have five
minutes.
Ms. Foxx. Thank you, Mr. Chairman, and thank you, Mr.
Grothman.
Thank you for clarifying the fact that it was not the
Department itself that decided to reopen the ACICS case. It
needs to be stated over and over and over again that the court
ordered the Department to do that. You have been painted as
somebody who had a nefarious reason for opening up this plan,
and I think it's a very unfair portraiture of you, and so I am
glad that question was asked and has been clarified.
You also have been portrayed as somebody who cares nothing
at all for students, but only about making money. But I know
that you have an accomplished history in postsecondary
education, including not only for-profit schools, but a public
community college.
Please tell us about your experience at a public community
college and your responsibilities there and why you came to
work at the Department of Education, and maybe what is it that
gets you out of bed every day, given the vilification that is
made of you and the Secretary?
Ms. Jones. Thank you, Congresswoman, for that question. You
know, Dr. Foxx, what gets me out of bed every morning is that I
had an opportunity to change my life by going to college, and I
want every student to have the opportunity to change their life
by going to college, by doing an apprenticeship, by finding
whatever it is that helps them move forward.
And so, I come to work every day because there are students
who, like me, have an opportunity to move forward if there's
somebody to help them find the way. And, in fact, that's why I
taught at a community college for 10 years.
I'm a molecular biologist by training. I was running a lab,
and I was asked to teach an evening microbiology class as an
adjunct faculty. I found my passion. My evening students were
nontraditional students. I loved working with them. And then
eventually I joined the full-time faculty and, in fact, was
able to get National Science Foundation grants. I ran STEM
camps for middle school kids. I ran STEM programs for teachers.
I ran all kinds of extra programs. The students were amazing,
and they just needed somebody who cared.
Ms. Foxx. You were not allowed to completely answer your
question about teach-out plan and teach-out agreement. I'd like
to make a comment as an educator. I don't call myself a former
educator, because I think everybody around here will tell you I
still act like one and I'm proud of that. And by the way,
that's why I do what I do every day is for the same reason that
you do it.
But I would assume that a teach-out plan by the schools
where the students are enrolled that help them get to certain
places would be better than a teach-out agreement where another
institution picks up the students and helps them. But it
appears to me that if you can have both of those things, that
would be the ideal situation.
But tell me if I'm right in my perception of that, and how
can this committee understand better the approaches that you
are taking in teach-out plan and teach-out agreements? And I
understand you have no control over those.
Ms. Jones. Well, Dr. Foxx, I think of myself as an
educator, too, and I will until the day I die. And I can't wait
to have the time in my life where I can teach as an adjunct
faculty member again.
Teach-out plans and teach-out agreements, absolutely, we
would love to see situations where both are available. For some
students, it's better for them to go to another institution and
complete. For other students, if they're close to graduating it
might be better to complete at the institution where they're
enrolled. And in other instances, students find their way
forward through a transfer agreement. There are differences
between plans and agreements. We support both and we hope both
are in existence. No student is required to take the options
that are available to them through a teach-out agreement. So I
agree with you, we need both.
The problem is we can't force a teach-out agreement,
because it is a contract between two institutions. We can
encourage, and I can assure you that as Argosy was closing, I
spent many evenings and weekends on phones with presidents of
other institutions asking them if they would be willing to
serve as a teach-out partner and enter into a teach-out
agreement. And their accreditors reviewed those plans, but we
cannot force them.
Ms. Foxx. Well, I thank you very much. And I will tell you,
you know, I invest a lot of time in these hearings, and I'm on
two committees. And honestly, on this subject we have the most
experts in the Congress of any subject that I am aware of, bar
none. And they have no experience whatsoever.
Thank you very much. I yield back my time.
Mr. Krishnamoorthi. Thank you, Dr. Foxx.
I'm going to recognize myself for five minutes of
questions.
Secretary Jones, the three largest college collapses in
American higher education were ITT Tech, Corinthian Colleges,
and Education Corporation of America, also known as ECA. ACICS
accredited ITT Tech before its collapse, correct?
Ms. Jones. I believe ITT Tech was accredited by ACICS, yes.
Mr. Krishnamoorthi. And ACICS accredited Corinthian
Colleges before its collapse as well, correct?
Ms. Jones. No, sir. ACICS accredited some of the Corinthian
College campuses. There were several Corinthian college
campuses accredited by another accreditor. And all of the Heald
Colleges were accredited by WASC, the Western accreditor, which
is a regional accreditor in California.
Mr. Krishnamoorthi. But the ones that--among the ones that
collapsed in the Corinthian Colleges chain were ACICS-
accredited ones, right?
Ms. Jones. No, Congressman, that is not correct. In fact,
it was Heald College that was the only college that admitted to
falsifying data, that admitted to misrepresentation, and that
was the regionally accredited campus. So that is the only group
of campuses for which the Department has evidence and an
admission of misrepresentation.
Mr. Krishnamoorthi. So you're saying Corinthian Colleges is
up and running today?
Ms. Jones. No, sir, I am not.
Mr. Krishnamoorthi. So was Corinthian Colleges accredited
by ACICS or not?
Ms. Jones. Some of the campuses.
Mr. Krishnamoorthi. So yes. So some of the Corinthian
College campuses were accredited, and those are no longer in
operation, correct?
Ms. Jones. And neither is the regionally accredited campus
of Corinthian, correct.
Mr. Krishnamoorthi. And last December before ECA collapsed
and left 20,000 students and their families without an
educational home, ACICS had accredited ECA, correct?
Ms. Jones. They had accredited ECA, but ECA was----
Mr. Krishnamoorthi. Thank you. According to the National
Center for Education Statistics, the average graduation rate
for four-year colleges is 60 percent. According to a letter
from 13 state attorneys general in April 2016, only 35 percent
of students enrolled at ACICS-accredited schools graduate from
their programs, the lowest rate from any accreditor. It should
come as no surprise that the Department of Education revoked
ACICS' recognition as an accreditor on December 12th, 2016.
Ms. Jones, at 35 percent, ACICS-accredited schools had a
graduation rate that was much lower than the national average.
Is that worth celebrating, in your opinion?
Ms. Jones. Well, Congressman, I need to make the point that
when you look at the 60 percent, you're looking at schools of
all selectivity levels. Frankly, and I love community colleges,
but most would die to have a 33 or a 35 percent completion
rate.
Mr. Krishnamoorthi. Okay, let's talk apples to apples.
Four-year colleges. We're only talking about four-year colleges
with a four-year graduation rate. The national average is 60
percent. For ACICS-accredited four-year colleges, their six-
year graduation rate is 35 percent. Is that worth celebrating
or not?
Ms. Jones. Well, sir, I don't think it's worth celebrating,
but that actually is a fairly strong performance for an open
enrollment institution.
Mr. Krishnamoorthi. Well, let me just tell you what you
said two years ago. You were very clear. As a for-profit
college lobbyist, in rebuttal expert disclosure testimony in
Colorado versus Center for Excellence and Higher Education, you
said, quote/unquote: ``We would have been popping champagne
corks if we had 30, 32, 44 percent graduation rates.''
In reinstating recognition of ACICS in November 2018, the
Department stated that ACICS met 19 out of 21 Federal criteria,
including that ACICS is, quote/unquote, ``widely accepted by
the national higher education community.'' Wide acceptance,
that's a term of art, is a legally established, quote/unquote,
basic ``eligibility requirement,'' meaning if ACICS does not
meet this criteria, it is ineligible to receive Federal
recognition.
Let me walk you through what the five accreditors you
recently cited in October said--and, actually, you repeated
this in your March response to our correspondence--said when
asked by Congress about their support for ACICS. One, ACTE said
that it is, quote, ``not in the position to judge if another
accreditation agency is, quote, 'widely accepted.' '' Another,
AART, said it does not, quote, ``make statements regarding how
widely accepted a particular accreditor is.''
Now, these are not national accreditors. They are small
programmatic accreditors and they are not ACICS' peer. Now,
would you recognize the Accrediting Bureau of Health Education
Schools, a national accreditor, as ACICS' peer?
Ms. Jones. Yes, I would recognize them as a peer.
Mr. Krishnamoorthi. Well, they didn't endorse ACICS either.
And that was one of the letters you put forth in support of the
proposition that ACICS is a widely accepted accrediting
organization. They explicitly stated in their letter that it is
not, quote, ``their practice to endorse other organizations.''
At least three out of the five letters that you submitted
in support of wide acceptance eligibility for ACICS do not
state what you purport that they state, that ACICS is a widely
accepted accrediting organization. In light of this
information, which we received in correspondence from those
accrediting agencies, would you be willing to reconsider your
recognition of ACICS as an accreditor, federally recognized
accreditor?
Ms. Jones. Well, Congressman, the decision is not mine to
make. I made a recommendation, but I am not the decider. But I
do want to point out that the criteria is not for an
endorsement.
And so when you evaluate an accreditor to determine whether
it's widely accepted, the question you are asking is, are there
other accreditors that will accept an ACICS-accredited
institution to either be a programmatically accredited
institution? Will a licensing body give licensure to students
who graduate from an ACICS accredited institution?
And, sir, I have those exhibits with me if you'd like to
see them. The letters came from those organizations and,
indeed, affirmed that accreditation, or when a student
completes an ACICS accredited--when a student completes their
degree at an ACICS-accredited institution, yes, that
accreditation is accepted by those other organizations.
Mr. Krishnamoorthi. I'm sorry, that's just flat-out wrong,
according to the Federal regulations. I thought you would
answer that way. 34 CFR 602.13 clearly states what wide
acceptance by other agencies means. It says: The agency--that
is in this case ACICS--must demonstrate that its standards,
policies, procedures, and decisions to grant or deny
accreditations are widely accepted in the United States by, and
it says (a), educators and educational institutions; and (b),
licensing bodies, practitioners, and employers in the
professional or vocational fields for which the educational
institutions or programs are within the agency's jurisdiction.
None of these agencies that sent those supporting letters
have stated that they accept the policies, standards,
procedures and decisions. It's not about whether they would
take students who are transferring over; it's whether these
particular regulations have been satisfied.
So would you reconsider the decision to reinstate that
recognition, in light of this new information that we've
received in correspondence from those five institutions?
Mr. Infusino. Well, Congressman, I appreciate that you read
the regulation, and I didn't hear the word ``endorsed''
anywhere in what you read. Widely accepted means that licensing
bodies and other accreditors will accept as a measure of
quality the accreditation of ACICS, either because that's the
institutional accreditor and the programmatic accreditor is
willing to provide programmatic accreditation at the
institution; or, in the case of a licensing body, because when
a student graduates from an accredited institution, they can
sit for a licensure exam. And so, sir, they did, indeed, meet
the criteria in the regulations, and there is no word
``endorsement'' anywhere in those regulations.
Mr. Krishnamoorthi. And nobody said that they had to
endorse. What they did have to say is that they met the
standards set forth in the regulation, which they did not.
Ms. Jones. And I have the documents here that were provided
from those accreditors, and I'm happy to share them with you.
Mr. Krishnamoorthi. And we're happy to share the
correspondence so you can reexamine this new information that
has come forth from the accreditation agencies, which purport
to be opposite of what has been stated as their support for
Federal recognition of ACICS.
We'd better take a pause right now for votes. We will be
back at 5 o'clock. Thank you so much.
[Recess.]
Mr. Krishnamoorthi. Thank you and sorry for the recess and
thank you again, Secretary Jones, for bearing with us.
I'd like to recognize Dr. Foxx for her questioning for five
minutes.
Thank you, Dr. Foxx.
Ms. Foxx. Thank you, Mr. Chairman.
Ms. Jones, I want to go back to clarify the scope of the
Education Department's responsibility again as it related to
ACICS.
Do you have the--did you have the ability to unilaterally
open up the ACICS decision?
Ms. Jones. I did not have the ability. The Department had
already rendered a decision. It was the Court that remanded the
decision back to the Secretary, and I simply made a
recommendation to her as to my review.
Ms. Foxx. Okay. All right.
So, I'd like to revisit the conversation on the closure of
Corinthian campuses. There was ACICS and a regional accreditor
who accredited Corinthian Campus. Is that correct?
Ms. Jones. That is correct, Dr. Foxx.
Ms. Foxx. Okay. The fact that both a regional and a
national accreditor were caught up in this tells me we can't
single out any one accreditor, that all accreditors need to
improve their analysis of quality assurance and continuous
improvement. In PROSPER, which we passed in the committee last
year, we talked about the need for total reform and the focus
on outcomes for students. We believe that's where the
accreditor should be. It's very disappointing to me to hear
that the fraud went on under an institution that was accredited
by a regional accreditor, and I don't think we can say that
often enough.
I also want to say right here that I don't want any bad
actors out there. I don't care who they are, whether they're
for-profits, nonprofits, publics. We don't need any of those,
and I just want to reiterate that. Every Republican feels that
way. We're not here to defend any one segment of the education
institutions. We want all students have the best possible of
experience.
Now I want to ask you, Did the closure of Corinthian and
ITT campuses happen when President Trump, Secretary DeVos, and
you were in office at the Department of Education?
Ms. Jones. No, Dr. Foxx, that happened prior to our
administration.
Ms. Foxx. Right. It's my understanding that Corinthian
closed in 2015 and ITT closed in 2016.
Ms. Jones. I believe those are the correct years.
Ms. Foxx. So, President Obama had been in office for seven
years when Corinthian closed and eight years when ITT closed.
So can you tell me why President Obama and the other
Secretaries of Education in his administration continued to let
these horrible, greedy schools exist during his entire
administration? Why is this suddenly only a problem now?
You don't need to answer that.
Ms. Jones. Oh, thank you.
Ms. Foxx. Never mind.
That is just something I have considered for a long time,
knowing myself when these institutions shut down.
And by the way, they did nothing, absolutely nothing to
help those students. They didn't do teach-outs. They didn't do
agreements between institutions. And I said at the time that
the people who were being hurt were the students because the
Obama Administration could have had an orderly shutdown of
those institutions, and it did not. They didn't care about
those students. They just shut them down arbitrarily and didn't
give them a chance to help those students get their
transcripts, teach them out, or anything. That's wrong.
The truth is that Congress has failed in its obligation to
produce laws and statutes that serve in the interest of
students. That's what we should be about, not caring what kind
of institution it is, but we have to reform the HEA and the
whole system.
So, can you--what are some examples of how you and career
staff at FSA and OGC tried to help students when Argosy closed?
Ms. Jones. Well, thank you for that question.
I have to say that the professional staff at FSA have been
amazing, and it's just unbelievable the amount of work they've
done, and I might add, including a number of them that spent at
least five hours a day working between Christmas and New
Year's, although they were officially on leave. We were on
calls at least five hours a day. So I want to give a shout-out
to the professional staff at FSA because they've been amazing.
So there are a number of things that we've done. I
personally got involved. Students who called, parents who
called or emailed, I responded to those calls or emails. I
worked with the state and others at FSA worked with the state-
authorizing agencies to identify other schools that might be
able to accept those students. There was information provided
on the FSA website. FSA went to teach-out fairs, and then I
personally spent a long time with institutions and accreditors.
There was one accreditor, the American Psychological
Association--it's very difficult to have a programmatically
accredited program enter into an agreement, and I spent a lot
of time with the APA, again, working with them to help
facilitate teach-out agreements.
Ms. Foxx. Thank you.
One more quick question, Mr. Chairman, which I hope will
help us as we develop legislation. Seriously, this is going to
that issue.
So it's a tricky situation at Education Corporation of
America. What happens when ownership of a school--and what
happens when ownership of a school happens in receivership? To
the best of my knowledge, the topic of receivership is not
mentioned at all in the statutes or regulation. Is that
correct?
Ms. Jones. That is correct.
Ms. Foxx. How can Congress help the Department in this
regard? Because I think the situation with ECA could have been
better had we had some rule on this issue.
Ms. Jones. Thank you very much for recognizing that.
Both with ECA and with Argosy, we had the additional
complication of those schools went into Federal receivership.
To my knowledge, these were the first two schools that ever
went into Federal receivership. And while statute is very clear
about what we're supposed to do in the case of bankruptcy,
there's no mention of receivership, and, frankly, not only did
we lose certain authorities but the accreditors lost certain
authorities and the school was no longer being run by qualified
people. It was being run by a receiver. So it's a very tricky
situation, and it would be great to have some help.
Ms. Foxx. Mr. Chairman, thank you for that indulgence
because I did really want to us get some idea of how we could
make the legislation better. Thank you.
Mr. Krishnamoorthi. Sure. Thank you, Dr. Foxx. And thank
you for your commitment to higher education. We worked very
hard on getting some legislation signed into law last term on
strengthening career and technical education.
I just want to point out one thing, which the gentlewoman
from North Carolina already knows, but, of course, the Obama
Administration crafted and implemented the gainful employment
rules to weed out the worst actors. Unfortunately, this
administration has not implemented those particular rules, even
though the first gainful employment data set found 800 programs
had failed the standard and another 1,200 were put on
probation.
So, with that, I will now recognize Congresswoman Donna
Shalala for five minutes.
Ms. Shalala. Thank you very much.
What was your recommendation to the Secretary on the ACICS
that it be reinstated?
Ms. Jones. Ma'am, there were 21 different criteria that I
had to evaluate. And I provided a recommendation. In some
cases, I found them in compliance. In other cases, I found them
not in compliance. And in some other cases, I found them in
compliance and recommended that the Secretary request a
monitoring report. So each one of the criteria were evaluated.
Ms. Shalala. So did you recommend to her that we--that you
reinstate AC--the accreditation agency?
Ms. Jones. My recommendations were on my findings of each
criteria. It was up for the Secretary to decide how she would
use that information.
Ms. Shalala. So you told her on the one hand/on the other
hand, basically?
Ms. Jones. Yes, Congresswoman. I mean, it's an 83-page
document. And I'd be happy to share it with you, but yes.
Ms. Shalala. Yes, if you could.
Ms. Jones. Yes.
Ms. Shalala. During the controversy between the accreditor
Higher Learning Commission and the Dream Center schools, you
issued a guidance document that rescinded an earlier policy.
This guidance document allowed for accrediting agencies to
retroactively accredit schools. In other words, unaccredited
schools could pretend that they had been accredited when they
were, in fact, not. This would have undoubtedly benefited the
Dream Center which lost its accreditation in January--on
January 20, 2018, and did not disclose that to their students
until June 20, 2018.
Your guidance is dated just after that, July 25, 2018. Was
this guidance designed specifically to assist the Dream Center?
Ms. Jones. No, Congresswoman. There had been a decision
made based on one of the nursing programmatic accreditors with
regard to the issue of retroactivity. That decision was then
appealed, and so it was my job to review that appeal and issue
guidance based on the Department's regulations regarding
retroactive accreditation. The Department had always allowed it
in the past, but I just want to make sure that I'm clear. It
does not allow a nonaccredited institution to be retroactively
accredited. The retroactive accreditation can only go back to
the time of a positive decision by the decision-making body,
meaning pre-accreditation.
So it cannot retroactively apply to a nonaccredited
institution. And the reason that we need to do this is, if you
cannot retroactively accredit an accredited program, you
essentially set students up so that you have to graduate, in
many cases, one entire class of graduates who could then never
be accredited and practice in their field. So there's no way we
can give title 4 funds to students and tell them: But no matter
what happens, even if the program gets accredited or the
institution gets accredited, you will never have a degree from
an accredited institution.
That would disallow any new programs that lead to licensure
and certification.
So that is the reason for retroactive accreditation. I
believe HLC's policies even prior to our guidance was a 30-day
retroactive accreditation policy.
Ms. Shalala. Did you ever communicate with higher
learning--the Higher Learning Commission or the Dream Center
officials about this guidance before issuing it?
Ms. Jones. I do believe that somebody from HLC called me to
ask me about retroactive accreditation, and I did let them know
that we were revising our guidance. This was something that
many accreditors were following and waiting for because of the
appeal. So we had to come to the end of an appeal for the
appeal that the nursing programmatic accreditor had submitted.
Ms. Shalala. So did you base the rescission of this policy
in any way on the accreditation dispute between the Higher
Learning Commission and the Dream Center?
Ms. Jones. Absolutely not. It had nothing to do with the
Dream Center. It was completely based on the appeal by the
nursing programmatic accreditor.
Ms. Shalala. In the last six months, there have been three
major for-profit chain closures. These closures took students
by surprise. How does the Department track colleges at risk of
closure?
Ms. Jones. So the Department has requirements in our
regulations for the Department to accept audited financial
statements every year. The Department then evaluates those
audited financial statements to come up with a composite score.
And based on what the institution's composite score is, the
Department either says it's a financially stable institution or
it's in the zone or it's not a financially stable institution.
And then we have different levels of action we can take
including Heightened Cash Monitoring, letters of credit, et
cetera. So we use the audited financial statements primarily to
monitor financial risk.
Ms. Shalala. Those schools were all on the Heightened Cash
Monitoring. There are another 650 schools on the Heightened
Cash Monitoring which are at risk of closing. So what are you
going--how are you going to prioritize the monitoring for those
schools?
Ms. Jones. Well, Congresswoman, not every school that's on
Heightened Cash Monitoring is at risk for closure. There are a
number of reasons that would bring a school into a Heightened
Cash Monitoring situation. The Federal Student Aid professional
staff in many instances require that the institution provide
monthly updates of enrollment or of financial information. We
have staff that monitor enrollments of a number of colleges,
but the truth of the matter is our evaluation of institutions
is based on audited financials, and they are always at least
six months old when we get them. It is dated information, and
we don't have the opportunity to do day-to-day or month-to-
month. So we are always going to struggle with the fact that,
by the time we get an audited financial statement, things could
have changed at the institution.
And what Heightened Cash Monitoring does is it disallows
institutions to pull money down from our system without either
prepaying the students or prepaying the students and getting
additional permission from us to draw down funds.
Ms. Shalala. That's a lot of schools.
I yield back.
Mr. Krishnamoorthi. Thank you very much, Congresswoman
Shalala.
I believe our distinguished ranking member, Mr. Cloud, is
up. And you have five minutes.
Mr. Cloud. Thank you.
I will yield to the gentlelady from North Carolina, Dr.
Foxx.
Ms. Foxx. You get to answer my questions again.
Thank you for that explanation.
So let me reiterate again: The retroactive accreditation
was done for the students so that the time they were in school,
the money they invested was not wasted.
What you did was to help the students.
Ms. Jones. That is correct.
Ms. Foxx. Thank you.
Ms. Jones, it seems to me that the Democrat Party is
obsessed with so-called facts about for-profit schools. So
let's take a closer look at the data. According to the College
Board, tuition and fees over the last two years have increased
5.4 percent at public community colleges, 5.8 percent at public
baccalaureate degree-granting institutions, and by 6.9 percent
at private, what are called four-year--and they're not four-
year--profit colleges. For-profit schools, their tuition and
fees have gone down 12.5 percent over the same time period.
An AEI-Third Way report by Harvard Professor Bridget Terry
Long tallied--Bridget Terry Long--excuse me--tallied completion
rates of students across all post-secondary education sectors
and disaggregated by racial characteristics. The category of
school with the highest completion rates? For-profit, two-year
institutions.
Mr. Chairman, I have a chart to submit for the record to
show--prove what I am saying.
Ms. Foxx. What is notable is that the report also found
White, Black, Hispanic, Asian, and Native American students
attending four-year for-profit schools all completed at a
better rate than their respective public four-year nongraduate
degree college student counterparts. It's apples and apples,
and that's what we should be comparing.
So far, I've provided data showing proprietary
institutions, unlike the other sectors of postsecondary
education, are responding to consumer demand for cheap--less
expensive education. And they're doing a better job making sure
their students earn a credential. But how are students
attending for-profit institutions doing with student loan
repayment compared to their other peers? According to the
College Board, the answer is just as good, if not a little
better, than community colleges which enroll a very similar
type of student. The two-year default rate at public two-year
schools, 23 percent; the two-year default rate at for-profit
schools, 18 percent--five points lower.
I want to mention you yourself elected to attend a
proprietary institution to earn the craft--learn the craft of
massage therapy. I have a granddaughter who just graduated from
a for-profit institution two weeks ago who is also pursuing a
future as a massage therapist.
Why did you decide to pursue this education? How has this
experience informed your outlook on helping all students
succeed? And will you practice your art here tonight? Never
mind. No.
Ms. Jones. Yes, I practiced as a massage therapist for
seven years and, in fact, opened an alternative healthcare
center in Catonsville, Maryland, and ultimately employed 15
people. Massage therapy was something that I enjoyed doing. I
learned a little bit about it when I was a nursing assistant.
And as I progressed through my career, I mean, frankly, the
only way I could be a community college professor is if I had
another part-time job. And I thought, wouldn't it be great to
have my part-time job be something where I can really help
other people and have schedule flexibility? So I chose to get a
certificate in massage therapy.
Ms. Foxx. Just for the record, my daughter loves it; did
not want to leave school but is anxiously awaiting getting her
license.
I'm going to conclude by quoting from the comments in
discussion section of a Bookings Institution report titled ``A
Crisis in Student Loans? How Changes in the Characteristics of
Borrowers and the Institutions They Attended Contributed to
Rising Loan Defaults.''
Buried at the end of the report, Columbia University
economist and former member of the Board of Governors of the
Federal Reserve System Frederic Mishkin emphasized the
importance of offering better information to help solve the
market failure of student lending.
Mishkin suggested, quote: The idea that for-profit
institutions are just bad guys who need to be taken care of is
not the right way to think about solving the problem, he
argued. Focusing on the market failure aspect may help bring to
light the kinds of innovations that could come from for-profit
institutions, particularly in the online sector. The idea of
simply closing down or otherwise severely punishing for-profit
institutions, he concluded, could actually be very bad public
policy.
Mr. Chairman and Mr. Lead Republican, thank you very much
for yielding time to me. I yield back.
Mr. Krishnamoorthi. Thank you, Dr. Foxx.
Okay. I am going to ask another series of questions here.
Secretary, on January 18, 2019, Dream Center, a not-for-
profit company that really seemed like a shell company used to
operate a chain of for-profit schools, entered into a
receivership due to potential insolvency.
A Department of Education statement said, and I quote:
Significant funds were released by the Department since mid-
January including after the receiver was appointed, close
quote.
Ms. Jones, exactly how much Federal funding did Argosy
operating under Dream Center receive during this January
through February 2019 time period?
Ms. Jones. I believe the total that they received was
around 13 million. The bulk of that was disbursed prior to the
receivership, and there was a small bit of it that had been
approved prior to the receivership and that the receiver was
able to draw down after the receivership. So I believe that it
was in the neighborhood of 13 million that had been released.
The rest of the funds that would have been disbursed for spring
semester were held in our system because they were on HCM2 once
they went into receivership.
Mr. Krishnamoorthi. Got it.
And HCM is Heightened Cash Monitoring.
Ms. Jones. That's correct.
Ms. Foxx. On February 22, Dream Center receiver Mark
Dottore--or Dottore--publicly stated that where--I'm sorry--
stated, and I quote: There were irregularities in Dream
Center's Title 4 requests before the receivership began.
Secretary Jones, do you know what irregularities Mr.
Dottore is referencing?
Ms. Jones. I don't know what he is referencing in
particular. I haven't reviewed those records. I believe though
that what he was concerned about is that the institution was on
Heightened Cash Monitoring, which meant that it had to pay
students' stipends first, and I believe what he was trying to
determine is how many students been paid their stipend.
Mr. Krishnamoorthi. Do you know if Dream Center falsified
certifications to the Department to draw down students' stipend
funds?
Ms. Jones. I don't know that. There is a review that's
ongoing.
Mr. Krishnamoorthi. So, the Department is currently
conducting an investigation into this matter?
Ms. Jones. The Department is currently reviewing documents.
And, yes, we will go back and look at student accounts, in
particular, because we have canceled loans for all of the
Argosy students or other Dream Center students who were
enrolled in the spring semester. And so it will take time to go
back and sort through all those records.
Mr. Krishnamoorthi. Reports show anywhere from $13 million
to $16 million meant for students' stipends were given to these
financially troubled institutions and has since gone missing.
Can you explain in detail how the missing funds were used?
Ms. Jones. I cannot explain in detail. We haven't received
those financials. However, what I was told is that the $13
million did not go missing but was instead used to pay for
things like rent, textbooks, continuing services for the
computer systems. And so, while it is inappropriate to use
those funds without first paying stipends, if what I was told
is correct, it's not that it went missing. It's that it was
used at a time when it should have been used for student
stipends.
Mr. Krishnamoorthi. Got it. So it may--now how about for
Dream Center officials, the Dream Center Foundation, or other
high-level employees, payments to those folks?
Ms. Jones. I have no idea. That would be part of the
financial records. So, once a school closes, we are--they are
required to provide us with audited financials. To my
knowledge, we have not yet received those financials, but I
will double-check when I get back.
Mr. Krishnamoorthi. Got it.
And how about Dream Center CEO Brent Richardson? Did he
receive a bonus before he stepped down?
Ms. Jones. We are told that Brent Richardson never took a
penny of salary for his work with Dream Center Education
Holdings. Again, we haven't received audited financials, but we
were told by multiple people that he never took a dollar.
Mr. Krishnamoorthi. And how about other Dream Center
officials? Do you know if they received bonuses before the
company's collapse?
Ms. Jones. I don't know.
Mr. Krishnamoorthi. Okay. Students did not receive the
stipends they expected. Do you know how many students in total
did not receive their expected stipends?
Ms. Jones. I don't have an exact number for you. We can
look that up.
Mr. Krishnamoorthi. Yes, could you please commit to going
back and answering that question, plus the previous question
about whether any officials from Dream Center received any
bonuses or compensation before the collapse?
I just want to say, you know, not only has these students'
education been disrupted but really their quality of life has
been directly harmed, and I think everyone would agree about
that. Students relied on these stipends for their rent and
other necessities. We are aware of at least one student, a
veteran with a wife and six children, who experienced
homelessness because of the diversion of his stipend.
Is the Department doing anything currently to help students
in these types of circumstances?
Ms. Jones. Yes, Chairman. So we agree with you that not
getting stipends is devastating to students. We spent about
three weeks trying to figure out if we had the authority to
make direct payments to the students of their stipend because,
remember, the majority of the money was still being held in our
system. We had not released it. So we spent several weeks,
looking. We don't have the authority to make direct payments.
So the best we could do was cancel the loans that the students
took for the spring semester. So every student, although we
could not help them get their stipend, we were able to cancel
their loan, and for those students who through a teach-out
agreement moved to another institution, they were able to apply
for aid at the new institution. And because we had canceled the
loan, they could then get their stipend for the semester.
Mr. Krishnamoorthi. Secretary, I urge you to please get to
the bottom of this matter and make it a priority because we are
aware of constituents and others who are directly harmed by
what happened in this particular Dream Center matter. And we
owe that to these students. I have no doubt that members of
this subcommittee will be in touch with additional inquiries
into Department actions to find the truth with regard to this
matter, and we urge you to cooperate with us in furthering the
investigation.
Ms. Jones. Absolutely.
Mr. Krishnamoorthi. At this time, I am going to turn the
gavel over to Congresswoman Tlaib who will conduct the rest of
the proceedings and the rest of the questioning here.
Congresswoman Tlaib, ready for the gavel? Okay.
Ms. Tlaib.
[Presiding.] Yes, I won't break it.
Mr. Krishnamoorthi. Okay. Thank you.
Ms. Tlaib. Thank you so much for joining us.
I yield five minutes to myself.
Just yesterday, the Department responded to questions for
the record that stated, quote: The Department believed then and
continues to believe that these campuses were in accredited
status until their date of closure. Let the students at these
schools...on record--let it be known as being told that their
school was not accredited. Their transcripts shows not
accredited, but you maintain that all along that these two
schools were accredited.
The question is: Is it within your authority to overrule
HLC and retroactively make these schools accredited? And, if
so, is that what you are trying to do today?
Ms. Jones. It is not within our authority to overrule the
accreditor. However, we have reviewed the accreditor's
standards and have found a number of inconsistencies. And, in
fact, they did not have a policy in their standards that would
have allowed them to take a negative action against the
institution, which is why they continued to participate in
Title 4. And it so is still our position and our belief, we
perceive that those institutions were accredited because there
was nothing in the HLC standards that would have allowed them
take a negative action against those institutions.
Ms. Tlaib. If you believe these schools were accredited,
then why did you order Dream Center officials to amend their
web page?
Ms. Jones. Well, it was a long and complicated review of
standards. And the most important thing was to make sure that
the information that the students received was consistent with
the accreditors' website. So, despite our concerns about the
accuracy, we have a long process that we have to go through to
review accreditor standards. And it was important to us that
the school adhere to the rules of their accreditor and used the
language required by their accreditor on their website.
Ms. Tlaib. So I don't know if--so these responses also
state that, on July 18th of 2018, you told Dream Center
officials to take corrective action and remove their false
declaration of accreditation status. Is that correct?
Ms. Jones. Yes, on July 17th, I had a call with a number of
accreditors. And HLC then raised the issue that the website had
incorrect information. On the next day, I met with Dream Center
leaders, and I provided them with a list of bullets of the
information that I had received from accreditors, and part of
that was to say to them please update your website to be
consistent with HLC's requirements.
I learned after the fact that they had already updated
their website, and HLC confirmed to me that the website was
correct.
Ms. Tlaib. In responses to QFRs submitted to Senator Durbin
yesterday, the Department stated that HLC did not notify the
Department that they have taken an adverse action against the
institution, which would have disqualified these institutions
from participating in Federal Student Aid programs.
Is it your understanding that HLC did not send a copy of
their July--January 20th letter or any other related
correspondence about the suspension of Dream Center's
accreditation to Department officials?
Ms. Jones. I was not at the Department at the time of the
transaction, and so I am not in possession of their letters.
However, what I was told is that the letter that the Department
received from HLC described change-of-control candidacy status
as a pre-accredited status, and pre-accredited is an accredited
status.
Ms. Tlaib. In December 4th of 2018, a letter to Senator
Durbin, you stated that prior to August 2, 2018, only two
meetings between the Department personnel and Dream Center
representatives occurred in regard to the impending closure of
many of Dream Center's campuses.
To clarify, other than these two meetings, did you ever
communicate in any way, including but not limited to exchanging
calls, emails, or text messages Brent Richardson, Randall
Barton, Shelly Murphy, or any other Dream Center officials?
Ms. Jones. Shelly Murphy was their regulatory affairs
person. She was the person that I was told to communicate with.
I don't remember the exact date, but when we had the meeting,
because there were so many accreditors involved in the closures
and because it was so complicated, I did say that I would
convene accreditors to make sure they were all in agreement
that the teach-out plan was sufficient. And at some point in
time during those meetings, I did communicate with Shelly
Murphy that indeed the accreditors did want to work together.
And, in fact, I continued to work with the accreditors
throughout the closure.
So I don't remember the exact date, but----
Ms. Tlaib. What was discussed at those meetings?
Ms. Jones. The first meeting was when--in fact, the first
meeting in June was the first time I ever met anybody from the
Dream Center, and that is when they met with a large group of
us, including professional staff from the Department. That's
when they said to us that the financial condition of some of
the campuses was worse than had been presented to them and that
they would need to close a number of campuses. And I think they
may have given us the number of 30 campuses.
And so they were talking to us about the campus closures.
At the time, you know, we said: You need to notify your
accreditors. You need to have teach-out plans.
And we talked about how that might move forward.
Ms. Tlaib. I have to reclaim my time. I'm so sorry, Ms.
Jones. Yes or no. Have you exchanged text messages with Brent
Richardson?
Ms. Jones. I'd have to go back and look at----
Ms. Tlaib. Sources have been in touch with the subcommittee
attesting that you, in fact, texted with Dream Center officials
about their suspended accreditation.
Do you agree with that statement?
Ms. Jones. I don't remember. I have to go back and look.
Ms. Tlaib. You don't remember texting?
Ms. Jones. I don't remember texting. I do remember
receiving a text from Shelly Murphy that she wanted to talk.
I----
Ms. Tlaib. But not Brent Richardson.
Ms. Jones. I'd have to go back and look. I just don't
remember.
Ms. Tlaib. Can you followup with the committee please?
Ms. Jones. Absolutely.
Ms. Tlaib. I really appreciate it. Thank you so much.
I will now acknowledge Congresswoman Pressley for her first
round of questions.
Ms. Pressley. Thank you, Madam Chair.
Ms. Jones, I'm going to get straight to the point because
I'm limited on time here. We have heard extremely troubling
figures regarding the Department's lack of action on borrower-
defense claims. Department data shows since June 2018, not a
single borrower-defense claim has been processed.
Ms. Jones, at this moment, do you know how many claims
remain unprocessed?
Ms. Jones. It is a number that changes from time to time.
It is probably in the neighborhood of 160,000. The last
official count I got was 158,000, so I'm assuming it's
somewhere in the name of 160,000 by now.
Ms. Pressley. Well, that is absolutely unacceptable.
Each and every one of these outstanding claims represent a
defrauded and harmed student, a student who has been saddled
with debt, which is standing in the way of a future degree or a
better job to support their family, or a student who literally
showed up to a school to find the doors closed. These are lives
that have been forever impacted by this industry's predatory
and deceptive practices. So it is crucial that we understand
how the Department has allowed these claims to pile up. Ms.
Jones, for the record, please, yes or no, is there currently a
policy which restricts the office of Federal Student Aid from
adjudicating or processing any borrower-defense claims that did
not stem from a school closure?
Ms. Jones. The problem that we are trying to solve at the
Department is that the----
Ms. Pressley. I'm sorry. I'm short on time.
Yes or no? Is there a policy that prevents----
Ms. Jones. There is not a policy that prevents the review
of claims. However, we are not able to determine the level of
harm or the level of relief that a borrower should get because
the methodology we use is now being challenged by the
California courts. So, we continue to process----
Ms. Pressley. Reclaiming my time.
In June of last year in a judgment against Secretary DeVos
that prevented the Department from collecting on certain
Corinthian College students, the ruling stated, and I quote:
Nothing in this order, nothing in this order prohibits the
Secretary from fully discharging the loans of any borrower who
has successfully completed or who successfully completes an
attestation form, unquote.
So I'm trying to understand what is the holdup here, Ms.
Jones. So, yes or no, can you commit to a concrete timeframe
for adjudicating the more than 160,000-plus claims the
Department has allowed to buildup?
Ms. Jones. No, Congresswoman, I could not commit to a time.
We are still waiting for the California court----
Ms. Pressley. I'm reclaiming my time.
Ms. Jones. But we also said that it was appropriate----
Ms. Pressley. I'm reclaiming my time.
Ms. Jones [continuing]. for us to----
Ms. Pressley. I'm reclaiming my time.
Ms. Jones [continuing]. deliver----
Ms. Pressley. The court case does not apply to all
borrowers. What about the others? Are you not going to process
any of them?
Ms. Jones. We are processing claims. We continue to
process. What we can't do is determine the level of harm or the
level of relief----
Ms. Pressley. Okay. Reclaiming my time.
Ms. Jones [continuing]. because the methodology has been
challenged.
Ms. Pressley. I'm sorry. I'm short on time. I'm reclaiming
my time.
Ms. Jones, the Project on Predatory Lending at Harvard
reports that up to 14,000 students from ITT, the for-profit
chain which collapsed in 2016, are still awaiting their claims
to be processed. Do you know how many of those 14,000 have
actually been processed?
Ms. Jones. I would have to get back to you with----
Ms. Pressley. Since 2016? I actually have the number. The
answer is 33--33 in four years, Ms. Jones. To add insult to
injury, some of these students have even had their tax refunds
garnished as their claims have been stalled,
People like my constituent in Mattapan, a neighborhood in
Boston who respectfully asked to remain anonymous. His claim
has been processing for more than two years, and he has
received no response from your agency. His loans are now in
default. His wages, his tax refunds including his earned income
tax credit have been garnished. He's a single father, just
trying to get by to support his family and bounce back from
being targeted by this industry.
These are the stories behind the claims that your agency
leaves unprocessed, 33 in four years, Ms. Jones.
Ms. Jones. I would encourage your constituent to reach out
to us because he should be----
Ms. Pressley. Reclaiming my time.
Ms. Jones [continuing]. in forbearance----
Ms. Pressley. I'm reclaiming my time.
Ms. Jones [continuing]. and not be in collections.
Ms. Pressley. Ms. Jones, does the Department refer students
with unprocessed borrower-defense claims to the Treasury
Department?
Ms. Jones. Could you repeat that question?
Ms. Pressley. Do you refer that information to the Treasury
Department, borrower-defense claims? Are you sharing
information with the Treasury Department around borrower-
defense claims?
Ms. Jones. I don't believe we share that information with
the Treasury Department. I believe that it's the servicers who
may have provided information about a default. But, again, when
somebody has a pending borrower-defense claim, they are
entitled to a forbearance, which means they would not be in
default on their loan. They would not have to make payments.
Ms. Pressley. Reclaiming my time.
Ms. Jones. So have your constituent----
Ms. Jones. Reclaiming my time.
Ms. Jones [continuing]. reach out to us.
Ms. Pressley. I'm sorry. Reclaiming my time. I'm running
out of time here.
The FOIA documents show that Corinthian's marketing and
advertising plan was tailored to low-income people and single
mothers of color specifically. The internal documents
heartlessly describe these potential students as desperate for
a better future and afflicted with low self-esteem, the
internal documents. And yet you sit on thousands upon thousands
of claims of students that attend schools like this.
Can you commit to providing this committee a detailed plan
in the next two weeks, explaining how you plan to expeditiously
address these 160,000 unprocessed claims?
Ms. Jones. No, Congresswoman, I cannot.
We are waiting for the California court to make a
determination----
Ms. Pressley. This does nothing----
Ms. Jones [continuing]. about our methodology.
Ms. Pressley. That does not speak to all of the loan--of
the borrowers.
Ms. Jones. Every single borrower defense----
Ms. Pressley. That----
Ms. Jones. Every single borrower-defense claim has to be
evaluated for the level of harm and the level of relief. The
only methodology----
Ms. Pressley [continuing]. Ms. Jones----
Ms. Jones [continuing]. we have is under----
Ms. Pressley [continuing]. Ms. Jones----
Ms. Jones [continuing]. the courts.
Ms. Pressley. Respectfully, there is no answer that you
could provide me that would be sufficient when you have
processed 33 claims in four years, and we're talking about
thousands of lives which have been irreparably damaged.
I yield back.
Ms. Jones. We processed the Corinthian----
Ms. Pressley. I yield back.
Ms. Jones [continuing]. claims first.
Ms. Pressley. I yield back.
Ms. Jones. So, there have been more than 33 claims total
processed.
Ms. Pressley. I yield back.
Ms. Tlaib. Thank you so much.
We will now start our second round. I recognize myself for
my second line of questioning.
One year ago today, the House Education and Labor
Committee, Ms. Jones, held a hearing with Secretary DeVos on a
variety of ethics and conflict-of-interest issues involving
Secretary--the Secretary and other appointees of the
Department, including yourself.
On January 28, 2017, President Trump issued an executive
order which required that every executive branch appointee sign
and abide by an ethics pledge. The ethics pledge includes a
provision that states, and I quote: I will not for a period of
two years from the date of my appointment participate in any
particular matter involving specific parties that is directly
and substantially related to my former employer or former
clients, including regulations and contracts.
Ms. Jones, did you sign that ethics pledge?
Ms. Jones. I did, and I had the good fortune of having gone
to the Department of Labor before the Department of Ed. So I've
had two career attorneys review that pledge, review my
background, and confirm that I am recused from the appropriate
prior employers.
Ms. Tlaib. It's wonderful you signed it.
On your financial disclosure report, you reported that, in
2017, while you were a senior fellow at the Urban Institute,
you were also an expert witness for the Center For Excellence
in Higher Education on, quote, Higher education policies,
practices, and regulations.
Ms. Jones. That is correct, and they are on my list of
recusals.
Ms. Tlaib. Okay. On your Lincoln page, it currently states
you were President of AJ Squared Consulting until October
2017--October 2017. Is that correct?
Ms. Jones. Yes, October 2017, yes. That is correct.
Ms. Tlaib. Did you have any other consulting clients during
the two years prior to your appointment at the Department of
Education?
Ms. Jones. Yes, I did. I spent one month doing a project
for APSCU, which is a trade association. They are on my list of
recusals. And I spent a couple of months writing a report for
Rasmussen University, and they are also on my list of recusals.
Ms. Tlaib. This committee is currently investigating the
Trump administration's use and disclosure of ethic waivers as
part of an effort to reform and improve existing ethic laws, as
you know. Last week, Chairman Cummings sent letters to the
White House and 24 Federal agencies, including the Department
of Education, seeking information on the use of ethic waivers.
Ms. Jones, have you been issued a waiver under the ethics
pledge or any other ethics rule?
Ms. Jones. I have received no waiver with regard to my
recusals. I'm not quite sure what you mean by a waiver, but I
have not asked for or received a waiver from any of the
organizations or institutions on my recusal list.
Ms. Tlaib. Yet despite the fact that you have not obtained
a waiver or you think you didn't have to obtain a waiver, you
have participated in matters including the gainful employment
rule that are substantially related to your former clients in
the for-profit higher education industry.
Did you ever complete an ethics agreement during your time
at the Department of Labor?
Ms. Jones. I did.
Ms. Tlaib. As part of the Ethics Committee--agreement--oh,
I'm sorry. Did you ever--ethics agreement during your time at
the Department of Labor or at the Department of Education?
Ethics agreement, you did both of those ethics agreements.
Ms. Jones. I did both of those.
And just to be clear about gainful employment, I spent time
with attorneys at both agencies. And I am not recused from
working on issues related to gainful employment because the
restrictions are around particular issues, particular entities,
and gainful employment has a much wider----
Ms. Tlaib. So, as part of the agreement, did you agree to
recuse yourself from any matters potentially affecting your
former clients or former employers, including Career Education
Corporation, particularly that one?
Ms. Jones. Career Education Corporation is not on my list
of recusals because I left Career Education Corporation in
2015, and according to the rules and the review by our career
attorneys, I was not recused. However, I have not worked on any
issues related to Career Education Corporation.
Ms. Tlaib. Okay. So you now work at the Department and are
involved in regulating the same industry you recently
represented. This is sort of a revolving door between the
industry and the government service that the executive order is
intended to prevent. You ought to be recusing yourself more in
regards to Career Education Corporation. But are you saying
gainful employment would not impact any of your prior
employees?
Ms. Jones. Gainful employment has a broad reach, including
certificate programs at nonprofit institutions.
Ms. Tlaib. So it doesn't?
Ms. Jones. So I am not required. It is not a particular
matter that I am required to recuse myself from.
Ms. Tlaib. That's what we were--we're not expecting you to
say that, but you ought to be recusing yourself from such
matters and setting an example for others instead of violating
the spirit of the ethics pledge because the spirit, but the
spirit of the ethics agreement and as attorney of law, I'm
telling you that's the whole point is, you know, government's
supposed to be about people and the conflict of interest in
making sure the best interests of American people is at the
forefront and trying to completely put a wall between you and
the former employees is so important.
Ms. Jones. Again, I'm following strictly the guidance that
I was given by two career ethics attorneys.
Ms. Tlaib. You should definitely get your own personal
lawyer. I'm recommending that to everybody that works for the
Trump administration. Please, I'm asking all of you: Seek your
own legal counsel. You will not be protected when it comes down
on you, but you'll have to fall on the sword. You don't want to
do that, Ms. Jones.
Thank you so much.
And I now recognize my colleague, Mr. Grothman, for five
minutes.
Mr. Grothman. Sure. Thank you for coming over here today.
Obviously, made more difficult than it was intended.
I'd like to ask your opinion of your predecessor, the past
administration, what things you wish they would have done
differently that would be able to make your job easier today.
Ms. Jones. Well, that's a difficult question, and I try not
to look backward, and I try to look forward. So I would have to
give that some thought. I'm not quite sure what advice I would
have for those who were there before me.
Mr. Grothman. Okay. I think for-profit colleges obviously
offer benefits. Otherwise, they wouldn't have so many people
going there.
Are you at all concerned that excessive regulation right
now might be unnecessarily limiting these opportunities or may
be unnecessarily driving up tuition at these institutions?
Ms. Jones. Yes, our position is that we're, you know, we're
quite concerned that--I mean, and we heard this from R.J. that
oftentimes there are programs that are available only at these
institutions, and if those programs don't exist, the student
won't have another option. So we are worried about limited
options; and we have to review this carefully.
We're also concerned about programs in the nonprofit sector
that have not yielded the outcomes that students expected.
Mr. Grothman. Okay. College can be a time for students to
find their passions. Some students know what they want, you
know, a technical career, plumber, whatever. For-profit
colleges offer certificate programs to advance students in
these types of careers. Do you feel that disproportionately
these colleges provide an option that might not be available
otherwise?
Ms. Jones. Absolutely. In fact, if you look at the gainful
employment disclosures that were posted by nonprofit colleges,
the majority of those programs did not have to report because
they served less than 30 students. And if you have less than 30
students, you don't get a report. So the majority of the
programs provided by nonprofit institutions that qualify for
gainful employment coverage didn't have 30 students.
I think that shows that there aren't enough of these
programs, and there aren't enough of these opportunities and,
yes, I do believe that the schools that are serving students
well provide opportunities that other institutions don't
provide.
Mr. Grothman. I'll give you another question, and I asked
this to the previous panel, but I'll ask you as well. I know
the student loan debt is just an embarrassment to the country
that it's gone on so long and, quite frankly, an embarrassment
to all sorts of institutions of higher learning that they let
their students out into the field in such a disastrous
situation.
I'm going to check a little bit more into this, but a
prominent person of for-profit suggested that, in the future,
before getting any student loans, the universities themselves
would have to sign off, the idea being that students like
probably everybody else in our society doesn't appreciate the
danger of debt, or, you know, they'll take out a loan right now
if it means the ability to buy some more junk without thinking
about how difficult it's going to be to pay it back in the
future.
Do you think it would be a good idea to have all
institutions of higher learning sign off on any student loans,
sign a statement they reviewed the financial situation and
that----
Ms. Jones. I think schools for many years have been asking
the Department for the authority to stop borrowing or stop
allowing a student to borrow. Right now, an institution does
not have the authority to interfere with the student's right to
borrow. So you can see a student headed for disaster. You can
counsel the student. You can warn the student. But you do not
have the authority to cut them off or not allow them to take
out a student loan, and that is a problem.
Mr. Grothman. Now, this is where I got it right, from a
for-profit who wanted that ability, and actually this person
claimed that at one time they were preventing people or did
something to try to prevent people from taking out loans, and
they got a call from Washington telling them that they couldn't
do that.
Is that possible?
Ms. Jones. It is possible. I remember some years ago there
was a letter that was sent to the Department asking
specifically if an institution could cutoff a borrower. And the
response, so I'm told, in response to that letter, was that an
institution does not have the right to interfere with the
student's right to borrow. I also made that request before I
came back to the Department when I was in higher ed, and I was
given the same information, that the school may not interfere
with the student's right to borrow.
Mr. Grothman. I'd like to work with you on that. I think
it's just horrible that the bureaucracy or somebody, I guess,
there are people around here who think it's beneficial to
borrow more money, but I'd like to work with you on that.
And, again, thanks so much for coming over here today.
Ms. Jones. Thank you.
Ms. Tlaib. Thank you as well. We really do appreciate you
answering our questions.
Before I yield to--you did say, just to followup on my
colleague, you said there was no policy preventing the quote,
review of borrower-defense claims, but I--but I want to know if
there is a policy preventing the adjudication to completion of
claims.
Do you have such a policy?
Ms. Jones. I wouldn't call it a policy. I would say that
our methodology is on hold because the California court has
said that we cannot continue until a decision is rendered. So
we don't have a policy, but the methodology cannot be applied.
So we are waiting for the court to rule.
Ms. Tlaib. Thank you.
I now yield to Congresswoman Pressley.
Ms. Pressley. Thank you, Madam Chair.
Ms. Jones, in 2014, the Obama Administration proposed the
gainful employment rule. This was proposed as an accountability
standard for all career-focused nondegree programs. The rule to
revoke a school's access to Federal Student Aid if the typical
debt-to-earnings ratio of graduates exceeded a certain
threshold two out of three years.
As you well know, it was designed to ensure that career-
focused programs had value and led to increased student
earnings sufficient to justify their costs.
In January 2017, the first complete set of gainful
employment ratings was released by the Department using
earnings data attained from a memo of understanding with the
Social Security Administration: 800 programs failed to meet the
debt-to-earning standard, and 1,200 more fell into probationary
status; 98 percent of the programs that failed were at for-
profit colleges. Reports show that 350,000 student were
enrolled at the worst rated programs, which collected a total
$7.5 billion in Federal funds.
Now, the rule can only be enforced if a second year of
failing ratings occurs. Yet, under the Trump administration,
the Department has issued no additional ratings since the 2017
data set.
Ms. Jones, how many programs would have been subject to
enforcement if the Trump administration had continued the Obama
Administration's policy?
Ms. Jones. Well, Congresswoman, we cannot get the data from
the Social Security Administration to do a second year's
analysis. And so I can't tell you how many of those programs
would have failed a second year. The MOU was not renewed. We do
not have access to those data. We cannot calculate the debt-to-
earnings outcomes.
Ms. Pressley. Okay. Well, again, 800 programs failed, and
1,200 were probationary when the Obama Administration was
enforcing this rule. And, in fact, The New York Times reports
that 300 of these programs have since been shut down. Just as
troubling is the fact the Department may have abused its
memorandum of understanding with the Social Security
Administration with the intent for the MOU to lapse.
So, without the MOU with SSA, is the Department able to
evaluate debt to earnings in the manner that gainful employment
rule requires?
Ms. Jones. No, Congresswoman, we can't. The rule----
Ms. Pressley. Why not?
Ms. Jones [continuing]. is very specific that only Social
Security Administration data can be used. This was part of the
negotiated rulemaking back in 2014, and the Department was very
specific in identifying which government data base would be
used, and it is the Social Security Administration.
Ms. Pressley. Well, this is most unfortunate, quite
unsavory. I think it's a failure to enforce--the rule would
give an additional $5.3 billion to almost exclusively for-
profit programs.
Did the Department make any attempts to extend this MOU
with SSA?
Ms. Jones. I believe so. I think those attempts began
before I joined the Department, but I am aware that----
Ms. Pressley. Can you commit to--I'm sorry. I'm running out
of time. Thank you.
Can you commit to submitting these communications to the
committee within the next two weeks?
Ms. Jones. I can't commit to a timeframe. I have to work
with our General Counsel's Office. I personally don't have
those communications. So I will take it back, and we will have
a conversation.
Ms. Pressley. Well, again, the Department's MOU expressly
stated its purpose for the enforcement of this gainful
employment rule, and yet the Department, it seems, has really
abused this agreement.
Did the Department intentionally abuse SSA data attained
from the MOU to create a tiered relief process for partial loan
forgiveness?
Ms. Jones. I don't believe that the Department abused the
use of data. I think the question is whether or not Social
Security data can be used for any purpose other than
administering the Social Security Act. I believe that that is
the source of the concern, and so it covers both gainful
employment calculations, and the California court has expressed
concern about using those data for tiered methodology.
Ms. Pressley. I hope that's true because I would hate to
think that the Department intentionally abused earnings data
and dragged its feet to trigger cancelation of the MOU.
Can you assure me that that's not what occurred?
Ms. Jones. I wasn't there at the time that the--our relief
methodology was developed, so I can't--and I can't assure you
to things--about things that happened before I got there, but I
can assure you that, right now, the tiered relief methodology
is on hold because of the California court.
Ms. Pressley. All right. Well, we've simply got to do
better, but I thank you for being here and for taking the time
to answer our questions.
Ms. Jones. Thank you.
Ms. Tlaib. Thank you so much again. I'd like to thank again
on behalf of all the committee members for your testimony
today, Ms. Jones.
Without objection, all members will have five legislative
days within which to submit additional written questions for
the witness to the chair, which will be forwarded to the
witnesses for responses.
I ask our witnesses to please respond as promptly as you
are able.
And, with that, this hearing is adjourned.
Thank you.
[Whereupon, at 5:30 p.m., the subcommittee was adjourned.]
[all]