Summary of written testimony:
Mary Mitchelson, Acting Inspector General focused on three areas in her written testimony: ability- to-benefit testing (ATB), on-line high school diploma mills and she also added eligibility problems associated with distance education:
- ATB testing: "Currently we have 15 open ATB-related investigative matters. Provided three examples related to fraudulent ATB test practices, including:
- "In 2006, the former owners of the Moler Beauty College, located in Louisiana, and their associates were sentenced to prison or probation and were ordered to pay $165,000 in restitution for altering individuals' failing ATB test scores to qualify them for financial aid. They also administered ATB examinations without being qualified to do so, and falsely certified that the school complied with the Department's ATB standards.
- High school diploma mills: "A growing issue impacting student eligibility for Federal student aid is on-line high school diplomas. The HEA and Department regulations do not currently specify that a high school diploma must be State recognized or approved, or issued by an accredited or State approved high school in order for a student to qualify for Federal student aid. Our office, GAO, and the Department have identified efforts to exploit this perceived ambiguity."
- Provided this example of on diploma mill investigation: "In 2008, we received another list of on-line high schools from an FSA employee. The FSA employee attended a roundtable discussion at a private career college symposium, and an administrator of a private career college approached the employee and provided a list of 32 on-line high schools that were potentially operating as diploma mills. Using both of these lists, we were able to identify and obtained records from 13 on-line high schools that appeared on both lists. An analysis of the data from these on-line schools identified over 9,500 students who purchased a diploma and had received Federal student aid between January 2005 and June 2008."
- Recommends that distance education get more attention: "Finally, we would like to bring to your attention an issue in the area of student eligibility that is placing increased demands on our investigative and audit resources and highlights the need for greater oversight and statutory or regulatory change: determining whether students in distance education are “regular students” and actually in attendance for Federal student aid purposes."
- Highlights one particular area in need of attention: "For institutions that are not required by a State licensing agency or an accrediting agency to take attendance, the regulations permit institutions to keep 50 percent of all student aid funds received if a student withdraws or drops out at any point prior to the 60 percent point. Institutions are allowed to keep 50 percent of the funds even when they have an actual record or knowledge of when a student last attended. That point could be as early as the first day or week of class, yet the rules permit an institution to keep 50 percent of all Federal student aid funds received, including loan funds that students will still be obligated to repay.
- Identifies recent case with distance education institution, TUI University: "In August of 2009, we completed another audit of another large distance education institution, TUI University, which found that the school did not have adequate policies and procedures for ensuring student eligibility for Federal student aid funds at the time of disbursement and for identifying students who had withdrawn from the institution. We estimated that $923,379 of the $8.6 million in Federal student aid disbursements made to students for the Fall 2007, Winter 2008, and Spring 2008 sessions was either disbursed to ineligible students or not earned by students who withdrew from the institution. TUI did not confirm academic activity prior to disbursing Federal student aid, and had no policies to address circumstances when students ceased attendance without notifying the institution and no procedures to identify such students in order to perform refund calculations."
- Importance of confirming student eligibility: "Our investigative work has also confirmed the vulnerability of on-line or distance education to fraud in the area of student eligibility. Since 2005, we have initiated 29 distance education-related investigative efforts, 19 of which were identified in the last 2 years. Our ongoing work has revealed that criminals seek to exploit institutions with minimal requirements to establish eligibility for initial and continued student aid disbursements."
George Scott, Director of Education, Workforce, and Income Security, GAO largely summarized the findings of the GAO report, which was the subject of the hearing.
- Replayed tapes of undercover analysts getting answers to ATB tests from test administrator: In what was perhaps the most interesting part of the hearing, the undercover tapes were played of the test administrator providing test takers with answers to the ATB test (to which Career College Association President Harris Miller later remarked "hang her high" as an appropriate punishment for the test administrator). So much for due process.
- Recommended Education take the following steps to address the oversight gaps: "In our recently issued report, we recommended that Education strengthen its monitoring and oversight of federal aid eligibility requirements to (1) improve its monitoring of ATB tests and target schools that fail to follow testing regulations for further review; (2) revise regulations to strengthen controls over ATB tests; and (3) provide information and guidance on valid high school diplomas for use in gaining access to federal student aid.
Bob Shireman, Deputy Undersecretary, Department of Education focused on program integrity and consumer protection in his written testimony:
- Highlighted risk factors used by Department to monitor schools: "...high dropout rates, heavy reliance on federal funds, students with high levels of debt or defaults, the financial distress or difficulty managing the institution’s financial affairs, consumer complaints, and rapid growth."
- Provided further details on issues to be addressed in upcoming negotiated rulemaking sessions, wrote about several areas of concern:
- Satisfactory Academic Progress: "...we will discuss whether the current regulations on retaking courses to meet qualitative standards should be reconsidered; whether students should be permitted to use Federal student aid funds to retake courses to get a better grade; whether the regulations governing SAP should be changed to require reviews more frequently than once each year; and whether the regulations governing cumulative completion and grade point average requirements should be revisited."
- Credit hour definition: "During the public hearings, the Department sought input on whether there should be a regulatory definition of a credit hour for Federal student aid purposes; whether different standards for earning a credit hour should be developed for undergraduate education, graduate study, distance education, and other non-traditional programs; and what relationship such a definition for purposes of Federal student aid should have to accrediting agencies' standards for program length."
- Definition of gainful employment: "One suggestion was that the term could be defined in a way that takes into consideration a student’s likely earnings as well as the likely amount of student loan debt. The negotiators, in consultation with the Department of Labor, can consider that suggestion and other ideas on the issue."
- On incentive compensation for admissions staff: "The Department has received a large number of complaints from students and enrollment advisors about the high-pressure sales tactics of some postsecondary institutions. Some argue that tying staff compensation to the number of students enrolled is an inherent conflict of interest, and that the safe harbors undermine the statutory ban on incentive compensation. The Department has also heard from a number of educational institutions that the purported lack of clear guidance prior to establishment of the safe harbors made it difficult for institutions to be confident of their compliance with the law. During the upcoming negotiations, we will consider whether the safe harbors should be maintained, amended, or eliminated in whole or in part from the regulations."
- False and misleading advertising: "During the public hearings, we also heard complaints about false and misleading advertising and other information that is provided to prospective students and their families. While this issue is also under the purview of the FTC as it relates to for-profit entities, it is clear that the potential for false and misleading information can be an issue at all types of postsecondary education institutions. We will discuss this issue during the upcoming negotiations, and hope to have input from the FTC on its experience."
- On specific recommendations from GAO report, highlighted steps that Department is taking:
- On monitoring of A-T-B tests: "The Department now has systems in place to monitor and track the 3-year test-anomaly analyses required of all test publishers. We are currently contracting for the services of independent psychometricians who will review not only the 3-year test analyses, but also any new or renewal requests received from test publishers. Moreover, the Department has begun planning for changes to its school-reporting systems that will support student-specific ATB reporting. The results of this reporting will help us focus monitoring efforts on institutions that have a high number of ATB eligible students."
Harris Miller, President and CEO, Career College Association focused his written testimony on:
- On industry reaction to the GAO report: "Let me say up front: there is no room for cheating in the process of higher education, whether by students, teachers, administrators, other school personnel, or outside testers and evaluators. Last month, the Government Accountability Office (GAO) issued a report on career colleges. We were disappointed to learn about a limited number of abuses allowing unqualified students to gain admittance and to access federal Title IV funds. We abhor any practice that breaks the rules or the law to admit unqualified students, whether through fraudulent testing practices or bogus high school degrees. We also hate high school diploma mills. We share the government’s interest in eliminating any form of fraud and abuse associated with the Title IV program.
- Highlights study from Imagine America Foundation (formerly Career College Foundation) that says career colleges produce better results in persistence and attainment: "Indeed, a new study by the Imagine America Foundation finds that career colleges out‐perform other types of institutions when it comes to dealing successfully with at‐risk students. The study looks at two key outcome measures across higher education sectors, persistence and attainment, and finds that career colleges often produce better results in these critical areas."
- Notes accreditation requirements on job placements: "To retain their accreditation status, institutions accredited by the Accrediting Council for Independent Colleges and Schools must maintain a placement rate of 65 percent. In 2008, ACICS accredited schools had an overall placement rate of 71 percent.6 Other national accreditation agencies have similar placement requirements."
- Details default rate for students at for-profits and compares to community colleges: "This higher default rate is true of most, but not all, community colleges, minority serving institutions, and career colleges, as the GAO indicates. CCA does have member institutions with default rates as low as the most elite traditional institutions, but we also have those with higher default rates, often those in inner cities and other low income areas. The average across all career colleges is now 11%, slightly higher than the 9.9% for community colleges."
- SLA comment: Now a reader might think that 1 in 10 borrowers defaulting is not too bad, and again this typifies how cohort default rates which measure losses over a very short period of time morph into "default rates." Blog readers might recall that the Dept. of Education has budgeted a cumulative default rate for 2-year proprietary schools of 38.0% to 40.8% for the 2002-2006 cohorts.
- Industry's Default Prevention Initiative (DPI) focusing on best practices to lower defaults: "Currently, the DPI is working on developing a student loan default prevention program more rigorous than would be required by the Secretary should an institution be above the CDR threshold. The goal is to introduce this plan to the CCA membership at large as a tried‐and‐true default prevention plan and eventually to all of postsecondary education as a means of reducing CDRs universally."
- I would love to hear more about this initiative so if anyone has more information, send it along.
- Support law to allow financial aid officers to prevent students from overborrowing: "And we support a change in the law that would allow financial aid officers to prevent students from overborrowing when their costs of education and/or post‐graduation earnings capacity do not justify the loan amounts they are taking. I understand that the community colleges also support this idea."
Highlights from Q&A:
- On challenges that IG's office faces in combating fraud in financial student aid (Mitchelson): Resources. These are immense programs. We have talented staff that is highly skilled but only 300 people to oversee $782 billion. We need to go beyond just adding bodies. We do analytical work to target highest degree of fraud and risk. For FY09, 11% of population receiving financial aid and $12 billion in financial aid was granted based on results of ATB tests (analyzed FAFSAs to come up with this figure).
- On the different approach that career colleges take (Miller): "It is the expectations that students have [about greater personal attention]. We see students as customers not as supplicants. Many have challenges; academic challenges, issues of confidence, family issues so schools put tremendous resources into staff support. [Noted following research from Mark Kantrowitz of FinAid] What percentage of students at community college and career colleges receive Pell Grants? Less than 50% of those at community colleges who where Pell-eligible, while the comparable figure was 97% at for-profits. Our schools focus on personal attention. People go to career colleges, because they want a career."
- On whether a law requiring schools that enroll more than 5% of their students under ATB test would be required to administer these tests truly by an independent entity would help combat fraud (this proposal was knocked out in conference for the HEOA apparently): Mitchelson noted that this would take a step toward integrity.
- On whether a pilot project, that allows students to earn 6 credits at no cost to determine their capabilities and lessen risk that they will drop, makes sense (Miller): "Several schools are already experimenting in this area. Some schools are cutting way back on ATB students. This can be both a blessing (less likely to have fraud) and curse for society (need to have more educated workforce). Our schools are cutting way back on ATB because of concerns about 90/10, cohort default rates and graduation rates. Many schools cutting back on their ATB population."
- SLA comment: For all the reasons, Miller states above there must be resources spent immediately to determine the outcomes of ATB test takers. Without that feedback, it is impossible to tell if the ATB actually is an effective measure of student performance. It would seem that $12 billion is enough of an expenditure (amount of federal aid going to students who entered through ATB testing in FY09) to warrant further investigation. Of course, given the limited scope of the GAO's investigation (visits to two schools) and the lack of oversight it chronicles in its report, I think it is still an open question about the pervasiveness of these testing practices. Call me a skeptic, but I doubt that they just happened to find the only two schools that give out answers and doctor test results. The data that Ms. Michelson shared was that 11% of federal aid recipients qualified through ATB tests (or over 1.5 million students based on data on ED site that 14 million students receive federal student aid). So, it may be the ATB tests are good predictors, but only when they are administered properly. Certainly questions worth exploring.
- Congressman Andrews (NJ) suggested areas of additional academic research on the topic:
- Does academic research indicate that students who are non-traditional are more likely to be loan defaulters than traditional students?
- Has any research been done to show the effect of combination of factors since it would seem that the proprietary sector has a disproportionate high share of students with those high risk factors?
- There is data that shows that loan defaults climb as students are further away from their graduation. Is there any evidence that the jump in defaults are caused by defects in their education?
One final thought...given the large share of for-profit students with so-called "risk factors", which Congressman Andrews refers to above, is it good public policy to encourage them to take on large amounts of debt to finance their dreams of an education? I am all for access to education but what the witnesses today suggested that this group is higher risk for 1) not completing their education 2) having more issues that might impact their employment stability once they have completed their program.
- Ferreting Out Financial Aid Fraud (Inside Higher Ed)
- Education Dept. Promises Better Policing of Tests Used To Qualify Students For Aid (Chronicle of Higher Education)
- Government Investigates High School Diploma Mills (US News and World Report): Link to a webcast of the hearing