Public Regional Hearing on Negotiated Rulemaking - October 8

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Public Regional Hearing on Negotiated Rulemaking - October 8 ...





Wednesday, October 8, 2008

    9:00 a.m. 4:00 p.m.

    1990 K Street, N.W.

    Washington, D.C.

    P R O C E E D I N G S

    MR. BERGERON: Good morning. I'm hoping this microphone's working. I'll

    just bring it closer--as though anybody has trouble hearing me. Good morning.

    I'm David Bergeron, I'm Director of Policy and Budget Development here in the

    Office of Postsecondary Education.

    With me this morning, we have a number of people from the Department staff who will be sitting at this table throughout the day, but right now I

    have Dan Madzelan, who is the Director of Forecasting and Policy Analysis

    here in the Office of Postsecondary Education, and Ron Sann, who is an

    attorney in our Office of General Counsel. Also sitting here up at the front

    is Vince Sampson, who is the Deputy Assistant Secretary for Policy, Planning,

    and Innovation. And before we go any further, I'm going to turn the

    microphone over to Vince and let him say a few words.

    MR. SAMPSON: I'll say very few words.

    First of all, thank you, everyone, for coming today. It's nice to see a packed house. There's still some seats up front, for those hanging around in

    the back. As you all well know, it's important that we have a robust record

    as we go through this process. You know, we're looking at a reauthorization

    for the first time in a number of years, with a lot of new issues and items

    for the Department to consider and implement in the years ahead.

    So, we've done a number of field hearings, as it were, and we have a couple more to go, but this one is obviously important because we get to hear

    from a lot of representatives that we might not be able to hear from out in

    the field. So, we're looking forward to taking your comments, and then we'll

    look forward to the next step of interacting with you guys as we move forward.

    MR. BERGERON: Thank you, Vince. Let me give you a little bit of

    background. This is our fourth--actually--fifth hearing that we're conducting.

    We have been in--around the country, as Vince said. We've been to California

    and Charlotte. We've been in Rhode Island and one in--and had a hearing in

    Texas. So, we've been hearing from folks. They've been well-attended,

    although not nearly as well-attended as this hearing is.

    We appreciated the testimony that we've received when we've been out in the field. As Vince said, this is an important start to our process, taking

    and hearing what people's concerns are as they look at the Higher Education

    Opportunity Act of 2008, in thinking about the issues that we'll need to be

    regulating around. To help people find information, we've created a Web site

    that is easier to find than most of ours at the Department, because it's at

     2 For people who know our Web site, it's pretty unusual for

    us to get a site that's easy to find. So, we would encourage you to check that Web site often. We have posted the record from the hearing in Texas, and we'll be posting the transcripts for each of these hearings as they are completed and reviewed by the Department staff. And so, look for those on our Web site. Once we complete this hearing process, we'll be publishing a Notice that will identify the committees and areas of interest that those committees will be addressing, and soliciting participation in negotiating committees.

    That's a little different than the way we have done this in the past,

    in the sense that, when we've done this before, we've done a Notice that covered all of this, you know, initial activity. But we thought, given the range of issues, it's probably a good idea for us to wait and see what the public comment was before we developed the committee structure. So, look for that Notice in coming weeks. With that, I'll see if Danny or Ron have anything they'd like to add before we get going.

    MR. MADZELAN: I just want to welcome you as well this morning, and

    thanks for coming out and helping us figure out what we're going to need to do over the next year or two in our regulatory process.

    As David mentioned, we will be providing further information in a few

    weeks around a negotiating agenda and timelines and those kinds of things. When we last had one of our mega rulemaking activities coming out of the '98 amendments, you'll probably recall we kind of divided our work up into some things that needed to be done immediately, which we did in 1999, and then some other items that could wait a year or so for regulating. And so, we followed up with subsequent activity. You know, that's, again, a part of what we're hoping to accomplish with these series of hearings, is to hear from you folks out in the field to help us figure out how we stage the work that we need to get done to implement this reauthorization. Thanks.

    MR. BERGERON: And before we get started, I guess just a couple

    logistical things. If you need to use the restroom, just go out through the doors--the door to your right, and then it's just around the corner, and there are signs that lead you to where the restrooms are, and then come back through the glass doors that are on your left. And the other thing is, if you do leave the building and need to come back in, the guard--now that you're all here, the guard should be able to let you up after lunch. We will make sure that there are people downstairs to help you get back up here again. They changed our security arrangements at the last minute on us. And so, it has complicated our lives a little bit today. But--so, bear with us. If you


    encounter any issues, just grab one of the staffs. There are a bunch of them in the room right now, and most of them are standing up. So, if you have questions, just grab them. Ron, you got anything?

    MR. SANN: Only hello and welcome. Thank you.

    MR. BERGERON: With that, we'll hear from our first witness. If you

    could come to the microphone. The first person coming up and speaking to us is Heather Jarvis. Hi. Yes, please state your name and the organization you are with. Thank you.

    MS. JARVIS: Good morning. My name is Heather Jarvis. I'm with Equal

    Justice Works. I'm an attorney representing Equal Justice Works on staff there. Can you hear me now?

    Equal Justice Works has dedicated 20 years to promoting public interest

    law, and to assisting law graduates who choose to do public interest work. We have joined with other public interest law leaders to support the enactment of Section 431, the loan repayment for civil legal assistance attorneys, and we have collaborated with law schools throughout the country to establish loan repayment assistance programs. We have assisted statewide programs, employer-based programs, and we really are national experts in the design and implementation of loan repayment assistance programs. And we have analyzed Section 431, and have a couple of suggestions to make in that regard. We've identified five specific areas that we find appropriate for regulation. The first is loan priority, the second are terms of repayment, the third, application priority, the fourth, double benefits, and the fifth, definition of statutory terms. So, we ask that the Department of Education designate these subjects for negotiated rulemaking. Specifically loan priority in Section 428(l) states that the Secretary shall carry out a program of assuming the obligation to repay a student loan by direct payments on behalf of a borrower to the holder of such loans, but the statute does not provide rules establishing a loan priority, and eligible civil legal assistance attorneys are likely to have many eligible student loans.

    So, rules establishing an order of priority for repayment of those

    loans should be included on the agenda of a negotiated rulemaking committee. The committee can consider whether to prioritize Direct Loans, FFEL Loans, Grad PLUS Loans, higher interest rate loans, or the like. We also ask that a committee consider repayment terms. In Section 428(l), as well, the statute indicates that if an attorney quits or is fired for misconduct before they complete their service obligation, that borrower will repay the amount of


benefits that they have received. Rules establishing the terms of that

    repayment will need to be determined.

    Thirdly, application priority. The statute itself sets out priority rules for selecting borrowers to receive benefits, but regulations

    implementing those borrower priority rules are needed. Negotiated rulemakers

    could determine additional priority rules as well for applications in the

    event that appropriations remain after initial distribution of benefits to

    priority borrowers. We also ask that a committee consider the double benefits

    provision of Section 428(l) which establishes an ineligibility for double

    benefits provision, stating that no borrower may, for the same service,

    receive a reduction of loan obligations under this Section and Section 428(k)

    or 455(m), being the new loan forgiveness program for servicing areas of

    national need and the College Cost Reduction and Access Act, public service

    loan forgiveness.

    Now, rules establishing the appropriate application of this Section will be needed, and the committee can consider how to apply this provision in

    light of the loan and borrower priority rules, and the interaction between

    this provision and the College Cost Reduction and Access Act. And finally,

    there are some definitions that I believe will be needed. There are several

    statutory terms, including full-time, continually-licensed, involuntarily-

    separated, and contrary to the public interest that we believe ought to be

    the subject of rulemaking and definition. Equal Justice Works and I are happy

    to offer advice, propose draft regulations, and to support the Department's

    effort to address these issues. And so, I thank you and I'd be happy to

    answer questions if you have any of those.

    MR. BERGERON: Thank you.

    MS. JARVIS: Thank you.

    MR. BERGERON: I appreciate it, Heather. Susan Saxton is next. Again, if

    you could tell us for the record who--state your name and the organization

    you represent. Thank you, Susan.

    DR. SAXTON: Good morning. Is everything okay? Hi, my name is Dr. Susan

    Saxton. I'm the Chief Academic Officer for Laureate Higher Education Group.

    Laureate Education has several accredited institutions in the United States, including Weldon University, Kendall College in Chicago, and the New

    School of Architecture and Design in San Diego. Weldon offers graduate

    degrees at the master's and doctoral levels in a variety of academic

    disciplines with the non-tradition adult learner who is working full-time or

    otherwise has not had the opportunity to pursue higher education in the


    campus-based traditional setting. Kendall College offers degrees in business, hospitality, the culinary arts, and early childhood education. The New School of Architecture and Design offers bachelor's and master's degrees in architecture.

    With a portfolio of diverse institutions, Laureate has experience with

    regional, national, and specialized accreditation. I appreciate the opportunity to share our thoughts with you on a number of issues, which we believe the Department should consider during the negotiated rulemaking process. As an overarching issue for consideration, my comments are focused on the need to better incorporate the interests of the non-traditional adult learner into the federal education policy.

    Thus I speak today on specific concepts of innovation and teaching and

    learning, simplification of the Title IV administration, institutional disclosure, and accreditation with the broad recommendation, with changes in these policies--must take into consideration the needs of the non-traditional adult student. Laureate supports the Higher Education Opportunity Act's efforts to combat diploma mills. We consider these efforts critical for preventing fraud against students, and essential for maintaining the quality of distance education. We must prevent bad actors and illegitimate institutions from impacting success in this area, and we welcome the opportunity to work with the Department to accomplish this goal.

    Laureate is proud of Weldon University's reputation and accomplishments

    in providing access to quality education for non-traditional students exclusively for distance learning. Distance learning is a proven way in which to provide access to quality education for many learners who otherwise would not be able to enroll in a campus-based program. Laureate, through Weldon, has been at the forefront of distance education, and has extensive experience in encouraging innovation while ensuring continued quality and a positive student experience. We also support the HEOA's provisions requiring Accreditors to maintain standards and train their site evaluators that have distance education. These changes recognize that distance education has become an accepted format for delivering educational programs, and that the accrediting agencies play an important role in ensuring quality in distance education as they do with all institutions and programs.

    To review institutions that offer distance education consistently, it

    is important that all recognized accrediting agencies be knowledgeable about how distance education programs operate and how they differ from programs offered by other formats. In addition, we applaud the Department for working


    with Congress to revise the definition of distance education to distinguish correspondence programs and other forms of distance education delivery.

    Our institutions also take very seriously the responsibility to ensure

    that students enrolled in our programs are students participating in and completing our programs. For example, Weldon has a number of methods it uses to ensure continual contact between its students and professors, and we'd be happy to share these experiences in detail with the Department. The conference report does not mandate that institutions use or Accreditors require a specific type of process. Rather, it indicates that mechanisms such as passwords or identification numbers are currently sufficient for student verification. We consider it important that the Act's language regarding verification processes continues to provide institutions the flexibility to determine what type of process should be adopted.

    Adjusting Title IV programs to better meet the needs of all learners,

    including the non-traditional adult learner, is of great importance to Laureate. We applaud the increases to the Pell Program's funding levels, and the expansion to a year-round Pell, because it recognizes the important role year-long funding plays in allowing particularly non-traditional FFEL students to continue and complete their educational programs.

    We also appreciate the other changes to the Title IV programs that

    allow institutions to increase access to higher education for non-traditional learners. Finally, we applaud all efforts, including the Secretary's recently announced plan to streamline the FAFSA application and the associated approval process so that students may more quickly understand the funding for which they are eligible. Such understanding often has a direct bearing on their educational choices. In this area, we would welcome the opportunity to assist the Department in improving its processes and systems.

    Laureate supports the general concept that institutions have a

    responsibility to disclose more information on student achievement to students, perspective students, and the public in order to improve institutional accountability and to help students make more informed decisions about their education. Such disclosures are particularly important for students who enter or return to higher education later in life to improve their career prospects. For this reason, we generally support the Act's requirement, for example, the data related to graduation, completion, and retention rates be disclosed. We believe it is important, however, that such information be disclosed in a manner that is useful to the public. Thus, it is critical that the Department carefully consider the definition of the


    terms "retention rate," "graduation rate," and "placement rate," recognizing that varying types of institutions might define such terms differently.

    Laureate believes accreditation should continue to play an important

    role in ensuring exceptional quality of educational programs, both those offered on the ground and those offered through distance education. In general, we support the new accreditation provisions of the Act. We believe those provisions generally respect the important independent relationship between an accreditor and an institution, for recognizing the need of federal policy agencies to ensure some consistency regarding processes and operations in accreditation. We commend the Act's recognition that different types of institutions measure student achievement in different ways unique to the distinct roles of that institution. As a general principal, we believe that measures must be linked to specific learning outcomes, and that each academic program should embody a set of student learning outcomes specific to defined and appropriate program goals.

    Laureate supports the concept that each accreditor will look at each

    institution and its unique program goals in assessing the institution against its standards on student achievement. Laureate supports continuous interaction and frequent communication with Accreditors which enhances the relationship between our institutions and the quality assurance agencies.

    The amendments to Section 102 regarding the expansion of the definition

    of proprietary institution of higher education to include liberal arts programs are complex. For example, they do not define what it means to have provided a liberal arts program by January 1, 2009. Further, the conference report indicates that, "The conferees understand that some programs offered by an institution make the definition of a program that leads to gainful employment in a recognized occupation and a liberal arts program." The conferees do not intend the terms "gainful employment in a recognized occupation," and "liberal arts" to be mutually exclusive. Given that this provision takes effect on January 1, 2009, we believe it is important for the Department to act quickly to provide institutions guidance on the implementation of this statutory definition.

    In conclusion, Laureate asks the Department to consider when making any

    changes to its regulations how the federal government and the higher education community might do a better job serving the needs of a growing cohort of non-traditional adult learners who are purposefully seeking professional growth and lifelong learning opportunities. We believe that the public at large will benefit from the disclosure of data related to student


    outcomes, continued support of the development of innovative methods of teaching and learning, policy reforms and streamlining of procedures relating to the financial aid system. Laureate looks forward to working with the Department on these issues as it proceeds with the negotiated rulemaking process. Thank you.

    MR. BERGERON: Thank you, Susan. As you can see, we're trying to make a

    few adjustments so that it's a little easier for people to hear. Our next speaker is Mary Dorrell.

    MS. DORRELL: Good morning. First of all, I want to thank you for the

    opportunity to be here today and share my thoughts and recommendations. The work of these public hearings is the first important step in identifying issues and address--soliciting our input. My name is Mary Dorrell. I've Vice President of Student Finance for Career Education Corporation.

    I've been in student finance for 28 years at a community college, a

    public university, and proprietary institutions. Career Education Corporation is the largest on-ground provider of private, for-profit, postsecondary education. The colleges, schools, and universities that are a part of Career Education Corporation offer higher education to more than 90,000 students in a variety of career-oriented disciplines. The 75 ground campuses offer doctoral, masters, bachelors, associate degrees, as well as diploma and certificate programs. Today, I would like to address some of our 90-10 concerns.

    I'd like to start with additional unsubsidized Stafford. The law

    provides that, for loans disbursed from July 1, 2008 to June 30 of 2011 an institution can treat as non-Title IV revenue the amount of Federal Stafford disbursed that exceeds the limits that existed prior to the enactment of ECASLA, Public Law 110-227. Our concern is that, because these loans are divided into multiple disbursements, it is unclear how the institution will attribute the additional loan amounts, particularly when some disbursements will cross over into the next award year. We suggest that the most appropriate method for determining the amount to attribute to the additional loan amount would be to relate the disbursements of subsidized Stafford, unsubsidized Stafford, and additional unsubsidized Stafford to each payment period in proportion to the total amount of the Stafford that was awarded for the loan period.

    Schools should not be required to go back after the close of a year and

    reattribute the loan back to the regular Stafford if the student subsequently drops out and does not receive the remaining disbursements. Similarly, when a


student drops out and the funds are subject to R2TIV, the amount of the

    Stafford repaid should be proportionately attributed to the additional and

    the regular Stafford loans for the purposes of 90-10 calculations.

    MR. BERGERON: Can you move the microphone a little closer.

    MS. DORRELL: A little closer? Okay.

    MR. BERGERON: Thank you.

    MS. DORRELL: I want to also talk about institutional loans.

    The HEOA provides addition flexibility to institutions to allow them to count net present value of institutional loans on an accrual basis toward the

    90-10 compliance. As a result of the tighter credit markets, many students

    who previously were able to obtain private loans are unable to obtain them

    now. Institutions are working with lenders to originate loans to their

    students despite the current markets. Schools then purchase these loans from

    the lender at a principal plus interest, and assume all responsibility for

    the debt at the point of purchase.

    Although the loans are not made by a proprietary institution of higher education, the proprietary institution assumes all responsibility for the

    loan, including collections and default risk. If the institution did not

    purchase the loans, these third-party loans would clearly be included as cash

    received for the 90-10 purposes. However, with the purchase of these loans,

    it's not clear that these loans can be counted as cash received. With the

    purchase of these loans, they are similar to loans made by the institution.

    Therefore, to ensure that these loans are clearly defined in 90-10 purposes,

    we request that loans originated by a third party lender for the students at

    an institution but purchased in full by the institution be treated the same

    as institutional loans made by the institution as they relate to the 90-10

    calculation. In addition, as part of paying institutional charges, many

    institutions allow students to use installment payment plans or retail

    installment contracts. While such payment plans do not include the issuance

    of funds at intervals related to the institution's enrollment periods, they

    include contracts that are legally enforceable, and subject to regular loan

    repayments and collections. For that reason, we believe such installment

    payment plans meet the standard of an institutional loan. Therefore, we

    request that such institutional payment plans be clearly defined as

    institutional loans as they relate to the 90-10 calculations. And finally,

    the law also requires that loans subject to regular repayment and

    collections--our institutions allow students to defer payment on certain

    loans while they're enrolled. We wish to ensure that a definition of


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