taxpayers'pocket . that needs to be dealt with here in the most in manner by the education ig because those practices cannot be accepted. whenever anti-fraud tools you have to prevent those practices -- if someone is taking $250,000 off the form, what is the education department doing on those forms to validate their assets? they have been checking irs records to look for people underreporting income on forms to get subsidized student loans. there are anti-fraud tools they could use to prevent that. >> that would lead me to my next question. did your investigation revealed gaps in the regulatory oversight scheme for the schools, or simply a need for increased

monitoring and enforcement of existing regulations, or both? >> probably both. it was a strict undercover. we did not evaluate the department of education. it certainly appeared like the wild west. there is not a lot of regulatory infrastructure overseeing or enforcing this particular case. >> you also mentioned earlier that it was your intuition, and reasonable at that, that these folks in the videos may have been trained in certain sales tactics and marketing approaches. as the senator from north carolina referred, there may be incentives to reach certain goals. did your investigation revealed any incentives or training, or a lack of training as to how to respond to questions from prospective students under a manner which complies with federal law?

>> it could have been lack of training. it was more training in a script. practices like not letting someone speak to financial aid until they pay an admission our application feet -- they were very persistent. we tried every way. those videos are two minutes, but we tried for 40 minutes to get to financial aid in one case. there would not let us get there. in the last video, you saw them rip up the application. that was the end result. i think they were very well trained. six of them refused to let us go to financial aid without signing a document and rolling in the school. there are others where it may have been lack of training or other types of things. >> thank you. >> thank you, mr. chairman. i want to salute you and the ranking member for having this series of hearings on

proprietary colleges. i would like to ask unanimous consent that this be placed in the record. mr. chairman, i took the lead 18 months ago to get higher education reauthorize. we worked closely with you. we worked very closely. we thought that what we were creating was an opportunity latter for people of all ages at all stages of their pursuit of higher education. we worked very hard. now we see that what has been created, in some instances, is not a ladder of opportunity but going into a black hole of debt and disappointment and heartbreak. i do think we need to reform,

but i do think we need to parse out the good, the bad, and the ugly. we look forward to working with you. there is a lot of accumulated knowledge here that we could benefit from. my concern is that the pell grants -- we could be going to the pell grant bubble. all of the schools have sprung up in the last couple of years and added to their enrollment. part of their largess is coming from the pell grant program. it is a rip-off for the student then the taxpayer. the think it is despicable. let me get to my questions. these so-called admission representatives -- would you call them bounty hunters? were they paid bonuses? did they have put as they had to

meet? were they paid bonuses? in other words, did they function like headhunters, not in terms of finding jobs, or bounty hunters? >> the function as salespeople is the way i would describe it. it was under cover, so we do not know what was happening behind the scenes. they appeared to be well trained in hard close tactics and aggressive marketing tactics. you saw what it was like to sit in the chair. >> i just read the script. >> it was aggressive marketing and sales people. >> you do not know if they had quotas? >> we do not know that. >> i am going to call them back to hunters. were these bounty hunters employees of the college or the school, or were they like a telemarketing firm that is trained on eat your kill tactics? >> the ones we did the face to

face with, the 15 colleges, they appeared to be employees. we also registered on to websites. those appeared to be headhunters. >> is not a one size fits all? >> some more employees, some were generators. >> we could prohibit telemarketing. let me ask you this question. after the students were recruited with often duplicitous promises for certification, when i went to the schools, did they get what they paid to get? in other words, if they signed up for anything from radiation therapy to a business degree? >> we never went to class. we just did these tests in june and july. we did not go all the way through. we ended our undercover at the

applications process. we do not know what we would have gotten if it attended class. >> you do not know after duplicitous luring in of the students whether there were also in the plazas and garments, where they thought there were getting a degree in massage therapy or radiation therapy, which are licensed by the state? there has to be an outcome and a test. that also have to be an accredited institution. that is another realm we should ask. do they lie to you when you are there? what would you recommend as the metric? you are a gao guy. what would you recommend as the metric to be able to parse out the good, bad, and ugly, in terms of this type of recruitment? >> from a standpoint of what we saw, fraud, i am not sure what

mattress you can use. some are graduation rates, completion rate, student default rates. those of the mattress that are used. these schools, the graduation rates vary from single-digit to 80%. the default rates are very, very high. on the fraud, hopefully the metric is none. hopefully you do not have your own employees telling people to lie about programs. that is what we found. 0 is the right metric. >> they range in such levels. i have an on-line university called walton. the default rate is 3%. that is better than the university of maryland. i have another school where the default rate is 48%. that is outrageous. i just want to turn to the

chair, thinking about some of the issues. if what you alleged is that these bounty hunters told students to live, which means that is an intent to defraud the federal government, i think my question is should we get this information and refer it to federal prosecution? if people are not only engaging in predatory practices but intent to defraud the federal government, i think they need to be prosecuted. >> we have done that. we met yesterday with the investigative side of the department of education inspector general. those cases are being referred to law enforcement. whether they can take it to a u.s. attorney i do not know. but they are going to consider them. >> when i have a school that has a 3% default rate, you talked

about a culinary school. there is only one culinary school in baltimore. they were cooking up something else. i am pretty steamy about what is going on here, and even crabby about it. [laughter] >> i cannot comment on that. this old fort is ready to go. personally, i know we are waiting -- kutz is my mother's family name. are you from pennsylvania? we never made it past baltimore. week opened a grocery store. there we are. thank you for all your good work. >> i may have lost track of what

this hearing is about. [laughter] but i am glad to be here. thank you for your testimony, which reveals an array of problems, problems that should be of concern to taxpayers and prospective students, and to the private universities themselves, at least those who are not engaged in practices like the ones you saw. that are very disturbing. what is your sense about how much the problem is coming from a lack of enforcement of current rules instead of a need for additional regulation? how has your experience led you to think about that question? there are a lot of things we saw that are clearly, in theory, regulated already. i wondered if you could talk about that a little bit. >> fraud is fraud. some of the other regulations -- there are certain requirements related to disclosures of tuition, other

fees, accreditation, completion, and graduation rates. with such issues with all of those. the regulations are there. it is a matter of whether they are being enforced. whose job is it to do that enforcement? >> the department of education. >> do you think that our research to adequately to do that? >> i cannot speak to resources. i met with them. they are aware of these. we are hopeful there will use these to help improve enforcement. >> did you get an impression, having seen the regulations that were being violated, an impression about further work we should do, other statutory or regulatory, to try to deal with practices that are not yet governed by these regulations? >> we did this in three months. if you watch the videos, there were all from june and early july. we scrambled to work hard.

my team did a great job logistically to pull this off in a period of just weeks. we can consider that and get back to the committee on any things we see as holes in the regulations. if we see any, we will share that with you. >> one of the challenges we are going to face and the department of education is going to face is that it is so difficult to monitor any individual transaction that occurs. that probably is not a sensible way to approach this. my question is how do we have a set of enforcement mechanisms that really will work. >> on certain things -- let us say programs. you have the fafsa form. you could look at independent databases of people who falsified those forms. you could run a batch of irs against program recipients. you would likely find people who were understating their assets.

>> they said you do not need to put this on their fast a form because that is what the income tax form is for? >> that is what they said. >> last question. how often during the investigation did you find that prospective students were not able to speak with a tuition counselor until they paid an application fee? how common is that? that was one of the most disturbing things we saw. >> six out of 15 times the refused to let us speak to financial aid without signing enrollment and paying the application fee. >> thank you. >> senator kutz -- mr. kutz. >> think you for the promotion, senator. >> it may be a demotion around here. thank you very much.

>> our second panel would be david hawkins, director of public policy and research at the national association for college admission counseling, a nonprofit membership organization founded in 1837 by 19 midwestern colleges to create a code of ethics. mr. hawkins has been at this organization since 2000 and recently served on the department of education have negotiated rulemaking panel as a representative of college admission officials. >> after mr. harkins, we will hear from the executive director and chief executive officer of the accrediting commission of career schools and colleges. he currently oversees the accreditation process for over

800 schools and roll over to under 50,000 students. he is an adjunct faculty member at the university of virginia, teaching graduate courses in education policy. finally, we have an emissions representative at west would college in denver from november 2007 through may 2008. he now works in development for a colorado based substance abuse treatment providers. he is a graduate of hobart university in 2005. i welcome our second panel. all of their prepared statements will be made it part of the record in their entirety. i ask if you could sum up in five minutes or so. i have been set for 5 minutes. if it goes over a little bit, fine, but not too much, i hope. your statements will be made part of the record. we will start with mr. hawkins, director of public policy

research at the national association for college admissions counseling. welcome, and please proceed. welcome, please proceed. >> thank you for holding this >> and the for inviting me to be part of the testimony. college admission as you said is a nonprofit of high school counselors from around the world. we have a code of ethics that we call our statement of principles of good practice, that govern admission practice for our member colleges and universities as well as high schools. we have some binding principles that are enforceable within our membership. we also have best practice principles that guide ethical practice for admission. in founding our association, the colleges that developed the idea

of standardses for ethical practice realized it was not in their best interest to engage in a race to the bottom in terms of unethical admissions practice. likewise, it was not in a student's interest because students suffer from the same kinds of information asymmetry that we see in other situations, the sub prime mortgage industry comes to mind immediately, where you have the situation in the admission and financial aide process, there's a large amount of ground to cover. there's an asymmetry that leaves students particularly vulnerable to being misled in the process. our founding colleges realize that, and they set forth in an effort to strive for higher standards for admission practice. our involvement in the issue before the committee really stems back to the 2002 creation

of what we're calling the safe harbors, to the incentive compensation band. as some of you alluded to earlier, that ban was enacted in 1992 after the nunn commission hearings which found substantial problems in recruiting similar to the ones we've seen today. i also pointed out that the department of education also covered this ground in the 1970s, there doesn't appear to have been any statutory result to congresss and the department's investigation into recruitment practices in the 1970s, but i did include some information in our written testimony, indicating has been a problem that far back. our concern about the safe harbors that were enacted in 2002 is that they have effectively gutted the incentive compensation bath that was passed by congress in 1992. our concern specifically is that

it has created a road map for institutions to circumvent the law as it was designed originally by congress. we pointed out in 2002 to the department as we have pointed out in our written testimony today, that what would result from the safe harbors was fairly widespread potential for fraud and abuse, actual fraud and abuse. and unfortunately, i think we've seen this born out. the basic features that -- of the practices that the incentive compensation ban was enacted to eradicate on the college side, you see aggressive boiler room style sales tactics, you see obfuscation of financial aide. you see misrepresent esensations about employment prospects and

earning potential. what lies behind a lot of this is the fact that admission officers and recruiters are kpen stated almost exclusively based on whether a student enroles, so they do not get paid or they may risk substantial pay reduction or even firing students -- if they do not actually process students through the door. what results is a cascading series of problems for students, of course. they're pressured into making decisions without accurate information or being offered an opportunity to consider their options to comparison shop. they're ushered through the enrollment process without the appropriate information about the amount of debt they may occur. they're roped into programs that may be ilsuited for their needs and left with a large mountain of debt, which is very difficult to pay off, particularly if you do not improve your immoment prospects. these are bad enough for the students. i think we have to consider that we are really concerned about

the students here in this discussion. but they are equally concerning for the taxpayers, when the students default on their loans, the taxpayers end up picking up the tab. it's in our fiscal health interest to make sure that this problem is cleared up. i think in closing reilly, i think contrary to what we've heard from the industry, these practices seem to be standard at this point, these are not isolated incidents, these do not appear to be isolated incidents of bad actors or rogue officers. this appears to be a fairly standard practice, the blueprint which has been laid out through the safe harbors. we acknowledge that nonprofit colleges have occasionally run afoul of the incentive compensation ban, just as they sometimes run afoul of our own standards and association. for that reason we sincerely appreciate the discussion that you have started here with this hearing. we certainly appreciate the department of education's effort

to tighten up the regulations and eliminate the safe harbors, and we would look forward to being a part of this discussion moving forward. thank you. >> please proceed. >> mr. chairman, members of the committee, thank you for the opportunity to testify. my name is michael mccomis. let me state at the outset that any student recruiting or advertising practice that undualie induces students to enroll in an institution tarnishes the entire higher education community. accc works diligently to -- only the highest level of integrity is injected into the student

recrueltiment and admissions process, and it is essential to the success of our triad system that accrediters under federal and state partners work together to stem any institutional abuses such as those presented here today. accrediting agencies are private, independentities focusing on establishing standards and assessing their members and institutions on a peer review basis. institutions eligible for title four funds must be accredited by an agency recognized by the united states department of education, and the higher education ablgtd crow ates the rigorous regular u tory structuo which all agencies must adhere. regardless of the types of institutions they accredit have and enforce admissions and advertising. the acc standards create a whole

school process. each of the school's practices including recruitment, advertising and admissions can impact its overall success and the success of its students. accc has more than 50 standards that address these areas directly. equally important are our processes to evaluaten institution's compliance. we have a multistep process which includes self-evaluation and determinations of compliance. there's ample evidence that the commission holds its institutions account bible to its standards. 80% of our findings resulted to areas of recruitment, advertising and admissions. another indicator is provided from analysis of our student surveys. results from surveys during 69 on site evaluations between april and may of this year, showed a very high rate of student satisfaction in areas related to admissions and financial aide processes. a rate high enough to support

the conclusion that the problems that do exist are not widespread amongst our credit institutions. accsc relies on an interim review and robust complaint process to monitor potential violations of standards. if a student believes he or she has been misled in the recruitment or admissions process, that student can forward a complaint to the commission. i review every complaint received for accreditation standards. those complaints are always troubling. when findings do occur, we are diligent in requiring institutions to take corrective action. when none occurs we take adverse action. accsc has a number of at its disposal. i want to explain the important

issues between the issues discussed today and the student achievement. we require institutions to submit a report annually and monitors any institution falling below the commission's benchmarks. we view these bench margins as tools by which an admissions can improve the success of its students. this helps us evaluate an institution including recruitment or advertising. if students are lured to an institution or induced to enroll, then that institution will likely have difficulty demonstrating kpen tensecy of its students. overall, i believe that accsc has demonstrated a commitment to enforcing standards related to recruitment, advertising and admissions. accrediters can't be expected to uncover all activities of noncompliance.

to that end, here are a few final thoughts. we will continue to assess its standards and practices and policies in these areas and commit to strengthening its accreditation practices even further. second, the department provide the appropriate oversite for all accrediters holding all accountable to a set of rigorous standards. accsc is committed to working with congress should it decide we need to do more for the higher education system and its students. thank you. >> thank you very much, dr. mr. comis. now, mr. prine, please proceed. >> thank you for inviting me today and for

my name is joshua pruyn, west wood is a for profit school with 17 campuses around the the country an online division, which is where i worked. i applied to be an admissions director because of my experience with my college hockey team. as captain of the team, i would talk to prospective students about the team and the university. i got satisfaction out of the experience and thought i'd feel the same about my role as an admissions rep. when i accepted the position at westwood in november of 2007. it didn't take long before i realized my new job was a sales job. during training, admissions reps learned sales techniques, a seven-step sales process and the cookie close. we were given a script that told us to tell potential students that interviewing with and securing recommendation from an admissions rep. in reality, there was no recommendation process and no standard for enrollment into westwood.

the interview process was a psychological game to enroll students. i finished the training feeling ill-prepared about my knowledge about the program, the class, the instructors and support systems the school offered. after my initial training, the real training on the boiler room sales floor began. prospective students are referred to as leads. i remember talking to one student shortly after he requested information. when i called him the very next day, he said he was put off by the whole experience because he received 34 voice messages from various online schools attempting to recruit him. this doesn't stop just after one day. in the location where i worked, there were over 100 admissions representatives divided into ten teams. the directors keep the teams in constant competition for prizes with one another. every time a team signed up a student, they'd set off their signature sound effect, bang a drum, ring a bell or blow a whistle. an e-mail was also sent out to the admissions department to

announce our latest enrollment. all of this was designed to keep the energy high and the phones dialing. in addition to the hyped-up atmosphere, representatives were kept motivated by the promise of rewards. each representative had a quota of two students to enroll per week. enrollment was nothing more than a completed and electronically signed application. individual enrollments could mean paid time off or gift cards, and a successful year earned you a trip to cancun. most importantly, each term reps needed to turn six of their enrollments into starts. a start consisted of a student who completed all of their financial aid requirements and attended classes for the first 14 days. 14 was the magic number. i was told after 14 days, westwood could keep the students' federal financial aid money even if the student dropped out. it was this start number that determined salary and promotions. it was all about the numbers.

with high numbers, the most successful representatives could earn about three times their starting salary. the emphasis on starts was brought home for me when i enrolled a student named jeffrey. on jeffrey's 13th day of school, he was called up from the army reserves into active duty. he called to tell me and withdraw. i told my director and she was furious. on her orders, i spoke to jeffrey again and reached the same conclusion. my assistant director and then my director both called jeffrey and pushed him to stay enrolled. she wasn't willing to lose the start, despite the fact it was clearly not in jeffrey's best interest before he was on the hook for his student loans. i was disgusting by a such a flagrant regard for a student, especially someone who was called on to serve in the military. disdeception was built into the department. to avoid revealing the full price for an online bachelor's

degree, some would just lie about the cost. i overheard representatives say the price was less than half the actual price. more often they would tell them the price would be $4800 and let the student incorrectly assume there were two or three terms per year like most traditional colleges. there's actually five terms per year. constantly heard representatives say federal grants would cover the cost of education and makeup or cite misleading salary information. to my knowledge, none of these lies were ever discouraged and at times were encouraged. the most appalling example i could think of is when one on my team was trented with a bust liar award at a team celebration. in training we were told that from the student's perspective there is no significant difference between national and regional accreditation. i started investigating and discovered there was a big difference. not only was there a higher standard of education but

there's a huge issue of transferring credits. yet for months i'd worked under the impression there wasn't much difference between regional accreditation at all. one last example where students were misled had to do with west wood's internal loan program. we were told to tell students if their financial aid didn't cover all the cost, westwood would step in to help. all they'd have to do to cover the balance was pay a maximum of $150 a month while they were in school. however, when i began enrolling more students, i was told the monthly payments hardly put a dent in the amount of student owed and that the students would pay 12% interest on what they owed after graduation. i had no plan to quit west wood on what became my last day. i could no longer tell myself it

was possible to work for westwood and consider myself to be working within any drg of ethical standard. i had no prospect for finding another job quickly. i didn't really think about that. i just thought about how naive i'd been. hoping to help students make a better future for themselves through college. instead i left the students i enrolled with a mountain of debt and little or nothing to show for it. thank you. thank you, senator ensign has to leave, i will yield to him first. >> i'd ask permission to put a series of charts of information that we gathered on schools and dropout rates and stuff in the record. i don't think so, i just got this, so --. i'll begin with mr. hawkins. what disciplinary actions would

the national association of college admission counseling take if one of its members was found to be engaging in a type of behavior revealed by the gao investigation? >> typically our enforcement is that we could -- if our internal admission practices committee found that there was a violation, could censure the member who was in violation of -- if it was a violation of our ethical principles, could censure them and prevent them from participating in certain programs, pinneding a change in the practices, or if they deemed it appropriate according to our bylaws could expel the institution from membership. >> okay. the gao investigation shows admissions representatives refusing to allow prospective students the opportunity to speak with financial aid office. how does that differ from admission counseling practices at public and nonprofit schools?

are there legitimate reasons why they would not provide access to financial aid offices to the students who either applied, neither applied nor enrolled? >> i can't think of a reason why an admission officer at a not for profit college would not let a prospective student talk to someone in the financial aid office. if no one was in the financial office that day would be one thing. but our standard practice for our institutions is to allow students to ask the kinds of questions that they feel they need about financial aid and many admission officers are prepared to answer those questions, and if they can't, again, standard practice is to walk them over to the financial aid office. >> okay. thank you. what role do the incentive compensation safe harbors play in encouraging the behavior revealed in that gao investigation? how will the department's proposed elimination of the safe harbors impact recruiting practices at for-profit schools? >> the safe harbors carved out a number of exceptions to the original incentive compensation

ban and in our association's opinion, each one of those safe harbored chipped away at the law's ability to be enforced. so the first safe harbor is the one i think is probably the most to blame here and that is that they poked a little hole in the statute by saying you couldn't base the salary solely on the number of students enrolled. so if you put some minimal criteria out for 10% of the -- or whatever% you want to call it of the admission officer salary you could base the other 90% on whether they enrolled the student or not that. is essentially commission sales and that is what congress sought to outlaw in 1992. to the second question, i feel the department's proposed rule that would eliminate safe harbors would really put the teeth back into that statute and in our opinion would go a long way towards providing enforceability. a number of have you mentioned enforceability and how the

department can do that. i think this puts the teeth back into it. it would really tighten things up. >> thank you. mr. mccomis, what role do schools' recruiting practices have in the acredation process? is there any? >> senator, as i outlined in my written and oral testimony, we have several standards that address recruiting, advertising and admissions practices. the goal of those standards is to ensure that the activity that's are engaged in by institutions lead to fully informed student who make -- are able to make enrollment decisions without any pressure and that they are fully informed before they choose to do so. and it's something we look at very closely. >> what actions would the accsc take if one of the schools accredited was found to be engaging in the behavior in the videos we saw in the gao investigation? >> clearly based upon the information that was presented there i'm confident that our

board would go into a full investy gatory process, find out the specific instances and occurrence that's went with that. there are a range of actions that the commission can take with regard to findings and they range with the swaeverity of th action. some are more severe than others, particularly with regard to fraud, and the commission has actions ranging from sanctions on programs, up to revocation. >> thank you for letting me go so i can make it to the white house. i appreciate it. i yield. >> thank you. mr. hawkins, in your testimony both written and which i read

last night and again this morning, but also in your verbal presentation, i made note of the fact that you said there's enough evidence to suggest that compensating admissions officers based on the number of students they enroll is standard practice. first of all, why do you think that? and just sort of what's wrong with that? what's wrong with paying in people an incentive for enrolling low income students? >> mr. chairman, to answer your first question, since the safe harbors have been passed, we've been collecting stories that are readily available and news accounts, state and federal regulatory actions and in lawsuits that have proceeded through the courts. in our written testimony, we have ten pages of summary of this kind of evidence, combined with what we saw from the gao today, there's no doubt in my

mind that because of the safe harbors, and because of what we see in front of us, there is a preponderance of evidence in fact that this practice is pervasive. and is in fact industry practice. and, of course, the question i ask is how much more evidence do we need? how many more students need to go through this for us to take some action? all that leads me to believe that this is a standard practice. and to answer your second question, we feel strongly that whenever you reduce the basis of a commission, you're effectively boiling the student's interest out of the equation. our principles for practice suggest there's a significant need for counseling when it comes to low income students, that need for counseling has never been greater. and that when you do not provide that counseling, the students are starting off at a disadvantage. and worse yet, when you give them misinformation, you are

really, really stacking the deck against them. so we feel very strongly that admission officers should not be compensated based on a commission. >> thank you very much. mr. pruyn, a couple of preliminary kind of questions. i understand there is a lawsuit by westwood students being handled by a florida law firm. are you personally suing westwood or seeking money from the school? >> i'm not, no. after i left westwood i had obvious ethical concerns about them and i reached out to a friend of mine who is a freelance journalist and during the course of his research had uncovered a law firm that was investigating the school and through him they had contacted me. but i'm not suing westwood, nor do i have plans to. >> if you left westwood two years ago, why are you willing to take the time off work and from your life to tell us about

your experiences? >> i would say that it's a minor inconvenience to try to help inform people about what goes on there. i mean, it's so egregious and personal -- i graduated my undergraduate with a lot of student debt and i have a firsthand experience with it and it makes me more acute to what it can do to a student that graduates with significant student debt. so it's obviously something that needs to be addressed. >> we hear a lot of rhetoric of this as the practice of rogue recruiters, sort of bad apples. did you ever hear recruiters saying misleading things and what was the disciplinary policy? was there reprimand for someone who lied to a student on the

phone? >> i never once witnessed anybody be reprimanded or disciplined at all. and the supervisors monitored calls. everyone was recorded. and you match up with your supervisor at least once or twice a week to go over calls and so forth. and there's also -- i mean, it's very much in the open. there is -- i remember one person in particular who in my mind was probably the most rogue of anybody who would just stand up and who was very loud and would just spout off whatever came into his head. he'd tell students they could make over $100,000 at their choice of video game company after they graduated and he would do this and everybody would hear him, but as far as i know he was never disciplined, because he never stopped. >> again, we hear a lot in requests and also i'm reading some of the feedback from some

of the for profit schools and their representatives who are saying that basically these are individuals -- we've got 200,000 people that work in this century a industry and, of course, there are a few that will be bad and do these kind of things. so it's the issues, this coming from the employees or is this coming from the top down? what do you think? is it just a few bad managers out there, or is this something higher upcoming down through the system itself? >> there's certainly a range of ethics among admissions reps, and certainly ones that try to do a good job and are ethical and there's certainly one that's don't seem to care. but you know, i'd worked there for at least four months when -- and i'd been trained by multiple directors, multiple assistant

directors, and in my initial training about how wonderful our gaming program was. i was told about how we had all these wonderful graduates that went to these different major gaming companies and these wonderful salaries they're making and i believe the number was about 85% of the students that graduated from the program had a job there, and -- in a video game company. and i assumed these things are true because they're being taught to me during training and re-enforced through coaching for several months. and then one day i decided to get more specific information and i went to the career center and i talked to the woman that ran this little career center of about two or three people, and she told me that in fact one of our two gaming programs didn't have a single student that graduated from it and the other had three. one of them was a truck driver, one of them was unemployed and the other did have an interview with a gaming company. so for several months i was lying to students, telling them

that our program was very successful, we used to say it was the harvard of gaming schools, and, you know, in the end there was nothing behind it. and that's something that every representative is taught. and every representative says. and you know, that's not rogue representatives, that's institutional. >> thank you very much. i will come back to this during our second round. senator alexander. >> thanks, mr. chairman, and thank you for the hearing. mr. hawkins, as i understand your testimony, if the things that you saw that the gao presented were brought to you about a specific institution, you said that that might result in anything from censure to expulsion, is that correct? >> yes. and dr. mccomis, you've got a fairly rigorous set of recruiting, advertising and admissions standards for your

commission. did i understand you to say that of the information that was brought to the gao discovered was brought to your attention that that might result in a -- an investigation of that institution which could lead to a lack -- to a variety of things, including a lack -- withdrawal of accreditation? >> that is correct, senator. >> mr. hawkins, you recommend as secretary duncan does, reinstating the safe harbor, or removing the safe harbor exception to the reform that was made in 1992. i was education secretary in 1992 when that was done. what happened between 1992 and 2002? did it pretty well dry up, the practice of incentive compensation? >> my experience in admission policy at that time is limited. i was not at the association during that time but my understanding of the issue and i'm sure the department of education would be able to give

a better answer. my understanding is that practice did in fact improve and that the number of actions that the department had to take went down fairly substantially. >> but it would take us back to the position of there can't be innocecentive compensation. that would be the rule, right? that's your recommendation. >> exactly. yes, sir. >> dr. mccomis, you accredit an institution, more than 800. how many of the -- what% of the for profit institutions do you accredit, does your organization accredit. >> i don't have that number precisely. >> most of them? >> i would say we accredited 800, so whatever the total population is that. >> you know the number, don't you? >> about a third or so. >> what percentage of the students attend those institutions? >> ore census count is about 250,000 as of june 2009. >> for all for-profit

institutions or just the ones you accredit? >> just for our accredited institutions. >> so generally speaking for-profit institutions, about 3,000 of the post secondary institutions we have in the country but are relatively small part of the students, 9% or 10% of all the students at -- in post secondary education in the united states are in for-profit institutions. and is it correct that most of them are low income, or predominantly low income minority students and somewhat older than other post secondary students? >> our demographic data we collect would support that. >> is it your impression dr. mccomis that the problem here is lack of rules or lack of enforcement of the rules? >> most likely it's a lack of enforcement but it could be a combination of both. i don't know the accreditation standards for every agency. i know that many agencies like my own have very rigorous standards. particularly those that have a predominance of for-profit

institutions within their membership. but it's likely a combination of both. >> are there other accreditation agencies other than yours that accredit for-profit institutions? >> yes. >> how many others? >> six others at the national level and then each one of the regional accrediters also have some population of for-profit institutions. >> but the way i read your standards, they're pretty tough about recruitment. if any of the things that we're talking about were done, were violated, a school could have a tough time keeping its accreditation. >> that's correct, senator. >> mr. chairman, if i could get your attention just for a moment, i'm going through the accreditation, i found something out when i was education secretary 20 years ago is that the education secretary accredits the accrediters basically. in order words, dr. mccomis was saying six or seven accrediting institutions that a for-profit institution and there are 3,000

for-profit institutions might choose among. and his standards looks to me like are pretty tough. and so one avenue for dealing with the problem you've outlined, mr. hawkins has suggested one, go back to the 1992 ban on incentive compensation, but another one is to go to work on the accrediting agencies a little bit as secretary duncan may very well choose to do and say we're going to rely more on you. i think you almost invited that in your comments. you said you'd be willing to work with us if the committee and the congress is worried about this. that we ought to -- we could work with the accrediting agencies, tighten up the rules, improve investigations, enforcement. is that correct? >> yes, senator. my time is up, mr. chairman. but i think about this in this light. we've got 6,000 higher education institutions in the country. one -- together, they become --

they become -- they're the best system in the world. i mean, we -- altogether. that's one of the things the united states does well. i think one reason is because they're autonomous and people have a choice of those institutions and they can go to a national auto diesel college, go to harvard, go to the university of iowa, wherever they want to go and the money follows them. when that happens, you'll have problems and we've seen some of that today. we want to make sure when we do something about this that we don't -- that we separate those who are doing the job of helping achieve the president's goal of increasing the college graduation rate and we don't shoot quail with a canon, in other words, and miss the quail and hit some innocent people, or to use another analogy, if you've got somebody singing out of tune on the grand old opry, you don't cancel the opry, you

cancel the act. so in canceling the act, i'm thinking with the accrediters is a very promising opportunity. because we really rely on them to make sure that the institutions are right, and if they're looking at things like graduation rates, stuntd loan default rate, job placement rates, even passing into professional exams, if we go back to the 1992 rule on compensation incentive that secretary duncan has recommended that those would be two steps that could make a big difference in achieving the goal that i think you've set out for the hearing. thank you for your attention and for your time. >> thank you, senator. senator franken. >> thank you, mr. chairman. mr. mccomis, in your testimony you say that your agency has established, quote, rigorous standards to ensure that schools you accredit, quote, recruit and admit only those students who

are accurately and fully informed about the institution's programs and who are qualified and capable of completing the program in which they intend to enroll. yet, three of the schools found to be engaging in deceptive recruitment in the gao report are accredited by your agency. and also westwood is accredited by your agency. there seems to be a discrepecy here. what are the standards you use to ensure that schools that you accredit, recruit and admit only students who are accurately and fully informed about the institutions? >> senator, as i provided in the written testimony, the actual

standards we require of our institutions, they require that institutions only engage in ethical practices, ensure that they do not make misstatements to institutions or to students, i'm sorry, that they do not make guarantees, that they ensure that students are provided with sufficient information such that they understand program requirements. >> i don't think you're quite answering my question. you say that you have rigorous standards to ensure that the students you accredit recruit and admit only those students who are accurately and fully informed. i understand that the fact that they have to be accurately and fully informed as one of your standards. i'm asking you what your rigorous standards are to ensure that the schools you accredit recruit and admit only those students who are accurately and fully informed about the

institutions when we've seen that of the -- three of the schools that you have accredited were involved in giving false information in the way they -- inaccurate information to prospective students who were not fully informed about the institutions. about the institution. >> so the processes that we use, then, for that assurance process is one whereby through a very high-touch accreditation, on-site evaluation requirement we have, an wall reporting of student achievement outcomes, robust complaint processes, robust interaction in the triad are all methods we use to find out if those rigorous standards have been violated. >> why do you believe -- how do

you explain the discrepancy at these three schools that you accredited were misleading to the gao perspective students that came in? in other words, rigorous means rigorous. and yet, to me, this doesn't seem like there was much rigor in your process. >> so certainly i think it's fair to say that our agency is i guess to quote senator mccok mc might look like clear sprylations of our standards and the important part is that we investigate that fully and sanction the institutions appropriately. >> do you think that perhaps your rigorous standards aren't rigorous enough? >> i don't think that's the case, senator. i think the standards themselves -- >> okay, to me there is a real

discrepancy here. because you describe saying your testimony a rigorous standards to ensure that the schools accredit only those schools that recruit and admit students who are accurately and fully informed and yet we see that the three schools that you accredited in this group ff 15 didn't do that. so what i'm saying to you is i think that your rigorous standards aren't rigorous enough, but you think they are and i don't know how you think they are. doesn't this industry -- what bothers me, i know my time is up but let me ask one last question. doesn't this industry have any interest in self-policing itself? >> i believe that it does, senator, and i think that -- >> is there any evidence you can

provide me that your industry has any interest in self-policing itself? >> the best evidence that i can provide to you is my 16 years of experience of working in the accreditation industry, particularly with for-profit institutions and seeing rigorous self-policing through that process. >> and yet what it clearly was not rigorous you described as rigorous. you said that you have rigorous standards to ensure that schools you accredit were only admitting those students fully informed about the institution's programs and we saw that the three schools that you accredit misled the people that came in there and i asked you about that and you said you are satisfied with the rigor of your standards. and that just seems to be on its face clearly wrong.

and i'm sitting here, i have a responsibility to the taxpayer, okay? i have a responsibility to the taxpayer. and i'm talking to -- you're saying i'm suppose the to take solace from you from your experience in this business when you're the one who just told me that was clearly not rigorous is rigorous enough? explain to me why i should believe you. >> i believe that the standards themselves are rigorous. i'm -- in these particular instances the school's compliance with those standards certainly fell short. >> you don't understand what the standards are. you are saying you have rigorous standards to ensure that the schools you accredit recruit honestly. i'm not talking about the standard you have that they do recruit honestly, it's your

standard to ensure that they recruit honestly. that's the standard i'm asking you about. and you said you were satisfied with the rigor on that. i don't know how you can be. >> you know, as i indicated in the conclusion of my oral statement, you know, certainly our commission and hopefully other accrediters will certainly look at this and find whether or not there can be greater vigilance put forth. i agree with that. >> thank you. i'm sorry to go over. >> thank you, senator. senator bennett. >> thank you, mr. chairman. mr. pruyn i want to start with you by first saying thank you for coming all the way from colorado for your testimony and for your courage in speaking out. i wanted to ask you a question that had been asked by other panel members which you talked about the effect of the training on your pitch and so forth. i wonder whether you'd share with the committee your view about whether the incentive structure, the way you were paid and others were paid contributed

or didn't contribute to the pitches that were made, would changing the incentive structure have made a difference, do you think? your thoughts on that. >> it would help to a degree, for sure. you know, there's a lot that goes into why that culture is there. certainly the incentives motivate some people. but as they're dangling a carrot in one hand, they have the ax in the other. for a while i wasn't enrolling students and i was on probation and threatened with my job on a regular basis. so there's that ace. and then a lot of it is just lies that are withheld from the representatives themselves. you know, there were programs at westwood that would -- were not -- while the school was accredited, the program itself wasn't accredited. one example is our paralegal program.

and i didn't know that for months of working there. and i could give examples like that where i found something out close to the time i quit all day. and, you know, that sort of information isn't provided to the representative, so changing the way a representative is compensated i don't think will have any effect on that. on that portion of the problem. >> when you used to go back, the incentive for a second, when you said it might help a bit, why would it help and if you really don't think it would help to change it, tell me that, too. i want to hear your honest thought about it. >> it would help but i don't think it would fix the problem. i think it would help because some of the representatives that are more rogue, i guess you could say, are really motivated by that piece, so i think it would help rein in some of the more egregious claims. but i still think the

fundamental problem is still going to be there. >> thank you. thanks again for being here. dr. mccomis, do you think -- just to pick up on where mr. pruyn took my question, you learn things, to what extent can some of the issues that he's raising be solved through better public disclosure of these issues that we're confronting? for example the idea they'd have programs, his testimony would suggest, that were not accredited even though the school was accredited. is that sort of information publicly available and widely available? >> the differences between institutional -- >> as an example. the kind of information that anybody would want to know before they even picked up the phone to call westwood and say, you know i'm thinking about your program. >> it would likely take a little bit of digging but i don't know

that i would say it's necessarily readily available. >> would you say it's as readily available as the equivalent information for public institutions? >> yes. in either instance, you know, in this particular case what you're referring to is to what degree does the institution itself decide to disclose that information. so if i wanted to know about whether or not a gaming program or some other kind of program was accredited, the institution's lack of disclosure has to lead the student to assume it's not accredited. what we're mainly focused on is when the school does use claims of accreditation that they accurately describe that status and the agency by which its institution or program is accredited. >> i think i'd make the opposite assumption probably as a student that if the school were accredited that that meant that the programs were accredited, but it doesn't matter.

the question is -- it seems to me it's in everybody's interest that the students, the schools, the taxpayers certainly, that people have access to this kind of information, it just feels to me in these hearings as though it's not out there in a way that makes sense to people. and it would have the -- i would think, based on what mr. pruyn and others have said, it would make it harder to do the kind of stuff we were watching on the television earlier. one last question, mr. chairman, thank you so much. i just wanted to -- for you, doctor, to describe, just to come back to something that senator franken was talking about. can you tell the committee a little bit about what the on-site part of your accreditation process looks like? what does it look like when you're on the ground at westwood or any other schools that you accredit? >> so the process begins through the attendance and accreditation workshop whereby then the

applicant to institution submits a self-evaluation report which is essentially our standards of accreditation in a question format. so the institution will need to go through and answer those questions and provide documentation and description about how they comply with those standards. the role of the onset evaluation team is to go through and then evaluate the information that's provided in that self-study. do some sampling and testing to ensure its veracity to the extent that they're able to. the team is comprised of subject matter specialists for each one of the program areas. education specialists and management specialists for that kind of institution. the self-evaluation report is the key document that they use in going through that process as well as reviews and interviews on-site. report is then generated from that, we'll list any findings of noncompliance and the institution will have an opportunity to respond to that. all that information then goes in front of our board and they make a final decision relative

to the application. >> is it all right, mr. chairman? thank you. can you give me a sense -- i've seen this in the k-12 context, the length of time that that on-site visit takes place generally? >> generally our schools are -- the average enrollment in our school is under 300 students. so we can typically do an on-site evaluation in about two days. >> okay. then just order of magnitude in terms of the process of gathering the accreditation information that you have and then responding to the institution saying we've detected the following problems before you take it or recommend it to the board, just -- can you give us a sense of how often you actually do go back and say we've got this list of issues that, you know, have concerned us and then you're not satisfied by the response that comes back from the institution and

therefore you can't recommend the accreditation? >> well, we've taken 12 adverse actions in the last two years against institutions, but that's the most extreme. so if an institution goes through and submits a response to a team report that has findings of noncompliance, so we'll have an opportunity to respond to that. the board could take a variety of actions, they could defer final action on that and try to get more information, they could place the school into a probation phase again through investigation, so -- >> how many have been put on probation over the last two years? >> oh, i think we on average have somewhere between six and ten institutions on probation at any time. >> and this is out of a total of how many -- >> 800 institutions. >> and how often are they reviewed? >> the maximum accreditation cycle is five years. it's three years maximum for schools that are receiving their first grant --

>> i'll stop here, but the 12 and the six, if you look at -- well, let's stick with the 12. the 12 that lost their accreditation over the last two years, that's out of how many accrediting examinations that you did over that period of time? because it's not 800, right? >> no, we don't do 800 a year. so we would probably do somewhere in the neighborhood of 125 renewal on-site evaluations and approximately another 150 or so of other kinds of evaluations for substantive change or other investigations. >> okay. i'd like to thank the panel and thank you, mr. chairman, for letting me go over. >> doctor mccomis let me follow up on that a little bit. when you do these on-site evaluations, i say to senator bennet and you take action, six to ten over the last couple of years was the figure i heard -- six to ten?

>> no, he asked me how many were on probation. >> yeah. and then you said on others that you take action against. and let's just take the probation. that's not the entire school, that's just the site, is it not? in other words, if you went to a location for the university of phoenix and you found an on-site and you put them on probation, you don't put the whole university of phoenix on probation, you just do that one site. the location. so it's the location. so what you might be putting them on probation might be going to somewhere else. >> we have instances where we have put entire systems on probation. >> and you'll provide that to this committee? >> yes, sir. >> i'd appreciate that. now m hawkins, i heard dr. mccomis say something that caught my attention on a question i believe was asked by senator franken, that the same information is provided to perspective for profit students and other college students.

is that what you said? i think he asked you, senator franken asked you, he said do you feel that the same kind of information is provided to perspective for profit students as other college students and i believe your answer was yes. >> i thought that what the senator was asking me was regarding disclosures relative to accreditation status and progress attic versus institutional would, regardless of the institution you go to. it depends on what that institution chooses to disclose and how they choose to disclose it. there's no requirement at our standards that you have to disclose program attic, as long as you do it truthfully and accurately. >> well, mr. hawkins, what happens when a student wants to go to a private or nonprofit college, one of the ones you're involved in and they ask for that kind of information about

finances and accreditation and all that, what does the school do? do they say you have to sign up first? >> no, that information is supposed to be made readily available. particularly about financial aid and cost. admission officers from the very junior admission officers that we call road warriors, go to high school and visit students all the way up to the dean and vp of enrollment are pretty well versed in all the types of information the student and their family might ask for. so that information is generally readily available. and as i said earlier, if they have questions the admissions office can't answer, standard practice is to forward those type of questions to the people on exam bus who might be able to answer them such as the financial aid office. >> so i see a clear delineation here between what the for profit schools are doing and for the schools that mr. hawkins covers. in terms of how they answer

student inquiries into finances, accreditation and all the other elements of that. it seems to me a lot different. they seem to have a set of standards that they follow where i hear from you, well, each school kind of does it differently. >> i was only referring to whether or not they choose to disclose accreditation status or not. with regard to all of the other instances that you've laid out, certainly it is our expectation that students are fully informed of all obligations prior to signing any kind of enrollment agreement. and that would include tuition, fees, all of the policies, the program objectives, the opportunities that the program leads to, everything that we require to be disclosed to students through the catalog and through the enrollment agreement.

>> we had in our hearing i think our last hearing we had a young woman who had gone to a for-profit school, spent a lot of money, went quite a bit in debt. she was told it was accredited. but when she graduated and couldn't find a job because the for-profit school was accredited, but the program that she was in was not and she was not told that and so a student goes to a school, they call up and say are you accredited, and they say sure. but they don't give them all the information. >> in that particular case, senator, i think that if there needed to be disclosure about the need to graduate from an accredited program in order to obtain employment, that institution had an obligation to inform the student of such. >> well they had an obligation

but they didn't do it. mr. mc -- dr. mccomis, again, student outcomes to judge school quality. according to calculations by my staff, you accredit more than 41 institutions with three-year cohort default rates of 30% or higher. that means at 41 schools where you evaluate quality, more than three in ten students default within three years of leaving school. that includes ati technical training institution of dallas where the default rate was 49.5%, i have the whole list of them here. lincoln technical institute of philadelphia, 42.2%. defaulted within three years. yet these are accredited by you.

so what does that say about the quality of these schools? >> we certainly have standards relative to student loan repayment and we don't just apply those standards in terms of federal financial aid. our standards apply to any kind of loan repayment obligations that students receive, should receive, a fair amount of counseling that goes along with that to ensure the repayment of those loans. we also monitor student loan defaults at our institutions and place them into monitoring mechanisms if they reach certain thresholds. we don't necessarily look at default rates themselves as a direct indicator of the quality of education that's provided by that institution. >> so you don't look at default rates as an indication of the quality of the education? is that right? is that what you just said? >> that is correct. we use other metrics such as

graduation rates, employment rates, where applicable, passing exams for state -- for certification, other indices of student learning. >> so student default rates, just don't factor in your accreditation process? >> i didn't say that, senator. >> what did you say? >> we have standard that's deal with student loan repayment but don't use it as a primary indication of quality of education. >> is it a secondary -- >> we have standard that's deal with it and we look at whether or not institutions are fulfilling their obligations to assist students in providing them with information about their loan repayment obligations. >> so this doesn't seem to bother you and your association that you have 41 schools here that have default rates of over 30% in the first three years, that doesn't -- that -- would that require you to look at these schools or maybe go out and do some more evaluations or

you just sort of look at that and say, well, that's the way it is. >> those rates would certainly put them into a monitoring mechanism. >> are you monitoring ati technical institute of dallas? >> i don't think those are the official rate that's have been distributed as of yet. >> the rates i'm told by my staff, these came out by the department of education last fall. >> the way that the -- >> if they came out since last fall you've had since last fall to look at them. i'm asking you, have you taken any action or investigated or done something about these 41? >> those are based on i believe the three-year default rate. >> yes. >> we're currently still using the two-year default rate mechanism for our monitoring. >> so it's two-year -- you just

only do two-year. >> that's what the law has been -- we've already looked at and our board has begun to talk about as the law changes and the regulations change we will change our monitoring mechanisms to accommodate that. >> this doesn't say anything to you about the educational quality of those schools? >> we have found no -- in our data, we found no correlation necessarily to indicate that default rates are directly related to quality of education, we find there to be a much more substantial connection between graduation rates and employment rates. >> this your written testimony, you make note of the fact you have standards on recruitment, admission processes and advertising. again, i'm interested in how you uphold those standards. the numbers that you provide demonstrate over the prior two

years you conducted 629 on-site evaluations. and that was also in response to senator franken's question. 629. on-site evaluations. you did not find any, quote, substantial noncompliance by our institutions. that's in your written testimony. gao randomly sampled three of your institutions and had adverse findings at all of them. how am i supposed to reconcile those two different versions? you visit them and say you didn't find any substantial noncompliance. gao random pli sampled three and had adverse findings at all of them. how do i reconcile those two? >> the process that we use for on-site evaluation i think is different from the way the gao has investigated. i'm not sure that our standard process would find substantially the kinds of fraud that the gao has alleged has occurred.

the on-site evaluation process through accreditation starts from a vantage point to work with this institution to work with their practices and for them to describe those practices and give us an opportunity to see those occur. we don't secret shop our institutions to see what their recruitment practices are. so in the normal course of an on-site evaluation, i'm not sure we would find those particular occurrences. now having said that, the findings that we do have particularly with respect to advertising and recruitment come to us from a variety of sectors. as i've indicated. so we rely not only upon what the school tells us but hopefully what we find out from our member partners in the triad and student complaints and use that information quite rigorously to understand the activities that occur at our institutions in those interim periods between our on-site

evaluations. as i believe all accrediters should. dr. mccomis, if your process -- and i say this by the way as chairman of this committee, i -- it's become apparent to me we need a hearing on accreditation. and what that means. but if your process doesn't detect readily apparent fraud, who's protecting the students and the taxpayers? we rely upon the accreditation people.

that's what i thought. so if your evaluations don't even uncover fraud, who can we go to to protect the taxpayers and the students? >> i think the congress purposely set up a triad system because accreditation first and foremost is a system to -- designed to evaluate quality of education, not to detect fraud. there are other opportunities within the triad for that to occur. >> i beg your pardon, quality education has nothing to do with fraud? it seems to me fraud has a lot to do with a quality education. >> senator, what i meant to say -- >> maybe i'm wrong. >> the first and foremost goal of accreditation is the evaluation of educational quality at the institution. certainly if we find fraud within that process we're going to act upon it. >> but again, your on-site evaluations didn't detect one. you said we had no substantial noncompliance, gao sampled three and found all three of them. i'm still trying to

understand -- >> we certainly. >> i hear what you're saying, you don't do the investigations that gao does. >> that is correct. >> you kind of go to the school and ask them what they're doing and they tell you and you just say fine. it seems like you accept the school's word on what they're doing. >> we look at other evidence points as well to support that information through, again, student surveys, as i've indicated to the surveys that we did just over the last two months indicated a very high rate of student satisfaction within those processes and rely heavily upon the information we receive. >> again, i read that in your testimony when i was going through it on these student surveys, but i didn't see how those students were picked and whether or not those students also included students who had dropped out. or are these just students who successfully completed the program? >> they're students -- >> i need to know the mix of those student. >> currently enrolled, conducted

in person at the time we are there. >> okay. so no students that dropped out were interviewed? >> that is correct. >> in your written testimony, you say, quote, accrediters must hold institutions accountable to ensure only the highest level of integrity is injected into the student recruitment and admissions process. moreover, all higher education institutions and their accrediters must understand the connection -- my second page here. >> must understand the connection between recruitment and admissions processes and student achievement outcomes. let me repeat that because it gets to what we were talking about earlier. you said that accrediters, that's you, must hold institutions accountable to ensure that only the highest level of integrity is injected into the student recruitment and admissions process. injected into the recruitment and admissions process.

mor over, all higher education must understand the connection between recruitment and admissions processes and student achievement outcomes. it seems to have to do with the quality of education of which you just spoke. can you explain how the practices observed by gao and schools you accredit are consistent with the highest level in the process? how are these consistent with what you just said? a creditor must hold institutions accountable to ensure it's injected into the student recruitment process. how can these practices observed be consistent with the highest level of integrity?

>> clearly, the report puts forth troubling practices. i believe the institutions need to be investigated and held accountable. there are findings of noncompliance of standards, law, violation of regulation. the institutions must be held accountable. >> dr. mccomis, how many accrediting institutions are in the united states that accredit schools. how many agencies? >> i believe there are 13. >> 13. 13. and how many accredit tors are there for the private, the non-profit and public schools? >> that's a question i don't know the answer to, sir.

>> i'm sorry, what was your answer, mr. hawkins? >> i don't know the answer. sorry. >> you don't know the answer. >> just to make clear, when i gave the number 13, there are some that do predominantly for profit and some that do not for profit and for profit. >> six of the 12 companies that were visited by gao have some campuses accredited by the acsc. three were visited twice. anthem college in springfield, pennsylvania. ati career training in dallas. everett college. cap lynn college, riverside and pembroke pines. a college in ontario. westwood in dallas.

seven other westwood campuses are accredited by you. 38 other everest college campuses accredited by you. three others accredited by you. 27 accredited by the accsc. so, what are you going to do about these? >> certainly, as i have expressed, we are interested in finding and gathering additional information from the gao report. looking at ways to begin an investigation. now that the disclosure of the institutions has been brought forward, we will forward the information to our board to begin the process we have for these complaint reviews. i think it's important to know. i'll go back. we have, in the past, taken action that began at a single campus or a number of campuses.

when we have seen there seems to be a problem, we have a place in the entire system on probation. i think largely, if we were to find something similar in these instances, our board would look to take a similar kind of action. >> how old is accsc? accsc? how old is your institution? how long has it been in existence? >> since 1967 as an accrediting body. >> since 1967. how many people work for accsc? >> i think currently, 32 full-time employees. 32? you have 32 employees, you accredit 629 schools, you do on sight evaluations. do you contract that out or something? >> no, senator. >> you do all the evaluations

with 32 employees. >> and volunteers as well. >> pardon? >> volunteers, as well. >> from where? >> the volunteers come from the education sector. they come from the employment sector for subject matter specialists and other institutions. >> so you might get volunteers from the institution that you are evaluating? >> no, senator. you would never send anybody that has a conflict of interest with the institution you are evaluating. >> no volunteers come from an institution you are evaluating? >> no, senator. >> it comes from somewhere else? >> yes. typically, we bring them from out of state so there's no regard for competition. find volunteers without a conflict that might exist along those lines. >> accsc, you receive your

income, how? how do you pay for what you do? where do you get your money? >> the fees of our organization come from the institutions and user fees. >> from where? >> user fees. it's when they apply for a new program. there's a fee associated with the application. it's based upon gross tuition revenue. >> they pay for you to do their accrediting? >> that is correct. i think we need to look into that some more. mr. pruyn. where am i? what did it cost to go to west wood? >> um, an associates degree was

approximately $43,000, bachelors approximately $75,000. >> 40 to $75,000. >> associates about 40 and bachelor's 75. >> $75,000. >> what portion of the students paying the higher amounts were paying $75,000 online? >> all of the students i helped enroll in interviews were online students. >> what were you trained to tell people about the cost of westwood and how did the people you work with handle the cost issue? >> um, our official training would tell students or would have us tell students the cost -- we would phrase it in terms of term. it's $148 per term. the problem is oftentimes they

automatically assume there's two or three terms. in reality, there's five per year. it can mislead the student on the total cost. representatives each had their own methods of explaining the cost. there was no -- i mean, that was the method on telling you is how we were initially trained. once you get into initial coaching and you are on if sales floor, it deviates widely. when i struggled to enroll students, one of the things i was told is my financial or the way i explain the cost of the school and financial aid wasn't very effective. i was saying the school cost $75,000 for a bachelor's degree. i was told to em late other representatives with tricks or that would straight-up lie about the cost of the education. >> what did you do if a student

asked to speak with someone in financial aid? >> they were absolutely not allowed to speak to someone in financial aid. what you saw in the video is pretty much identical. that would come up fairly frequently. our response was that this is step one of the process. you can't jump to step two. we would not let them talk to someone in financial aid. the reason i was given for that policy was that we simply can't overburden the financial aid staff. when that happens, what you saw in the video is basically them pressuring the student into making that up front commitment with the application fee and finding their enrollment documents. it's basically -- what we would have done is use information about that student to use back at them. you heard them say, i can't

remember what the director of admissions said. we would say similar things like, well, i thought you wanted to make a change. i think it's the phrase they would make in the video. we would use the same terminology or methodology to sign their enrollment documents before they discuss it with financial aid. >> i understand you accredit westwood? >> we have some we accredit, yes. >> do you accredit this one in colorado? >> we do. >> you do. evidently, they are in accreditation. >> they have chosen to leave my agency. they are currently accredited. they are in a deferral status with us. they are making application with another agency. >> during the time mr. pruyn you

accredited them? >> we still do accredit them. >> you do. >> yes. >> i guess i'm still concerned you do on sight evaluations. this seems to be pervasive at this campus. it's not just one person, it was everyone. and you said, as i kept repeating that in your written testimony, you said the highest level of integrity injected into the student recruitment and admissions process. how could you do on sight evaluations at westwood when it was so pervasive and not see it? >> we had them operating on a show cause order. we were concerned about the outcomes at the institution. we placed them on show cause. they responded by saying they were going to cease enrollment in six of the eight programs we identified as low outcome. they were indicative of the

practices discussed here. after that action was taken, westwood indicated to us that they chose to make application to another agency. they told us directly it was because they were unable to meet our standards with regard to student achievement. i think it's indicative of a problem throughout with regard to accreditation. i would encourage the committee to look at that as an issue. i would like to follow up on the last point with regard to membership dues. all acreditors receive their sustaining fees from the accredited institutions. it's an opportunity for the process to ensue. it doesn't matter if you are for profit or not for profit. >> yeah. i'm going to look into that. that seems to me to sort of be a

situation that would be rife with a conflict. if i'm inspecting somebody and they are paying me to inspect them and they can leave my organization and take their money someplace else. it makes it tough. >> i think there are legitimate reasons why it happens with regard to transfer of credit. as we talked about here today, there are discriminatory practices. >> i come back to the fact with the stuff going on at westwood, you accredit them. why didn't you just -- an on sight evaluation to see this and say we are taking your accreditation away. bang. why can't you do that? >> i don't know that we identified the specific instances nor do we have evidence of what was brought forth in this particular hearing. we certainly have identified issue that is led us to have concerns about the outcomes.

>> i'm wondering why the on sight evaluation didn't pick that up. just like the other 41 that i mentioned here that are on the -- on that -- on the co-hert of default rates. mr. pruyn. again, i want to get back to one other thing here. that is this idea they are just a few bad apples out there. i keep hear thing that. we have to separate the bad from the good. i asked you if it was at the managerial level or was it something higher up that was filtering down through the organization? the reason i focus on that is to help us determine whether or not there's a systemic problem in the for profit situation.

or is it really just a few bad apples? now, this was -- i'm going to show this chart here because this just came into us yesterday from the largest for profit school in arizona. we know which one that is. it's the university of phoenix. this is a copy of the instructions. it was put on a chart so you could see it. it came from the university of phoenix to their recruiters and people that sign up students. creating urgency. getting them to apply now. remember, students don't buy benefits they buy to ease or avoid pain. finding and burrowing into the pain moves the sale to a close. also, the close of the sale is really just a beginning.

that did you want come from some employee. that comes from the top. the university of phoenix. the largest of the for profit colleges. so, that's why i keep wondering about whether or not we are talking about a few bad apples or are we talking about the entire orchard being contaminated by a business model, by a business model that churns students, that provokes it kind of recruitment and unethical conduct we saw because of the need both to increase profits, to answer to wall street and expectations for

earnings and also the easy availability of taxpayer money. my generation, when i was a young man, we had a lot of for profit schools. '50s, '60s, '70s. these schools were school that is provided an avenue for kids who didn't want to go to a four-year college to get an engineering degree or liberal arts degree, but they wanted an occupation. we had these schools that, well, at that time taught women to be secretaries and stenographers and nurses assistants and taught men to be welders and truck drivers. that sort of blended now. but, that was the idea.

not every student was suited for a four-year college general degree, but they could do an occupation. quite frankly, a lot of the for profit schools did a good job in that area, but also in the '60s, '70s, '80s, in transitioning the work force in america. a work force that was moving from one type of employment to another type. these were older people. older workers. maybe their skill set was no longer needed. they needed to learn a new skill set. the for profit schools provided that and helped us transition from one economy to another. that was then. today, we see a different system and set up with the for-profit schools. because at that time, we didn't

have to many pell grants and guaranteed student loans and all that. but, there were instances starting in the '80s for-profit schools incentivizing enrollments. that led to the nun commission. senator nun and the hearings he held at that time and that led to the higher education act of i believe 1992 or '93. 92? 92. it was absolutely forbidden to have incentive payments for recruitment. well, then, less than ten years later, an administrative ruling, mr. hawkins you pointed this out in your testimony. it wasn't passed by congress. administration approved it for 12 safe harbors, which as you said, you said they gutted,

gutted, what we did in 1992 to close the loophole. i was interested to note in your testimony the inspector general at that time did not concur with that action taken by the department. the fact that you or others asked for, i believe you asked for the under freedom of information act the reasons for the ig not concurring and you were denied access to that information. that raises all kind of questions. none the less, the flood gates were opened, again. now, with congress putting more money into the pell grants, as i said 300 and some billion. we see what's happening in the for-profit schools. this is what alarmed us in the first place. 9% of the students are in our for profit schools.

they are consuming 23% to 24% of the pell grants. that's going up. escalating. and they have 44% of the default rates. get that? 9% of the students, 24% of the pell grants at an ever increasing rate, 44% of the default rates. and, to me it seems when we talk about recruitment and things like that that some say well, private colleges, they do advertising and recruiting. sure, they do. but, at the end of the line, they don't have to meet wall street expectations on earnings. they don't have to pay shareholders. or private investors who invested. so, they don't have that kind of

incentive. so, it seems to me, what we have done with this industry or what's happened in this industry is that with the easy availability on pell grants and higher pell grants and guaranteed student loans and with incentive payments and with a cloak of secrecy about what their graduation rates are. we don't know what the graduation rates are in the for-profit schools. we don't know. i mentioned about how many thousand students this one school had as of march 31. 21,000 more were added, but at the end of june, they only had

144 more students. it raises questions. they had the 14-day thing. well, we know 60%, students there 60% of the time for the term, they get to keep the money. that's why you had the 14-day rule. you stay 14 days, they don't care what happens, you keep the pell grants. guess where it goes? does it help other students? maybe. a lot of it goes for very high paid administrators and executives and a lot of it goes to pay for investors. profits into the -- either into the public arena or into the private investor arena. so, when we look ahead, we say, you know, look, education is too important for the future of this country.

it's education is too important for our students. and facing the budget problem that is we have in the next ten years, we just can't permit more and more of the taxpayers dollars that are supposed to go for education and quality education. and i might add more and more of the student debt they racked up to be going to pay shareholders. or private investors. because they want to increase their profits. i can't blame them. it's profit motive. it seems like what we have done here is we have -- we have privatized the profits and socialized the risk. it's what we saw in the subprime

lending institution and subprime problem we had. so, that's why i'm concerned about this area. it's why a lot of us are concerned about this. i will say that tomorrow i will issue a request for information and document request to 34 profit schools. i believe the information i'm requesting will help us form a more full picture than we have at this time. it's nearly impossible to figure out graduation rates. i want to know. i want to know that one school i talked about in my opening statement, i want to know what happened to the 20,000 student that is enrolled, but didn't show up in june. how much churning is taking place among students? in order to get the pell grants, you get the student loans they paid in. the students are out.

you know i guess there's a lot of things in these video that is got me. but, the one that got me the most, i think, was when the individual that worked for the school said this is not like a car loan. they can't come after you. or the student, the one recruiter, the one recruiter that said, well, i have all this debt i owe to the university of florida and i don't intend to pay it back. here is the difference between the subprime problem that we had, the mortgage problem or the car loan and student loans. that person was right. student loans and car loans are completely different or a mortgage loan. you see, if i have a debt that's on a car, i can walk away from the car. if i have a debt on the

mortgage, i can walk away from the house. but, a student who has a debt can't walk away from the debt, never. never. it is not dischargeable in bankruptcy or any other way. that debt follow that is student the rest of that student's life until it's paid off with interest. they can come after your social security checks, believe it or not. if you have defaulted on your student loans. they can come after your paychecks. they can dunn your paycheck when you get a job later on. you are married with two or three kids and all of a sudden, the government comes in and takes your money back. it's being done today. there's a difference. the difference is students cannot get rid of the debts. i don't know how many of them know that. what the interest rates are. so, i would like to thank the witnesses for being with us today.

we'll leave the record open for ten days. witnesses may submit statements for the record or supplement statements. i think what we have seen today from the gao and the witnesses is very concerning. i have a statement from senator durbin to insert into the record at the end of the hearing without objection. 15 of the 15 -- let me repeat. 15 of the 15 schools gao investigated found instances of fraud, deceptive practices. 15 out of 15. again, this is unacceptable. especially when the students they are serving need the greatest help. these are the lowest income students. maybe they don't have parent that is went to college. they would say wait a minute. let's take a look at this and examine it. they sign up. school gets the pell grants. that's another misnomer.

students think they get it. it goes to the school. so, they come from lowest income families. yes, they want a better life. i continue to be amazed by the questionable and outright illegal practices occurring in this for-profit sector mr. pruyn talked about. critics say it's only a few bad apples. i question, is it the whole orchard. does something need to be done systemically to make the for-profit institutions viable and an asset to society rather than a debit to the students and taxpayers. so, as i said, i will issue a request for information and documents tomorrow. i believe i might issue more

later on. i will tell you, we will have additional hearings in september. not in october. probably in november. maybe even in december. i intend to follow this trail to wherever it leads to get as much information as possible. because we have got to get to the bottom of this. mr. hawkins, you mentioned the fact that the department is issuing new regulations now. well, i put out a statement yesterday saying fine. it's a nice first step. but, that's a regulation. another administration could come in and overturn that regulation. i'm not certain regulations will suffice. i believe, and i think where we are headed is very clear cut

legislation that can't be overturned by another administration, that can't put in quote safe harbors and say it complies but really tightly designed legislation to correct the practices and, quite frankly, because of the testimony this morning and the information that we get into our committee, i believe we are going to have to take a look at accreditation and different accrediting agencies, how they work, what they can do, what their power is and how they fit into this overall structure of making these schools accountable for what they are doing. so, we are going to -- you may be back here again, i say. i don't know. we are going to look at the accreditation process also. so, the hearing of the health

committee is adjourned. we'll have another [captions copyright national cable satellite corp. 2010] >> tonight, tim geithner discusses the financial health of the financial critic of the social security's programs. the justice department announced the arrest of several people with ties to terrorism. and bill gates discusses his technical worked at the afghan ideas festival. >> jimmy carter, for every day of his presidency, wrote in his journal. this is a very intimate look at his white house years. this is super top-secret, and

almost everything bob woodward does is meaningful. this will be one of the biggest titles around. this is now sweeping memoir, this is talking about the specific points in his administration where he had to make major decisions. >> learn more about these and other books coming out in the 2010 fall book. v. for the latest in nonfiction authors and books, watch "book tv." >> today, treasury secretary tim geithner said social security will remain solvent until 2029. that is the finding of a report by the social security and medicare trustees. this is the first year the social security program is spending more than it takes in. geithner also discusses the new health care law's impact on health care. he is joined by kathleen

sebelius and the labor secretary at this 20-minute briefing. [captioning performed by national captioning institute] >> the social security and medicare board of trustees met this morning to complete their annual financial review of these programs and to transmit their reports to the congress. i want to welcome my fellow trusties and acknowledge the hard work and dedication of the chief actuary, in particular. trustees and acknowledge the hard work and dedication of the chief actuaries in particular, steven goss and richard foster. 75 years ago this month, president roosevelt signed the act into law creating a program that tens of millions of americans rely on to help them retire with economic security. and 30 years later, president johnson signed amendments to that law creating medicare,

providing health insurance for older americans. and this year, president obama signed into law the affordable care act. this act gives americans more control over their health care decisions, will improve the quality of health care and will help address insurance company abuses. this law also takes major steps to bring down the rate of growth in health care costs over time. the positive impact of these reforms is made clear by the trustee reports. medicare's hospital insurance trust fund or h.i. is now expected to remain solvent through 2029, 12 years longer than projected last year, a record extension of the life of the h.i. trust fund. the 75-year shortfall has been reduced from 3.88% of taxable payroll to just 0.66% of taxable

payroll and projected costs for the medicare supplementary medical insurance program over the next 74 years expresses a share of gdp are down 23% from what was projected in last year's report. now, in addition, the affordable care act also improves social security's finances. while the recession has taken a toll on social security in the near term, the long-term outlook is nevertheless improved as a result of the affordable care act through provisions that are expected to shift some compensation over time from health insurance to earnings. these are very encouraging projected improvements in the financial position of these critical benefits for americans. now it's important to note that for the benefits of these reforms to be realize, they have to produce large improvements in efficiency and productivity, they have to be allowed to work.

congress will stick with them. now, of course, both social security and medicare still face considerable challenges, but today's reports are evidence that with resourceful and responsible policy making, we can achieve very substantial improvements in limiting the rate of growth of health care costs. thank you. >> today, as a trustee for the medicare trust funds, i am pleased to join my colleagues to report that the outlook for medicare has indeed improved greatly compared to this time last year. thanks, secretary geithner said, to the pass a affordable care act. the trustees' report backs up the finding of the report issued earlier this week for the centers for medicare and medicaid services and concludes that the reforms in the new

health care law will extend the solvency of the hospital insurance trust fund by an additional 12 years until 2029. also shows these reforms from developing new models of care would to rae warding quality to crack down on fraud, waste and abuse, have kut the projected 74 year hospital shortfall as a share of taxable payroll by more than 80%. for the supplemental medical insurance trust fund, which helps medicare beneficiaries pay for services and prescription drug, the report projects a balanced budget for the foreseeable future, but for both trust funds, the report shows that we have a lot of work left to do. to achieve the gains projected by the report, we must continue to work hard with our partners across the country to implement the reforms in the affordable care act effectively and on time.

as we work to secure medicare's future, we're also committed to honest accounting. and that's why president obama and i have asked congress to pass a permanent fix to the sustainable growth rate formula for doctors. so our projections can be based on the most accurate information. that's with i'm pleased to announce that last month, i re-established a panel of experts that will review these reports with a special focus on our long-term health care spending. the panel will hold its first meeting in the near future so its recommendation can be incorporated into next year's report. medicare, as secretary geithner has said, is a promise to all americans made 45 years ago that if you work hard you can retire knowing that medical bills will not force you into bankruptcy. today, we've taken another very critical step towards securing that promise. the report demonstrates to the american people that we won't

stand by while medicare's future is threatened. as we move forward, we need to cannot our work to strengthen medicare for today and tomorrow. and now i'll pass it over to trustee secretary hilda solis. >> thank you, i also want to thank everyone for joining us today. today, we heard from the long-term outlook gore social security and medicare have improved relative to last year. much of the projected improvement in medicare finances is tao to the program changes under the affordable care act which will take effect in the coming years. this highlights the importance of making every effort to ensure that the affordable care act is successfully implemented. due it a deeper and more prolonged recession than was projected last year, unemployment remains near its peak. loss of wages, or income has a severe impact on the livelihood of many american workers and their families. it also erodes the payroll tax

business and revenues needed to pay current program benefits. as baby boomers, that generation, workers are retiring faster than the number of covered workers, we expect that the annual gap between social security tax receipts and benefit expenditures will begin to grow rapidly beginning in 2015. while trust fund earnings are projected to cover the gap for a few years, ultimately the trust fund assets will be needed. we know in particular that the social security disability insurance trust funds are projected to be exhausted in 2018. new policies should create more jobs with better pay that revitalize the medical class. more good paying jobs would mean more revenue for these programs. new policies are also needed to enable disabled and older workers to continue to working both to increase their retirement savings and to delay collecting thus optimizing their social security benefits. the affordable care act adds

tens of millions of additional people to the health insurance marketplace. policies are needed that reign in cost even as we expand and promote quality, not just for medicare but for everyone. a more efficient health care system would make medicare's problem problems more manageable. we all know they provide a safety net for retired workers and beneficiary, yet financial challenges facing social security and medicare remain. this administration looks forward to hearing the guys phys cal kmigs's recommendations on ways in which we can address the imbalances between income and cost to the program. by work together we can find solutions that ensure these programs are sustainable so america's workers can continue to count on them in the future. thank you very much. >> in a 1934 fires side chat, president roosevelt described

his proposal in this way. i believe what we're doing today is a necessary fulfillment of what americans have always been doing, a fulfillment of old and tested american ideals, he then went on the to compare his legislative proposal with the imminent renovation of the white house complex. wooirl while i'm away from washington this sum, a long-needed renovation of the addition to our white house office building is to be started. but the structural lines of the old executive office building will remain. the artistic lines of the white house buildings were the creation of master builders when our republican was young. the simplicity and strength of the structure remain in the face of every modern test. but within this magnificent pattern, the necessities of modern government business require constant reorganization and rebuilding. it is this combination of the old and the new that marks orderly peaceful progress, not only in building builds but in building government itself. our new structure is a part of

the fulfillment of the old. it is in this spirit of rebuilding that president obama established the national commission on fiscal responsibility and reform that in december will make recommendations for social security. it is in this spirit that all americans should participate in a civil zee bait about our expectations of social security and our willingness to make those expectations a real at by what we pay. i have two wonderful children who have enter the workforce in the past year. one is being called up for military duty in october and the other starts teaching inner city children next week. what is important about the debate and its resolution is that they and their friends and millions of other young americans have confidence that we will continue to honor the great intergenerational contract that is social security. to help this debate stay civil and fact based, i do want to ask

the members of the media who have joined us here today to be very precise in their descriptions of the phrase trust fund exhaustion, while the osgi fund will reach exhaustion in 2037, that does not mean there will be no money left. what it does mean if congress takes no action at all, we would be able to about about 78% of our current level of benefit payments that would be a bad result, but a far cry from having no money for benefits at all. this misreporting has caused many young people to despair about social security and so i urge all of you to be careful with this critical and often misunderstood term of art. with the 74th anniversary of the social security acted just nine day dayes away, the agency about revitalized despite the huge work loads caused by higher unemployment. compared to four years ago, productivity is up, backlogs are

down and in an aging i.t. infrastructure is being replaced by state-of-the-art systems ant very best electronic services in the federal government. i'm excited about the next 74 years of social security and i think all of you should be, too. thank you. >> with that we'll take a couple of questions. down front. >> secretary, and any of you, actually, do you expect a civil debate over what the deficit commission seems to be leaning towards recommending, which is of course raising the retirement age slowly? do you expect the civil debate when even a lot of democrats consider themselves tour protectors of social security? >> well, we're going to have to have a debate and we can always hope it will be civil. but i think you're a little ahead of the commission. it's clear that the commission has been asked by the president to take a broad look at our

long-term fiscal trong problems an to lemd changes that will bring our commitments and our resource more into balance. and what he did, he asked those men and women to step away from politics and take a careful look at how best to restore gravity to our fiscal position and they are in the process of sorting through what it's going to take and how best to achieve that, but we don't have any sense today and i don't think they do yet about where they're going to find consensus an what mix of proposals they're going to introduce, certainly no spirvgs at this stage. >> so we're looking forward to their recommendation, we'll have a chance to reflect on them as will the country as a whole and ultimately of course the president and congress will have to come together and continue the progress. you're seeing at lot of progress today in these report, but continue the progress of again restoring balance, restoring gravity, restoring

sustainability to our long-term fiscal commission sthanchts easier for the trustees? >> what would. >> if the commission would recommend raising the retirement age? >> again, people are are going to have different views on what is appropriate, what the right mix is. the challenge for the commission is to try to find way to begin to build a consensus among both republicans an democrats an how west do to do it. thooes are national challenges that have have to come with bipartisan solutions. we've got a terrific model in the commission that president reagan established to undertake a previous set of challenges in social security. the best model, most successful model of the commission, i think we've had is on that basis of that model that the president formed this commission. and they are working very hard and they are terrifically capable people and we're very hopeful they're going to find a way to begin helping us build a consensus on making changes. >> you had a once in a

generation opportunity with the health care law it restore solvency and today you're tagging this good news about an extra 12 years. but did you miss an opportunity to set the program solvent? i mean to set it on a real path towards solvency. 12 years doesn't seem like a lot when this type of legislation comes around very seldom. >> i'll let the secretary speak to that, but let me just make the following initial point. if you look at the full scope of these reports an you look at what cbo itself provides in terms of its analysis, if you look at the analyses presented by a wide range of independent economists and experts, these are very, very, very substantial improvements knit rate of growth and health care cost that make a very substantial improvement in our long-term fiscal position, much, much larger than anything we have considered, much less embraced as a country over the last several decades.

so it's a very promising set of reforms. as we know, the future sun certain. these are long-range projections and those require that we receive substantial improvementmeimprovements in efficiency and productivity. but look at the full mix of the change in estimates and you'll see a very substantial reduction in projected growth in health care costs, on a scale that make a, very substantial improvement in that piece of our long-term fiscal challenges. >> well, i would just add to that economic picture the fact that an underlying assumption of the affordable care act is a true transformation in the delivery system involving health care in this country. and not only the productivity increases but the notion that we are changing emphasis and focus into entirely new areas on prevention and wellness, on

increasing quality of things that currently we pay for and pay way too much for. so if indeed those transformation are as successful as the pockets of those practices indicate, if we can really bring these to scale and drive that sort of not only productivity but quality across this country, some of the underlying assumptions will be much more robust. cbo, for instance, doesn't even score prevention and wellness because they don't know how to do that. if we have fewer diabetic, far less chronic disease, 20, 25 years from now, these projections will look very, very different. if we cut dramatically into the 20% of the americans who smoke and end up therefore with far fewer diseases, so there are a number of initiatives that are contemplated by the passage of

this act that don't show up in the economic projections at this point but we think hold enormous promise for far lower costs well into the future and a far different rate of growth of overall health care spending. >> are you concerned that the economic performance throughout this year and into 2011 could impede the 12-year extension? >> not that i know about. i mean i think that it may have more impact on the social security fund overall than the medicare funds and i think there's a balance in that program, but we, given the fact that we are likely or hopefully have seen the bottom at least of the economic downturn and are now slowly recovering, we're optimistic that these targets can be met. >> last question.

up here. >> hi, secretary sebelius, can you get into a little bit more >> we continue to provide cautionary notes. the president has suggested very strongly supports a permanent fix of the s.g.r. he includes that in his budget each year but feels congress really needs to tackle this as a long-term solution, because if you look at the projections just over the next three years, we would have a 32% cut of medicare

provider rates which would be untenable. if you want to destroy the medicare program, the fastest way to do what would be to drive providers out of the program, and that kind of cut would do it. we intend to work on not just the short term but the longer- term. congress is intent on finding and paying for fully the s.g.r. having said that, the impact on the trust fund would not be significant. we would have other areas to pay for those expenses. the report reflects correct law. >> thank you very much, everyone. >> thank you. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute]

>> tomorrow, the government releases the monthly unemployment figures for july. following the release of the jobs report, the bureau of labor statistics commissioner will talk about the new jobs numbers at a hearing of the joint economic committee. watch live coverage at 9:30 a.m. eastern time on c-span2. our attorney general eric holder today announced the arrest of somali americans charged with ties to the terrorist group al- shabab. based in somalia, they have claimed responsibility for recent bombings in neighboring uganda. he is joined by officials from the fbi and several u.s.

attorneys. this is 15 minutes. >> good afternoon. today, the department of justice on sealed four separate indictments, charging 14 individuals with terrorism by elections for providing money, personnel, and services to al- shabab, a terrorist group operating in somalia with ties to al qaeda. two of these individuals have been arrested. these indictments and arrests were in minnesota, alabama, and california, and they shed further light on a deadly pipeline that has sent funding to fighters of al-shabab from across the united states. the indictment was unsealed in minnesota charging 10 men with terrorism offenses for leaving the united states to join al- shabab as foreign fighters. seven of these defendants had previously been charged with either indictment or criminal

complaint. the remaining three in the district of minnesota, a total of 19 defendants have been charged in connection with this investigation. with this investigation. nine of these defendants have been arrested in the u.s. or overseas, five of whom who have already pleaded guilty. 10 of those charged are not in custody and are believed to be overseas. additionally, two u.s. citizens and former residents of alabama and california, have been charged in part cases for providing material support to al-shabab. both a believed to be in somalia and fighting al-shabab on-of. according to reports, one of them has for -- has appeared in several propaganda veos which have been distributed worldwide

and he is believed to be a ranking member of the al-shabab organization and has operational responsibilities. finally, another to individuals are both naturalized u.s. citizens and residents from minnesota and were arrested by fbi agents earlier today. they have been charged with providing material support for terrorists among other offenses. the indictment alleges that these two women raised money to support al-shabab and went door- to-door and-in somalia and communities in several locations in the u.s. as well as in canada. in some cases, these funds were raised under the false pretense that they would be used to aid the needy and the poor.

if you choose this route, you can expect to find if you choose this group, expect to find yourself in a jail cell or as a casualty on the battlefield. we are seeing an increasing number of individuals, including u.s. citizens who have become captivated by the ideas, ideology, and have carried out steps to carry out terrorist objectives either read home or abroad. t home and abroad. this is a disturbing trend that we have been intensely investigating in recent years and will continue to investigate and will root out. we must also work to prevent this type of radicalization from ever taking hold. members of the american muslim community have been and continue to be strong partners in fighting this emerging threat. they have regularly denounced terrorist attacks and those who carry them out. they have provided critical

assistance to law enforcement to help disrupt terrorist plots and combat radicalization. these individuals have consistently and correctly expressed deep concern about the recruitment by terrorist groups. many members of the committee have taken steps to stop recruitment of the youth by terrorist groups. recently, a group of prominent american muslims joined together in a video to repudiate the tactics employed by radicalized militants via the internet. there needs to be more recognition of the losses suffered by the muslim community here and around the world. many of the victims of terror attacks by al-shabab, al qaeda, the taliban and other terrorist groups are innocent muslims. they are innocent. i want to applaud the tremendous work ofhe fbi terrorist task

force for their wk on ese cases. i also want to thank the d ut ministry of justice, the state department including the u.s. embassies in the united arab emirates and yemen, the hague and the department of defense for their assistance in the minneapolis cases, in particular. these indictments and arrests would not have been possible without the critical contributions from the national security division and the u.s. attorney's offices throughout the country. they are represented by individuals on the stage with me today. i would now like to turn it over to the fbi executive assistant director.

>> thank you. good afternoon. today marks a significant milestone in our efforts to bring justice to members and supporters of the terrorist group al-shabab and to deter others who would seek to follow their example. as attorney general holder just noted, these arrests give us greater insight into the evolving nature of the terrorist threat we face. terrorist organizations such as al-shabab continued to radicalize and recruit u.s. citizens and others to train and fight with them and to provide support for their violent activities. our success in identifying and charging these individuals is due to the dedicati and commitment of the intelligence committees, specifically the joint terrorism task forces of san diego, mobile, and minneapolis. on behalf of the fbi, i want to thank the agents, analysts, the

offices, of all of the federal state and local agencies that serve on this task forces. they have worked diligently and tirelessly to obtain and share information and carefully pieced together each element of these cases. i would also like to join the attorney general in thinking our international partners. the cooperation of our citizens is critical to our efforts to prevent radicalization activities of terrorist groups. the fbi is extremely grateful to the members of the somali- american community. i finally went to join the attorney general in recogniz ing and thanking the u. attorney's offices in diego, mobile, and minneapolis. while today's indictments and arrests are significant steps, they remind us that our woris

not finished. the fbi will continue to work side-by-side with our partners to see that justice isone and that the u.s. remains safe. thank you. >> in light of that and in light of the ongoing recruitment, how you assess the threat from al- shabab directly against this country? >> we do not have any direct evidence that they are threatening the homeland o. the fact that they have expanded their range of operations outside of somalia to uganda gives us pause and we are monitoring it. >> since the first indications that people in the u.s. were willing to go to somalia for support al-shabab until now, do

you think that you have a pretty good handle on the extent of their recruitment and the willingness people inthe u.s. to join or argue still in the early stages of identifying this? >> i think we have a etty good handle on it given the upper jeffords would have made to the somali community in the u.s. given the efforts we have under way, the good work that is being done by the joint terrorism task forces here and our work with our foreign counterparts, we have a good sense of what we are facing. it does not mean that we are not concerned orhink this is something that we have totally under control. it is something that ll require constant vigilance and a great deal of work. >> from the beginning when the young men from minnesota were found a couple years ago, we have heard from the fbi that it

appears that most of this was nationalistic. people recruiting people because their country was invaded. what has changed in the intervening years? >> early on, if you have been following it, there have been waves of travelers. we have a good handle on those waves in 2007 and 2008 and 2009. there are indications from our workforce that the initial motivation was based more along the lines of nationalism with the event with ethiopia and african union forces, but it has more overtime. i think this third superseding indictment where we have added five additional defendants, three of whom who are no, i think we have a good handle on our traveler cases. frankly, we have done some

pretty good work in the somali community in minnesota. it is a vibrant community. it is the largest in the u.s. and they have been very helpful because bottom line, it is their kids that had been recruited and inome cases ended up as casualty's in somalia. parents are parents and they are very concerned and we have had a good effort. to answer your question, that may have been initial motivation but it has morphed into other things. >> is there anything unique you can put your finger on as to why al-shabab had so much success in recruiting americans decide what you mentioned just now? it seems like they are getting a lot of records. >> if you look at the indictments, there are indicators about their recording techniques and the demographics of the communities that they

have been targeting. it is young men, young people. very difficult points in their lives, just like any normal american teenager and there are certain hopes they can aw people into and they have been used. that has been a conrn for us. that is probably the underlying basis for any success that we have had with our somali community. >> you mention the risk that individuals who go to somalia to fight risk being a casualty on the battlefield. are you signifying a ramped up efforty the u.s. to combat al- shabab? >> what i meant by that statement was those who decide to join the fight run the risk of ending up either in u.s. jails sell or a casualty on a battlefield. theyun the risk of being killed by those who are opposing

al-shabab in somalia. i was thinking more about the fight over there as opposed to any efforts on our part. >> related to that, do you know if any or how many of these individuals indicted today have been designated as special local terrorists which would allow the u.s. to target these individuals? it is a chaotic environment and there have been reports in the past of u.s. drone attacks against terrorists. are these people potential targets for u.s. attacks? >> i would not want to comment on any possibility that the action of the u.s. or get into things that might be intelligence-derived. >> but is there any evidence that any of these people have a

beef against the u.s. or had plans to come back and do anything here or did they want to fight over there? >> can you tell us a bit about the involvement of t uae and yemen, what was their role? >> a lot of these investigations, and there are many more not including today, involving some of the somali- american community. those tentacles reach overseas and we continue to work with our partners overseas and in this particular instance, the attorney general noted, they have been particularly helpful. we are extremely grateful for their cooperation. >> they are flying through these countries in some cases? >> i will not comment on the specifics of an ongoing investigation. >> you mentioned that there is a thought that omar hamami is in a

leadership role. do you know in what capacity? >> i did not want to go into things that our intelligence derived. i feel safe in saying he has assumed an operational role in that organization. >> my team play some role and the decision to carry out the bomb i the inn uganda? >> there have been reports that he has been a key financial facilitator. >> i do not want to go beyond that which i have said which is to say he is an operational person in that terrorist organization. >> what do you mean by operational? the one to define that? >> nope. [laughter] >> there is a somali element and there are cases where

individuals have no relation to this group. >> he has made those videos and those are of concern. that is what it is particularly important that recent efforts done by leaders of the muslim community on video to counter the message that he has been spewing was so important. the voices need to be heard from the other parts of the muslim community that really represent wi that community actually is. we are talking about a fringe part of the community and that has to be recognized and that has to be understood for what it is, people who are trying to kill innocent muslims in whotion to those pople they view as westerners. these people are murderers and we will hold them accountable for their actions.

>> coming up, microsoft founder bill gates it discusses it charitable work at the aspen ideas festival. treasury secretary tim geithner discusses the obama administration's fiscal policy, and the proposal to reduce the federal debt by senator john thune. >> we cannot go around suspecting and expecting double dealings and crockery. you cannot run a democracy like this with any kind of satisfaction in the absence of that base of honor and justice. >> watch this candid interview with new jersey rep millicent fenwich, the outspoken congresswoman, and inspiration for doonesbury character.

that is free online at the c- span video library. it is washington it your way. >> now microsoft founder and chairman bill gates. he is at the annual aspen ideas festival to talk about his charitable work in education and health care. as chairman of the bill and melinda gates foundation, he manages the charity's $43 billion endowment and funds health care and education initiatives around the world. this is one hour. >> >> welcome, bill, to aspen.

it is nice to have you here for the first time. bill gates. [applause] this started with some pretty downbeat talks from neil ferguson and others. i will ask you to uplift us a little bit. tell us what you are optimistic about. >> well, i am optimistic about most things. if you avoid getting close to u.s. politics, that helps to be more optimistic. [laughter] if you look at the last 50 years, what has happened to the world in terms of health, education, women's rights, almost any metric that you can pick, in fact, every metric that goes into the human development index, there has been

unbelievable improvement. one of my favorites is the under five childhood death number, which in the 1960's, 20 million children die. now the number of kids in that group, because of the increased population, is up 40%, but the number who died is under 8 million. you have almost a factor of three reduction in the rate of death, and vaccinations explain about two-thirds of that. ut two-thirds of that. we can look and see things that kind of scare us we see some things that scare us. literacy in africa. we are making progress. that is tough and many areas. it sometimes feel like it will not happen. but whether it is advances in medical science, information technology, advances in energy- type systems, there is a lot to be optimistic about if you look

at it the look at it the right way. >> what about education in the u.s.? is that going in the right direction? >> no. that is a tough problem. since 1970, a lot of resources were put into the system. that is coming teachers' salaries, particularly because of a generous pension piece, were increased to be well above the average. there were below the average and there were increased to be above the average and the number of adults was more than doubled. the adult-student ratio was increased by a factor of two. >> does that mean teacher salaries did not increase? >> some went into the classroom. the average class size today is lower than it was back then but much of it went into special needs education where you have traditionally mandated resource

intensive activities. some went into counselors and some money to security guards. there are often arguments about which part of that has merit and which do not. it is when you take a charter schools, they get a much higher percentage of their adults in the classroom teaching as compared to typical schools. >> what can we do to improve education in the u.s.? >> if you are motivated to learn, if you really want to learn, this is an amazing time for everyone. you have access to wikipedia, the latest information on the web. there is a new web site called khanacademy. he does 15 minute tutorials. there are college lectures out.

if you are motivated, you can go to the electors. the average quality of a lecture is greater than any individual university because it brings together 15 different universities and it brings together the best teachers, the best teachers from mit, the best from stanford, the best from berkeley. it is a phenomenal thing. you can get online, talk to other people about what you agree with or what you are confused about. you can hire a tutor for about $28 per hour for any of your scientific misunderstandings. the learning in parliament at one level is showing the potential that every student will be able to assess their skills and understand what part of nafta why not understand. there is great promise if we use technology well. more importantly, is to take the

ferry best practices, take the great teachers and a great environment for teaching that have been created and learn what is there and spread that out through these rest of the system. there is a small part of the system that is high-performance charter schools that proved that for less than what we spend on average for students in the public school system, that you can get over 90% of the kids to go to a four-year college and have incredible learning in any metric you want, creativity, they can add and subtract, it is a phenomenal experience in the most deprived inner-city kids are the ones that it seems to work well for. >> should we have competition in education? >> i am a big believer in charter schools.

charter today, high-performance charter, to%, the best over a 15 year. it is going up 10%. you are going to have 90% of the students in public school. you have to believe that changing the personnel system, using on-line technology, and spreading best practices from charter into those schools, that is where you get the dramatic change. we should keep growing chargers. there are some low-performing charters that need to be shut down that messes up the overall statistics from the charter movement. we need people that are good to grow as fast as they can. the heart and soul of this issue is going to be about how teachers are encouraged to improve, how they are told what

they are good at, given positive feedback that is the management challenge and personal challenge of taking great teachers and having more of them. is the big win. >> you are about to address the american federation of teachers which is one of the two big unions, probably the more reform oriented of the unions. between us, what will you say to them? [applause] -- [laughter] the union has reached out and gotten involved in a number of these reform efforts. our foundation has four districts with both the district and the union has agreed to really measure the teachers and give them feedback and where they are short in terms of keeping the classroom for helping the student who is behind or helping the one that

is ahead. there are ways you pick the dimension that somebody is better at it and give them the way of transferring that knowledge. in the four districts, two of those are ast districts. i praise the union leader who took the part of the contract that said you have to notify somebody weeks in advance if you are coming into the classroom and you can only be in the classroom for a period of time, they're changing that to say there is a web came in there that is taking video and if you have a part were don't think you did a good job, remember what time it was cannot show it to someone else and get advice. look at something you did well and put it into a library of best practices said teachers look at teaching various concepts and they will see who is the best and learn from it. it requires a radical change to say that the evaluation system

is not going to be capricious and high overhead. what you have but the fault is an evaluation system where you just have to know how many years to have been in the job and if you have a master's and you know the salary. there is no other factor that has to do with how well your kids are doing and the data shows that the top quartile of teachers gives you about two- years of learning and the bottom quartile gives you close to zero years of learning. the variants is mind blowing. it is a factor of 50 difference between the best and the not best in terms of how much learning. >> why don't we get rid of the worst? >> once you really evaluate people and give them a chance to improve, all personnel systems that are in most areas to include that if you have been

given enough chances, it is not a profession for you. we tend not to emphasize that because the big win isn't the five pat -- 5% or 10% that do not belong taking the people that do want to do well but are not doing a few things well, that is where you get the improved achievement, not so much the piece about the bottom. but that is part of the natural personnel system that you would have some of that with the appropriate safeguards. >> on your campus tour, you talked about doing something in life that really matters. how do you get more young people to believe in that? teaching is a noble profession. >> certainly, we are in a period where demand the students for the greatest -- with the greatest opportunities to go in to teach for america which is

the option for them if they did not kick a teaching certificate, the demand exceeds the number of positions. it is stunning to see that at harvard and yale you have somewhere between 10% and 18% of the class applying for teach for america and one of the four of those, there was enough capacity to let them in. to compound that, not only is it a finite number, but in many states over the next few years, there are going to be a significant number of teacher layoffs, anywhere up to about 6% of the teacher workforce will be laid off in some states. the way the rules work, it is not based on who the best teacher is, it is based on who has the most seniority. you have a lot of young teachers who come in and put more time into the classroom and by year

three, they are getting better results on average than the veteran teacher is, you have big variants of there. this fiscal situation is going to make things tougher and some people went into the profession and are finding themselves temporarily not having a job. overwhelmingly, we need more young people and talented people to go into teaching. part of the reason the u.s. had better teaching in the past was because it was the injustice that women did not have equal opportunity. you had a very talented women going into teaching. it is better that they get to pick any profession they want and most professions, there are very few left where it they do not have opportunities. that means that teaching has to get serious about identifying those best practices. you cannot rely on natural talent as you did in the past.

>> how can technology help us with teacher assessment? >> in an area like math, you take the math scores of the kids coming in and the math scores of the kids going out and see if they improve. we can correlate that with other metrics. if you go to the students and ask them to questions, does your teacher use class time well and when you are confused, does your teacher help you out? if you ask those two questions, you get a result that correlate perfectly to the test results. the students know are the good students -- who the good teachers are. it is different from the teachers they like. they're not kidding about what will happen when they go into that room. if class is column. if they're not paying attention. if you visit a charter school,

that is when you see that teachers are really tracking everybody in the room. it is not just small class size, they are up to 35. they learned the technique, which is not a natural thing, to behave to learn how great teachers. they found examplars and worked hard at it into pieces of what they found. the high-performance charters are doing that in a systematic way. they are bringing teachers in and do team teaching with huge numbers of students and make that work. it can be done. we also take the with the cameras, we survey the parents, we survey the other teachers. all of these indicators line up and so for reading, math, you have a very strong data that are constant and we think that

teachers are involved in these are willing to tell the other teachers. this worked well, it helped me identify where i need to improve. we care about it. this is a good system. that is the goal. we do not that the teachers out of the -- or use a web cams and electronic surveys but if we do not get some evangelizing, we are done. you cannot change this without bringing teachers as a whole along and a majority being enthusiastic about what you're up against. >> do you worry about the criticisms of teaching to the test? should we teach to the test? >> 8% of the things that are called teaching to the test are actually defined. actually defined.