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Testimony of Mr. David Moore Hearing on H.R.3039, the Expanding Opportunities in Higher Education Act House Education and the Workforce Committee September 11, 2003 Mr. Chairman and Members of the Subcommittee, thank you for the opportunity to testify about the Expanding Opportunities in Higher Education Act of 2003. I am David G. Moore, Chairman and Chief Executive Officer of Corinthian Colleges, Inc. Corinthian was founded in July 1995, and today is one of the largest for-profit postsecondary education companies in the United States. We are active members of the Career College Association (CCA) and have participated in the development of its legislative positions. As I will show below, the number, breadth and diversity of Corinthian’s colleges allow us to speak on behalf of the interests of CCA’s members. Corinthian’s colleges serve the large and growing segment of our population seeking to acquire career-oriented education to become more qualified and marketable in today’s increasingly demanding workplace. We offer programs at a range of levels of education to serve the needs of these students,. including diploma and certificate programs, and degree programs at the Associate’s, Bachelor’s and Master’s levels. Our focus is primarily in healthcare, business, technology and criminal justice. We operate 80 colleges and two continuing education centers in 21 states, and 45 colleges and 15 corporate training centers in seven Canadian provinces. Additionally, Corinthian offers programs exclusively online for students seeking Bachelor’s and Associate’s degrees in business, criminal justice and accounting, and Master’s degrees in business administration and criminal justice. In particular, our FMU Online programs offered through our Florida Metropolitan University are serving primarily adult students who must concurrently manage careers, family and personal lives to gain the education and training they need. We have achieved great success in helping students to become job ready and advance their careers in today’s competitive economy. This is shown by the increase in our total student population to over 50,000 and our high rate of graduate placement – 82% of our graduates are employed within six months of graduation in the field for which they have been trained. My own background includes experience in both for-profit and public higher education. Prior to helping found Corinthian, I served as president of National Education Centers and of DeVry Institute of Technology in Los Angeles, CA. From 1980 to 1992, I worked at Mott Community College in Flint, MI, where I served as President for eight years. Prior to joining Mott, I had a 20-year career in the U.S. Army, retiring at the rank of colonel. At the first hearing held by the Education and the Workforce Committee on the reauthorization of the Higher Education Act, Chairman Boehner outlined four guiding principles – accessibility, accountability, affordability, and quality. We agree with these goals, and believe that the Expanding Opportunities in Higher Education Act of 2003 takes a number of important steps toward achieving them. In my testimony, I will focus on three important aspects of the proposed legislation – the single definition of an institution of higher education, the elimination of the 90/10 requirement, and the reforms relating to distance education. I. Single Definition of Higher Education Institution Corinthian and other career colleges support these changes. They represent further steps in a direction that Congress began five years ago in the last reauthorization in recognition of changes that were occurring in higher education. Those trends have continued and accelerated so that it increasingly makes little sense to perpetuate distinctions that are rooted in history. Changing student demographics and the goals of our society for postsecondary education support the additional steps that the Expanding Opportunities Act would now take. In the Higher Education Amendments of 1998, Congress transferred all definitions of an institution of higher education from four different sections of the HEA to two sections in a new Title I. This transfer and consolidation recognized that the purpose of all such institutions is to provide access to higher education. Furthermore, the transference and consolidation made plain that the same core requirements applied to all institutions – authorization by a state in which the institution operates, accreditation by an agency recognized by the Secretary of Education, and certification of eligibility to participate in the Title IV student financial assistance programs by the Department of Education. Nonetheless, distinctions between for-profit institutions, on the one hand, and "traditional" institutions, on the other hand, continued. The Expanding Opportunities Act takes another step in an evolutionary process. It is not a radical step, but rather a recognition that the landscape of higher education has substantially changed. This change can be described in a variety of ways, but most tellingly it is revealed by the changes in demographics and purposes of students who pursue higher education. As the National Center for Education Statistics reported recently, today’s undergraduate population is different from a generation ago. The "traditional" undergraduate – an individual who earns a high school diploma, enrolls full time in college immediately after finishing high school, depends on parents for financial support, and either does not work during the school year or works part time – is now the exception rather than the rule. In 1999-2000, just 27 percent of undergraduates met all of these criteria. Thus, 73 percent of all undergraduates were in some way "nontraditional." These students are older, have family and work responsibilities, and are concerned with preparation for entry into the work force or advancing their careers. Most institutions of higher education, including nonprofit and public institutions, have modified their program offerings in recognition of this fundamental shift. For-profit institutions from their inception, however, have addressed the needs of this nontraditional population, and prepared and certified them as ready for entry and advancement in the work force. As a result, career colleges comprise 46 percent of all postsecondary institutions and 38 percent of all Title IV – eligible institutions. They are roughly evenly divided between degree and non-degree granting institutions, and enroll approximately 1.3 million students annually. The maturation of for-profit career institutions, of which Corinthian’s colleges are a prime example, and the way that they match the needs of a changing student population, affirm that the perpetuation of distinctions among institutions of higher education can no longer be justified. The movement toward a true single definition of an institution of higher education is appropriate and timely. Indeed, it could be argued that the bill does not go as far as it should as it preserves a two-year rule applicable only to for-profit institutions, continues to treat for-profit foreign institutions separately, and restricts for-profit institutions from funding sources for institutional purposes. Nevertheless, the proposed amendments will encourage institutions funded by private capital to fill the needs of our society’s modern work force. II. Elimination of 90-10 Rule The hypothesis supporting the enactment of the 90-10 rule and its predecessor, the 85-15 rule, was that students’ willingness to pay some portion of their own money would be an indication of the quality of for-profit institutions. At best, this was an unproven supposition. The rule never purported to examine the quality of these institutions directly; instead, it relied upon an inference about student payments that could just as easily have been explained by other factors – particularly socioeconomic status. The 90-10 rule also involved a second-guessing of the decisions of accrediting agencies that have the responsibility for assessing educational quality in the Title IV system. This has proven unwarranted since, as a recent report by the Inspector General has shown, the agencies that principally accredit for-profit institutions have been more focused on assessing student achievement than those agencies that accredit public and nonprofit institutions. On its face, the 90-10 rule appears to be simple. The statute states that a proprietary institution must have "at least 10 percent of the school’s revenues from sources that are not derived from funds provided under tTitleitle IV, as determined in accordance with regulations prescribed by the Secretary." The regulations developed by the Department of Education, however, are complex. Many of the provisions in these regulations and the Department’s interpretations of them are counter-intuitive and unsupported by the statute. For example, the Department has created a presumption that any Title IV funds disbursed or delivered to a student are used to pay the student’s tuition, fees and other institutional charges, even if the student has received and used non-Title IV funds for those purposes. This presumption, in other words, turns the 90-10 rule on its head. A rule designed to ensure that students use at least some non-Title IV funds, in fact, counts Title IV funds first and diminishes the importance of non-Title IV funds in making the 90-10 calculation. Non-Title IV funds are disadvantaged or not counted in other ways as well. For example, funds paid to the institution from tuition savings plans established by students and their families pursuant to Section 529 of the Internal Revenue Code may not be counted. This is clearly the students’ own money, and yet the Department’s regulations do not recognize these funds. Nor are institutional funds used to match Title IV funds under the Perkins and SEOG programs recognized. In all of these instances, non-Title IV funds are utilized by students – again, the ostensible purpose of the 90-10 rule – but the Department’s regulations and interpretations focus on maximizing the counting of Title IV funds. It must also be recalled that the 90-10 rule is highly punitive. Institutions must notify the Department within 90 days of the end of their fiscal year if they fail to satisfy the rule, including the Department’s unexpected interpretations of it, and they then lose their eligibility to participate in the Title IV programs completely. There are no opportunities for correction or remediation, and the Department has no authority to impose liabilities or fines as is the case in other instances where institutions may be found in noncompliance with the numerous and often complex provisions of the HEA and Department regulations. The 90-10 rule as implemented by the Department of Education, therefore, is full of traps for the unwary, and the effects of failing to meet it are draconian. Has it nonetheless succeeded as a reform measure? The answer is that it has clearly not. Other reforms have had a far greater impact in removing substandard institutions from the Title IV system. In fact, the 90-10 rule has had a number of unintended adverse consequences. First and foremost, the 90-10 rule creates disincentives for institutions to serve those most in need of student financial assistance, especially the poor, minorities and women. These are the groups who most heavily use need-based grant assistance, particularly Pell Grants, to gain access to higher education. Institutions are precluded from denying access to this financial aid for students who qualify. A study forcommissioned by CCA demonstrates that the 90-10 ratio of an institution is not a measure of its quality but rather a reflection of the number of students in need that it serves; The the more students who are in need, the greater is the institution’s 90-10 ratio. The heavy usage of such Title IV aid puts an institution at risk of violating the 90-10 rule. This risk will increase dramatically if proposals to increase the Pell Grant authorization and loan limits, to front-load Pell Grants, or to equalize loan limits are adopted. An institution facing the risk of losing its eligibility to participate in the student financial assistance programs, and unable to deny financial aid to students who qualify, would have no choice but to consider changing its location or the programs offered to appeal to potential enrollees who are able to pay tuition and fees from their own funds. The study commissioned by CCA suggests that this is precisely what has happened. While Title IV funds pay all costs for about 31 percent of the students who attend career colleges, Title IV funds pay almost none of the costs for approximately 25 percent of these students. This suggests that many institutions have reoriented their missions and programs away from students who are most in need of assistance – the very students the Title IV aid programs are designed to serve in order to promote access to higher education. In this critical way, therefore, the 90-10 rule is inconsistent with, and defeats the purpose of, promoting access and the public policy goals of the Higher Education Act. The 90-10 rule also undercuts the aim of improving the affordability of higher education. Very simply, the rule creates incentives for institutions to seek funds that are not covered by financial assistance under Title IV. Since Title IV aid is limited under the HEA, principally by statutorily prescribed loan limits and authorizations for Pell Grants, an institution can obtain additional non-Title IV revenue by raising its tuition and fees. This, of course, cuts completely against a solution to what has rightly been described as a crisis in college costs. The 90-10 rule, however, creates just such an incentive. Moreover, raising tuition and fees in order to achieve 90-10 compliance exacerbates the problem that I previously noted, i.e., that the 90-10 rule pushes institutions away from serving economically disadvantaged student populations. In sum, the 90-10 rule has an unproven and dubious premise. Its implementation has created regulatory complexity and anomalous interpretations. And, most importantly, the 90-10 rule has created incentives that undercut the goals of access and affordability that underpin the student financial assistance programs and the goals rightly articulated by Chairman Boehner for this reauthorization. The time has come to end this wrong-headed experiment in public policy and to eliminate the 90-10 rule from the HEA. III. Distance Education The need for the reforms contained in the Expanding Opportunities Act is now beyond question. The case for such reforms was made by this Subcommittee and the Committee on Education and the Workforce two years ago when, based upon the findings of the Web-Based Education Commission, the Internet Equity and Education Act of 2001 was passed. We commend Vice Chairman Isakson for his leadership on this issue. As the Web-Based Commission found, online learning is one of the most promising developments to have occurred in higher education over the past decade. It leverages the power of technology to enrich learning and create new educational opportunities. A substantial and growing body of research demonstrates that online instruction produces quality learning outcomes comparable to, and perhaps even better than, traditional education programs. Literally millions of students, especially working adults, will have higher education opened to them. Since the House of Representatives passed H.R. 1992, other developments have confirmed that the time is ripe for changes to the HEA to foster online education. Senator Michael Enzi (R-WY) chaired a hearing a year ago in which, among other things, the General Accounting Office (GAO) presented testimony on the growth of distance education, its expansion of access to older students in the workforce, the important role that accrediting agencies play in reviewing distance education programs, and the need to modify restrictions that limit eligibility for student aid. Senator Enzi, Senator Bingaman and other co-sponsors have now introduced S. 1203, which would use an accreditation-based approach to make online education programs Title IV – eligible. Corinthian and other institutions with an interest in online education supported this bill as well as a similar bill, H.R. 2913, introduced by Congressmen Kildee and Andrews on July 25, 2003. In July of 2003, the Department of Education released its Second Report to Congress on the Distance Education Demonstration Program. Significantly, the Department reported that it had uncovered no evidence that waiving the current restrictions in the HEA and the Department’s regulations that impede distance education had negative consequences. On the contrary, the Department stated that "[b]ased upon the experience gained to date through the demonstration program, and the trends that are evident in the development of distance education generally, the Department recognizes the need to amend the laws and regulations governing Title IV student financial assistance in order to expand distance education opportunities." The Department’s report also notes that it has become evident that there is "a great deal of confusion" about how to interpret the existing restrictions, especially the interplay between institutional and student eligibility. As to policy direction, the Department stated that there is a growing consensus that the 50 percent rules need to be revised or eliminated, and that the quality of distance education programs should be assessed through the same accreditation process that governs on-campus programs. In fact, accrediting agencies, such as those that accredit Corinthian’s schools, have developed standards and procedures that address the special issues raised by distance education and that are even more rigorous than the bill would require. The Department’s conclusions are supported by the findings of a recent survey conducted by Babson College and the Sloan Consortium which found that most chief academic officers and university presidents believe that Internet-based courses are already at least equivalent to lecture hall courses in educational quality. This survey also found a substantial increase in the number of online students to more than 1.6 million – 11 percent of those enrolled in postsecondary institutions. Public and for-profit institutions are particularly seizing the opportunities presented by online education. These developments amply support the reforms on distance education in the Expanding Opportunities Act. The bill appropriately severs the linkage between telecommunication courses and correspondence courses, and focuses the 50 percent restrictions where they were originally intended – on correspondence education. The heart of the bill’s approach to distance education is in section 102. This would make a distance education program eligible for the Title IV programs if it is offered by an institution that has been evaluated and determined to have the capability to effectively deliver distance education programs by an accrediting agency which is recognized by the Secretary and has evaluation of distance education within the scope of its recognition. The accrediting agency would achieve such recognition by demonstrating that it has standards appropriate to the evaluation of distance education. In particular, the accrediting agency would have to assess measures of student achievement specific to programs offered through distance education. It is now well-recognized, based upon the developments that I have described, that the key consideration relevant to distance education is quality assessment, and that accrediting agencies are the appropriate entities to make those assessments. Thus, the accreditation-based approach of the Expanding Opportunities Act provides the right solution with appropriate safeguards to ensure that accrediting agencies effectively serve as the gatekeepers to expanding access through this mode of educational delivery. Finally, the bill addresses section 484(l) of the Higher Education Act to remove unwarranted disadvantages applicable to certificate and diploma programs. Using additional 50 percent rules, section 484(l) currently equates these programs to correspondence education and thus prevents student eligibility even if an institution is eligible to offer online programs. As the Department stated in its most recent report, these additional restrictions have created confusion. More fundamentally, there is no reason why an online certificate or diploma course of study is like a correspondence program when a degree program delivered online is not. Indeed, certificate and diploma programs hold special promise for working adults who wish to pursue new competencies and credentials so that they may advance their careers with current and future employers. Thus, removing the linkage of online certificate and diploma programs to correspondence is also a beneficial feature of the Expanding Opportunities Act. IV. Conclusion |