against the Department's National Student Loan Data System (NSLDS) to determine whether the student is in default on a student loan, or has received an overpayment on a grant and therefore owes a refund, before he or she can receive additional aid. This new data system provides more timely, accurate, and comprehensive loan-level information than was previously available through the database of loans held by the Department and the annual status reports filed with the Department by the guaranty agencies. NSLDS is also used to verify the enrollment status of student borrowers, verify that student borrowers have not exceeded statutory loan limits, and is critical in ensuring that the Federal Government does not overpay lenders for interest benefits arising from federally guaranteed loans. To date, NSLDS has identified approximately 125,000 prior defaulters among students applying for additional financial aid, preventing as much as $310 million in future defaults and denying about $75 million in Pell Grants to these ineligible students.

Third, the Department verifies the eligibility status of applicants who claim to be eligible noncitizens by matching their alien registration number ("A" number) with the Immigration and Naturalization Service. We have also implemented, beginning in January, 1996, a recommendation from our Office of the Inspector General to expand the Social Security number match to include citizenship status in order to prescreen all applicants for citizenship status rather than only those who provide an alien registration number. Finally, the Department has recently begun systematically to identify students with scheduled Pell Grants in excess of the amount allowed by law. Such excesses can occur when students transfer schools. This check will help ensure that no such student will receive an overpayment.

We are also building on the accomplishments of the Direct Loan program to use technological advances to consolidate our student aid data systems and processes. For example, we are redesigning the Department's financial and management information systems to ensure that data from accounting, grants, contracts, payments, and other "feeder" systems such as the student aid application system are integrated into one financial management system. Additionally, we are working with a diverse group of government, business, and education leaders to reengineer the

postsecondary student aid delivery system through the creation of Project EASI (Easy Access for Students and Institutions). Project EASI will integrate the various systems components into a single, student-centered system. All of these measures will help us reduce our costs through the elimination of redundant and obsolete systems, reduce fraud and system vulnerability, and facilitate program flexibility and change as we expand our capability to quickly utilize new technologies. They will also help institutions avoid noncompliance with our rules and regulations.

ENFORCEMENT ACTIONS AND DEFAULT REDUCTION INITIATIVES When audit reviews, program reviews, or other monitoring devices indicate that an institution is failing to comply with requirements of Title IV programs, or that a school is otherwise determined to be at-risk, the Department can limit, suspend, or terminate an institution's participation agreement. In 1994, 191 termination actions were imposed by the Department, the most ever for a single year.

The default reduction initiative has also proven to be a very effective tool in enabling the Department to end an institution's eligibility for one or more of the student aid programs when the institution's student loan cohort default rate exceeds certain statutory and regulatory default rate criteria. The cohort default rate is defined as the percentage of borrowers whose loans entered repayment in a given fiscal year who defaulted in that year or the subsequent year. Because the statutory threshold has dropped from 35 percent to 25 percent over a four-year period, the number of institutions removed from participation has increased considerably in the past few years. More than 600 institutions have been made ineligible to participate in the Federal Family Education Loan (FFEL) program since the default reduction exclusion authority was enacted in 1990.

The national cohort default rate declined from 22.4 percent in the 1990 cohort to 11.6 percent in the 1993 cohort. The Department's reinsurance payments have declined more than 30 percent, from $3.5 billion in 1991 to $2.4 billion in 1995, despite a 50 percent increase in the volume of

loans in repayment during the same period.

Through these measures, and our overall commitment to stronger oversight, more than 300 institutions have been removed from participation in all Title IV programs since this Administration came into office in January, 1993. This is more than twice the number removed from eligibility in the previous seven years combined.

THE DEPARTMENT'S NEW APPROACH FOR OVERSIGHT REFORM Finally, I want to share with you today a very different approach to monitoring and oversight that will best utilize our available resources. Our approach includes regulatory relief for institutions where appropriate, statutory relief, with your help, where necessary, and improvement of administrative processes wherever possible. At the same time, we are increasing our oversight of institutions that have experienced problems in managing our programs and that pose significant risks to Federal funds.

This initiative builds upon the actions already taken by the Department to simplify regulations and administrative processes and to ensure the integrity of the programs and promote accountability. The Department has alleviated some unnecessary burdens for all institutions through the recent issuance of new regulations and by streamlining the recertification application that each institution is required to submit. Our latest initiative would allow us to move further in this direction and reduce administrative burden where the program's requirements do not improve accountability, protect the Federal fiscal interest, or serve the students. We believe that there are a number of institutions that should not have to be regulated as stringently as other institutions because of their past successful performance in managing the Title IV programs.

We are focusing on further improving our oversight of institutions that require closer monitoring through the development of a risk-analysis model that will allow us to target oversight resources on institutions with poor performance records. The Department will also re-align staff with oversight responsibilities along case management lines, whereby a team of employees is

responsible for all oversight activities for an assigned group of institutions. We believe that this approach will enable us to manage the program more effectively and efficiently and to be more sensitive to our customers' concerns. In this regard, we have consulted extensively with both the leadership of individual institutions and the associations representing all sectors of higher education to develop a more-responsive relationship.

CONCLUSION

Mr. Chairman, I have explained the policies and processes involved in institutional eligibility for Title IV programs. Although the requirements for eligibility may, at times, seem daunting, we recognize and take seriously our responsibility to maintain the integrity of the student financial aid programs. We also believe that we have made significant improvements in the existing oversight system, both by reducing the unnecessary administrative burdens and by better monitoring institutions that pose risks to Federal funds. Our hard work in implementing the regulations arising from the 1992 Amendments and in improving the management of these programs is consistent with the President's belief in providing opportunity with responsibility. In all, our efforts have allowed us to provide more financial aid to students than ever before, while ensuring that the institutions that participate in the Title IV programs are operating within the boundaries of financial and administrative responsibility.

I would be happy to answer your questions at this time.