nessed substantial improvement. And we are convinced that these private organizations are better suited to assess educational capability than is the Federal Government.

If an institution is State approved and accredited, then it can apply for eligibility and certification by the Department. And this is where we come into the quality dimension. We look at whether that institution has the financial and administrative capability to operate its programs. So we're assessing its administrative quality, if you will.

That institution must demonstrate that it meets standards of financial responsibility and administrative capability. This is certainly not automatic, though it used to be. In 1990, only 16.6 percent of applications were rejected. In 1995, 40 percent were rejected.

Mr. SHAYS. Can you give me that statistic again? I'm sorry.

Mr. LONGANECKER. In 1990, 16 percent of applications were rejected; 1995, 40 percent were rejected. Furthermore, the sheer number of initial applications has declined by more than 50 percent since 1991. We think that demonstrates that people now know that this is more than just a frivolous activity.

When an institution seeks initial eligibility and meets the standards, it is granted provisional certification. Now, provisional certification is, incidentally, a very important result of the 1992 amendments. To remain eligible, you've got to pass these various tests, participate rapidly if the capacity is-let me just catch my breath. I saw that red light go off, and it just

Mr. SHAYS. No. I turned it off, which meant don't worry about it, within reason.

Mr. LONGANECKER. OK. Thank you. I appreciate that, Mr. Chair

man.

Mr. SHAYS. Your testimony is very important to us, and I want to make sure you have an opportunity to share it with us.

Mr. LONGANECKER. I mentioned how important we thought provisional certification was. It allows the Department to allow new and marginal institutions to remain eligible. But it also allows the Department to remove those institutions for participation rapidly if their capacity to serve the program's purposes deteriorate.

After the first full year on provisional certification, new institutions are reviewed and either granted full certification, continued provisional certification, or they are terminated.

Now, fully certified institutions must also follow certain procedures to continue to remain in the programs. Obviously, they must remain licensed and accredited, as they are requirements of the program. But they must also be recertified every 4 years. And when they come up, we determine, based on their performance, whether they are again fully certified, provisionally certified, or whether we withdraw certification.

Of the 1,500 institutions undergoing recertification last year, 70 percent were fully certified, 20 percent were provisionally certified, and 10 percent were rejected.

We also monitor these institutions' progress. And we have dedicated more staff, more training and more attention to this process. Last year, our 10 regional offices conducted more than 850 reviews of institutions, 50 percent more than the previous year. We've

worked hard to better target our reviews on at-risk schools, reduce the time it takes to complete a review, and to assess only meaningful liabilities.

We also monitor student aid applications to ensure that ineligible students don't get aid. And, last year, through the new data base that we have and some of the matches that we have with Social Security, the INS, and others, we rejected over 125,000 applications for students who should not have been eligible, but were applying, who, if they had received aid if we hadn't caught them, would have received over $300 million in student loans and $75 million in Pell grants.

Plus, we've redesigned our computer systems and financial management systems to ensure greater integrity into one slick system. A major piece of that is a project we call EASI, which stands for Easy Access for Students in Institutions, which is taking the lessons we've learned from a very successful direct lending program and applying them to the delivery system for all student aid programs so that we can better serve our students and the institutions and have greater accountability to boot.

You've probably heard about the great success in reducing defaults. You heard about it a little bit earlier. We would like to claim success for all of that, but, in fact, you deserve some of the credit. It was, in fact, the default initiatives of the late 1980's that put in place the process we're using. And they've led to a tremendous reduction in the default rates and the number of schools. More than 600 schools have been eliminated from loan eligibility since 1988. And 300 have been removed from all title IV since we came to town in 1993, more than twice the number in the previous 7 years combined. But we're not satisfied.

Mr. SHAYS. I don't understand. The 600 schools are what?

Mr. LONGANECKER. The 600 is the number of schools that have been eliminated from the program since 1988.

Mr. SHAYS. Because of a default rate?

Mr. LONGANECKER. Default rate and other factors, but principally because—no, excuse me, that 600 is solely because of the default rates.

Mr. SHAYS. Right. And the 300 is?

Mr. LONGANECKER. That's the number that we have eliminated from the program since 1993.

Mr. SHAYS. So the 300 is part of the 600?

Mr. LONGANECKER. That's correct.

Mr. SHAYS. OK. Thank you.

Mr. LONGANECKER. We're not satisfied with what we've accomplished.

Mr. SHAYS. No. I just wanted to understand the statistics.

Mr. LONGANECKER. Yes. Perhaps our most ambitious project is the one in which we're currently engaged to rethink the way we approach monitoring and oversight. We've begun an approach that will reward institutions that have continually demonstrated outstanding performance with less regulation, using the resources previously focused on those institutions to more fully focus on those institutions that pose the most significant risk to the Federal Government and to students.

We began that process by simplifying regulations which we released last December. We've also reinvented the administrative processes to focus more on a case management approach. We're doing a great deal to try to ensure that we are good stewards of those Federal funds, and that we are rewarding those people who do a good job and focusing on those who are placing Federal dollars in students' educations at risk.

I do have some of the specific information that you were asking the previous respondents for. I'll be glad to provide those tables and numbers. And when we get to questions and answers, we can go into those, as well.

Mr. SHAYS. Mr. Longanecker, that would be very helpful, and I'd like to get to that.

Mr. LONGANECKER. My apologies for running long there. [The prepared statement of Mr. Longanecker follows:]

Mr. Chairman and Members of the Committee,

I am pleased to appear before you today to share with you the process by which institutions of postsecondary education become and remain eligible to participate in the student financial aid programs. I would also like to share the work we have done to ensure that these institutions are complying with administrative and fiscal requirements, as well as providing high-quality education and training to their students. Our goal -- one that I am sure you share -- is to provide deserving students access to high-quality postsecondary education while simultaneously ensuring the integrity of the federal student aid programs. It is a goal that embodies the President's longstanding conviction that the Federal Government has an obligation to ensure educational opportunity, but with that opportunity comes responsibility, including responsibility on the part of the institutions. Our commitment to ensure that students, who increasingly are from low and middle-income families, have access to a high-quality postsecondary education, depends, in large part; upon our management of these very important programs.

While we believe that the vast majority of the institutions that participate in our programs are operating in full compliance with our rules and regulations, there are some institutions that perform contrary to the program's goals and objectives. These are the institutions that we are especially concerned with in our monitoring and oversight efforts. We remain committed to enhancing the effectiveness of our oversight responsibilities and to reducing the incidence of high-risk institutions participating in the federal student financial aid programs authorized under Title IV of the Higher Education Act of 1965 (HEA). In my testimony today, I will explain the requirements that institutions must meet for eligibility in the student financial assistance programs. I will also discuss how our more focused and attentive oversight efforts, as well as our tougher standards, have removed many institutions from the programs and deterred other unqualified institutions from even applying for eligibility. Finally, I will share with you the work we have done, and the progress we have made, to adopt a fundamentally different, and we are convinced far better, approach to oversight that will build upon our accomplishments of the last few years.

ELIGIBILITY AND CERTIFICATION

Currently, approximately 7,000 postsecondary institutions participate in Title IV programs, and nearly $40 billion of financial aid will be provided to students through these programs this year. In order to participate in the Title IV programs, an institution must (1) be licensed or otherwise legally authorized by a State to provide postsecondary education or training; (2) be accredited by a nationally recognized accrediting agency; and (3) meet the Department's requirements for certification. [Flow charts outlining the existing oversight system are attached at the end of the testimony.] These three partners represent what is often referred to as the Program Integrity Triad. The Department of Education has worked with Congress to improve the eligibility and certification process, and our combined efforts have paid off handsomely. For example, the percentage of initial applications for certification that are denied has increased substantially, from 16.6 percent in 1990 to 30.5 percent in 1992 to nearly 40 percent in 1995, reflecting our tougher standards for certification. Furthermore, the sheer number of initial applications for certification has declined more than 50 percent since 1991.

To participate in Title IV programs, an institution must first be licensed or otherwise legally authorized by a State to provide postsecondary education or training. Currently, state licensure requirements vary widely across states. Some states have strict licensure requirements that address an institution's financial and administrative capability and its educational program. In other states, licensure consists of little more than acknowledgment that the institution is owned and operated by a duly-chartered corporation, and no scrutiny is exercised over the institution's ability to provide education. For eligibility purposes, the Department recognizes the state license regardless of the licensure requirements.

The 1992 Amendments to the Higher Education Act enhanced the role of the states in the oversight system through State Postsecondary Review Entities (SPRES). Initial efforts to implement these statutory provisions suggested that the SPRE program was developing as anticipated. However, creating the SPRES changed the relationship between institutions and their State and Federal governments so substantially that the overwhelmingly negative response