But more attention should be paid. Now, whether that attention comes from the Department of Education or comes from States, as long as someone is paying attention-and paying attention to weed out fraudulent schools certainly, but also perhaps to provide technical assistance to schools where the owners and the managers have good intention, but just are not as strong managers as they could be. So by focusing on the problem schools, there's an opportunity to perhaps turn things around and not have the school necessarily go out of business or necessarily not be eligible for title IV aid, but to help the schools turn things around. Mr. Towns. All right. Ms. BLANCHETTE. I think also, as you'll probably hear from some of the witnesses later, that standards are important. Now, they have to be realistic standards and they have to be relevant to the particular program that they're attached to, but I think schools need to be held accountable, and there needs to be standards in order to hold them accountable. Mr. Towns. All right. Thank you very much. There's a vote on, so I'm going to run in and vote. Mr. SOUDER. My understanding is that we have a vote, then a short debate, and then two more votes. So, depending whether the chairman comes back in, we may be in recess for a little while. Mr. Towns. We should go in recess now. Mr. SOUDER. I declare us in recess now until somebody gets back. [Recess.] Mr. SHAYS. I bring this hearing to order. Ms. Blanchette, I would like you to just give me an outline of whether or not we have more proprietary schools now than we had 10 and 20 years ago. And I'd like you to give me, if you could, because you make reference to it in 1982, the amount of financial assistance. And give me a sense of-walk me through a little bit, the amount of defaults that we find in proprietary schools. Ms. BLANCHETTE. Would you like to tackle this? Mr. APPEL. There are fewer proprietary schools today than several years ago. But, in some cases, that data is hard to get. The total number of proprietary schools, we've estimated right now, is somewhat over 5,000. Not all of those necessarily participate in title IV. Mr. SHAYS. Just explain to me why the Department of Education wouldn't have a complete list of proprietary schools or certainly any to which grants have been extended? Mr. APPEL. They would if they were participating in title IV. Ms. BLANCHETTE. So your question is, What has been the change in the number of proprietary schools? Mr. SHAYS. I'd like to know how many proprietary schools we had in 1982, 1992, and today. I just want to have a sense of whether there's a growth, a decline, a consolidation. Ms. BLANCHETTE. Do we have that? Mr. APPEL. We don't have specific numbers here today. We do know that there has been a trend, over the last few years, of fewer schools being accredited. Ms. BLANCHETTE. We could attempt to get that information from the Department and submit it later for the record. Mr. SHAYS. OK. What is your bottom-line point to this committee? Ms. BLANCHETTE. Well, the bottom line is that there have been improvements, we believe, in the quality of proprietary schools, because that's what we focused on. And, that's reflected in such things as declining default rates. But we don't believe that the, quote, problem has been resolved, that there are still schools in existence that are not providing the type of education that would allow its students to enter the job market and be productive. Mr. SHAYS. Why would you describe quality by the declining of default rates? Why would that be a basis? Ms. BLANCHETTE. That's an indicator. It's not the only indicator of quality. It's the one that's readily available, that's computed by the Department and reported annually. It's not the only one, as I said. Placement rates and training-related jobs would be another; completion rates for programs still another; and I'm sure that there are many others. But it is an indicator of how well a school is doing. Mr. SHAYS. Do we evaluate higher institutions of education, colleges, universities, based on their default rate? Ms. BLANCHETTE. Yes. Mr. SHAYS. In terms of quality? Ms. BLANCHETTE. Well, the default rates certainly are determined for those schools. And to the extent that those default rates for the period of 3 years exceed the 25-percent limit, they are no longer eligible for title IV aid, so the default rates are applied in the same manner. Mr. SHAYS. Could you just outline to me what the default rate has been over the last 20 years? Ms. BLANCHETTE. I don't have the 20 year. I think we had numbers for the last 5 years or so. Jeff, why don't you present what we have and then we can get more information for the record, if you'd like. Mr. APPEL. We have some information in our prepared remarks. Default rates for proprietary schools in 1991 were 34 percent. Mr. SHAYS. A little louder, please. Mr. APPEL. Were 36 percent in 1991, 30 percent in 1992, and 24 percent in 1993. Mr. SHAYS. To what do you attribute that decline in the default rate? Ms. BLANCHETTE. A good portion of it is probably due to the change in the requirement, the threshold at which institutions were removed from the program prior to the 1992 amendments. And we seem to keep going back to that, because that's a convenient point in time when things did change, when the criteria did change for these schools. Prior to that, going back to 1990 or 1991, the level was at 35 percent. So schools have become ineligible because they've had that high default rate for 3 consecutive years and have been eliminated from the program; that's part of it. Mr. SHAYS. Do we have a program that says that each institution has to have a declining rate or else they won't be accredited? Ms. BLANCHETTE. NO. Mr. SHAYS. So, basically, you're taking the worst ones out, so that affects the average? Ms. BLANCHETTE. Sure. Mr. SHAYS. But the bottom line is that we have extraordinarily high rates of default. I would be obviously encouraged by the trend rate of 36, 30, and 24. And 24 is as of what year? Mr. APPEL. 1993. Ms. BLANCHETTE. That's the latest rate for which the Department has published default rates. Mr. SHAYS. It boggles my mind that we can't know what the default rate was for 1994. And 1995 would be the end of this last September. Or is it calendar year? Ms. BLANCHETTE. It's fiscal year. But there is a lag. The default rate is determined based on the number of loans that become due in a year and are not paid within the subsequent year, so there is a natural lag. Mr. SHAYS. That's a good point. Ms. BLANCHETTE. And, also, the Department doesn't publish its default rates until after schools have had a chance to appeal the calculations and that sort of thing. So there has not been a report since fiscal 1993. We would expect fiscal 1994 to be available-well, I think actually by the end of September, I have read that it should be available. Mr. SHAYS. Your focus has been primarily on the default rate? Ms. BLANCHETTE. Well, as I said, that's the indicator that's readily available. Mr. SHAYS. Tell me who, as you looked at this triad, who determines quality? Ms. BLANCHETTE. Well, OK. I guess it depends on how you're defining quality, and I know that's at the root of your question. In terms of the Department, its definition is that the school is accredited and that it has met State licensing requirements, that it appears to be administratively and financially capable of administering and operating the program that it set out to operate. In terms of the accreditation agencies, quality seems to be sort of mutually derived on the part of the accrediting agency and the school. There's a lot of self-evaluation and self-reporting that the accrediting agencies take into consideration in terms of recommending or suggesting things that need to be changed. And, in terms of the States, it varies across the States. In some States, it's nothing more than paying a fee to get a license, as any other commercial entity would do. In other States, there are more stringent requirements. Mr. SHAYS. Have you done any research on how many schools lost their accreditation? Ms. BLANCHETTE. Do we have that? Mr. APPEL. Not specific numbers. In our conversations with some of the accrediting agencies, we did get information on the number of institutions they've accredited over the past few years, but they don't necessarily always track why a school may be accredited 1 year and not the other. Sometimes a school might just choose not to seek accreditation any longer, if it's not going to, for example, participate in title IV. Mr. SHAYS. I'm not trying to stump you all. I'm just trying to sort this out. I think, for instance, you would be able just to get in a computer, like yesterday, exactly how many different institutions have loans, are accredited and have loans under the title IV program. Then determine how many of them lost their accreditation, because of the new accrediting process that's supposed to weed out those that don't provide a quality education. Am I asking a question that is not answerable or one you haven't looked at? Mr. UPSHAW. We've looked at it, Mr. Chairman. We had to rely on the data bases of the accrediting agencies that we visited. We visited the accrediting agencies that Mr. SHAYS. OK. I'm just trying to sort out what the task is and what my Mr. UPSHAW. And they're not required to, and they haven't been self-motivated to maintain information on why certain schools disappear from their rolls. It's a confluence of factors. Some schools disappear from rolls because they had dual accreditation and they sought single accreditation. Some knew they were going to-they weren't going to meet the tougher standards, so they didn't seek accreditation. And, in some limited cases, I presume, although we don't have any data to support it, schools actually had their accreditation revoked. But the records just are not maintained. Mr. SHAYS. How much money are we talking about when we talk about 36, 30, and 24? Can you give me numbers next to each of those, in terms of defaults? Mr. UPSHAW. Default dollars. Mr. SHAYS. I mean, it's mind boggling to think, first, that there is one-third of the American citizens who take out loans who don't honor their commitment. It's a pretty pathetic commentary on schools, and on the students, that they don't honor their commitments. Twenty-five percent of everyone who takes out a loan in a proprietary school simply isn't honoring their commitment. I mean, that's pathetic. Do you have a number that is associated with this? Ms. BLANCHETTE. We'll have to provide it later for the record. Mr. SHAYS. Explain in your statement, "Between fiscal years 1983 and 1993, annual Federal payments to honor default claims increased over 400 percent, from $445 million to $2.4 billion." Now, I'm making an assumption Ms. BLANCHETTE. That's in total. Mr. SHAYS. But in 1993, the default rate was $2.4 billion? Ms. BLANCHETTE. Well, the defaults, the default claims that were paid. Mr. UPSHAW. The claims. The data isn't disaggregated, so we can't distinguish-we can't identify what proportion of the default claims are associated with proprietary schools. Mr. SHAYS. Versus? Mr. UPSHAW. Versus traditional 4-year colleges, community colleges. Mr. SHAYS. Now, why can't we determine that? Mr. UPSHAW. The data isn't maintained, was not historically maintained in that fashion. We have a request Mr. SHAYS. Who is supposed to maintain that data? Mr. UPSHAW. We rely on the Department of Education to supply us with that. Mr. SHAYS. Now, the Department of Education, in the direct student loan program, is supposed to be in charge of administering student loans? Mr. UPSHAW. Yes. Mr. SHAYS. And that group is the group that can't give us a distinction between proprietary and nonproprietary schools in terms of the default rate? Ms. BLANCHETTE. It's the same Department. Mr. UPSHAW. Not so much the default rate, but the default claims that are triggered through defaults. Mr. SHAYS. Do you have anything else that you want to say to the committee before I get to the next panel? Ms. BLANCHETTE. Mr. Souder has left, but before the recess, there was a discussion of the discharge of student loan debt in a bankruptcy. And my staff has informed me that student loan debt is not discharged in a bankruptcy. Perhaps that could be passed onto him, and it might help him in understanding his question. Mr. SHAYS. Before you go I want you to summarize the role of each of the three, the Department, the State, and the accrediting agency. Ms. BLANCHETTE. All right. Mr. SHAYS. I'd like to be clear as to who looks at quality in those three. Ms. BLANCHETTE. OK. Again, as I said, the definition of quality has not been defined and it's somewhat in the eye of the beholder. From the Department standpoint, it is responsible for certifying the eligibility of financial institutions to receive title IV aid. That basically means that the institution is accredited by a recognized accrediting agency, and the Department is the entity that recognizes accrediting agencies for purposes of the title IV aid. The Department also certifies that the school is administratively and financially capable of operating the program that it is set out to operate. The Department's information is the Department's decision is basically based on information from the schools, financial statements and other information coming from the schools. Mr. SHAYS. The schools provide this information to the Department of Education? Ms. BLANCHETTE. That's correct. Mr. SHAYS. OK. Ms. BLANCHETTE. The accrediting agencies-first of all, were set up a long time ago and had a role prior to any role under title IV. And accrediting agencies basically work with schools to, hopefully, ensure a quality program. They, as I said earlier, work very closely with the schools in the sense that the schools self-evaluate. Schools, along certain parameters, as defined by the accrediting agency 43-818 97-2 |