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Witness Testimony of Mr. Barmak Nassirian, Associate Executive Director, American Association of Collegiate Registrars and Admissions Officers (AACRAO)

Chairman Stutzman, Ranking member Braley, and Members of the Subcommittee,

My name is Barmak Nassirian and I am Associate Executive Director with the American Association of Collegiate Registrars and Admissions Officers. AACRAO is a non-profit association of more than 2,600 degree-granting institutions of higher education and some 11,000 campus enrollment services officials. The admissions professionals within our membership play a central role in recruitment and academic placement of veterans and active-duty Service members. In addition, the registration officials within our membership have historically served as institutional points of contact with veterans and Service members, and serve as school certifying officials on many campuses. I appreciate the opportunity to participate in today's hearing on Executive Order 13607 and its impact on veterans and institutions.

The April 27 Executive Order Provides Needed Protections

While concerned about its implementation challenges and compliance costs, we nevertheless strongly support Executive Order 13607 (“EO”) as an important first-step in improving educational opportunities for veterans and Service members and in protecting them from predatory providers. There is ample evidence that veterans and Service members are being specifically targeted by a subset of providers who mislead them into enrollment in expensive programs of highly questionable educational and employment value. The nearly $10 billion of combined federal educational benefits that the Departments of Defense (DoD) and Veterans Affairs (the VA) provide for veterans and Service members are, of course, sufficient incentives in themselves for unscrupulous providers seeking to maximize profits through high-pressure marketing, deceptive advertising, and misrepresentation of worthless or subpar programs that often cost vastly more than quality programs at legitimate institutions of higher education. But a gatekeeping provision of the Higher Education Act of 1965 (“HEA”), known as the “90-10 Rule,” which requires for-profit schools to derive at least 10 percent of their annual revenues from sources other than HEA Title IV (“federal student aid”) programs, provides an even more powerful economic incentive for the targeting of veterans and Service members.  This is because revenues derived from programs administered by the DoD and the VA, although funded entirely with federal dollars, count as part of the 10 percent non-Title IV cash flows of for-profit schools. Institutions that have difficulty selling their programs to anyone but individuals entirely financed with Title IV funds can thus leverage nine dollars of federal student aid funding for every dollar they obtain through the DoD or the VA. Enrolling veterans and Service members is now a matter of company survival for many for-profit corporations, because without DoD Tuition Assistance and GI Bill revenues, they would also lose eligibility for Title IV, which is their lifeblood and otherwise their sole paying customer.

It should therefore come as no surprise that for-profit providers are resorting to extreme measures in their attempts at recruiting veterans and Service members. The pattern of fraudulent and abusive marketing and recruitment practices targeting veterans and Service members that have come to light over the course of the past few years are disturbing and reprehensible. These include aggressive recruitment of veterans with traumatic brain injuries, misrepresentation of actual costs, and the bundling of “free” consumer electronic giveaways with expensive tuition charges as inducements for enrollment. In addition to the mounting evidence of corrupt and questionable recruitment practices, the program utilization data for both the DoD's Tuition Assistance Program and the Post-9/11 GI Bill clearly evince signs of systemic abuse, with a disproportionate share of program funds flowing to institutions with high costs and abysmal retention, graduation, and job placement outcomes. The EO represents a constructive attempt at providing greater transparency about costs and outcomes and, if properly implemented over the coming months, will certainly provide veterans and Service members with critical protections lacking today. Even the most robust implementation of the EO, however, would not be sufficient to root out waste, fraud and abuse altogether. As the Subcommittee deliberates about future legislative improvements to the Post-9/11 GI Bill, it may wish to consider more effective gate-keeping provisions. The single most effective legislative amendment to the Post-9/11 GI Bill would be the adoption of an “80/20” rule to require that participating institutions derive at least a modest 20 percent portion of their annual revenues from non-federal sources. The ability of companies to sell their services to buyers spending non-federal dollars would provide the best market-validation of their offerings and would certainly offer an assurance that taxpayers are not the only buyers of any provider's worthless services.

Compliance Issues

Assessing the likely processes through which the directives established in the EO would be implemented is extremely difficult at this early stage. There can be no doubt that even the most carefully crafted implementation of the EO will entail institutional costs, but such costs would, we hope, be justified by the added protections for Service members and veterans. There are significant administrative challenges in coordinating the efforts of the several federal agencies involved, and micromanagement and regulatory overreach are distinct possibilities. But in conversations with Administration officials, we have been assured that the agencies are sensitive to compliance issues and institutional burdens, and that every attempt will be made to reduce duplicative and unnecessary requirements. The higher education community, in turn, stands ready to work with the Administration and Congress in implementing the “Principles of Excellence” articulated in the EO.

Principles of Excellence

The EO lists eight specific consumer disclosure and protection provisions that institutions should comply with to the extent permitted by law. Participating institutions would be required (or encouraged) to:

            1-  provide prospective students who are eligible to receive military or veterans educational benefits with a “personalized and standardized” form that discloses certain cost, aid, and outcomes data. While appealing in concept, this requirement will prove exceedingly difficult to implement in practice, particularly given that institutions often do not know whether an applicant or even a student may be eligible for certain federal benefits. Clearly, the mandate should apply to all cases where institutions do know about a prospective student's likely eligibility, but unless a readily available method of verifying eligibility is provided for institutions, some interpretive flexibility will be essential. In addition, consensus on the specific data to be disclosed will prove quite challenging. On this latter issue, we strongly urge the designated agencies to engage representatives of higher education institutions in a collaborative effort to arrive at reasonable definitions. Understandably, our interactions with the Department of Education have been quite collegial over the years, and we have established better relations with the appropriate offices within the DoD in recent months. Despite its increasing prominence given the growing number of student veterans, the VA has been generally less accessible and less communicative, and we hope to be more engaged with its leadership and officials as well.

            2-  inform students who are eligible to receive military or veterans education benefits of the availability of federal student aid programs. This requirement can and should be carried out for all students. The challenge here is how the agencies of jurisdiction will attempt to carry out the mandate and how institutions would demonstrate compliance. Federal student aid programs are typically less expensive and offer greater protections to students than private financing arrangements, and all students should be properly counseled of their availability before they resort to private borrowing or payment with credit cards. Unfortunately, some ill-advised agency policies—the VA’s on-again, off-again policy of attempting to collect outstanding balances from previously certified veterans’ educational benefits due to institutions, for example—inadvertently promote last-minute private financing by cash-strapped veterans, a matter that we hope the Subcommittee takes up with the VA.

            3-  end fraudulent and aggressive recruiting techniques, misrepresentation, payment of incentive compensation, and failure to meet State authorization requirements. Institutions participating in Title IV are already subject to these strictures and compliance with this requirement will not be particularly difficult or costly for them. On the issue of fraudulent and aggressive marketing and recruitment, we are certainly aware of some the excessive and abusive practices documented by the media, veterans’ advocacy organizations, and public interest groups. As a voluntary association of colleges and universities we have no investigative or enforcement powers against entities that engage in such behaviors, and believe that the Department of Education has not done an adequate job of enforcing the applicable regulations. It is our hope that the EO will induce all agencies of jurisdiction, including the department of Justice, to step in and address the problem through robust enforcement of the law.

            4-  obtain the approval of the institution's accrediting agency for new academic offerings when appropriate under the substantive change requirements of the accrediting body. Again, institutions participating in Title IV are already subject to these strictures and compliance with this requirement will not be particularly difficult or costly for them. We believe that accreditation is increasingly vulnerable to gaming and manipulation by corporate entities with vastly greater resources than their accrediting bodies, but hope that this provision of the EO will serve notice to accrediting agencies that they need to do more when confronted with rampant waste, fraud, and abuse.

            5-  allow Service members and reservists to be readmitted in cases of absence or withdrawal due to Service requirements. This is current practice at most legitimate institutions, and compliance with this provision is not substantively problematic. We hope that the agencies will be minimalistic in interpreting this requirement, however, because heavy-handedness and micromanagement of policies at thousands of schools would be ill-advised, costly, and burdensome.

            6-  agree to an institutional refund policy that is aligned with return of Title IV rules. This provision can, in its most expansive reading, be interpreted to upend current refund policies and prove extremely expensive and unworkable for most institutions. It is our understanding, however, that the intent of this language is to apply the existing Title IV refund provision to institutions that do not participate in Federal Student Aid programs, in which case there would be no additional costs for the vast majority of institutions.

            7-  provide educational plans for Service members and veterans. After months of extensive conversations with DoD officials, we jointly agreed that a better label for what they hitherto referred to as “educational plans” would be “degree requirements.” So long as this provision is interpreted in conformity with that understanding, we do not believe that it would impose particularly difficult compliance challenges for institutions. We have been assured that this provision of the EO is intended to mandate the same general disclosures as those that the DoD and representatives of higher education institutions have discussed.

            8-  designate a point of contact for Service members and veterans. This is a provision that we support, and would require a practice that most institutions already have in place.

Implementation

The Departments of Defense, Education, and Veterans Affairs must take immediate action to implement the EO in consultation with the Department of Justice, and the Consumer Financial Protection Bureau; and are to provide the President with a progress report within 90 days. While some of the requirements articulated in the EO can be imposed through administrative, regulatory, or enforcement mechanisms; others may require legislative authorization. The DoD, for example, has significantly greater discretion in defining the programmatic requirements of the Tuition Assistance program than does the VA in its management of GI Bill benefits. Indeed, we were initially concerned that the EO may delay the release of the DoD's long anticipated revision of its Memorandum of Understanding (MOU). But we have been informed that the EO's requirements will be included in a future version of the MOU, and that the DoD will release the revised version sometime this summer as previously announced.

The choices and decisions that the agencies will make over the coming weeks and months will have significant consequences in terms of compliance costs and effectiveness of the EO's implementation. Such contested and controversial concepts as “student outcome measures” or “key measures of affordability and value” will have to be defined, and the data needed to generate them will have to be obtained. We urge the agencies to consult and regularly communicate with institutions of higher education as they proceed, and are ready to provide assistance as appropriate. The centralized complaint tracking system, procedures for referrals to the DOJ and the configuration of targeted risk-based program reviews and audits are, in themselves, quite reasonable requirements that we would support. As always, there are dangers associated with even seemingly innocuous requirements, and the as-yet-unknown manner in which these new policies will be implemented does lead to compliance and cost concerns. Other provisions of the EO, in contrast, are more readily understandable and more immediately acceptable to institutions. The EO’s requirement, for example, that the agencies initiate a process to protect the “GI Bill” from misleading commercial uses is one that we strongly endorse, as is its call to create uniform rules and procedure for access to military bases.

Mr. Chairman, I thank you for this opportunity to share some of our concerns with you and the members of the Subcommittee. AACRAO stands ready to assist the Subcommittee in its work on this important issue.