Mr. SHAYS. Mr. Souder will be recognized.

Mr. SOUDER. Thank you. I thought I heard you say, right toward the end of your testimony, that one of the problems was, and you have it in your written statement too, that people are being trained for jobs that don't exist and that you were looking into how to address that question.

Ms. BLANCHETTE. That's correct.

Mr. SOUDER. What would be some of the ways that you would look into addressing that question?

Ms. BLANCHETTE. Well, we're starting with a determination of what information is available. We know that, at least in some States, there is information available about the job market in that State. And, from there, we'll look at what programs there are.

The key will be to tie in students receiving financial aid under title IV with the programs that don't have an adequate job demand, so that our approach is first to determine what information is available on the market, the local markets, and then to tie that to recipients of financial aid.

Mr. SOUDER. The reason I ask the question is, we're trying to really be careful to balance two different things in our society. And we're going through this right now with the so-called careers bill, the job training bill.

Is it that how much we don't want to waste Government funds through loans or job training for jobs that don't exist versus how much steering and control of a job market should the Federal Government be practicing? And if we, in fact, through controlling student loans, while it might help the default rate in student loans, we could, in effect, be collaring the society as far as what the market is going to do and where an individual's choice is with that.

I just want to be careful that we don't back door into a Government-controlled economy, even though I understand what is driving it. I think we need to be cautious that we don't accidentally make executive branch policy that wasn't intended by the legislature, even though I understand that concern.

I have another kind of fundamental question. I apologize if this is kind of general information. But, in the default rates, which seem to me making great progress, but seem to me still quite high, are student loans treated differently than other tax liabilities? In other words, if somebody declares bankruptcy, presumably their student loan risk is gone? Is that why the default rate what is propelling that default rate?

Ms. BLANCHETTE. Well, we haven't done a study of what's causing the defaults. I would imagine that the bankruptcy of some students may be part of the problem. But, generally it's just students are not paying now. Are they not paying because they're unemployed, in which case-well, they could also be declaring bankruptcy.

I don't know the answer to your question, whether it's because of the bankruptcy laws or not. I would suspect that that could be part of it, but probably it is not the whole problem.

Mr. SOUDER. It seems like a fairly fundamental question to look at. And that is, the reason I ask about other tax liabilities is, I suspect, not being a tax lawyer, which I'm proud of

Ms. BLANCHETTE. You're not even a lawyer.

Mr. SOUDER. I'm proud that I'm not a lawyer. I'm a businessman. That you can't avoid other tax liabilities by bankruptcy and other means. And I wonder how much of our problem is being caused by the ability to escape. I know, doing both undergraduate and graduate, and hearing different people talk, that that is viewed as a viable option among students if their loans get too high, to get out of their loans. That's folklore and not factual. And it would be interesting to look at the factual background to that.

I wasn't real clear. Partly it was clarified reporting and tracking, partly-I'm trying to get at what do you believe were the key elements of the decline in the default rate. Obviously some came from the collection standpoint.

Do you believe-and this is something that may be of concern later in this hearing. Do you believe part of that has been squeezing out high-risk students and what does that mean for the society? Ms. BLANCHETTE. Well, I'm sure it is. And high-risk schools, of course, as you know, that in 3 consecutive years, have default rates that exceed 25 percent are no longer eligible for the program. So removal of schools because of high default rates and the students that would attend them, of course, has helped to lower the rate somewhat. Proprietary schools that fall within that group, of course, have left, and that's part of the reason the proprietary school default rate has declined.

It seems that the overall default rates have declined because of the proprietary school segment and the decline there.

Mr. SOUDER. If I can ask this last question: In the decliningwhat is not clear to me is whether you feel that the default rate is predominantly because of schools' kind of inappropriate management or whether they're recruiting inappropriate students, from your perspective?

Ms. BLANCHETTE. Well, again, we have not done a study of the default rates and looked at why they are what they are. And we also have not looked at schools' recruitment procedures.

Part of the reason could very well be the clientele served by particularly the proprietary schools. As I said, proportionately more of the students in proprietary schools are minorities or low-income students. And, for that group, although they may receive a quality education, there are certainly other factors that affect their willingness and ability to repay loans. And I would suspect that proprietary school programs would not deal with some of those other aspects.

Mr. SOUDER. Because there's a very explosive issue of the right to get an education, even if you are high risk versus schools that are trying to kind of capitalize on a Government program to make profits.

Mr. Towns.

Mr. TOWNS. Thank you very much. Let me first thank you for your testimony.

Ms. BLANCHETTE. You're welcome.

Mr. TOWNS. You indicated that trade and technical school students' default rates have been reduced, although their rates remain higher than those students who attend nonprofit institutions. What are the reasons for this difference; do you know?

Ms. BLANCHETTE. Well, we believe at least part of the reason is the quality of the education that the students are getting. If a student completes a program and can't get a job, either because the student isn't prepared for it or because the job market doesn't allow for the student to get a job, the student can't repay the loan. So that's, at least, part of it.

Another part could be the clientele of the schools. As I said, they are proportionate to nonprofit schools. A higher percentage are low income students to begin with, economically and perhaps educationally disadvantaged students. That could account for part of it. We have not done a study that would allow me to precisely answer that question.

Mr. Towns. I guess I'm just sort of thinking out loud now. This one has not been baked. It's the idea, but it's just a thought. If there was some way we could get information out to the general public in a timely fashion maybe the response would be a little different, because I think in terms of the schools and everybody sort of participating in this process.

And I'll give you an example: When we were dealing with athletes in terms of graduation rates that, of course, these schools would come out and recruit athletes. And they would go to the university. And the graduation rate, in some instances, one school had not graduated a basketball player in 15 years, and they were still recruiting. And then finally, we were able to pass legislation here in the House that, where in the letter of intent, they had to place the graduation rate.

Now, we talk about placing default rates and we start getting the information out. And, I think that everybody gets involved in trying to make certain that there's some improvement in it. I don't know exactly how we could do it, but I think that we all need to be much more aggressive.

Now, I know you have this triad, in terms of-and I guess my question is, After you comment on that, what can we do to strengthen it?

Ms. BLANCHETTE. Well, I think you're absolutely right. The more informed potential students are, the better choices they could make. And, I think it's reasonable to make a presumption that anyone enrolling in a school wants an education and wants to better his or her life as a result of experience.

And although student aid is available, quite often students probably spend money of their own as well. And if they've gotten a loan, they have to repay the loan. So there is an investment that these students have made.

So, presumably, if they had better information, they would make better choices, and a lot of the schools with the high default rates would go out of existence for lack of demand.

In terms of how we make things better, there are a number of things that have been proposed and a number of things that seem quite reasonable. Certainly more attention should be paid to highrisk schools, and high-risk schools being schools that appear to have problems based on any various indicators, default rates being one, completion rates being another. There are various potential indicators.

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.
Mr. SHAYS. So let me limit it to 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.