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A Case Study in For-Profit Education and Oversight S. HRG. 112–774 BRIDGEPOINT EDUCATION, INC.: A CASE STUDY IN FOR-PROFIT EDUCATION AND OVERSIGHT HEARING OF THE COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS UNITED STATES SENATE ONE HUNDRED TWELFTH CONGRESS FIRST SESSION ON EXAMINING BRIDGEPOINT EDUCATION, INC., FOCUSING ON A CASE STUDY IN FOR-PROFIT EDUCATION AND OVERSIGHT MARCH 10, 2011 Printed for the use of the Committee on Health, Education, Labor, and Pensions ( Available via the World Wide Web: http://www.gpo.gov/fdsys/ U.S. GOVERNMENT PRINTING OFFICE 81–200 PDF WASHINGTON : 2013 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS TOM HARKIN, Iowa, Chairman BARBARA A. MIKULSKI, Maryland MICHAEL B. ENZI, Wyoming JEFF BINGAMAN, New Mexico LAMAR ALEXANDER, Tennessee PATTY MURRAY, Washington RICHARD BURR, North Carolina BERNARD SANDERS (I), Vermont JOHNNY ISAKSON, Georgia ROBERT P. CASEY, JR., Pennsylvania RAND PAUL, Kentucky KAY R. HAGAN, North Carolina ORRIN G. HATCH, Utah JEFF MERKLEY, Oregon JOHN MCCAIN, Arizona AL FRANKEN, Minnesota PAT ROBERTS, Kansas MICHAEL F. BENNET, Colorado LISA MURKOWSKI, Alaska SHELDON WHITEHOUSE, Rhode Island MARK KIRK, Illinois RICHARD BLUMENTHAL, Connecticut DANIEL E. SMITH, Staff Director PAMELA SMITH, Deputy Staff Director FRANK MACCHIAROLA, Republican Staff Director and Chief Counsel (II) CONTENTS STATEMENTS THURSDAY, MARCH 10, 2011 Page COMMITTEE MEMBERS Harkin, Hon. Tom, Chairman, Committee on Health, Education, Labor, and Pensions, opening statement ............................................................................... 1 Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, opening statement .............................................................................................................. 6 Hagan, Hon. Kay R., a U.S. Senator from the State of North Carolina, statement .............................................................................................................. 49 Blumenthal, Hon. Richard, a U.S. Senator from the State of Connecticut, statement .............................................................................................................. 51 Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon, statement .......... 55 Durbin, Hon. Richard J., a U.S. Senator from the State of Illinois, prepared statement .............................................................................................................. 66 WITNESS—PANEL I Tighe, Kathleen S., Inspector General, U.S. Department of Education, Wash- ington, DC ............................................................................................................. 11 Prepared statement .......................................................................................... 12 WITNESSES—PANEL II Willems, Arlie, Ph.D., Retired, Iowa Department of Education, Anamosa, IA ........................................................................................................................... 23 Prepared statement .......................................................................................... 25 Manning, Sylvia, President, The Higher Learning Commission, Chicago, IL .... 33 Prepared statement .......................................................................................... 34 Cruz, Jose´, Vice President for Higher Education Policy and Practice, The Higher Education Trust, Washington, DC ......................................................... 39 Prepared statement .......................................................................................... 40 ADDITIONAL MATERIAL Statements, articles, publications, letters, etc.: Why Do Ethics Stories Still Quote CREW’s Melanie Sloan?, The New Republic, article ............................................................................................ 9 Gregory D. Kutz, Managing Director, Forensics Audits and Special Inves- tigations, GAO, reissued testimony ............................................................. 70 GAO redlined summary of revisions ............................................................... 91 GAO memorandum ........................................................................................... 97 Response to questions of Senator Enzi by: Kathleen S. Tighe ...................................................................................... 98 Sylvia Manning ......................................................................................... 101 Jose´ Cruz .................................................................................................... 101 (III) Letters: William J. Taggart, CEO, U.S. Department of Education’s Federal Student Aid (FSA) ................................................................................. 10 Michael D. Bopp, Gibson Dunn, from Daniel E. Smith, Staff Director, Senate HELP Committee ...................................................................... 102 William O’Reilly, Jones Day, from the Hon. Tom Harkin ..................... 102 Duncan Anderson, Education Affiliates, from the Hon. Tom Harkin ... 104 Hon. Lamar Alexander from: Louis Gladney, student, Ashford University .................................... 106 Amanda Knochel, student, Ashford University ............................... 107 Samantha Rhea, student, Ashford University ................................. 107 Hon. Michael B. Enzi, from Stehpanie Vallejo, student, Ashford Uni- versity ..................................................................................................... 108 Arne Duncan, Secretary, U.S. Department of Education, from Citi- zens for Responsibility and Ethics in Washington, (CREW) .............. 109 Kathleen Tighe, from the Hon. Richard Burr and the Hon. Tom A. Coburn, M.D. ..................................................................................... 116 Hon. Tom Harkin and Hon. Mike Enzi, from DicksteinShapiro LLP ... 119 Michael Zuver, student, Westwood College ............................................. 122 Beth Stein, Esq., Chief Investigative Counsel, Senate HELP Com- mittee, from WilmerHale ...................................................................... 122 Andrew S. Clark, CEO, Bridgepoint Education, Inc., from Daniel E. Smith, Staff Director, Senate HELP Committee ............................ 123 Hon. Tom Harkin, from Andrew Clark, CEO, Bridgepoint Education, Inc. .......................................................................................................... 124 Daniel E. Smith, Staff Director, Senate HELP Committee, from WilmerHale ............................................................................................ 125 (IV) BRIDGEPOINT EDUCATION, INC.: A CASE STUDY IN FOR-PROFIT EDUCATION AND OVERSIGHT THURSDAY, MARCH 10, 2011 U.S. SENATE, COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, Washington, DC. The committee met, pursuant to notice, at 10:02 a.m., in Room SD–430, Dirksen Senate Office Building, Hon. Tom Harkin, chair- man of the committee, presiding. Present: Senators Harkin, Hagan, Merkley, Blumenthal, Enzi, and Isakson. OPENING STATEMENT OF SENATOR HARKIN The CHAIRMAN. The Committee on Health, Education, Labor, and Pensions will come to order. This is the committee’s fourth hearing focusing on the Federal investment in for-profit higher education companies and whether the $26 billion in annual taxpayer money flowing to this sector is a good value for students and taxpayers. Now I intend to make quite a lengthy opening statement with charts, and I certainly will yield whatever time I take to my Rank- ing Member to use whatever time that he would like to take also, just so that we are fair in terms of the time. We have previously taken a look at the specific aspects of this sector, including recruiting practices, placement, accreditation issues, student outcomes, and, most recently, the for-profit indus- try’s targeting of veterans and GI educational benefits. These were in previous hearings. Today’s hearing is our first opportunity to bring all of these pieces together with a case study of a single for-profit education company, Bridgepoint Education, Inc. This will give us a window into the key elements of the for-profit education business model and the implications of that model for students and taxpayers. Today’s hearing will examine not only Bridgepoint, but also the regulatory environment that allowed a school of just 300 students to grow into big business with a student body of 78,000 students in just 4 years, capturing more than $600 million in Federal sub- sidies annually. All institutions of higher education that receive Federal student aid are regulated by at least three different entities—the Federal Government, the State in which the institution operates, and an accrediting body recognized by the Secretary of Education. To- (1) 2 gether, these three bodies are referred to as ‘‘the triad’’ and are col- lectively tasked with ensuring that the schools are meeting basic guarantees of academic quality and fiscal soundness and are com- plying with pertinent State and Federal laws. With us today are representatives from each of the three bodies with responsibility for regulatory oversight of Bridgepoint. On our first panel is Kathleen Tighe, the Inspector General of the Depart- ment of Education. The Department of Education enforces basic Federal standards for schools that participate
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