NAICU Washington Update

Congressional Committees Focus on Program Integrity

July 08, 2010

Education committees in both the House and Senate have begun oversight hearings on program integrity issues raised in the proposed rulemaking now underway by the Department of Education.  Interest in the issue has also been spurred by a rising tide of media reports on the growth and activities of proprietary schools.

On June 17, the House Education and Labor Committee held a hearing to examine the Department of Education Inspector General's (IG) criticisms of accreditation agency reviews of institutional credit hour policies.  The criticisms grew out of the IG's review of three regional accreditation agencies, and are the basis for proposed rules to establish a federal definition of "credit hour."

Committee Chairman George Miller (D-Calif.) framed the issue as one of cost to students and taxpayers. Federal student aid is based on credit hours.  To the extent that credit hours are inflated in order to generate more income to an institution, the federal government ends up footing a large part of the bill.  He expressed concern that credit hour inflation could well become part of a business plan for increasing corporate profits.  Miller also noted that members of Congress are not eager to decide this, but that a "lot of money" is at stake.

Noting that Congress has traditionally relied on accreditation in this area, Miller expressed concern that the IG reports "highlight a lack of clear standards and policies on this issue, as well as a questionable decision by one agency to accredit an institution which peer reviewers observed had ‘egregious' credit hour policies."  The decision he cited from the IG's report was the Higher Learning Commission's handling of credit-hour inflation in some programs offered by InterContinental University, a for-profit institution owned by the Career Education Corporation.

The committee heard from the Department's inspector general, Kathleen Tighe; the president of the Higher Learning Commission of the North Central Association, Sylvia Manning; and Michale McComis, executive director of the Accrediting Commission of Career Schools and Colleges.  Tighe emphasized the need to establish a federal definition of "credit hour."  Manning took the position that the meaning of a credit hour is well understood in the academic community.  She noted that establishing a federal definition would set a bare-minimum threshold, but that such a threshold would neither assure nor advance quality.

A week later, the Senate Health, Education, Labor, and Pensions (HELP) Committee held a hearing to review for-profit education.  It was the first of a series of hearings the committee plans to hold.

Committee Chairman Tom Harkin (D-Iowa) focused the hearing on student aid dollars, observing that for-profit schools enroll less than 10 percent of all postsecondary students, but receive 23 percent of all federal financial aid.  He also expressed uncertainty about what the government is getting for its investment.  In particular, Harkin noted that the exceptionally high rate of students "churning" through for-profit schools each year requires further investigation to determine whether or not students are completing their programs.

Ranking member Mike Enzi (R-Wyo.) urged caution, suggesting the committee use a "scalpel" and not a "hatchet" in approaching for-profit institutions.  He stated that proprietary schools have been effective in reaching non-traditional populations, and suggested that the performance of private not-for-profit and public institutions deserve scrutiny as well.

The attention-getter at the hearing was investor Steve Eisman, featured by Michael Lewis in his book The Big Short as having foreseen the crash of the subprime mortgage industry.  Eisman contends that the same factors that led to the mortgage crisis are at play today in the proprietary sector.  Specifically, he cites the increasing volume of loans being made to individuals who will not be able to repay them.  All of the risk falls to the federal government, which has made or guaranteed the loans, and to the student, who is responsible for repayment. The school bears no risk at all.

Representatives of the for-profit sector have argued that Eisman is trying to bring down the sector in order to cash in on his investment bets against them.  Eisman acknowledges he would make money in such an instance, but contends he is speaking out to stop current practices "before it's too late."

Other witnesses included the Department's Inspector General, Kathleen Tighe, who said that a large portion of complaints brought to the attention of her office have involved proprietary schools - and that prop-school complaints were growing at a faster rate than those for other sectors.  She also mentioned that several of the program integrity rules proposed by the Department had been inspired by these investigations.

Former student Yasmine Issa described accumulating thousands of dollars of debt she's been unable to pay since completing ultrasound technician training at a proprietary institution.  She has been unable to find work in the field because the ultrasound program wasn't accredited (although the institution as a whole was).  Another witness, consumer attorney Margaret Reiter, described fraudulent proprietary sector practices she had observed while working in the office of the California Attorney General.

Sharon Thomas Parrott, senior vice president at DeVry, Inc., was the only representative of the for-profit sector to testify.  She focused most of her remarks on DeVry, attempting to distance it from practices at other for-profit schools, while mentioning the work of the sector in enrolling poor, disadvantaged, and minority students.

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