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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.

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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 oppor, tunity 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:]

Statement of Representative Gene Green Subcommittee on Human Resources and Intergovernmental Relations

June 6, 1996

Thank you, Mr. Chairman, for calling this
important hearing on the gatekeeping function in the
Higher Education Act programs. Congress has acted
in the past to address the failures of the gatekeeping
system that allowed poor and fraudulent schools to stay
in the system. As we have seen in past hearings on
this subcommittee, the federal government also has
problems ridding itself of poor and fraudulent health
care providers in the Medicare and Medicaid system.

One problem that the Higher Education Act
programs have that health care does not is that
education is seen as a primarily state and local
function. Any attempts to strengthen federal oversight
will be met of a federalization of education in America.
I believe that we need to devise a response to this
concern that will not, in fact, lead to unnecessary
federal intervention, but will solve the real problem
that we face in the Higher Education Act programs.

I look forward to exploring this and other issues involving the Higher Education Act at this afternoon's hearing.

Thank you, Mr. Chairman.

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Mr. SHAYS. It's nice to have that dual role. Before calling our witnesses to come forward, I would get two housekeeping items out of the way. I ask unanimous consent that all members of the subcommittee be permitted to place any opening statements in the record and that the record remain open for 3 days for that purpose. Without objection, so ordered.

I also ask unanimous consent that our witnesses be permitted to include their written statements in the record. Without objection, so ordered.

First, I'd like to apologize to those who don't seem to have any seats here. At this time, I would like to call our witnesses. Or, actually, only one first: Cornelia Blanchette, Associate Director, Education and Employment Issues, the General Accounting Office, GAO.

I will be swearing you in. Will anyone else be making comments, because if they will, I'd like them to be sworn in, as well.

Ms. BLANCHETTE. No, sir, just the three of us.

Mr. SHAYS. But the three of you will be testifying, so I'll need your names for the record. But first, if I could swear you in.

(Witnesses sworn.)

Mr. SHAYS. For the record, our three witnesses have responded in the affirmative. Ms. Blanchette, you will be giving a statement, but I am assuming all three are prepared to answer questions; is that correct?

Ms. BLANCHETTE. That's right.

Mr. SHAYS. If you could, would you just identify yourself for the recorder, just so we have your name and your position.

Mr. UPSHAW. Wayne Upshaw, Assistant Director, General Accounting Office. Mr. SHAYS. Thank you. And?

? Mr. APPEL. I'm Jeff Appel, senior evaluator, General Accounting Office.

Mr. SHAYS. Jeff, I'm sorry, what is your last name?
Mr. APPEL. Appel, A-p-p-e-1.
Mr. SHAYS. Does the recorder have the names? Thank you.

Ms. Blanchette, we are happy to have your testimony. STATEMENTS OF CORNELIA M. BLANCHETTE, ASSOCIATE DI


Ms. BLANCHETTE. Thank you, Mr. Chairman. Mr. Chairman and members of the subcommittee, we are pleased to be here today to assist the subcommittee in its oversight of education. As you know, the Department administers an array of student financial aid programs under title IV of the Higher Education Act. In fiscal year 1995, the Federal Government made about $35 billion available to 7 million students in postsecondary institutions, including proprietary schools, which are the focus of our remarks today.

Since the late 1980's, the Department's IG, the Congress, and GAO have all found that extensive fraud and abuse exists in student aid programs. Student loan defaults are one of the more visible results of this fraud and abuse. Between fiscal years 1983 and

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