Mr. SHAYS. Do we have a program that says that each institution has to have a declining rate or else they won't be accredited? Ms. BLANCHETTE. No.

Mr. SHAYS. So, basically, you're taking the worst ones out, so that affects the average?

Ms. BLANCHETTE. Sure.

Mr. SHAYS. But the bottom line is that we have extraordinarily high rates of default. I would be obviously encouraged by the trend rate of 36, 30, and 24. And 24 is as of what year?

Mr. APPEL. 1993.

Ms. BLANCHETTE. That's the latest rate for which the Department has published default rates.

Mr. SHAYS. It boggles my mind that we can't know what the default rate was for 1994. And 1995 would be the end of this last September. Or is it calendar year?

Ms. BLANCHETTE. It's fiscal year. But there is a lag. The default rate is determined based on the number of loans that become due in a year and are not paid within the subsequent year, so there is a natural lag.

Mr. SHAYS. That's a good point.

Ms. BLANCHETTE. And, also, the Department doesn't publish its default rates until after schools have had a chance to appeal the calculations and that sort of thing. So there has not been a report since fiscal 1993.

We would expect fiscal 1994 to be available-well, I think actually by the end of September, I have read that it should be available.

Mr. SHAYS. Your focus has been primarily on the default rate? Ms. BLANCHETTE. Well, as I said, that's the indicator that's readily available.

Mr. SHAYS. Tell me who, as you looked at this triad, who determines quality?

Ms. BLANCHETTE. Well, OK. I guess it depends on how you're defining quality, and I know that's at the root of your question. In terms of the Department, its definition is that the school is accredited and that it has met State licensing requirements, that it appears to be administratively and financially capable of administering and operating the program that it set out to operate.

In terms of the accreditation agencies, quality seems to be sort of mutually derived on the part of the accrediting agency and the school. There's a lot of self-evaluation and self-reporting that the accrediting agencies take into consideration in terms of recommending or suggesting things that need to be changed.

And, in terms of the States, it varies across the States. In some States, it's nothing more than paying a fee to get a license, as any other commercial entity would do. In other States, there are more stringent requirements.

Mr. SHAYS. Have you done any research on how many schools lost their accreditation?

Ms. BLANCHETTE. Do we have that?

Mr. APPEL. Not specific numbers. In our conversations with some of the accrediting agencies, we did get information on the number of institutions they've accredited over the past few years, but they don't necessarily always track why a school may be accredited 1

year and not the other. Sometimes a school might just choose not to seek accreditation any longer, if it's not going to, for example, participate in title IV.

Mr. SHAYS. I'm not trying to stump you all. I'm just trying to sort this out.

I think, for instance, you would be able just to get in a computer, like yesterday, exactly how many different institutions have loans, are accredited and have loans under the title IV program. Then determine how many of them lost their accreditation, because of the new accrediting process that's supposed to weed out those that don't provide a quality education.

Am I asking a question that is not answerable or one you haven't looked at?

Mr. UPSHAW. We've looked at it, Mr. Chairman. We had to rely on the data bases of the accrediting agencies that we visited. We visited the accrediting agencies that

Mr. SHAYS. OK. I'm just trying to sort out what the task is and what my

Mr. UPSHAW. And they're not required to, and they haven't been self-motivated to maintain information on why certain schools disappear from their rolls. It's a confluence of factors. Some schools disappear from rolls because they had dual accreditation and they sought single accreditation.

Some knew they were going to they weren't going to meet the tougher standards, so they didn't seek accreditation.

And, in some limited cases, I presume, although we don't have any data to support it, schools actually had their accreditation revoked.

But the records just are not maintained.

Mr. SHAYS. How much money are we talking about when we talk about 36, 30, and 24? Can you give me numbers next to each of those, in terms of defaults?

Mr. UPSHAW. Default dollars.

Mr. SHAYS. I mean, it's mind boggling to think, first, that there is one-third of the American citizens who take out loans who don't honor their commitment. It's a pretty pathetic commentary on schools, and on the students, that they don't honor their commitments. Twenty-five percent of everyone who takes out a loan in a proprietary school simply isn't honoring their commitment. I mean, that's pathetic.

Do you have a number that is associated with this?

Ms. BLANCHETTE. We'll have to provide it later for the record.

Mr. SHAYS. Explain in your statement, "Between fiscal years 1983 and 1993, annual Federal payments to honor default claims increased over 400 percent, from $445 million to $2.4 billion." Now, I'm making an assumption

Ms. BLANCHETTE. That's in total.

Mr. SHAYS. But in 1993, the default rate was $2.4 billion?

Ms. BLANCHETTE. Well, the defaults, the default claims that were paid.

Mr. UPSHAW. The claims. The data isn't disaggregated, so we can't distinguish-we can't identify what proportion of the default claims are associated with proprietary schools.

Mr. SHAYS. Versus?

Mr. UPSHAW. Versus traditional 4-year colleges, community colleges.

Mr. SHAYS. Now, why can't we determine that?

Mr. UPSHAW. The data isn't maintained, was not historically maintained in that fashion. We have a request

Mr. SHAYS. Who is supposed to maintain that data?

Mr. UPSHAW. We rely on the Department of Education to supply us with that.

Mr. SHAYS. Now, the Department of Education, in the direct student loan program, is supposed to be in charge of administering student loans?

Mr. UPSHAW. Yes.

Mr. SHAYS. And that group is the group that can't give us a distinction between proprietary and nonproprietary schools in terms of the default rate?

Ms. BLANCHETTE. It's the same Department.

Mr. UPSHAW. Not so much the default rate, but the default claims that are triggered through defaults.

Mr. SHAYS. Do you have anything else that you want to say to the committee before I get to the next panel?

Ms. BLANCHETTE. Mr. Souder has left, but before the recess, there was a discussion of the discharge of student loan debt in a bankruptcy. And my staff has informed me that student loan debt is not discharged in a bankruptcy. Perhaps that could be passed onto him, and it might help him in understanding his question.

Mr. SHAYS. Before you go I want you to summarize the role of each of the three, the Department, the State, and the accrediting agency.

Ms. BLANCHETTE. All right.

Mr. SHAYS. I'd like to be clear as to who looks at quality in those three.

Ms. BLANCHETTE. OK. Again, as I said, the definition of quality has not been defined and it's somewhat in the eye of the beholder. From the Department standpoint, it is responsible for certifying the eligibility of financial institutions to receive title IV aid. That basically means that the institution is accredited by a recognized accrediting agency, and the Department is the entity that recognizes accrediting agencies for purposes of the title IV aid.

The Department also certifies that the school is administratively and financially capable of operating the program that it is set out to operate. The Department's information is the Department's decision is basically based on information from the schools, financial statements and other information coming from the schools.

Mr. SHAYS. The schools provide this information to the Department of Education?

Ms. BLANCHETTE. That's correct.

Mr. SHAYS. OK.

Ms. BLANCHETTE. The accrediting agencies-first of all, were set up a long time ago and had a role prior to any role under title IV. And accrediting agencies basically work with schools to, hopefully, ensure a quality program. They, as I said earlier, work very closely with the schools in the sense that the schools self-evaluate. Schools, along certain parameters, as defined by the accrediting agency

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Mr. SHAYS. Now, who are you talking about, the accrediting agency?

Ms. BLANCHETTE. Well, I was talking-the schools provide a selfevaluation to the accrediting agencies.

Mr. SHAYS. OK.

Ms. BLANCHETTE. That's right. And I'm talking about the accrediting agency's role.

Mr. SHAYS. You're finished with the Department.

Ms. BLANCHETTE. Finished with the Department, and I'm now talking about the accrediting agency's role. The accrediting agency, particularly since the 1992 amendments when the agencies were tasked with coming up with standards for the schools in certain areas,, such as placement rates and facilities and faculty qualifications and so forth. The accrediting agencies seek information from the schools. Initially the schools provide a self-evaluation along various parameters.

The accrediting agency visits. A team under the auspices of the accrediting agency actually visits the school and it's very much a peer review. And they determine, based on talking to various people involved with the school just what the situation is, again along certain parameters.

And they reach a consensus as to whether or not the school should be accredited. And if it's accredited, should it be accredited for a full 5-year-up to 5 years or should it get interim accreditation, and should they go back and look at it before the normal 5year period is up.

It's not an audit. It's not an indepth review, as was envisioned for SPRE's. And I'm not sure I'm characterizing it in a way that— I don't know if I'm confusing you more or making it easier. Would you like to add something?

Mr. UPSHAW. Yes. The responsibility, in terms of defining what constitutes a quality program, rests with accrediting agents primarily. And that's different from ensuring program-the integrity of title IV programs, which, ultimately, is the Department of Education's responsibility.

But in terms of providing the perspective of what constitutes a quality education training program, given the divisions of responsibility with the triad, that rests with the accrediting agent, as I understand it.

Mr. SHAYS. Now, what accrediting agencies did you look at?

Ms. BLANCHETTE. We looked at the six that accredit 95 percent of proprietary schools.

Mr. SHAYS. What were those six?

Mr. APPEL. They were the Accrediting Council for Continuing Education and Training, the Accrediting Commission of Career Schools and Colleges of Technology.

Mr. SHAYS. Now, these aren't State by State?

Ms. BLANCHETTE. No.

Mr. SHAYS. OK.

Mr. APPEL. The Accrediting Council for Independent Colleges and Schools, the Council on Occupational Education, the National Accrediting Commission of Cosmetology Arts and Sciences, and the Accrediting Bureau of Health Education Schools.

Mr. SHAYS. Now, what I'm not clear about is, when you looked at them what you were trying to look for.

Ms. BLANCHETTE. All right.

Mr. SHAYS. I know what I would have been looking for, but I'm not sure what you were looking for.

Ms. BLANCHETTE. OK. This is, of course, part of our ongoing work for the subcommittee, and we have not completed our work. Mr. SHAYS. OK.

Ms. BLANCHETTE. But we talk to officials in the accrediting agencies to basically find out what they do in accrediting a school, what they saw as pertinent issues, what they saw their role as, what they would identify as perhaps problems.

Mr. SHAYS. Was there anything that unified these different six accrediting agencies?

Mr. APPEL. Well, they all accredit primarily proprietary schools. Some of the data that we were looking at in terms of why they are accrediting less

Mr. SHAYS. So, why are they accrediting less? They were accrediting less, but were they taking away any accreditations? Did you ask them how many schools they have taken accreditation away from?

Mr. APPEL. We did ask.

Mr. SHAYS. And what was the answer?

Mr. APPEL. We got some information. Our primary interest was to look for an increasing rate of being willing to revoke or deny accreditation.

Mr. SHAYS. Give me an example of what you found in one of those six.

Mr. APPEL. Basically, for all of them, we were looking for dif ferences before and after the 1992 amendments. And we didn't really find that accrediting agencies were revoking accreditation with any more frequency after the 1992 amendments than before. We didn't ask for broad, detailed information, but they're some of our initial observations, based on our conversations with them.

Mr. SHAYS. Well, it sounds like you don't know how many they— you didn't ask the specific question. How many schools have they accredited? How many new ones have they accredited? How many accreditations have they revoked?

Mr. APPEL. We did ask.

Mr. UPSHAW. We asked that.

Mr. SHAYS. So how many did they revoke? Give me an example. Mr. UPSHAW. They were unable to-they didn't maintain records on-OK. I know what. They told us that they did not maintain records on

Mr. SHAYS. No, no. Now, these are the accrediting

Mr. UPSHAW. Yes. I understand.

Mr. SHAYS. No, no. It would seem to me you would be pointing this out in your report. What I'm hearing you say is that the accrediting agencies cannot give you documentation of how many schools they've accredited or how many they've revoked.

Mr. APPEL. We did ask them for how many schools they revoked accreditation for, and we do have that information. We didn'tMr. SHAYS. Compile it?