DEPARTMENT OF EDUCATION OVERSIGHT:

GATEKEEPING

THURSDAY, JUNE 6, 1996

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON HUMAN RESOURCES AND

INTERGOVERNMENTAL RELATIONS,

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,

Washington, DC. The subcommittee met, pursuant to notice, at 2:05 p.m., in room 2247, Rayburn House Office Building, Hon. Christopher Shays (chairman of the subcommittee) presiding.

Present: Representatives Shays, Souder, Morella, Towns, and Green.

Staff present: Lawrence J. Halloran, staff director and counsel; Christopher Allred, professional staff member; Thomas M. Costa, clerk; and Cheryl Phelps and Denise Wilson, minority professional staff members.

Mr. SHAYS. Thank you for coming today. I'd like to call this hearing to order and welcome our witnesses and also our guests.

Today we ask this question: Is the Department of Education effectively discharging its statutory duty to guard against the abuse of Federal higher education funds by schools that don't teach what students need to learn?

This year the Department of Education will make almost $40 billion available through student loan aid program authorized under title IV of the Higher Education Act. These funds will be used to pay tuition at public and private universities, community colleges, and both nonprofit and proprietary vocational and technical schools.

How can we be sure that the substantial Federal commitment to higher education is being used effectively?

This question first arose during our hearings last year on the Department's mission and performance. The Department of Education inspector general [IG] identified Federal education assistance programs as, "those most vulnerable to fraud, waste and abuse," in part due to "the multitude of entities the Department has had to rely on to assist it in administering the programs."

The IG concluded that the control of access to Federal funds, or the gatekeeping process, "has proven insufficient in keeping weak and unscrupulous schools out of the SFA programs," the student financial aid programs.

Based on that testimony, we asked the General Accounting Office [GAO] to identify weaknesses in the gatekeeping process affecting the quality of the education and training purchased with Federal

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assistance. Although that review is still underway, the GAO testimony today will provide an important perspective on the dimensions of this problem.

Guarding access to Federal education assistance is described as, "a shared responsibility," borne by a triad consisting of the Department, the States and recognized accrediting bodies. Each member of the triad is responsible for monitoring one or more of the factors used by the Department to determine that schools are eligible, or ineligible, for participation in Federal student aid programs.

As the fiduciary guardian of Federal funds, the Department measures administrative and financial capacity of participating schools. But a solid bottom line and low loan-default rates are, at best, indirect indicators of educational quality.

Accrediting bodies recognized by the Department measure their member schools against curriculum and instruction standards. It would seem they bear primary responsibility for quality assurance. But these private peer review organizations can be reluctant to sanction dues-paying members, just as they can be too eager to punish innovative or aggressively competitive schools for technical deficiencies unrelated to program quality.

The States license schools to operate within their borders and apply a wide variety of standards including minimum teacher qualifications, library resource levels, and physical plant requirements. But the 1992 Federal effort to standardize the State role through the recognition of State postsecondary review entities, called SPRE's, proved both unpopular and unworkable.

In such a tripartite arrangement, no one is ultimately accountable for the quality of what is purchased with Federal higher education assistance. Each party in the troika can rely on quantitative measures, such as loan default rates, test scores or student placement rates, while each points to the others to take responsibility for the far more difficult task of applying and enforcing qualitative standards.

Contrary to President Truman's observations, when it comes to higher education quality in Federal programs, the buck never stops anywhere.

As a result: Federal student aid spending remains on the GAO list of high-risk programs; students still use Federal funds to pay for poor quality education; and students still pay to receive training for jobs that do not exist.

So we asked our witnesses for their assessment of the current gatekeeping system and for their suggestions, how to stop the finger pointing and point all Federal higher education spending toward high-quality schools.

Along with the GAO and the inspector general, we will hear testimony from representatives of all three members of the gatekeeping triad: the Department of Education, accrediting agencies, and a State education department. We appreciate their being here today, and we look forward to their recommendations. Their testimony will be useful as we continue our oversight of the Department and as Congress begins to prepare for reauthorization of the Higher Education Act programs.

At this time, I'd like to thank my colleagues for being here and to recognize the very distinguished ranking member of this committee, Mr. Towns.

Mr. Towns. Thank you very much, Mr. Chairman. I am pleased to join you to consider current efforts to prevent fraud, waste, and abuse among postsecondary institutions receiving Federal student aid grants and loans.

Our purpose in today's hearing is to examine the gatekeeping triad system and whether measures established by the 1992 amendment to the Higher Education Act are being effectively implemented. We will also review whether the Department of Education State agencies are fulfilling their gatekeeping functions to ensure that only quality institutions are allowed to participate in title IV programs.

The Department of Education, the States, and the 88 agencies that accredit the educational institutions all have a poor record of management and oversight of the title IV student aid program. Through the 1992 amendment, Congress sought to correct this problem by strengthening the framework of the shared responsibility established by the Higher Education Act.

GAO reports indicate that, as a direct result of the 1992 amendment, default rates on student loans have steadily declined. This is important because this statistic is used to measure the success of fiscal management efforts, and it is the basis for determining whether quality institutions can continue to receive funding under title IV.

In addition to the mandates established by the 1992 amendment, the Department of Education has undertaken other reform initiatives. The agency has recently implemented a number of recommendations by the inspector general to improve program integrity. It is also taking steps to provide regulatory relief to institutions that have successfully demonstrated outstanding performance in administering title IV programs.

Despite this progress, there is still more work to be done to improve management of Federal student aid programs and to reduce student default rates. However, we all owe it to the taxpayers to see to it that the structure mandated by law is in place and appropriately funded.

Mr. Chairman, the subcommittee must be fair in its examination of the success of the gatekeeping system and compliance with the Higher Education Act, as amended. We must carefully examine the act's initial objectives and then ask ourselves if the three-part system can be effective if one or more components are not fully operational.

For example, Mr. Chairman, the 1992 amendments authorized the creation of a new State review process to enhance State oversight, the State postsecondary review entities, SPRE's. However, before this initiative could be fully implemented, the 1996 appropriations bill rescinded all of its funding. This funding cut creates a gaping hole in a critical gatekeeping component that ensures programs' integrity before Federal funds are disbursed.

I look forward to hearing from each of our witnesses, and hope to gain insight from each of them as to the methods we can use to enhance the current system.

Let me extend special greetings to Al MacKinnon, who is here this afternoon to testify from my home State of New York. New York is the only State to begin SPRE reviews, even though all States had signed agreements with the Department to do so. I am particularly interested in his views on how SPRE cuts have affected New York's effort to work cooperatively with the Department of Education.

So, Mr. Chairman, let me thank you again for holding what I consider a very important hearing, and I look forward to working with you and making certain that the areas that need to be strengthened are strengthened, and also to say to you that, in order to do that, we might have to find some resources.

I yield back.

Mr. SHAYS. I thank you, Mr. Towns, and for your continued cooperation in this committee.

I would now call on the vice-chairman of the committee, Mr. Souder. Do you have any comment?

Mr. Green, any comment?

Mr. GREEN. Mr. Chairman, just briefly. I appreciate the opportunity to be here, and, again, also serving on the Economic and Educational Opportunity Committee, and also on the Subcommittee for Post-Secondary Education. This is another dual role that some of us play on this committee, and I look forward to the hearing. [The prepared statement of Hon. Gene Green follows:]