2011 Negotiated Rulemaking for Higher Education - Transcript of the May 26, 2011 Public

1 2 Office of Postsecondary Education (OPE) 3 4 U.S. Department of Education (ED) 5 6 7 8 9 10 11 Negotiated Rulemaking for Higher Education 2011 12 13 14 Transcription of Public Hearing held at 15 The Sciences Auditorium, Room 129, of the 16 College of Charleston School of Sciences and 17 Mathematics Building, 202 Calhoun Street, 18 Charleston, South Carolina on May 26, 2011. 19 20 21 22 23 PANEL MEMBERS PRESENT: 24 25 DAN MADZELAN, Department of Education, 26 Office of Postsecondary Education 27 28 CARNEY McCULLOUGH, Department of Education, 29 Office of Postsecondary Education 30 31 HAROLD B. JENKINS, ESQ., Office of the General 32 Counsel 33 34 35 36 37

2 3 Negotiated Rulemaking Higher Education 2011 – Public Hearing May 26, 2011 1

1 C-O-N-T-E-N-T-S 2 3 Welcome...... 3 4 5 Public Comment 6 7 Diane Auer Jones...... 10 8 9 Jennie Rakestraw...... 23 10 11 Anthony Fragomeni...... 32 12 13 Fran Welch...... 40 14 15 Carol Lindsey...... 47 16 17 Betsy Mayotte...... 58 18 19 Chuck Knepfle...... 70 20 21 Mary Lyn Hammer...... 80 22 23 John Beckford...... 97 24 25 Closing...... 105

1 P-R-O-C-E-E-D-I-N-G-S

2 9:01 a.m.

3 CHAIR MADZELAN: Good morning,

4 everyone. Welcome to this hearing for

5 regulatory issues related to the Title IV

6 Student Financial Aid Programs that are

7 administered by the Department of Education.

8 The first thing we want to do here

9 at this end of the room is to thank our hosts,

10 the College of Charleston for providing this

11 venue today and also some additional space for

12 tomorrow's roundtables.

13 My name is Dan Madzelan from the

14 Office of Postsecondary Education.

15 I am joined on my right by Carney

16 McCullough also of our Office of Postsecondary

17 Education and on my left, by Harold Jenkins

18 from our Office of General Counsel.

19 We are here in Charleston for two

20 days or one and a half days at least and these

21 are two separate activities. What we are here

22 today about is to get input from you, the

23 community, the higher-education community

1 around what we ought to do in our next round

2 of rulemaking.

3 What we will be doing tomorrow for

4 a half day, we have three separate fora or

5 roundtables where we want to have a more in-

6 depth discussion around several of the

7 Department's -- the administration's

8 priorities in higher education: The First in

9 the World, a competition in our FIPSE

10 programs, teacher preparation and also some

11 activities around improving college

12 completion. So, again, three roundtables

13 tomorrow that are really focused on helping us

14 flesh out some of our policy positions.

15 Today though, this is about

16 rulemaking and in particular negotiated

17 rulemaking. I'm sure you all know that

18 agencies when they engage in rulemaking

19 activities are governed by the Administrative

20 Procedure Act which provides for a Notice of

21 Proposed Rulemaking, a public comment period

22 and then a final rule in which the agency

23 either considers what they heard in public

1 comment or does not consider it, but either

2 way, has to inform the public of what they did

3 agree to or not agree to in terms of producing

4 the final rule.

5 What we have for our Title IV--HEA

6 Title IV Programs--is an additional

7 requirement on the front end of the process

8 called negotiated rulemaking and that is where

9 we can convene panels. We meet several times

10 over a several month period to actually hammer

11 out the language of the Notice of Proposed

12 Rulemaking. So, again, the neg reg piece of

13 this is a front-end activity in the rulemaking

14 process.

15 On the front end of the rulemaking

16 process is why we are here today which again

17 is to get input from the community about what

18 we ought to be considering.

19 Now, we did publish a notice in the

20 Federal Register. I'm sure you all read it.

21 That's why you're here today. Otherwise, you

22 would not have known about this. Well, I

23 shouldn't say that. I'm sure you all have

1 friends and colleagues that would have told

2 you about this.

3 But, we did identify a couple of

4 topic areas. We are interested in taking

5 another look at the issue around the discharge

6 of Federal student loans for total and

7 permanent disability. We're also interested

8 in taking a look at some of our alternate

9 repayment plans, income-based repayment,

10 income-contingent repayment and we're also

11 interested in insuring that our regulations in

12 particular with the Direct Loan Program are,

13 you know, independent and free standing.

14 Now that all Federal student loans

15 are originated through the Direct Loan

16 Program, what we have done over the years is

17 that we have regulated Direct Loans in many

18 instances by cross-reference to FFEL Program

19 rules and so, what we're interested in doing

20 is again as I say having our Direct Loan

21 regulations independent and free standing.

22 What my colleagues in the Office of

23 General Counsel say is to have our Direct Loan

1 rules naturally readable so you don't have to

2 cross-reference here and there. I like that

3 term. Naturally readable.

4 So, again this morning and this

5 afternoon, we do have some people who signed

6 up ahead of time.

7 The number of people on this list

8 is less than the number of people I see in the

9 room. If you are not signed up and you become

10 inclined or maybe already are inclined, but if

11 you become inclined to speak, just go out to

12 the back of the room. Our colleague Kathleen

13 Smith will be happy to sign you up.

14 You know, there are time slots that

15 we have. We generally do not keep to a strict

16 schedule. If a speaker takes a little bit

17 longer, that's kind of okay. If the speaker

18 uses a little bit less time, then we typically

19 ask the next speaker to come forward.

20 We likely will get to a point where

21 there is sort of a break where we do not have

22 speakers scheduled or ready to speak and we

23 will take breaks. We will take, you know, a

1 recess until we have another speaker ready to

3 We will take a break at noon for

4 lunch approximately 12:00 to 1:00 p.m.

5 Everything that we say here is

6 being transcribed and we will make the

7 transcriptions of this and our other sessions

8 available on our website.

9 I think the last point is again we

10 are looking in this process moving forward.

11 We are interested in what you have to say

12 about, you know, the topics we've identified

13 or maybe some other topics that you think are

14 important. We're less interested in issues

15 related to regulations that are not yet in

16 effect.

17 So, again with that, I'll ask

18 Carney and Harold if they have something to

19 add or did I miss something?

20 MR. JENKINS: I'll just add a word

21 about the framework that we're operating

22 under.

23 Congress, of course, establishes

1 the Student Aid Programs by legislation and in

2 regulating, we are implementing this

3 legislation. Now, for some of the programs or

4 for some of the provisions of the programs,

5 Congress is very prescriptive and very

6 specific. That gives us less latitude. In

7 other cases, we have more latitude, but in all

8 cases, we're limited in our regulating by the

9 specific terms of the legislation which

10 authorizes the programs.

11 CHAIR MADZELAN: Thanks, Harold,

12 and so, we'll get started with our first

13 speaker.

14 Now, we know who you are because we

15 have the list, but when you come up, for the

16 record, please state your name and where you

17 are from, who you represent and our first

18 speaker is Diane Auer Jones.

19 Yes, everyone come up to the podium

20 and the mike is live.

21 MS. JONES: Great. Thanks. Good

22 to see the three of you. Thanks for holding

23 this meeting and thanks for providing me with

1 an opportunity to provide comments.

2 Given the President's January 18th,

3 2011 Executive Order on improving regulation

4 and regulatory review, I would recommend that

5 the Department's future negotiated rulemaking

6 be focused on reducing regulatory burden,

7 eliminating outdated or useless regulations

8 and ensuring that compliance with the

9 remaining regulations not only meets the

10 intended goals, but that such compliance does

11 not cause additional unnecessary harm to an

12 already struggling economy.

13 To do this effectively and for the

14 public to be able to provide informed and

15 relevant comments, we must first see the

16 Congressionally mandated report of the

17 Advisory Committee on Student Financial

18 Assistance regarding Title IV regulatory

19 burden.

20 It is disappointing that despite

21 the significant advance notice of the report's

22 due date the Advisory Committee has opted to

23 wait until the last minute to conduct their

1 research and I use the term research quite

2 loosely. They've decided to distribute brief

3 surveys to university administrators that must

4 be completed in an expedited fashion during

5 the busiest time of the academic year.

6 It is hard to believe given the

7 experience we had inside of the Department to

8 look at regulatory burden that a 10 or 20-

9 minute survey will accurately or adequately

10 inform the Committee's findings. It is hard

11 to understand how anyone who understands

12 rigorous research methodology would consider

13 these surveys to be an adequate way to assess

14 regulatory burden.

15 It would appear that the interest

16 in determining regulatory burden is less than

17 genuine which is disturbing given that there

18 is unanimous agreement among Congress and the

19 Administration that reducing unnecessary

20 regulatory burden is a top priority if we hope

21 to get our economy back on track.

22 A serious effort is required on the

23 part of the Department to fully and adequately

1 assess regulatory burden as well as to examine

2 the efficacy, usefulness and clarity of the

3 current regulations.

4 I do agree with the Department that

5 a realignment of lending and servicing

6 regulations is in order now that the FFEL

7 Program has been eliminated and the Department

8 of Education serves as lender, servicer and

9 guarantor. It is critical that the Department

10 take responsibility for borrower repayment and

11 hold itself to the same standards to which it

12 once held lenders and guaranty agencies

13 regarding borrower satisfaction and reduced

14 default rates.

15 I must say that if the servicing of

16 loans purchased by the Department through the

17 PUT Program serves as a bellwether for

18 servicing to come under an all-DL Program, I

19 have grave concerns.

20 I would encourage the Department to

21 convene an expert panel of experienced loan

22 servicers, guaranty agencies and others to

23 develop regulations that clearly articulate

1 the Department's roles and responsibilities in

2 this regard and will define a set of measures

3 by which the Department's performance in the

4 areas of borrower servicing, customer

5 satisfaction, ease of use and default

6 reduction are rigorously evaluated in keeping

7 with the ways in which FFEL lenders and

8 guaranty agencies have been evaluated in the

9 past.

10 In particular, it is necessary for

11 the Department to explain in its regulations

12 how it will fulfill the provisions of Section

13 422 of the HEA. This section assigns a number

14 of important borrower education servicing and

15 default prevention responsibilities to

16 guaranty agencies.

17 Who will provide these services

18 when all Stafford Loans are Direct Loans?

19 Included in Section 422 are such default

20 avoidance and prevention actions as: partial

21 loan cancellation to reward disadvantaged

22 borrowers for good repayment histories,

23 establishing a financial and debt management

1 counseling program for high-risk borrowers

2 that provides long-term training in budgeting

3 and debt management, establishing a program of

4 placement counseling to assist high-risk

5 borrowers in identifying employment or

6 obtaining additional training and skills,

7 developing public service announcements that

8 detail the consequences of student loan

9 defaults to the public.

10 Clearly, Congress saw these

11 services as critical to meeting borrower needs

12 and to the integrity of the Stafford Loan

13 Program. So, it is necessary for the

14 Department to explain how it will provide

15 these services in an all-DL Program.

16 At a time when the Federal Reserve

17 has set interest rates at near 0 percent, the

18 high interest rates and fees charged to

19 student borrowers should provide adequate

20 resources to support the development and

21 implement of a robust Department-led or GA-led

22 and Department-funded default reduction

23 program.

1 Along those lines, I urge the

2 Department of Education to align its

3 regulations regarding the calculation of

4 cohort default rates to the language found in

5 the statute. For example, Section 462 of HEA

6 states that CDRs should not include as

7 defaulted loans those on which the borrower

8 has made six consecutive payments, voluntarily

9 caught up on past-due payments, repaid in full

10 the amount due on the loan, received deferment

11 or forbearance based on a condition that began

12 prior to the default period or if the loan has

13 been otherwise rehabilitated or cancelled.

14 Meanwhile, the Department's

15 regulations as articulated in the Handbook are

16 contrary to statute in that the Department's

17 calculation of CDR includes as defaults loans

18 in which the borrower has entered into

19 repayment and subsequently obtained a

20 deferment or forbearance, loans that have been

21 consolidated as part of the Loan

22 Rehabilitation Program and loans that have

23 been paid in full without rehabilitation but

1 within the cohort default period.

2 These inconsistencies must be

3 resolved so that loans that have been paid in

4 full or are back in lawful repayment--

5 including through consolidation programs

6 authorized by Congress required of borrowers

7 who want to benefit from the programs created

8 by CCRAA and frankly promoted by the

9 Department--are not counted in the numerator.

10 Statute requires as much and

11 rightly so given the significant consequences

12 that the Department's artificially inflated

13 CDRs have on institutions and students.

14 The Department's lifetime default

15 estimates should similarly take the percentage

16 of loans that are ultimately rehabilitated out

17 of the equation. It is disingenuous to cite

18 statistics that focus on the number of

19 borrowers who default since the uninformed

20 media and public assume that those loans are

21 never repaid. Lifetime default numbers should

22 exclude from the calculation defaulted loans

23 that are rehabilitated.

1 By the way, it would also be

2 helpful if the Department's website included

3 on each page where loans or debt management

4 programs are discussed a button that would

5 link the student to the loan calculator. So

6 that, at every step of the way, they could

7 accurately learn exactly how much borrowing,

8 consolidation and debt management will cost

9 them. Right now the calculator is buried

10 several levels in and the student almost has

11 to be in the debt management and repayment

12 page before they find the calculator.

13 Similarly, the Department's website

14 should include ample warnings that few

15 students will actually benefit from public

16 service loan forgiveness or Teach Grants given

17 the small print conditions that are embedded

18 in those programs.

19 Perhaps the most tragic

20 misrepresentation in higher education is the

21 language used on the Department's own website

22 including on college.gov. These websites make

23 loans seem like a simple way to pay for

1 college and they imply that consolidation, IBR

2 or public service loan forgiveness will make

3 repayment a snap.

4 By the way, it would also be

5 helpful if in the student guide, Funding

6 Education Beyond High School, you accurately

7 cited the Department of Labor's projections

8 about future job growth. It isn't the first

9 table from the Occupational Outlook Report

10 that matters. The number one field -- that

11 table cites data about job rate -- growth in

12 job rate. The number one field on that table

13 is biomedical engineering and while the rate

14 of growth approximates 70 percent, the field

15 is so small that a 70 percent growth

16 translates to only 11,000 new jobs over ten

17 years. So, clearly, it's not the rate of

18 growth that matters.

19 Instead, it is the second table

20 that shows where most Americans will work over

21 the next ten years. This is the table that

22 shows where the largest numerical growth will

23 take place and this table shows that the

1 majority of new jobs over the next ten years

2 will not require a college degree. Instead,

3 they will require a certificate or

4 apprenticeship-like training.

5 Finally, since there seems to be

6 unanimous agreement that student's are

7 overborrowing and frequently for activities

8 and purchases that are not related to higher

9 education enrollment, institutions of higher

10 education must be given the tools necessary to

11 limit student borrowing to reasonable levels

12 based on the cost of tuition, fees and books.

13 One way to do this is by

14 interpreting the statutory definition of cost

15 of attendance, as a ceiling rather than as a

16 floor. Just because Congress allows

17 institutions to include a long list of

18 indirect costs in the cost of attendance

19 calculation should not mean that an

20 institution is required to include all of

21 these costs if it determines that inflated COA

22 numbers are leading to overborrowing. This is

23 especially the case for institutions whose

1 students are demographically at high risk for

2 default.

3 Similarly, the Department should

4 support the strategy proposed or employed by

5 many community colleges that disallow students

6 to borrow through the Stafford Loan Program.

7 It is inappropriate to hold institutions

8 responsible for borrower behaviors when, in

9 fact, these institutions have no ability to

10 influence or determine who borrows or how much

11 they borrow.

12 The Department cannot continue to

13 encourage students to overborrow while then

14 placing the blame for overborrowing on the

15 institutions these students attend.

16 In closing, I want to reiterate

17 that the focus of future negotiated rulemaking

18 should be on compliance with President Obama's

19 Executive Order 12866 on improving regulation

20 and regulatory review.

21 It is imperative that the

22 Department improve the way its regulations are

23 written and I think, Dan, you used the term

1 naturally readable.

2 The public as well as

3 administrators and students and frankly, the

4 Department's own staff should be able to

5 easily read and agree upon the interpretation

6 of these regulations. I know all too well

7 that even within the Department there's often

8 times disagreement on how to interpret a

9 regulation.

10 I also know that it is a strategy

11 employed sometimes to intentionally write

12 regulations that are vague and subject to

13 changing interpretation. This must end

14 because it violates both the language and the

15 spirit of the Executive Order.

16 I encourage you to follow the

17 President's Directive to base regulations not

18 in speculation or personal opinion, but

19 instead in scientifically collected data. It

20 is important for the Department to consider

21 the academic literature about the lengths

22 between student demographics, student risk

23 factors and various higher education outcomes

1 such as graduation rates, retention rates and

2 loan repayment. We all know what those data

3 say and it's time to develop policies that are

4 based on and respond to reality rather than

5 our outdated vision of a higher education

6 system that once exclusively served advantage-

7 dependent students.

8 Finally, it is absolutely critical

9 that the Department facilitate a full review

10 of existing regulations, including the

11 supporting data to determine which are

12 ineffective in meeting the regulatory

13 objectives they were written to achieve. It

14 is time to look at the regulations we have

15 before embarking on yet another round of

16 actions that will potentially expand

17 regulatory burden, potentially with no

18 positive results.

19 I thank you for this opportunity to

20 provide public comment.

21 CHAIR MADZELAN: Thank you very

22 much. Jennie Rakestraw.

23 MS. RAKESTRAW: Good morning. My

1 name is Jennie Rakestraw and I'm Dean of the

2 Richard W. Riley College of Education at

3 Winthrop University and I serve as President

4 of the South Carolina Association for Colleges

5 of Teacher Education, the state affiliate of

6 AACTE.

7 I appreciate the opportunity to

8 comment at this hearing and my comments are

9 mainly going to be about teacher preparation.

10 There seems to be agreement and

11 ample research attests to the fact that in

12 order for student achievement levels to

13 improve, highly effective teachers are needed

14 and their schools need highly effective

15 leaders. These teachers and school leaders

16 need to be fully prepared for the challenges

17 faced by our country's schools.

18 In South Carolina, 53 percent of

19 children are from low-income families and in

20 half of South Carolina's schools, more than 70

21 percent of their students live in poverty.

22 Kids Count 2010 reports a 54 percent increase

23 in children from migrant families in South

1 Carolina and school data continue to reflect

2 20 to 30 percent gaps in the achievement of

3 white students and that of minority and poor

4 students.

5 High poverty, high need schools are

6 less likely to have a shared vision,

7 commitment to problem solving, effective

8 leadership or ongoing professional development

9 and this inferior work environment leads in

10 turn to higher rates of teacher and principal

11 attrition, which compounds the problem of

12 providing quality teaching and learning

13 environments in high poverty schools and it

14 reduces their ability to recruit good teachers

15 and leaders.

16 Currently, in South Carolina, most

17 of our core academic courses are taught by

18 teachers who are certified and qualified to

19 teach in those fields. However, we have over

20 5,000 core classes that are taught by teachers

21 not certified to teach those subjects and of

22 those, twice as many core classes are taught

23 by non-qualified teachers in high poverty

1 schools than in low poverty schools.

2 When you look at the test scores by

3 racial ethnic groups, socioeconomic status and

4 English proficiency, there is consistently a

5 serious achievement gap.

6 For example, in South Carolina's

7 Palmetto Assessment of State Standards, the

8 PASS examination of students in grades 3

9 through 8, I looked at the 2008/2009 data, but

10 if you look at most tests given in South

11 Carolina and nationally, there's at least a 20

12 point gap between achievement of white

13 students and African American students and

14 Hispanic students and between students who

15 fully pay for their school meals and those on

16 free and reduced meal plans.

17 In addition, between 1990 and 2006,

18 there's been an increase of over 700 percent

19 in the Latino population alone in the up-state

20 region of South Carolina which includes the

21 counties surrounding Winthrop University in

22 Rock Hill and according to our State

23 Department of Education, there's been an

1 increase of almost 1,000 percent in the number

2 of English language learners enrolled in South

3 Carolina's public schools since 1990 and

4 that's using 2010 data.

5 In our local area, English language

6 learners are clearly under served and

7 disparities among districts are evident when

8 it comes to trained and certified teachers to

9 work with those students and typically, you'll

10 see at least a 10-point achievement gap

11 between English proficient and non-English

12 proficient students.

13 To address these serious issues in

14 schools, teachers and school leaders must be

15 sufficiently prepared. I believe that it is

16 critical for the Federal Government to

17 continue to play a key role in supporting

18 educator preparation reform.

19 At Winthrop University, we're

20 transforming how we prepare teachers and

21 school leaders through our U.S. Department of

22 Education Teacher Quality Partnership Grant

23 and School Leadership Grant. Initiatives like

1 these propel institutions to rethink how we

2 are preparing teachers and school leaders and

3 to do so in close collaboration with high-

4 needs schools and school districts. Those

5 that can benefit most from this type of

6 partnership.

7 Although alternative routes to

8 teaching and school leadership are touted and

9 there are certainly viable programs in

10 existence that prepare teachers and leaders

11 well and provide them with a more streamlined

12 path into school careers, more than 70 percent

13 of today's teachers are prepared by colleges

14 and universities through standards-based,

15 traditional undergraduate programs, MAT

16 graduate programs and their own alternative

17 programs.

18 The U.S. Department of Education

19 needs to continue to promote innovation and

20 clinical preparation of teachers and school

21 leaders in university-based programs and

22 invest in partnerships between universities

23 and P-12 schools, especially high-needs

1 schools.

2 Strong accountability systems do

3 need to be in place for all teacher

4 preparation programs, traditional,

5 transformative, public, private, alternative,

6 all of them.

7 Who are producing the good

8 teachers, the ones who can impact student

9 learning?

10 From my perspective, universities

11 have been anxious to see statewide data

12 systems in place that will allow us to receive

13 good feedback on how well teachers and school

14 leaders we graduate are performing on the job.

15 We also want to see our graduate student

16 learning data used in accountability systems

17 that will allow us to continue to get better

18 at what we do and guide ways in which we work

19 with schools to improve teaching and learning

20 in those settings.

21 I believe that many universities

22 are doing an excellent job in preparing

23 effective teachers and leaders, but the data

1 we have access to for the most part is self-

2 generated although based on state and national

3 standards which is not a bad thing, but they

4 do not provide the level of objectivity and

5 transparency that's needed to ensure the

6 public and the Federal Government that the

7 educators we're producing are doing a good job

8 and are having a strong impact on student

9 learning.

10 There are many, many university-

11 based programs in this country and in the

12 state of South Carolina that are not mediocre

13 and that are contributing to the solutions

14 that we seek in P-12 schools today. The only

15 way to acknowledge that is with credible

16 statewide data systems.

17 The U.S. Department of Education

18 should invest in the development of these

19 types of student learning-based systems.

20 And finally, I would like to lend

21 my support for the notion that states should

22 be empowered and required to recognize good

23 teacher preparation programs and identify and

1 close low performing teacher and school

2 leadership preparation programs as well as any

3 alternative program that is getting weak

4 results in terms of teacher quality and

5 resultant student learning.

6 Just as we feel a moral

7 responsibility to produce highly-effective

8 teachers who are well equipped for the diverse

9 needs of learners in schools today, states

10 should also recognize a moral responsibility

11 to make those decisions through a fair minded

12 and informed process so that our schools will

13 employ truly good teachers who can make a

14 difference in the success of their students.

15 Thank you.

16 CHAIR MADZELAN: Thank you.

17 Anthony Fragomeni.

18 MR. FRAGOMENI: Morning. How are

19 you doing, Dan, Carney?

20 My name's Anthony Fragomeni. I am

21 the Chairman of the Government Relations Team

22 from the American Association of Cosmetology

23 Schools, better known as AACS.

1 I appreciate the opportunity to

2 come here today and speak to you about some

3 loan issues on behalf of the association.

4 We've long been a supporter of the

5 Federal Direct Loan Program and we believe

6 that among the many strengths, perhaps the

7 greatest strength of the Direct Loan Program,

8 was the direct connection between the

9 institutions and the singular highly effective

10 servicer who served as the sole point of

11 contact for the borrower as well as the

12 institution.

13 We understand that as a result of

14 the congressional actions under both the

15 ECASLA and the HEOA that the Department needed

16 to expand beyond just one contractor in order

17 to have the resources necessary to administer

18 the loan program and the rapidly expanding

19 portfolio.

20 Unfortunately, we believe that the

21 addition of four of the contracted entities as

22 well as the lingering role of outside entities

23 who still service portions of the overall

1 portfolio has blurred the lines of

2 communications and made access to clear and

3 accurate information for both the borrowers

4 and the institutions less transparent and

5 accessible.

6 As a result, it has weakened the

7 level and the quality of the customer service,

8 possibly the overall effectiveness, of this

9 vital, important program.

10 As a result of these concerns and

11 in response to the Assistant Secretary's

12 request for comments and recommendations, AACS

13 submits the following testimony which is

14 broken down into four categories: Direct Loan

15 simplification, FFEL conversion, borrower

16 benefits and institutional necessities.

17 So, we thank the Department for the

18 opportunity and we offer some suggestions

19 publicly today and we welcome the opportunity

20 to work with the staff and Assistant Secretary

21 and the rest of the higher ed community on the

22 development and revisions and modifications to

23 the regulations.

1 When appropriate, we will be

2 submitting for consideration experts familiar

3 with the minutiae of the loan programs as

4 nominees for participation in the negotiated

5 rulemaking process.

6 Little technical difficulty here.

7 CHAIR MADZELAN: That's why I use

8 paper.

9 MR. FRAGOMENI: You know, it's

10 always a good idea to have it, Dan, and I know

11 we just can't get away from it.

12 Having more technical difficulties

13 than we thought. Yes, I know we've got time.

14 I appreciate the fact that they said that from

15 the beginning that, if we need extra time

16 we're going to take it, and I apologize to the

17 folks here for the disappearance of this

18 document all of a sudden. Here we go.

19 Apologize. Thank you.

20 Okay. First of all, under the

21 Direct Student Loan Program and the Direct

22 Loan simplification, single point of contact,

23 we urge the Department to modify the Direct

1 Loan Program so that, at a minimum, each

2 institution has a single servicer responsible

3 for all the students. One institution, one

4 servicer.

5 Among large groups of institutions,

6 we would encourage the Department to consider

7 broadening the institution/servicer

8 relationship to include all institutions under

9 common ownership or control and we further

10 request the Department to permit institutions

11 to choose which of the servicers is

12 responsible for the servicing of the

13 portfolios based upon the Department's

14 assessment of the various contractors'

15 effectiveness in achieving the requirements

16 detailed in their contracts. Emphasis should

17 be placed on the effectiveness of the

18 contractor in preventing student loan defaults

19 and providing quality customer service.

20 Moreover, if the servicer has a

21 portfolio reduced for failure to meet or

22 exceed its contractual obligations, the

23 Department should be required to take these

1 findings into consideration as part of the

2 review of any negative or adverse

3 institutional eligibility determinations, for

4 example, cohort default rate eligibility, and

5 make accommodations as necessary if the reason

6 for potential noncompliance is based upon the

7 actions of the servicer and not the

8 institution.

9 Real time access to borrower

10 information is key. It compromises the

11 default management efforts of the institutions

12 and the students. We urge the Department to

13 consider ways in which both the borrowers and

14 the institution can have access to real time

15 information maintained by the servicers. That

16 would include information to both held within

17 the Department, as well as access to

18 information contained by external servicers,

19 who continue to participate in the program.

20 Uniform terms and definitions in

21 application to the regulations. We support

22 the Department's goal of developing clear,

23 understandable regulations governing the

1 Direct Loan Program and we urge the Department

2 in the development of these regulations that

3 they eliminate redundant or conflicting terms

4 and definitions; establish a single clear and

5 easily understandable term and definition

6 which is applied unilaterally and ensure that

7 the terms and definitions can and are equally

8 applied throughout the regulations.

9 Under the FFELP Education Loan

10 Program conversion, given the complications

11 that have arisen during the transitional loans

12 under both the ECASLA and HEOA and the

13 prospect of still more outstanding FFELP loan

14 portfolios being transitioned into the

15 Department under various legislative

16 proposals, we urge the Department to develop a

17 single interface between students, schools and

18 servicers.

19 We believe that such a

20 clearinghouse could have helped prevent many

21 of the frustrations experienced by borrowers

22 and institutions throughout the transition and

23 it would help avoid some of the confusion that

1 now exists when the schools attempt to counsel

2 students.

3 The role of external servicers. We

4 support the role of external servicers and

5 their connectivity to the local community. As

6 an emerging role, these entities appear to be

7 financial literacy, default aversion and

8 default management. We hope that these

9 servicers will support the following practices

10 which will seek to clarify the construction of

11 the new regulations: Institutional and third-

12 party access to student borrower information,

13 possible expansion of loan counseling to

14 include counseling at the midpoint of the

15 program as well as entrance and exit

16 counseling and understanding and communicating

17 with institutions to better understand the

18 impact of entrance, exit and loan repayment.

19 Customer service and borrower

20 information transparency and consistency.

21 Customer service, AACS recognizes that the

22 Department has and continues to work

23 vigilantly to ensure the Direct Loan Program

1 maintain a high level of quality of customer

2 service, but the transition, as with all

3 transitions, has not been without some growing

4 pains.

5 We look forward to working with the

6 Department and we welcome any comments.

7 CHAIR MADZELAN: Thank you. Fran

8 Welch.

9 MS. WELCH: Good morning. I am

10 Fran Welch. I'm Dean of the School of

11 Education, Health and Human Performance here

12 at the College of Charleston and welcome to

13 Charleston, for those of you who aren't from

14 here. We're glad to have you and I appreciate

15 this opportunity to discuss the issues that we

16 have in front of us today.

17 I also represent the South Carolina

18 Education Deans Alliance here in South

19 Carolina and several of my colleagues are

20 here.

21 I'd like to ditto what Jennie

22 Rakestraw has said already. Don't need to

23 repeat any of that. Very good comments about

1 our needs and what we face.

2 But I'd like to just comment on the

3 four areas that we're discussing, relative to

4 our future in education and teacher

5 preparation.

6 First, the Presidential Teaching

7 Fellows Program. We have a Teaching Fellows

8 Program here in South Carolina and other

9 states do as well and many of my colleagues

10 here have those Teaching Fellows Programs at

11 their institutions and they're very effective

12 and we have a recent report that demonstrates

13 how very effective they are in terms of

14 persistence in the profession, in terms of

15 success in student achievement, and we also

16 have Project TEACH. And if I understand

17 what's planned here, is that there would be no

18 new money for these Presidential Teaching

19 Fellows, but we would actually divert funding

20 to Project TEACH for the Presidential Teaching

21 Fellows.

22 I'm totally against that and the

23 reason is, we need those funds and many of our

1 current students are already accessing the

2 Project TEACH funds, and they're particularly

3 effective for students who come to us from

4 outside of our own state, for example, to

5 study and become effective teachers.

6 So, I would encourage you to look

7 at what states are already doing with their

8 Teaching Fellows Programs and then to plan

9 accordingly at the Federal level.

10 We need many pathways to teaching

11 and lots of different pathways to teaching.

12 We certainly need to make sure that every

13 pathway is resulting in effectiveness of

14 teachers as they promote learning, but those

15 multiple pathways need lots of alternative

16 forms of funding.

17 I do agree with Diane Howard

18 Johnson. We do need some deregulation

19 relative to how we approach all of this, but

20 certainly, multiple forms of funding to

21 encourage folks to consider teaching.

22 The second thing I want to talk

23 about is our need for minority teachers and I

1 think there's a proposal for the Hawkins

2 Centers of Excellence and we also have a

3 program to encourage individuals who are from

4 underrepresented groups to go into teaching

5 here in South Carolina. The program is called

6 the Call Me Mister Program, and again, many of

7 my colleagues sitting here in the audience

8 have those programs at their institutions. We

9 have one here at the College of Charleston.

10 It's designed to get African-American males

11 into teaching.

12 And I think we all know that

13 approximately less than 1 percent of our

14 teachers currently are African-American males.

15 Because we wanted to fundraise around this

16 issue, we actually developed a case to learn

17 that young African-American males in grades K-

18 8 who have at least one African-American male

19 teacher are three times more likely to

20 graduate from high school. So, we obviously

21 need more African-American male teachers.

22 There are a number of programs

23 designed to encourage underrepresented groups

1 to go into teaching and this Call Me Mister

2 Program here in South Carolina is a

3 collaborative. It's a partnership program.

4 It's not one institution. We have many of our

5 HBCUs who have this program, but then

6 obviously, the College of Charleston and

7 Clemson University are not HBCUs. We also

8 have the program and this type of partnership

9 is what really brings about excellence in

10 teaching, I think. And so, if we go down the

11 path of working to get more minorities into

12 teaching, I would encourage us to look at

13 partnership programs.

14 You know, when you think about

15 streamlining institutional reporting, but also

16 identifying low-performing educator

17 preparation programs, those things are in kind

18 of a competition if you think about it. They

19 don't really fit together too nicely.

20 So, I think one of the things, as

21 we think about streamlining our institutional

22 reporting requirements, we certainly need to

23 make sure that all teacher preparation or

1 educator preparation programs report.

2 Alternative programs, as well as the

3 traditional programs in colleges and

4 universities. So, let's make sure that that

5 happens.

6 Don Stowe is here from our South

7 Carolina Department of Education and I think

8 we've already streamlined to some degree. I

9 would have to look at my colleagues to see,

10 but, I mean, we have a pretty good system here

11 in South Carolina. It's not -- we've been

12 doing this reporting for some time.

13 But, I think the real question is:

14 are we collecting the right data? Second: now

15 that we have that data, are we using it and

16 are we using it in a meaningful way and are we

17 using it in a meaningful way to identify

18 institutions or programs?

19 Many of these programs -- in fact,

20 Don, I'd have to look to you, but my

21 understanding is that our largest teacher

22 education program in South Carolina is, in

23 fact, not housed in any institution of higher

1 education, but it's our alternative program.

2 So, I think, as we look at those

3 programs and we collect the data and we use

4 the data, and then to identify those programs

5 that are performing. There's some way of

6 identifying these programs that are not doing

7 what they need to do.

8 But then I think the real question

9 is: so then what do you do?

10 Don told me this morning that the

11 last time we identified a low-performing

12 program in South Carolina was in 2003. So,

13 what's the consequence once we identify them?

14 Well, I think the consequence

15 should be, so we identify what they need to do

16 to improve and again, we work in partnership,

17 and work in partnership to help all teacher

18 education programs be what they can be and we

19 all can improve. I mean, there's no question

20 about that.

21 So, I do think what Jennie said,

22 and I'll ditto again, having some type of

23 statewide data system to help us answer these

1 important questions, help us show what we are

2 or are not doing, do the things that will help

3 us improve. We pretty much know what those

4 things are. I don't think we need to spend a

5 whole lot of time trying to figure that out,

6 but to then have our programs at the Federal

7 level help us to do this work.

8 Thank you for the opportunity to

9 speak.

10 CHAIR MADZELAN: Thank you very

11 much. Carol Lindsey.

12 MS. LINDSEY: Good morning. My

13 name is Carol Lindsey. I'm the Vice President

14 of Policy and Compliance at the Texas

15 Guaranteed Student Loan Corporation or TG.

16 I'm speaking today on behalf of TG and other

17 guaranty agencies in the National Association

18 of Student Loan Administrators or NASLA.

19 NASLA is a private nonprofit

20 voluntary membership organization that

21 represents the interests of FFELP guaranty

22 agencies. NASLA is organized to ensure

23 consistent and reliable delivery of student

1 loan services to Americas' students, parents

2 and postsecondary institutions. NASLA members

3 are committed to working cooperatively with

4 all postsecondary participants and

5 organizations in fulfilling the promise of

6 successful student loan repayment.

7 First, I want to talk a bit about

8 participation in negotiated rulemaking. We

9 are all aware that postsecondary education

10 loan debt continues to grow and, in fact, now

11 exceeds consumer credit card debt. For

12 several years, we have seen the effects of our

13 current economic condition in the increase of

14 national default rates.

15 A recent study shows that at least

16 41 percent of borrowers become delinquent at

17 some point during the loan repayment period.

18 These factors underscore the need to review

19 several areas in our program for potential

20 improvement to insure successful loan

21 repayment and equitable treatment for

22 borrowers.

23 A core focus of guaranty agencies

1 is education loan debt management services to

2 help maximize the success of borrowers in

3 repaying their loans and also to be an

4 advocate for borrowers.

5 As administrators of the 384

6 billion FFELP portfolio, guaranty agencies

7 work closely with the Department, students,

8 families, schools, lenders and loan servicers

9 throughout the life of the loan providing

10 education debt management assistance.

11 Inclusion of a guaranty agency voice in the

12 upcoming negotiations will promote broad-based

13 well-informed discussions as rules are

14 developed, amended or removed from the

15 regulations as appropriate.

16 In terms of issues for negotiation,

17 NASLA believes there are a number of important

18 issues the Department should address during

19 the upcoming process. Many of these focus on

20 a single overarching principal. Changes to

21 the regulations should be made to enhance

22 default aversion success and offer comparable

23 repayment options and tools to Federal student

1 loan borrowers regardless of the program or

2 programs from which they obtain their loans.

3 Accordingly, NASLA proposes the

4 following list of issues for negotiation in

5 both the FFEL and Direct Loan Programs.

6 The first focuses on extended

7 repayment and the minimum repayment amount.

8 Under current FFEL regulations, a borrower

9 must have more than $30,000 outstanding in

10 FFEL loans to be eligible to repay through the

11 extended repayment plan.

12 The same holds true for a Direct

13 Loan borrower. He or she must have more than

14 30,000 outstanding in order to extend

15 repayment from the standard 10-year plan to 25

16 years.

17 In today's environment of many

18 split borrowers, those who have both FFEL and

19 Direct Loans, these rules place a potential

20 burden on receiving an important program

21 benefit. Some borrowers do not meet the

22 minimum balance requirement in either program

23 separately, but would qualify for extended

1 repayment if their loan balances were

2 considered on an aggregate basis.

3 NASLA believes the Department

4 should address this situation and revise the

5 regulations to permit a borrower with both

6 FFEL and Direct Loans to combine their total

7 loan balances for both programs to determine

8 eligibility for extended repayment. This

9 change would allow split borrowers to have the

10 same repayment options as borrowers who have

11 more than 30,000 outstanding in just one loan

12 program which promotes greater fairness and

13 consistency of treatment.

14 This split borrowing situation

15 should not harm borrowers who meet the minimum

16 aggregate balance threshold across the two

17 loan programs.

18 Similarly, FFEL and Direct Loan

19 regulations specify that a borrower must pay

20 at least $600 each year under the standard

21 repayment plan. As with the requirements for

22 extended repayment, the regulations do not

23 account for borrowers who have loans in both

1 programs.

2 Therefore, NASLA recommends that

3 the Department change the regulations to

4 permit a borrower with both FFEL and Direct

5 Loans to pay $600 each year between the two

6 loan programs. So, that the total minimum

7 payment per year is 600.

8 I'd like to also address total and

9 permanent disability loan discharge. The

10 process itself, as you have invited comments

11 on specifically.

12 While the statute and regulations

13 generally embrace the electronic exchange of

14 information, the requirements as they relate

15 to a guaranty agency's processing of total and

16 permanent disability applications have remain

17 archaic and cumbersome. Currently, guaranty

18 agencies are required to print and mail

19 collateral documents for each individual

20 applicant including hard copies of promissory

21 notes, indemnification agreements in lieu of

22 the backside of promissory notes, supporting

23 data for electronic signature and paper forms

1 noting any applicable non-zero refundable

2 payments to be made to the borrower upon

3 approval.

4 Most, if not all of this

5 information, is stored electronically.

6 However for total and permanent discharge

7 processing, guaranty agencies must reproduce

8 the documentation in hard copy format to be

9 mailed to the Department's contractor for

10 processing.

11 Additionally, if the application is

12 rejected for any reason, the hard copy

13 documentation is returned by mail to the

14 guaranty agency even though the submitting

15 entity has no need for the paper

16 documentation.

17 This continuous exchange of paper

18 documents via snail mail has lead to frequent

19 mix-ups, unnecessary information security

20 risks and unacceptable processing delays for

21 disabled borrowers needing relief.

22 So, NASLA suggests that the

23 Department allow and encourage guaranty

1 agencies to file total and permanent

2 disability claims electronically in the manner

3 currently utilized by the Title IV Additional

4 Servicers, or TIVAS, and further into this

5 concept and the efficiency, consistency and

6 improved service to borrowers that would

7 result, we advocate for the addition of

8 explicit permissive or supportive language in

9 the regulations.

10 And finally, on the topic of

11 teacher loan forgiveness, permissible breaks

12 in service, as a consequence of continual

13 nationwide budget shortfalls, many elementary

14 and secondary schools and school districts

15 that serve low-income families have laid off

16 qualified teachers and some of these schools

17 are closing also.

18 To qualify for forgiveness under

19 the Teacher Loan Forgiveness Program, a

20 borrower must be employed as a full-time

21 teacher in an eligible Title I school for at

22 least five consecutive complete academic

23 years. However, Federal regulations permit a

1 break in qualifying teaching service if the

2 teacher returned to postsecondary education in

3 some cases, had a condition covered under the

4 Family Medical Leave Act or was called or

5 ordered to active duty military service.

6 Like some of these current

7 exceptions, a permissible break in service for

8 teacher layoffs would address a circumstance

9 that may be beyond a teacher's control.

10 Without a permitted exception to the

11 consecutive complete academic year

12 requirement, teachers whose qualifying service

13 is interrupted by a layoff, including a layoff

14 due to school closure, must start their

15 qualifying service all over again. They

16 receive no credit for their years of service

17 prior to being laid off.

18 The combined challenges of being

19 laid off coupled with losing already completed

20 teaching service for purposes of loan

21 forgiveness may greatly weaken a teacher's

22 incentive to return to the profession thus

23 undermining the objective of this provision

1 and denying the teacher the anticipated

2 relief.

3 There has been a long-standing

4 sense of a low compensation and high job

5 security trade off in the teaching profession

6 that will be in question going forward because

7 of economic challenges.

8 Having a sufficient number of

9 qualified teachers will always be critical to

10 the nation's interest. Becoming a TLF

11 eligible Title I school teacher is an arduous

12 undertaking in itself. Perspective teachers

13 generally understand the associated

14 challenges, but are willing to follow that

15 path to achieve meaningful rewards including

16 teacher loan forgiveness relief.

17 This proposed change would better

18 fulfill the intent of the Teacher Loan

19 Forgiveness Program which is to encourage

20 individuals to enter and continue in the

21 teaching profession.

22 Therefore, NASLA recommends that

23 the Department create a new permissible break

1 in teacher loan forgiveness qualifying service

2 requirements to accommodate qualified teachers

3 who are laid off, but subsequently resume

4 teaching at a Title I school within a

5 reasonable period of time.

6 In conclusion, NASLA appreciates

7 the Department's consideration of this

8 testimony and offers itself as a resource to

9 the Department on these and other issues that

10 the Department may consider in the upcoming

11 negotiated rulemaking process.

12 Thank you.

13 CHAIR MADZELAN: Thank you. Betsy

14 Mayotte.

15 MS. MAYOTTE: Good morning. My

16 name is Betsy Mayotte and I am the Director of

17 Regulatory Compliance and Privacy at American

18 Student Assistance.

19 I speak to you today on behalf of

20 ASA and to show our support of our fellow

21 guaranty agencies at NASLA and the testimony

22 that Carol just recently provided.

23 American Student Assistance is a

1 private nonprofit organization whose public

2 purpose mission is to help college students

3 and their families fulfill the promise of

4 higher education by successfully managing

5 their higher education debt.

6 We encourage the Department to

7 include an education debt management voice at

8 the negotiated rulemaking table to promote a

9 broad-based well-informed discussion as

10 student loan rules are developed.

11 Just like NASLA, ASA's comments

12 focus on changes to the regulations that

13 should be made to enhance default aversion

14 success and offer comparable repayment options

15 and tools to Federal student loan borrowers

16 regardless of the program or programs for

17 which they obtain their loans.

18 Accordingly, ASA proposes the

19 following list of issues for negotiation for

20 both the FFELP and the Direct Loan Program.

21 The first is in regards to the

22 deadline for deferment processing and

23 delinquent loan repurchases.

1 The Higher Education Act defines

2 default for both the Direct Loan and FFEL

3 Programs as the failure of a borrower or

4 endorser to make installment payments for 270

5 days. While the regulations reflect this

6 definition, operationally, borrowers in the

7 FFEL Program are treated very differently from

8 those in the Direct Loan Program.

9 Based on our experience, FFELP

10 borrowers are unable to have deferments

11 processed on loans that are 270 days or more

12 past due. While Direct Loan borrowers are

13 able to have deferments processed up to the

14 delinquency day of 359 days in order to

15 prevent default.

16 Our ombudsmen have had numerous

17 cases where borrowers who began school or were

18 deployed in the military after becoming 270

19 days delinquent but before a default claim was

20 filed with or paid by the guarantor had their

21 loans default or received denials from

22 servicers when repurchases were requested.

23 This situation causes much confusion for

1 borrowers with loans in both programs and

2 certainly creates an inequitable situation for

3 those borrowers within the FFELP.

4 It is a request that the

5 regulations specifically require eligible

6 deferments to be processed on a FFELP and/or a

7 Direct Loan borrower's account if eligibility

8 begins prior to the date a default claim was

9 paid in the FFEL Program or by day 359 in the

10 Direct Loan Program. This would also align

11 the process of default with the current cohort

12 default rate calculations and help standardize

13 industry requirements for mandatory

14 repurchases of defaulted loans in cases of

15 military deployment.

16 On a related issue, borrowers who

17 requested discretionary forbearance after

18 their loans have become 270 days or more past

19 due are also treated very differently between

20 the two loan programs. The Direct Loan

21 Program will process a verbal forbearance for

22 any eligible borrower not more than 359 days

23 past due. While the FFELP borrower in a

1 similar situation will be denied that same

2 forbearance request.

3 Recently, the Department provided

4 guidance to its servicers saying that a FFELP

5 borrower whose loan has been put and is in a

6 Department held asset is allowed to receive a

7 verbal forbearance after reaching 270 days

8 delinquent. This default aversion tool is

9 already in place for Direct Loans and the

10 Department agreed to extend it to FFELP loans

11 that are held by the Department to allow for

12 consistent treatment of borrowers.

13 In contrast, FFELP regulations

14 require that a written agreement between the

15 lender and the borrower be in place in order

16 for forbearance to be granted after the

17 borrower becomes more than 270 days

18 delinquent. Having such a requirement creates

19 delays that worsen an already difficult

20 situation for late stage delinquent borrowers

21 who are taking steps to avoid default.

22 We believe the FFELP regulations

23 should be revised to provide the same benefit

1 to FFELP borrowers as is available to Direct

2 Loan borrowers in regards to granting such

3 verbal forbearances after the 270th day of

4 delinquency. The holder of one's loan should

5 not dictate the action that can be taken to

6 assist them with averting default. This

7 default prevention tool needs to be applied

8 consistently across the loan programs not just

9 among Department held loans.

10 It becomes particularly important

11 for borrowers who have loans in both the FFEL

12 and Direct Loan Programs. Such a borrower is

13 required to obtain a written agreement on his

14 FFELP loans held by a commercial lender while

15 simply requesting forbearance over the phone

16 with the Department on his Direct or

17 Department held FFELP loans. ASA urges the

18 Department to include this item on the

19 negotiated rulemaking agenda to resolve the

20 disparate treatment of borrowers.

21 My remaining comments surround the

22 Income Based Repayment Program which I believe

23 was the topic that you had requested comments

2 The Income Based Repayment Option

3 is a power tool for helping borrowers

4 successfully repay their loans. It is well

5 designed to assist borrowers managing loan

6 debt in good and bad economic situations. ASA

7 applauds Congress and the Department for

8 creating and structuring the program in such a

9 way that it can assist the greatest number of

10 at-risk borrowers.

11 However, there are two

12 clarifications that should be added to current

13 regulations to improve borrower utilization of

14 this benefit. These clarifications are

15 designed to insure that a borrower with both

16 FFEL and Direct Loans will experience a common

17 set of requirements and procedures for both

18 types of loans.

19 The first clarification deals with

20 documentation that is required to verify a

21 borrower with income if he did not file a tax

22 return and therefore, has no reported adjusted

23 gross income or AGI. The current regulations

1 provide latitude for each loan holder to

2 determine the documentation that a borrower

3 must submit to verify income in this

4 situation. This has resulted in inconsistent

5 instructions to borrowers and often a delay in

6 determining eligibility for IBR.

7 Anecdotal information indicates

8 that a borrower with loans being serviced by

9 the Department servicers is only required to

10 provide a self-certifying statement to show

11 that he or she does not have any income when

12 applying for IBR. However, a FFELP servicer

13 may require the same borrower to wait until he

14 or she has filed that year's income tax return

15 before determining the borrower's eligibility

16 for IBR.

17 Clarifying in the FFELP

18 regulations that a self-certifying statement

19 from a borrower is sufficient to show that he

20 or she does not have any income when applying

21 for the program would align the process for

22 making IBR eligibility determinations and

23 assist borrowers who have loans with more than

1 one holder, particularly those with loans in

2 both programs.

3 A second clarification is requested

4 because of confusion surrounding the repayment

5 options for a borrower that leaves IBR. When

6 a borrower leaves IBR, current regulations

7 require the borrower be automatically placed

8 in a standard repayment plan calculated based

9 on the term remaining in the 10-year repayment

10 schedule.

11 However, these regulations do not

12 clarify that after leaving IBR a borrower

13 retains the ability to change the selection of

14 a repayment plan to anything other than the

15 standard 10-year repayment plan.

16 In presentations at the FSA

17 conference and in private guidance, the

18 Department has clarified the process for a

19 borrower choosing a new repayment plan after

20 leaving IBR. ASA requests that this

21 clarification also be codified in the

22 regulations so that all loan administrators

23 will clearly understand that a borrower may

1 choose any repayment plan for which he or she

2 is eligible upon leaving the Income Based

3 Repayment Option.

4 My final comment is in regards to

5 Income Contingent Repayment. Similar to

6 Income Based Repayment, we believe that the

7 Income Contingent Repayment Option is an

8 important tool for assisting some borrowers in

9 managing their Federal student loan debt.

10 With a modification to current rules,

11 borrowers in need of this type of relief will

12 more easily be able to utilize this option.

13 To the extent allowed by statute, we believe

14 the regulations that align the IBR and ICR

15 Repayment Options for married borrowers who

16 file separate Federal tax returns.

17 Unlike IBR, ICR generally requires

18 married couples to include both spouses' tax

19 information when applying for this repayment

20 option even if the individuals filed separate

21 tax returns. The only exception to the rule

22 is for a borrower who is separated from his or

23 her spouse.

1 Aligning ICR with IBR regarding how

2 the rules address spousal income for married

3 borrowers who file separately will assist

4 borrowers who may not qualify for IBR, but are

5 still in need of a repayment option to address

6 this current economic challenge.

7 As a personal aside, I recently

8 counseled a borrower who was strongly

9 considering going through a divorce with her

10 husband in order to be eligible for ICR. It

11 was becoming the difference between whether

12 they were going to be able to afford their

13 mortgage payment. But, having to include both

14 incomes would not have provided them enough

15 relief to afford both their student loan

16 payment and their mortgage. They were

17 considering divorce.

18 That concludes my comment. Again,

19 I thank you for the time and I thank you for

20 providing this forum. We look forward to

21 assisting the Department with these and other

22 issues.

23 Thank you.

1 CHAIR MADZELAN: Thank you. We

2 have come to at the moment the last of our

3 speakers this morning. We'll take a minute

4 here to check up front to see if we have

5 anyone else in the queue. So, hold on for a

6 minute please.

7 First, a reminder. If you do have

8 or did have written testimony that you wanted

9 to submit, you can provide that up front at

10 the desk or if, you know, you have it

11 electronically and you want to send it to us

12 via email, again see Kathleen up front and

13 she'll give you the email address.

14 At this time, we have no one in the

15 queue to speak. So, we'll take a break until

16 we have someone who wants to speak or it

17 becomes the lunch hour whichever comes first.

18 (Whereupon, the above-entitled

19 matter went off the record at 10:11 a.m. and

20 resumed at 10:59 a.m.)

21 CHAIR MADZELAN: Good morning

22 again. We'll reconvene at this time with

23 Chuck Knepfle and again, when you come to the

1 podium, if you could again identify yourself

2 and who you represent, where you're from.

3 MR. KNEPFLE: So, I dragged

4 everyone back from Starbucks. I feel bad

5 about that. I'm sorry.

6 I'm actually on the agenda for

7 later this afternoon and I appreciate you

8 taking me early.

9 Good morning. My name is Chuck

10 Knepfle. I am the Director of Financial Aid

11 at Clemson University and Chair-elect for the

12 National Direct Student Loan Coalition.

13 I bring you my greetings to South

14 Carolina from the upstate.

15 I speak to you today on behalf of

16 the National Direct Student Loan Coalition a

17 grassroots organization comprised of schools

18 dedicated to the continuous improvement and

19 strengthening of the Direct Loan Program. Its

20 members are practicing financial aid

21 professionals working at participating

22 institutions.

23 I'd like to thank the Secretary for

1 the opportunity to provide the Department of

2 Education with comments on Federal student

3 loan programs that may be addressed in the

4 negotiated rulemaking process later this year.

5 First and foremost, the Coalition

6 wants to extend its thanks and congratulations

7 to the staff at the Department of Education

8 and especially at Federal Student Aid for the

9 tremendous success in moving all 5,000-plus

10 schools to the Direct Lending Program this

11 year.

12 While some in our industry

13 predicted that this would be an impossible

14 task, the fact is that there has not been a

15 report of even one student who was denied

16 access to Stafford Loan funds this year as a

17 result of schools making the transition to

18 Direct Lending. This transition could not

19 have been more successful for schools or for

20 students.

21 To insure that the Federal Direct

22 Loan Program continues to be a strong and

23 viable source of funding for students, I wish

1 to address regulatory issues in four different

2 areas.

3 First, the simplification of

4 origination regulations. The Healthcare and

5 Education Affordability Reconciliation Act of

6 2010, HR 4872, requires that all new Federal

7 loans beginning with 2010/2011 academic year

8 be originated in the Direct Loan Program. The

9 Direct Loan regulations continue to cross-

10 reference regulations with the Federal Family

11 Education Loan Program, FFEL, which Congress

12 ended with HR 4872.

13 With so many new administrators in

14 the Direct Loan Program needing quick, easy to

15 read regulatory language to insure compliance

16 with the origination regulations for Direct

17 Loans, it is important to simplify the Federal

18 Loan regulations by negotiating a clear,

19 concise, standalone set of Direct Loan

20 regulations that eliminate any cross-reference

21 to the FFEL Program.

22 Second is servicing. One of the

23 trademarks and richest features of the Direct

1 Loan Program prior to this year was that all

2 Direct Loans were serviced by the same

3 servicer. Every Direct Loan borrower and

4 school staff member knew exactly where a

5 student's loans were held and knew who to call

6 with questions.

7 The National Direct Student Loan

8 Coalition recognizes that the Department of

9 Education now uses multiple contractors for

10 the servicing of Federal student loans, but we

11 encourage new regulatory language to address

12 the following issues that are inherent when

13 multiple servicers compete for servicing

14 contracts.

15 First, a single interface between

16 students and schools and all servicers to

17 avoid the confusion that now occurs when

18 schools attempt to counsel students with loans

19 held by multiple servicers.

20 Next, transparency of borrowers and

21 their families about the contractor that is

22 serving their loans and repayment.

23 Third, the Department's vigilance

1 in monitoring the servicing contracts to

2 insure accurate data is provided by the

3 servicer to the Department for the calculation

4 of cohort default rates.

5 Next, loan terms that are

6 consistent for all borrowers regardless of

7 their servicer. Currently, issues like

8 capitalization of interest for borrowers and

9 the date income-based repayment is calculated

10 are not always the same with different

11 servicers. Terms need to be consistent with

12 the historical Direct Loan methodology that is

13 favorable to most borrowers.

14 And lastly, exit counseling

15 requirements that insure the providing of

16 helpful information about consolidation

17 options that benefit borrowers with multiple

18 loan types.

19 Further, we urge the Department to

20 retain the role of assigning students to

21 servicers. A topic we've heard on more than

22 one occasion that there could be a change that

23 would allow either the students or the schools

1 to choose their servicer. Even though the

2 current servicers do not profit in nearly the

3 same way as lenders did under the FFEL

4 Program, there would still be a financial

5 incentive to encourage schools to recommend an

6 individual servicer.

7 This would inevitably lead to a

8 situation that we finally left behind this

9 year, inducements and incentives to steer loan

10 volume to particular companies.

11 The Department is the only entity

12 that should be making those servicer

13 assignments.

14 Third, on the topic of total and

15 permanent disability, the Coalition requests

16 that the Department of Education negotiate

17 rules with a final result that is fair to both

18 permanently disabled borrowers and Federal

19 taxpayers. Currently, students are required

20 to submit multiple applications for loan

21 discharge and are monitored for up to three

22 years after being granted the permanent

23 disabled status.

1 We encourage the Department to

2 develop a less intrusive and simplified

3 process that retains the integrity of the

4 current one.

5 And lastly, operations.

6 Regulations for the Direct Loan Program

7 encompass both the policy and operational

8 aspects of the program. With all Federal

9 loans and grants processed through one system,

10 the Common Origination and Disbursement

11 System, COD, student aid processing and

12 delivery have now focused on the student

13 rather than on each individual aid program as

14 it was in the past.

15 It is absolutely critical that the

16 Department insure that regulations address the

17 need for a system concept like COD. Any

18 solution that does not retain the ease of use

19 and understanding of our current COD process

20 will set students and schools back

21 significantly.

22 This standardization of the common

23 record file formatting in such a system is

1 essential for the following reasons.

2 Standardization of the common record format

3 streamlines student eligibility changes for

4 funds and insures students receive their funds

5 on time. Standardization of the common record

6 format simplifies and enables quick

7 programming that is required by software

8 vendors to deliver funds for new programs that

9 Congress develops.

10 For each program in COD, a school

11 or third party servicer is assigned the same

12 customer service representative team to

13 facilitate origination of the disbursement

14 process and issue resolution thus providing

15 more time for financial aid professionals to

16 counsel students about all aspects of their

17 financial aid.

18 Before COD, schools did not have

19 any online capability to make corrections or

20 changes, process emergency requests, check

21 processing status to help resolve issues for

22 students quicker or to get their aid disbursed

23 immediately.

1 The COD system provides

2 accountability because funds for all programs

3 are processed through one system: G5. Monthly

4 and annual reconciliation processes decrease

5 fraud and abuse by insuring that all funds are

6 accounted for in a timely basis. Every

7 disbursement record for a student's funds is

8 recorded in the system to insure

9 accountability.

10 The COD system now contains

11 information about the servicer to which

12 student's loans have been assigned under our

13 current multiple servicer format.

14 And finally, over multiple academic

15 years and institutional enrollments, a

16 student's record remains in a single record

17 within COD to insure greater ease in the

18 school's compliance with Federal regulations.

19 In closing, I want to thank you

20 again for the opportunity to present this

21 testimony on behalf of the National Direct

22 Student Loan Coalition. Many of our members

23 were the first schools to implement the Direct

1 Loan Program over 15 years ago and have years

2 of expertise in operational and policy issues

3 as well as compliance with the regulations.

4 The Coalition looks forward to participating

5 in the negotiating rulemaking process that

6 will occur later this year.

7 Thank you.

8 CHAIR MADZELAN: Thank you. We do

9 have word that we'll have another speaker this

10 morning, but at this point, we again will take

11 a short break.

12 (Whereupon, the above-entitled

14 resumed at 11:13 a.m.)

15 CHAIR MADZELAN: We will continue

16 at this point with Mary Lyn Hammer and again,

17 Mary Lyn, if you can identify yourself and who

18 you represent, where you're from.

19 MS. HAMMER: Morning, everybody.

20 My name is Mary Lyn Hammer. I'm the President

21 and CEO of Champion College Services and we

22 have been in business 22 years doing default

23 prevention.

1 And going back to give you a

2 background, I used to handle foreclosures for

3 a bank in Texas when the oil market crashed

4 and prior to that, I was in the student

5 lending part of the bank back in the old days

6 when it was easy and, you know, $30,000 a year

7 and you got a loan.

8 So, I got to the point where I just

9 couldn't do any more foreclosures. It was

10 really sad because they weren't bad people.

11 They just had bad circumstances.

12 Moved to Arizona and there was an

13 ad in the paper. It said default manager. I

14 thought what is that and it was when they

15 first made defaults an issue. So, I answered

16 the ad in the paper and they said well, you

17 have the right background. Our default rate's

18 35 percent. Here's an office and a computer.

19 Get our default rate down. So, that was as

20 much direction as I had.

21 I was the first full-time default

22 manager in the history of the country that we

23 know of. Got the default rate down to 9

1 percent within two years. I helped write

2 Appendix D which was the original regulatory

3 criteria for default prevention from 1989 to

4 1996. It's still in the regulations under

5 Subpart M.

6 Been a negotiator three times with

7 the Department. Most recently rewriting

8 Subpart M and Subpart N a couple of years ago.

9 And we've been in business 22 years

10 and on average, our default rates we cut in

11 half for our clients.

12 So, to go back a little further

13 than that, I grew up in an abusive home in

14 Montana and I knew that education was the way

15 that I was going to change my circumstances.

16 So, I went to a proprietary school, graduated

17 when I was 19 and it was that education and

18 the support from those people that changed my

19 life and that's why I go to Washington and do

20 what I do because I'm actually one of your

21 high-risk students.

22 So, that's my background and some

23 of the subjects that I'm going to talk about,

1 some of the Department people are very

2 familiar with. I've been trying to get some

3 of this for 18 years.

4 The first point that I wanted to

5 make was about sharing of information for

6 student loans. As a third-party default

7 management servicer, we don't have access to

8 student loan information that's needed to

9 properly educate the borrowers and it's been

10 an issue for quite some time.

11 Congress thinks that the Department

12 already has the authority to regulate it. The

13 Department wants Congressional input on it and

14 we've had our language in three bills so far,

15 but it's never made it all the way through.

16 But, with the emphasis on financial

17 literacy from other parts of the Government

18 and also within the student loan industry,

19 it's becoming more and more important. It has

20 a great effect on default rates. You can only

21 do so much borrower education with general

22 facts. What they really need is the exact

23 details.

1 And the student loan industry has

2 become more complicated than the transition.

3 The loans are being transferred. You know,

4 things have gone wrong and I won't get into

5 all of that right now. Most of us know what

6 those things are. We need to be able to have

7 the detailed information necessary to properly

8 counsel the borrowers.

9 And as I said, we've cut our

10 default rates in half, but I want to give you

11 a true picture of the effectiveness when you

12 do it right and we've been doing it 22 years.

13 With the most recent information

14 that was released by the Department with the

15 increases in default rates from the official

16 2008 to the draft 2009 data, our clients went

17 up .06 percent. The national average went up

18 27 percent and the proprietary schools which

19 are our main client base went up 31 percent

20 compared to our .06. So, basically, a half a

21 percent increase.

22 At the same time last summer when

23 they released the data for gainful employment,

1 our average tenured client was at 45 percent

2 repayment rate.

3 So, we have those statistics and

4 our students are paying and we need access to

5 the information to keep that trend going

6 because I think it could only improve if we

7 have the right information to give them.

8 So, I've provided some written

9 materials and I'll also email them out to the

10 Department people. Kathleen has the copies of

11 where I've quoted all of the laws, Gramm Leach

12 Blieay, FERPA. There's many, many laws that

13 have sections that require the sharing of

14 information and gives authority to do so. So,

15 we just need to outline how that happens.

16 The next point I'd like to make is

17 giving the schools authority to limit student

18 loan debt. This is a very frustrating part of

19 what we deal with everyday because we have a

20 couple of generations of kids that have grown

21 up in an unaccountable -- where the

22 accountability is not really there and the

23 entitlement is there and what's confusing

1 about the Federal programs is that they're

2 called an entitlement and entitlement in the

3 kids' minds these days means they get it for

4 free. So, just by the name of the program,

5 it's confusing to those people. So, they

6 think it's entitlement and they forget the

7 accountability piece and it's not just

8 something that's happening in student loans.

9 It's something that's happening in

10 our country and with all of the electronic

11 processes that are in place, it made

12 everybody's life easy. Paperwork Reduction

13 Act. But, out of sight, out of mind. They're

14 not signing checks like they use to. They're

15 not filling out deferment forms like they used

16 to. It just all magically happens and it's

17 taken the ownership away.

18 So, they don't really understand

19 the debt that they have. They don't

20 understand how much interest accrues when

21 they're in school and they don't really

22 understand the long-term ramifications of all

23 the money that they take out until they're

1 paying it.

2 So, I think we have a

3 responsibility to help them make decisions,

4 make good decisions when you know that taking

5 out that extra $4,000 or $6,000 is going to

6 put them over what is an appropriate income-

7 to-debt ratio.

8 So, we ask that you give some type

9 of established regulatory language to allow

10 schools to do this.

11 One of the other things that we run

12 into a lot and I think it's going to become

13 more and more prevalent is in rehabilitating

14 loans. Because as our economy recovers, more

15 and more of these students who have gone into

16 default because of their circumstances are

17 going to want to repair their credit and many

18 of them need to be retrained because the job

19 that they had before is simply not available.

20 The way they can do this is in

21 rehabilitating their loans, but there's a gap

22 in the definition between six months that it

23 takes of on-time payments to get a new loan

1 and nine months of payments to fully

2 rehabilitate the loan and what that does is it

3 promotes bad behavior. They can take out more

4 debt; before they've taken care of their old

5 debt as far as their own credit reports and as

6 far as cohort default rates and all of the

7 other criteria.

8 So, what we are suggesting is that

9 the Department recognizes 0 as a payment.

10 Because when they go into school and have a

11 deferment or they're on an Income-Based

12 Repayment Program or whatever the circumstance

13 is, there are many, many people that are

14 qualifying for 0 as a payment and that would

15 take them through the other three months while

16 they're in school or you can align the

17 definition to be the same number of months.

18 One or the other. It just -- it should be the

19 same. It's better than it used to be when it

20 was 12 months, but there's still a gap.

21 And we have to remember that once

22 they're in default, they have little incentive

23 to keep the next one out of default. So, if

1 we can't get them rehabilitated and they're

2 already in default, they may say well, my

3 credit's already messed up. So, I don't care

4 and I think that promotes bad behavior.

5 I know one of the subjects on your

6 agenda is IBR and ICR Programs and I have a

7 few suggestions for it, but, you know, really

8 it's something that should be worked out in

9 the negotiated rulemaking process. But, it's

10 very difficult for the students to get out of

11 that program once they're in it. My personal

12 opinion in how we cancel borrowers, it's the

13 Standard Repayment Program is the best program

14 for the student.

15 And that goes to another one of my

16 points. The Graduated Repayment Program is an

17 entitlement. The students can qualify for it

18 and ask for it and it is the worst repayment

19 program that there is.

20 If you look at it in comparison to

21 what's happened in the mortgage loan business,

22 you see that all of the people on the ARM

23 loans, they were the same ones I was

1 foreclosing on 25 years ago in Texas. They

2 are the same ones that are foreclosed on now.

3 It doesn't show up in the cohort

4 default rates. It shows up in the life of the

5 loan default rates and the reason why is

6 because when the loan payment goes up, they

7 can't afford it and they go into default and

8 it costs them a ton more money in interest.

9 So, it's in the best interest of

10 the students to not have options for them that

11 set them up for failure and, you know, anybody

12 or most kids are going to say oh, it's cheaper

13 payment. I'll choose this one and they don't

14 think about, you know, it goes up $200 in

15 three years. So, it's detrimental to their

16 future.

17 So, those are a couple of things.

18 The payment programs that I believe should be

19 taken a look at and then there's a few appeal

20 benefits that I feel are appropriate. Some of

21 them having to do with economic times.

22 I did some research and the average

23 unemployment rate in the country was 5 percent

1 for the ten years leading up to this most

2 recent recession and now, it's in the 9

3 percent range. It definitely has an effect on

4 the default rates and I believe that that

5 should be taken into consideration and I find

6 it pretty appalling that it is taken into

7 consideration for mortgage loans and for

8 credit cards and for all other credit debt,

9 but in student loans, there's absolutely no

10 regard given to it and that's not realistic.

11 It's not realistic for the students. It's not

12 realistic for the schools.

13 And as a taxpayer, I can tell you

14 that I would rather pay a defaulted loan and

15 have somebody in the workforce than to just

16 eliminate a possibility for education because

17 I truly believe that education is a means for

18 making dreams come true and we need to have

19 some dreams out there in order to turn our

20 country around.

21 So, that's one of the appeals

22 options I believe is fair.

23 Another is that if a school has an

1 approved default management plan and it's

2 documented that they have followed that plan,

3 that there should be some consideration

4 instead of a strict threshold for three years

5 over 30 percent or 25 percent or whatever the

6 criteria is going to be in the future.

7 If they're doing everything they

8 can, many of the intercity schools are serving

9 a high-risk population and most of those

10 programs that the high-risk population enter

11 are lower tuition programs. So, we have

12 schools that have moved from the city out into

13 the country because they don't want to serve

14 the high-risk people and those are the people

15 the program is written for. In 1965, it was

16 written for people to get an education who

17 wouldn't otherwise be able to do so.

18 So, we ask that if the right thing

19 is being done and the school has crossed all

20 their t's and dotted all of their i's and the

21 Secretary has approved the default management

22 plan that's used to do so, that it be taken

23 into consideration.

1 And lastly, I can't be here for the

2 roundtables tomorrow. So, I've also put my

3 ideas about something -- an idea that I've had

4 for many years actually and that is in

5 rewarding good behavior. To have a program

6 like that.

7 So, in our budget, they're talking

8 about getting rid of the interest subsidies

9 and also, they're talking about funding a lot

10 of money to completion programs and retention

11 and, you know, a lot of the programs like that

12 and I feel that we should be using this

13 opportunity to create a program that teaches

14 our kids the accountability that they haven't

15 learned for the last couple of decades so that

16 they can have success long term.

17 So, some of my ideas are to reward

18 them for good behavior by paying 10 percent of

19 the interest that's accrued on the loan for 95

20 percent attendance. Reward them for good

21 grades. Fifteen percent accrued interest is

22 paid when you have a C average. Twenty

23 percent when you have a B average. Twenty-

1 five percent when you have an A average and

2 the rest of the interest 70 percent for

3 completing your program. It gives them

4 incentive to stay in school. It gives them

5 incentives to get good grades.

6 The other part of it is during

7 approved deferment times which are not

8 enrollment because that's covered with those

9 incentives, I believe that the money would be

10 well spent if we are rewarding them for making

11 interest payments. Instead of paying the

12 whole interest on half of the loan that they

13 have, do an interest payment match. If they

14 pay $50 in interest, the Government matches

15 it. It will get them in the habit of making

16 payments. It will reduce their debt burden

17 and I believe that it would be about the same

18 budgetary cost to the Government.

19 And then the last idea on that is

20 again rewarding good behavior and I have two

21 ideas about it and again, this is all, you

22 know, for negotiation, but you're getting my

23 theme of rewarding good behavior. It would be

1 something like if they've made 11 on-time

2 payments, the Government makes the 12th or if

3 they make 12 on-time payments, the Government

4 makes the equivalent of a payment and it would

5 be the average of what their payments were for

6 that year. That gives an incentive to pay and

7 to pay on time. So, it once again rewards

8 good behavior.

9 So, instead of paying the interest

10 for them during deferments or different things

11 like that, you're taking it to reward good

12 behavior which is going to benefit everybody.

13 It'll benefit the schools. It'll benefit the

14 students and it'll benefit the Government

15 because your default rates will come down. I

16 guarantee it.

17 Because the difference between a

18 high default rate and a lower default rate are

19 those students that just don't understand

20 things and need a little bit of help. Because

21 you're going to have students that will always

22 pay. You're going to have students that will

23 never pay and the difference between the rates

1 are those in between that just need a little

2 bit of help.

3 So, those are my ideas and I look

4 forward to the negotiations. I hope that the

5 Department is open minded and, you know, it's

6 for our kids. It's for our future and I think

7 we can use the opportunity to leverage what we

8 have and we can do because education goes way

9 beyond the classroom. Thank you.

10 CHAIR MADZELAN: Thank you. We

11 have no more speakers scheduled this morning.

12 So, what we will do is break for lunch now and

13 we'll reconvene at 1:00 p.m. Thank you.

14 (Whereupon the above-entitled

16 resumed at 1:00 p.m.)

1 A-F-T-E-R-N-O-O-N S-E-S-S-I-O-N

2 1:00 p.m.

3 CHAIR MADZELAN: Good afternoon.

4 We are ready to resume with John Beckford and

5 again, for the record, please state your name,

6 where you're from and who you represent.

7 MR. BECKFORD: Good afternoon. My

8 name is John Beckford. I'm Vice President for

9 Academic Affairs and Dean at Furman University

10 in Greenville, South Carolina.

11 Furman is a 185-year-old private

12 liberal arts college originally affiliated

13 with the Southern Baptist, but for the last 20

14 years has been an independent college.

15 This is my 35th year at Furman

16 having started my career in the Department of

17 Music and for the past four years, as an

18 administrator.

19 Today, I'm not only representing

20 Furman University, but the South Carolina

21 Independent Colleges and Universities and by

22 extension, the National Association of

23 Independent Colleges and Universities.

1 I appreciate having the opportunity

2 to appear here today to suggest additional

3 issues that the next round of negotiated

4 rulemaking should address.

5 Specifically, I'd like to address

6 the regulations dealing with state

7 authorization, 34 CFR 600.9 and the Federal

8 definition of credit hour, 34 CFR 600.2, that

9 are scheduled to take effect on July 1 of this

10 year. These portions of the October 29

11 Program Integrity regulations are highly

12 problematic.

13 First, with respect to the state

14 authorization and in particular the distance

15 education component, generally speaking,

16 institutions like Furman have been delivering

17 exceptional postsecondary education for

18 decades within long-standing arrangements with

19 our respective states. It seems inappropriate

20 and unnecessary for the Federal Government to

21 require states to second guess the explicit

22 decisions that have already been made in

23 meetings with the authorizations and their

1 responsibilities.

2 Also, the ambiguity of the new

3 regulations raises concerns that state

4 officials may overreach by imposing

5 requirements on private nonprofit institutions

6 that go well beyond the objectives of the

7 regulations. This is particularly of concern

8 to institutions with religious affiliations.

9 But, with regards to the distance

10 education component of the regulation, I

11 personally find this to be onerous for both

12 states and institutions, stifling toward the

13 development of innovative models in education

14 and an unnecessary Federal involvement in

15 state law.

16 Because of the long valued teacher

17 to student relationships embraced by small,

18 private liberal arts colleges, we are probably

19 among the last to explore the possibilities of

20 distance education, but with the advancement

21 of technology in this area, we're seeing these

22 institutions implement effective models of

23 distance education that parallel the quality

1 educational outcomes found on our traditional

2 campuses.

3 The state authorization provisions

4 will layer a bureaucratic obstacle that will

5 smother the creativity required to develop

6 quality distance education programs.

7 For the United States to remain

8 competitive in higher education, we should be

9 adopting policies that unleash the innovation

10 in the delivery of quality education.

11 Otherwise, our foreign competitors will seize

12 the upper hand in distance education if we

13 lose our agility and become mired in needless

14 state authorization regulations.

15 With respect to the credit hour, it

16 is this issue that I have most closely

17 followed for this last year. For me, it

18 represents the most glaring intrusion on the

19 academy during my 35 years in higher

20 education. It is the primary reason I am here

21 today.

22 If I might draw though from an

23 April 26 letter that was sent to Senators Hart

1 and Enzi from Molly Corbett Broad, who is the

2 President of the American Council of

3 Education, and was endorsed by 70 other higher

4 education associations and accrediting

5 organizations.

6 She says, and I quote, "A credit

7 hour is the most basic building block of any

8 academic program. By establishing a Federal

9 definition of a credit hour, the regulation

10 opens the door to inappropriate Federal

11 interference in the core academic decisions

12 surrounding curriculum. The very kind of

13 interference expressly prohibited in the

14 Department's enabling legislation.

15 "Consistent with our support are

16 the principles and limitations outlined in

17 this and other Federal laws. It is our

18 position that no Federal definition of a

19 credit hour is ever appropriate because it

20 becomes the basis of perpetual regulatory

21 intervention in multiple institutional and

22 accreditation decisions associated with the

23 credit hour."

1 She goes on to say that "As a

2 secondary, but practical matter, the ambiguity

3 of the particular definition at issue and the

4 insufficiency of the guidance about it pose

5 serious challenges for institutions as they

6 review tens of thousands of courses in an

7 effort to insure consistency with the new

8 Federal definition. Accreditors will face

9 similar burdens as they attempt to develop or

10 revise policies and practices to review credit

11 policies of these institutions.

12 "The definition and related

13 guidance also place accreditors in the

14 unprecedented position of being required to

15 force institutions to meet a Federal standard

16 in an academic area as a condition of

17 accreditation."

18 Let me add to her remarks though by

19 saying at my institution, I'm also confident

20 that it is the same as what we find at all of

21 the other National Association of Independent

22 Colleges and Universities institutions, that

23 determining course credit is one of the most

1 carefully considered decisions we make.

2 Numerous variables and factors play

3 into assigning credit. Course experiences

4 ranging from the traditional lecture to

5 private weekly music lessons, service learning

6 projects in the community, spending 15 weeks

7 in a foreign country or a summer in a biology

8 lab. The range of educational experiences

9 recognize the rich diversity of pedagogues we

10 bring to our students. But, that diversity

11 which is the key to a successful approach to

12 education defies any simple formula that might

13 define earned credit.

14 The level of engagement and

15 measurement of student outcomes are complex

16 and truly beyond any Federal regulation of

17 credit hours that could have any kind of

18 meaningful application to all institutions.

19 Let me conclude by saying that I

20 believe I understand what has prompted these

21 regulations, but the Federal intrusion in

22 areas fundamental to core academic decision

23 making is inappropriate and contrary to our

1 shared commitment to strengthening higher

2 education in the United States.

3 These regulations are both

4 ambiguous and inappropriate and should be

5 rescinded.

6 Thank you for your time.

7 CHAIR MADZELAN: Thank you. At

8 this time, we'll take another break and when

9 we have another speaker, we will convene.

10 If you care to speak, again, we ask

11 that you go out to the table and sign up with

12 Kathleen.

13 Thank you.

14 (Whereupon the above-entitled

15 matter went off the record at 1:09 p.m. and

16 resumed at 3:32 p.m.)

17 CHAIR MADZELAN: This concludes

18 this afternoon's hearing or today's hearing I

19 should say and we want to thank all of our

20 speakers today and we also want to remind

21 everyone that transcripts from this hearing as

22 well as our other two hearings will be

23 available on the Department's website in the

1 near future.

2 Again, thanks to everyone who came

3 today. Bye.

4 (Whereupon, at 3:32 p.m., the

5 above-entitled matter went off the record.)

2 3 Negotiated Rulemaking Higher Education 2011 – Public Hearing May 26, 2011