[Senate Hearing 112-888]
[From the U.S. Government Printing Office]


                                                        S. Hrg. 112-888
 
                  INNOVATIONS IN COLLEGE AFFORDABILITY 

=======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                                   ON

             EXAMINING INNOVATIONS IN COLLEGE AFFORDABILITY

                               __________

                            FEBRUARY 2, 2012

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions

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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                       TOM HARKIN, Iowa, Chairman

BARBARA A. MIKULSKI, Maryland              MICHAEL B. ENZI, Wyoming
JEFF BINGAMAN, New Mexico                  LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington                   RICHARD BURR, North Carolina
BERNARD SANDERS (I), Vermont               JOHNNY ISAKSON, Georgia
ROBERT P. CASEY, JR., Pennsylvania         RAND PAUL, Kentucky
KAY R. HAGAN, North Carolina               ORRIN G. HATCH, Utah
JEFF MERKLEY, Oregon                       JOHN McCAIN, Arizona
AL FRANKEN, Minnesota                      PAT ROBERTS, Kansas
MICHAEL F. BENNET, Colorado                LISA MURKOWSKI, Alaska
SHELDON WHITEHOUSE, Rhode Island           MARK KIRK, Illinois
RICHARD BLUMENTHAL, Connecticut
                                       

             Daniel E. Smith, Staff Director, Chief Counsel

                 Pamela J. Smith, Deputy Staff Director

              Frank Macchiarola, Republican Staff Director

                                  (ii)




                            C O N T E N T S

                               __________

                               STATEMENTS

                       THURSDAY, FEBRUARY 2, 2012

                                                                   Page

                           Committee Members

Harkin, Hon. Tom, Chairman, Committee on Health, Education, 
  Labor, and Pensions, opening statement.........................     1
Mikulski, Hon. Barbara A., a U.S. Senator from the State of 
  Maryland.......................................................     3
Burr, Hon. Richard, a U.S. Senator from the State of North 
  Carolina.......................................................     4
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming..     6
Murray, Hon. Patty, a U.S. Senator from the State of Washington..    22
Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee    23
Bennet, Hon. Michael F., a U.S. Senator from the State of 
  Colorado.......................................................    24
Franken, Hon. Al, a U.S. Senator from the State of Minnesota.....    27
Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon......    28

                            Witness--Panel I

Kanter, Martha, Under Secretary, U.S. Department of Education, 
  Washington, DC.................................................     7
    Prepared statement...........................................    11

                          Witnesses--Panel II

Carey, Kevin, Education Policy Director, Education Sector, 
  Washington, DC.................................................    31
    Prepared statement...........................................    33
Quillen, Carol E., President, Davidson College, Davidson, NC.....    38
    Prepared statement...........................................    39
Mendenhall, Robert, W., Ph.D., President, Western Governors 
  University, Salt Lake City, UT.................................    45
    Prepared statement...........................................    46
Earl, Charles N., M.A., B.A., Executive Director, Washington 
  State Board for Community and Technical Colleges, Olympia, WA..    49
    Prepared statement...........................................    51

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Pennsylvania Association of Private School Administration 
      (PAPSA)....................................................    63
    Response by Carol E. Quillen to questions of:
        Senator Enzi.............................................    67
        Senator Hagan............................................    68
        Senator Murray...........................................    69
    Response by Robert W. Mendenhall, Ph.D. to questions of:
        Senator Enzi.............................................    70
        Senator Hagan............................................    71
        Senator Murray...........................................    71
    Response by Charles N. Earl, M.A., B.A. to questions of:
        Senator Enzi.............................................    73
        Senator Hagan............................................    75
        Senator Murray...........................................    76

                                 (iii)

  


                  INNOVATIONS IN COLLEGE AFFORDABILITY

                              ----------                              


                       THURSDAY, FEBRUARY 2, 2012

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:20 a.m. in 
Room SD-430, Dirksen Senate Office Building, Hon. Tom Harkin, 
chairman of the committee, presiding.
    Present: Senators Harkin, Enzi, Mikulski, Alexander, 
Murray, Burr, Merkley, Franken, and Bennet.

                  Opening Statement of Senator Harkin

    The Chairman. Good morning, everyone. The Committee on 
Health, Education, Labor, and Pensions will come to order.
    Last weekend in Iowa, I toured the Blong Technology Center 
where Eastern Iowa Community College partners with local 
businesses to train people in specialities, such as advanced 
welding and machining. It reminded me that today's global, 
knowledge-based economy is largely driven by technology, and at 
least some post-secondary education is no longer an option, but 
a necessity. In order to qualify for a career that pays family 
supporting wages and offers opportunities for advancement, an 
education beyond high school is imperative.
    Today, a worker with a bachelor's degree makes 85 percent 
more, on average, than a high school graduate, and is 50 
percent less likely to experience unemployment. Over the course 
of a lifetime, a bachelor's degree holder will make about $1.6 
million more than a high school graduate, again, on average, 
and this gap is expected to grow even wider. Almost two-thirds 
of the job vacancies between now and 2018 will require some 
post-secondary education, and about half will require an 
associate's degree or better.
    The message here, I think, is very clear: a college degree 
or some post-secondary technical training is the key to entry 
into the middle class. Another message is equally clear: 
America's economic competitiveness and growth depend on a 
highly educated, highly skilled workforce.
    But there is a problem: lack of affordability stands as a 
major barrier to college access and success for both students 
and workers seeking retraining. As college costs soar and 
student loan debt burdens America's workers, a college 
education is moving beyond the reach of millions of Americans, 
especially those from lower and middle-income families.
    Between 1992 and 2004, enrollment in 4-year colleges for 
low-
income students fell from 54 percent down to just 40 percent. 
During the same period, enrollment for moderate income students 
fell from 59 percent down to 53 percent. This is a deeply 
disturbing trend that we can no longer ignore.
    It is also a shocking fact that student loan debt will soon 
exceed $1 trillion and has surpassed credit card debt for the 
first time ever. We must be much more aggressive in looking for 
ways to address runaway tuition and fees, support students with 
meaningful financial assistance, and provide incentives to 
States and institutions to promote college affordability.
    We all know there are no easy answers to this complex 
problem. There are many cost drivers and misaligned incentives 
in our system of higher education both on the supply and demand 
sides of the equation. In our current difficult fiscal 
environment, States are retrenching on their responsibility to 
adequately fund public higher education, instead, shifting the 
burden onto students and their families and, I might add, the 
Federal Government. Institutions are faced with rising costs, 
increasing demands, and a highly competitive marketplace for 
students, faculty, resources, and research dollars.
    However, I must also note that they are also often 
competing for things unrelated to students' academic success 
such as expensive dormitories and other facilities, athletic 
programs, and rankings that are based on flawed methodologies. 
Clearly, we need to do more to incentivize States and schools 
to bring the net price of college under control.
    For this reason, I did not want our first hearing on this 
topic--and this is just the first hearing--to be a review of 
the current troubling state of affairs. We all know the 
problems. We know that costs have outpaced inflation over the 
last 30 years. The cost of a 4-year college has tripled in real 
terms over the past three decades while family incomes have not 
grown at all. These are troubling figures. They have had a very 
real impact on middle class America.
    The aim of today's hearing is to move beyond just merely 
acknowledging the severity of the problem, but begin to look 
for promising ways of addressing this. We want to examine 
innovative approaches and promising practices that can inform 
our policy discussions on affordability. We need to examine how 
technology can help cut costs, expand access, deliver quality 
education. We need to take a closer look at initiatives that 
lead to higher efficiencies without compromising quality, such 
as dual enrollment programs and accelerated learning 
opportunities.
    As the composition of our higher education student body 
changes, and as what we used to call ``nontraditional 
students'' become an ever-growing share of the enrollment, we 
need to learn more about colleges and universities that 
successfully serve a diverse population, and yet still produce 
solid outcomes.
    To that end, I applaud the President's focus on making 
college affordable and accessible for all students. I certainly 
agree with him that we need bold action to address the 
spiraling costs of higher education and to promote college 
success. This is one of those issues that affect all Americans. 
More broadly, I commend the President for his steadfast 
commitment to rebuilding our economy and the middle class 
through smart Federal investments in our Nation's most precious 
resource: our human capital.
    The President has recently elevated the issue of college 
affordability on the agenda by proposing a set of innovative 
steps that our Nation can take to strengthen our global 
competitiveness and reclaim our leadership in higher education.
    So appropriately, we will begin this hearing by learning 
more about the Administration's efforts from the Under 
Secretary of Education, Martha Kanter.
    We will then move on to a second panel of distinguished 
guests from higher education institutions, systems, and policy 
organizations.
    I look forward to working with our distinguished Ranking 
Member, Senator Enzi, and my colleagues on both sides to ensure 
that a college education remains within reach of all Americans 
regardless of their background.
    At this point, I will leave the record open for an opening 
statement by Senator Enzi. He has been detained in traffic, but 
I expect him to be here shortly.
    Senator Mikulski, did you have anything that you wanted to 
add to this?
    Senator Mikulski.

                     Statement of Senator Mikulski

    Senator Mikulski. First of all, Senator Harkin, I would 
like to thank you and President Obama for putting not only 
access to higher education on the front burner, which is 
crucial to the future of our country and our citizens, but also 
making affordability a front burner issue.
    In my own home State of Maryland, the cost of higher 
education is exploding. The fact that now, at the University of 
Maryland, a wonderful land grant college where the Governor 
himself has pledged to hold tuition down at one of our larger 
campuses, it is more than $11,000 a year, where you include 
tuition, fees, room and board.
    If you go to our most prestigious university, Johns 
Hopkins, it is well over $50,000 with the fees, the books, and 
so on because the cost is not only the tuition, students and 
families must account for the fees and the books, ET cetera.
    Then when you go to our vibrant, independent college 
network, again, whether it is Loyola, whether it is Washington 
College, it is nearly $50,000. And yet, the president of 
Washington College told me it costs $60,000 to educate a 
student.
    We cannot keep this going. I do not know about the rest of 
you, but I'm stunned that the cost of an independent college in 
Maryland is more than what my first home cost me. And in many 
instances this is like a mortgage, that is what the young 
people are doing is taking out a mortgage, and they do not know 
if they are going to have equity or whether they are going to 
have just an albatross of debt. We need to get to the bottom of 
this and we need to work together on affordability.
    I know that there are discreet sometimes unseen or 
unthought of costs at the higher education level, which can be 
owning and operating labs and facilities. Labs, whether you are 
doing something for nursing education or something as 
sophisticated as astronomy education, labs cost a lot.
    Senator Lamar Alexander, the former president of the 
University of Tennessee and the former Secretary of Education, 
has often talked to me about the issue of Federal and other 
regulations on colleges that raise the cost. He would like to 
scrub the regs to see what do we need to keep for safety and 
efficacy, but rid the regs from a bygone era.
    And last, Senator Harkin, you outlined some great things. I 
mean, what I see are athletic directors making more than 
presidents of universities. What do we value? Are we going to 
produce jocks? Are we the NFL farm team, the NBA farm team, or 
are we interested in increasing graduation rates and producing 
students? There are a lot of issues, and we look forward to 
working with you.
    I will conclude by saying the community college system 
offers, also, a unique situation. In many instances, the 
students are already older, they already have debt from other 
aspects in their life, and in many instances they are not 
prepared. We are using Pell grants to pay for the 13th year of 
high school. I do not want to use Pell grants for the 13th year 
of high school. I do not think that is a good use of the Pell 
grants.
    What I am interested in is what we can do about this. We do 
not want a new debt bubble in higher education. We need to have 
graduation rates at a much higher level because debt without a 
degree perpetuatually indentures students and we need to look 
at what we can do to help our students. But remember, we are 
often using our Pell grants for our most needy students to pay 
for what high school did not do for them. Well, that is not 
what Pell grants are for.
    We have to really work together, and I really want to thank 
you for digging into this and want to be a partner with you. 
Thank you. Senator Alexander, I want to start looking at the 
regs and see what we can do to produce graduates.
    The Chairman. Thank you. Thank you, Senator Mikulski.
    Senator Burr, do you want to say anything?

                       Statement of Senator Burr

    Senator Burr. Thank you, Mr. Chairman. I would not miss the 
opportunity.
    Mr. Chairman, I also would like to thank you for doing this 
because I think education, higher education is one of the most 
important components to the future success of the next 
generation.
    For most developing countries, every student who attends 
higher education is a first generation student, and we are 
still experiencing that in the United States of America. We 
have a tendency to say anything that is wrong just needs the 
Federal Government to fix it. I am not sure that is the case, 
but we are going to continue to try.
    Senator Mikulski has some tremendous institutions in 
Maryland. Well, we have some good ones in North Carolina too. 
We also have a rich history of subsidizing that education, and 
for that reason, many institutions are affordable.
    We produce the second largest pool of graduates of higher 
education annually of any State in the country other than 
California. It is the No. 1 magnet of attraction for economic 
development. In North Carolina is the next generation of the 
cream of the crop that we attract from public and private, 2-
year and 4-year.
    My fear is that if we shift the responsibility to determine 
what success or affordability is to Washington, we come up with 
arbitrary thresholds that sound good, like graduation rates. 
Well truthfully, if we walked out today and used that as the 
determining factor, we would close just about every community 
college because their graduation rate, if that is solely how 
you check it, is low in comparison even to some of the for-
profit institutions that Senator Harkin has held numerous 
hearings on.
    I would suggest to you that higher education today is a 
great example of how the marketplace works. Where students have 
the ability to choose the institution they want to go to, price 
comes into that.
    Now, I am not going to sit on the panel and tell you that I 
am not alarmed at the rising cost of higher education. But an 
incredible process happens when something gets overpriced; 
people choose to buy something else. In the case of education, 
they choose to go somewhere else.
    There are many great schools today that are struggling to 
transform themselves because their student population has 
dropped and somebody else has the students. I personally 
believe that that is a better function for the marketplace to 
go through than for us to choose that we will subsidize some 
segment and not others.
    I do not believe government's role is to pick winners and 
losers. And if we pick it among the student population, we will 
eventually affect the winners and the losers in the 
institutions.
    Being a college football player, I find it appalling also, 
Senator Mikulski, that there are coaches that make more than 
presidents. There are also presidents that make way too much 
money at institutions, but I think for the most part, academic 
budgets and athletic budgets are separated and they are funded 
totally different. So unless we are here to talk about the 
contributions that alumni make to their sports programs, that 
is really not a relevant point other than we both agree that 
the cost is too high.
    I would think that the University of North Carolina would 
tell you that the success of their basketball program, which 
will probably win the national championship this year, probably 
has an impact on the draw academically of who chooses to go to 
the University of North Carolina Chapel Hill. So there is some 
benefit to it, but I agree, it should not come with money 
diverted or subsidized for athletics away from academics.
    I hear the Chairman is anxious for me to finish. Since I 
see the Ranking Member here, I will be happy to turn it over to 
him.
    I am anxious to hear what our witnesses have to say today. 
Their successes to the cost of higher education around this 
country that do not emanate from Washington, and I hope that 
the members of this committee will explore those as well as the 
proposals of the President. And at the end of the day, where it 
is appropriate for us to have a role, I hope we play it, and I 
hope we do it in a fiscally responsible way. I thank the Chair.
    The Chairman. Thank you, Senator Burr.
    We are joined by our Ranking Member, Senator Enzi.

                   Opening Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman. I apologize for 
being late, but the National Prayer Breakfast ran a little bit 
late today. And since you were mentioning athletics, the 
closing prayer was by the Heisman Trophy winner from the 
national championship team Alabama.
    Senator Burr. And he is overpaid as well.
    [Laughter.]
    Senator Enzi. Well, so far, he is not paid, but I am sure 
he will be paid well.
    Senator Burr. He is in the SEC, he is paid.
    [Laughter.]
    Senator Enzi. Ooh.
    Senator Mikulski. Umpire, umpire.
    Senator Enzi. That is probably a different hearing, right?
    But we have been going through a series of hearings on 
college costs. They have all been focused on the for-profits, 
and I asked at that time that we focus on all post-secondary 
institutions because I thought there was a problem across the 
board, not in the same way necessarily, but I think this is a 
topic well worth looking into.
    Higher education has become very expensive and it is 
increasingly out of reach for many students. Tuition and fees 
at public institutions increased at an astonishing 89.7 percent 
last year, continuing a trend that has only accelerated over 
the last 10 years.
    I have a chart which shows that tuition has increased 
faster than inflation, and even faster than healthcare over the 
past 25 years.
    The President recently made a series of ambitious proposals 
he believes can begin reversing this trend, which I look 
forward to hearing more about today. However, if we have 
learned anything in recent years, it is that the Government 
cannot solve this problem. Over the past 5 years, the Federal 
Government has dramatically increased Pell grants' funding and 
made Federal student loans more accessible, yet tuition 
continues to rise even faster, and some say it is because of 
the Federal money. If out of control tuition is going to 
finally be brought under control, everyone is going to have to 
make significant changes.
    Fortunately, not everyone is waiting for an answer from 
Washington. We will hear from three witnesses who have had 
success controlling costs, while ensuring their students finish 
school with a diploma. It is my hope that others will take note 
of what they are doing and realize it is possible to keep 
tuition down while providing a first rate, quality education.
    However, as we continue this conversation, we must keep in 
mind that today's student is far different than when we were in 
school. As noted in a recent article posted by Education 
Sector, which is represented at this hearing by Kevin Carey, 
three facts sum up today's college students.
    First, nontraditional students actually outnumber 
traditional students. Out of 19 million students enrolled in 
graduate or undergraduate institutions, only 7 million students 
fit the traditional role of a student going straight from high 
school to university.
    Second, a large portion of students attend nonselective 
schools and 43 percent of undergraduates attend community 
colleges.
    And third, many college students do not fall between the 
ages of 17 and 24. Thirty-seven percent are 25 years or older; 
and 61 percent of Pell grant recipients are independent 
students. These students are the future of higher education and 
increasingly, these are students that institutions and aid 
programs find the most challenging to serve. We have to be 
certain that whatever we do to address affordability meets the 
needs of both traditional and nontraditional students.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Enzi.
    We have two panels today. On the first panel, we welcome 
Dr. Martha Kanter, Under Secretary for the U.S. Department of 
Education, back to our committee; she's been here before. 
Secretary Kanter oversees post-secondary education, adult and 
career technical education, Federal student aid, and five White 
House initiatives.
    Prior to her position in the Administration, Secretary 
Kanter served as chancellor of the Foothill-De Anza Community 
College District in California, and is the first community 
college leader to serve in the Under Secretary's position. We 
appreciate her joining us today to talk about the proposal the 
President is making to address college affordability.
    Secretary Kanter, your statement will be made a part of the 
record in its entirety. Welcome, and please proceed.

         STATEMENT OF MARTHA KANTER, UNDER SECRETARY, 
          U.S. DEPARTMENT OF EDUCATION, WASHINGTON, DC

    Ms. Kanter. Thank you very much.
    Chairman Harkin, Ranking Member Enzi, and members of the 
committee, thank you for having me here to testify on what can 
be done to keep college affordable, an issue that is creating a 
critical need for America to become the country that we all 
want: an America built to last.
    Recognizing that an affordable, high quality education is 
fundamental to America's future, President Obama established a 
bold goal for the United States to have the highest proportion 
of college graduates in the world by the year 2020. Achieving 
the President's goal is essential to ensuring the basic 
survival of the American promise that if you work hard, you can 
do well enough to raise a family, own a home as you have said, 
and put enough away for retirement.
    The facts are indisputable. Earning a college degree is the 
clearest path to the American Dream, and the benefits and the 
security of the middle class. It is a path to higher earnings 
and reducing the likelihood of unemployment, as Chairman Harkin 
noted. It opens doors and provides opportunities that just are 
not there to those who only finish high school.
    As president and chancellor of the Foothill-De Anza 
Community College District for the past 16 years before joining 
the Administration, I saw firsthand how post-secondary 
education opened doors for thousands of students to better jobs 
and a more secure future.
    I know many of you on this committee have heard similar 
stories from your constituents and even from your own families. 
That is why I am confident that we are all on the same page 
when we talk about these issues as a shared responsibility, as 
Senator Burr noted. The Government cannot do this alone. We 
have got to share in this responsibility.
    But while higher education has become an economic 
imperative to our success on a national and, for me, on a 
personal level and for many students, the President, the 
Secretary, and I are concerned that without immediate action, 
the price of higher education, as you all noted, will make it 
an unaffordable luxury for too many students.
    For many students today, in fact, nearly half of all 
undergraduates affording college means starting a post-
secondary education at a community college which is often a 
less expensive alternative to a traditional 4-year institution, 
as you have noted.
    But I can tell you that even with its more affordable 
price, at the Foothill-De Anza Community College District where 
I came from, over 41 percent of our students received some form 
of financial aid, many of these students living below the 
poverty line. Those students were able to earn degrees, which 
enabled them to become the nurses that cared for us at Stanford 
or El Camino Hospital, the automotive technicians that fixed 
our increasingly high tech cars, the bioinformatics technicians 
who contributed to the growing biotech industry in Silicon 
Valley and we have noted in North Carolina, the same is true, 
and look at Connecticut and other parts of the country where 
this is starting to bloom. Home health aids, fiber security 
technicians, these are just a few of the many careers that 
higher education is preparing students to enter.
    Over the last 3 years, we have come a long way with your 
help to address the challenge of making some progress to keep 
college affordable and accessible. With your help, we have 
doubled funding for Pell grants, created the American 
Opportunity Tax Credit to provide up to $10,000 to help pay for 
college, and helped ease the burden on students in repaying 
their college loans.
    Our investments are working. The average price students and 
families actually pay, that is the net price, to attend a 4-
year public institution have increased by just $170 since 2006. 
At community colleges, the average price students actually paid 
decreased by $840 over the same period. That is on a national 
level, but if you look at individual institutions across the 
country, some tuitions have skyrocketed, as you have noted, and 
some have remained stable.
    We need to recognize that all of us--the Federal 
Government, Congress, States, institutions, and families--all 
have a shared responsibility to do our part to keep college 
affordable. The Federal Government cannot do this alone, as you 
have all said. That is why last week, President Obama unveiled 
new reforms that will promote shared responsibility to address 
the college affordability challenge.
    On our end, we look forward to working with you to increase 
our commitment to student aid, and to make sure taxpayer 
dollars are well spent.
    For States, we need them to prioritize higher education 
funding and pursue policies that encourage long-term 
affordability, and colleges need to tighten their belt too. The 
Federal Government cannot singlehandedly ensure college access, 
affordability, or quality. States play a much larger role in 
college affordability and quality than just providing funds. 
State policies, or the lack of those policies, on high school 
graduation and college admission standards, credit transfer, 
articulation, and tuition setting all can contribute to rising 
costs.
    Today, the typical bachelor's degree recipient completes 
his or her program in 5 years instead of 4. It is also taking 
longer for community colleges. If we could get more college 
graduates to complete their degree and certificate programs on 
time, if not earlier, America could help reduce total tuition 
by one-fifth for a large number of students. But when they 
cannot get the classes they need because of State budget cuts, 
or they cannot transfer credits, it takes longer. They lose and 
our Nation loses.
    The good news is that a number of States are addressing 
these issues head on. However, we have yet to see this level of 
reform activity on a national scale that would have States 
pursue foundational reforms to improve college affordability 
and quality over the long term.
    That is why we are proposing a Race to the Top for college 
affordability and completion framework to spur State reforms 
that will reduce costs for students and promote success in 
higher education. This program would incorporate the important 
principles of Race to the Top, systemic reform and stakeholder 
engagement. It will not, however, be a replica of the K-12 
competition. Rather, it will reflect the uniqueness and 
diversity of American higher education.
    All institutions of higher education, even those that do 
not set their tuition levels independently, have an important 
role to play in keeping college affordable and providing 
greater value. To do this, they must embrace the same culture 
of experimentation and innovation that we see in the research 
universities, and apply it to student learning and success, 
identifying ways to increase quality, while reducing costs.
    But we recognize that innovations are tough to implement 
and evaluate. That is why we are proposing $55 million for a 
First in the World fund. This program will improve higher 
education by investing in applied research at colleges and 
universities. It will help scale innovative and effective 
strategies to boost college completion and enhance quality.
    At the same time, we need to be smarter about the dollars 
that we invest directly in institutions. That is why we are 
proposing to reform the campus based aid programs to recognize 
colleges that are succeeding in doing their part to keep 
college affordable, while providing good value to students 
especially those from low-income backgrounds.
    Further, we need to empower families and students with 
better, clearer information to help them make good decisions 
when searching for and selecting a college. To do this, we will 
create a College Scorecard for all degree granting institutions 
that will make it easier for students and family to choose a 
college that is consistent with their educational goals, career 
aspirations, and best suited to their financial needs. A draft 
of the Scorecard is available for public comment on the White 
House Web site, and we look forward to hearing your input.
    Let me conclude by circling back to what I said at the 
onset. College affordability is an issue that is critical for 
creating an America that is built to last. An America that is 
better off because of the contributions of our students, the 
contributions they will make as they live, work, and contribute 
to society.
    Students that I had at my college, like Sandra Lui, a 
veteran of Operation Enduring Freedom and Operation Iraqi 
Freedom, the eldest of four children in a first generation 
family who immigrated from Burma in 1991, and struggled in a 
one-room apartment with four children. Sandra served our 
country for 5 years in the Navy and after completing her tour 
of duty, went to college. She completed her studies at the 
University of California San Diego, and now works as a chemical 
engineer in Michigan.
    Or the story of Emanuel Maverakis, who grew up in Los 
Angeles in a neighborhood that was grappling with poverty, and 
his dream was always to attend UCLA. After De Anza College, he 
transferred to UCLA where he graduated summa cum laude in 
microbiology and molecular genetics. He then went on to 
graduate from the Harvard Medical School summa cum laude. The 
first-ever student from an underrepresented group to do so, and 
indeed, only 1 of 16 summa cum laude graduates in the 230-year 
history of the Harvard Medical School.
    These stories and thousands more, many I heard on Tuesday 
at the University of Maryland Medical Campus are what I carry 
with me every day. But I also carry too many stories of 
students who did not complete their college education. The 
support of the State, the Federal Government, the colleges 
themselves, and the students contributed to the success of 
these students who do graduate. Together, we can slow the 
growth in college costs, but to do so, we must incentivize 
State support for higher education.
    We must reduce inefficiencies in our education pipeline. We 
must promote applied research that expands higher education 
capacity while also improving student outcomes. We must direct 
campus-based aid to colleges that provide good value. And 
finally, we must empower consumers to channel their demand 
toward the most valuable options for them.
    Mr. Chairman, Ranking Member Enzi, and members of the 
committee, more students and families than ever are seeking 
post-secondary education and relying on student aid to do so. 
If we are to reach the President's goal of leading the world in 
college attainment, we need to continue our investment in these 
students. But to keep the American promise alive, we must also 
embark on a more comprehensive approach to shared 
responsibility for higher education access, affordability, and 
quality.
    We need to ensure that everyone, States and institutions of 
higher education, as well as Congress and the Administration, 
are doing their part to constrain college costs, provide value, 
and increase college completion.
    As the President has said, ``In today's global economy, a 
college education is no longer just a luxury for some, but 
rather, an economic imperative for all.'' Our administration 
stands ready to work with members of this committee on 
legislation that will implement the President's proposals that 
I have talked about this morning. We also look forward to 
working with States, colleges, and stakeholders on this 
important agenda.
    I would be happy to answer any questions you have, and 
thank you for the opportunity to provide these remarks this 
morning.
    [The prepared statement of Dr. Kanter follows:]
                  Prepared Statement of Martha Kanter
    Mr. Chairman and members of the committee, thank you for inviting 
me to testify on the issue of college affordability--an issue that is 
critical to creating an America that is built to last.
    Recognizing that an affordable, high-quality college education is 
fundamental to America's future, President Obama established a bold 
goal for our Nation: for the United States to have the highest 
proportion of college graduates in the world by 2020. The President, 
the Secretary, and I deeply believe that achieving this goal is vital 
if our Nation is to prosper in a global economy that is predicated on 
knowledge and innovation.
    Achieving the President's goal is essential to ensuring that all 
our citizens share in the economic and social prosperity of our Nation. 
Earning a college degree is the clearest path to the American dream and 
the benefits and security of the middle class. The facts are 
indisputable. College graduates not only earn substantially higher 
salaries than those without degrees, but they are much less likely to 
experience unemployment. The unemployment rate for college graduates is 
half that of those with only a high school diploma. And the difference 
in earnings is growing. Bureau of Labor Statistics data show that high 
school graduates in 1979 earned about 72 cents for every dollar that 
bachelor's degree holders did; today they earn just 55 cents. In fact, 
the disparity today between weekly earnings for bachelor's degree 
holders and high school graduates is greater than both the gender and 
racial pay gaps.\1\
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    \1\ http://www.bls.gov/news.release/wkyeng.t09.htm.
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    The challenge before us is great. Estimates from the Georgetown 
Center on Education and the Workforce show that we are projected to 
produce 3 million fewer college graduates than are needed by our 
economy within the next decade--a gap that could make it hard for 
American employers to fill high-skill positions. Worse yet, this gap 
will hamper innovations and advancements that could open up new 
industries and sources of future jobs. But we can change this if we act 
now. By adding an additional 20 million postsecondary-educated workers 
over the next 15 years, our national level of educational attainment 
would be comparable to the best-educated nations, help us meet the 
economy's need for innovation, and reverse the growth of income 
inequality, according to the Center.
    In his recent State of the Union address, the President called for 
a comprehensive approach to tackling rising college costs. He believes 
that we have a shared responsibility to confront the college 
affordability challenge head on, and that college affordability has 
never been more important than it is now at this critical make or break 
moment for the middle class. What's at stake here, he emphasized, is 
the very survival of the basic American promise that if you work hard, 
you can do well enough to raise a family, own a home, and put enough 
away for retirement.
    President Obama is calling for new reforms that will promote shared 
responsibility to address the college affordability challenge. States 
need to do their part to prioritize higher education funding, and 
colleges should tighten their belts too. If these proposals are passed, 
this will be the first time in history that the Federal Government has 
tied Federal campus aid to colleges to responsible campus tuition 
policies.
    That is why this Administration has worked with Congress and taken 
a number of steps over the last 3 years to address the challenge of 
helping to keep college affordable and accessible:

     We have invested more than $40 billion in Pell grants, 
extending aid to 3 million more college students (over 9 million total) 
and raising the maximum award to an estimated $5,635 for the 2013-14 
academic year--a $905 increase since 2008. As you know, most of that 
investment was paid for by increasing efficiency in our student loan 
program.
     We are working to make college loans more affordable 
through the ``Pay as You Earn'' proposal, which enables an additional 
1.6 million students to take advantage of a new option to cap student 
loan payments at 10 percent of a borrower's monthly income starting as 
early as this year.
     We have created the American Opportunity Tax Credit, which 
provides up to $10,000 for up to 4 years of education. Over 9 million 
middle class and low-
income families claimed the credit last year.

    This historic investment in student aid has kept the price that 
families actually pay for college--the net price--essentially flat over 
the last few years. Thanks to our Federal investments, the net price of 
4-year public institutions has increased by just $170 since the 2006-7 
academic year, while the net price of attending a community college has 
actually decreased by $840 over the same period.
    But this path is not fiscally sustainable. The Federal Government 
cannot single-handedly ensure college affordability while ensuring 
quality and promoting college access and success. The Administration, 
Congress, post-secondary institutions, and, most importantly, States 
must all work together to keep building on our momentum in recent years 
to make an affordable college education available to all students who 
want one. That is why the President laid out a framework to address 
college affordability last Friday, one that recognizes this shared 
responsibility.
    The Obama administration will fight to preserve student access and 
increase student aid, especially the maximum Federal Pell grant award, 
which will be $5,635 for the 2013-14 academic year. We urge Congress to 
take action this year to keep the Pell program on firm financial 
footing going forward. Working with stakeholders, we can and must make 
the difficult choices needed to ensure the long-term stability of this 
vital program.
    We have also called on Congress to make permanent the American 
Opportunity Tax Credit; double the number of work-study jobs available 
within 5 years; and prevent a statutory doubling of the interest rate 
on subsidized Stafford student loans for 7.4 million borrowers at a 
time when the economy is slowly recovering from the recession and 
students are taking on increasing amounts of debt to earn their college 
degrees.
    States need to do their part in this shared responsibility as well. 
Last year, based on total State support, including one-time Federal 
stimulus dollars, 41 States cut their funding for higher education.\2\ 
At a time when higher education is more important than ever for our 
shared future, States should not turn to higher education as a major 
source for cuts whenever times get tough. Such cuts lead to tuition 
spikes and higher dropout rates. Neither Federal nor State budget 
challenges should be borne on the backs of students and families in the 
form of higher college costs.
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    \2\ http://grapevine.illinoisstate.edu/tables/FY12/Table%201.xlsx.
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         race to the top--college affordability and completion
    States play a much larger role in college affordability and quality 
than just providing funds. State policies--or the lack of those 
policies--on high school graduation and admission standards, credit 
transfer, articulation and tuition setting--can contribute to rising 
costs. Today, the median bachelor's degree recipient completes his or 
her post-secondary education program in 5 years, instead of 4. If we 
could get more college graduates to complete their degree programs on 
time, if not early, we could reduce college costs by one-fifth.
    The good news is that a number of States are addressing these 
issues. They are revisiting how they allocate funds to better recognize 
quality and results; they are developing data systems to better track 
outcomes; and they are taking the tough steps to address the high rates 
of remediation due to students arriving at college who are 
underprepared to succeed.
    However, we have yet to see activities on a national scale that 
encourage States to pursue foundational reforms that address the issues 
of affordability and quality over the long term.
    That is why we are proposing a Race to the Top--College 
Affordability and Completion framework that will spur State reforms to 
reduce costs for students and promote success in higher education. This 
program would provide incentives for States to make commitments to 
higher education and pursue policies with long-term payoffs, such as:

     Revamping the structure of State financing for higher 
education to recognize and reward quality and student success.
     Aligning entry and exit standards with K-12 education, 
community colleges, and universities to facilitate on-time completion.
     Maintaining consistent financial support for higher 
education.
               establish a first in the world competition
    All institutions of higher education--even those that don't set 
their tuition levels independently--have an important role to play in 
keeping college affordable and providing greater value. To do this, 
they must embrace the same culture of experimentation and innovation 
that they bring to their research and apply it to student learning and 
success. They need to recognize that there are ways to increase quality 
while reducing costs.
    But we recognize that innovations are tough to implement and 
evaluate. That is why we are proposing $55 million for a First in the 
World fund. This program will improve higher education by investing $55 
million in applied research to enable institutions of higher education 
and nonprofit organizations to develop, validate, or scale up 
innovative and effective strategies that boost completion rates of 
students and enhance quality education on campuses. This initiative 
would provide startup funding for individual colleges, including 
private colleges, for applied research projects that could lead to 
long-term innovations--such as course redesign through the improved use 
of technology, early college preparation activities to lessen the need 
for remediation, competency-based approaches to gaining college credit, 
and other ideas aimed at better student outcomes. A portion of this 
funding would go toward Minority Serving Institutions (MSIs). MSIs 
educate a significant share of our Nation's minority students; making 
sure these students are able to access and complete degrees is critical 
to our Nation's ability to reach the 2020 college completion goal.
                   reforming campus-based student aid
    At the same time, we need to be smarter about the dollars that we 
invest directly in institutions. That is why we are proposing to reform 
the campus-based aid programs to recognize colleges that are succeeding 
in doing their part in keeping costs low, while providing good value to 
students, especially those from low-income backgrounds.
    The campus-based aid that the Federal Government provides to 
colleges through Federal Supplemental Educational Opportunity Grants 
(SEOG), Federal Perkins loans, and Federal Work Study, is distributed 
under an antiquated formula that rewards colleges for longevity, and 
provides perverse incentive to raise tuition, because it results in 
higher levels of financial need among students, a factor considered in 
allocations. The President is proposing to change how those funds are 
distributed by implementing an improved formula that shifts aid from 
schools with rising tuition to those who are focused on setting 
responsible tuition policy, providing good value in educating their 
students, and ensuring that higher numbers of low-income students 
complete their degrees and certificates. The President is also 
proposing to increase the amount of campus-based aid to $10 billion 
annually. The increase is primarily driven by an expansion of loans in 
a revamped Federal Perkins Loan program--which is expected to come at 
no net taxpayer cost.
              better information for students and families
    Finally, we need to empower families and students with better, 
clearer information to help them make good decisions when searching 
for, and selecting a college. To do this, we will create a College 
Scorecard for all degree-granting institutions that will make it easier 
for students and families to choose a college that is best suited to 
their financial needs, and consistent with their educational goals and 
career aspirations. A draft of the Scorecard is available for public 
comment on the White House Web site.\3\
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    \3\ http://www.whitehouse.gov/issues/education/scorecard.
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                               conclusion
    If we can incentivize State support; reduce inefficiencies in our 
K-12 and higher education pipeline in aligning education standards; 
promote applied research that expands capacity or supply while also 
improving student outcomes; direct campus-based aid to colleges 
providing the best value; and empower consumers to channel their demand 
toward the most valuable options for them, we can slow the growth in 
college costs. Mr. Chairman, and members of the committee, more 
students and families than ever are relying on student aid, and if we 
are to reach the President's goal of leading the world in college 
attainment, we need to continue our investment in these students. But 
to keep the American promise alive, we must also embark on a more 
comprehensive approach to share responsibility and ensure that 
everyone--States and schools, as well as Congress and the 
Administration--are doing their part to rein in college costs and drive 
forward college completion. As the President has said, in today's 
global economy, a college education is no longer just a luxury for 
some, but rather an economic imperative for all. The Federal 
Government, States, and colleges and universities, must all work to 
promote access and affordability by reining in college costs, providing 
value for American families, and ensuring that America's students and 
workers can obtain and complete the education and training they need. 
America must have a workforce prepared for the jobs of the 21st century 
and a society that will strengthen and preserve our democracy. Our 
Administration stands ready to work with members of this committee on 
legislation that will implement the President's proposals discussed 
this morning. We also look forward to working with States, colleges, 
and stakeholders on this important agenda.
    I would be happy to answer any questions you might have. Thank you.

    The Chairman. Thank you very much, Secretary Kanter. We 
will now start a round of 5-minute questions.
    Secretary, as I said and as you also said States must do 
their part. We have seen a significant shift of the burden from 
States' budgets, to students and their families, and it is 
shifting more to the Federal Government to pick up that loss of 
revenue from States.
    Can you describe some of the systemic reforms that this 
Race to the Top proposal would encourage so that States would 
live up to their role of having shared responsibility?
    Ms. Kanter. Yes, I would be happy to. The Race to the Top, 
as we envision it, is going to provide a framework that will 
spur reforms to keep tuition growth down in the short term, and 
support changes in the long term to improve higher education 
affordability, quality, and capacity in the long run.
    This first year request is $1 billion, but this is really 
about a multiyear effort which is aimed at improving higher 
education, affordability, and value. We are really excited that 
the Administration has made historic investments in student 
aid, and that has kept the price that families actually pay in 
the public institutions stable over the past few years, as I 
mentioned. And net price versus sticker price is just something 
that we have to remember to keep in mind.
    But the current path is not fiscally sustainable, so we 
need Congress and the schools themselves and States, to work 
together to share the responsibility. So this model would 
actually leverage a modest amount of Federal dollars to enact 
large scale change. It would work upon the lessons learned from 
the Race to the Top that we have already offered. And it 
requires up front reforms and commitments from States in 
exchange for funding.
    The Chairman. You say you are proposing $1 billion for this 
program. Would this also include more funds, for example, for 
work-study programs, more money for Perkins loans from the 
Federal Government to schools that have kept their costs down 
or their increase in tuition, say, to the level of inflation?
    Ms. Kanter. We have proposals which are First in the World, 
which I talked about, funds that would inspire innovation in 
the institutions themselves. Race to the Top that is designed 
to address what we hope that States will do, the activities 
that some of you mentioned of States that can do a lot more on 
cost. Campus-based aid, Federal aid that would be designed to 
reward institutions that are providing good value, and getting 
students through college, earning their certificates, earning 
their degrees, and providing the work-study for students to do 
just that. We know that work-study is allowing students more 
often to persist in college. It is essential for success and we 
want to do more of that. Finally, as I mentioned, the College 
Scorecard is the last part.
    There are four parts to this proposal. One directed at 
States, institutions themselves, students and families with the 
Scorecard. I think we can do a lot better getting simple 
information collected so that students and families can make 
those choices that best fit their needs, their academic 
aspirations, and their financial situations.
    The Chairman. Yes.
    Ms. Kanter. Then the last part is the campus-based aid, 
which would be more and more directed to better and better 
colleges and universities. We want them to give out that money 
through work-study or through supplemental educational 
opportunity grants to institutions that are providing good 
value to families. You know, we have over 6,000 colleges and 
universities, and we can all do better.
    The Chairman. When will this committee get some paper on 
this that puts some meat on this proposal?
    Ms. Kanter. We are looking forward to getting the budget on 
February 13, and we will have a lot more details then.
    I know I can tell you on Race to the Top, there is a 
tremendous need, I think, as you have all said. We are paying 
too much for the remedial needs of students coming from high 
school. That is about a third of the students over the next 10, 
20 years that will be graduating from college. We have many 
Americans that are adults that want a college education for a 
variety of reasons.
    But we are hoping to use Race to the Top also to better 
align the K-12 exit standards with the entrance standards for 
college. We want those freshmen to be ready for college level 
work so that they can get through. That is another barrier, 
that whole remedial challenge that we need to address.
    Also, driving the use of data to improve policy; we need to 
do a much better job not only using the data we have, but 
improving the data we have. And letting teachers and students 
just like in the other institutions we have across the country 
use that data to do a better job to get those students through.
    In addition, and I think you will hear from some of the 
other panelists, the actual State policies, the transfer 
policies, the legitimacy of accepting credit from one 
institution at the next institution. That can be streamlined by 
helping institutions and States work together on those kinds of 
policies.
    The Chairman. Thank you, Secretary. Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman.
    I want to followup a little bit on your question, because 
you asked when the paper was going to get here, not when the 
budget was going to get here. There is a significant difference 
because for the last 3 years, any changes made to Federal 
student aid has been done through appropriations or the budget 
process. And because it did not come through this committee, 
there have been a lot of ad hoc changes that we have had to 
make to correct problems that, I think, could have been avoided 
if they had come through committee.
    I am hoping that there is not a plan to circumvent this 
committee, because this is where a lot of the knowledge is of 
how it actually does work, and we think we can prevent some of 
those unintended consequences that just come from budget and 
appropriation. Although I serve on the Budget Committee and it 
has not been there for the last couple of years either.
    So are you going to provide us with some actual legislation 
that we can do in these areas or just rely on appropriations?
    Ms. Kanter. We look forward to working with members on the 
committee of the best way to propose this. It may be 
legislation. Obviously, we will be back to this committee and I 
will have to get back to you on the specifics, but legislation 
has not been introduced yet. But we look forward to all of 
these proposals moving forward in the best possible way and 
that we would really like your input on that.
    Senator Enzi. OK. I was hopeful from the President's speech 
that some of that had been prepared already.
    Now there is a scheduled 3.4 percent increase in interest 
rates on Federal student loans, and the Congressional Budget 
Office has given us a preliminary estimate that that would cost 
about $2.4 billion this year and that accumulates if it goes 
beyond this year.
    I am interested in how long that delay is proposed. You 
have mentioned a couple of billion dollars here and a billion 
dollars there. I was wondering if you had some suggestions on 
where that money was going to come from.
    Ms. Kanter. Yes. Our budget is going to be released, as I 
said, as you know, on February 13. The President is firm in his 
commitment to education funding including the higher education 
funding on both the discretionary and the mandatory sides of 
the budget.
    We are looking forward to a proposal that will not cost 
taxpayers more dollars. We will be funding these proposals, and 
you will be able to look at that in the budget with a lot more 
detail.
    Senator Enzi. We are looking forward to it. I am on the 
budget committee, and I am anxious to see where that is going 
to come down.
    We want to keep tuition down, but I noticed like in 
California, they have had some significant reductions in State 
support for the colleges. Is there going to be any provision in 
there for when the States are not doing their part and driving 
up the cost of the colleges? The colleges do not have any 
control over that.
    Ms. Kanter. I mean, that is exactly one of the pieces that 
we hope could be walked through in designing a Race to the Top 
that would be focused on college affordability and completion.
    We cannot, as you know, restrict tuition increases. That is 
not the role of government, but we want to look to the States 
and provide innovation funding so they can look at the policies 
that will really stabilize tuition in the long term.
    We are proposing to promote and invest in colleges that 
provide good value for students and taxpayers. Some of the 
money is going to colleges, unfortunately, that are not 
providing good value. We have a responsibility there. And to 
assess value, we are proposing and what the President has said, 
that we look at cost, we look at service especially to the most 
needy and disadvantaged students, and outcomes like loan 
repayment and college completion rates.
    And you mentioned, I think, Senator Burr mentioned the 
numbers and the efficacy of the numbers. To me, we have to do a 
much better job with numbers, not rates. I know that in my own 
campus, I watched those numbers. I looked at exactly how many 
students needed remedial help, how many remedial classes I had 
to offer as a community college president, how many remedial 
classes I would offer as opposed to freshman English, which I 
knew those students were going to go straight through. And it 
was a real tragedy to have to make that decision, you know, how 
many freshman English courses or freshman calculus courses 
could we offer as opposed to how many remedial courses to get 
students through?
    One of the pieces of Race to the Top is going to look at 
those barriers whether they are policy barriers in 
articulation, in transfer, in curricular design and what is 
offered. But we really also need to rely on the colleges, on 
the colleges and universities, to tackle remediation in a much 
more innovative way than we have done in my 40-year history as 
a teacher. You know, a long time, I started out teaching 
English in an alternative high school.
    I think with this proposal, we are looking at not only what 
States can do, what institutions can do, what we can do to help 
consumers make good choices about value and, of course, looking 
at the campus aid, looking at Pell grants. We do not want to 
give Pell grants. I did not want my students to be using up 
Pell grants because they were so far behind in the basic skills 
that they should have gotten somewhere else, or they could get 
faster with more innovative curricular redesign.
    We have a lot of models across the country. We have States 
that are starting to make some progress. We have great 
institutions, what I call ``Islands of Excellence,'' all over 
the country where I can pick up. They are doing remediation 
much better than College B. Why can't we transfer those? Part 
of what we want to do with this fund is look at what is working 
well in the country, and be able to help others take advantage 
of that. I think every educator in the country is concerned 
about that.
    As a teacher, that is what I worried about all the time. 
How many of my students were getting through? What was the 
number? How many were going through to get a certificate 
whether it was a home health aide, or a nurse, or going on to 
be a doctor? That is what we want everyone to think about and 
really cleanup the pipeline that has so many logjams in it.
    Senator Enzi. We are hoping, of course, that the high 
schools will pick up some of the slack on this so that it sends 
kids prepared for college, and there is not that remediation. 
My time has expired.
    The Chairman. Thanks, Senator.
    Senator Mikulski.
    Senator Mikulski. Thank you very much.
    Miss Kanter, you have an excellent reputation coming from 
being the chancellor of one of the largest community college 
systems is in the United States. I think it was with the 45,000 
students in your system. And you said a lot here today in terms 
of goals. But I need actionable steps. I need a must-do list. 
Like what are the three to five things you can do this year?
    I am going to come back to something raised by my 
colleagues when we were reauthorizing higher ed, Senator Enzi 
and particularly Senator Alexander, the whole issue of 
regulation. Have you, and we had a commitment which I think 
would be good to get back to, Senator Alexander, that we were 
going to, on a bipartisan basis, look at regulation. Because we 
are concerned that over regulation leads to strangulation of 
innovation at higher ed, where the money goes into regulatory 
compliance rather than helping the students, or holding costs 
down, or helping faculty be even better at what they do.
    My question to you is, No. 1, have you looked at this issue 
of getting rid of increasing regulations? No. 2, have you 
particularly talked to college presidents and others to say, 
``Hey,'' you know, ``We've got this escalation going on.'' 
There are many reasons for it, but have they themselves told 
you what we could do to deal with the issue of costs?
    We have three issues: cost, price, and value. But let us 
focus on cost. These old regulatory issues--and I want my 
colleagues to know I remembered that, and this is a good time 
to come back to it. But, what did the college presidents tell 
you they could do?
    Ms. Kanter. Yes. OK. I can tell you first that President 
Obama has directed us to scrub all of our regulations and 
eliminate those that just do not make sense anymore. And I 
think you said, one of you said----
    Senator Mikulski. That is what he told you to do a couple 
of months ago. But what have you actually been given now?
    Ms. Kanter. Right. We have been reaching out----
    Senator Mikulski. We always have goals in the future but 
what do we have to work with now.
    The time is now. I believe in the power of now.
    Ms. Kanter. Right. We have reached out. I personally have 
talked to over a hundred college presidents in the last month 
or so, maybe even longer. I have gone to a lot of association 
meetings, reaching out, and asking specifically what can we get 
rid of?
    Senator Mikulski. And what did they say?
    Ms. Kanter. One good example is the rulemaking now that we 
are involved with, teacher preparation programs. How can we 
improve teacher preparation programs?
    One little example of many, and we have others going 
forward, but one example is that we have 440 requirements that 
schools of education have to fulfill for prospective teachers. 
That is insane, frankly, and it is mostly input-oriented, not 
output-oriented.
    I think Senator Alexander was kind of smiling a little bit 
and I go back to the 1980s, to the books Trudy Banta wrote from 
the University of Tennessee about outcomes, and how can we be 
more responsive to the kinds of outcomes that we want for great 
teachers in every classroom? That is one of many examples.
    We are in a rulemaking process now on student loans, what 
can we eliminate? What is the bare minimum that we need? I 
think we have done a lot. We have cut out a lot of questions on 
the Federal student aid form. That is a good example of trying 
to simplify bureaucracy that just seems to swell.
    I think you have a champion in the Department of Education 
in our Secretary Arne Duncan and myself. We need to change the 
regulatory environment so that it works to get students 
through. That has got to be the driver. It has got to be a 
student-centered focus and then institutions need to do their 
part. Certainly, every State is looking at regulations all the 
time to try to see, can we simplify what States are doing, and 
what role does the Federal Government have in that?
    We will do everything we can. We are soliciting 
recommendations from the higher education community. We are 
reaching out constantly to ask them, ``What can we get rid 
of?'' We have to go through a rulemaking process or other kinds 
of things, like legislation. There are other levers of change 
we have.
    But we are very interested in what the University of 
Maryland thinks, what the University of California thinks, what 
the Lorain County Community College in Ohio thinks.
    Senator Mikulski. I will jump back in, in my 19 seconds 
left. We are proud of the University of Maryland, and I think 
they are cited in other testimony, and we are proud of Governor 
O'Malley taking the lead in this. However, I will come back.
    So you actually have been looking at this, but now with the 
college, just in three sentences. Hello. Three sentences. Did 
the college presidents give a must-do list? I helped move the 
reauthorization of higher ed. When Senator Kennedy was so sick, 
I had the job of reauthorizing that bill. And I had no finer 
partners than Senator Harkin, and Senator Enzi, and Senator 
Alexander. We got the job done, but God.
    I think there were 600 groups that wanted to come in and 
talk to me. When these 600 groups brought comments, they all 
had to be peer-reviewed and it just went on and on. What should 
have been a very simple process particularly with the skill set 
at the table, was cumbersome because everybody had opinions, 
and everybody had other opinions. And there were more groups 
talking about higher ed than there were colleges in the United 
States of America. I am not kidding.
    Now my question to you, I have been listening, you have 
been great in describing all the processes that we are talking 
about. But do you have a specific list that has come out of 
this, right now, that you could talk with us about as we 
consider legislation?
    Ms. Kanter. Well, we are going to, you know----
    Senator Mikulski. Do you have it?
    Ms. Kanter. We have lots of ideas and proposals. We can 
talk. I published, for example----
    Senator Mikulski. Miss Kanter, I cannot have a long answer 
here.
    Ms. Kanter. OK.
    Senator Mikulski. Harkin is banging the table quietly.
    Ms. Kanter. In 1 minute, I can tell you we laid out seven 
steps, seven areas or States that we think would improve 
student graduation, student success, and add value. I can give 
you that. It is called, ``The State Toolkit for College 
Completion.''
    We are now, I guess, on Monday had 50 or 100 researchers 
and practitioners----
    Senator Mikulski. OK. I got it. I got it. I do not mean to 
be brusque, OK, but we have got it.
    Senator Harkin, really, if we go back to the 
reauthorization of higher ed, we worked so well together here 
and I think we have many good ideas, but I think we need to 
look at the regulatory framework as well. Thank you very much.
    The Chairman. Thank you.
    Senator Burr.
    Senator Burr. Secretary Kanter, thank you so much for being 
here and for a lifetime commitment to educating the next 
generation, and the next generation, and the next generation. 
And that is really what I want to try to emphasize. This is not 
just about this year's rising seniors in high school.
    You said in response to a question, and again reiterated in 
your written statement talking about the current path that we 
are on, and I quote, ``But this path is not fiscally 
sustainable.''
    Ms. Kanter. Right.
    Senator Burr. And in the next paragraph of your testimony 
you said,

          ``The Obama administration will fight to preserve 
        student access and increase student aid, especially the 
        maximum Pell grant awards, which will be $5,635 for the 
        2013-14 academic year. We urge Congress to take action 
        this year to keep the Pell grant on firm financial 
        footings going forward.''

    Let me just ask you, in the budget process last year, we 
reduced the number of years of eligibility for Pell from 8 to 
6, would the administration be supportive of us reducing from 6 
to some number under that so that the financial stability of 
Pell was more intact, and that more students would have the 
availability of Pell money?
    Ms. Kanter. We think the reduction that has already been 
made is going to produce, hopefully, a positive outcome. Many 
students, the large bulk of students finish within 6 years, but 
as you know, students are working while they go to college. The 
whole idea of what a full-time, first-time student is without 
other responsibilities is very different.
    Senator Burr. So we have to----
    Ms. Kanter. I personally do not want to see further 
reductions to that. I think you have made the reductions. 
Congress has acted. We would like to give students a chance to 
see how that is a secure window, if we can focus with these 
proposals, with Race to the Top, with First in the World, on 
accelerating college completion in a shorter amount of time. 
That is where the higher education community, all our colleges 
and universities----
    Senator Burr. Well, can I take from that that there would 
be no State that would have restrictions suggested to them that 
would move a student through higher education in shorter than 6 
years?
    Ms. Kanter. Well, we cannot----
    Senator Burr. We are not going to penalize a State because 
they hit 6 years versus 4 years.
    Ms. Kanter. I mean, what we wanted to do is encourage 
States to work with institutions of higher education to 
actually help students accelerate their education.
    Senator Burr. I know where Senator Mikulski was. There is a 
big difference between suggesting and creating an incentive----
    Ms. Kanter. Right.
    Senator Burr. And wishing, and penalizing somebody for not 
hitting it. Is the acceptable length of time now for college 
graduation now 6 years?
    Ms. Kanter. Yes.
    Senator Burr. OK. You talked about Race to the Top and I am 
asking specifically as it relates to North Carolina. We have a 
rich history of a very high, if not the highest in the country, 
subsidy to our public institutions. Now, that has begun to 
become less. There are some States that do not subsidize their 
public education. From the way I heard you describe this new 
program, States will be encouraged to participate financially 
to reform certain things, and if they do it, they will be 
rewarded.
    Now, if North Carolina chooses to accept some of the 
reforms, whether we do them currently or not, but we are in a 
decline in the level of subsidy that we are currently offering, 
though it may be the highest in the country, is North Carolina 
going to be penalized by not being able to participate because 
we, for generations, have highly subsidized higher education?
    Ms. Kanter. This is exactly why we are reaching out to all 
of you and to the institutions themselves. What we want to do 
is create momentum to provide good value.
    Senator Burr. But that is a very specific question. Would 
North Carolina under how you envision Race to the Top, would 
they be penalized or excluded from participating because they 
were declining the level of State subsidy, even if it was the 
highest in the country?
    Ms. Kanter. What we want to do is incentivize States to 
actually provide better value. I have a number of States who 
have already moved to stabilize tuition increases. I think New 
York is the latest one that has said for the public 
institutions in the State, we are going to only increase 
tuition in the public institutions by a small amount over the 
next few years. Maryland is another example.
    I think if States are making efforts to actually put in 
place what we hope would be a long-term policy, set of policy 
proposals to stabilize tuition over time, I think that would be 
of great benefit to the student.
    Senator Burr. My time is running out. Let me just make this 
comment, and again, this may be a North Carolina editorial. 
Public education in North Carolina has been, is, and will 
continue to be affordable in comparison to other States. Will 
it live within some artificial increase percentage that we 
choose by the Federal Government? I doubt it. We are penalized 
because historically we have maintained an affordable level for 
all students to attend.
    I find it incredible that we might think of a program that 
would exclude or create some type of penalty on a State that 
has shown tremendous support and subsidy in the past because 
they may pick up a little more than everybody else because they 
have held it down so tight for so long. And I might add, it 
concerns me about where North Carolina might head or any other 
State that falls in that category.
    But it also concerns me that we pick one tiny subset of 
students and say,

          ``We are going to target you for lower interest rates 
        than everybody else from a standpoint of the 
        affordability of what the Federal Government is going 
        to provide to you for higher education.''

    We have a long way to go in this debate, I realize that, 
and I know you are constrained today as to how much you can 
share prior to the budget.
    Mr. Chairman, I am anxious for that budget to come out so 
that all members can look at it. This committee has shown 
tremendous bipartisan willingness in the past to look beyond 
maybe the politics that could be in education and should not 
be, and to make the right decisions. And I think Senator 
Mikulski has said that.
    I hope we will take our time. We will thoroughly look at 
this issue, but at the end of the day, I just want to make a 
statement to my colleagues. If the policies we propose penalize 
those States or institutions that have lived by what we are 
trying to set up for generations, and we are going to penalize 
them for it, this is very, very wrong. It is not in the best 
interest of the education of future generations.
    I thank the Chair for his leniency.
    The Chairman. Thanks, Senator.
    Senator Murray.

                      Statement of Senator Murray

    Senator Murray. Mr. Chairman, thank you so much for having 
this really important hearing about the issue of affordability 
in our college institutions.
    We are hearing from so many people today, high school 
students and families that are really worried that they are not 
going to be able to be able to go on to continue their 
education. I have talked to unemployed workers who really are 
having trouble making ends meet today, and they know that they 
need to get further training to be able to get the skills they 
need to find a job. And all this comes at a time when post-
secondary education is even more important to getting a job in 
the 21st century.
    This is actually an issue that hits really close to home to 
me because when I was growing up, my own family faced some very 
tough times. My dad got sick and had to quit work, and my mom 
went back to Lake Washington Voc Tech, so she could get a job, 
and put food on the table. All six brothers and sisters of mine 
were able to go to college because of Pell grants, and work-
study programs, and Federal support. And because we all got 
that support, my mom and all my brothers and sisters--Federal 
support--we all graduated, found jobs, and we were able to give 
back to our community.
    I think this is really an important concept that our 
country was based on, and this hearing is very important, and I 
am really glad that President Obama is focused on that, this 
committee is focused on that.
    I do have questions, but I want to submit them in writing 
so that we can move to our second panel because I know we have 
some very important testimony to come.
    But thank you very much for having this hearing.
    The Chairman. Thank you, Senator Murray.
    Senator Alexander.

                     Statement of Senator Alexander

    Senator Alexander. Thanks, Mr. Chairman and thank you for 
having the hearing. And Miss Kanter, thank you for coming. I 
want to thank Senator Mikulski for her offer to renew our 
effort to work on finding appropriate ways to deregulate higher 
education which, I think, is a real problem.
    In listening, I have a suggestion. You know, I like it. I 
am one Senator who likes the Race to the Top concept, but I 
think you have it headed in the wrong direction. I think we 
ought to have a Race to the Top competition among Federal 
agencies to see if they come up with ways to find regulations 
that stop adding mandates to States that increase the cost of 
government, and reduce the amount of money available for 
colleges and universities. I can think of two or three, and all 
of them have to do with healthcare, which I really would rather 
not bring up because that healthcare has been such a partisan 
issue. But let me just use those as an example without trying 
to be partisan.
    For example, we have about $100 million, $116 million that 
we loan to students this next year in the Federal Student Loan 
Program. The Department of Education borrows it at 2.8 percent, 
loans it to students at 6.8 percent. Where does that profit go? 
That is about $4.5 billion a year.
    Ms. Kanter. There is a difference between what the 
Government pays to borrow money and the interest rate that is 
paid by borrowers.
    Senator Alexander. No, we know what it is.
    Ms. Kanter. The Government's rate----
    Senator Alexander. It borrows it at 2.8 percent and it 
loans it to students at 6.8 percent. And does it not use that 
$4 billion to help pay for the healthcare law, and to pay for 
Pell grants for other students? So is not the Federal 
Government, in effect, overcharging 16 million students across 
the country on their student loans?
    And is it not true that if you took that $4 billion and 
applied it to the average student loan, that you could lower 
the interest rate payment over 10 years by about $2,200? Would 
not that be a better proposal to reduce the cost of going to 
college?
    Ms. Kanter. I do not think it is that simple.
    Senator Alexander. I believe it is.
    I mean, the difference between 2.8 and 6.8 is 4, and added 
together----
    Ms. Kanter. That is one small piece of the----
    Senator Alexander. You have $116 billion that you have 
loaned out and the Congressional Budget Office has said, in 
effect, that if that money were spent, if the students were not 
overcharged that the loans could, the interest on the loans 
would be about $2,200 less over 10 years. But let me give you a 
larger example.
    In Federal legislation, we have required States, and I used 
to be a Governor, we have required States not to reduce their 
Medicaid spending. Now, I know what happens when Governors have 
budgets like that and the economy is bad. You go through the 
budget, and you try to allocate the money where it goes. You 
are getting down toward the end, and you have really got a 
choice between Medicaid spending and higher education. And what 
happens? I am sure you saw this when you were a community 
college president, the Governors say, ``Well, the Federal 
Government has told us we have to spend more on Medicaid,'' and 
so, there is less to spend on higher education.
    Now, this is not a President Obama problem all alone. This 
was going on 30 years ago and I fought that 30 years ago, 
Governors have fought it for 30 years. But would it not be a 
good idea for the Federal Government to begin to think of ways 
not to add mandates to States that soak up the money that 
States normally might use to go to the community college in 
Maryland, or the University of Tennessee, or the State 
institutions that are now suffering such large decreases?
    Ms. Kanter. Yes, I mean, we want to work with you Senator 
to do just that. I will say that, you know, other proposals----
    Senator Alexander. Do you know the maintenance of effort 
requirement that States have? That would be a good idea, I 
think.
    And to stop the mandate of the healthcare law that adds 
$1.2 billion to the State government that is going to require 
further reductions in higher education spending in Tennessee. 
Are you saying you are willing to change that?
    Ms. Kanter. No. I mean, what was interesting to me to look 
at the maintenance of effort in a small program, the College 
Access Challenge grants that you authorized that we are in Year 
3 of was that only four States could not meet that maintenance 
of effort requirement. So everybody was able to meet that and 
better serve students. And we have seen in the Pell grant 
program, we have moved from 6 million in 2009 to 9.4 million 
today, students from the lowest income families in this country 
enrolled in higher education.
    Senator Alexander. My time is up, but I respectfully 
suggest turning the Race to the Top around, heading it in the 
direction of the Federal Government. Let us look for ways to 
stop Washington from adding to State costs, that soak up 
dollars, that raise tuitions in California, Tennessee, Wyoming, 
and all of our other States. That is the real reason tuitions 
have been going up. It is a problem here in Washington, not in 
the States.
    The Chairman. Thank you, Senator Alexander. And now, this 
would be Senator Bennet.

                      Statement of Senator Bennet

    Senator Bennet. Thank you, Mr. Chairman, and I apologize 
for being late. We had a banking committee hearing and I want 
to just say I cannot think of a topic more important than the 
one that you have brought to our attention today, and it 
strikes at the heart of our economy in the 21st century in an 
incredibly profound way. The worst the unemployment rate ever 
got for people in this recession, the worst recession since the 
Great Depression, who had a college degree was 4.5 percent. 
That was the worst it got for people that had a college degree.
    We find ourselves in a place where only 9 out of 100 kids 
born into poverty can expect to get a college degree. And when 
the last president became president, we led the world in the 
production of college graduates; we led the world. And just 10 
or 12 years later, we are 16th in the world. At a time when we 
have made it harder and harder and harder for people to go to 
college and get a degree which they need more and more, the 
rest of the world is figuring out that they need to move their 
people along.
    In Denver, thanks to the generosity of some wonderful 
citizens there, we started something in 2005 called the Denver 
Scholarship Foundation which said that any kid who is 
graduating from the Denver public schools would have the gap 
filled.
    And the result of that, Mr. Chairman, is there are 30 
percent more graduates of Denver public schools in college 
today than there were in 2005, but this affordability problem 
is making it harder and harder and harder to keep them there.
    This is of such concern to me and to the people that I 
represent that--actually, over the last month our Senate 
office, that has no responsibility for this at all, has been 
having college affordability discussions all over the State. We 
have been walking people through the FAFSA process, the 
scholarship process, trying to demonstrate to people what 
options are available. Because to me, the hardest thing you can 
hear anybody say is they cannot afford to send their kid to the 
best school they got into and I have heard that time and time 
again over the last 3 years. Everybody is saying it.
    I wanted to just go in with Senator Mikulski and her 
observation about the importance of working to diminish these 
regulations that confront our institutions of higher ed and our 
States.
    You mentioned, Madam Secretary, the teacher preparation 
programs, and I am very interested in this, as you know. You 
said in that context that you think we ought to be more focused 
on outputs than we are on inputs. I wholeheartedly agree with 
that. But I wonder whether you are applying that philosophy 
generally as you do this review. Are we going to get to a place 
where we begin to focus on outputs again instead of 
contributing to the problem that we are seeing in our States 
and in our communities?
    Ms. Kanter. Yes. I mean, I do think that the national 
conversation is about value, and I think the more we can look 
at it, and I think many people have said, when you look at 
price and you look at quality, then you look at the value to 
Americans. Are people getting the value that they are paying 
for, with the effort that they are making, in the design of the 
institutions we have, and can they get through?
    I think on the affordability side, we have a lot to do to 
help Americans understand that they can afford to go to 
college. And we want States with our competitions and our 
proposals, actually, I should say, to reduce regulation. I 
mean, every teacher, every person who wants to become a 
prospective teacher has to take a Myers-Briggs test. Now, I 
took a Myers-Briggs test. I know what that is, but it should 
not be a requirement because what we want is great teachers.
    Senator Bennet. I never took it because I was scared to 
find the results, but you are right. It is crazy.
    Ms. Kanter. It is an example of a 20th century----
    Senator Bennet. I do not have a fancy chart like that, but 
here is what is happening to college tuition versus all this 
other stuff over the last 10 years, and we have to get a hold 
of it somehow. This is going to require partnership at the 
State and local level where this work really gets done, the 
Federal Government.
    I wonder with the last few seconds that I have whether you 
could tell us specifically whether there are States, or 
communities, or foreign countries that have figured out how to 
specifically deal with this affordability problem? Are there 
specific examples that you have in mind that you wish we could 
get to?
    Ms. Kanter. One great example is the Tennessee Technology 
Centers. If you look at Tennessee and you look at the success 
of those Centers in preparing students for the workforce. It is 
part of the 2-year college system where students are earning 
certificates to go into the workforce, that is one example. 
Courses are offered every day at set times, 5 days a week. It 
is affordable. They have been able to maintain that 
affordability. I can talk about Indiana. I can talk about 
Maryland.
    In freezing tuition in Maryland for the last 4 years has 
been a tremendous boon to the residents of Maryland.
    The I-BEST program in Washington State, that has been a 
tremendous program where we are taking students at the adult 
level, low-skilled adults, getting them trained up, and then 
getting them ready for not only a career, but to continue their 
college education.
    I think, as I said in my testimony or I think I said it in 
one of the questions, we have islands of excellence. We have 
States, models within States, we have programs, institutions of 
higher education leading the way in a variety of places. 
Unfortunately, we have 50 States and 6,000 institutions of 
higher education that have got to do better because the numbers 
are not there. We are losing 50 percent of students.
    As you said, when you look at those data, nationally we are 
losing 50 percent of students over 6 years. We are wasting Pell 
money because we are not doing a better job. This is America. 
We should be able to fix the remediation problem. We should be 
able to have the best institutions in the country providing 
value so students do not have to repeat what they should have 
got in high school. Or if they come in underprepared because it 
is an immigrant family, and it is an adult incident, or it is a 
low-skilled adult.
    I went out to Macomb Community College and saw the closing 
of a plant, the replacement of that plant with robotics, and 
met so many low-skilled adults in their 40s and 50 s who were 
not ready to transition to another career because they needed 
higher level skills. In Washington State, there are programs, 
the I-BEST I mentioned, that are going to address that, but it 
is not available in many other States.
    It is that kind of thing that we want to do with not only 
Race to the Top, but the First in the World competition, and 
the other proposals with campus-based aid and so on, giving 
students more work-study. But providing value so ultimately, we 
are going to have more students completing college in a shorter 
amount of time with the highest quality education that this 
country can provide and that those students deserve.
    Senator Bennet. Thank you.
    The Chairman. Thanks, Senator.
    Senator Franken.

                      Statement of Senator Franken

    Senator Franken. Thank you, Mr. Chairman, for starting this 
very important discussion. I would like to associate myself 
with Senator Murray and Senator Bennet's comments. I got here a 
little late because I was in a judiciary executive meeting.
    This is a central problem. As Senator Bennet said, we were 
first only a few years ago in OECD countries in the percentage 
of our population that had college degrees. And now we have 
fallen to 16th. I remember hearing this during an ESEA hearing. 
And all of this is, by the way to me, very holistic. I mean, 
this really starts with early childhood because when you are 
talking about paying the cost of kids coming in to college who 
are not ready to go to college, that remediation costs money as 
well.
    But I remember that day and Senator Sanders asking Andreas 
Schleicher from the OECD if one of the reasons that we are 
losing ground on this compared to other countries is the cost 
of college here. And Senator Sanders said, ``How much does it 
cost to go to college in Germany? '' And Andreas Schleicher 
said, ``Well, it's free.'' And Senator Sanders said, ``Well, I 
imagine it is like that in other countries.'' And then he said, 
``How much, for example, does it cost,'' this is what Senator 
Sanders said, ``In Scandinavia? '' And Andreas Schleicher said, 
``In Scandinavia, they pay you to go to college.''
    I just had a meeting with MnSCU, with the Minnesota State 
Colleges and Universities System and their costs have stayed 
very stable per student. In fact, I think they have gone down, 
but the expenses have gone up.
    And at the same time, I talked to the student board and 
these are students who serve on the boards of MnSCU. And I 
asked them, ``How many of you work 10 hours, at least, a week? 
'' All of them; 20, most of them; 30, a lot of them; 40, some 
of them. That is no way to go to college to work 40 hours a 
week and go to college, and no wonder it takes 6 years.
    To answer Senator Burr about the Pell grants, my wife's 
family had a similar experience to Senator Murray's. Her father 
died when she was 18 months old, mom widowed at age 29 with 
five kids. All four girls went to college on combinations of 
Pell grants and scholarships. Pell grant at that time paid 77 
percent of a public college education; today it pays 35 
percent. This is something that is of such importance as I go 
around in my State.
    I just want to ask one specific question and like Senator 
Murray, I will probably submit some others. Miss Kanter, the 
Obama administration recently proposed a financial aid shopping 
sheet in the form of a universal financial aid award letter. 
This letter will allow students to accurately compare financial 
aid packages, and will expose the practice of providing lots of 
grants in the first year, without saying the student will 
receive all those loans in later years to make it look like the 
package is better than it is.
    This letter will enable apples to apples price shopping, 
but I understand you do not have statutory authority to require 
colleges to do this. I would like to work with you to fix that. 
What do you need from Congress to require all schools to use a 
uniform financial award letter?
    Ms. Kanter. We would need legislation that would do just 
that and then we go put that in place. We would look forward to 
working with you on that. That is part of the President's 
proposal. We have got to simplify and make it easy for families 
to compare that per value. They are looking for good quality, 
they are looking for value, and they are looking at cost. Cost 
and quality are really the two kinds of things that we want to 
do. It is too difficult now for families to compare, and they 
need their total package.
    When I think of all of the things in here, whether the 
students, the family is getting the American Opportunity Tax 
Credit, whether the family has a direct loan, whether the 
family qualifies for a Pell grant, whether the family could get 
a Supplemental Education Opportunity Grant. Has the State cut 
disproportionately State aid so that State grants are not as 
available as they might have been the year before, or the year 
before?
    Campuses, I know, I talked to many college and university 
presidents who are raising lots of money for scholarships, 
adding that in. And all of those pieces need to be really made 
available as options for families to look at to see what they 
could qualify as a total package.
    The Scorecard will make things simpler, will allow families 
to compare from this college to that college. If I want to look 
at the top five that I want my child to consider, or I am an 
adult and just got laid off, and I have got to go back to 
school, how can I really understand what choices I have? And 
then, can I go back to what the President is calling the 
College Scorecard to look at value?
    And we look forward to working with Congress on this. We do 
not have all the answers. I think that is pretty clear from my 
testimony. The States have got to do their part. It is a shared 
responsibility: colleges, universities, Congress, and 
ourselves. We are really excited to work on these proposals and 
figure out, we have got to do better as a country.
    I think, Senator Bennet, when you hold up that chart, we 
cannot be 16th anymore. We have so much talent in this country, 
the students that I have lost over the years, the student 
success stories. We can do this in every State. We are doing 
it. I mean, we have the best institutions in the country, but 
again as I said, we have 6,000 of them.
    We have to give families the opportunity to go to those 
places where they are going to get the greatest value, get 
through in the shortest amount of time, to go ahead and 
contribute, make their contributions to society as you all are 
doing.
    Senator Franken. I look forward to working with you on that 
specific matter. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Merkley.

                      Statement of Senator Merkley

    Senator Merkley. Thank you, Mr. Chair. And thank you for 
your testimony and for your emphasis on affordability and value 
in programming.
    I sometimes feel like we are in the middle of these 
conversations about, ``How do we tweak it here or there? '' And 
perhaps we do not step back and see the view from 30,000 feet 
and opinions may differ on what that view is. I believe we are 
spending way too much money on foreign bases and foreign wars, 
and not nearly enough on education and infrastructure, and that 
we need to have that conversation as well.
    One hundred and twenty billion dollars a year spent in 
Afghanistan. What would a third of that buy in terms of 
supporting the affordability of colleges across America?
    Ms. Kanter. We would get many, many more people through 
college. I mean, the investing in education and the shared 
responsibility, what we are envisioning in something like a 
Race to the Top for affordability and completion could be done 
in every State. We would not have a competition. We could have 
goals for every State, I mean, revenue like that.
    I think we have all been, you know, the new normal has 
really shaped, I think, everything we are talking about to a 
limited view. But this is our country, so if we did have more 
revenue, we would look to these kinds of proposals for the 
kinds of things we want to do to focus more on how we can get 
more value, and how everyone can play a role.
    We have three researchers, Arne Duncan brought in three 
researchers from the top schools in the country talking about 
student effort. What can we do to help students feel that they 
can achieve? That they believe in themselves, they have the 
confidence to do the mathematics. I mean, for students to have 
confidence in math that happens in K-12. Many students just get 
shut out. They do not get called on enough. We see it as 
systemic.
    I think your comments about looking at early learning, a 
third of children in this country are not ready for 
kindergarten. Fourth grade reading levels have stayed stagnant 
for 40 years. That is a comment from the Modern Language 
Association of the country, and we have half of the students 
not completing college in 6 years much less 5. And we know many 
students have to work. I mean, you have talked about those 
working students.
    I had a class of nursing students. They raised their hands 
at their graduation, 40 percent of them were working full-time 
while they were getting their nursing degree. I mean, they were 
on fire because they were studying and working literally 18 
hours a day. I did not know how they slept. I truly did not for 
the students that were working full-time.
    I think if we were to be fortunate to end a war, these are 
the kinds of dreams we would like to see. We need to get rid of 
regulation that makes no sense anymore in the 21st century. But 
it is all about outcomes, it is all about value, and it is all 
about giving that American student an opportunity to do the 
best that he or she can.
    We have a lot of work. Carnegie Mellon, I will mention, the 
work in learning sciences and analytics. We have seen courses 
that have accelerated student learning and success. Why 
everyone in this country cannot read and we cannot really 
tackle that literacy problem and use the revenue to do that to 
promote better research and education. I mean, it is a long 
laundry list.
    Senator Merkley. I will interrupt you right there, if I 
might.
    Ms. Kanter. Sure.
    Senator Merkley. My time will soon be gone. But as I looked 
at the Administration's plan, I see a $6 billion per year cost 
for keeping the interest rates lower. And I see $1 billion for 
Race to the Top, so that makes $7 billion, and then 
miscellaneous other things. But really, we are talking about a 
$7 billion plan roughly. Is that correct?
    Ms. Kanter. I think our figures for keeping the interest 
rate at 3.4 percent, I think our figures are $4.5 billion. The 
Race to the Top would be $1 billion a year, yes and those 
dollars, you know, we will be releasing the budget on February 
13.
    Senator Merkley. All right, to my point then, in the 
ballpark of a $6 billion plan. That is less than the numbers I 
had before me. I just want to emphasize the contrast that if a 
third of the savings in Afghanistan were directed toward 
education that would be $40 billion that would be completely 
beyond the proposal you are putting forward.
    This is why I want to re-emphasize this point that we must 
make choices as a nation, and that we are systematically 
undermining our investment in our intellectual infrastructure 
and our physical infrastructure. We are weakening this Nation 
and we have to have the conversation, or we are just fiddling 
around the edges. My time is now expired.
    I appreciate very much the proposal you are putting 
forward; appreciate it a great deal. I hope the Department of 
Education and the President's team will start to talk in terms 
of the grand challenge facing America if we continue to fall 
behind other nations in the world are we imperiling the success 
of our children. We are imperiling the success of our future 
economy. We are making this Nation weaker and it is wrong for 
our families and wrong for our Nation.
    Thank you.
    The Chairman. Thank you, Senator Merkley. Dr. Kanter, thank 
you very, very much. We will now turn to our second panel.
    Ms. Kanter. Thank you.
    The Chairman. I am sorry we are losing some Senators, 
because the second panel, I read their testimony last night, 
and there are some great suggestions and insight into what is 
causing prices to go up, and what could be done about it. 
Nonetheless, we made it part of the record.
    First, I would like to welcome our second panel. I will 
introduce them as they take their seats. Mr. Kevin Carey will 
start off our second panel. Mr. Carey is policy director of 
Education Sector, a nonpartisan think tank in Washington, DC. 
His research includes higher education reform, improving 
college graduation rates, community colleges and higher 
education affordability. I liked the testimony I read last 
night.
    Following Mr. Carey, we will hear from Dr. Carol Quillen, 
president of Davidson College, an independent liberal arts 
college for 1,900 students located near Charlotte, NC. 
President Quillen is Davidson's 18th president and joined the 
Davidson College community on August 1st.
    Our next witness is Dr. Robert Mendenhall, president and 
CEO of Western Governors University, a private, not-for-profit 
online university that offers competency-based degrees. Dr. 
Mendenhall has more than 30 years of experience in the 
development and delivery of technology-based education.
    Finally, we have Mr. Charlie Earl.
    Charlie Earl is the executive director for the Washington 
State Board for Community and Technical Colleges. Mr. Earl has 
served as president of Everett Community College. He currently 
serves as the chair of the National Council of State Directors 
of Community Colleges.
    I thank you all for joining us today. As I said, I read 
your testimonies last night. I think there is some really good 
stuff in there, so I am sorry that we have lost Senators here. 
I know people are busy, but I want you to know that your 
testimony will be made a part of the record in its entirety. 
And, we have staff here, but I appreciate the insights that 
each of you have given on this issue. I thought your testimony 
was very, very well-written of what I read last night.
    We will ask you to just give a short statement as your 
statements will be made a part of the record in their entirety. 
We will go from left to right. We will start with Mr. Carey.

          STATEMENT OF KEVIN CAREY, EDUCATION POLICY 
           DIRECTOR, EDUCATION SECTOR, WASHINGTON, DC

    Mr. Carey. Thank you, Chairman Harkin, Ranking Member Enzi, 
and members of the committee for the opportunity to speak 
today.
    The price of higher education in America is spiraling out 
of control. Student loan debt is at an all-time high. Many 
students and families can no longer pay the college bill, and 
neither can the American taxpayer. Annual Federal college aid 
has ballooned by over $100 billion per year over the last 
decade. Innovation is needed and quickly.
    It is important to note that there are two elements of 
college affordability: cost and price. Costs are what colleges 
spend to educate students; prices are what students pay to 
attend college. We need innovation in both cost and price to 
fix the affordability problem.
    Now, some colleges will tell you that there is no way to 
reduce costs without harming the quality of education they 
provide. This is not true. We know that colleges can reduce 
costs and maintain quality because some of them are doing it 
right now. Some of them are here today. Others include Virginia 
Tech, which has used technology to revamp its math courses over 
a decade ago, dramatically reducing costs while improving 
student learning at the same time. And there are hundreds of 
other colleges and universities in this country that are 
applying similar techniques today.
    The University of Minnesota branch campus in Rochester has 
a lean student focus structure that costs a fraction of what it 
takes to fund a traditional university. The University of 
Maryland system recently collaborated to cut costs system-wide. 
Meanwhile, Carnegie Mellon and MIT are developing high quality, 
next generation, online courses that will be offered to 
students around the world free of charge. These and other 
examples show that colleges can cut costs and improve learning 
simultaneously.
    Yet, many of these innovations are not widespread and 
other, more commonly used cost cutting measures like replacing 
tenure track faculty with adjunct faculty have not resulted in 
lower prices for students. That is because while costs are a 
function of practice, prices are largely a function of policy. 
And prices are the root of the affordability problem.
    Now to be sure as we have talked about today, many States 
have slashed higher education budgets in recent years resulting 
in tuition hikes that are not the fault of colleges and 
universities. Many of your colleagues in State legislatures are 
passing their higher education bill onto you.
    But the price problem is not merely cyclical. For 30 years, 
colleges have raised prices well beyond inflation in good times 
and in bad times. Why do they do this? I think the answer is 
simple: because they want to and because in the current policy 
environment, they can.
    They want to because money is useful for buying things that 
colleges care about like fame, and prestige, and so-called 
better students. They can because recent economic trends have 
made their product so valuable. The earnings gap between 
college graduates and everyone else is growing.
    College graduates were much less likely to lose their jobs 
in the recent recession, and parents and students know this. 
And so they scrimp, and they save, and increasingly they borrow 
because, really, what other choice do they have?
    We cannot change the desire of colleges to raise money from 
tuition increases. Everybody wants money. What we can change is 
their ability to recklessly increase tuition year after year by 
implementing three policies that I would characterize as price 
innovation.
    One of them is about regulation and there has been a lot of 
discussion about regulation this morning. I have a different 
take on regulation. I do not actually think there is much 
credible evidence that the cost of compliance with reasonable 
regulation really is driving college costs up in this country. 
I think the regulatory problem is that we are keeping low-
priced competitors out of the higher education market. Let me 
give you an example.
    Let us say you wanted to create a nonprofit organization, 
or a for-profit organization, and all you wanted to do was 
provide the world's greatest online college calculus classes. 
You wanted to specialize. You were not going to offer degree 
programs. You were going to be really good at one thing and 
because of the economies of scale involved with technology, 
once you get big enough, you could offer that course to 
students at a very, very low price.
    Right now, you are not allowed to use--students would not 
be allowed to use their Federal financial aid money, which most 
students now use to go to college in order to pay you. You 
would not be allowed to offer credits that would automatically 
transfer into other college systems. Those are regulations that 
our existing colleges and universities are actually very much 
in favor of because they keep control over who is in the system 
to the accreditation process which is run by existing colleges 
and universities.
    I think the Federal Government could create basically a new 
space where innovative competitors who are willing to offer low 
prices and be accountable for quality and transparent about 
what they offer, could compete and have price competition for 
students.
    Second, I think we need to create more transparency in the 
higher education market by actively providing students, 
parents, and guidance counselors with consumer information 
about college prices, learning results, graduation rates, and 
employment outcomes for all colleges, nonprofit, and for-
profit.
    We need colleges to compete for students on value, which is 
the combination of quality and price. But without better 
information on quality, there can be no such competition and it 
is the proper role of the Federal Government to require 
colleges to report information about value.
    Finally, I think we should, as Under Secretary Kanter said, 
reward States that implement a comprehensive higher education 
reform agenda that encourages greater college competition, 
innovation, and investment in higher learning.
    Thank you very much.
    [The prepared statement of Mr. Carey follows:]
                   Prepared Statement of Kevin Carey
                                summary
    The price of higher education in America is spiraling out of 
control. Loan debt is at an all-time high and many students and 
families can no longer pay the college bill. Neither can the American 
taxpayer--annual Federal aid has ballooned by over $100 billion in the 
last decade. Innovation is needed, and quickly.
    There are two elements of college affordability: cost and price. 
Costs are what colleges spend to educate students. Prices are what 
students pay to attend college. We need innovation in both cost and 
price to fix the affordability problem.
    We know that colleges can reduce costs because some are doing so 
right now. Virginia Tech used technology to revamp its math courses 
over a decade ago, dramatically reducing costs while improving student 
learning at the same time. Hundreds of other colleges are using similar 
methods to redesign courses. The newest University of Minnesota branch 
campus has a lean, student-focused cost structure. The University of 
Maryland system collaborated to cut costs systemwide. Carnegie Mellon 
and MIT are developing next-generation online courses that will be 
offered to students around the world, free of charge. These and other 
examples show that colleges can be more efficient without sacrificing 
student learning.
    Yet these innovations are not widespread, and other cost-cutting 
measures, like the increased use of adjunct and part-time faculty, have 
not resulted in lower prices for students. That's because while costs 
are a function of practice, prices are a function of policy. In recent 
years, State tax and budget policies have led to slashed higher 
education budgets and resulting tuition hikes. But the price problem is 
not merely cyclical: for 30 years, colleges have raised prices beyond 
inflation in good times and bad. Colleges do this because they want to, 
and because, in the current policy environment, they can.
    We can't change colleges' desire for money from tuition increases, 
which is useful for buying prestige and other things they covet. We can 
change their ability to raise tuition, by implementing three policies 
focused on price innovation:

    1. Bypass the existing accreditation system, which is stacked 
against innovation, and allow high-quality, low-cost entrepreneurs who 
are willing to be transparent about and accountable for quality access 
to the Federal financial aid system.
    2. Create more transparency in the higher education market by 
actively providing students, parents, and guidance counselors with 
consumer information about college prices, learning results, graduation 
rates, and employment outcomes.
    3. Reward States that implement a comprehensive higher education 
reform agenda that encourages greater college completion, innovation, 
and investment in higher learning.
                                 ______
                                 
    Chairman Harkin, Ranking Member Enzi, and distinguished members of 
the committee, thank you for the opportunity to speak today about 
innovations in college affordability. My name is Kevin Carey, and I am 
the policy director of Education Sector, a non-partisan education 
policy think tank based here in Washington.
    The topic of today's hearing is a crucial one because, as we all 
know, the price of higher education in America is spiraling out of 
control. Over the past 10 years, public university tuition grew by an 
average of 5.6 percent above inflation every year. As a result, student 
loan debt is at an all-time high and access to college is threatened. 
Students and families can't afford to pay these bills and, 
increasingly, neither can the American taxpayer. Annual Federal 
financial aid to higher education has increased by over $100 billion in 
just the past decade. We can't just keep shoveling money into a system 
that consumes resources at an ever-faster clip. Innovation is needed, 
and needed badly.
    I would like to start by making a distinction between two elements 
of affordability: college costs and college prices. These terms are 
often used interchangeably, but they actually represent very different 
things. College costs are what colleges spend to educate students. 
College prices are what students pay to attend school. We need 
innovation in both college costs and college prices in order to fix the 
affordability problem.
    This will require new Federal policies that open up the higher 
education market to innovative, low-cost, high-quality providers--
including organizations that look very different from traditional 
colleges and universities. It means we need much more information and 
transparency in the market for students and parents struggling to 
choose the school that is best for them. And it demands a more active 
Federal role in regulating an industry that cannot regulate itself.
    Colleges like to argue that college costs cannot be seriously 
restrained. Higher education is an inherently labor-intensive industry, 
they say, and thus subject to the immutable laws of economics. If we 
want college students to get a good education, we are told, we have no 
choice but to keep writing ever-larger checks, forever.
    This is nonsense.
    Colleges are not--alone among all human institutions--exempt from 
the need to become more efficient. Other industries have been 
transformed by managerial innovation and the power of information 
technology. Colleges, too, can take these opportunities to reduce 
costs.
    We know this because many colleges are doing it already. Some of 
them are represented here today. Let me describe a few others. Virginia 
Tech is one of the Nation's finest engineering schools and a leader in 
technology-based innovation. In the late 1990s, it completely changed 
the way students learn introductory mathematics. Instead of sitting in 
a lecture hall once or twice a week, students go to a computer 
laboratory that's open 24 hours a day, 7 days a week, where they work 
through carefully designed problem sets that provide customized 
feedback and access to video, text, and other materials. Tutors are on 
staff to help students who need it. As a result, Virginia Tech has cut 
its labor costs dramatically for courses like Linear Algebra and 
Calculus. Crucially, student learning results stayed the same, or 
improved. This is not a new experiment or obscure institution; a major 
research university has been teaching this way for over a decade.
    And it's not alone. The non-profit National Center for Academic 
Transformation has helped hundreds of 2- and 4-year colleges use 
technology to redesign their courses. Some are fully online, but most 
are hybrids--a combination of technology and personal instruction. Many 
of these colleges have cut their costs dramatically, in some cases by 
over 50 percent. More important, student learning results have 
consistently improved.
    We all know there's a terrible college drop-out problem in this 
country. These innovations help students pass courses that are often a 
major barrier to graduation. Colleges can cut costs and improve 
learning simultaneously.
    Of course, technology isn't the only way to cut costs. Many 
colleges and universities have been around for a long time. They've 
become bloated, cumbersome, and inefficient. It's hard for 
organizations like that to reform themselves. Like any industry, higher 
education needs new, efficient competitors to challenge old ways of 
doing business.
    Recently I visited one such organization, a new branch campus of 
the University of Minnesota, in Rochester. Rather than lay out a 
smorgasbord of academic offerings, this university has only three 
majors, all in health sciences. The brand-new, state-of-the-art 
classrooms were built in renovated commercial space that used to house 
a food court. Instead of building dorms, the university negotiated 
group rates in apartments. There are no elaborate fitness facilities--
students work out at the ``Y.'' All the professors, including those on 
the tenure track, teach undergraduates in small classes. The university 
partners with local industries such as IBM and the Mayo Clinic to 
provide its students with access to labs, experts, and internships. The 
library has no books, just computers and wi-fi. If students like 
college football, they can drive to the Twin Cities or watch TV.
    All of this costs the Minnesota taxpayers a fraction of what it 
takes to build and maintain a traditional university. And students are 
getting a great education.
    Other cost-reducing innovations have happened at the system level. 
A few years ago, the University of Maryland system took a hard look at 
itself. Buildings were sitting half-empty on Monday mornings and Friday 
afternoons because students and professors don't like to attend class 
then. Some students were taking too long to graduate. Faculty workloads 
were too low and utility costs were too high. So system leaders put 
their heads together and saved millions of dollars through joint 
purchasing, improving classes where many students were dropping out, 
and working with faculty to increase the number of credit hours 
professors teach.
    Meanwhile, some of the Nation's leading universities are developing 
even more radical innovations.
    Learning scientists at the Carnegie Mellon University Open Learning 
Initiative have created sophisticated online classes that use 
``cognitive tutors'' and virtual laboratories to teach subjects 
including Statistics, Biology, Chemistry, and Logic. Initial studies 
suggest that students learn more in these environments than in 
traditional, sit-down courses.
    In another example, just a few weeks ago, MIT announced the 
creation of a new initiative called ``MITx,'' a next generation of 
online courses designed in consultation with some of the greatest 
scientists in the world.
    The up-front development costs for Carnegie Mellon and MIT are not 
inconsequential. The best online courses offer much more than some 
lecture notes or videos on YouTube. But once the courses are developed, 
it costs the university very little to serve additional students. The 
more students who enroll, the lower the cost per student becomes.
    And the Carnegie Mellon and MIT initiatives have more in common 
than being developed by two of the world's great research universities. 
They carry the same price to the student: zero. Both Open Learning 
Initiative and MITx courses are free.
    This shows the crucial distinction between cost and price.
    There are many things colleges can do to reduce costs that they are 
not doing. For every Virginia Tech using technology to cut costs and 
improve learning, there are hundreds of universities teaching math the 
same old way. The University of Maryland example is the exception, not 
the rule.
    But other cost-cutting strategies are widespread. We know, for 
example, that in recent decades, colleges have been steadily replacing 
expensive academic labor with cheap academic labor. In 1975, one-third 
of faculty were adjunct or part-time. Today, over two-thirds of faculty 
are adjunct or part-time, and these workers are often paid little 
salary and no benefits. Whether or not this is a cost-cutting 
innovation, it is definitely a successful cost-cutting strategy.
    And yet at the very same time, college prices have been rising 
dramatically. The cost of educating students is going down even as the 
price students pay to be educated is going up. Why?
    The answer lies with policy. Cost-reducing innovation is mostly a 
matter of practice. Price-reducing innovation is mostly a matter of 
policy.
    Some of that policy is financial. There is no doubt that colleges 
have raised their prices in recent years because States reduced their 
subsidies for higher education. Some States have hacked hundreds of 
millions of dollars from public university budgets, and universities 
have responded by reducing access to courses and imposing dramatic 
price increases on students and parents. They're counting on the fact 
that families will still scrimp and save to send their children to 
college--and that the Federal Government will come through with more 
financial aid. Many of your colleagues in State legislatures are 
passing the higher education bill to you.
    In Maryland, State lawmakers rewarded the more efficient university 
system with enough money to keep prices stable even as other States 
were causing tuition to skyrocket. Some States are experimenting with 
performance-based funding, while others are creating early college high 
schools that allow at-risk students to earn college credits, for free, 
before matriculation.
    But overall, in a time when the Nation needs more well-educated 
workers and citizens than ever, State financial trends are moving us in 
the opposite direction. President Obama's proposed Race to the Top for 
higher education is one way to address this problem. States need strong 
incentives to maintain their commitment to higher learning.
    But it's also important to note that, over the long term, college 
prices have gone up in good economic times and bad. When State funding 
goes down, college gets more expensive. When State funding goes up, 
college gets more expensive.
    Why do colleges always raise their prices? The simple answer is: 
because they want to, and because they can. Most colleges are non-
profit. But that doesn't make them indifferent to money. Colleges and 
universities enjoy a great deal of autonomy and they operate with 
strong desires. What they desire most are fame and prestige. Both of 
these can be bought.
    For example, U.S. News & World Report ranks colleges by, in part, 
how much money they spend per student. A college that discovered 
innovative new ways to reduce costs and passed those savings on to 
students in the form of reduced prices would see its ranking fall. 
Unsurprisingly, nobody ever does this.
    Colleges are also ranked according to their students' average SAT 
scores. As a result, colleges are increasingly spending their financial 
aid dollars recruiting high-scoring, well-off students, instead of 
giving aid to needy students. They, too, are counting on the Federal 
Government to make up the difference.
    Colleges do much more than educate students. They are centers of 
research and scholarship. They provide community services and sports 
entertainment. They pay the salaries of administrators who are in 
charge of setting prices. All of these things are expensive and can be 
funded from student tuition.
    This explains why colleges desire to constantly raise prices. It 
doesn't explain why they get away with it. That question goes to the 
peculiar market and policy environment in which colleges and 
universities operate.
    During their three-decade-long price-raising spree, colleges and 
universities have benefited from a number of underlying economic and 
demographic trends. First, the value of a college degree--what 
economists call the ``wage premium''--has increased substantially. As 
well-paying blue-collar and less-skilled jobs have disappeared from the 
economy, the gap between what college graduates make and what everyone 
else makes has widened. During the recent great recession, college 
graduates were much less likely to lose their jobs and those who were 
unemployed were more likely to get their jobs back.
    Parents and students realize this. People keep paying ever-rising 
college prices because: What other choice do they have?
    Colleges have also enjoyed a surge of new students from the 
children of baby boomers, a demographic bulge that has given higher 
education institutions more customers than they know what do with. In 
other words, the value of college is rising, demand for college is 
rising, and the population of customers for college has been rising.
    In a normal market, this would be an opportunity for new firms to 
grab market share, particularly if existing firms are inefficient and 
over-priced. But with a few exceptions, States stopped building new 
public colleges and universities in the 1970s. Major new private 
universities are a thing of the past. And while a number of for-profit 
colleges have entered the market, they have, for the most part, not 
chosen to undercut traditional colleges on price.
    Nothing can change college's desire for money. What can change is 
their ability to act on that desire in the form of steep tuition hikes. 
There are three main ways public policy can create stronger incentives 
for colleges to keep prices down--three kinds of price innovation.
    The first kind of price innovation is about who gets to be a 
college_or, more specifically, who gets to be a provider of higher 
education.
    Consider the company Straighterline. It was created by an education 
entrepreneur and is located here in the Washington, DC area. 
Straighterline offers online courses to students for a flat 
subscription rate of $99 a month plus a one-time charge of $39 per 
course, for all the courses students can take. They can enroll in 
accounting, statistics, calculus, biology, and other introductory 
classes. The textbooks and course materials all come from the same 
major commercial publishers that regular colleges use. Individual 
tutors are available, online.
    Straighterline's prices are so low because, as I noted earlier, 
once you make the initial investment in online course development, the 
cost of serving additional students is very small. And also because 
Straighterline isn't paying the sunk costs of maintaining football 
stadiums, research departments, vice-provosts, and so on.
    Straighterline currently serves several thousand students and is 
growing. This education comes at no cost to the American taxpayer 
because students aren't allowed to use Federal financial aid to take 
Straighterline courses.
    That's also the problem. Straighterline is a victim of higher 
education regulation. Not the kind of regulation that traditional 
colleges like to complain about, where they are required to disclose 
basic information about themselves in exchange for billions of dollars 
in Federal funds. This is the regulation that traditional colleges 
cherish--regulation that protects them from competition from innovative 
companies like Straighterline.
    Federal financial aid like Pell grants and subsidized loans can 
only be spent at accredited colleges. Who controls the accreditation 
process? Existing traditional colleges and universities. What 
incentives do they have to allow innovative low-cost competitors into 
the market? None. What incentives do they have to keep them out? Many. 
And the more expensive traditional colleges get, the bigger those 
incentives grow.
    Straighterline has managed to make a business by laboriously 
forging partnership agreements with accredited colleges who agree to 
accept their credits. But this just illustrates the absurdity of the 
system.
    The higher education market needs many new, high-quality, low-price 
competitors to act as a counter-weight to traditional colleges and 
universities bent on increasing prices forever. To be sure, students 
also need consumer protection. One kind of innovative affordability 
policy would open up the Federal financial aid system to low-price 
entrepreneurs who are willing to be transparent about and accountable 
for the quality of the services they provide. This policy would include 
educators and companies who only provide individual courses. If you can 
specialize by providing the world's greatest college calculus class, 
and only that, why should you be excluded from the system?
    This kind of experimentation could also make space for courses like 
those developed by Carnegie Mellon and MIT. When it comes to 
innovations in college affordability, nothing is more innovative than 
``free.''
    More broadly, when the Federal Government invests in education 
resources, those resources should be made available to the public, for 
free, under an open license. The departments of education and labor are 
currently collaborating on just such an effort focused on training 
workers in community colleges. These materials will be available for 
educators to use and improve, and for entrepreneurs to repurpose and 
sell.
    The second kind of price innovation is transparency. Choosing the 
right college is very difficult. It's a source of much anxiety for 
students and parents, and for good reason: you can get it wrong. A bad 
choice can leave students with years of lost time and mountains of 
debt.
    Yet there is very little reliable, comparable information available 
to students about college value--the combination of quality and price. 
How much do students actually learn while they're in college? What kind 
of jobs do they get when they graduate? The answers to these and other 
important questions are largely unknown. Markets only work well if 
consumers have access to the all information they need to make smart 
choices. Because the higher education market lacks this information, 
many of the available choices are poor.
    This, too, contributes to higher education price inflation. If 
customers lack objective information about quality, they assume that 
price is quality. The most expensive colleges are seen as the best 
colleges, by definition. This creates further incentives for colleges 
to charge higher prices, particularly at the top end of the market. 
Higher education begins to resemble a luxury good. As former George 
Washington University President Stephen Joel Trachtenberg once 
admitted, ``You can get a Timex or a Casio for $65 or you can get a 
Rolex or a Patek Philippe for $10,000. It's the same thing,'' Except 
the Federal Government isn't spending vast amounts of money to help 
students buy over-priced watches. And the norms and values established 
at the high end trickle down through the entire system.
    The Federal Government is well-positioned to improve the higher 
education market by mandating the disclosure of more information. This 
is a proper, limited role for the Government to play. The Securities 
and Exchange Commission doesn't tell companies how to do their 
business, but it does tell them to file honest quarterly earnings 
reports, because without that information, the capital markets don't 
work. Why should colleges and universities, which enjoy far greater 
public subsidies than do publicly traded companies, not have to do the 
same? If private companies can report earnings, colleges can report 
their success in helping students learn and prosper.
    If students and parents have more information about value, colleges 
won't be able to get away with increasing prices while giving quality 
short shrift. I encourage the Federal Government to create more 
transparency in the higher education market by actively providing 
students, parents and guidance counselors with basic consumer 
information about prices, learning results, graduation rates, and 
employment outcomes, for all colleges, for-profit and non-profit.
    The third kind of price innovation is more direct intervention. I 
know most Federal policymakers are wary of this, and rightly so. The 
strength of the American higher education system lies, in part, with 
its diversity and independence. Nobody wants the U.S. Department of 
Education to take over our colleges and universities; it would do this 
badly.
    At the same time, it's simply not acceptable to continue spending 
tens of billions of taxpayer dollars every year on an unaccountable 
higher education system that has shown no willingness or ability to 
restrain prices. The system will not change of its own accord. Vague 
promises and good intentions will not suffice.
    One way to move in this direction would be through competitive 
grant programs that reward States that implement a comprehensive higher 
education reform agenda, including boosting graduation rates, 
encouraging innovation, focusing attention on student learning, and 
keeping prices affordable for all students. States are and will remain 
key players in higher education policy. The best should be recognized 
and supported in their efforts.
    In summary, college affordability is a crucial problem for the 
Nation to address. The Nation's economic competitiveness and civic 
character depend on giving every student who is willing to work hard 
access to higher education. If current trends continue, that 
opportunity will be lost for many. Something has to change, and soon.

    The Chairman. Thank you, Mr. Carey. Now we go to Dr. 
Quillen.

  STATEMENT OF CAROL E. QUILLEN, PRESIDENT, DAVIDSON COLLEGE, 
                          DAVIDSON, NC

    Ms. Quillen. Senator Harkin, Senator Enzi, members of the 
committee. On behalf of Davidson College and the National 
Association of Independent Colleges and Universities, I am here 
to describe an initiative called the Davidson Trust. I want to 
thank you very much for the privilege of being here.
    In 2007, Davidson College eliminated loans from its 
financial aid packages. When a student is admitted, we meet 100 
percent of that student's demonstrated financial need through a 
combination of grants and employment, usually work-study. Some 
students and families still choose to borrow, as it makes 
financial sense for them. However, Davidson College meets 
demonstrated need without loans.
    This initiative, called the Davidson Trust, is a huge 
financial commitment for a school without resources. As we 
implemented it, we relied on the pro-education policies of 
North Carolina and the Federal Government, and on gifts from 
the Duke Endowment, and the Knight Foundation. We sustain the 
Davidson Trust through unprecedented ongoing giving from the 
Davidson College community who have made our commitment to 
educational access their own.
    Ensuring access to an unsurpassed education is, for us, an 
ethical imperative. Davidson extends to all talented students 
this invitation and this promise: we want you here. You belong 
here. You can afford it. And if you enroll at Davidson, we will 
do everything we can to ensure that you thrive, both while you 
are at Davidson and after you graduate.
    Measured in terms of admission statistics, the Davidson 
Trust is working. We have maintained the highest academic 
standards and students from underrepresented groups, first 
generation students, and Federal Pell grant recipients have all 
increased significantly.
    These numbers matter, but they are not the only measures of 
the success. Davidson's first year retention rate is roughly 96 
percent. Our 4-year graduation rate is 88 percent, our 6-year 
graduation rate is 92 percent. All have remained remarkably 
consistent with the implementation of the Davidson Trust. Last 
year, 6 months after graduation, roughly 95 percent of Davidson 
graduates were in graduate school or employed in career-related 
jobs.
    The most telling indicator of our success is not our 
graduation rates, or our increasingly diverse student body, or 
our growing reputation as a good place for first generation 
students. The most telling measure is what our graduates do in 
and for their communities. We already know that the Davidson 
Trust enables us to attract an ever greater number of 
extraordinary young people whose talents enrich our campus and 
enrich the education we offer. We look forward to, and are 
grateful for, the incredible things they will do in the world.
    Davidson is a small college committed to cultivating the 
whole human being within a community that values unfettered 
inquiries, academic rigor, personal integrity, intellectual 
humility, and service to something beyond oneself. What we do 
is expensive, yet we strive to bridge the privilege gap. At 
Davidson College, students with means live and learn together 
with students with Pell grants. And consider what our students 
do.
    They publish research that will help cure Alzheimer's. They 
develop a leadership program for at-risk middle school girls. 
They start a nonprofit organization that designs sports 
programs for homeless people. They design a national registry 
for bone marrow donors. They create online globally available 
lessons in physics for high school teachers. They graduate 
emboldened to lead and eager to serve. What we do is worth it 
to those who attend Davidson and to the countless others who 
benefit from their work.
    Davidson is a distinctive example among a small group of 
need-blind institutions with a dual commitment to access and 
academic rigor. Through programs like the Davidson Trust, we 
are changing the face of society's leadership and striving to 
make equal opportunity real.
    We welcome and need you as allies in this quest. Thank you.
    [The prepared statement of Ms. Quillen follows:]
                 Prepared Statement of Carol E. Quillen
                                summary
    On behalf of Davidson College and the National Association of 
Independent Colleges and Universities, I am delighted and honored to 
have this opportunity to share with you the success of our initiative 
called The Davidson Trust. Thank you for your invitation to do so.
    In 2007, with The Davidson Trust, Davidson College became the first 
liberal arts college in the country to eliminate loans from its 
financial aid packages. Once a student is admitted through our need-
blind admission process, we provide 100 percent of that student's 
demonstrated need--defined as costs beyond what a family can pay--
through a combination of grants and campus employment. Families are not 
obligated in any way to secure loans in order to pay for their 
students' Davidson education. We know that some need-eligible students 
still choose to borrow, because their families feel it makes financial 
sense for them, and our data shows they repay these loans at a rate of 
more than 97 percent--well above national averages. However, we do not 
expect nor encourage families to borrow. Through the Davidson Trust, 
Davidson College always meets demonstrated need without loans.
    The Davidson Trust represents a huge financial commitment for the 
college, which has an endowment of $500 million. While that figure 
certainly is significant, it is approximately half of the average 
endowment of our peer institutions.
    With significant financial support from Davidson alumni, faculty, 
staff, parents, students and friends--including private funders such as 
The Duke Endowment and the John S. and James L. Knight Foundation--we 
now are able to make a top-tier education accessible for any admitted 
student, regardless of the family's financial situation.
    More than one-third of annual support to Davidson is donor-directed 
to The Davidson Trust, and as a result of this passionate belief in the 
Trust, Davidson is able to extend an invitation and a promise to all 
talented and eager students: We want you here; you can afford it; and 
if you enroll at Davidson, we will do everything we can to ensure that 
you thrive, while you are here and after you graduate.
    Over the past 5 years, as a result of The Davidson Trust, 
applications from underrepresented student groups have increased nearly 
45 percent. The number of first-generation applicants has increased 
nearly 54 percent. The number of students qualifying for, and 
receiving, need-based aid has increased more than 33 percent, and the 
number of Federal Pell grant recipients has increased by 93 percent. At 
the same time, the profile of Davidson's enrolling students has not 
changed as defined by traditional measures of academic preparedness. 
Once enrolled, these students graduate at the same pace as our students 
who come from more traditional backgrounds. In the world of higher 
education at large, the graduation rate hovers around 50 percent. 
Davidson's 4-year graduation rate continues to be 88 percent; and our 
6-year graduation rate has remained at 92 percent.
    Davidson was founded to help students develop humane instincts and 
disciplined and creative minds for lives of leadership and service. Our 
graduates go on to lead and to serve in their careers and in their 
communities, in their volunteer activities and in the world. We are 
changing the face of society's leadership--and we are doing that in no 
small part because of The Davidson Trust.
                                 ______
                                 
    Good morning, Chairman Harkin, Ranking Member Enzi and Senators. I 
am Carol E. Quillen, president of Davidson College, and I am appearing 
today on behalf of Davidson and the National Association of Independent 
Colleges and Universities (NAICU), of which Davidson is a member, 
although the specific views expressed today are mine alone.
    NAICU serves as the unified national voice of independent higher 
education. With more than 1,000 members nationwide, NAICU reflects the 
diversity of private, nonprofit higher education in the United States, 
including traditional liberal arts colleges, major research 
universities, church- and faith-related institutions, historically 
black colleges and universities, women's colleges, performing and 
visual arts institutions, 2-year colleges, and schools of law, 
medicine, engineering, business, and other professions.
    It is my privilege to speak with you today about Davidson College 
and how we are ensuring the affordability of our quality education 
through our innovative program, The Davidson Trust.
    In 2007 Davidson College became the first liberal arts college in 
the country to eliminate loans from its financial aid packages. For all 
accepted students, Davidson pledged to meet 100 percent of demonstrated 
need--defined as costs beyond what a family can pay--through a 
combination of grants and campus employment. Davidson, like several 
other highly ranked colleges and universities, has long practiced need-
blind admission. Through our initiative, known as The Davidson Trust, 
we further ensure that a student's financial aid award meets 100 
percent of demonstrated need without loans. Some need-eligible students 
still choose to borrow, and for some, such borrowing makes financial 
sense. However, we do not expect this. Davidson always meets 
demonstrated need without loans, through grants and employment, usually 
campus employment of between 8-10 hours per week. Furthermore, all 
available data and a repayment rate in excess of 97 percent indicate 
that students who do choose to borrow money pay it back at a rate above 
national averages.
    The Davidson Trust builds on Davidson's longstanding leadership in 
access and affordability. The minutes of an 1841 Board of Trustees 
meeting state our founders' determination to keep the cost of education 
``within the reach of many in our land who could not otherwise obtain 
it.'' Expanding this vision, each year we now offer an unparalleled 
education to hundreds of students for whom, before The Trust, even 
applying to Davidson seemed unimaginable.
    The Davidson Trust represents a huge financial commitment into the 
future. Davidson's endowment of $500 million, though significant, is 
approximately half that of the average endowment of our peer 
institutions and is one-third that of some. A significant part 
(approximately 58 percent) of our operating budget comes from tuition, 
and our ``sticker price'' is lower than comparable institutions. Yet we 
are committed to providing a second-to-none education that prepares 
talented students from all backgrounds for meaningful lives of 
leadership and service. We have learned to allocate our resources 
efficiently while also offering the liberal arts education that best 
serves students for the 21st century.
    We are always striving to do more with limited resources, and 
Davidson did not and cannot rely only on existing sources of revenue to 
fund The Davidson Trust. Rather, our commitment was initially made 
possible through the pro-education policies of North Carolina 
legislators and through significant support from private foundations 
and in particular through the generosity of The Duke Endowment and the 
John S. and James L. Knight Foundation. The Davidson Trust is 
sustained, year to year, through ongoing, visionary financial support 
from Davidson alumni, faculty, staff, friends, parents and students, 
all of whom have embraced our no-loans commitment and made it their 
own. More than one-third of annual support to the college is donor-
directed to The Davidson Trust. To date we have raised more than $63 
million in commitments to The Davidson Trust as we continue to seek 
long-term funding.
    And yet, The Davidson Trust is not primarily about financial aid. 
It is an invitation and a promise that we extend to all talented and 
eager students. To these students, The Davidson Trust says: We want you 
here; you can afford it; and if you enroll at Davidson, we--the 
faculty, staff, alumni, and leadership--will do everything we can to 
ensure that you thrive, while you are here and after you graduate.
    We make this promise as a direct extension of our foundational 
commitment to service and to excellence. Davidson exists to assist 
students in developing humane instincts and disciplined and creative 
minds for lives of leadership and service. We create a culture of 
inquiry and intellectual risk taking, where faculty and students who 
love to learn create new knowledge in every classroom, every day, and 
where students discover talents within themselves that they did not 
know they possessed. As a result of the education and experiences we 
offer, our graduates leave Davidson eager and able to fulfill their 
aspirations in light of what the world most needs from them, and their 
impact for good far exceeds their numbers. This impact is what 
justifies a labor intensive, very expensive form of education. All 
talented students deserve--and are entitled to--the opportunities we 
make possible. And we as a nation need these students acting and 
leading in the world. Our dual commitment to access and to educational 
excellence in the interest of leadership and service enables Davidson, 
though we are small, and schools like us, to meaningfully address some 
of the urgent global challenges.
    We believe in the promise that The Davidson Trust extends to 
talented students nationwide. So, Davidson staff have traveled the 
country offering a workshop, Financial Aid 101, to students, families 
and high school counselors, and building partnerships with school 
districts, community-based organizations and charter management 
organizations like KIPP and YES Prep. We created a Center for Teaching 
and Learning that provides integrated support for all students in 
writing, speaking, math, science and economics. Our faculty received 
grants from the Howard Hughes Medical Research Institute to create a 
program, Strategies for Success, that encourages students from 
underrepresented groups who express interest in math and science to 
pursue research in those fields. Our residence life advisors developed 
an early orientation and year-long peer mentoring program for students 
of color to build community and ease the transition from home to 
college. Davidson requires all first-year students to take a writing-
intensive course with each class's enrollment limited to 14 students, 
where experienced faculty provide individualized instruction and all 
students reach a high level of proficiency. Our commitment to our 
students extends beyond graduation. Each year, Davidson alumni expand 
internship and career opportunities to ensure that students smoothly 
move from our liberal arts environment to impact for good in the world. 
Last year, 6 months after graduation, approximately 93 percent of 
Davidson graduating seniors were employed, on a fellowship or in 
graduate school. This year, we anticipate an even higher percentage.
    Measured in terms of admission and matriculation statistics--the 
usual metrics--The Davidson Trust is working. Applications from 
underrepresented groups are up: in 2007 Davidson received 743 
applications from domestic students of color and 334 applications from 
first-generation college students; last year we received 1,074 
applications from domestic students of color and 514 applications from 
first-generation college students.
    Enrollment of students from underrepresented groups is up: in the 
Fall of 2011, 100 domestic students of color and 39 first-generation 
college students entered in the Class of 2015, compared to the 79 
domestic students of color and 28 first-generation college students who 
entered in the Class of 2011.
    We are attracting and enrolling a greater number of students with 
financial need: nearly 44 percent of the Class of 2015 qualified for 
and received need-based aid, compared to approximately 33 percent of 
the Class of 2011. Over the same period of time, the number of Federal 
Pell grant recipients has increased from 115 to 222 (a 93 percent 
increase).
    We are attracting students from a greater number and wider range of 
high schools, receiving applications from students at 2,152 high 
schools last year, a number that has increased 6 percent over the past 
5 years.
    These numbers matter, but they are not the only measures of 
success. In the world of higher education at large, the graduation rate 
hovers around 50 percent. Davidson's 4-year graduation rate is 88 
percent; and our 6-year graduation rate is 92 percent. These numbers 
have remained remarkably consistent even after the implementation of 
The Davidson Trust and the accompanying changes in the demographics of 
our student profile. Similarly, we have maintained our rigorous 
admission standards. The profile of our enrolling students has remained 
unchanged as defined by traditional measures of academic preparedness.
    The most telling indicator of our success is not retention and 
graduation rates, or academic profile, or our increasingly diverse 
applicant pool and student body, or our growing reputation as a good 
place for first-generation students. The most telling measure is the 
impact of our alumni--teachers, artists, bankers, consultants, 
ministers, parents and entrepreneurs--who are leaders in their chosen 
fields and in their communities and who give back to Davidson in record 
numbers, year after year, so that all talented students, regardless of 
means, can have the Davidson experience. While it is far too early to 
speak precisely about the long-term impact of The Davidson Trust, we 
already know that it enables us to attract truly remarkable students 
whose talents enrich our campus and our community. We look forward to 
and are grateful for the incredible things they will do.
    Davidson is a small, residential college committed to cultivating 
the whole human being within a community that values unfettered 
inquiry, academic rigor, personal integrity, intellectual humility, and 
service to something beyond oneself. What we do is labor-intensive, 
expensive, and not scalable in conventional terms. Yet consider what 
our students do. They work one-on-one with faculty on a year-long 
research project that will help cure Alzheimer's; they develop a 
leadership program for middle-school girls at an area school; they use 
seed funds to start a composting program or design a solar-powered 
cart; or they start a non-profit organization that supports schools in 
Nigeria or sports programs for at-risk youth or a national registry for 
bone marrow donors. What we do is worth it, to those who attend 
Davidson and to the countless others who benefit from their work.
    Davidson is a distinctive example among a small group of highly 
selective, need-blind colleges and universities, schools that each in 
its own way have long demonstrated a dual commitment to academic rigor 
and access. Collectively, these schools both transform individual lives 
and exert disproportionate societal impact. Through programs like The 
Davidson Trust, we are changing the face of society's leadership.
    Our experiences at Davidson show that thoughtfulness, dedication 
and a focused effort with contributions from all--alumni, foundations, 
and Federal, State, and local governments--can make an unsurpassed 
education available and affordable to all talented students. Davidson 
understands this as an ethical imperative as well as an urgent national 
need. We welcome you as allies in this quest.
                                Appendix

                                                     Table 1
----------------------------------------------------------------------------------------------------------------
                                      Class of   Class of   Class of   Class of   Class of   Class of   Class of
                                        2009       2010       2011       2012       2013       2014       2015
----------------------------------------------------------------------------------------------------------------
First-Year Matriculants Need-Based
 Aid

Early Decision:
  Total Enrolled...................        182        176        187        186        208        222        236
  No. Receiving Need-Based Aid.....         48         35         41         46         71         72         81
  Percent Receiving Need-Based Aid.      26.37      19.89      21.93      24.73      34.13      32.43      34.32
Regular Decision:
  Total Enrolled...................        281        288        278        296        283        279        254
  No. Receiving Need-Based Aid.....        109        119        115        153        151        146        134
  Percent Receiving Need-Based Aid.      38.79      41.32      41.37      51.69      53.36      52.33      52.76
Entire Class:
  Total Enrolled...................        463        464        465        482        491        501        490
  No. Receiving Need-Based Aid.....        157        154        156        199        222        218        215
  Percent Receiving Need-Based Aid.      33.91      33.19      33.55      41.29      45.21      43.51      43.88
First-Year Need-Based Applicants
  No. of Admitted Offered Need-            351        375        377        376        410        480        461
   Based Aid.......................
  Percent of Admitted Offered Need-      58.21      59.43      60.22      61.54      63.17      68.67      67.20
   Based Aid.......................
  Total No. of Enrolled First-Year         463        464        465        482        491        501        490
   Students........................
  No. of Enrolled and Applied Need-        228        231        243        306        309        284        285
   Based Aid.......................
  No. of Enrolled Receiving Need-          157        154        156        199        222        218        215
   Based Aid.......................
  Percent of Enrolled Receiving          33.91      33.19      33.55      41.29      45.21      43.51      43.88
   Need-Based Aid..................
      Average Need.................    $19,379    $20,240    $21,624    $23,262    $30,715    $32,938    $33,552
----------------------------------------------------------------------------------------------------------------


                                                     Table 2
----------------------------------------------------------------------------------------------------------------
                                  2006-7       2007-8       2008-9      2009-10      2010-11         2011-12
----------------------------------------------------------------------------------------------------------------
Direct Costs For Academic          $38,784      $40,814      $42,950      $45,030      $47,029  $49,723
 Year.
Need-Based Aid Per Academic
 Year:
  Percent Eligible for Need-          34.5         34.3         40.6         41.6         43.3  [In process)
   Based Aid.
  Average Need-Based Aid           $19,548      $20,542      $24,121      $26,331      $28,167  [In process)
   Award.
  Lowest Need-Based Award....         $100         $100         $100       $1,000       $1,000  [In process)
  Highest Need-Based Award...      $46,680      $50,347     $47, 277      $54,017      $58,975  [In process)
Sources & Amounts of Need-
 Based Grants:
  Federal....................     $510,325     $695,583     $635,765     $874,108   $1,011,781  [In process)
  State......................     $399,350     $474,160     $489,757     $588,454     $584,513  [In process)
  Institutional..............   $9,090,905  $10,290,965  $12,559,906  $16,402,058  $19,037,110  [In process)
                              ----------------------------------------------------------------------------------
    Total....................   10,000,580  $11,460,708    $,685,428  $17,864,620  $20,633,404  [In process)
PELL Recipients--All
 Students:
  All Students...............          106          115          124          171          221  222
----------------------------------------------------------------------------------------------------------------
Note: The information shown above is cumulative across all class years for all enrolled students of the above
  academic years.


                                                     Table 3
----------------------------------------------------------------------------------------------------------------
                                      Class of   Class of   Class of   Class of   Class of   Class of   Class of
                                        2009       2010       2011       2012       2013       2014       2015
----------------------------------------------------------------------------------------------------------------
Ethnic Groups

Domestic Students of Color:
  Applicants.......................        657        706        743        915        889        897       1074
  No. Accepted.....................        185        262        247        245        250        290        286
  Percent Accepted.................       28.2       37.1       33.2       26.8       28.1       32.3       26.6
  No. Enrolled.....................         66         82         79         87         78         95        100
  Yield Percent....................       35.7       31.3       32.0       35.5       31.2       32.8       35.0
First Generation:
  Applicants.......................        294        292        334        440        487        463        514
  No. Accepted.....................         47         74         79         96        108         93         90
  Percent Accepted.................      16.00      25.30      23.70      21.80      22.20      20.10      17.50
  No. Enrolled.....................         24         25         28         43         58         40         39
  Percent Enrolled.................      51.10      33.80      35.40      44.80      53.70         43         43
----------------------------------------------------------------------------------------------------------------


                                                                         Table 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    2000       2001       2002       2003       2004       2005       2006       2007       2008       2009       2010
      Entering Fall Cohort       [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
First-Year Student Retention
 Rate By Entering Year:
  Retention Rate...............      95.70      95.70      96.40      94.90      95.70      95.20      96.10      96.10      97.00      96.30      96.20
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                         Table 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    1995       1996       1997       1998       1999       2000       2001       2002       2003       2004       2005
      Entering Fall Cohort       [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]  [percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Historical Graduation Rates for
 Entering First-Year Students:
  4-Year Graduation Rate.......      86.30      86.50      88.20      89.80      83.80      88.80      90.10      92.10      89.20      88.70      88.00
  6-Year Graduation Rate.......      90.00      89.20      89.20      91.50      87.20      91.40      92.70      94.40      91.00      90.90      91.50
--------------------------------------------------------------------------------------------------------------------------------------------------------


 Table 6.--Endowment Per FTE Top Tier Liberal Arts--Colleges (as of June
                                30, 2011)
------------------------------------------------------------------------

------------------------------------------------------------------------
Davidson College...........................................     292,528
Median.....................................................     342,167
Note: Davidson is among the lowest of the top tier private liberal arts
  colleges with respect to endowment per FTE student. The range among
  the top tier as of June 30, 2011 (as reported in The Chronicle of
  Higher Education) is from a high of $1,097,775 per FTE to a low of
  $134,174. Davidson's endowment per FTE was $292,528.


    The Chairman. Very good. Thank you very much, Dr. Quillen.
    Dr. Mendenhall.

 STATEMENT OF ROBERT W. MENDENHALL, Ph.D., PRESIDENT, WESTERN 
            GOVERNORS UNIVERSITY, SALT LAKE CITY, UT

    Mr. Mendenhall. Chairman Harkin, and Ranking Member Enzi, 
and members of the committee, thank you for inviting me to 
testify.
    I appreciate this committee shifting the discussion from 
just helping students pay for college to actually making 
college more affordable. And my message is that it is possible 
to have high quality, affordable higher education, but it will 
require new models, not just tweaking the existing system.
    Many of you know of WGU. It was created by 19 Governors 
specifically to use technology to rethink the way we deliver 
higher education, to make it more affordable, more accessible, 
and more accountable for results.
    Second, to develop a model for competency-based education 
that is, to measure learning rather than time, or to say it 
another way, to hold learning constant and let the time vary 
rather than holding time constant and letting the learning 
vary.
    It was created by Governors as a private nonprofit 
university and it was designed to be self-sustaining on 
tuition, which it is today, self-sustaining on tuition of 
$6,000 for a 12-month year.
    It was a true public-private partnership created by 
Governors. The States put money into it, the Federal Government 
contributed money to it, and corporations contributed. The 
total cost to start WGU was $40 million, less than the cost of 
a nice, new building on campus. And for that investment, we now 
have a national university with 30,000 students growing at 30 
percent a year, self-
sustaining on tuition.
    Not only is it more productive as an institution through 
the use of technology and a new business model, it is also more 
productive for students through using competency-based 
education. We know that students come to higher ed knowing 
different things. We know they learn at different rates. In 
fact, we each learn different subjects at different rates. And 
so, we simply allow students to demonstrate what they already 
know, spend their time learning what they do not know. The 
result is that the average time to graduation with a bachelor's 
degree is 30 months compared to 60 months nationally. Yet 
employers say that our graduates are as well, or better 
prepared, as those they are hiring from other universities.
    States' Governors now are taking the next step in 
incorporating WGU into their State systems. In the last year 
and a half, we have created WGU Indiana, WGU Washington, and 
more recently WGU Texas as private-labeled State universities 
within the State systems.
    This is a discussion about making college more affordable, 
and I think we are not talking about 3 to 5 percent improvement 
in college costs. McKinsey & Company did a study that suggested 
that to make the President's graduation goal by 2020 will cost 
$52 billion a year for the next 8 years at the current cost of 
higher education, or alternatively require a 23 percent 
increase in educational productivity. Real change at this level 
requires brand new models.
    The Center for American Progress created a report called 
``Disrupting College,'' which applied the theory of disruptive 
innovation to higher education. The two key things that it 
suggested that are needed for real innovation is, No. 1, a 
technology driver. And No. 2, a new business model.
    We know that technology has changed the productivity of 
virtually every industry in America except higher education. In 
education, it is an add-on cost. In most cases, we use 
technology within the existing business model or simply 
delivering classroom education over a wire, and the costs are 
just the same as they are in the classroom. The question for 
this committee and for the country is: How do we encourage 
rather than discourage new models in higher education?
    States and Governors have done it before; public-private 
partnerships have accomplished it. I have a couple of 
recommendations.
    The first is that the committee and Congress consider a new 
financial aid demonstration project similar to the distance 
education demonstration project you did in 1998. This would 
allow financial aid for the kinds of new models that Kevin 
talked about and that WGU represents. It would also allow us to 
change the way we do student disbursements and make them more 
performance-based to improve student performance. In short, we 
could experiment with better ways to leverage the billions of 
dollars in Federal financial aid to improve education.
    Second, to remove barriers that inhibit innovation and 
restrict the supply of higher education. This includes 
regulations around seat time, credit hours, student-faculty 
ratios, and a variety of Federal and State regulations that 
limit the spread of new ideas and new models.
    And finally, we need to look at policies that look beyond 
traditional age students to support working adult students. We 
have 37 million adults in America with some college and no 
degree, and their jobs are going away. We do not make the 
President's graduation goal without reaching out to these 
working adults who are working full-time and allowing them to 
gain an education and a better job.
    Thank you very much.
    [The prepared statement of Mr. Mendenhall follows:]
           Prepared Statement of Robert W. Mendenhall, Ph.D.
    Western Governors University (WGU) is a nonprofit, fully online 
university established in 1997 by 19 U.S. governors with the goal of 
using technology to develop a new model in higher education that would 
be more affordable, more accessible, and responsive to workforce needs. 
This new model uses technology to facilitate learning and applies 
competency-based education, which measures learning rather than time. 
As a result, the average time to complete a bachelor's degree at WGU is 
just 30 months.
    WGU offers accredited bachelor's and master's degree programs in 
the four high-demand workforce areas of business, information 
technology, K-12 teacher education, and health professions, including 
nursing. Growing by approximately 30 percent annually, the university 
has more than 30,000 students and 15,000 graduates in all 50 States and 
the District of Columbia. Since 2010, three States have adopted State-
chartered versions of WGU, allowing them to increase higher education 
capacity without adding ongoing impact to State budgets.
    The affordability and productivity of WGU's model is evident. The 
university is self-sustaining on tuition of $6,000 per year for most of 
our programs, and, while other institutions are raising tuition 
annually, WGU's tuition has only increased by $200 in the past 6 years.
    Our Nation is facing a crisis in higher education. Today, 37 
million American adults have started, but not completed, a college 
degree. The Georgetown Center on Education and the Workforce tells us 
that by 2018, 66 percent of new jobs will require a college degree, and 
today, only 40 percent of adults have completed college. This means 
that the United States needs to produce roughly 1 million more 
graduates per year to ensure that we have the skilled workers we need. 
According to a report published by McKinsey and Company in November 
2010, to achieve this increase in degree production at the current 
cost, the United States would need to increase educational funding by 
$52 billion a year or increase productivity by 23 percent.
    We know that we cannot increase funding for higher education at 
that level, so we must find ways to make higher education more 
productive and affordable. Efforts to cut costs by streamlining 
administrative processes, reducing facility costs, and other savings 
measures will not be enough. We must re-think the way we look at higher 
education and make fundamental changes, including adopting new models 
like competency-based learning.
    ``Disrupting College, How Disruptive Innovation Can Deliver Quality 
and Affordability to Post-Secondary Education,'' published by the 
Center for American Progress, discusses the application of disruptive 
innovation in higher education by using technology enablers and new 
business models. The report cites WGU and WGU Indiana as examples of 
disruptive innovators in higher education.
    As the U.S. higher education community works to increase access and 
affordability, the committee and Congress need to support the 
institutions that are ``disruptive innovators,'' and champion 
legislation and regulations that will encourage, rather than hinder, 
development of new models. We need to remove barriers that judge 
institutions based on seat time, credit hours, and student-faculty 
ratios.
    It is time for higher education to take advantage of technology to 
re-think education. We need to find ways to use it to customize 
learning to individual needs, make college more relevant and meaningful 
for students, increase productivity, expand access, and, most 
importantly, improve quality and affordability.
                                 ______
                                 
    Chairman Harkin, Ranking Member Enzi, and members of the committee, 
thank you for the opportunity to testify before the committee today. I 
am Dr. Robert Mendenhall, president of Western Governors University, 
and I appreciate the committee's interest in considering innovations in 
college affordability.
    Western Governors University (WGU) is a nonprofit, fully online 
university established in 1997 by a bi-partisan group of 19 U.S. 
Governors. The university's mission from the start has been to improve 
quality and expand access to higher education opportunities. WGU offers 
accredited bachelor's and master's degree programs in the four high-
demand workforce areas of business, information technology, K-12 
teacher education, and health professions, including nursing. Growing 
by approximately 30 percent annually, the university has more than 
30,000 students and 15,000 graduates in all 50 States and the District 
of Columbia.
    WGU provides high-quality education that is very affordable. The 
university is self-sustaining on tuition of $6,000 per year for most of 
our programs, and, while other institutions are raising tuition 
annually, WGU's tuition has only increased by $200 in the past 6 years.
    Today, 37 million American adults have started, but not completed, 
a college degree. WGU was created to meet the needs of working adults 
and other individuals who do not have access to more traditional higher 
education. The average age of WGU students is 36 years old, most of our 
students have families, 65 percent work full-time, and the majority 
have completed some college when they enroll at WGU. In addition, 74 
percent are classified as underserved (ethnic minority, low income, 
rural, or first generation to complete college).
    The WGU approach to learning is unique in two important ways, 
resulting in increased productivity, a higher level of student support, 
and shorter times to graduation. First, rather than simply delivering 
classroom instruction through the Internet, WGU uses a competency-based 
learning model, which measures learning rather than time. This approach 
allows students to earn their degrees by demonstrating their mastery of 
subject matter rather than spending time in class to accumulate credit 
hours.
    Required competencies for each degree program are defined in 
collaboration with external program councils that are composed of 
representatives from industry and higher education. By working with 
these councils, we ensure that our students graduate with the knowledge 
and skills employers need.
    We know two important things about adult learners: they come to 
college knowing different things, and they learn at different rates. 
Rather than requiring all students to complete the same classes, all 
lasting 4 months, WGU has created a model that allows students to move 
quickly through material they already know so they can focus on what 
they still need to learn. Students advance by successfully completing 
assessments that measure competencies, such as exams, papers, and 
performance tasks. To pass, they must earn the equivalent of a ``B'' 
grade or better. This model dramatically shortens the time to 
graduation--the average time to complete a bachelor's degree is 30 
months.
    The second unique attribute of our model is the use of technology 
to facilitate learning. Technology has increased the productivity of 
nearly every industry except education, where it is most often an add-
on cost and not used to change or improve teaching and learning. Even 
with the improvements in online learning platforms and resources, the 
majority of online education is simply classroom education delivered 
through the Internet, instructor-led and time-based. As a result, most 
online higher education is no more affordable than traditional 
education.
    In contrast, WGU actually uses technology to provide interactive 
instruction that allows students to learn at their own pace. Rather 
than delivering lectures, our faculty, all full time, serve as mentors, 
and are fully engaged in the learning process, leading discussions, 
answering questions, and serving as role models for their students. WGU 
does not develop course content and curriculum; faculty members 
identify and qualify learning resources from the best third-party 
sources in the country.
    WGU is accredited by the Northwest Commission on Colleges and 
Universities and the Distance Education and Training Council. The WGU 
Teachers College, which offers initial teacher licensure as well as 
nationally recognized math and science education programs, has earned 
accreditation from the National Council for the Accreditation of 
Teacher Education (NCATE). In addition, our nursing programs are 
accredited by the Commission for Collegiate Nursing Education (CCNE).
    In 2010, WGU partnered with Governor Mitch Daniels of Indiana to 
establish WGU Indiana as ``Indiana's 8th State university.'' Creation 
of WGU Indiana allowed the State to expand its higher education 
capacity without adding ongoing cost and to offer an affordable option 
to populations underserved by the State system. This State-chartered 
version of WGU has also been adopted by Washington and, most recently, 
Texas. Partnering with States in this way has resulted in dramatic 
enrollment increases--more than 500 percent growth in Indiana in 18 
months and 100 percent growth in Washington in 6 months.&
    While we want to increase the affordability and accessibility of 
higher education, we must also maintain quality. There is an ongoing 
debate about the quality of online learning, but the fact is that the 
quality of education is largely independent of the mode of delivery. 
Just as with ``brick and mortar'' institutions, there are wide 
variations in quality. Regardless of whether it is delivered in a 
classroom or online, all higher education should be judged on the same 
basis: educational results. That is, is it high-quality and effective 
in meeting the needs of students and employers?
    At WGU, we measure our success by the engagement and success of our 
students. Here are some key data:

     In the National Study of Student Engagement (NSSE), WGU 
consistently scores above the average of all participating institutions 
in areas such as the level of academic challenge, quality of academic 
advising, supportive environment, and overall educational experience.
     The university's 1-year retention rate is 78 percent, and 
more than 80 percent of our students are in good academic standing.
     On our most recent student satisfaction survey, 97 percent 
reported that they are satisfied with their experience and that they 
would recommend WGU.
     Approximately 65 percent of graduates surveyed said they 
had received a raise, promotion, or new job as result of their WGU 
degree, and 97 percent said they would recommend WGU.
     On our 2011 employer survey, 98 percent rated the 
preparation of WGU graduates as equal to or better than graduates of 
other universities; 42 percent rated it better.

    We do not claim that we have achieved the perfect model for higher 
education at WGU. We continue to work to refine and improve it, 
focusing on affordability, but always keeping academic rigor and 
student success at the forefront.
    As the members of the committee know, our Nation is facing a crisis 
in higher education. The Georgetown Center on Education and the 
Workforce tells us that by 2018, 66 percent of new jobs will require a 
college degree, and today, only 40 percent of adults have completed 
college. This means that the United States needs to produce roughly one 
million more graduates per year--40 percent more than we are producing 
today--to ensure that we have the skilled workers we need. According to 
a report published by McKinsey and Company in November 2010, to achieve 
this increase in degree production at the current cost, the United 
States would need to increase educational funding by $52 billion a year 
or increase productivity by 23 percent.
    We know that we cannot increase funding for higher education at 
that level, so we must find ways to make higher education more 
productive and affordable. Efforts to cut costs by streamlining 
administrative processes, reducing facility costs, and other savings 
measures will not be enough. We must re-think the way we look at higher 
education and make fundamental changes, including adopting new models 
like competency-based learning.
    In a report for the Center for American Progress, ``Disrupting 
College, How Disruptive Innovation Can Deliver Quality and 
Affordability to Post-Secondary Education,'' Harvard Business School 
Professor Clayton Christensen and the Center's Director of Post-
Secondary Education Louis Soares discuss disruptive innovation in 
higher education. The report applies the principles of disruptive 
innovation--using technology enablers, such as online learning, and 
changing the business model--as an approach to make higher education 
more affordable and accessible. WGU and WGU Indiana are cited as 
examples of disruptive innovators in higher education.
    As the U.S. higher education community works to increase access and 
affordability, I encourage the committee and Congress to support the 
institutions that are ``disruptive innovators,'' providing quality 
education at a lower cost. Opponents of new models and innovative 
approaches to higher education can be vocal and sometimes convincing, 
but the best way to evaluate the quality and effectiveness of these 
institutions is to ask their students, graduates, and faculty, as well 
as the employers of their graduates.
    I would also recommend that Congress consider creating a 
``Demonstration Project'' for financial aid, similar to the 
demonstration project for distance learning, which was created in 1998. 
This project would allow, on a selected basis, waivers of current 
financial aid rules to allow us to try new things and explore and 
evaluate new models before implementing them nationally. A key area of 
study should be the use of ``performance triggers'' for disbursing 
financial aid. This project could also help determine the types of new 
regulations and/or legislation needed to support competency-based 
education, in other words, measuring learning rather than time.
    It is vital that Congress support new, more cost-effective models 
of higher education. We need our legislators to highlight and promote 
new models and ensure that future legislation and regulations support, 
rather than hinder, development of new models. For example, we need to 
remove barriers that judge institutions based on seat time, credit 
hours, and student-faculty ratios.
    It is time for higher education to take advantage of technology to 
re-think education. We need to find ways to use it to customize 
learning to individual needs, make college more relevant and meaningful 
for students, increase productivity, expand access, and, most 
importantly, improve quality and affordability. I appreciate this 
opportunity and look forward to working with the committee and the 
Administration to advance our mutual goals of college affordability. 
Thank you again for allowing me to testify before the committee today. 
I look forward to answering any questions that you may have.

    The Chairman. Thank you, Dr. Mendenhall.
    Mr. Earl.

      STATEMENT OF CHARLES N. EARL, M.A., B.A., EXECUTIVE 
 DIRECTOR, WASHINGTON STATE BOARD FOR COMMUNITY AND TECHNICAL 
                     COLLEGES, OLYMPIA, WA

    Mr. Earl. Chair Harkin, Senator Enzi, thanks much for 
having me this morning. I very much appreciate the opportunity 
to share some thoughts of what we are doing within the 
community and technical colleges in the State of Washington.
    As the executive director of the State system, I am 
definitely honored to be in the Nation's capital and so pleased 
to be part of a 2-year college system that is, indeed, building 
careers and contributing so much to the economy of the State of 
Washington. We are a system of 34 colleges presently. Last 
year, we served 460,000 individuals in the State.
    I would be remiss if I did not just start off with a thank 
you to the faculty and staff of those colleges that have done 
such tremendous work over the last few years during the 
recession. Our enrollments are way up. Our money, the combined 
State and tuition money is down in net terms, and our 
educational outcomes are up. So it is a tremendous piece of 
work.
    I also want to thank Senator Murray for her steadfast work 
over the years in support of higher education and the workforce 
development system.
    Like community colleges across the country, we have an 
open-door admission policy that assures that every person who 
can benefit from higher education has the opportunity to do so. 
We strive to get students into colleges, and we work very hard 
to keep them there, so that they can complete their work and 
gain the advantages of higher education, regardless of their 
life and financial circumstances.
    Affordability. There are many elements or contributors to 
affordability and so, I will just highlight a few.
    First of all is institutional costs or what drives the cost 
within institutions and that is primarily determined by 
student-faculty ratios, as well as other employment costs. And 
limitations that we have felt because of the limitations in 
overall revenue structures over the last few years have indeed 
limited costs, at least in the State of Washington.
    The higher education system is very important to 
affordability and in Washington's case, it has a very robust 2-
year to 4-year transfer system. It works very, very well. We 
have contract relationships between the 2-year system and the 
4-year public universities that assure slots, which basically 
what that means is the promise of the State that a 2-year 
college, a successful 2-year college degree will find a place 
in one of the public universities, and thus enjoy the lower 
tuition costs, and probably live at home while that is 
occurring is a big part of the overall average cost of a 
baccalaureate degree. So system cost--system structure State by 
State is very important to affordability.
    To move on. State support that complements Federal 
financial aid support is very, very important. There are a lot 
of labels for what the State of Washington does, State need 
grant, opportunity grants, worker retraining, a bunch of 
programs that indeed help our lower income students stay within 
the colleges, and they are enjoyed also by most of those by the 
universities.
    Moving students further and faster, so that educational 
effectiveness performance of the college or university is 
critical. In Washington, we have developed a financial reward 
system to our 2-year colleges for elevating the educational 
throughput of their entire student bodies. And a performance 
reward system that enables the colleges to earn additional 
funding for which they can do additional investments in student 
success appears to be quite successful. Our completions of 
certificates and degrees have increased 42 percent since we 
started this program 4 years ago, and that is substantially 
more than the enrollments.
    Dual credit program, we partner with the schools, the high 
schools in Washington to enable high school juniors and seniors 
to dual enroll at high school credit and college. Nineteen-
thousand Washingtonians last year earned two quarters' worth of 
college credit. When you run those numbers out for what that 
credit means to them for their college time, it saves those 
families about $40 million bucks a year. It is a huge benefit 
and goes to affordability.
    Finally, the aspects of other college-going costs and not 
particularly, I think, in the public colleges and universities 
goes way beyond just thinking about tuition. In the Washington 
2-year college system, we have recently completed the redesign 
of 42 or our 81 most frequently enrolled courses with a maximum 
of $30 textbook costs. Gathering and enabling students to use 
information available on the Web or our faculty have actually 
remade textbooks in digital formats for the students is going 
to have tremendous savings for our students over years in these 
frequently enrolled courses.
    We are part of a 38 institution, 24-by-7 e-tutoring 
program. We have been in that just 3 years now, but the hit 
rates are just substantial. And that is free to students and 
available, of course, all the time.
    Then finally, e-learning and we now in Washington across 
those 34 colleges are offering, or the students earned last 
year enough credit that would have required six more colleges. 
And the transportation cost savings, childcare savings, the 
tremendous effectiveness, we think, for our students.
    Thank you for the opportunity to comment. I look forward if 
there is time for any questions.
    Thank you.
    [The prepared statement of Mr. Earl follows:]
           Prepared Statement of Charles N. Earl, M.A., B.A.
                                summary
    Introduction and thanks to committee.
    Background on Washington's community and technical college system:

     34 community and technical colleges.
     Help fuel our economy--provide training; people need to 
land good jobs; employers need to thrive.
     Join forces with local employers to provide training in 
critical areas of job growth.
     Also shed programs that become less relevant for the 
workforce and more resources to programs for today's and tomorrow's 
jobs.
                             affordability
     Hold tuition rates to the national average.
     Utilize strong State need grants affordability.
     Move students further/faster.
     Hold down other college going costs.
                          state financial aid
     State-need grant for higher education.
     Opportunity grant for higher education job training for 
low-income students.
     Worker retraining grants.
     Public/private partnership.
                      move students further/faster
     Student Achievement Initiative performance funding.
     High school/College dual credit program Running Start.
     Integrated Basic Education and Skills Training (I-Best).
                       holding down student costs
     Open Course Library limits text book costs.
     eTutoring (free and 24-hour availability).
     eLearning used by 25 percent of students.
                                 ______
                                 
    Good morning! Chairman Harkin, Ranking Member Enzi, and members of 
the committee, thank you for inviting me to join you today. I 
appreciate the opportunity to discuss the innovative ways we're keeping 
college affordable at Washington's community and technical colleges. I 
thank Senator Murray for her steadfast support of higher education and 
workforce development in Washington and nationally.
    My name is Charlie Earl, and I'm the executive director of the 
Washington State Board for Community and Technical Colleges. I feel 
honored not only to be here with you at our Nation's capitol, but to 
represent a community and technical college system that is building 
careers and reinvigorating the economy in ``the other Washington.''
    I'll provide some background information about Washington's 
community and technical college system and then share three strategies 
that help keep our community and technical colleges affordable.
    We have 34 community and technical colleges in Washington. Our 
colleges help fuel our economy by providing the training programs that 
residents need to land good jobs, and current and future employers need 
to thrive. We join forces with local employers to offer programs in 
aerospace, alternative energy, business services, hospitality, health 
care and sustainable agriculture--critical areas of growth for our 
State. We discontinue programs that have become less relevant for the 
workforce. The colleges keep a laser-sharp focus on where jobs are now, 
and where they're going to be in the future. And we move students and 
resources to the necessary skills and knowledge.
    Like community colleges across the Nation, we have an open door 
admission policy that assures that every person who can benefit from 
higher education has the opportunity to enroll. We strive to get 
students where they need to be regardless of their circumstances--
whether they are preparing for a 4-year university, retraining for new 
careers, or trying to raise their literacy or English skills.
    The avenues to education are varied, but they lead to a common 
destination: a good career and a life enriched with knowledge and 
skills.
    Our colleges serve a predominantly working class and low-income 
student population--over half of our students work and go to school, 
more than a third are parents, and the median age is 26. For many of 
our students, all it takes is an expensive textbook . . . a slight 
tuition increase . . . an unexpected car repair . . . or a medical bill 
to put them over the edge financially and force them to drop out, 
drastically reducing their chances of earning a living wage in the 
future. We work hard to keep them in school.
    Which brings us to the issue of affordability.
    Compared to other States, our tuition is average and our financial 
aid investments are among the highest in the country, which makes a 
community and technical college education affordable for 
Washingtonians.
    Washington ranks 9th in the country in the number of Pell grant 
recipients who also receive State financial aid, and 4th in the country 
in how much State money those students receive.
    In-State students who attend a community or technical college full-
time in Washington State pay $3,542 per year. We've held tuition close 
to the national average despite deep budget cuts. This has been a tough 
task. Ten years ago (in 2002), the State paid 78 percent of the cost of 
enrollment for community and technical college students; today that 
number has slipped to 63 percent.
    Our tuition remains a fraction of the amount charged at 4-year 
institutions. Students who go to a community or technical college for 
the first 2 years of their bachelor's degrees save tens of thousands of 
dollars in tuition. In fact, 38 percent of students who graduate with a 
bachelor's degree in Washington started off in a community or technical 
college.
    We have a strong transfer system with State universities. 
Proportionality agreements with each public university ensure that the 
number of slots for transfer students grows at the same rate as slots 
for university freshmen.
    Our system also waives tuition to help the least skilled, lowest 
income students catch up on the skills they missed in high school, and 
transition to college-level programs. Our ``Adult Basic Education'' 
students only pay $25 per term. We also waive part of the tuition for 
apprenticeship programs, parenting education, and military veterans.
    In addition to our tuition policies, we keep college affordable for 
our students in three other ways.

    1. Providing a strong network of financial aid,
    2. Moving students further and faster through college, and
    3. Keeping student expenses down.

    Our first strategy is to provide strong financial aid for lower-
income students.

    Nearly half--47 percent--of the students in our system received 
some form of financial aid in the 2010-11 school year, including State 
and Federal aid. Our State's largest program is the State need grant, 
which supplements Federal financial aid for low-income students. In the 
2011-12 school year, 29,000 community and technical college students 
will receive State need grants of up to $3,256. State need grants can 
be used on a wider range of expenses than Federal Pell grants, so they 
play an important role in rounding-out aid for our students.
    Historically, our State has placed more money into the need grant 
program when tuition rises, although the program is now under stress 
because of additional proposed budget cuts.
    The opportunity grant is a special program that provides funding 
for low-income community and technical college students to train for 
high wage, high demand careers.
    Unemployed adults can get a jump-start on worker retraining by 
getting grants that help pay for costs until traditional financial aid 
kicks in. In the second year of the recession, our worker retraining 
enrollments jumped from 6,000 to 12,000 full-time students, and the 
Legislature gave our system a special appropriation to meet that 
demand. Today, 45 percent of our students are enrolled in workforce 
training.
    Washington State also offers work-study programs and academic-based 
scholarships. We are one of the few States to offer ``college bound'' 
scholarships for low-income 8th-graders who promise to finish high 
school, stay out of trouble, and keep up with their grades.
    Last year, Governor Christine Gregoire forged public-private 
partnerships with local industries to provide scholarships for students 
to complete degrees in high demand fields like science, technology, 
engineering and math.

    Our second strategy uses statewide programs to move students 
further and faster through college.

    Simply enrolling students in school is not the true measure of 
success--it's what students achieve and what they can do with their 
educations that count. We've launched a performance-based funding 
system that tracks student achievement in key academic milestones. 
Colleges receive financial rewards for the increased academic 
performance of their students. Since we started tracking data in 2007, 
we've seen a 42 percent increase in certificates and degrees--not 
simply because more students are enrolling in the system, but because 
more students are reaching important academic milestones and building 
momentum to finish.
    The program is called the ``Student Achievement Initiative'' and it 
is being duplicated in other States now. Colleges use their award money 
to reinvest in successful practices that improve academic achievement.
    We also offer a popular dual-credit program that is appropriately 
named ``Running Start.'' Running Start allows high school juniors and 
seniors to attend tuition-free classes at community colleges. The 
students not only earn credit toward high school graduation, they also 
earn credit toward an associate degree or a bachelor's degree. Last 
year (2010-11), 19,000 high school students--or roughly 10 percent of 
the State's junior and senior class--earned on average two full 
quarters of college credit, saving families across the State $41 
million in college tuition.
    These types of dual-credit programs are consistent with Governor 
Gregoire's ``Washington Learns'' plan, which calls for a seamless 
education system from kindergarten through graduate school.
    Students who are not yet ready for college-level classes--either 
because they didn't finish high school or don't speak English--can come 
up to speed quickly by attending an Integrated Basic Education Training 
(IBEST) program. This nationally recognized program pairs basic skills 
instruction with workforce training. For example, a student might learn 
basic math skills while working in an automotive class. Students don't 
have to wait until they're done with basic-skills classes before they 
start their job-training. It's basically a ``two for one'' deal that 
keeps students motivated and moving through the system more 
efficiently--and saves them money.
    Our IBEST students are nine times more likely to earn a college 
credential than those who go through basic skills first and then enter 
workforce training. We are working with the Bill & Melinda Gates 
Foundation on a national dissemination project of our IBEST model.

    Our third strategy is to keep costs down for students.

    Many of our community and college students live on the edge 
financially, so we work to help cut their expenses using technology.
    For example, textbooks alone can cost students more than $1,200 per 
year, so we've developed an online, open course library. Faculty and 
staff teams are redesigning 81 of the highest enrolled courses with 
open digital content and with open textbooks that cost students $30 or 
less per course. Already, students are saving $1.3 million in textbook 
costs this year, just from the lead faculty who designed the first 42 
open courses. These savings already exceed the original $1.2 million 
investment from the State and the Bill & Melinda Gates Foundation. Our 
students could save up to $43 million per year statewide if open 
textbooks are adopted for all sections of these 81 courses.
    Our system also manages the Northwest eTutoring Consortium, which 
has 38 member institutions in six northwest States. Students have free 
access to tutoring 7 days a week, 50 weeks per year--this is above and 
beyond the kind of coverage provided in most face-to-face tutoring 
sessions. The consortium is the largest online, free-for-students 
tutoring site in the northwest.
    E-learning is another way our students save money. About 25 percent 
of our students take classes completely or partially online, saving 
time and travel expenses.
    In closing, I would like to thank you again for this opportunity to 
speak to the committee on behalf of Washington's 34 community and 
technical colleges. We share your goal of providing the highest quality 
education at the most affordable cost. We achieve that goal every day--
in many ways--across our State. And in doing so, we enrich our 
citizens, our communities, and our economy.

    The Chairman. Thank you, Mr. Earl. I thank all of you for 
what I would call very provocative statements. Provocative in 
the good sense, provoking thinking, provoking new kinds of 
thinking and new approaches. Because I think all of you have 
said that in one way or the other that the old ways may have 
served a purpose during a certain time, but we have to start 
thinking anew on how we approach higher education.
    Mr. Carey, you raised some interesting points in your 
written testimony, but did not verbalize here today. You 
pointed out that a lot of these new institutions, like 
StraighterLine, cannot get accreditation. And why can't they 
get accreditation? Because the accreditors are supported and 
paid for by the colleges they accredit. So what interest do 
they have in accrediting new entities?
    As you said here in your testimony,

          ``Who controls the accreditation process? The 
        existing traditional colleges and universities. What 
        incentive do they have to allow innovative, low-cost 
        competitors into the market? None. What incentives do 
        they have to keep them out? Many. And the more 
        expensive traditional colleges get, the bigger those 
        incentives grow.''

    I sympathize with that because we have had a couple of 
hearings and we have looked at some of the accreditations and 
accreditors, and I always thought it was odd that accreditors 
are in a position to say, ``I examine you and accredit you, but 
you, the school, pay me to do that.'' That is sort of a fox-
guarding-the-hen-house kind of situation there.
    I wonder if you have any further thoughts on how we might 
change our accreditation system because this is vitally 
important.
    Mr. Carey. I think Dr. Mendenhall made a great suggestion, 
which is, an alternative to changing it is to use the large 
amount of Federal financial aid money, now $40 billion in Pell 
grants, $100 billion in loans. You could take a very small 
amount of that and use it to experiment and offer opportunities 
for providers of higher education who cannot be accredited 
under the normal terms to be able to educate students with 
Federal money under a very strict set of conditions.
    It would have to be a low-cost education. It would have to 
be a high quality education. Really, much more than normal 
colleges are subject to under the existing accreditation 
system.
    The Chairman. Aside from that, accreditation does, to some 
extent I will say, assure some quality. How do you assure the 
quality in these new approaches, without some kind of quality 
assurance process?
    Mr. Carey. I think in some cases, the accreditation system 
assures quality, although many of the colleges that have been 
discussed recently were all accredited, and yet were not 
satisfied with their quality.
    The accreditation process accredits who you are, not what 
you accomplish. To be accredited, you have to look like a 
traditional college, you have to have the characteristics of a 
college in terms of credentials, and library books, and so on, 
and so forth.
    But the accreditation does not accredit outcomes, and so 
that, I think, is the appropriate place to go where you can 
show that your students are learning, that you can demonstrate 
that, you can prove it, and you should have the opportunity to 
compete on a level playing field.
    I would also say, we should think about course level 
accreditation. Again, you can only be accredited if you are a 
college and you offer entire degree programs. But some people 
in StraighterLine, in the example that I cited that you cited, 
they do not offer whole degree programs. They just specialize 
in certain kinds of courses.
    The Chairman. Yes, I got that. This is always a bedeviling 
thing too about how we are approaching this. Almost all the 
testimony here, Secretary Kanter, everybody is saying that the 
jobs of the future are going to need to be filled by people who 
graduate from college. So we think about college in a job 
context, an economic context.
    When I hear that, I am always reminded of the inscription 
in the library at Iowa State University. A lot of the stuff was 
put there during the Depression by the artists that were hired 
during the Depression. And the inscription says this, ``We come 
to college not alone to prepare to make a living, but to learn 
to live a life.''
    There is something about a liberal college education. I am 
not pointing at you, Mr. Carey, but for all of you to respond, 
that there is more than just getting a job. It is understanding 
life, understanding societies, understanding art and music, or 
just the interplay of different forces that make up a complex 
society.
    How do we balance that along with the need to make a living 
too? In other words, how do we look at colleges in that context 
without just looking at it as a conduit to a better job? 
Anybody? Dr. Quillen, you represent a liberal arts college.
    Ms. Quillen. I do not think they are mutually exclusive, 
Senator.
    The Chairman. I do not think so either.
    Ms. Quillen. I will say that I think it is important for 
colleges like Davidson, highly selective, academically 
rigorous, basically residential community that brings together 
a small number of very talented students with faculty doing 
research.
    We are valuable because of the close interaction that those 
two groups of people have every day, all the time so that they 
are constantly questioning, and learning what it means to live 
a life of inquiry, and creating new knowledge together every 
day. That is one model of higher education that serves a 
particular population and that is socially valuable because of 
the disproportionate impact for good that those graduates have.
    I do not think it is the only model, and I think one of the 
things that has been, these great ideas that my fellow 
panelists have expressed today indicate that there are lots of 
opportunities for us to create a much more diversified, much 
more efficient higher education system that could easily 
embrace all of these models.
    I would make only a plea for the value of that kind of 
education that you describe and that is celebrated at the 
University of Iowa, which is what we try to do.
    The Chairman. I have some more. I have run out of time. I 
have a followup question on that and also about Western 
Governors, but I will turn to Senator Enzi for his round.
    Senator Enzi. Thank you, Mr. Chairman. I have questions for 
all of the panelists. I know I will not have time to ask them 
all, but I will submit the ones that I do not get a chance to 
ask in writing.
    I am going to start with Western Governors, Dr. Mendenhall, 
because I was at a higher education conference, a WICHE 
conference when the States, which included mine, made the 
announcement about Western Governors. And all of the college 
presidents who were there were fascinated by it, and the first 
question they asked after the announcement was over was, ``So, 
how are they going to charge out-of-state tuition? '' There 
were other questions that came up as a result of it too.
    My question is that you mentioned that in addition to the 
16 original States that you have recently added Indiana, Texas, 
and Washington. Could you give some additional detail on what 
motivated each of those States to form a partnership and how 
did it differ with each State?
    Mr. Mendenhall. Yes, thank you. Actually, each of those 
States were among our founding States; they have just taken it 
to another level now.
    The Governors who created WGU, rather than every State 
create their own virtual university, said let's create one and 
share it, since it is virtual. And there is only one tuition, 
not in-state and out-of-state tuition. But Governor Daniels in 
Indiana started this and then it was picked up by others. 
Really, how do we bring this in a bigger way to our State? How 
do we incorporate it into our State strategy, into our State 
plans?
    What drove it in Indiana was these working adults who 
essentially had limited education. Many of their jobs had 
disappeared, other of their jobs were threatened, some of those 
jobs were not coming back. In Indiana there is, if I recall it 
correctly, about 750,000 adults with some college and no 
degree. They are not well served by the traditional residential 
system. They may not live close to a campus. Sixty-five percent 
of our students are working full-time. There are not a lot of 
classes offered at 10 o'clock at night.
    This simply became, as the Governor said, a part of the 
family of opportunities, part of the family of opportunities 
within the State for our students, not instead of research 
universities or community colleges, but an addition that would 
reach an additional population.
    In Washington, the legislature picked up on it rather than 
the Governor, and a whole different driving force. Essentially 
they needed to add capacity for transfer students from the 
community colleges. So the base statistic in Washington the 
year before we came was that the No. 1 transfer destination for 
community college students was the University of Phoenix. And 
the State thought, you know, we are not fulfilling our 
obligation to provide affordable higher ed transfer 
opportunities for our community college graduates. And WGU 
essentially allowed them to add capacity to their State higher 
ed system without impacting their State budgets.
    I think it simply meets the needs of States to add 
affordable capacity within their State.
    Senator Enzi. Thank you. And you also mentioned in your 
testimony, and when you were speaking earlier, that you have a 
competency-based model. As I understand this, the students do 
not have instructors, they have a mentor that guides them 
through the coursework.
    Could you give us some detail on how that mentor-student 
relationship works? How are the mentors selected? What type of 
interaction do they have with the students? And what kind of 
support services are provided?
    Mr. Mendenhall. Yes, we are using the technology to 
facilitate the learning interactions with students, which allow 
us to individualize to every student, because if it is a 
professor with 30 students, then the pace of the class is at 
the professor's pace. And if you buy the assumption that 
students come to education knowing different things, and they 
learn at different rates, then the professor's pace, no matter 
how good he is, is the wrong pace for a large number of those 
students.
    They are able to interact with interactive technology-based 
learning materials. But there is a course instructor for each 
of those courses that is integrally involved in leading 
discussions, answering questions, providing a role model for 
the profession.
    Our students actually have two mentors, so they have what 
we call a student mentor that starts with them the day they 
start, stays with them until they finish, and responsible to 
help them succeed through their college career. And then as 
they go into each course, there is a course mentor and a course 
instructor that essentially is the subject matter expert in 
that course.
    We have added other support services over time. We 
discovered that half of our students were dropping for life 
reasons, having nothing to do with academics. So we added 2 
years ago free life counseling for our students so they can 
access a licensed counselor in every State that can help them 
through issues of divorce, or health, or jobs, or whatever.
    We discovered that students were not always buying the 
textbook. They were trying to pass the class without the 
textbook. So we have digitized the textbooks, and we are 
providing them as part of the tuition.
    We continue to try to innovate, to find ways to help 
students be more successful in the model.
    Senator Enzi. I think that textbook issue is a big one. I 
had just recently looked up a governmental accounting book that 
I thought I might buy and it was $250.
    The Chairman. It was a textbook?
    Senator Enzi. A textbook, yes. My time has expired. I will 
submit questions for the rest.
    The Chairman. Thank you, Senator.
    Senator Franken.
    Senator Franken. Thank you all for your testimony.
    Dr. Mendenhall and Mr. Carey, both of you in your testimony 
mentioned the need for disruptive innovation in our higher 
education system. Mr. Carey, you talk about the availability of 
online courses that are ineligible for credit at universities. 
And Mr. Mendenhall, you are living in a world of disruptive 
innovation every day.
    I heard a lot of terms, performance value, talking about 
accreditation. It all brings to me the question of how we 
measure success, how we measure performance value. We pay a 
tremendous amount of money out in Federal loans, but also in 
Federal grants, including Pell grants. How do we determine how 
we spend that large amount of money most effectively?
    I was wondering, Mr. Carey, do you have any idea about that 
because we are talking about--Dr. Quillen talked about the 
tremendous graduation rates and job rates, and Dr. Mendenhall, 
you also talked about outcomes. I just want to know how we 
measure if we are getting that bang for our buck federally.
    Mr. Carey. Thank you. I would say a few things.
    First of all, if a student is not graduating, then they are 
not getting much value for their education. The job market does 
not give you very much partial credit for going to college, and 
I think we said 37 million adults, we heard earlier today, in 
America right now, who have been to college and yet have no 
degree.
    I definitely agree with Chairman Harkin that college is not 
merely vocational and there are incalculable benefits that you 
receive to your person and in your life from going to college 
that cannot be measured in dollars and cents.
    However, the main reason most students go to college is to 
get a job, to get a better job, to succeed in the economy. I 
think we can now find out what happens to students after they 
leave college, what kind of careers they go into, how much 
money they make. Can they pay their loans back? If the cost of 
higher education is so high that it does not give you enough 
earning power to pay your loans back, then I think you have to 
question whether there is enough value there.
    I also think there is the question of what are the right 
measures for public policy purposes, and then what are the 
larger ideas of value that really are properly left within the 
sphere of higher education? And I think we should not be trying 
to regulate the global value of a liberal arts education. I 
think that would not work very well. But I do think we should 
focus, for consumer protection purposes and for regulatory 
purposes, on important things like graduation rates.
    Given the students you have, if you enroll a lot of lower 
income students, first generation students, underprepared 
students, you are not going to graduate 98 percent of them.
    Senator Franken. Of course.
    Mr. Carey. But you might be able to graduate 60 percent of 
them and that might be a really good number. Those kind of 
contextual measures, I think, are important.
    Senator Franken. I see Dr. Quillen smiling because she does 
get those students. But you are a very selective school and 
while I think what you are doing is absolutely commendable and 
a great model, I do not know if it is scalable. I mean, you are 
nodding, and I am just going to take that as a yes.
    Ms. Quillen. Not scalable in conventional terms.
    Senator Franken. Yes. Mr. Earl, and then I want to get to 
one last question, so take less than a minute.
    Mr. Earl. From the 2-year college system, we really have no 
ultimate value than the worth of our credential. So if our 
professional technical certificate and associate degree holders 
are not hired, or if we get feedback they are not capable, we 
are toast. And similarly with our transfers to the 
universities, if our students do not perform well at the 
universities, those patterns will be known, and they will not 
take our students.
    Senator Franken. I agree. I think we have to be tough about 
that on this committee and I think we have to be tough on the 
Federal Government if we really care about our value for our 
dollar.
    I am going to get under my time by asking a question now, 
and it is really about in Minnesota, if you are getting 
unemployment insurance, people receiving unemployment benefits, 
Mr. Earl, can attend job training programs to get the skills 
they need to get back to work.
    Minnesota is also piloting a program called Right Skills 
Now, which is a partnership between businesses and colleges to 
get people fast track training in skills that businesses need. 
And to me, this makes a lot of sense, but there are States 
where this is not, where people receiving unemployment benefits 
have to choose between keeping those benefits and getting 
training, and I am planning to introduce a bill that would 
change this.
    From your perspective, would there be any problems to 
allowing people who are receiving unemployment benefits to 
enroll in one of your school certificate or short-term 
credential programs?
    Mr. Earl. No. We have a lot of unemployed people on 
unemployment benefits that are in our programs. In effect, the 
State of Washington has a financial aid program that bridges 
the time from when they are unemployed and want to go to 
school, and when the normal financial aid kicks in to make that 
bridge.
    There is not a direct tie. If you are unemployed, you have 
to go to school, but a lot of them are.
    Senator Franken. Right. Thank you, and thank you, Mr. 
Chairman.
    The Chairman. Thank you, Senator.
    Dr. Mendenhall, the one question I wanted to ask, Senator 
Franken kind of referred to it, and that is you recommended 
that Congress look closely at the use of performance triggers 
for dispersing financial aid. Could you get into that a little 
bit more with me? What do you mean by that?
    Mr. Mendenhall. Actually, I think two thoughts. I had 
suggested a financial aid demonstration project, one that would 
allow financial aid to be provided, on a selective basis to 
those who are providing learning. It might be short of a full 
degree or it is brand new models for degrees.
    The distance learning program in 1998 really waived a 
number of financial aid regulations so that we could figure out 
how to apply financial aid to distance learning, which we then 
incorporated into the 2006 reauthorization. I think something 
similar to spur new models in innovation would be helpful from 
the Federal Government.
    The performance triggers, my thought there is really 
allowing institutions financial aid flexibility waivers from 
the current rules to explore different ways of distributing 
financial aid to students.
    Today, it is essentially an all or nothing. I mean, you 
sign up for a semester, you get your financial aid whether you 
do half the work or all of the work. I could see distributing 
that financial aid based on completion metrics along the way. 
That applies more to a competency-based model than it does to a 
traditional model because we have it along the way. Students 
can pass it as they go as opposed to taking all their tests at 
the end of a semester.
    But we believe if we had flexibility in financial aid, it 
would motivate students to make greater progress and be more 
successful, and my sense is that others could find innovative 
ways to do the same.
    The Chairman. I would like to look at some demonstration 
programs like that.
    Last, on the issue of student debt, setting aside Pell 
grants, which is not debt, but student loans, guaranteed 
student loans. I am not talking about the Perkins loans; I am 
talking about the Stafford loans. As I said in my opening 
statement, it has now outstripped credit card debt. Students 
are graduating with humongous amounts of debt.
    Now, I will make a provocative statement, but I want it 
understood in the context that I am not saying it is true all 
over the map; there are gradations in terms of students 
borrowing money. But I wonder how many students, emancipated 
students, are borrowing money for lifestyle purposes rather 
than for educational purposes?
    When you are young you might think,

          ``Hey, hey, that money, that's easy. I just fill it 
        out and get all that money. Wow. And guess what? I am 
        going to make a lot of money when I get out and I can 
        pay that all back.''

    And they take on these huge debts not really understanding 
what that means. They are not understanding that this is not 
dischargeable in bankruptcy, by the way. It is around your neck 
forever.
    Every time I say that, people say, ``Oh, my gosh. These 
students borrow this money, they need it.'' As I say, there are 
gradations. I just wonder how many students are borrowing this 
money for lifestyle purposes. Any thoughts?
    Mr. Mendenhall. I know for our students that there are 
clearly students borrowing it for lifestyle, and it appears 
like free money.
    The Chairman. Yes.
    Mr. Mendenhall. You know, ``Someday we will pay it back.'' 
I could not say what percent, but it certainly exists, and I 
think it contributes to increasing costs.
    The Chairman. How do we clamp down on that? I think it is 
bigger than what people think. I think it is a lot bigger than 
what people think. I think a lot of students are borrowing 
money for lifestyle purposes.
    Mr. Mendenhall. I think we have a challenge in this country 
in that we finance higher education with debt. And I think if 
we could do more, and I know we have done some, if we could do 
more to incent savings, to incent college savings, tax credits 
so that people are spending their own money somehow they make 
wiser decisions. The cost of tuition and the cost of education 
is more important to them if it feels like their money. And too 
often, I think, Federal loans do not feel like their money. It 
will be someday, but they do not know that yet.
    The Chairman. It seems that when I went to college, and of 
course, at a State school, the idea was that you would live a 
diminished lifestyle while in school, and you would sacrifice 
knowing that if you got a good education, you would get a 
better job, and you would have a better life later on.
    I know a lot of the high school students I graduated with 
when I was at college, they went out and got great jobs. Of 
course, at that time you could get good jobs out of high 
school. They had new cars and all that kind of stuff, and here 
we were living three in a basement, scrimping by. I had no car 
in college. I did not have clothes. We never took fancy trips 
or anything like that. We could not afford to. But we knew that 
if we sacrificed for a while that we would be better off later 
on.
    It seems to me that so many college students today want to 
have it both ways. They want to go to college, but they do not 
want to give up on any lifestyle. They want to have a really 
nice lifestyle while they are in college and again, I say, I do 
not know how you get on top of that. I do not know how we 
restructure the loan program to make sure that they are 
actually borrowing the money for tuition or for meeting 
necessary college expenses rather than for lifestyle. I do not 
have an answer to it, but I think it is a bigger problem than 
what most people think.
    Any thoughts on that?
    Mr. Earl.
    Mr. Earl. I have no numbers. It is recognized. I tend to 
agree with you. It is worth looking at. I would just hang a 
huge caution out that at least in the income demographic that 
is prominent in the 2-year college system is, we need to be 
very careful not to restrict the lower quintiles in the income 
demographic from their ability to gain the advantages of higher 
education. And we know that low-income people already are 
disadvantaged from ever enjoying the benefits of higher 
education. So I just throw the big cautionary note out.
    The Chairman. Well said and a point well-taken. That is why 
I say there are gradations in this and not just one blanket 
condemnation of this at all. But it is something that I know is 
happening out there.
    I am going to call this to a close. Yes, Dr. Mendenhall.
    Mr. Mendenhall. Just one other quick thought. You know, 
most college aid has now shifted to merit-based aid as opposed 
to need-based aid as colleges compete for the best students, 
and rankings, and so on. And I think anything the Congress 
could do to incent colleges to return to providing need-based 
aid reduces the loan amounts that are required.
    The Chairman. I agree with that. Any last statements, or 
comments, or things that people want to make sure that we know 
before I close?
    Again, I just want to thank all of you for being here, and 
for the great work you do every day. I know it is tough to get 
away, and some of you traveled great distances.
    This is an extremely important topic. This is not the last 
of these hearings. This is the first, and we are going to keep 
delving into this, and we are going to try to come up with some 
suggestions on demonstration programs, new methodologies. But 
we just cannot continue doing what we have been doing in the 
past.
    And I think that applies both on what I call the public 
schools, public universities, nonprofit universities, community 
colleges, but as I have had hearings over the last year or so 
also on the for-profits too. This is a problem that spreads 
across everything.
    I thank you all very much for being here.
    The committee will stand adjourned.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

          Prepared Statement of the Pennsylvania Association 
                of Private School Administrators (PAPSA)
    The Pennsylvania Association of Private School Administrators 
represents the more than 300 for-profit career schools, colleges and 
universities in the Commonwealth.
    PAPSA is deeply concerned about student overborrowing. What schools 
have found is that over borrowing is a big part of the loan debt 
problem, especially among unsophisticated borrowers. And it is 
increasing despite aggressive loan counseling.
    Schools constantly report stories of students asking for all the 
financial aid they are entitled to, paying their tuition and then 
walking away with thousands of dollars which ends up paying for a newer 
car, Christmas presents, plastic surgery, bail money or big parties 
which the school usually ends up hearing about. These cash stipends can 
be, in one case, as high as $24,000 for an associate degree. Despite 
the best efforts of schools to curb overborrowing, the U.S. Department 
of Education mandates that schools must disclose to students all the 
loan money they are entitled to borrow. How can schools be responsible 
for repayment when the U.S. Department of Education encourages 
irresponsible overborrowing?
    Overborrowing is defined in three ways by our schools:

     Students transfer or move from school to school and 
continue to mount debt which goes into deferment while they are 
attending another college or school.
     Commuter students, living at home, borrow available funds 
in excess of direct school costs (tuition, fees, books) without regard 
to debt consequences. While these dollars make sense for traditional 
college students, they are not appropriate for commuter students. Since 
schools must disclose all the loan money available to these students, 
they often access these significant additional dollars with no thought 
to the future.
     Students also overborrow when they receive an unexpected 
increase in PELL, OVR, State grant, public assistance or WIA funding. 
As a result, more grant money is received than students originally 
planned. But when the school counsels and encourages them to return the 
excess loan money, the students almost always decline the request and 
keep the extra loan amount.

    The following are actual examples of student overborrowing in 
Pennsylvania.
    A small cosmetology school in Central Pennsylvania--In 2007-8-9, 
the school had a 0 percent tuition increase and .06 percent enrollment 
increase, yet overborrowing increased from 4 to 41 students (a 925 
percent increase). Overborrowing loan amounts increased from $2,064 in 
2007 to $68,473 in 2009 (over a 3,000 percent increase).
        Chart 1. Overborrowing Loan Amounts--Cosmetology School

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Three Business school campuses in Northwestern Pennsylvania--In 
2007-8-9 the school averaged a 3.8 percent total tuition increase with 
a 43 percent enrollment increase, but a 152 percent increase in 
overborrowing--from $234,000 to $590,000 in 2 years.
      Chart 2. Overborrowing Loan Amounts--Three Business Schools 
                      in Northwestern Pennsylvania

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    One business school campus in Central Pennsylvania--Between 2007 
and 2009, the school averaged a 1.7 percent tuition increase each year 
and no increase in enrollments or borrowers. Yet, overborrowing 
increased by 104 percent (from 36 to 74 students) and overborrowing 
dollars tripled from $100,193 in 2007 to $363,983 in 2009.
        Chart 3. Overworking Loan Amounts--One Business School 
                        in Central Pennsylvania

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Three small Pittsburgh technical schools under one ownership--While 
the number of students overborrowing remained the same between 2007 and 
2009, the total amount of over borrowing increased by 99 percent 
($32,651 to $61,316). Although tuition increases averaged 6.2 percent a 
year and enrollment increased by only 1.2 percent on average over the 
period, the dollar amount of overborrowing increased as the same number 
of students chose to increase their overborrowing.
 Chart 4. Overborrowing Loan Amounts--Three Small Pittsburgh Technical 
                                Schools

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Nineteen small cosmetology schools throughout Pennsylvania--
Although tuition increases averaged less than 1 percent per year for 
2007 to 2008 to 2009 and the average enrollment increase was 3.8 
percent a year, the number of students overborrowing increased from 757 
in 2007 to 6,033 in 2009. Actual overborrowing loan dollars increased 
sixfold, from $1,169,261 to $6,551,978 over the 3-year period.
Chart 5. Overborrowing Loan Amounts--Nineteen Small Cosmetology Schools 
                            in Pennsylvania

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    A trade/technical school in Northwestern Pennsylvania--Between 2007 
and 2009 the school had a 5 percent total tuition increase; a 42 
percent increase in enrollment; and no change in the student 
demographic. Yet, they experienced a 4,250 percent increase in 
overborrowing--from $6,496 in 2007 to $255,680 in 2009. The number of 
students overborrowing increased from 10 in 2007 to 180 in 2009.
    Chart 6. Overborrowing Loan Amounts--Trade/Technical School in 
                       Northwestern Pennsylvania

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    A business school in Northeastern Pennsylvania--Between 2008 and 
2010, 65 percent of the students each took more than $1,000 in extra 
loan stipends, averaging $5,351. Thirty-five percent took less than 
$1,000. The 65 percent however, represented over 97 percent of the 
total amount of loan stipends issued, or $1,480,000 of the $1,530,000 
in extra stipend money.
    The point in this example is the school's concern that 65 percent 
of the students who borrowed more than $1,000 averaged over $5,000 in 
extra stipends. The school felt the students were taking on unnecessary 
expenses and would have a higher likelihood of default.
    A 37 campus private group of schools in Pennsylvania and in other 
States--Overborrowing increased from $17,601,189 to $34,883,339 a 101 
percent increase in the private school group. Over the 3-year period, 
there was a 7.6 percent tuition increase and a 41 percent increase in 
enrollment.
 Chart 7. Overborrowing Loan Amounts--A 37 Campus Private School Group 
                    in Pennsylvania and Other States

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Large private college in Western Pennsylvania--Compare the previous 
data to the data provided by a more expensive 2-year college in Western 
Pennsylvania. Student overborrowing increased only slightly from 
$1,329,854 in 2007 to $1,373,764 in 2009. The tuition increase averaged 
3.5 percent a year. Enrollment between 2007 and 2009 increased an 
average of 1 percent a year. There was no change in student 
demographics.
      Chart 8. Overborrowing Loan Amounts--Large Private College 
                        in Western Pennsylvania

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    In this instance, tuition was above the State average in 2007 and 
students were already borrowing larger amounts for all years in 
question. The conclusion is clear. More expensive private colleges do 
not see an increase in over borrowing since their students have 
traditionally borrowed at higher levels. Relief, however, from 
mandatory loan disclosure to students is needed at lower tuition 
institutions.
    The 3-year trend appears clear. While there were minor tuition 
increases, no change in student demographics, stable or moderate 
enrollment increases due to some new campuses, only over borrowing, as 
was defined earlier, increased exponentially. In addition, from all 
early indications the upward trend toward excess borrowing will 
continue in 2010 and possibly beyond.
    The problems PAPSA sees now with overborrowing will only be 
exacerbated in the future by the recent gainful employment regulations 
that the Department of Education has implemented. If career schools are 
going to be penalized for high debt, (and currently are under cohort 
default limit requirements) debt problems should be addressed at the 
front-end of the loan as well by curbing over borrowing and considering 
other front-end approaches.
    PAPSA would like to see Congress or the U.S. Department of 
Education consider additional methods beyond counseling for limiting 
student borrowing. We propose Federal changes to allow an institution 
to use professional judgment to decrease the loan amount approved for a 
student based on the appropriateness of the budgeted items and 
Satisfactory Academic Progress (SAP), as long as the loan amount fully 
covers the cost of attendance (COA), as we understand COA to be 
defined, and there are no other government programs that contribute to 
the COA. We would be happy to provide legislative language if 
requested.
    Thank you.
        Responses to questions of Senator Enzi, Senator Hagan, 
                 and Senator Murray by Carol E. Quillen
                              senator enzi
    Question 1. What challenges have you encountered in sustaining 
Davidson's commitment to the Davidson Trust?
    Answer 1. The Davidson Trust builds on Davidson's longstanding 
leadership in access and affordability. The minutes of an 1841 Board of 
Trustees meeting state our founders' determination to keep the cost of 
education ``within the reach of many in our land who could not 
otherwise obtain it.'' Expanding this vision, each year we now offer an 
unparalleled education to hundreds of students for whom, before the 
Trust, even applying to Davidson seemed unimaginable.
    When Davidson's Board of Trustees established The Davidson Trust, 
we knew that our aggressive investment in access (meeting 100 percent 
of demonstrated need without requiring loans) would require an equally 
aggressive effort to secure funding. The Davidson Trust is currently 
sustained in large part through annual financial support from Davidson 
alumni, faculty, staff, friends, parents, and current students. We 
continue to seek long-term support. Our institutional commitment to The 
Davidson Trust and to the ideal that it embodies has never wavered.
    For this innovative program and others like it to succeed, Davidson 
must persuade the public, whose support we need, that equal opportunity 
matters, that all talented students are entitled to a transformative 
education, and that our liberal arts education enables graduates to 
exert impact for good far out of proportion to their numbers. Davidson 
and schools like us that have demonstrated simultaneous commitments to 
academic rigor, access, and service need the support of others who see 
that our work is changing the face of society's leadership and making 
equal opportunity real. The Trust benefits all students at Davidson--
not just those who receive financial aid.
    The Davidson ``community'' has embraced these ideals. We aim now to 
persuade the broader public that our work and impact merit their 
investment.
                             senator hagan
    Question 1. How do we change the mentality of ALL institutions of 
higher education, to ensure that college is a realistic option for the 
lowest income Americans, not just a select few?
    Answer 1. Davidson is an academically demanding, residential, 
liberal arts college. Because our approach to education is labor 
intensive and expensive, we are small. Our commitment to access is 
expressed through aggressive recruitment, need-blind admission and 
offering financial aid that meets 100 percent of demonstrated need 
without requiring loans. Because our endowment is roughly half the 
average of our peer schools, our example suggests that institutions 
like us have found or can find ways to commit simultaneously to 
excellence and to access for all talented students.
    Furthermore, as the HELP Committee's February 2, 2012, panel 
indicates, the higher education landscape is increasingly wide-ranging 
as existing and emerging institutions strive to meet the needs of a 
diverse student population within a global economy. Different 
institutions will express their commitment to access in vastly 
different ways, and this range of options is crucial to serving all 
students. Education must be a realistic option for all students 
regardless of financial circumstances, yet we do not presume to 
proscribe how institutions vastly different from Davidson should ensure 
this access.
    Please know that Davidson's commitment to access is not primarily 
about financial aid. It is a promise to all talented students that they 
can afford Davidson, and that if they choose to enroll, our faculty, 
staff, alumni, and leadership will do everything possible to ensure 
that they thrive while they are here and after they graduate. The 
Davidson Trust is as much about nurturing our students once they have 
enrolled and after they graduate as it is about getting them here. In 
our view, providing this support is a crucial dimension of making equal 
opportunity real.

    Question 2. What priorities, if any do you foresee having to set 
aside 5, 10 and 20 years down the road in order to honor the commitment 
of The Davidson Trust?
    Answer 2. Our commitment to The Davidson Trust is a dual commitment 
to access and to educational excellence. The value of the Trust is 
measured by the quality of the education our students receive and the 
disproportionate impact for good our graduates exert in the world. 
Therefore, our commitment to the Trust requires an equally vigilant 
commitment to providing an unsurpassed liberal arts education. We 
constantly ask how we can improve, refine, or re-imagine what we do and 
how we do it. Of course, we seek to provide this education as 
efficiently as possible. With an endowment and tuition rates that both 
are lower than at comparable institutions, Davidson has demonstrated 
that we can deliver an excellent education through efficient use of 
resources and that we will be good stewards of funds raised going 
forward.

    Question 3. Can you tell me more about the leadership program for 
at-risk middle-school girls? They are such an important demographic of 
students that often need a little extra attention and support.
    Answer 3. Davidson's Sigma Psi Chapter of the Alpha Kappa Alpha 
Sorority, in partnership with the Junior League of Charlotte and KIPP 
Charlotte, launched the Girls Leadership Program, a 10-month leadership 
program for seventh- and eighth-grade girls. KIPP Charlotte is a 
tuition-free, open-enrollment college preparatory middle school that 
serves students who are traditionally underserved or marginalized in 
education. The program draws on the award-winning Athena's Path 
curriculum, which focuses on the specific needs of middle school girls, 
and also incorporates a service element. Davidson's students mentor the 
72 program participants and applied for a $2,000 grant to help fund the 
program. The program is in its first year.
    Our students embody Davidson's commitment to the values of 
leadership and service in a variety of ways. The Girls Leadership 
Program is but one of several outreach programs for at-risk youth 
supported by our students and the staff of our Center for Civic 
Engagement. I would also like to highlight three other outreach 
programs sponsored by Davidson that focus on at-risk youth.
    The Children's Defense Fund Freedom Schools program at Davidson 
College (established in 2005) provides summer enrichment for 50 
students in grades K through 8. The 6-week program fosters a love for 
reading, increases self-esteem, and generates positive attitudes toward 
learning. The program is grounded in a model curriculum that supports 
children and families around five essential components: high quality 
academic enrichment; parent and family involvement; civic engagement 
and social action; intergenerational leadership development; and 
nutrition, health, and mental health. Davidson College students serve 
as Servant Leader Interns for the program participants.
    Davidson was one of the first colleges in the Nation to become part 
of the Bonner Scholars program, and has been a participant in that 
program for 20 years. This is a 4-year scholarship program that centers 
on a strong team of students working to bring about positive community 
change through service, research and action. Our Bonner Scholars 
partner with Communities in Schools to host an interactive college 
visit day for approximately 50 middle school students from Charlotte 
schools. Communities in Schools is the Nation's leading dropout 
prevention organization.
    Our Bonner Scholars and students involved in our Federal Community 
Service Work Study program work with students in grades one through 
five through the LEARN Works program at the Ada Jenkins Center, a 
community center located in the town of Davidson. Through tutoring 
services and mentoring, our students seek to inspire these children to 
become lifelong learners. The LEARN Works program serves 60 students.
    These programs and the innumerable other outreach efforts conducted 
by our students and alumni exemplify Davidson's commitment to helping 
our students lead lives of leadership and service. We estimate that 89 
percent of Davidson's students participate in some sort of service 
activity each year, and our students contributed over 82,693 hours of 
service to the community last year.
                             senator murray
    Question 1. What are your thoughts and plans to extend the economic 
health and future of the Trust? How are you planning to advance the 
institution's goals and expand the Trust for students?
    Answer 1. The primary purpose of Davidson College is to assist 
students in developing humane instincts and disciplined and creative 
minds for lives of leadership and service. We do this by offering the 
liberal arts education that best serves students for the 21st century, 
a time when globalization and technology have changed the context in 
which we work. In this 21st century world, communication across 
disciplines and distance is easier, and information is increasingly 
free. Working effectively now does require the talents we have long 
stressed--critical thinking, creativity, clarity of expression, and 
leadership. But it also requires technological literacy, multi-cultural 
fluency, entrepreneurial problem-solving, and the ability to synthesize 
vast amounts of disparate data. We need to offer our students the 
opportunity to cultivate these talents. Furthermore, technology now 
allows us to build our curriculum around student research and creative 
work, so that, even as first-year students, they become active 
producers of knowledge.
    Ensuring access for all talented students to this form of education 
is a direct extension of our primary purpose. It is expensive. Our dual 
commitment to excellence and access can be compelling to individuals 
not affiliated with the college, and we will need their support to 
strengthen the promise the Trust holds out. We believe that the impact 
our graduates make on the world justifies the cost of our labor-
intensive form of education. Our Nation needs these students acting and 
leading in the world.

    Question 2a. You mentioned at the hearing that you don't believe 
the Davidson Trust approach is very scalable. Are there smaller steps 
you would advise interested institutions pursue to follow your lead?
    Answer 2a. As a small, residential, liberal arts college, Davidson 
offers a type of education that is labor intensive, comparatively 
expensive, and not scalable in conventional terms because it requires a 
low student-faculty ratio and because the cost of the education we 
offer exceeds our sticker-price tuition. Yet, as a group, highly 
selective, need-blind schools are changing the face of society's 
leadership and making equal opportunity real. Our graduation and 
employment rates are very high; in an increasingly segregated America, 
our residential campuses embrace kids from across the economic 
spectrum; and our graduates enter the world committed to serving 
something larger than themselves. The success of the Trust and of 
similar efforts at schools like Davidson must be measured not only in 
terms of the numbers we educate but also in terms of the 
disproportionate impact we have on individual lives and on the society 
that we and our graduates serve.

    Question 2b. Are there successes, failures, and barriers you 
experienced during the establishment and policy development of the 
Trust that you can share with us?
    Answer 2b. One visible measure of the success of The Davidson Trust 
is the increase in the percentage of students with demonstrated 
financial need who enroll at Davidson. Nearly 44 percent of the Class 
of 2015 qualified for and received need-based aid, compared to 
approximately 33 percent of the Class of 2011. Over the same period of 
time, the number of Federal Pell grant recipients has increased from 
115 to 222 (a 93 percent increase). And we are recruiting and enrolling 
more domestic students of color and first-generation college students.
    As successful as The Davidson Trust has been, the fact remains that 
Davidson's tuition is expensive, and so one issue we face is ensuring 
that Davidson remains an option for the middle class. For some middle-
class families who do not qualify for financial assistance, covering 
the cost of attending Davidson is challenging. Our commitment is to 
make a Davidson education accessible for all talented students. We 
strive to honor this commitment by keeping our tuition low relative to 
our peers and delivering our programs as efficiently as possible.
    Shortly after we announced The Davidson Trust, our country entered 
a recession. The economic downturn was a test of the college's 
commitment to the Trust--our endowment earnings were down and our 
students had increased levels of need. Other colleges and universities 
backed away from the recent commitments many of them had made to no-
loan financial programs following our lead. Davidson remained committed 
to its promise.
   Response to Questions of Senator Enzi, Senator Hagan, and Senator 
                                Murray 
                     by Robert W. Mendenhall, Ph.D.
                              senator enzi
    Question 1. Why did Indiana, Texas, and Washington simply not work 
through their existing institutions of higher education? Why did they 
not expand the capacity of those institutions?
    Answer 1. Indiana, Washington, and Texas chose not to work through 
their States' existing institutions for many of the same reasons that 
WGU's founding Governors chose to create an entirely new university. It 
is more difficult for existing colleges and universities, with their 
established business models and academic systems, to radically change 
their models. In every industry, not just higher education, true 
disruptive innovation usually comes through the creation of a new 
institution.
    Each State had slightly different reasons for establishing State 
versions of WGU, but the overriding reason for all of the States was 
the fact that by creating a State-based WGU, they could add capacity 
without incurring additional ongoing cost. WGU offers degree programs 
that are affordable and accredited, as well as self-sustaining on 
tuition of only $6,000 per year, and it would be very expensive for 
each State to develop and earn accreditation for its own online, 
competency-based programs.
    In Indiana, a State that was deeply affected by the recession, 
Governor Daniels was looking for ways to help the nearly 800,000 
Hoosiers who had started but not completed college, many of whom were 
working in low-paying jobs or whose jobs had been eliminated by the 
recession. The Governor saw the creation of WGU Indiana as a way to 
help Indiana residents to retool for the new healthcare and technology-
based jobs coming into the State. With its focus on the needs of adult 
learners and its degree programs in high-demand career fields, WGU 
Indiana adds another high-quality option to the State's higher 
education opportunities without impacting the State's strained budget.
    When WGU Indiana was launched, there were approximately 250 WGU 
students in the State. Today, there are more than 2,200.
    In Washington, the State legislature initiated the process of 
establishing WGU Washington. The legislators were concerned about the 
limited capacity of existing State institutions. This capacity shortage 
was driving graduates of the State's community colleges to transfer to 
expensive for-profit schools to complete their bachelor's degrees. 
Endorsing WGU Washington allowed the State to offer another higher 
education option for its residents. Since its launch in July 2011, WGU 
Washington's enrollment has more than doubled.
    Texas Governor Rick Perry, with the support of key legislators and 
higher education policymakers in the State, established WGU Texas to 
provide another affordable option for earning a degree. Like Indiana, 
Texas has a large number of residents, more than 3.5 million, who have 
started, but not completed, a college degree. Another key motivation 
for the establishment of WGU Texas was to increase educational 
opportunities for the large number of returning veterans in the State. 
The university's learning model is ideal for individuals who have 
gained competencies through their military service.
                             senator hagan
    Question 1. The Education Trust, a research and advocacy group that 
I am sure you all are familiar with, released a report last summer 
titled ``Priced Out: How the Wrong Financial Aid Policies Hurt Low-
Income Students.'' The report examined tuition and graduation rates at 
nearly 1,200 4-year colleges. Out of these 1,200 institutions, only 5 
were determined to be servicing low-income students well. I am proud to 
say that one of these five schools was the University of North Carolina 
Greensboro. Additionally, we have several schools, private and public, 
committed to ensuring that students, no matter what their economic 
background may be, have the option to receive a college education.
    How do we change the mentality of ALL institutions of higher 
education, to ensure that college is a realistic option for the lowest 
income Americans, not just a select few?
    Answer 1. One of the major challenges comes from the fact that 
educational prestige is determined by rankings like those published by 
U.S. News & World Report, which are focused on selectivity (how few 
students an institution admits) and low student-to-faculty ratios. 
Using these criteria as measures of quality actually drives costs up 
and access down.
    The United States needs to find a way to recognize and reward 
institutions for reducing costs and expanding access to higher 
education, particularly access for low-income Americans. The majority 
of U.S. institutions of higher education are focused on providing 
quality education, and overall, they do this very well. However, to 
make college affordable for all Americans, we must find ways to 
significantly increase the productivity of our colleges and 
universities without sacrificing quality. Efforts to cut costs by 
streamlining administrative processes, reducing facility costs, and 
other simple savings measures will not be enough. We must re-think the 
way we look at higher education and make fundamental changes, including 
adopting new models.
    In almost every other industry, new technology has resulted in 
improved productivity and lower overall cost, but in higher education, 
technology has largely been treated as an additional cost. This needs 
to change, and to make this change, we have to be open to new methods 
for teaching and learning. From the university's inception, a key 
element of the WGU mission has been to help promote new learning models 
in U.S. higher education. As the university continues to grow and 
demonstrate the efficacy of our competency-based model, we hope to 
encourage other institutions to consider models similar to ours.
                             senator murray
    Question 1a. Dr. Mendenhall, you have received accolades for your 
work to improve student educational experiences. I have always believed 
it is important to make education accessible to all students, so I 
commend you for your efforts to improve distance education 
opportunities.
    Please talk about the work that went into developing WGU's 
competency-based learning model.
    Answer 1a. When our founding Governors conceived WGU in the mid-
1990s, their objective was to find ways to use technology to improve 
the productivity and accessibility of higher education. They chose to 
create a new model for higher education, one that would address the 
needs of adult learners. We know two things about adult learners: they 
come to college knowing different things, and they learn at different 
rates. Rather than requiring these adult learners to spend 4 months in 
each class, regardless of their prior education and experience, the 
founders wanted to create a model that would allow students to earn 
their degrees based on learning, not time. The competency-based model 
created for WGU allows students to move quickly through material they 
already know so they can focus on what they still need to learn. As a 
result, students have the opportunity to accelerate, saving time and 
money--the average time to complete a bachelor's degree at WGU is 30 
months.
    Another key objective in the development of WGU was to ensure that 
degree programs address the needs of employers. For each degree 
program, WGU established external program councils, composed of 
representatives from industry and higher education, to develop required 
competencies. By creating these program councils, WGU has ensured that 
its students graduate with the knowledge and skills employers need. In 
addition to establishing competencies when new degree programs are 
created, WGU uses program councils to conduct regular reviews, ensuring 
that the programs are up-to-date and continue to address employer 
needs.
    It is also important to note that WGU's model was structured from 
the beginning to use technology to facilitate learning. While most 
online universities simply use technology to distribute classroom 
education--classes led by an instructor with a fixed schedule and 
syllabus--WGU's model significantly changes the role of the faculty. 
Technology provides interactive instruction that allows students to 
learn at their own pace, and the role of the faculty has shifted to 
that of ``a guide on the side'' rather than the traditional ``sage on 
the stage.'' Grading for WGU courses is done by a separate team of 
evaluators. WGU faculty members serve as mentors whose sole focus is to 
provide individualized support and guidance to students.

    Question 1b. Is the model reviewed and revised if new data and 
research is released?
    Answer 1b. From its inception, WGU has used data to identify what 
is working well and what needs to be adjusted in its model. Over the 
years, WGU has made a number of changes and revisions based on data 
that measure student/graduate success and satisfaction, employer 
satisfaction, and student engagement. For example, we have developed 
and adjusted the role of our faculty mentors, changed and upgraded our 
student support services, and modified many of our learning resources 
and assessments. As a result, in the past 4 years, WGU's 1-year 
retention rate has increased from 64 percent to 78 percent and the 
percentage of students achieving satisfactory academic progress has 
increased from 69 percent to 83 percent. We will continue to use data 
to guide improvements to our model, using student outcomes as the 
primary indicator of success.

    Question 2. When you mentioned that WGU students receive a higher 
level of support, what do you mean by this? Are you referring to 
support in terms of staff, financially, or both?
    Answer 2. WGU students do receive a higher level of faculty 
support. Our mentors work with each student one-on-one, meeting by 
telephone at least every other week, and communicating much more often 
through e-mail and online chats. In addition, students have the 
individualized support of course mentors, subject matter experts who 
can answer questions, lead online group discussions, and even provide 
tutoring if needed. Our scores on the National Study of Student 
Engagement (NSSE), which are above the average of all institutions in 
areas such as level of academic challenge, quality of academic 
advising, supportive environment, and overall educational experience, 
demonstrate that our students believe they receive a higher level of 
support.
    With regard to financial support, WGU works closely with our 
students to help ensure that if they borrow money to attend college, 
they borrow only what they need. Our default rate, which is currently 
4.9 percent, is comparable to that of many traditional universities. In 
addition, we award need-based scholarships--since July 1, 2010, we have 
awarded nearly $7 million.

    Question 3. How do you think the WGU model can be scaled up at 
other institutions across the country? What would be the barriers to 
developing similar institutions?
    Answer 3. A few institutions are considering adopting parts of the 
WGU model--particularly our mentoring and the use of technology to 
facilitate learning. However, current business models and academic 
traditions make it difficult for existing institutions to really 
transform themselves. For example, to implement significant aspects of 
the WGU model, these institutions would need to change faculty roles as 
well as academic calendars.
    In ``Disrupting College,'' Harvard's Clayton M. Christensen 
describes the issues associated with trying to insert disruptive 
innovations into existing business models:

          ``Plugging a disruptive innovation into an existing business 
        model never results in transformation of the model; instead, 
        the existing model co-opts the innovation to sustain how it 
        operates. What this means is that, generally speaking, the 
        disruption of higher education at public universities will 
        likely need to be managed at the level of State systems of 
        higher education, not at the level of the individual 
        institutions, which will struggle to evolve. And if private 
        universities are able to navigate this disruptive transition, 
        they will have to do so by creating autonomous business 
        units.''

    To develop an entirely new institution like WGU is possible. The 
primary barrier is likely to be the time and expense required for any 
startup--staffing, systems, and programs--as well as earning 
accreditation. The approximate cost to bring WGU to its break-even 
point was $40 million. Over the past 20 years, every new institution 
has been for-profit, largely because of capital costs. However, for-
profit institutions have different drivers that do not incentivize them 
to keep costs to students low.
                                 ______
                                 
    State Board for Community & Technical Colleges (SBCTC),
                                                       Olympia, WA,
                                                 February 29, 2012.
Hon. Tom Harkin,
731 Hart Senate Office Building,
Washington, DC 20510.

Hon. Mike Enzi,
379A Senate Russell Office Building,
Washington, DC 20501.
    Dear Chairman Harkin, Ranking Member Enzi, and members of the 
Committee on Health, Education, Labor, and Pensions, it was an honor 
testifying before you on February 2 about the innovative ways we're 
working to keep college affordable at Washington's community and 
technical colleges. Here are our responses to the insightful questions 
of HELP committee members.
    I welcome any opportunity to discuss this important issue with you. 
Please contact me if you need further information. Your observations 
and questions add to the national dialog about the vital role of 
community and technical colleges in America's economic recovery. Thank 
you.
            Sincerely,
                                           Charles N. Earl.
                                 ______
                                 
        Responses to Questions of Senator Enzi, Senator Hagan, 
           and Senator Murray by Charles N. Earl, M.A., B.A.
                              senator enzi
    Questiion 1. What types of partnerships have you forged with 
private industry in Washington? I'm particularly interested in hearing 
about what Walla Walla Community College is doing that has attracted so 
much national praise.
    Answer 1. In Washington State and across the Nation, community and 
technical colleges forge partnerships with local land regional business 
leaders and their employees to offer top-notch, job-relevant programs. 
Our colleges join forces with local chambers of commerce, business and 
labor organizations, workforce development councils, and businesses of 
every size and type that make up their communities.
    Through Washington's Job Skills program, for example, colleges work 
directly with employers to provide short-term training customized for a 
specific employer. This dollar-for-dollar matching grant helps 
businesses build and retain a quality workforce. Employees in the 
program learn marketable skills that lead to raises and promotions; 
businesses gain skilled employees who need less on-the-job training and 
who sharpen the businesses' competitive edge. In 2010-11, Washington 
State community and technical colleges and local businesses 
participated in 34 Job Skills partnerships.
    Community and technical colleges serve small businesses in 
partnership with the U.S. Small Business Administration. Seven colleges 
host Small Business Development Centers that provide advice, training 
and research to new and existing firms.
    Many of our community and technical colleges also partner with both 
union and non-union training organizations to provide apprenticeship 
programs. Students get on-the-job training from journey-level craft 
persons or trade professionals, and receive supplemental classroom 
instruction from the colleges. In 2010, these programs served 13,790 
apprentices.
    Importantly, every college professional-technical education program 
has an advisory committee made up of leaders, workers, and labor 
representatives in the field of study. These committees keep college 
leaders and faculty up-to-date on industry and workforce needs, 
employment forecasts, industry trends, and new technologies and 
equipment. Faculty members consult industry for ``on the ground'' 
skills and experience, and then use their knowledge to build and update 
curricula.
    Following are a few examples of the partnerships in Washington 
State.

     Walla Walla Community College: Walla Walla Community 
College is an excellent example of how college-business partnerships 
grow regional economies from the ground up. In December, Walla Walla 
Community College was named one of the top five community colleges in 
the Nation by the Aspen Institute. The college was named a ``finalist 
with distinction'' for developing visionary programs that create jobs 
and boost economic development. The college was also recognized for 
achieving graduation and transfer rates that are much higher than the 
national average.
    President VanAusdle of Walla Walla Community College often refers 
to the ``Walla Walla way''--a set of values focused on innovation, 
entrepreneurship and partnership with the local community. The college 
looks through an ``economic lens,'' developing programs in current and 
future high-demand fields and solving economic challenges.
    For example, Walla Walla hosts a $6.8 million Water and 
Environmental Center funded by the U.S. Department of Commerce, Pacific 
Power Blue Sky Renewable Energy, Port of Walla Walla, Walla Walla 
County, and the Confederated Tribes of the Umatilla Indian Reservation. 
The center formed an alliance in the community on a contentious issue 
statewide--how to use water and still protect watersheds for the 
benefit of people, farms, fish and wildlife. The center brought 
together State and local governments, tribal leaders, businesses, 
environmental organizations, and farmers to reach an agreement. By 
protecting the local watershed, the alliance is creating jobs, 
protecting salmon and steelhead runs, and supporting sustainable 
agriculture. Students are trained for careers in the local water and 
environmental workforce, including wind-energy technology.
    Walla Walla Community College also created a Center for Enology and 
Viticulture, an economic driver for the local wine and tourism 
industry. Additionally, the college has a longstanding partnership with 
the John Deere Company to provide heavy equipment training for 
agribusiness.
     Bellingham Technical College obtained $95,000 in Federal 
funding to develop a targeted training program for potential new 
employees for Heath Tecna, a local aerospace company. The college 
secured the funding through a partnership with 10 organizations: Heath 
Tecna, Northwest Workforce Council, Washington State Department of 
Commerce, Northwest Economic Council, Impact Washington,Worksource 
Whatcom Career Center, Washington State Employment Security Department, 
Manpower, Kelly Services, and the Bellingham Waterfront Innovation 
Partnership. This program is an essential part of a larger effort 
projected to create 400 new jobs and bring $40 million in new export 
business to Whatcom County.
     Edmonds Community College operates the Washington 
Aerospace Training and Research Center at Paine Field. Opened in 2010, 
the center is built to create career opportunities in the aerospace 
industry. Students learn skills for entry-level I aerospace jobs in 12 
weeks. From the time the center opened in 2010 to September 2011, 357 
students had graduated and 324 of those students interviewed with local 
employers. Two-hundred and thirty two graduates reported to work as 
union aircraft assembly workers.
     Bellevue College's district includes the headquarters of 
Microsoft and many other high-tech companies. The college is home to 
the Center of Excellence in Information and Computing Technology, a 
statewide resource for information technology education and training, 
best practices, industry trends, and career events. ``Centers of 
Excellence'' are lead colleges that focus on building job skills for 
strategic industry sectors--like information, aerospace, and 
international trade. The Centers of Excellence develop industry-
specific curricula and share it throughout the State system so colleges 
avoid duplicating efforts and employers have one place to go for 
curricula redesign. Bellevue College also has a strong connection to 
local healthcare employers, which provides the bedrock for academic and 
professional development programs in the region.

    Question 2. In what ways are you responding to declining State 
funding?
    Answer 2. State funding for Washington's community and technical 
colleges has dropped sharply in the past few years because of declining 
State revenues. Since 2009, State funding for community and technical 
colleges has fallen by 22 percent.
    Community and technical colleges have weathered the cuts by 
reducing costs, squeezing every savings out of an already efficient 
system, and--regretfully--shifting more of the burden on students in 
the form of tuition increases.
    Efficiencies include:

     Statewide purchases of technology for education delivery 
and online meetings.
     Thirty-two shared professional and technical programs 
among colleges. These shared programs typically have one institution 
delivering course content to multiple colleges.
     Hybrid classes, which involve a mix of online and 
classroom instruction. Colleges maximize limited classroom space and 
students make fewer trips to campus.
     A robust e-tutoring consortium for colleges and their 
students to share tutors across courses and institutions 7 days a week.
     A nationally recognized, performance-based funding system 
that rewards colleges when more students reach key academic milestones, 
including the completion of certificates and degrees.
     Ten ``Centers of Excellence,'' including: Information and 
Computing Technology; Clean Energy; Aerospace and Advanced Materials 
Manufacturing; Education; International Trade, Transportation and 
Logistics; Homeland Security; Construction; Marine Manufacturing and 
Technology; Agriculture; and Allied Health. (Please see ``Bellevue 
College'' section for a description of Centers for Excellence.)

    Washington is ranked 4th in the Nation in productivity (performance 
relative to funding) by the National Commission of Higher Education 
Management Systems. While efficiencies help save money, they cannot 
replace lost State funding. Between June 2009 and June 2011, colleges 
cut:

     250 exempt positions (10 percent), including 70 
administrators and 181 professional technical personnel.
     150 classified positions (3 percent).
     75 full-time faculty (2 percent).

    The colleges first cut administrative costs to shield students as 
much as possible; however, students are now feeling the impact of 
reduced course offerings, long waiting lists for classes, and higher 
tuition. Individual courses and entire programs have been eliminated.
    Loss of State funding has also put more of the financial burden on 
students. Tuition has increased nearly 30 percent since 2008--from 
$2,730 to $3,542 for a full-time student. Washington State has a strong 
network of financial aid for students, but that network is fraying with 
each cycle of budget reductions.
                             senator hagan
    Question 1. The Education Trust, a research and advocacy group that 
I am sure you all are familiar with, released a report last summer 
titled ``Priced Out: How the Wrong Financial Aid Policies Hurt Low-
Income Students.'' The report examined tuition and graduation rates at 
nearly 1,200 4-year colleges. Out of these 1,200 institutions, only 5 
were determined to be servicing low-income students well. I am proud to 
say that one of these five schools was the University of North Carolina 
Greensboro. Additionally, we have several schools, private and public, 
committed to ensuring that students no matter what their economic 
background may be, have the option to receive a college education. How 
do we change the mentality of ALL institutions of higher education, to 
ensure that college is a realistic option for the lowest income 
Americans, not just a select few?
    Answer 1. According to the Education Trust report, only 5 out of 
1,200 4-year colleges and universities serve low-income students well. 
The report also found that low-income students' families contribute 72 
percent to 100 percent of their household income each year for one 
child to attend a university-after grant aid. Middle-income and higher 
income families, on the other hand, pay a much lower percentage of 
their household incomes--27 percent and 14 percent respectively. The 
criteria used to examine college low-income enrollment patterns 
included:

     Percentage of enrolled low-income students that is equal 
to or greater than national low-income population (30 percent).
     Family household contribution to college after grant aid 
which should be no more than a middle-class family contribution (27 
percent).
     Graduate rates of at least 50 percent.

    As a community and technical college State director, I admit to 
some level of bias in this response. Community and technical colleges 
embody the type of change needed in America's higher education system. 
We provide an affordable option for citizens to train or retrain for 
careers, earn work-relevant certificates and degrees, and complete the 
first 2 years of a 4-year degree at a much lower cost. Importantly, 
community and technical colleges offer Basic Skills programs, which are 
a major entry point to college education for low-income students. 
(Basic Skills programs include English as a second language, adult 
literacy, and high school completion.)
    America's community and technical colleges serve more than 7.4 
million certificate and degree seeking students. We serve a larger 
proportion of low-income students and students of color than other 
institutions. Nationally, community and technical colleges serve 
students who are:

     Older--average age of 28 years.
     First generation to attend college--42 percent.
     Ethnically diverse--45 percent people of color.
     Working while attending college--80 percent work while 
attending college full-time.

    In Washington State, about half of the community and technical 
college students are low income and receive financial aid. These low-
income students have minimal estimated family contribution as 
determined by the Free Application for Federal Student Aid (FAFSA) and 
qualify for Pell grants. Washington State is able to support students 
beyond the Pell grant with a State Need grant. The student aid award 
from both Federal and State sources typically covers 75 percent of 
students' total cost of attendance, which includes tuition and fees, 
books, supplies, transportation, and living expenses. The remaining 25 
percent is made up with employment earnings and student loans.
    Approaches to consider:

     Increase enrollment capacity at community and technical 
colleges. This will automatically expand higher education opportunities 
for low-income students because the colleges offer a high quality 
education at a fraction of the cost of 4-year institutions.
     Increase higher education and financial aid funding, and 
reverse the trend of shifting education costs onto students. With 
revenue downturns and cuts in State funding, higher education is moving 
from a public investment made ``for the good of the all'' to a purchase 
by the select few who can afford it. Preserving and increasing 
financial aid is a critical way to increase degrees for low-income and 
underrepresented populations.
     Change financial aid policies that specifically hinder 
community and technical college students. Financial aid guidelines 
assume that all college students are 18-year-old high school graduates 
who have taken all of the correct college preparation courses, and who 
are attending a university with the expectation of graduating in 4 
years. This type of student is quickly becoming the exception. 
Financial aid policies must support pre-college education for returning 
adult students. New Pell grant eligibility rules require a GED or high 
school diploma, eliminate the ``ability to benefit'' option, and 
shorten the number of quarters allowed for students to receive aid. 
These changes make it especially difficult for a returning adult 
student to attend a community or technical college. We would appreciate 
the opportunity to work with you to modify the rules and level the 
playing field for community and technical college students.
     Provide an admissions guarantee for students who transfer 
from a community or technical college to a 4-year college or 
university. In Washington State, we have a direct transfer agreement 
with all public 4-year colleges and universities. The agreement 
guarantees transfer students who attain an associate degree will enter 
the transfer institution at the junior level.
     Encourage faculty and administrators to see the potential 
of all students to earn a certificate or degree, and implement teaching 
strategies to accommodate non-
traditional learners. Washington State has more than 170 Integrated 
Basic Education Skills Training programs (I-BEST) and 39 accelerated 
learning pilot programs that integrate pre-college English and Math 
into job skill programs. Students enrolled in these programs are nine 
times more likely to earn a college credential than students enrolled 
in traditional pre-college courses.

    A 4-year degree is becoming increasingly out-of-reach for middle-
income American families. Community and technical colleges offer an 
affordable option for students of all economic backgrounds to achieve 
the first 2 years of their 4-year degrees.
                             senator murray
    Question 1.  In your testimony, you discuss the increased 
challenges that community and technical colleges have faced over the 
past decade in light of tightening State budgets. Could you provide 
your insight on how expanded partnerships and collaborations with other 
organizations and institutions could help make college tuition more 
affordable for students?
    Answer 1. Local colleges form valuable partnerships to reduce 
student costs, including raising funds for local scholarships, working 
with local employers on employee tuition reimbursement, and contracting 
with regional workforce investment boards on financial aid for 
unemployed adults. As a State system of community and technical 
colleges, we're able to collaborate with government agencies, employer 
groups, and colleges statewide to bring cost-savings to students at all 
34 community and technical colleges.
     K-12/Running Start: Washington's Running Start program 
allows high school juniors and seniors to attend tuition-free classes 
at community colleges. The students not only earn credit toward high 
school graduation, they also earn credit toward an associate degree or 
a bachelor's degree. Last year (2010-11), 19,000 high school students--
or roughly 10 percent of the State's junior and senior class--earned on 
average two full quarters of college credit, saving families across the 
State $41 million in college tuition.
     Open textbooks: The Open Course Library is a collection of 
expertly developed educational materials for 42 of the State's highest-
enrolled college courses. The materials--including textbooks, syllabi, 
activities, readings, assessments--cost $30 or less per student and are 
freely available online under an open license for use by the State's 34 
public community and technical colleges, 4-year colleges and 
universities, and anyone else worldwide. The project is set to expand 
to 81 courses by 2013. The course content and open textbooks were 
designed and selected by small groups of expert faculty but are 
available for adoption by their faculty colleagues throughout the State 
college system and across the Nation. We expect textbook savings for 
students to grow by millions of dollars each year as more faculty test 
and adopt these open textbooks.
     State agencies: The State Board for Community and 
Technical Colleges (SBCTC) and other State agencies collaborate to 
leverage college funds for people who use Federal and State income 
support while they are unemployed. SBCTC has a single, $20 million 
statewide contract with the State Department of Social and Health 
Services to provide education and training for TANF recipients 
(Temporary Assistance for Needy Families), so that the recipients can 
gain credentials and job skills to become employed. Through a 
collaboration with the State Employment Security Department, adults who 
receive unemployment benefits are referred to colleges for retraining 
programs and tuition and book assistance worth $40 million.
     State Chamber of Commerce: SBCTC has a modest contract 
with the Association of Washington Business to build partnerships 
between colleges and employers. Last year, we held focus groups with 
business leaders in five regions around the State to identify 
expectations, opportunities, and potential partnerships with local 
businesses. Business leaders expressed a strong desire to expand 
college partnerships to increase the supply of skilled workers. We are 
now organizing regional employment summits to identify skill gaps in 
specific regions and to inventory available training resources. We are 
confident this effort will yield more loaned employees, faculty and 
student internships, equipment and technology exchanges, contract 
training, and employer-paid tuition assistance.

    These partnerships provide resources for many of our citizens; 
however, none can take the place of Federal and State investment in our 
colleges, citizens and workers.
    We appreciate your continued interest in Washington State's 
community and technical colleges, and your dedication to improving 
prosperity in America through higher education.

    [Whereupon, at 12:40 p.m., the hearing was adjourned.]