[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
PROTECTING STUDENTS AND TAXPAYERS:
IMPROVING THE CLOSED SCHOOL
DISCHARGE PROCESS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
HIGHER EDUCATION AND
WORKFORCE INVESTMENT
OF THE
COMMITTEE ON EDUCATION AND LABOR
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, SEPTEMBER 30, 2021
__________
Serial No. 117-29
__________
Printed for the use of the Committee on Education and Labor
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: edlabor.house.gov or www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
45-794 PDF WASHINGTON : 2022
-----------------------------------------------------------------------------------
COMMITTEE ON EDUCATION AND LABOR
ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman
RAUL M. GRIJALVA, Arizona VIRGINIA FOXX, North Carolina,
JOE COURTNEY, Connecticut Ranking Member
GREGORIO KILILI CAMACHO SABLAN, JOE WILSON, South Carolina
Northern Mariana Islands GLENN THOMPSON, Pennsylvania
FREDERICA S. WILSON, Florida TIM WALBERG, Michigan
SUZANNE BONAMICI, Oregon GLENN GROTHMAN, Wisconsin
MARK TAKANO, California ELISE M. STEFANIK, New York
ALMA S. ADAMS, North Carolina RICK W. ALLEN, Georgia
MARK DeSAULNIER, California JIM BANKS, Indiana
DONALD NORCROSS, New Jersey JAMES COMER, Kentucky
PRAMILA JAYAPAL, Washington RUSS FULCHER, Idaho
JOSEPH D. MORELLE, New York FRED KELLER, Pennsylvania
SUSAN WILD, Pennsylvania GREGORY F. MURPHY, North Carolina
LUCY McBATH, Georgia MARIANNETTE MILLER-MEEKS, Iowa
JAHANA HAYES, Connecticut BURGESS OWENS, Utah
ANDY LEVIN, Michigan BOB GOOD, Virginia
ILHAN OMAR, Minnesota LISA C. McCLAIN, Michigan
HALEY M. STEVENS, Michigan DIANA HARSHBARGER, Tennessee
TERESA LEGER FERNANDEZ, New Mexico MARY E. MILLER, Illinois
MONDAIRE JONES, New York VICTORIA SPARTZ, Indiana
KATHY E. MANNING, North Carolina SCOTT FITZGERALD, Wisconsin
FRANK J. MRVAN, Indiana MADISON CAWTHORN, North Carolina
JAMAAL BOWMAN, New York, Vice-Chair MICHELLE STEEL, California
MARK POCAN, Wisconsin JULIA LETLOW, Louisiana
JOAQUIN CASTRO, Texas Vacancy
MIKIE SHERRILL, New Jersey
JOHN A. YARMUTH, Kentucky
ADRIANO ESPAILLAT, New York
KWEISI MFUME, Maryland
Veronique Pluviose, Staff Director
Cyrus Artz, Minority Staff Director
------
SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE INVESTMENT
FREDERICA S. WILSON, Florida, Chairwoman
MARK TAKANO, California GREGORY F. MURPHY, North Carolina
PRAMILA JAYAPAL, Washington Ranking Member
ILHAN OMAR, Minnesota GLENN GROTHMAN, Wisconsin
TERESA LEGER FERNANDEZ, New Mexico ELISE M. STEFANIK, New York
MONDAIRE JONES, New York JIM BANKS, Indiana
KATHY E. MANNING, North Carolina JAMES COMER, Kentucky
JAMAAL BOWMAN, New York RUSS FULCHER, Idaho
MARK POCAN, Wisconsin MARIANNETTE MILLER-MEEKS, Iowa
JOAQUIN CASTRO, Texas BOB GOOD, Virginia
MIKIE SHERRILL, New Jersey LISA C. McCLAIN, Michigan
ARIANO ESPAILLAT, New York DIANA HARSHBARGER, Tennessee
RAUL M. GRIJALVA, Arizona VICTORIA SPARTZ, Indiana
JOE COURTNEY, Connecticut JULIA LETLOW, Louisiana
SUZANNE BONAMICI, Oregon VIRGINIA FOXX, North Carolina
ROBERT C. ``BOBBY'' SCOTT, Virginia (ex officio)
(ex officio)
C O N T E N T S
----------
Page
Hearing held on September 30, 2021............................... 1
Statement of Members:
Wilson, Hon. Frederica S., Chairwoman, Subcommittee on Higher
Education and Workforce Investment......................... 1
Prepared statement of.................................... 3
Murphy, Hon. Gregory F., Ranking Member, Subcommittee on
Higher
Education and Workforce Investment......................... 4
Prepared statement of.................................... 6
Statement of Witnesses:
Cooper, Preston, Research Fellow, The Foundation for Research
on Equal Opportunity....................................... 33
Prepared statement of.................................... 36
Emrey-Arras, Melissa, Director, Education, Workforce and
Income security, U.S. Government Accountability Office..... 8
Prepared statement of.................................... 10
Rhodes, Karyn, Student Borrower.............................. 29
Prepared statement of.................................... 32
Sith, Robyn, Senior Attorney, Legal Aid Foundation of Los
Angeles.................................................... 46
Prepared statement of.................................... 49
Additional Submissions:
Takano, Hon. Mark, a Representative in Congress from the
State of California:
Prepared Statement of Veterans Education Success......... 130
Questions submitted for the record by:
Chairman Scott........................................... 138
Bonamici, Hon. Suzanne, a Representative in Congress from
the State of Oregon.................................... 135
Response to question submitted for the record by:
Ms. Emrey-Arras.......................................... 136
Ms. Smith................................................ 139
PROTECTING STUDENTS AND TAXPAYERS:
IMPROVING THE CLOSED SCHOOL DISCHARGE PROCESS
----------
Thursday, September 30, 2021
House of Representatives,
Subcommittee on Education and
Workforce Investment,
Committee on Education and Labor,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:15 a.m. via
Zoom, Hon. Frederica S. Wilson (Chairwoman of the Subcommittee)
presiding.
Present: Representatives Wilson, Takano, Leger Fernandez,
Manning, Bowman, Pocan, Castro, Espaillat, Bonamici, Scott,
Murphy, Grothman, Stefanik, Banks, Miller-Meeks, Good, McClain,
Letlow and Foxx (ex officio).
Staff present: Katie Berger, Professional Staff; Jessica
Bowen, Professional Staff; Rashage Green, Director of Education
Policy; Christian Haines, General Counsel; Rasheedah Hasan,
Chief Clerk; Sheila Havenner, Director of Information
Technology; Ariel Jona, Policy Associate; Andre Lindsay, Policy
Associate; Max Moore, Staff Assistant; Mariah Mowbray, Clerk/
Special Assistant to the Staff Director; Kayla Pennebecker,
Staff Assistant; Veronique Pluviose, Staff Director; Manasi
Raveendran, Oversight Counsel--Education; Banyon Vassar, Deputy
Director of Information Technology; Claire Viall, Professional
Staff; Michael Davis, Minority Operations Assistant; Amy Raaf
Jones, Minority Director of Education and Human Resources
Policy; Hannah Matesc, Minority Director of Member Services and
Coalitions; Chance Russell, Minority Professional Staff Member;
and Mandy Schaumburg, Minority Chief Counsel and Deputy
Director of Education Policy.
Chairwoman Wilson. Good morning. Good morning to all of
you. We're ready to begin. I will count down from five and then
we will start, 5, 4, 3, 2, 1. The Subcommittee on Higher
Education Workforce Investment will come to order.
Welcome everyone. I note that a quorum is present. The
Subcommittee is meeting today to hear testimony on protecting
students and taxpayers, improving the closed school discharge
process. This is an entirely remote hearing. All microphones
will be kept muted as a general rule to avoid unnecessary
background noise.
Members and witnesses will be responsible for unmuting
themselves when they are recognized to speak, and when they
wish to seek recognition. I also ask that Members please
identify themselves before they speak. Members should keep
their cameras on while in the proceeding. Members shall be
considered present at the proceedings when they are visible on
camera, and they should be considered not present when they are
not visible on camera.
The only exception to this if they are experiencing
technical difficulty and inform Committee staff of such
difficulty. If any Member experiences technical difficulties
during the hearing you should stay connected on the platform,
make sure you are muted and use your phone to immediately call
the Committee's IT director whose number was provided in
advance.
Should the Chair experience technical difficulties or need
to step away to vote on the floor, Representative Bonamici--
thank you Ms. Bonamici, as a Member of the Subcommittee, or
another majority Member of the Subcommittee is not available,
is hereby authorized to assume the gavel in the Chair's
absence.
This is an entirely remote hearing and as such the
Committee's hearing room is officially closed. Members who
choose to sit with their individual devices in the hearing room
must wear headphones to avoid feedback, echoes and distortion
resulting from more than one person on the software platform
sitting in the same room.
Members are also expected to adhere to social distancing
and safe healthcare guidelines, including the use of masks,
hand sanitizer and wiping down their areas both before and
after their presence in the hearing room.
In order to ensure the Committee's five-minute rule is
adhered to, staff will be keeping track of time using the
Committee's digital timer which appears in its own thumbnail
picture. Members and witnesses are asked to wrap up promptly
when their time has expired.
Pursuant to Committee Rule 8(c) opening statements are
limited to the Chair and the Ranking Member. This allows us to
hear from our witnesses sooner and provide all Members with
adequate time to ask questions. I now recognize myself for the
purpose of making an opening statement.
Today we're meeting to discuss ways to improve the Closed
School Discharge Program which provides relief to students when
their institution abruptly closes. This discussion will focus
on new preliminary findings from a Government Accountability
Office study that will be presented to the Committee this
morning.
In the last decade at least five large, for-profit college
chains have collapsed overnight leaving tens of thousands of
students with significant student loan debt, and often without
degrees. These school closures can be devastating for students,
plunging them into financial and emotional despair, while
robbing them of the education and opportunity they deserve.
The support these students Congress included a closed
student discharge provision in the Higher Education Act. Under
current law affected students have three options. No. 1--
continue presenting the degree either through a teach out plan
offered by their own institution, or through agreements with
other institutions.
No. 2--transfer to another institution of their choice, or
three--apply for a discharge of their Federal student loans.
Unfortunately, the first two options are fraught with
challenges. Many institutions will not accept credits earned at
default schools, and institutions that do participate in teach
out plans or accept credits, are often very low quality.
In fact, in 2017 GAO found that students who transferred
their credits from for-profit schools to public school lost 94
percent of their credits. The students applying for a full
discharge of their Federal student loan is often the best
option because it both reduces their financial burden, and
restores their eligibility for Federal student aid.
The closed school discharge process should be simple to
understand and easy to navigate for students. The GAO's finding
show that this is not the case as we'll hear today that three
key problems at the Education Department must solve.
First, many students do not become aware that they are
entitled to loan relief until they have already damaged their
credit through delinquency and default. It is critical that
affected students receive more timely information about the
process for applying for closed school discharge.
One way to address this challenge is to restore the
automatic school discharge process that was implemented under
the Obama administration. This process streamlined relief for
affected students without forcing them to submit information
that the Education Department already has.
Unfortunately, the Trump administration under Betsy DeVos
eliminated this program. The Education Department also could
reduce the 3-year waiting period that student borrowers must
endure before their loans are fully discharged.
Second, students who experience a school closure often do
not go on to complete their degrees at another institution. The
teach out options that defunct schools are required to provide
their students often follow them into other low-quality
schools. The Education Department should address this challenge
by conducting greater oversight, over teach out plans and other
agreements between institutions.
And finally, the GAO's preliminary finding once again
demonstrate that low-quality, for-profit schools are costing
students and taxpayers billions of dollars. 96 percent of the
students who receive closed school discharges between 2010 and
2020 attended for-profit schools. I'll say that again, 96
percent of the students who received closed school discharges
between 2010 and 2020 attended for-profit schools.
Congress and the Education Department must work together to
crack down predatory schools that continue to cheat our
students and our taxpayers. The challenges described in the
GAO's preliminary findings are important and extremely timely.
In the next 2 weeks the Education Department will begin
considering changes to the closed school discharge process. I
hope the Rulemaking Committee will closely review the lessons
that can be learned from the GAO's report.
[The prepared statement of Chairwoman Wilson follows:]
Statement of Hon. Frederica S. Wilson, Chairwoman, Subcommittee on
Higher Education and Workforce Investment
Today, we are meeting to discuss ways to improve the Closed School
Discharge program, which provides relief to students when their
institution abruptly closes. This discussion will focus on new
preliminary findings from a Government Accountability Office study that
will be presented to the Committee this morning.
In the last decade, at least five large for-profit college chains
have collapsed overnight, leaving tens of thousands of students with
significant student loan debt-and often without degrees. These school
closures can be devastating for students, plunging them into financial
and emotional despair while robbing them of the education and
opportunities they deserve.
To support these students, Congress included a closed school
discharge provision in the Higher Education Act. Under current law,
affected students have three options:
One--Continue pursuing their degrees either through a teach-out
plan offered by their own institution or through agreements
with other institutions;
Two--Transfer to another institution of their choice;
Or Three--Apply for a discharge of their Federal student loans.
Unfortunately, these first two options are frought with challenges.
Many institutions will not accept credits earned at defunct schools,
and institutions that do participate in teach-out plans or accept
credits are often very low quality.
In fact, in 2017, GAO found that students who transferred their
credits from for-profit schools to public schools lost 94 percent of
their credits.
For students, applying for a full discharge of their Federal
student loans is often the best option because it both reduces their
financial burden and restores their eligibility for Federal student
aid. The Closed School Discharge process should be simple to understand
and easy to navigate for students.
The GAO's findings show that is not the case. As we'll hear today,
there are three key problems that the Education Department must solve.
First--Many students do not become aware that they are entitled to
loan relief until after they have already damaged their credit through
delinquency and default. It is critical that affected students receive
more timely information about the process for applying for closed
school discharge.
One way to address this challenge is to restore the automatic
school discharge process that was implemented under the Obama
administration. This process streamlined relief for affected students
without forcing them to submit information that the Education
Department already has. Unfortunately, the Trump administration, under
Betsy DeVos, eliminated this program.
The Education Department also could reduce the 3-year waiting
period that student borrowers must endure before their loans are fully
discharged.
Second--Students who experience a school closure often do not go on
to complete their degrees at another institution. The teach-out options
that defunct schools are required to provide their students often
funnel them into other low-quality schools.
The Education Department should address this challenge by
conducting greater oversight over teach-out plans and other agreements
between institutions.
And finally, the GAO's preliminary findings once again demonstrate
that low-quality for-profit schools are costing students and taxpayers
billions of dollars. 96 percent of the students who received closed
school discharges between 2010 and 2020 attended for-profit schools.
I'll say that again: 96 percent of the students who received closed
school discharges between 2010 and 2020 attended for-profit schools.
Congress and the Education Department must work together to
crackdown on predatory schools that continue to cheat students and
taxpayers.
The challenges described in the GAO's preliminary findings are
important and timely. In the next 2 weeks, the Education Department
will begin considering changes to the closed school discharge process.
I hope the rulemaking committee will closely review the lessons that
can be learned from the GAO's report.
______
I want to thank the GAO and all of our witnesses for being
with us today. I now recognize the distinguished Ranking Member
for the purpose of making an opening statement, Representative
Murphy.
Mr. Murphy. Thank you, Madam Chairman. Thank you very much
everyone for coming today. When a college class closes
thousands of students are thrown off their academic paths, some
permanently. This often leaves students that are left with tens
of thousands of dollars in debt and no degree to show for it.
Without credentials, it is exponentially more difficult for
these students to repay their loans.
They are thus left in a worst place then when they started
their degree. This is simply not right. These students deserve
protections. They should not face the full financial burden of
student loan debt if their school's closure forced them to end
their education abruptly.
In the best-case scenario when a school closes students
should have the option to continue their program at another
college. Students have already invested time and money into
starting a degree, and it would be unfortunate to see this
effort go to waste.
Finishing their programs would be a far greater benefit for
students in the long-term, really than just forgiving their
loan. Simply discharging students? debt without providing every
avenue possible to degree completion leave taxpayers bearing an
unnecessary burden. This is simply not a reasonable pathway,
nor is it right for an administration to use its narrow
authority to grossly abuse the closed school discharge program.
In August the Biden administration announced that it was
expanding the ``look back window,'' to students who attended
ITT Tech in 2008. A full 8 years before it closed. This will
cost taxpayers over a billion dollars. This policy is simply
reckless and financially honestly absurd. It is clear that the
Biden administration is using this narrow program as a trojan
horse for the Democrat's radical mass student loan forgiveness
agenda. We must resist these efforts if we're ever to get our
Nation's financial house in order.
The money simply does not grow on trees. Education is an
investment, and all investments have inherent risks. We need to
get back to the belief in this country that personal
responsibility means something. Everything is not free when
faced with adverse circumstances.
While no student however should be left holding the bag if
their school preemptively closes, we should ensure that schools
receiving Federal financial dollars are financially viable,
rather than cleaning up the mess after they've closed.
This topic is just one of many that we should be discussing
in the context of a higher and full reform of the Higher
Education Act. If we're serious about addressing this issue, I
urge the Committee together that we work together in a
bipartisan manner, which we can do, to adequately legislate.
The pandemic exposed some significant flaws with our
country's higher educational system. Our country's college
students deserve better from their institutions. When
discussing such reforms it is critical that we balance the
interest of hard-working taxpayers with those of student
borrowers.
It is difficult to explain to a hard-working American that
never went to college why he or she would have to pay off
someone else's student loan. Blue collar Americans have
struggled the most throughout this pandemic, many losing their
jobs or being told they aren't allowed to show up for work.
And all of these Americans now are being asked to pay for
white collar degrees. That is simply not right. Degree
completion is a student's best bet for a successful future.
This should be our focus, not burdening taxpayers with debt
that is neither their fault, nor their responsibility.
[The prepared statement of Mr. Murphy follows:]
Statement of Hon. Gregory F. Murphy, Ranking Member, Subcommittee on
Higher Education and Workforce Investment
When a college closes, thousands of students are thrown off their
academic path, some permanently. This often means students are left
tens of thousands of dollars in debt and no degree to show for it.
Without credentials, it is exponentially more difficult for these
students to repay their loans. They are thus left in a worse place than
when they started their degree. This is simply not right.
These students deserve protections and should not face the full
financial burden of student loan debt if their school's closure forced
them to end their education abruptly.
In the best-case scenario, when a school closes, students should
have the option to continue their program at another college. Students
have already invested time and money into starting the degree, and it
would be unfortunate to see this effort go to waste. Finishing their
programs will be a far greater benefit for students in the long term
really than just forgiving their loan.
Simply discharging students' debt without providing every avenue
possible to degree completion leaves taxpayers bearing an unnecessary
burden. This is simply not a reasonable pathway. Nor is it right for an
administration to use its narrow authority to grossly abuse the closed
school discharge program.
In August, the Biden administration announced that it was expanding
the 'look back window' to students who attended ITT Tech in 2008-a full
8 years before it closed. This will cost taxpayers over $1 billion.
This policy is simply reckless and financially, honestly, absurd.
It is clear that the Biden administration is using this narrow program
as a Trojan horse for the Democrats' radical mass student loan
forgiveness agenda. We must resist
these efforts if we are ever to get our Nation's financial house in
order. The money simply does not grow on trees. Everything is not free.
Education is an investment, and all investments have inherent
risks. We need to get back to the belief in this country that personal
responsibility means something. Everything is not free when faced with
adverse circumstances.
While no student, however, should be left holding the bag if their
school preemptively closes, we should ensure that schools receiving
Federal dollars are financially viable, rather than cleaning up the
mess after they close.
This topic is just one of many that we should be discussing in the
context of a full reform of the Higher Education Act. If we are serious
about addressing this issue, I urge the committee work together in a
bipartisan manner, which we can do, to adequately legislate.
The pandemic exposed some significant flaws with our country's
higher education system. Our country's college students deserve better
from their institutions.
When discussing such reforms, it is critical that we balance the
interests of hardworking taxpayers with those of student borrowers.
It is difficult to explain to a hardworking American that never
went to college why he or she would have to pay off someone else's
student loan.
Blue-collar Americans have struggled the most throughout this
pandemic, many losing their jobs or being told they aren't allowed to
show up for work. And these are the Americans we are asking to pay for
white-collar degrees.
That is simply not right.
Degree completion is a student's best bet for a successful future.
This should be our focus, not burdening taxpayers with debt that is
neither their fault nor their responsibility.
______
Thank you Madam Chairman. I look forward to an excellent
Subcommittee meeting, and I appreciate the time to speak. I
yield back.
Chairwoman Wilson. Thank you. Without objection all other
Members who wish to insert written statements into the record
may do so by submitting them to the Committee Clerk
electronically in Microsoft Word format by 5 o'clock p.m. on
Thursday, October 14, 2021.
I will now introduce the witnesses and thank you so much
for coming today. Our first witness is Melissa Emrey-Arras who
is a director of GAO's Education Workforce and Income Security
Team. She oversees GAO's higher education work. Prior to
joining GAO she worked as a private sector consulting company
conducting program evaluations for State and local governments,
and worked in non-profit agencies serving children and
families.
Melissa earned a master's degree in public policy from
Harvard University, and a bachelor's degree from Swarthmore
College. Welcome Melissa.
Our second witness is Karyn Rhodes who's a mother,
grandmother, entrepreneur, and real estate agent from Torrance,
California. In 1988 as a single mother Miss Rhodes took out
$6,625.00 in Federal student loans to enroll in a data entry
program at American Business Institute, ABI, which suddenly
closed 7 months into Ms. Rhodes' education.
Ms. Rhodes has never been informed about her right to a
closed school discharge, but eventually had her loans
discharged in August 2020.
Our third witness is Preston Cooper, who is a Research
Fellow at The Foundation for Research on Equal Opportunity, a
non-partisan, non-profit think tank focused on bringing
opportunities to those who least have it.
Mr. Cooper's work focuses on the Federal student loan
program and the economics of higher education. He's also a
regular contributor to Forbes. Mr. Cooper holds a bachelor's
degree from Swarthmore College and a master's degree in
economics from George Mason University, welcome.
And last we will hear from Robyn Smith, who currently works
as a Senior Attorney with the Legal Aid Foundation of Los
Angeles where she concentrates on student loan and for-profit
school issues. She also acts as, Of Counsel, for the National
Consumer Law Center where she coauthored NCLC Student Loan Law
Treatise.
Mrs. Smith also worked as a supervising Deputy Attorney
General at the California Attorney General's Office where she
investigated and prosecuted fraudulent for-profit colleges.
Last, she has authored a report on the Department of
Education's existing authority to provide widespread discharges
to borrowers impacted by student loan closures welcome.
We appreciate the witnesses for participating today, and we
all look forward to your testimony. Let me remind the witnesses
that we have read your written statements, and they will appear
in full in the hearing record.
Pursuant to Committee Rule 8(d) and Committee practice each
of you is asked to limit your oral presentation to a five-
minute summary of your written statement. Before you begin your
testimony, please remember to unmute your microphone. During
your testimony, staff will be keeping track of time and a timer
will sound when your time is up.
Please be attentive to the time. Wrap up when your time is
over and remute your microphone. If any of you experience
technical difficulties during your testimony or later in the
hearing do not disconnect. Stay on the platform, make sure you
are muted, and use your phone to immediately call the
Committee's IT Director whose number was provided to you in
advance.
We will let all the witnesses make their presentations
before we move to Member questions. When answering a question
please remember to unmute your microphone. I will first
recognize Miss Emrey-Arras, that's it.
STATEMENT OF MELISSA EMREY-ARRAS, DIRECTOR, EDUCATION,
WORKFORCE AND INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY
OFFICE
Ms. Emrey-Arras. You got it.
Chairwoman Wilson. Good morning.
Ms. Emrey-Arras. Good morning, Chairwoman Wilson,
Republican Leader Murphy, Chairman Scott, Republican Leader
Foxx, and Members of the Subcommittee. I am pleased to be here
today to discuss GAO's work on closed school discharges. When a
college closes it can derail the education of many students
leaving them with loans, but no degree.
Those who cannot complete their education may be eligible
to have their Federal student loans forgiven through a closed
school discharge from the Department of Education. I will focus
my remarks on GAO's research findings in two areas. One, what
is known about borrowers who were enrolled in colleges that
closed, and two, the extent to which these borrowers received
closed school discharges.
Beginning with a look at the borrowers who were enrolled at
schools that closed, we found that about 246,000 of Federal
student loan borrowers were enrolled in over 1,100 colleges
that closed from 2010 through 2020. We also found that 86
percent of these borrowers were enrolled at for-profit colleges
that closed. While some students at closed schools managed to
complete their programs or transfer, including some students
who transferred to another college that also subsequently
closed, we found that many of the borrowers enrolled at closed
schools did not complete their program or transfer making them
eligible for a closed school discharge.
Specifically, we found that over 40 percent of impacted
borrowers did not complete their program before their college
closed, or transferred to another college, showing that
closures are often the end of the road for a student's
education.
Next, turning to GAO's research findings on closed school
discharges, we found that over 80,000 borrowers had their
Federal student loans forgiven through the closed school
discharge process. The majority of these borrowers applied for
loan forgiveness, however, over 27,000 received relief through
a process that took effect in 2018, which automatically
discharged loans for eligible borrowers.
The automatic process discharges loans for eligible
borrowers 3 years after a closure, and helps those who have not
applied for a loan discharge. According to education officials,
some of these borrowers may not have been aware that they were
eligible for loan discharges.
Automatic discharges have accounted for at least 42 percent
of discharges since borrowers became eligible for them. The
automatic discharge process has provided relief to many
borrowers struggling to repay their loans. About 73 percent of
borrowers who eventually received automatic discharges faced
difficulty repaying their loans.
Specifically, 52 percent of these borrowers defaulted on
their loans, and an additional 21 percent were past due on
their loans by 90 days or more at some point during repayment.
More than half of the borrowers who fell into default before
receiving an automatic discharge did so within a year and a
half of their college closing.
Since education processes discharges 3 years after a
closure, many borrowers will receive these automatic
discharges, or facing the consequences of default for a
substantial amount of time before receiving the automatic
discharge. Borrowers who eventually received automatic
discharges faced higher rates of default than other borrowers.
For instance, borrowers receiving automatic discharges
defaulted at about five times the national average, and about
nine times the rate of those who applied for and received
discharges. Although many borrowers are at risk of facing
severe financial burdens from their Federal student loans that
were past due or in default, they did not apply for a
discharge.
Borrowers in default may be subject to wage garnishment or
reduction in income tax refunds, and some social security
benefits. Defaulted loans and loans past due for 90 days or
more will also appear on the borrower's credit record, which
may make it more difficult for them to obtain their other loans
and can also harm their ability to obtain a job or rent or buy
a home.
Many borrowers who were struggling to repay their loans
eventually received relief through the automatic process. Since
education eliminated the process, borrowers impacted by future
closures will have to apply to receive the discharge. Those who
do not apply potentially because they are not aware of their
eligibility, may face long-term financial burdens from student
loans that are past due or in default even though those loans
are eligible to be discharged.
This completes my statement, and I would be pleased to
answer any questions you may have.
[The prepared statement of Ms. Emrey-Arras follows:]
Prepared Statement of Melissa Emrey-Arras
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairwoman Wilson. Thank you so much. Next we'll hear from
Ms. Rhodes.
STATEMENT OF MS. KARYN RHODES, STUDENT BORROWER
Ms. Rhodes. Good morning everyone. My name is Karyn Rhodes
and I live in Torrance, California. I'm a wife, mother,
grandmother and now a self-made entrepreneur. I would like to
share this testimony of my 30 year long journey with the
Department of Education to get a closed school loan discharge.
My goal is to help anyone who is experiencing, or who has
experienced a defaulted school loan as a result of a school
closure. In 1988 I was a single mother who worked for Comcast
as a customer service representative. In this position I was
struggling financially.
I wanted to provide a better life for my daughter, so I
decided to try to become a data entry clerk. This position
required a degree, and I discovered that the American Business
Institute in Los Angeles offered this course. I made an
appointment to tour the school. After the tour I enrolled and
took out $6,625.00 in Federal student loans.
I officially started school in April 1988, and attended
classes while balancing my job and taking care of my daughter.
Seven months later while trying to attend one of my night
classes, several other students and I were stopped by the
police from entering the school premises and were told there
would not be any classes today. The police told us they could
not give us any information, but they stated that there was an
open investigation with the school and asked us to leave.
The following week I called the school multiple times and
left voice mails for all the employees listed on the school's
website, but with no answer. I decided to drive to the school
in hopes of reaching one of the faculty Members. Once I arrived
I saw other students that showed up to the school as well.
All we saw was a note taped to the school's main door
stating that the school was closed. No other information was
listed. One student informed me that the owners of the school
had committed fraud and were indicted. I was stunned. Week
after week I kept calling and stopping by, but nothing changed.
I also reached out to other school branches, but I received
no assistance. I then understood I was on my own and stuck with
the debt from a school that was now closed. In the first few
years after the school closed I told the people who were
collecting my student loans about the closure, and asked for my
loan to be canceled because I never received my degree.
However, my requests were denied because at that time
Congress had not created a closed school discharge process. For
almost three decades I struggled to make my student loan
payments and eventually defaulted. During that time I was a
junior operator at a hair salon while attending cosmetology
school, and my husband was the main provider for our family.
Although, according to my legal aid lawyer, I was eligible
for this discharge since 1994. I had never been invited to
apply by my loan servicer or debt collectors, even when I
explained that my school had closed. The Department of
Education obtained a judgment against me in Federal Court and
seized $2,100.00 in Federal income tax refunds.
I was confused why my tax returns were seized because I had
no knowledge of the judgment. I was never served, nor received
any paperwork, and did not have any legal representation. Due
to the judgment I was not eligible for stopping the tax refund
offsets through consideration or rehabilitation. This also
prevented me from going back to school because I would never be
able to secure any Federal funding when I had a defaulted loan
on my credit.
This caused me tremendous stress and I felt the education
system had failed me. In October 2018 I received a letter
attempting to collect on my school loan. It stated that my
original $6,625.00 loan had ballooned to a $26,000.00 debt. I
was informed that I needed to make payments on the loan or else
they would pursue wage garnishments against me.
I agreed to start making $60.00 month payments to protect
my family and our wages while I continued to pursue a school
loan discharge. I researched on the internet and found that
there was a class action suit against American Business
Institute, so I called and spoke with Legal Aid Foundation of
Los Angeles, explaining my situation.
On December 23, 2018, Legal Aid assisted me by submitting a
closed school discharge application. On December 21, my
application was denied. In August 2020, Legal Aid submitted an
appeal, a few weeks later I received a letter stating that I
was granted my closed school discharge.
I was so excited and relieved that I finally was free of
that $26,000.00 debt. I was also refunded the $2,100.00 that
was taken in income tax refunds. Legal Aid also succeeded in
having the judgment removed from my credit as well as the
lawsuit dismissed with prejudice.
This was the icing on the cake for me and a day to
remember. I was overjoyed that it was finally over after almost
30 years. I felt vindicated and that the truth had prevailed in
the end. I am glad my God never let me give up. He led me to
the right people to help me, and they were at Legal Aid of Los
Angeles. Thank you for this opportunity to share my story, and
thank you Chairwoman Wilson, Ranking Member Murphy and Members
of the Committee for this opportunity to share my experiences.
[The prepared statement of Ms. Rhodes follows:]
Prepared Statement of Karyn Rhodes
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Chairwoman Wilson. Thank you. Thank you so much. We'll now
hear from Mr. Cooper.
STATEMENT OF PRESTON COOPER, RESEARCH FELLOW, THE FOUNDATION
FOR RESEARCH ON EQUAL OPPORTUNITY
Mr. Cooper. Good morning Chairwoman Wilson, Ranking Member
Murphy and distinguished Members of the Subcommittee. Thank you
for the opportunity to testify today on improving the closed
school discharge process. My name is Preston Cooper, and I am a
Research Fellow in higher education policy at the Foundation
for Research on Equal Opportunity, a non-profit, non-partisan
think tank focused on bringing opportunity to people with
incomes below the U.S. median.
My remarks today are my own and do not represent the views
of my employer. Closed school discharges are an important
feature of the student loan safety net, but policymakers should
view them as a last resort.
Students affected by school closures did not originally go
to college with the intention of taking out loans that would
later be discharged. They went to college in order to earn a
degree or certificate, and build a better life for themselves.
When schools close we want students to complete their programs
through a teach out, or transfer their credits to another
university and earn a credential there.
This will make them ineligible for a discharge, but they
will get what they originally wanted, a degree. Closed school
discharges should be the last option we consider not the first.
When they occur it means we have failed students. The problem
is not that schools sometimes close.
School closures will always be a fact of life, in fact
creative destruction in higher education is desirable. If
schools never close it would be a sign of stagnation in higher
education. The challenge is not preventing school closures, but
managing them to ensure students can complete their education
elsewhere and do not impose excessive burdens on taxpayers
through the closed school discharge process.
Institutions can sometimes shut down with little warning,
leaving students scrambling to complete their education. The
Department of Education's track record of predicting school
closures ahead of time is poor. The key metric it uses to
access school's financial health once suggested that a school
for hypnotists is in better shape than Harvard University
financially.
Institutions such as Corinthian Colleges have found ways to
manipulate financial responsibility metrics, and limit the
Department's ability to take action to protect students and
taxpayers.
The private sector has often proven better than the
Department of Education at assessing the true State of
institution's financial health. According to the GAO in 2016
private credit rating agencies gave junk bond status to 30
colleges that received a clean bill of financial health from
the Department of Education.
To that end Congress should leverage the power of the
private sector to help the Department predict when schools will
close, and provide the financial incentives for schools to shut
themselves down in an orderly fashion.
The solution is to require schools to purchase insurance to
cover the costs associated with closed school discharges. Each
year the Department of Education would calculate taxpayer's
total potential liability in the event of a school closure.
Aid-dependent schools would then be required to purchase
insurance on the private market to fully cover those potential
losses.
If the school fails, and closed school discharges are
granted, the insurance company would make taxpayers whole. The
key benefit is that insurance companies could vary
institution's premiums according to the financial risk each
school presents. Institutions on stronger financial footing
would pay lower premiums.
Schools with a well-defined teach out plan and articulation
agreements with other colleges to ensure transferability of
credit would also get a break on their premiums, but
unscrupulous institutions such as Corinthian Colleges, might
not be able to secure insurance coverage at all.
The insurance mandate creates a direct financial incentive
for institutions to serve students better. There is ample
precedent for insurance mandates. Car owners must purchase
insurance as must homeowners if they want to get a mortgage.
It's not unreasonable to ask colleges and universities which
receive taxpayer funding in excess of 100 billion dollars every
single year to meet the same standard as ordinary people.
The best way to serve students is not to grant as many
closed school discharges as possible, but to make closed school
discharges unnecessary. Students take on debt because they want
a degree or certificate. Schools need incentives to maximize
their students' chances of earning that credential, even in the
event of the school closure.
And insurance mandate for higher education could provide
those incentives while protecting taxpayers at the same time.
Thank you again for the opportunity to testify today, and I
look forward to your questions.
[The prepared statement of Mr. Cooper follows:]
Prepared Statement of Preston Cooper
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Chairwoman Wilson. Thank you, thank you very much. Well now
hear from Ms. Smith.
STATEMENT OF ROBYN SMITH, SENIOR ATTORNEY, LEGAL AID FOUNDATION
OF LOS ANGELES
Ms. Smith. Chairwoman Wilson, Ranking Member Murphy and
Members of the Committee, thank you for inviting me to testify
today about improving the Federal loan discharge process for
borrowers harmed by sudden school closures.
I offer my testimony on behalf of the low-income clients of
the Legal Aid Foundation of Los Angeles and the National
Consumer Law Center. Legal Services organizations have long
witnessed the suffering endured by Federal student loan
borrowers after their school has abruptly closed.
At least since 1986 thousands of for-profit schools have
closed leaving hundreds of thousands of low-income students
with student debt that they have been unable to repay through
no fault of their own.
In 1992 after Senate Subcommittee hearings revealed, the
extensive harm caused by school closures, Congress amended the
Higher Education Act to mandate that the Department grant loan
discharges to borrowers who are unable to complete their
education due to school closure.
Congress applied the mandate retroactively to students
whose schools closed after January 1 of 1986. The Department's
closed school regulations published in 1994 provide discretion
to the Department to grant automatic discharges to borrowers
who are eligible based on information in its possession instead
of using this authority to grant retroactive automatic
discharges to borrowers harmed by school closures between 1986
and the present, the Department has required students to submit
applications, even though students remain unaware that a closed
school discharge is even an option.
Although the Department recently used this automatic
discharge authority for some ITT Tech students, there are
thousands of other schools that closed between 1986 and the
present whose former students continue to suffer from the
burden of Federal debt they do not owe.
As a result, legal services organizations have a constant
influx of borrowers whose schools closed from 2 to 35 years
ago. All are low-income and most attended for-profit schools
and are African American, Latin X, or other people of color.
Most have no idea that they are eligible for a discharge, while
others have been unable to obtain a discharge without the
assistance of an attorney.
They usually seek our help after they have defaulted, and
the government has garnished their wages, seized tax refunds,
or seized portions of Federal benefits such as social security.
These punitive collection measures push our clients over the
financial brink, ruining their credit histories, and causing
severe distress when they cannot afford to pay for rent,
utilities, transportation to and from work, medical supplies or
even food.
Thus the Department's decades long failure to grant
automatic closed school discharges has systemically removed the
wealth from economically disadvantaged families and communities
of color through the collection of burdensome and invalid debt.
Its failure has also prevented these borrowers from
building wealth by barring many from earning a credential at a
legitimate institution that would allow them to improve the
economic well-being of their families. Cruelly the communities
hit hardest by the Department's failure are the same
communities currently hit hardest by the COVID-19 global health
crisis.
The Department's application requirements and reluctance to
provide wide-spread automatic closed school discharges have
hindered Congress's broad remedial intent in enacting the
Higher Education Act's closed discharge mandate. It has caused
decades of unnecessary suffering to thousands of students who
are disproportionately people of color who are clearly eligible
for discharges according to the Department's own records.
There is little to be gained by continuing to wage this
economic war on poor people who were harmed through no fault of
their own by sudden school closures. At a minimum, the
Department should immediately change course and comply with its
statutory mandate by immediately beginning to grant automatic
closed school discharges to all borrowers whose schools closed
after January 1 of 1986 who are clearly eligible for discharges
according to its own records.
I describe in my written testimony other steps that the
Department should take to alleviate the devastating
consequences of abrupt school closures. Thank you for your
close attention to this urgent issue, and for the opportunity
to provide this testimony. I look forward to your questions.
[The prepared statement of Ms. Smith follows:]
Prepared Statement of Robyn Smith
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Chairwoman Wilson. Thank you so much. Under Committee Rule
9(a) we will now question witnesses under the five-minute rule.
I will be recognizing our Subcommittee Members in seniority
order. Again, to ensure that the Member's five-minute rule is
adhered to staff will be keeping track of time, and a timer
will sound when time has expired. Please be attentive to the
time. Wrap up when your time is over and remute your
microphone.
As the Chairwoman, I now recognize myself for five minutes.
Ms. Emrey-Arras the automatic discharge process was designed to
provide relief for borrowers if they did not complete their
program or transfer to another school within 3 years after
their college closed.
Is this time period quick enough to catch eligible
borrowers before they face negative financial consequences?
Ms. Emrey-Arras. Great question. We found that 73 percent
of the borrowers who went on to receive the automatic
discharges defaulted, or were past due on those loans by 90
days or more prior to getting a discharge, and over half of
those borrowers defaulted within a year and a half of the
college closing.
So within a year and a half many were defaulting, and then
it wasn't until a year and a half later that they received the
discharge.
Chairwoman Wilson. Wow. Ms. Rhodes can you please describe
your experiences in the first weeks immediately after the
school closed? Ms. Rhodes?
Ms. Rhodes. Yes. There we go I'm sorry. OK. After a few
weeks of the school closing I really wanted to complete my
education and become a data entry clerk. I wanted to finish my
schooling as I had planned to do. My school closing caused me
great stress. I was so devastated about not completing my
courses, graduating and receiving my diploma. I didn't know
what I was going to do now, and I was really worried about
having outstanding loans.
All I know was that I had to continue working to provide
for my daughter until I could figure it out--what my next step
was going to be. I didn't apply to any other schools because
accumulating another debt didn't make any sense to me.
However, in 1991 I was offered an opportunity to assist as
a junior operator in a salon, and I jumped on that opportunity
to do the apprenticeship and I became a cosmetologist.
Chairwoman Wilson. Do you recall if you received any
information about your eligibility for a closed school
discharge during this time, and if so, was it difficult to
understand the process given everything you experienced in that
time. Did you know anything about this process?
Ms. Rhodes. No. At the time there wasn't any closed school
discharge, so I was unable to receive any information regarding
my eligibility, and I feel like I was in the first wave of
closed schools, and I was left to fight this issue on my own
with no assistance from anyone.
Chairwoman Wilson. Did you know if anyone else in your
class was able to have any success the way that you were able
to get success, or do you think most of them are just thrown
away?
Ms. Rhodes. I would say we were thrown away. We were all in
the same situation. The school closed and we just had nowhere
to turn, no information.
Chairwoman Wilson. Were most of the students African
American?
Ms. Rhodes. I would say it was mixed, but yes my area would
be considered more African American.
Chairwoman Wilson. And how were you recruited to go to the
school? How did you find out about it?
Ms. Rhodes. I basically wanted, I worked for Comcast, and I
wanted to become a data entry clerk, and they had a position
available, but I had to get a degree, so I just searched the
internet, and then found the school and it essentially was
about five minutes from my home, that was perfect for me, and I
could take night classes and still take care of my daughter, so
that's why I chose the school.
Chairwoman Wilson. Were there any other people in your
community who had gone to that school, or were there any
recruitment efforts from that school, or any other for-profit
college in that community?
Ms. Rhodes. There were other students that was in my
neighborhood, but I didn't know them personally, but they were
from the general area, yes.
Chairwoman Wilson. Were there any recruitment efforts from
the for-profit schools in that area to recruit you?
Ms. Rhodes. I would say yes a little bit because they were
in like a mall, so of course when you come in they kind of
would give you flyers to join the school, so yes, a little bit
of that recruitment.
Chairwoman Wilson. Thank you so much. I now recognize the
Ranking Member for the purpose of questioning the witnesses.
Mr. Murphy. Thank you Madam Speaker, or Madam Chairman
rather, and I want to thank all the witnesses that came today.
Very good information. We obviously have a problem here. It's
tragic when someone has put their name on the dotted line on a
loan, and they put it forth with a good faith effort to get an
education, and it's tragic when those places close their doors,
and then the person is left with a burden of debt that is
through literally no fault of their own.
That said, is it fair to have someone who's never been to
college and that just works hard at a blue-collar job to pay
off that debt? There has to be something that we can put forth
in the middle. And so let me just ask Mr. Cooper first a
question. I'm intrigued by--I live in the world of medicine,
and we all have to have malpractice insurance regardless.
Is there any avenue that we can put forth for these for-
profit schools to get insurance beforehand before anything goes
on that is recognized as them having financial troubles?
Because we all know that State institutions are backed by the
State. They have backing in that regard. Private institutions--
I went to a private undergraduate college, had a large
endowment otherwise. And so I wonder if that's an avenue that
has been pursued, we should pursue that may help prevent the
taxpayer from having to take the burden if defaults occur?
Mr. Cooper. Thank you, Doctor Murphy, that's a great
question. So right now the Department does have some
discretionary authority to request protection from schools when
it looks like they're in danger of closures, such as requesting
a letter of credit, in order to make taxpayers whole in the
event of a closed school discharge.
The problem is that this is very reactive, not proactive.
The Department often waits to request a letter of credit until
the problems in the schools have already become apparent, and
at that point it's very hard for a school that has just been
deemed financially irresponsible by the Department, to go to a
bank and say please give us a letter of credit.
And so that's why I believe we need a more proactive
approach to financial protection, and that's where my proposal
for an insurance mandate comes in which is analogous to the
malpractice insurance mandate for doctors which you described.
If institutions wish to participate in the Federal student loan
program they are putting some financial risk on taxpayers
because there is a risk that those schools will close and there
will be hundreds of millions if not billions of dollar of
closed school discharges associated with those closures that
will place a burden on taxpayers.
So my proposal is for them as a condition for participating
in the Federal student loan program to have to purchase
insurance in order to make taxpayers whole in the event of a
discharge. And this won't only have the benefit of protecting
taxpayers, but will also have the benefit of providing a
financial incentive for schools to make sure that when they do
face the risk of closure it's done in an orderly fashion, and
that students are able to either complete their programs
through a teach out, or transfer their credits to another
school and complete their education there.
Both of those scenarios would make them ineligible for a
closed school discharge, but it will get them what they
original went to college for which is a degree.
Mr. Murphy. Yes. I think that's actually fair. I think
that's a reasonable compromise for all this. We don't burden
the taxpayers with money that unjustifiably is not their debt,
and then but we hold them accountable for some of the other
things. And one thing I wish we would also look into I think
one of the speakers commented that up to 94 percent of credits
were not accepted by other institutions.
Well some of these institutions need to accept some of
these credits, and I think as a condition of getting student
loans they need to be much more lenient in accepting credits
from for-profit institutions because you know we know that
there is profit motive on the non-profit schools that they want
those students to pay and do more of that.
So you know there has to be a happy medium. I think running
to the one side where all of a sudden there's more and more and
more taxpayer money put into a program, put into these colleges
and universities I think is wrong. I think there's a much
smarter way to do that protects consumers, protects students,
but also protects colleges and universities.
We don't need to have a hoarding approach to all of this.
So Madam Chairman I'm not sure of my time that's left. How much
time do I have left. I can't even see it. 17 seconds? Well I
could talk about the baseball game last night, but we won't
talk about that considering it was such a resounding victory.
But anyway I want to thank the speakers for coming in, and
Madam Chair I'll yield back.
Chairwoman Wilson. Thank you. Thank you Dr. Murphy. Now Mr.
Takano from California.
Mr. Takano. Thank you Madam Chair. You know you touched
some glimmer of hope. I think the Ranking Member does recognize
there's a problem. However these solutions I really beg to
differ. I don't see the good in say a top-quality medical
school being forced to accept credits from a fly by night
medical school, or a school--but let's not talk about medical
schools, but a regular school with a great reputation that has
great standards to be accepting credits from a school that just
closed. That makes no sense to me.
That means even less accountability and less value for the
taxpayer. But anyway, Ms. Smith. I want to thank you for your
testimony today. Very quickly, before I begin the rest of my
questions and respond to the Ranking Member more sensibly, I
wanted to inquire if the extension of the lookback window for
ITT was within the Education Department's authority?
Ms. Smith. Yes. The extension back was within the
Department's authority both as extenuating circumstances, but
it also has the clear authority to grant automatic discharges
based on information in its own possession. It can determine
and has determined who withdrew from that school before it
closed within the extended period and is granting automatic
discharges.
So this really shows that the Department has the authority
and can in fact look back according to its own records to see
who did not--who's eligible for a closed school discharge and
grant widespread discharges if it wants to.
For ITT Tech I understand that's about 115,000 borrowers.
That of course is just the tip of the iceberg. There are
probably hundreds of thousands of borrowers who remain stuck
with debts that they don't owe, and struggling from that who
have no idea still that they should be eligible for a closed
school discharge.
Mr. Takano. Well thank you. So the Department of Education
has recently moved to provide other forms of loan relief,
including total and permanent disability charges to borrowers
without requiring them to submit an application. Can you
explain how automatic processes can remove major barriers from
borrowers and get them benefits they are entitled to under law?
Ms. Smith. Sure. So, as you all know a closed school
discharge not only discharges the debt, it also provides a
restoration of Pell Grants and removes the negative history
from credit reports so people who have for decades dealt with
defaulted debt, who struggled because they can't get ahead.
That idea with wage garnishments, they have bad credit reports,
they can't get housing.
And I see these folks, many of whom are people of color all
the time who've gone to schools in the 80's, and 90's, and as
recent as you know several years ago. So the closed school
discharge is a bright light of hope for these borrowers who
struggled for so long because it clears their history and they
can go back to school, they don't have the psychological and
emotional burden that kind of debt can bring.
And so these discharges are incredibly important for also
restoring the wealth to those communities. As I said the
communities most impacted are communities of color and low-
income communities who traditionally have been excluded from
higher education.
So it is important to restore the wealth to those
communities, to get them back on track to be able to go to
legitimate institutions of higher education and pursue better,
more financial stability for themselves and their communities.
Mr. Takano. So, Ms. Smith would you consider shortening the
period of eligibility for the closed school discharge will be
from the current 3-year wait period? I mean it seems like that
wait period, to me is a real problem.
Ms. Smith. Yes it is as Melissa explained. Most borrowers
first of all when a school closes, they look right away to
transfer their credits, so it's within a year I would say that
most borrowers decide either to move on to another school, or
to give up. So the other issue of course is you want to give
them a closed school discharge before they go into default.
They have 6 months grace period, then 270 days before they
will go into default, so it's important I think to shorten the
period to about 1 year because that would get them out of
default or keep them from going to default in the first place.
Mr. Takano. Well thank you. I would like to explore that
more, but my time is running out. It does seem to me that
students are at a period like of real trauma or crisis, the
schools close, it's not their fault. They should be given a
choice about whether what they do next.
Anyway before I yield back Madam Chair I'd like to enter
into the record a statement submitted to the Higher Education
Work Force Investment Committee from Veterans Education
Success, a statement for the record. I ask unanimous consent.
Chairwoman Wilson. So ordered. Thank you so much.
Mr. Takano. I yield back Madam Chair.
Chairwoman Wilson. Thank you. Now Mr. Banks.
Mr. Banks. Thank you, Madam Chair. According to the U.S.
Department of Education's College Affordability and
Transparency Center, the average tuition rate for a public 2-
year technical school is only $3,588.00. When Corinthian
College closed its campuses the Obama administration approved
approximately 15,000 students for loan discharge relief who owe
a total of 200 million dollars in student debt, forcing the
taxpayers to foot the bill.
In other words each former Corinthian student was on
average granted over $13,000.00 in relief, meaning that it cost
taxpayers nearly four times as much to pay for borrower's
school discharge claim than it does to pay for the entirety of
their trade school education. Mr. Cooper what are your thoughts
on creating policy that allows students in the discharge
process to pursue a different type of education at technical
and trade school?
Mr. Cooper. Thank you. Thank you, Representative Banks. I
think that is the No. 1 goal that when a school closes we want
students to have the opportunity to complete their education
elsewhere, or complete their education at the original school
through a teach out.
Because when students take on loans they're not taking on
loans with the hope that they will eventually be discharged,
they're taking on loans with the hope that they'll be able to
use this financing in order to get a degree or a certificate
somewhere. And so I would say that is the No. 1 goal. We do
want them to transfer to other schools, whether those are other
private institutions or community colleges, and complete the
credential there.
I do know that if the programs which they are transferring
is significantly different from the program which they were
originally enrolled in at the school that was closed, they
still might be eligible for a closed school discharge in that
circumstance, but still it is the No. 1 goal for them to be
able to get that credential that they originally went to
college for and build a better life for themselves.
Mr. Banks. So we know that the Department has historically
had difficulties tracking transfer and re-enrollment of
students in institutions of higher education. This is
concerning given that the Biden administration's proposed
changes to the closed school discharge regulations that were
circulated this week would reinstate the automatic closed
school discharge policy implemented under the Obama
administration.
But we've changed the re-enrollment period from 3 years to
one. So for instance a student who attended a closed
institution and had their loans discharged, and then enrolled
in a new institution a few years later in a similar program,
may receive a free degree.
Mr. Cooper can you explain why reinstating the automatic
closed school discharge is a poor policy?
Mr. Cooper. Yes that is correct. And I believe that if you
do instate these automatic closed school discharges which cast
a very wide net that I don't really see a way for the
Department of Education to effectively verify when a successful
transfer of credits and a successful degree completion done at
another college has taken place, but we're always going to--
there are always going to be some errors like that.
I see that as fairly unavoidable, specifically when you're
looking back to the pre-2014, pre-2019 enrollments in colleges
when the data on program enrollments was just much poorer. And
you know that's why I believe that the approach really needs to
be centered around making sure that closed school discharges
are not even necessary in the first place.
That you know when we've exhausted all other options, yes
we should make it easier for people to receive a closed school
discharge, but we should only do that after we've exhausted all
other options, and we have exhausted the options of trying to
get students into other programs and into other programs where
they might be able to get what they originally came for which
is a degree.
Mr. Banks. Mr. Cooper what other Federal policies have been
enacted recently that you can think of that have propped up
failing schools beyond their natural lifespan?
Mr. Cooper. Yes. Well, I do know that the Department of
Education under, excuse me, under President Obama did propose a
number of policies that would have affected different sectors
very differently, specifically they did target the for-profit
sectors specifically, and some of those regulations might have
been justified in terms of trying to do a stronger emphasis on
outcomes and accountability, but I do worry that some of those
regulations have basically exempted entire swaths of the higher
education system, specifically public and private non-profit
colleges that are enrolling the vast majority of students,
about 86 percent of students, and therefore potentially
ignoring the abuses and the potential poor outcomes that are
transpiring at those schools which were not covered by Federal
regulations.
Mr. Banks. Thank you my time is expired.
Chairwoman Wilson. Thank you. Thank you so much. And now
Ms. Manning of North Carolina.
Ms. Manning. Thank you, thank you, Madam Chair and Ranking
Member. Mr. Cooper I want to make sure I understand your
proposal. You're suggesting that all schools should be required
to purchase insurance to protect against losses for schools
that shut down leaving students with large debts and no
degrees?
Mr. Cooper. That is correct.
Ms. Manning. So you're suggesting this for non-profit and
for-profit schools?
Mr. Cooper. Yes, that is correct because both non-profit
and for-profit schools are subject to the current financial
responsibility composites for regulations, and if either of
them shut down there are potential closed school discharge
costs associated with that.
Ms. Manning. But I know you're aware that 86 percent of
borrowers who were impacted by school closures attended for-
profit schools right?
Mr. Cooper. Yes I'm aware of that.
Ms. Manning. And 96 percent of students who received closed
school discharges between 2010 and 2020 schools attended for-
profit schools correct?
Mr. Cooper. I believe that's correct yes.
Ms. Manning. So you would punish all schools with this
insurance requirement even though the real problem lies with
for-profit schools?
Mr. Cooper. Well I don't like to think of it as punishing
schools. I like to think of it as----
Ms. Manning. You would impose this burden on all schools?
Mr. Cooper. Yes. But----
Ms. Manning. OK. And wouldn't you assume Mr. Cooper that
schools required to purchase insurance would pass those
additional costs on to students in their tuition or fees?
Mr. Cooper. Yes that is a potential cost, but I do believe
that it could be rectified with additional aid to students to
counter out accountability.
Ms. Manning. Ah, so you actually want to increase student
loan debt by saddling schools, and therefore students, with the
cost of buying insurance.
Mr. Cooper. That is not how I would state my position.
Ms. Manning. No. But that's what the outcome would be
correct?
Mr. Cooper. Yes, but I believe that----
Ms. Manning. OK. And wouldn't this be a boom to the
insurance industry?
Mr. Cooper. Well, the insurance industry that would be able
to sell insurance to these schools yes, but the insurance----
Ms. Manning. OK. And so what you're proposing would help
the insurance industry and would burden students with
potentially higher student debt at a time when what we're
trying to do is make school more affordable because more
students needs a higher education to get jobs that pay a
livable wage. Isn't that correct?
Mr. Cooper. Yes. But I believe that this proposal----
Ms. Manning. OK thank you very much. I'm going to move on
to Ms. Emrey-Arras. Your testimony mentions that transferring
to another college may not be a great option for students after
closure. Can you talk about that a little bit more? Can you
explain why is it that so many of the credits that the students
get at for-profit schools are non-transferrable?
Ms. Emrey-Arras. Thank you for that question. So when
students transfer their tuitions, one is can they bring their
credits with them? And two, is can they complete their
education at that second school? And in terms of that first
issue of can they bring their credits with them, in this work
looking at closed schools we found that most students leaving a
for-profit transferred to another for-profit school.
And in our prior work we found that for that pathway
students lose on the average 83 percent of their credits.
Another common pathway that we found in this work is going from
a for-profit school to a public school, and as you've heard
previously we found that pathway results in a loss of 94
percent of credits. And I would say----
Ms. Manning. And why is that? Why is it that non-profit
schools are so reluctant to accept the credits from for-profit
schools?
Ms. Emrey-Arras. I'm not able to comment on that. It's not
the subject of this work, but I would say that those rates are
much higher than the average credit loss rates. In average we
found previously when students transferred regardless of where
they were coming from, or where they were going, they lost a
little over 40 percent.
So these rates we're seeing are more than double the
transfer loss rates for the general population per prior work.
Ms. Manning. Thank you so much. And Ms. Smith do you have
any answer to why so many credits are lost when transferring
from for-profits to non-profits?
Ms. Smith. Yes. Thank you for that question. In our
experience a majority of for-profit schools that closed
suddenly, there's been a large time period during which the
education has deteriorated when a school is having financial
issues, they tend to cut salaries, they stop paying teachers,
teachers stop showing up.
They stop updating equipment, and in addition these are
often schools that are already very low quality and engage in
other types of fraud to get the students in the door. So the
students from these schools don't actually often have the
skills or the education they need to succeed starting at a
higher level at another institution.
So those institutions take a hard look at those credits and
say can this student actually succeed in starting at a higher
level, or do they really need to retake those courses, so they
get a good education? We don't want people dropping out because
they're put into higher level course and then they can't
complete it.
So that's a primary reason that you don't see the
transfers.
Ms. Manning. Thank you. Madam Chair I yield back.
Chairwoman Wilson. Thank you. Thank you so much. Ms.
Miller-Meeks of Iowa.
Mrs. Miller-Meeks. Thank you so much Madam Chairwoman, and
I find it fascinating that there's a concern about having all
colleges pay into insurance to cover colleges that are
discharged when we just passed legislation and passed
appropriations that don't cover the Hyde Amendment, so we want
all taxpayers to pay for abortions, even if they are morally or
religiously opposed to abortions.
So there seems to be no concern about having all taxpayers
pay for other things when it's to someone's preference. So
interestingly enough Mr. Cooper, you noted that the higher
education landscape is changing, and that Federal policies
should adapt with it. What are some of the key changes or
drivers of this changing landscape, and how big of an impact do
you believe that changing demographics will have on college
enrollment?
Mr. Cooper. Thank you Congresswoman. So one of the most
important factors that are driving changes in higher education
enrollment is the fact that higher education is a rather
counter cyclical industry, so when the economy is not so great
people will tend to want to go back to school in order to get
another degree, and potentially increase the scope of their job
opportunities.
And when the economy is doing better, then the labor market
will look much better relative to education, because higher
wages and more jobs available will mean more opportunities out
there. During the decade of the 2010's we did see this, that
there was a long decline in college enrollments between 2010
and 2019.
That may be the case again as the economy begins to recover
from the COVID-19 recession, and this is going to have effects
on the higher education sector that when enrollment contracts
in this way due to the improving economy, not all colleges are
going to be able to survive, and that's a natural part of the
cyclicality of the higher education sector.
And some colleges are going to close, it's unfortunate, but
it is a reality, and that's why we do need to be prepared for
when those college closures happen and make sure that both
students and taxpayers are protected.
Mrs. Miller-Meeks. So I think that we saw this in the past
several years when you had MBA programs at both public and
private colleges. There was a proliferation of MBA programs,
but now we've seen those close. And part of that I think is
this dynamic between the college degree you're achieving, and
then the income opportunities, or employment opportunities
thereafter, and do they you know is there a benefit to getting
that higher education.
So is this demographic similar for undergraduate as well as
for graduate schools--that landscape that you're talking about
changing?
Mr. Cooper. That is definitely true. When the economy is
improving, and when there are more opportunities out there,
that simply that reduces the demand to get the next degree
because students will say why should I spend two, or three or 4
years in college when there is a great job opportunity waiting
for me right now?
But when the economy does turn south, then you see students
going into those MBA programs which might not have the returns
they promised, so they're going into other programs that they
hope will be able to graduate them to a better life, but it is
extremely cyclical and it's getting more cyclical with each
business cycle.
Mrs. Miller-Meeks. And I think you know certainly we don't
you know want, we want all bad actors, bad performers held
accountable. We want students who are trying to you know
improve their education get a better education, improve their
employment opportunities. You know we want them to be made
whole.
And so I guess in that vein looking at what's happened in
the past and where we are economically now do you see more
colleges closing their doors in the very near future?
Mr. Cooper. I think it's certainly a possibility. We don't
still fully understand how college enrollments, and therefore
the number of colleges operating is going to react to the
COVID-19 pandemic. You know if we recover fairly quickly
economically, that might result in fewer students going to
college, and therefore more college closures.
I'm not going to say that it's definitely going to happen,
but it's definitely a major possibility, and an eventuality
that we need to be prepared for.
Mrs. Miller-Meeks. Thank you so much. I thank all of our
witnesses and I yield back my time Madam Chair.
Chairwoman Wilson. Thank you very much and now we'll hear
from our Vice Chair of the Committee Mr. Bowman from New York,
welcome.
Mr. Bowman. Thank you so much Madam Chair. Mrs. Rhodes
thank you for being here today and telling us your story. As
you say our education system failed you on so many levels. I
was particularly heartbroken hearing your testimony that you
have been eligible for a closed school discharge since 1994,
but that you were never made aware of the process, or of your
eligibility.
If the closed school discharge process had applied to you
automatically back in the 90's, how would that have affected
your life?
Ms. Rhodes. Well I will say this. If the school closed
discharge was applied automatically it would have made my life
easier and less stressful. I really wanted to succeed at this
school, but that wasn't an option for me after the school
closed. I would have continued pursuing my education in another
school of my choice, and I would have definitely graduated.
I'm a motivated woman who never gives up when my mind is
set on something I want, I will pursue it and complete it. I
eventually finished several education courses that I did not
have to take out student loans for despite what happened to me.
I am now a cosmetologist, salon owner, a real estate agent, and
I own a trucking company with my husband, so I succeeded but.
Mr. Bowman. Well of course you did because you're strong.
That's why you succeeded. Thank you so much.
Ms. Rhodes. Thank you.
Mr. Bowman. For sharing that.
Ms. Rhodes. Thank you.
Mr. Bowman. Ms. Emrey-Arras thank you for being with us as
well. I know that I and my colleagues on this Committee
appreciate the excessive work that the GAO has done to
investigate and shine a light on this topic. Your testimony
provided really important information on how college closures
affect borrowers, and how important a closed school discharge
process is.
And I'm hoping you could provide a bit more information
about the experiences of these borrowers related to defaults.
Specifically, how do the default rates of borrowers affected by
a college closure differ from the average borrower?
Ms. Emrey-Arras. Thank you for the question Congressman.
The default rates for borrowers who went to closed schools are
higher than the default rates for the general student
population. For example, we found that between 2010 and 2020,
19 percent of all borrowers who attended closed schools
defaulted, and that 19 percent was much higher than the
comparable rate in the general Federal student loan borrower
population, which was about 11 percent.
But think about those numbers. 19 percent for everyone
affected by a school closure, now let's move to those that were
affected by the automatic loan discharge process. Those folks
have even higher default rates. The people who were then
eligible for automatic discharges defaulted at 52 percent, so
those are folks that are in significant distress, and those
people are defaulting on loans that are eligible to be
discharged, and they're defaulting about a year and a half
after their school closes, and then waiting for another year
and a half to get the discharge.
Mr. Bowman. Yes. Thank you. Quick followup. In your opinion
what do these differential rates tell us about how we can
improve our higher education system to better support all
students?
Ms. Emrey-Arras. GAO doesn't have a particular opinion on
this issue. We just want to make sure that the facts are
available for policymakers to consider.
Mr. Bowman. OK awesome. Thank you so much. Madam Chair I
yield back.
Chairwoman Wilson. Thank you. And now we'll hear from
Representative Good.
Mr. Good. Thank you Chairwoman Wilson and Ranking Member
Murphy for holding this important hearing. It's crucial that
American institutions for higher learning are providing the
best possible education for our students. In a free market
economy, it's important for students to be incentivized to
complete their degrees, and be equipped with the tools to
contribute to the workforce.
It's also essential that competitive forces would
incentivize educational institutions to provide the best
possible education for our students. I am concerned that
colleges and universities aren't focused on the most important,
pardon me, I've lost my place there. That they aren't focused
on the most important thing which is developing critical
thinking. Students who are effectively prepared to contribute
to the American economy.
As has been said in testimony today, instead of trying to
right the ship it seems too often that these sinking schools
are just throwing up their hands and walking away and shirking
all responsibly and leaving American taxpayers holding the bag.
I hope that moving forward we can have truly beneficial
discussions surrounding this topic and not resort to the
consistent default solution from my colleagues in the majority
to simply throw more money at the issue, and simply forgive
loans with zero questions asked.
I would also ask the majority to consider the fiscal
implications of all the policies that we enact because that has
to always be a factor for sustainable government and
sustainable economy. I would also ask the majority would
consider the morality of flippantly requiring those who don't
or can't attend college, or those who sacrifice diligently to
pay off their own student loans be required to pay for student
loan balances of others regardless of the circumstances.
That said, Mr. Cooper thank you for taking the time to come
before the Committee today. You said that when discharges occur
it means that we failed our students. You're exactly right, and
I would add that the policies of the current administration are
failing our students in many other ways as well.
And I appreciate in your testimony you mentioned that the
composite score tool used to determine the financial health of
an institution is an untenable tool. What would a responsible
and accurate evaluation tool that would give a timely and
thorough assessment of the financial state of institution look
like?
Mr. Cooper. Thank you Congressman. So in 2017 the GAO
identified a number of shortcomings with the financial
responsibility composite score metric. One of the most
important in my mind is that it only looks at a single, at the
financial metrics for a single fiscal year, but pretty much any
accountant in the private sector will tell you that you need to
look at what are the trends, you know, are institutions getting
more financially health, less financially healthy?
What are the historical trends, what are the future
projections that you need to have that context in order to get
a true assessment of the institution's financial health.
Another major problem with the scores is that they're
vulnerable to manipulation by colleges which have orbits of
accountants to figure out every loophole in its force, most
infamously Corinthian Colleges which manipulated scores while
it was still in existence by borrowing tens of million dollars
in long-term debt on the last day of the fiscal year, paying it
back on the next day during the next Fiscal Year and getting
credit for all those debt repayments.
So there are certainly ways that we can fix the financial
responsibility formula today, and I believe the Department of
Education is actively working on them. They haven't addressed
all of the shortcomings. I'm glad to see that they're at least
thinking about it, but I think in the long-run the only way to
ensure that the metrics of financial responsibility are keeping
up with the times and keeping up with what a financially
responsible institution looks like in the 21st Century is to
bring the private sector into the equation, and to leverage the
power of the private insurance industry in order to help assess
how healthy are institutions really.
And what can we do in order to make them more financially
healthy.
Mr. Good. Thank you. Is there anything else that you might
add, changes that you feel should be made to the accreditation
process as to ensure that these educational institutions are
held accountable for the product they're producing?
Mr. Cooper. I agree. I think that the accreditation system
is not a really well suited to the task of a gatekeeping the
hundreds of billions of dollars in Federal loan and grant money
that go out the door every year, and that's why I think we
should be probably moving away from relying on accreditors to
hold colleges accountable, and more toward a system of
outcomes-based accountability incentives-based accountability,
that directly holds institutions accountable for their
financial health and for the outcomes that they're delivering
for students.
Mr. Good. Thank you, Mr. Cooper. And Madam Chairman I see
I'm out of time, so I yield back. Thank you.
Chairwoman Wilson. Thank you, thank you so much. Ms.
Bonamici from Oregon welcome.
Ms. Bonamici. Thank you, and thank you to the Chair and
Ranking Member, but truly thank you to our witnesses today. Ms.
Rhodes just following up on Representative Bowman's comment.
You started your data entry clerk program in 1988, and the
Higher Education Act was changed to add the closed school
provisions in 1992.
So you were eligible shortly thereafter then. I'm glad you
found legal aid, but I find it tragic that it took decades. And
listening to your story, thank you for sharing it, really I
think exemplifies why we need to make some changes here today.
We have unanticipated closures we know of institutions and
especially for-profit colleges, and they can have devastating
effects on students, academically and financially, and again
Ms. Rhodes thank you for sharing your personal story. I can't
imagine what those decades were like for you and the
frustration.
I used to work with Legal Aid, so I understand the
importance of the work they do, but I also understand what you
were going through. And so, since 2017 in Oregon, my home State
has seen a significant number of school closures at Oregon
State University, Concordia University, Oregon Culinary
Institute, Pioneer Pacific College. We have to do everything we
can to assist students who are faced with the consequences of
those closed schools.
And I do note that there are the options of transferring
credits and teach out programs, but as we've heard a lot of
credits just don't transfer, especially from for-profit
institutions. But the GAO found that tens of thousands of
borrowers eligible for closed school discharges were not
applying for forgiveness, even though most of them were
suffering financial consequences.
So I want to ask Ms. Smith what steps can the Department
take to improve the outreach and communication to borrowers who
have been affected by school closures, so they are aware of all
their options, including their potential eligibility for a
discharge?
Ms. Smith. Thank you that's an excellent question. The
Department can do a lot to improve outreach, for example it can
do a lot more with emails that are clearly labeled closed
school discharges. It can provide many more communications to
students as soon as the school closes instead of waiting for
example 6 months to contact those students.
But the point I think that's most important to make is that
no matter what the Department does, you're going to have a
significant number of borrowers who just don't know or
understand their closed school discharge rights. When a school
closes its complete chaos.
Ms. Bonamici. Right.
Ms. Smith. The students are getting incomplete and
inaccurate information from their schools who typically push
them into enrolling somewhere else and transferring credits so
that they are not liable for a closed school discharge amounts
to the Department, and students and the government are both
focused on helping them to transfer credits, so they're not
really thinking at that point about what other options they
have, and they are in a state of panic and distress so that
they often don't even notice that information if it is
provided.
Ms. Bonamici. I wanted to try to get another question in
Miss Smith also for you, and I appreciate the answer. With so
much of what we do here we're looking at how we address
problems after they happen, but we really need to look at
prevention.
So an additional step would be for the Department to be
more aware of the warning signs. For example, ITT Technical
Institute officially closed in 2016. There were signs of
financial issues for several years, which the Department
recently shared in their decision to extend eligibility for
students receiving the closed school discharge.
At the time of their closure ITT Tech had 520 students
enrolled in Portland and Salem in Oregon, and Courtney
University in Portland similarly. They had long-standing
financial trouble that contributed in part because of
enrollment decline, but they began consolidating courses of
study, but what really changes should the Department, or other
regulatory entities make so they can act earlier in the process
to protect students impacted.
Ms. Smith. In the case of ITT Tech, and many of the
schools, the Department had information and could have taken
steps much, much sooner. It should I think create an
enforcement unit that not only tracks these schools financially
and do a better job of it, but also do more investigations
regarding potential fraud.
And the point I want to make is that as long as you have
for-profit education receiving guaranteed Federal subsidies of
up to 90 percent of their revenues, there is going to be fraud,
and there will be school closures whenever you have businesses
receiving that much money from one guaranteed source no matter
what you do you will have school closures no matter what steps
the Department takes to monitor those schools.
Ms. Bonamici. I appreciate that very much, and I know that
we're working on it with the Higher Education Act
reauthorization. And I'm out of time, but I just want to note
that I will be submitting a question because of this
accountability issue about the financial responsibility
composite score, and what we can do to make sure that is really
more accurate and helpful in identifying problems at the
outset. So I'm out of time, I yield back. Thank you Madam
Chair.
Chairwoman Wilson. Mr. Grothman of Wisconsin.
Mr. Grothman. OK, OK. OK I have another question for Mr.
Cooper. I think your proposal, what you're saying here is in
line with the view many of us have, specifically I think that
schools like taxpayers, have to have some skin in the game.
However, your proposal also introduced another actor in the mix
that have an incentive to protect students and taxpayers
because they too bear financial risk.
Why is it important that Federal policy ensures that all
stakeholders have skin in the game, and are there examples in
Federal policy, including those outside of higher education
that illustrate the benefit of risk sharing?
Mr. Cooper. Thank you. Thank you Congressman. Yes. I
believe that you know accountability is really key. It's most
important. And one of the reasons that we do see so many
disasters in the closed school discharge arena is that right
now schools really do not have the financial incentives to
serve their students well in the event of a closure, and that
we do need to make sure that procedures are in place for
students to either be able to complete the teach out or
transfer their credits in the event of the school closure.
And that's where my insurance proposal comes in, that this
is one of the things that will provide a direct financial
incentive for that to happen. But the conversation about
incentives and accountability shouldn't necessarily end there.
That I think that there is potential for an entire overall of
the way that we do higher education accountability to focus it
more around incentives.
One of the proposals out there which has attracted
bipartisan interest is to do some sort of risk sharing for
institutions which participate in Federal aid programs. And
basically the idea behind this is that if students are unable
to repay their Federal student loans after attending the
college or university that the college or university would then
be liable for a portion of the unpaid debts.
And this would align the incentives of both the school and
the student because if the student is able to graduate and get
a good paying job, and pay back their loans, then the
institution will be placed under much less financial liability
for that. So yes, I believe that you know making use of
incentives in order to do accountability for institutions which
are dependent on the Federal purse for their revenues is
basically the only way to ensure that we don't have repeat
disasters like we saw with Corinthian and ITT Tech, and the
many other disasters that have been mentioned over the course
of this hearing.
Mr. Grothman. OK. You made an important point in your
testimony that students ultimately go to college to get a
degree. And I think the approach taken by Secretary DeVos
recognized that. Are there particular policies that the Biden
administration should consider during the rulemaking process
that were implemented under the previous administration?
Mr. Cooper. Yes. I think one of the most important policies
that the Biden administration could continue is the DeVos
administration's policy of transparency. So in 2019 the DeVos
Department of Education launched what's called the program
level college scorecard, which is a first of its kind data base
that essentially provides outcomes information for many, many,
many different--over 200,000 different programs both bachelor's
degrees, associate's degrees, certificates, graduate degrees.
It provides earnings data. It provides loan repayment
rates, and this is really an invaluable source of information
for students who are looking for the best way to get an
education, to create a better life for themselves, to graduate
into a job which is going to deliver them a middle-class income
and a middle-class lifestyle.
I am encouraged to see that there is bipartisan interest in
this with the Obama, the Trump, and the Biden administration
seem to have interest in continuing these transparency efforts,
and I look forward to seeing what the Biden administration
recommends.
Mr. Grothman. I'll give you another question I know how to
answer. When you begin to do things like put graduation rates
and that in there it's helpful, but I think we also use
graduation rates as an important sign we have a good or bad
high school. And I think one of the ways that schools deal with
it is that they let everybody graduate.
And you know already you're out of people with college
degrees. You wonder, you know, you've got a college degree. Are
you afraid in how you deal with the fact that as people you
know go down this path, the universities just dumb down the
degrees to look good.
Mr. Cooper. I agree that's definitely a concern, and that's
one reason why I'm reluctant to do accountability policy
directly based on graduation rate, because as you say it is
very easy for the institution to manipulate. And I think that
if it's done it should be done in conjunction with other
metrics such as graduate earnings and loan repayment rates,
which are much harder for the institutions to fake.
Mr. Grothman. OK. Would you be in favor of some sort of
generalized test to say you've got to pass the test to get a
college degree?
Mr. Cooper. I think it's certainly a possibility that we
could consider, but I also think we should recognize that
higher education has a huge diversity of offerings out there,
and not all programs are going to teach the same material, and
I'm not sure it would be possible to design a standardized test
which is both going to test the knowledge earned during a
liberal arts bachelor's degree and you know a certificate of
welding at a community college.
Mr. Grothman. Thank you, and thank you for letting me go
over.
Chairwoman Wilson. Thank you so much. Mr. Espaillat of New
York welcome.
Mr. Espaillat. Thank you, thank you Madam Chair. My
question is--my first question is for Melissa Emrey-Arras.
According to your testimony the automatic discharge process is
not an option for all borrowers that are eligible for closed
school discharge. Can you explain which borrowers are not being
caught in this safety net? Who does that apply to?
Ms. Emrey-Arras. Happy to Congressman, thank you for the
question. There are two groups that are not eligible for the
automatic process, so they are eligible to apply, but they
cannot get it automatically. Those are individuals who transfer
but don't complete their program at the second college.
And what we found in our work was that almost half of the
people who did transfer were in the situation of not completing
within 6 years. So you have a sizable population that are
transferring and not completing, and those individuals are not
eligible for that automatic process.
Similarly, there's a second group of borrowers who transfer
to another college in what's called a non-comparable program.
So it's different than the original program that they were
studying at the first college. Those folks are also eligible
for a discharge, but cannot obtain it automatically.
Mr. Espaillat. Thank you. My next question is for Karyn
Rhodes. Karyn may you describe the process of putting together
and completing a closed school discharge application? How was
your experience with that?
Ms. Rhodes. Thank you for the question. It wasn't easy. And
it was the most difficult part for me was finding proof of
documentation from 1988 needed for my application. And my
lawyer from Legal Aid was able to find more information than I
was, which was unbelievable. My application was denied at
first, and then Legal Aid sent an appeal, and then it was
granted after that.
And it took almost 2 years to finally get my school loan
discharged and receive relief from the debt.
Mr. Espaillat. Were you able to get like a lawyer easily,
or someone that was experienced in this area?
Ms. Rhodes. No actually I contacted legal aid through
researching the internet and found that American Business
Institute, there was a class action suit, and that's how I was
able to reach Legal Aid, they were handling the class action
suit, so they----
Mr. Espaillat. So it's not like Legal Aid had a unit you
know within their office that dealt you know with this kind of
help right?
Ms. Rhodes. Not to my knowledge. I just saw them on the
internet, and I reached out to them immediately, because that
was the first time I had seen anything related to my school
that I could get some assistance.
Mr. Espaillat. OK. And how long did you have to wait to
receive relief from the Department of Education?
Ms. Rhodes. It was about 2 years. I contacted Legal Aid in
2018, and so it took about 2 years from then for the process
from them starting the application, to being denied, and then
submitting an appeal. And then I was granted my closed school
discharge after that in August 2020.
Mr. Espaillat. Very good thank you. Thank you Karyn. My
last question is to Robyn Smith. And you mentioned in your
testimony that many of the individuals who you worked with have
been unable to obtain a discharge without the assistance of an
attorney right? So on this same line of thought, you know how
difficult is it out there to get an attorney? And it seems that
you know it's necessary to have one to really be able to
navigate through this entire process.
Ms. Smith. That's a great question, thank you so much.
First of all we do have 1.5 I'm half of attorneys dedicated to
student loans at Legal Aid Foundation of LA, but most Legal
Aid's in the country just don't have the resources to do that
so it's very difficult for most low-income people to get legal
assistance. It is difficult also to get these closed school
discharges often because schools have reported incorrect
information to the Department.
In Ms. Rhodes case, the American Business Institute, which
at the same time was being prosecuted for fraud had
fraudulently reported that she graduated before the school
closed. That mean that we, after the appeal, after the initial
application was denied, we had to do a FOIA request to the
Department of Education to get evidence to show that it did in
fact lie about student outcomes, and it took us a year and a
half to do before we could successfully appeal her case.
Mr. Espaillat. Thank you, thank you, Madam Speaker I yield
back, Madam Chair.
Chairwoman Wilson. Thank you. Thank you. Ms. Letlow
welcome.
Ms. Letlow. Thank you. And to all the witnesses thank you
for taking the time to testify before the Committee today. It's
deeply concerning that the rate of school closures has
drastically increased over the last decade. School closures are
harmful to students and the educational system as a whole.
I've said before education is the key to success. We must
do all we can to ensure our students have the opportunity to
learn, grow, and find career opportunities that best suit their
talents. Therefore, I believe Congress and the Department
should focus our attention to help students who are enrolled in
a closing school to receive assistance to continue their
education.
We should not leave students without a path forward to
obtain a degree. Mr. Cooper simply forgiving the debt of
students attending closed schools without ensuring they have
had every opportunity to continue their education seems like a
misguided approach.
Rather, it's important that Congress and the Department
value the time and effort, and the work these students did
during their time at school. Do you believe our current
policies are too heavily slanted toward loan discharge, rather
than helping students complete their education?
Mr. Cooper. That certainly seems to be my perception that
may be the case, that there doesn't seem to be enough emphasis
on helping students get what they originally came to college
for, which is a degree or certificate, helping them either
complete their program or transfer their credits to another
school and complete there.
It does seem at times that the goal of the administration
is to deliver as many closed school discharges as possible,
rather than necessarily trying to help these students get what
they originally came to college for. That's not to say you know
that's always going to be a great option.
I mean some schools have been more fraudulent, and the
proper remedy there is probably a closed school discharge. But
that's not the case all the time, and I do believe that there
should be more emphasis on helping students complete the
education that they originally set out to get in the first
place.
Ms. Letlow. Thank you so much. I do have a followup
question for you Mr. Cooper. As you noted in your testimony the
Biden administration recently expanded the look back window for
discharge eligibility to students attending ITT Tech to 8 years
before it's closure.
I find it difficult to believe that the Department's had
the ability to accurately verify the over 115,000 claims that
they approved. In fact, the Office of Federal Student Aid
announced this month that a number of borrowers improperly
received approvals for borrower defense claims as they did not
attend an eligible school.
Do you have any indication as to how the Department may be
verifying this information, and how can we ensure that taxpayer
dollars are not being spent on fraudulent or incorrect
discharge cases?
Mr. Cooper. Thank you Congresswoman. I don't have any
special insight into the Department's process for how they're
adjudicating these claims, but I would say that I'm skeptical,
especially when we have a look back window that's going back to
2008, 13 years ago before a lot of the more sophisticated
transfer tracking data and program tracking data that came
online.
I would be very skeptical that they're able to verify truly
whether each of those students who's receiving a discharge is
in fact eligible for one.
Ms. Letlow. Thank you so much Mr. Cooper. And I yield back
the remainder of my time to the Ranking Member.
Ms. Foxx. Thank you very much Dr. Letlow. While I
appreciate the work GAO has done in compiling this data on
closed school discharges, it seems to me this work is far from
complete. While GAO's testimony includes some potentially
troubling numbers, we do not have the additional context
necessary to properly assess this data.
As Mr. Cooper just indicated, indeed the report does not
include any context as to why some students have not received
relief. Further, there's nothing to help further the discussion
about which policies may be affected, and which need reform.
Unfortunately, we know that over the next decade many
institutions will close their doors because students are
increasingly looking for options other than the traditional
brick and mortar model.
Federal policy needs to adapt to these changes. Rather than
rushing a hearing on an incomplete report, the responsible
thing to do would be to let GAO complete its work so we have a
full picture about the implications of the Department's
policies. In the meantime I would suggest the Committee turns
its focus toward a bipartisan reform with the Higher Ed Act.
So Mr. Cooper I have a question. Under certain
circumstances institutions may be required to remit a letter of
credit to the Department to serve as collateral when there are
concerns about the financial viability of an institution. Mr.
Cooper as you noted in your testimony your proposal was similar
to this policy, but is more proactive.
In essence, your proposal would address these problems on
the front end, rather than have taxpayers pick up the tab on
the back end. Can you describe the benefits of a more proactive
approach such as yours including for students, schools, and
taxpayers?
Mr. Cooper. Thank you Dr. Foxx I'd be happy to. So as you
noted one of the main problems right now with the way we're
holding institutions accountable for their financial outcomes
is that our system is very reactive, so the Department does
have the authority to request letters of credit from
financially troubled schools in order to protect taxpayers, but
often the Department waits to request these letters of credit
until the financial troubles have become apparent and few banks
are willing to extend this kind of surety to an institution
which the Department has just said is in serious financial
trouble.
In some cases requesting a letter of credit can actually
accelerate the collapse of an institution as you saw in the
case of ITT Tech in which the Department requested the letter
of credit from the institution which ITT Tech was not able to
secure, and therefore had to shut down just 2 weeks after the
Department made its request.
This is why we need a more proactive approach in terms of
holding schools accountable for the costs that they impose on
taxpayers. I believe that if an institution decides to
participate in the Federal student loan program, it is putting
a certain amount of financial risk on taxpayers who will have
to pick up the tab if the school closes without a teach out
plan, or without a transfer of credit policies in place.
And that's why because institutions are presenting this
risk to taxpayers that they should be required to purchase
insurance in order to make taxpayers whole in the event of a
closure which will also provide the right incentives for
schools to make sure that when its closure does have to happen,
the school is wound down in an orderly fashion and students
have numerous options to complete their education.
Ms. Foxx. Madam Chair I'm going to yield back time from my
time. Madam Chair I wouldn't go over that long, except I'll
yield back time when it's my time OK?
Chairwoman Wilson. OK. Thank you so much I appreciate it.
And now Mr. Castro of Texas.
Mr. Castro. Thank you Chair. The Department of Education
has a duty under Federal law to provide debt relief to students
who were defrauded by a for-profit college, and left holding
the bag with nothing to show for it.
School closures have left thousands of students many unable
to find jobs in their field of study saddled with incredible
student loan debt. And too many families shoulder the burden of
debt when relief is available. To think that about half of
eligible borrowers did not apply for a discharge, even 3 years
after their school closed, and struggle with crippling debt is
really shameful.
That's why the conversation that we're having today about
supporting these students is very important. Restoring the
automatic discharge process is the right thing to do. We must
protect students when they are affected by abrupt school
closures, and I'm glad the Biden administration has taken steps
to extend relief to students.
I'd like to hear from Ms. Rhodes, our student borrower in
this, so that she can share with the Committee how the
Department of Education could have assisted her and many
students who needed relief, and so Ms. Rhodes I had a question
for you.
Although you were eventually able to get your loans
discharged, how do you think the Department of Education should
have done a better job to mitigate the consequences that you
experienced? And also, after your school closed, how long did
it take you to decide your next steps, and whether or not you
wanted to transfer to another institution?
Ms. Rhodes. Thank you. As far as what I feel the Department
of Education should have done, I feel that they should have
done a better job to mitigate the consequences of a school
closure for all students. When they decided to close the school
there should have been a program in place to help students
transition from a closed school to another school of their
choice.
They should have made sure that all of the students with
the loan from any school closure had access to the appropriate
resources, and that could have been discharged--that could have
discharged their debt. My hope is that the Department of
Education will implement a program that is easy for students to
be informed about their options when a school closes.
Inform them on how to transfer to another school, or about
the discharge process, giving students like myself the full
access to the resources needed to complete their application
and receive their discharge loans in a timely manner. It
shouldn't take several years to get assistance or relief from a
closed school loan, and your second question?
Mr. Castro. How long did it take you to decide your next
steps, and whether or not you wanted to transfer to another
institution?
Ms. Rhodes. OK. It didn't take me very long to figure out
my next steps because I basically was working, and just decided
to continue to work. Once I realized the school was closed and
I had no other options, no assistance to help me, I just
continued working and just moved on. That was my only options
at the time.
Mr. Castro. Was there anything in your discussions with
others that were affected in the same way that you were,
classmates for example. Was there any other advice that you
have for us, or anything else that you've picked up from them
that you want to share with the Committee as we think about
this issue?
Ms. Rhodes. Basically I really feel like it should be some
kind of mainly informing the students of what's going on
because I think that was the biggest problem. We didn't know
what was going on. We didn't know what to do. We didn't know
why the school was closing. We're hearing the information
secondhand.
And then we have no resources to go anywhere to get
assistance, so our hands were kind of tied. It's like what do
you do? You have this debt looming over you and you can't do
anything about it, and you have to pay it back. And then I for
years felt that it was very unfair that I had to carry a debt
and be responsible, and then it's ballooning to $26,000.00, and
I can't get any assistance.
And even when I applied I was denied without having Legal
Aid or an attorney, so it's very difficult to navigate the
process, so they need to have something to help us be able to
work through the process.
Mr. Castro. Notable. Thank you, Ms. Rhodes, for sharing
your story with us.
Ms. Rhodes. Thank you.
Mr. Castro. When for-profit institutions that close their
doors often thousands, hundreds or thousands of students
suffer, and so we want to make sure that we prioritize the
needs of defrauded students, and provide immediate and complete
relief to that, so thank you. I yield back.
Chairwoman Wilson. Thank you Mr. Castro. And now we'll go
to Ranking Member Foxx. You have 4 minutes left.
Ms. Foxx. Thank you Madam Chair, I appreciate that very
much. I'll keep to my commitment. Mr. Cooper I would like to go
back to you. While my colleagues are focused on one particular
sector, both your testimony and that of GAO's note that for-
profits are not the only schools that have been forced to close
their doors.
Further, I think it's safe to say that many more will have
closed in the previous 18 months, many more would have closed
in the previous 18 months if it were not for the substantial
support provided through the CARES Act, and subsequent relief
packages.
What factors are driving this trend of non-profit school
closures, and do you expect this trend to accelerate? What
changes to the way we handle these closures should be made to
prepare for this coming consolidation in higher education?
Mr. Cooper. Thank you, Dr. Foxx. Yes as you mentioned that
for-profit institutions are not the only institutions that
close, while they're most of them, they're not all of the
institutions. And I do worry that you now as we're seeing the
number of students participating in higher education has been
dropping since about 2010, and that's a pretty natural process
because as the economy was improving over the course of the
2010's, fewer students wanted to go into education, most had
better job opportunities, there were more jobs available, there
were higher earning jobs available.
And so the labor market simply looked more attractive to
them. And so this is great for students obviously, but it
leaves the question of what happens to the institutions? And of
course some of them are going to close. That's a natural part
of the higher education system. Institutions are going to close
sometimes, and we need to make sure that we are prepared to
deal with the consequences of those closures when they happen.
Private non-profit institutions as noted, were relieved by
the tremendous relief that Congress committed in the CARES Act
and subsequent relief packages which definitely staved off a
number of college closures, but that might not be the case
forever. It might be the case that we might see another round
of college closures as the economy recovers from the recession
associated with the COVID-19 pandemic.
And there's no guarantee that all of those closures are
going to be for-profit colleges, it's possible that private
non-profit colleges will be among the closures as well. It's
also possible I would say that for-profit colleges in order to
avoid the disproportionate regulation that is targeting them,
might simply decide to change their tax status to non-profits,
and thereby avoid those regulations, which is one reason that
we also can't ignore the private non-profit sector.
So yes, it's something that we absolutely need to be
prepared for, and that's why I believe the insurance mandated
proposal that I laid out in my written testimony is the best
way to use incentives-based accountability in order to protect
taxpayers and the students when these closures inevitably
happen.
Ms. Foxx. Thank you very much. Ms. Emrey-Arras, isn't it
true that borrowers will still be able to obtain a closed
school discharge by submitting a short application? And can you
describe quickly what this application process looks like?
Ms. Emrey-Arras. Yes Dr. Foxx thank you for the question.
Yes borrowers will still be able to apply for a discharge
through that process, and they will need to complete the
application form which is two and a half pages, and has
information about the borrower and their attendance at the
closed school.
Ms. Foxx. Thank you very much and again thank you Madam
Chairman for your tolerance on my going over at the time that
was given to me, I yield back.
Chairwoman Wilson. Thank you so much, thank you. I'll go
down here. Our distinguished Chairman of the Committee Mr.
Scott.
Mr. Scott. Thank you, thank you Madam Chairman and I want
to thank all the witnesses for being with us today. First Ms.
Smith in the clients that you represent, are they given any
credit for payments made after they were entitled to discharge,
or is just the balance due when the dust settles it's the only
thing that gets discharged?
Ms. Smith. Thank you. That's a great question. When the
discharge happens they get a complete discharge of all amounts
that are outstanding on the debt, so that includes interest and
fees. They also get a refund of any amounts that they have paid
back, and they do also get their Pell Grant eligibility
restored, which is very important because then that allows them
to restart the higher education at a legitimate institution if
they want to.
Mr. Scott. What do they get paid back?
Ms. Smith. When it sometimes----
Mr. Scott. What do they get paid back?
Ms. Smith. They get paid back all amounts that were
involuntarily taken from them, for example, if tax refunds were
taken, if their wages were garnished, if social security was
offset they get all of that money back.
Mr. Scott. What about payments that were made after they
were entitled to a discharge?
Ms. Smith. Yes. All of that is returned as well.
Mr. Scott. OK thank you. Ms. Emrey-Arras we've heard a
little back and forth about non-profits and profits. We're
looking into the for-profit conversions and the non-profits for
reasons that have been articulated to avoid any abuse there.
But what is the percentage of those abruptly closing in
terms of profit and non-profit?
Ms. Emrey-Arras. I don't have the figures of the schools at
my hands. I know that 86 percent of the borrowers who were
affected by school closures had been attending for-profit
schools.
Mr. Scott. Thank you. And we've heard from the Ranking
Member and from Mr. Cooper about the importance of being
proactive rather than reactive. Let me ask you a couple of
questions all at once. One, should we be expecting more from
our accreditors?
These people they don't go insolvent overnight, should the
accreditors be doing more? And if they abruptly close what
could we have done to have made the school, not the taxpayer,
pay for the closed school discharges? We know there's a letter
of credit that can be available, but I understand one school
had a nice letter of credit, but the Department of Education
let them spend most of it.
So when the dust settles there wouldn't be much for
reimbursement. What could we reasonably expect in terms of
bonding or to cover these losses, and personal responsibility
for officers that were involved in the fraud?
Ms. Emrey-Arras. Thank you for those questions, Chairman
Scott. In terms of our prior work I can note that we have done
work previously looking at accreditors, and whether accreditors
sanction schools that were in financial distress, and we found
that they did not always do so, so we have that work out there
that shows that they have not always done that.
In addition, we have done work--actually let me clarify.
This work is a little bit dated, but the work on the
accreditors found that they did not always sanction for schools
that had quality metrics. They actually did a better job on the
financial metric side in terms of holding schools accountable.
In terms of our other work on what the Department of
Education should do. We have an existing recommendation that
has been referred to previously in Mr. Cooper's statement,
which is to have the Department of Education improve the
financial composite score.
We found that it is an imprecise measure of school
closures. It does not always predict which schools are going to
close--those that are in financial trouble are not always
caught in this metric, and we have an outstanding
recommendation on that issue from 2017.
So we're still waiting for the Department of Education to
implement our recommendation. And our recommendation is to
improve that composite score so that it does take into account
broader metrics of financial health, including liquidity and
historical trends.
Mr. Scott. And you also suggested that it could be subject
to manipulation, I assume your recommendation would correct for
that. What about bonding and personal responsibility to recoup
the losses, rather than taxpayer get left holding the bag?
Ms. Emrey-Arras. We haven't done work on that sir.
Mr. Scott. In terms of the bonding or letters of credit?
Ms. Emrey-Arras. We have done work in a prior study on the
financial responsibility score looking at the fact that letters
of credit are required, but again you may not get to that point
if the financial composite score doesn't correctly identify
schools in financial distress.
So even if that is a potential tool for the Department,
they may not always use that tool.
Mr. Scott. And you didn't look into personal responsibility
of officers who may be involved in the fraud?
Ms. Emrey-Arras. Correct. We have not looked at that sir.
Mr. Scott. Thank you. Thank you Madam Chair, I yield back.
Madam Chair I yield back.
Chairwoman Wilson. Ms. McClain.
Mrs. McClain. Hi. Thank you Madam Chair. Can you hear me?
Chairwoman Wilson. I can, thank you.
Mrs. McClain. OK thank you. I'm curious and I have a couple
questions is we're not forcing these students to go to a for-
profit college correct? They do have options to go to a non-
profit college correct? Anyone can answer.
Mr. Cooper. Yes that's correct.
Mrs. McClain. OK. So the student does have some choice in
terms of what college they choose right? I guess my question is
this why is the answer always a bail out on the taxpayer when
students have choices? Now I'm not saying that I don't have any
empathy for the students who fall victim to this, but at the
end of the day why if they have a choice does the bearer of the
responsibility always fall on the taxpayer?
I don't think that's fair either. So Mr. Cooper I think
something needs to be said for personal responsibility. So
students are willingly taking out massive loans for an
education. Do you get any sense that these students are doing
the background research that they need to do prior to taking
out this massive loan and choosing the school of choice before
they take out thousands of dollars in loans?
Mr. Cooper. Thank you Congresswoman McClain. I think it's
definitely very important to consider personal responsibility
in these discussions, but it often goes unexamined, and yes
there is a responsibility for the student to do their due
diligence when they're choosing a school and to make use of the
data that is available out there that the Department of
Education under Secretary DeVos has made available on student
outcomes.
But I also do believe that there are things that
policymakers can also do in order to guide the system in the
right direction because the Education Department as we've seen,
as Ms. Emrey-Arras has noted, is not necessarily great at
predicting when these schools are going to close.
Their current financial responsibility metrics are simply
not predictive. They're somewhat predictive, but they're
generally not very good at predicting when these schools are
going to close. And so I wonder that when the Department of
Education is having such a hard time with this, that students
might also not necessarily have all the information available
to them in order to figure out is this school that I'm
attending at risk of closure?
Because as we've seen the data that the Department of
Education is putting out in terms of the financial
responsibility metrics, the financial responsibility composite
scores is flawed, and they do not always figure into when the
school is going to close. And students that might be thinking
about that might be making their decisions based on incomplete
or imperfect information out there.
And so yes, we absolutely shouldn't dismiss the role of
personal responsibility, but I also believe that there is a
role for policy in terms of improving the information that's
available to students and pushing the higher education system
in the right direction.
Mrs. McClain. But to that end why is it my responsibility
as a taxpayer to bail that institution out? Why not bail out
failing other industries of people? Why does it always fall on
the taxpayer?
Mr. Cooper. I agree with you that it shouldn't be the
taxpayer's responsibility to bail out these institutions.
Mrs. McClain. OK.
Mr. Cooper. That's why I propose that institutions be
required to purchase insurance to make taxpayers whole.
Mrs. McClain. I fully agree with you on that because I
think as a taxpayer who does their due diligence, I shouldn't
be responsible for somebody else's you know, where does that
road end is I think the issue. And I like the idea of instead
of giving loans, or forgiving the loans excuse me, forgiving
the loans, maybe we should focus our effort instead of putting
the burden on the taxpayer, finding other resources to get
students into other schools.
Because at the end of the day that was their ultimate goal
right, was to get an education of which they were defrauded on,
or for whatever reason a bad institution for example. That
would be to me a much better use of our time, effort, energy
and resources as opposed to burdening the taxpayers with paying
their debt.
Let's help them, and let's spend our time and effort and
energy on finding another school as opposed to burdening the
taxpayer. Would you agree with that synopsis?
Mr. Cooper. I fully agree yes.
Mrs. McClain. OK. With that I yield back.
Chairwoman Wilson. Thank you so much.
Mrs. McClain. Thank you.
Chairwoman Wilson. I think we all have exhausted our
witnesses with our testimony and questions today. Is there
anyone else? OK. I remind my colleagues that pursuant to
Committee practice materials for submission for the hearing
record must be submitted to the Committee Clerk within 14 days
following the last day of the hearing.
So by close of business on October 14, 2021, preferably in
Microsoft Word format. The material submitted must address the
subject matter of the hearing. Only a Member of the
Subcommittee, or an invited witness, may submit materials for
inclusion in the hearing record.
Documents are limited to 50 pages each. Documents longer
than 50 pages will be incorporated into the record by way of
the internet link, and that you must provide to the Committee
Clerk within the required timeframe, but please recognize that
in the future that link may no longer work.
Pursuant to House rules and regulations items for the
record should be submitted to the clerk electronically by
emailing submissions to [email protected].
Again, I want to thank all of the witnesses for their
participation today. Members of the Subcommittee may have
additional questions for you, and we ask the witnesses to
please respond to those questions in writing.
The hearing record will be held open for 14 days in order
to receive those responses. I remind my colleagues that
pursuant to Committee practice, witness questions for the
hearing record must be submitted to the Majority Committee
Staff, or Committee Clerk within 7 days.
The questions submitted must address the subject matter of
the hearing. I now recognize the distinguished Ranking Member
for a closing statement, Doctor Murphy.
Mr. Murphy. Thank you Madam Chairman. I just want to extend
a thank you to the speakers who came and witnesses who came
today. I think we learned a great deal. We learned a lot and I
think there was a lot of common ground discussed. I will say as
someone who took out thousands of dollars of student loans
myself to go to college and enter medical school, I would be
devastated if I showed up 1 day and the school was closed, and
I was left holding the bill.
So I am truly empathetic with the cause that we are
discussing here. But I want to return to just to one issue that
I think is something that the Committee actually can find a
great deal of bipartisan support for, and that was the issue of
that insurance.
But I just want to make sure that everyone understands how
insurance actually works. A comment made by one of my
colleagues argued that the burden of purchasing insurance would
fall equally on all institutions, including those with the
likelihood--very little likelihood of closure, and that's
factually correct.
But then again let's remember what insurance does, and I
often fall back on my experience in medicine, and I apologize
for this, but it's what I know best. As a physician I am
required, as are all physicians to pay malpractice insurance,
but the infinite majority of physicians do not have claims put
against them.
So while I may never not have a claim put against me, I am
still paying malpractice insurance. And so while it's very
similar in this concept that the function of a specific risk of
an individual policy holder, which in this case is the
individual school. And so they have to take some--pay for some
risk for others that are within the educational system for
failure.
Therefore, however but in total contrast the policies that
we're talking about today--the ones which the Biden
administration seeks to expand, places the entire burden of the
student's debt on hard-working taxpayers, a significant number
of which never went to college.
And so I just want to make this distinction very, very
clear. We have two different very different paradigms. We have
the tried-and-true method of insurance protection, or sadly
enough, the often-repeated policy of continuing placing burdens
on taxpayers. And while it's important that students who are
unable to complete their degree have protections, I believe
there's consensus on this Committee.
It's equally important that we understand that taxpayers do
as well. The proposal that was discussed today about insurance
is one way of doing so. And this is why I really suggest that
we work together in a bipartisan manner to reform the Higher
Education Act, and discuss this further. It is a proactive way
of helping these students who have been left out in the cold.
It's critical that we do this despite my colleague's focus
sometimes on a limited set of defunct proprietary claims that
policy experts agree that over the coming decades we will see
also another wave of school closures.
So let's get this right now. This is not being just for
for-profit schools, but for everyone. So let us work together
on a proactive way of dealing with this rather than just
dumping things often times again on taxpayers, most of which
have no skin in this game.
So let's talk about ensuring that students have the ability
to complete their degree, which is the ultimate goal, and earn
their credentialling that leads to a process of life-long
success, and that should be our No. 1 priority. Burdening
taxpayers further with other people's debt should be our last
resort. Thank you Madam Chairman, thank you again visitors, and
I yield back.
Chairwoman Wilson. Thank you Dr. Murphy. I now recognize
myself for a closing statement. I want to thank all of the
witnesses for your time today. You have just been exceptional.
All of us have learned so much, and we take your testimony
very, very seriously, so thank you for taking the time from
your busy day to come before our Higher Education Committee and
testifying.
We appreciate it so much. I want to particularly thank the
Government Accountability Office for sharing its preliminary
findings with our Committee, we really appreciate it. The GAO's
examination of the closed school discharge process identified
important challenges that the Education Department must address
to support students affected by abrupt college closures.
As our witnesses discussed, school closures are devastating
to students, plunging them into financial and emotional
despair, while robbing them of the education and opportunities
they deserve. As the Education Department and the Negotiating
Committee begin considering changes to the closed school
discharge process, borrowers like Miss Rhodes, must be at the
center of their discussions.
The GAO's findings point to three clear steps that the
Education Department can take to improve the closed school
discharge process. First, restore the automatic school
discharge process and streamline relief for students.
Second, conduct better oversight of teach out plans to help
students complete their degrees. And third, crack down on
predatory schools that are costing students and taxpayers
billions of dollars. I look forward to working with the
Education Department to better protect students and taxpayers
affected by school closures, a majority of which are predatory
colleges, including holding these owners and executives that
defraud their students to take on personal responsibility for
their actions.
I look forward to hearing more from you as you answer
questions that are submitted to you, and thank you again for
being our witnesses today. If there is no further business
without objection the Subcommittee stands adjourned. Thank you
so much.
[Additional submission by Hon. Mark Takano, a
Representative in Congress from the State of California
follows:]
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[Question submitted for the record and the response by Ms.
Emrey-Arras follows:]
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[Questions submitted for the record and the responses by
Ms. Smith follow:]
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[Whereupon, at 12:28 p.m., the Subcommittee adjourned.]
[all]