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Hearing of House Committee on Education and the Workforce:Enforcement of Federal Anti-Fraud Laws in for-Profit Education

Location: Washington, DC


March 1, 2005


Mr. Kildee. Thank you, Mr. Chairman.

For the record, Ms. Waters, it was 85/15 from 1992 to 1998. During your first term in Congress we enacted the 85/15 rule. Then in 1998 we changed that to 90/10.

However, H.R. 609, which is the bill before this Committee, would completely eliminate the 90/10 rule.

Mr. Carter, would you comment on the wisdom, or lack of wisdom, on the total elimination of the 90/10 rule?

Mr. Carter. I guess the way I would answer that is I would go slowly in eliminating any rule before I knew what the effect of eliminating that rule is, or would be.

Mr. Kildee. You stated earlier that when you eliminate a rule, you should go back and find out why the rule came into being.

Mr. Carter. Yes.

Mr. Kildee. This fits into what you are saying, and I am sorry to interrupt you.

Mr. Carter. Right. And that is why I say I think we would have to go slow. I am not arguing for 10 or 15 years going slow, I am just talking about giving due consideration to what the rule was intended to do.

If there is another rule that would work better, and I am not in a position to say what that rule is, then I think that should be considered. The concern I would have is if you just keep adding one rule on top of another, that just makes the program more complex, and that leads to another set of problems.

Mr. Kildee. But you would be skeptical, then, on having no rule, especially since the 90/10 rule was brought into being to address the problem.

Mr. Carter. As I understand it, the rule was put in to stop some of the abuses of schools that were offering poor programs. Ms. Waters described them very well. I would be looking to keep something that would avoid those abuses from occurring again. I have even heard the industry argue they don't want to go back to those days, and I guess everybody would agree they don't want to go back to those days.

So again, I would just argue that we consider the effect of eliminating the rule and what substitutes there would be.

Mr. Kildee. Another question. The Committee in the 107th Congress, two Congresses back, voted to eliminate the 50 percent rules on distance learning. I remain concerned that straight elimination of the 50 percent rule could lead to increased fraud and abuse. If we do eliminate the 50 percent rule, shouldn't we ensure that there is upgraded fiscal and accreditation-based accountability?

Mr. Carter. Well, again, eliminating a rule like that without considering an alternative, I think that would not be something that we would recommend. If you wish to eliminate that rule, then I think you have to consider what substitute there might be out there. And again, the end goal is a student has received a good education and is gainfully employed as a result of that education.

Mr. Kildee. One other question. Your testimony mentions the fact that GAO recently removed financial assistance programs from their high-risk list. You may be aware that the GAO issued a report of the School As Lender Program only a few days before these programs were removed from the high-risk list. This report scolded the Department of Education for a complete lack of oversight over the School As Lender Program. Don't you find it curious that a few days after such a report, the GAO says that the Department's financial assistance programs are on sound footing?

Mr. Carter. I really wish to not comment on why GAO made their decisions. I was not a part of that decisionmaking.

As I said, we decided to keep the Federal Student Aid Programs under what we consider our significant management challenge list.

Mr. Kildee. Well, it would seem to me, and I know you have to be cautious when criticizing another agency, but when they remove them from the high-risk list and then report that the programs are not on sound footing, it would seem to me that they haven't read their own report.

Mr. Carter. Again, I have no comment on what the GAO was thinking about when they made their decision. I think they were looking at a number of issues, and on balance they decided that they had made enough changes or had plans to make enough changes that it warranted taking them off the list.

Mr. Kildee. Let me put it another way: Do you think they were warranted in taking them off the list, regardless of the status of the School As Lender Program.

Mr. Carter. Again, not knowing exactly--I am not familiar with their rationale, so it is hard for me to judge whether it was warranted or not. What I can say is that, for our purposes, we consider the program to be a significant challenge.

Mr. Kildee. Thank you very much.


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