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On Saturday morning, February 19, 2011, at 4:40 a.m., the House of Representatives voted 235 to 189 to approve a continuing resolution (“CR”) to fund federal agencies, including the Department of Education, for fiscal year 2011 or through September 30, 2011. H.R. 1 would reduce federal spending during the current fiscal year by $60 billion. The CR would reduce Pell Grants for 2011-2012 by 15 percent or by $845, which would result in an annual Pell Grant of $4,705. The continuing resolution would also eliminate the SEOG and LEAP programs as well as other education programs. Federal Direct Stafford and PLUS loans and the Federal Work-Study programs would not be impacted. (NOTE: If the Pell Grant is reduced for the 2011-2012 award year, the Department will have to issue revised 2011-2012 Pell Grant Payment and Disbursement Schedules.)
A day earlier, the House of Representatives overwhelmingly passed the Kline/Foxx/Hastings/McCarthy/Payne Amendment [Chairman John Kline (R-MN), Chairwoman Virginia Foxx (R-NC), Congressmen Alcee Hastings (D-FL), Carolyn McCarthy (D-NY), and Donald Payne (D-NJ)], to the continuing resolution, which would deny federal funds for implementing, administering, and enforcing the gainful employment regulation for the remainder of the FY 2011. The supporters of the amendment were not only all of the Republicans, except for four, but 58 out of the 193 Democrats as well, including former Speaker of the House Nancy Pelosi (D-CA). During the debate, Republicans and Democrats questioned the Department of Education’s approach in defining gainful employment. Those who opposed the regulation said it was an example of federal overreaching and as Congressman Todd Rokita (R-IN) noted, the rule was “another example of this big federal government run amok.” Congressman Alcee Hastings (D-FL), an early supporter of the amendment, said that the Administration’s proposal was “misguided and would force many schools that train nurses, physical therapists, and other essential workers to close.”
Congresswoman Maxine Waters (D-CA), who opposed the amendment, said that many for-profit colleges are “rip-off schools” that target the vulnerable. Congressman Danny Davis (D-IL) said that the amendment would inappropriately interfere with the Department of Education’s authority to regulate higher education.
Chairman of the House Education and Labor Committee John Kline (R-MN) issued the following statement:
“Today’s overwhelming bipartisan vote in support of a new approach to gainful employment is more than a victory for Congress; it is a victory on behalf of students everywhere. Students should be empowered to make an informed decision about their education, and we must ensure they have the information they need without targeting an entire sector of colleges and harming our economy. By blocking the administration’s regulation, we prevented an unnecessary hurdle to important skills and training at a time when workers need every advantage to succeed in the workplace.”
I urge Secretary Duncan to concede to the will of Congress and put an end to this job-destroying regulation once and for all. I look forward to working together on real solutions that strengthen the workforce and promote transparency for all students pursuing higher education.”
On March 2, 2011, by a vote of 91 to 9, the Senate agreed to a two-week continuing resolution that would allow the federal government to operate until March 18, 2011. The two-week continuing resolution passed the House on March 1, 2011 by a vote of 335 to 91. The bill reduces federal spending by $4 billion, which includes $1.2 billion resulting from the ending of funding for eight programs also proposed in the President’s FY 2012 budget. (See article below.) President Obama signed the two-week continuing resolution into law on March 2, 2011. While most financial aid was spared, the LEAP program was eliminated. The bill does not impact the current $5,550 maximum Pell Grant. This action diverted a government shutdown since the current continuing resolution was set to expire on March 4, 2011.
With the current continuing resolution set to expire on March 18, 2011, many congressmen predict that there will be another short-term continuing resolution while talks continue on a longer bill.
Senator James Risch (R-ID) has introduced S. 460, the Education for All Act of 2011, which would prohibit the Secretary of Education from using any federal funds to implement, administer, or enforce the “gainful employment” rules included in the October 29, 2010 final regulations or to issue or otherwise implement the “gainful employment” proposals that have not been finalized. The provision included in H.R. 1 is less broad since it only applies to the use of funds in the FY 2011 continuing resolution. S. 460 would not be time limited.
On February 14, 2011, President Obama released the Administration’s $3 trillion Fiscal Year 2012 budget proposal to Congress. The request includes $77.4 billion for the Department of Education’s discretionary programs, an increase of $7.5 billion from the level provided in the current continuing resolution (CR). The budget requests an allocation of $28.6 billion to fund Federal Pell Grants, which would maintain the annual maximum Pell Grant Award of $5,550.
The following proposals are included in the FY 2012 budget proposal:
- Eliminates the availability of subsidized Stafford Loans to graduate students beginning with the 2012-2013 academic year (Helps retain $5,550 annual Pell Grant Award);
- Allows a one-time opportunity for borrowers with loans split between the Department’s services and FFEL lenders to convert existing FFEL debt and move it to ED (available from January 1, 2012 through September, 30, 2012);
- As was requested last year, turns the Federal Perkins Loan Program into a mandatory Direct Loan Program originated and serviced by ED beginning July 1, 2012. Annual loan volume will increase from the current $1 billion to $8.5 billion and will be allocated among schools using a method to be determined. The interest rate will be 6.8 percent, rather than 5 percent;
- Retains the current Pell Grant annual maximum award of $5,550;
- Eliminates the Leveraging Educational Assistance Partnerships (LEAP) Program;
- Level funds the Supplemental Educational Opportunity Grants (SEOG);
- Returns Federal Work-Study funding level of $908 million;
- Eliminates the TEACH Grants; and
- Calls for $50 million in FY 2012 to establish a new College Completion Incentive Grants (“CCIG”) program.
According to a press release released by Secretary of Education Arne Duncan, he said that “[w]e are cutting where we can to invest where we must.” Secretary Duncan noted that “[t]hese are challenging times, but we cannot delay investments that will secure our future. We must educate our way to a better economy, by investing responsibly, advancing reform, and demanding results.”
The Department estimates that demand for Pell Grant funds will reach 9.6 million students next year, an increase of 6 million from 2008. The budget protects recent increases in the maximum grant (up to $5,550) while ensuring that all eligible students continue to be served. In order to sustain the program, the Administration proposes savings billions, by eliminating the provision that enables students to receive up to two Pell Grants in a single award year and by eliminating subsidies for graduate students.
View the Department of Education's Press Release.
Congressman John Kline (R-MN), Chairman of the House Education and the Workforce Committee, issued a statement on February 14, 2011 stating:
“The president’s budget denies the reality of the fiscal crisis we face. It is time we realized that Washington’s spending binge is contributing to economic uncertainty and high unemployment, and we need a new direction. While the White House continues to ignore repeated warnings by economists and experts that we must cut spending to encourage job growth, House Republicans have already developed a plan to cut more than $100 billion in federal spending over the next seven months. If the president won’t propose the serious blueprint for fiscal discipline that our economy desperately needs, we will.”
On March 2, 2011, Senator Tom Carper (D-DE), Chairman of the Subcommittee on Homeland Security and Governmental Affairs, held a hearing titled “Preventing Abuse of the Military’s Tuition Assistance Program,” which examined the state of the Department of Defense’s (“DOD”) Tuition Assistance Program, which provides assistance benefits to active duty military personnel who enroll in school while serving on active duty. The hearing discussed whether DOD has the proper structure in place to prevent fraud and abuse of the Tuition Assistance Program by schools.
Senator Carper described a report released on March 2, 2011 by the Government Accountability Office (“GAO”) on potential waste, fraud, and abuse of the Department of Defense’s (“DOD”) Tuition Assistance Program. The report acknowledged that the GAO review was limited to the schools offering traditional classroom instruction at installations and did not include distance education courses, which account for 71 percent of the courses taken in FY 2009. The GAO report indicated that DOD’s limited coordination with accreditors and the Department of Education may hinder its oversight efforts. According to the GAO report, the lack of monitoring leaves military members vulnerable to recruitment abuses. The GAO recommended that the DOD needed to: develop a systematic risk-based oversight approach, increase accountability in its education quality review process; and develop a centralized system to track complaints.
Senator Tom Coburn (R-OK) made an opening statement before leaving for another hearing that accused the Department of Education of engaging in inappropriate behavior by discussing its thinking with short sellers who invested in for-profit colleges. Senator Coburn suggested that some Department of Education officials should go to jail.
Senator Carper invited Senator Harkin to testify because of his ongoing investigations into the for-profit sector. Senator Harkin noted that the GAO report showed that revenues from military education benefits at 20 for-profit education companies increased more rapidly than overall revenues every year between 2006 and 2010. He stated that it would be fine if service members received good value for their education, but he stated that if schools are misleading students and serving them poorly, they are encouraging students to waste hard-earned benefits. Senator Harkin said that he was concerned because many for-profit institutions have high costs, high withdrawal rates, and high default rates and there is inadequate oversight. He also indicated that he thought that the Military Tuition Assistance should count toward the 90 percent in the 90/10 calculation, rather than the 10 percent.
Senator Carper said in his statement that it was “just wrong to say to people who serve our country that we’re not going to make sure you have the best preparation to be successful in the military and afterward.” He also expressed surprise to learn that the Military Tuition Assistance did not count as federal aid in the 90/10 calculation.
Robert Gordon, Deputy Undersecretary of Defense for Military Community and Family Policy from the Defense Department, testified that the Defense Department was preparing a policy that would initiate oversight of online courses. Unfortunately, Mr. Gordon noted that there had been no reviews during the last year because the contract with the American Council on Education had elapsed. Mr. Gordon advised the Senators that the Department has issued proposed rules that would provide guidelines for programs receiving Tuition Assistance, and require institutions to enter into a Memorandum of Understanding with the Department. The Department is also developing an automated tracking system to track complaints. Finally, Mr. Gordon concluded by indicating that the Department was working with the Department of Education to obtain information related to program reviews and accrediting decisions.
On February 14, 2011, Senator Dick Durbin (D-IL) asked the Department of Veterans Affairs (“VA”) for a list of colleges and universities from which it has suspended or withdrawn GI Bill and education benefits after discovering questionable recruiting practices used by the institutions. In a response to VA Secretary Eric Shinseki’s letter of December 17, 2010, Senator Durbin commended him for taking a “more careful look at how for-profit schools attract and serve students assisted by VA education benefits.” Senator Durbin asked for more detailed information on the process it used to assess the schools as well as the identity of those that have had their approval withdrawn.
The Senate Committee on Health, Education, Labor and Pensions (“HELP”) rescheduled a hearing on for-profit colleges that was to be on February 17, 2011, but will be on March 10, 2011. The HELP Committee will examine Bridgepoint Education, Inc. as to its growth and profits. On February 8, 2011, Senator Harkin spoke on the floor of the Senate to discuss his ongoing investigation into the for-profit sector and the misleading tactics used by for-profit colleges to enroll students. Senator Harkin cited documents submitted to the HELP Committee and detailed the systematic focus on “exploiting emotional vulnerabilities of prospective students.”
On March 1, 2011, the House Committee on Education and the Workforce held its first hearing to examine the administrative burden of federal regulations on K-12, colleges and universities. The members who were present agreed that regulations should ensure that taxpayer dollars are spent effectively without impeding educational institutions’ ability to educate their students. Chairman John Kline (R-MN) cited the recent program integrity regulations as evidence that the federal government was overregulating. However, Ranking Member George Miller (D-CA) said that while regulations can impede education, he believed that regulations were important to protect the integrity of billions of dollars in federal taxpayer dollars.
While the focus was mainly on K-12 education, Christopher Nelson, President of St. John’s College, testified that the “regulation of colleges and universities is massive.” He went on to say that “every diversion or distraction from these primary purposes [of educating students] weakens our best attempts to achieve those ends.”
On March 1, 2011, Comptroller General Gene Dodaro of the Government Accountability Office (“GAO”) announced that the official responsible for the team that conducted undercover investigations of for-profit colleges was being reassigned. Rick Hillman, a GAO employee, is replacing Greg Kutz, as head of the restructured and renamed team, the Forensic Audits and Investigative Service (“FAIS”) team. Greg Kutz will serve as Director of Audit Services. The August 4, 2010 GAO report was revised and released again on November 30, 2010 because the original report contained numerous errors. House Oversight Committee Chairman Darrell Issa (R-CA) praised the GAO’s move. On January 18, 2011, Congressman Issa had begun a Committee investigation into the GAO’s Forensic Audit and Special Investigations Unit after the GAO issued the revised report, which alleged fraudulent and deceptive recruiting practices at for-profit colleges.
On February 16, 2011, the American Council on Education (“ACE”) on behalf of 70 higher education associations and accrediting agencies sent a letter to Secretary of Education Arne Duncan requesting that the Department rescind its definition of credit hour from the final regulations on program integrity. The letter indicates that the Department has not addressed serious concerns raised during the development of the program integrity regulations. By defining a credit hour in Section 600.2, the Department has “federalized a basis academic concept and, at the same time, developed a complex, ambiguous and unworkable definition.”
The letter states that the concern is not that the accrediting agencies must examine institutional policies with respect to credit hours, since they have and will continue to do so. The concern is that there is “very little evidence of a problem and no evidence that Congress wants the federal government to interview in this area.”
While the letter notes that the inspector general’s report was critical of an accrediting agency’s handling of a credit hour issue, the letter reminds the Secretary that the accreditor’s peer review team identified the problem and brought it to the attention of school officials, who corrected the problem. The letter noted that this is how the accrediting process is designed, that is, to be self-regulating. Further, a single instance should not be a basis for a “one-size-fits-all federal regulation,” which is ambiguous and will impose confusion and enormous burdens on institutions.
View a copy of the letter.
On March 2, 2011, the American Council on Education (“ACE”) on behalf of higher education associations and accrediting agencies sent a letter to Secretary of Education Arne Duncan urging the Department to withdraw its state authorization regulations included in the October 29, 2010 program integrity rules. The letter explains that the final regulations significantly expand the existing rules for an institution to be “legally authorized” in a state and may have the potential of allowing state officials to overreach by imposing new requirements on postsecondary institutions. The letter points out that the final regulations also include a new requirement for institutions offering distance education programs, which would place the federal government in the role of enforcing state statutes. “There is no way to guarantee that an institution has met the department’s interpretation of any state’s regulations” and could force campuses to pull back on their education programs. This in turn would hamper efforts to meet the President’s 2020 goals to increase the number of students who graduate college.
View a copy of the letter.
On February 15, 2011, the Department of Education issued a report submitted to Congress by the Department of Education containing information regarding the amount and percentage of each proprietary institution’s revenues from Title IV resources and non-Title IV sources as provided by the institutions in their audited financial statements. The reports were sent to the Chairmen and Ranking Members of the House and Senate authorizing committees in accordance with Section 487(d)(4) of the Higher Education Act.
Based on financial information for the fiscal year ending during the 2008-2009 award year, eight for-profit institutions have 90/10 calculations greater than 90 percent while an additional 257 institutions have 90/10 calculations that are greater than 85 percent and up to 90 percent. If institutions fail 90/10 for one year, the institution’s participation generally would become provisional for two fiscal years. If an institution does not satisfy the 90/10 rule for two consecutive fiscal years, it would lose its eligibility to participate in the Title IV programs for at least two fiscal years. According to a report issued in 2010, no institution failed 90/10 in the previous award year.
View a copy of the report.
On February 14, 2011, the Department released the FY 2009 Draft Cohort Default Rates to all eligible institutions. Beginning with the FY 2009 Draft Cohort Default Rates, all incorrect Data Challenges (IDC) must be made through the eCDR Appeals application. Participation Rate Index Challenges (PRI) will continue to be submitted via hard copy. Questions about the FY 2009 Draft Cohort Default Rates should be made by contacting ED at fsa.schools.default.management@ed.gov or by calling the Operations Performance Division Hotline at (202) 377-4259.
View a copy of the electronic announcement.
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