Transcript: Martha Kanter’s Testimony on “Drowning in Debt: Financial Outcomes of Students at For-Profit Colleges”
Senate Committee on Health, Education, Labor & Pensions
Hearing on “Drowning in Debt: Financial Outcomes of Students at For-Profit Colleges”(June 7, 2011)
Transcript of Testimony by Martha Kanter, Undersecretary of Education
“I’m here on behalf of Education Secretary Arne Duncan, who’s unable to come this morning because he’s recuperating from a back injury. We’re here to talk about student loans – loans that enable access to higher education. Without them, as we heard this morning, millions of Americans would not be able to afford a college education.
“College is an investment that yields significant returns over a lifetime for individuals, for the tax base of our nation, and most importantly for our nation’s social and economic vitality and security.
“Census data shows workers with bachelor’s degrees earn 70% more than a person with only a high school diploma. College graduates are half as likely to be unemployed than those with only a high school diploma. More than two-thirds of our nation’s jobs are going to require a post-secondary education.
“Education is at the heart of the American promise for a nation built by immigrants and sustained by the energy and ideas of people from all over the world. Education remains the gateway to citizenship, civic engagement and prosperity.
“Our goal in the administration, as you’ve said, is to have the highest percentage of college-educated workers in the world by the end of the decade. A generation ago we were first in the world; today we’re ninth. To achieve the 2020 goal thereby increasing our global competitiveness, we need every segment of the educational sector to boost productivity and achievement, from early learning through higher education.
“Today, one in four young people don’t graduate from high school. Of those that do, about two-thirds enroll in college, and large numbers – as we’ve heard – never finish, depending on whether you’re looking at private, public, non-profit or for-profit, four-year or two-year institutions. We believe it’s a national crisis that on average half of America’s undergraduates fail to graduate in six years. This is why our college access, quality and completion agenda is such a high priority for the department.
“Meanwhile, tuitions keep rising as fiscally-challenged states cut back on education spending, as institutions struggle to cover the costs of a quality education. Two-thirds of American college students today graduate with student loan debt averaging about $23,000 more than a 25% increase since 2004.
“Simply stated, too many students and their families are challenged to repay their loans. Default rates are climbing and are now in the range of 15% for all schools and 45% for for-profit schools.
“As a former community college instructor, dean, and president, I did everything over the years to help students land part-time jobs, get Pell grants, scholarships, and work-study to minimize the impact of the loans that they would have to take. I didn’t want to see as many as we could get that loan indebtedness that you heard about this morning. But I knew eventually many of them would have to take out loans as they continue their education and training throughout their lives.
“Student loans are a powerful tool for bringing higher education within reach. But like any tool, they can be misused leaving students and taxpayers with few options.
“To address these challenges, our department published the Gainful Employment and 13 other programs integrity rules this year, challenging career colleges programs both for-profit and non-profit to meet new standards over the next four years to lower default rates and to ensure that the education that they’re providing leads to real jobs. The rules were enacted to respond to the escalating default rates and poor graduation rates of too many Americans and the marketing, lending, and compensation practices that became increasingly prevalent in career college programs, especially in the for-profit sector. Our research shows that 92% of students at for-profit institutions borrow to finance their education in 2007 and 2008. By contrast, the sector with the next highest borrowing rate was at four-year private non-profit institutions where 59% of students borrow. At public two and four-year institutions just 13% and 46% respectively of students borrow.
“On balance, the Gainful Employment Regulations require each program to demonstrate that at least 35% of their students pay their loans and the debt burden for typical students don’t far exceed the recommendations we receive from experts. Members of the for-profit colleges have already accepted the challenge and have begun to taking steps to improve their programs. Some are offering – as we’ve heard – tuition free trial periods to give students the opportunity to decide if they really want to enroll before taking on the debt. And toward this end, today we are releasing a guidance letter to encourage these trial periods in more institutions and announcing a pilot program applications that will give institutions new tools to reduce student debt.
“The Department is committed to striking a balance that is going to draw upon strength of the for-profit sector while avoiding its pitfalls, protecting student and ensuring that federal dollars are well-spent.
“But let me be perfectly clear about one thing: Our Gainful Employment Rule will do nothing to hurt the educational opportunities for low-income students and students of color; just the opposite is true. In the years ahead, the disadvantaged students that are disproportionately likely to enroll in these programs are going to see higher graduation rates, lower default rates, and programs that provide better value in the labor market. We shouldn’t be saddling students with debts they won’t be able to repay, and that’s no less true when it comes to students from disadvantaged backgrounds. Only 1% of the variation and repayment rates is explained by the percent of the student body who are of racial or ethnic minorities.
“Our written testimony reviews all of our efforts to keep college cost affordable for young people, for working Americans, for displaced workers, and for adults who’ve never had the chance so I won’t go through them in detail right now but I’ll be able to answer your questions.
“Let me close by saying that America faces a stark choice in this era of growing federal deficit and shrinking state and local revenues. Either we come together as a nation and meet this challenge collectively to educate our way to a better, stronger, and more productive economy or we watch our competitive advantage in the global economy slowly erode.”
- Senate Committee on Health, Education, Labor and Pensions
- Transcript of Sen. Tom Harkin’s opening statement on “Drowning in Debt: Financial Outcomes of Students at For-Profit Colleges”
- Transcript: Sen. Barbara Mikulski’s Opening Statement on “Drowning in Debt: Financial Outcomes of Students at For-Profit Colleges”
- Education Undersecretary Martha Kanter’s written testimony submitted on June 7, 2011 (PDF)
- U.S. Department of Education: Obama administration announces new steps to protect students from ineffective career college programs
- U.S. Department of Education: Gainful Employment Rules draft released on June 3, 2011 (PDF)