The Program Integrity Issues Negotiated Rulemaking (negreg) Committee discussed four of the 14 integrity issues it will cover over the next week. Tuesday's discussions focused on the definition of high school diploma, ability to benefit testing, misrepresentation of information, and incentive compensation. This is the first round of negreg meetings where panelists discuss possible issues and solutions. Negotiators will discuss draft regulatory language proposed by the Department during subsequent negreg meetings.
Negotiators focused on the definition of a high school diploma and the Ability to Benefit (ATB) test during the first half of the day. A recent Government Accountability Office (GAO) report identified weaknesses in the Department's oversight of these requirements that place students and federal funds at risk of potential fraud and abuse. The panel of negotiators discussed how to determine that a student has the skills to succeed at the post secondary level without creating additional barriers to higher education or additional administrative burden on institutions.
Definition of High School Diploma
The recent GAO report identified cases in which officials at two proprietary schools helped prospective students obtain invalid high school diplomas from diploma mills in order to gain access to federal loans. GAO's findings do not represent nor imply widespread problems at all proprietary schools, but it motivated the Department to investigate the issue.
The negreg panel's discussion on the possibility of the Department defining a "high school" diploma highlighted the complexity of the issues and the many consequences of federal intervention into this issue. Negotiators recognized the need to address high school diploma mills and protect students from using bogus diplomas to access post secondary education and financial aid even though they are not prepared for higher education.
One negotiator said her school maintains a list of more than 100 high schools that are not recognized by the institution and that some other schools maintain lists of high schools that are recognized. The negotiator suggested that the Department could help institutions identify fraudulent high schools.
The panel recognized that tracking these high schools is a challenge because they can change their name and reopen faster than they can be identified. One negotiator noted that tracking U.S. high schools would be a breeze compared to tracking foreign schools for students from abroad.
Some members of the panel expressed concern that if the Department began defining high school diploma it would set a precedent for the federal government to encroach on state rights. These panel members noted that fraudulent high school diplomas affected relatively few students and institutions and there was concern about unintended negative consequences of federal diploma regulation. These negotiators seemed more comfortable with the department helping institutions identify bogus high schools by providing information rather than the Department heavily regulating what constitutes a high school diploma and how institutions should verify this.
The diploma debate ran into the discussion about the Ability to Benefit (ATB) test. Some negotiators suggested that institutions should make students with suspect high school diplomas take the ATB test to ensure they have the skills to succeed in higher education. Others highlighted the weaknesses in the current ATB test system that need to be addressed before ATBs could be used to effectively determine if a student was able to succeed in higher education.
Ability to Benefit
When GAO analysts posing as prospective students took the basic skills test at a local proprietary school, the independent test administrator (ITA) gave out answers to some of the test questions. In addition, the analysts' test forms were tampered with-their actual answers were crossed out and changed-to ensure the individuals passed the test. Again, the GAO report notes that this does not imply that this is a widespread practice, but it motivated the Department to review its oversight of the ATB test.
The Department noted that there is not a large percentage of students benefiting from the ATB test -- it was less than 5 percent of students in 1996 and has been declining. Nevertheless, the tests do benefit some students who would otherwise be able to access and complete higher education. However, one negotiator said that her institution stopped admitting ATB students because their success rate was so low and default rate was so high.
Negotiators generally agreed that ATB test fraud and abuse was a problem, but addressing the issues is tricky. One negotiator noted that financial aid offices used ATB tests as a safety net and if fraud was wide spread the Department needed to address it. Some suggested requiring more frequent "core analysis" of the companies that administer the ATB tests. Currently the Department requires analyses of test scores for indications of irregularity once every three years. Others suggested that the Department needs additional tools to enforce current regulations.
Department officials said that more frequent reviews of testing could be tough because they sometimes need three years of data to effectively identify data abnormalities that suggest fraud or abuse. The Department also noted that identifying fraud and abuse can be tough because it can happen on so many levels, from the test administrator to the owner of the institution.
Negotiators also discussed the implementation challenges of allowing students without a high school diploma to become eligible for federal student aid by successfully completing six credit hours. Negotiators felt that this was another good opportunity for students to demonstrate they are able to benefit from higher education. However, negotiators also want to ensure that there would be no way for unscrupulous institutions to game the system to get more federal student aid funds from students who are unprepared for postsecondary education. Negotiators also raised some concerns about when a student would be able to start receiving aid under this scenario.
Misrepresentation of Information
Most negotiators on the panel seemed to agree that further regulations would not effectively prevent institutions from misrepresenting information and the Department should focus its efforts on enforcing current regulations rather than creating new ones. Negotiators also expressed concern about trying to adopt FTC regulations to the higher education arena because these regulations were too specific and not applicable to higher education outside of the for-profit sector.
Some negotiators suggested the Department should set universal standards and metrics for institutions to use so they would not promise students more than the institution delivers. However, other negotiators said that these universal metrics and standards could be difficult because the diversity of institutions and their missions are unlikely to be captured by federal standards. These metrics would likely fail to assess many of the intangible benefits that many unique institutions provide, one negotiator argued. He also noted that outcomes and metrics are different for different institutions and for different programs within an institution. All of this makes it likely that universal metrics could provide meaningless information.
Additionally, one negotiator maintained that existing regulations are clear and it doesn't stop some institutions from providing misrepresentative information to students. He maintained that new regulations would not stop these unscrupulous practices. However, he said that swift enforcement of current regulations would likely cut down on these practices.
Incentive Compensation
The Department has received complaints from students and enrollment advisors about the high-pressure sales tactics of some postsecondary institutions. Some argue that tying staff compensation to the number of students enrolled is an inherent conflict of interest and that the safe harbors undermine the statutory ban on incentive compensation. The Department has also heard from a number of educational institutions that the lack of clear guidance prior to establishment of the safe harbors made it very difficult for institutions to be confident of their compliance with the rule.
Negotiators noted that the statute is very clear, but safe harbors have unnecessarily hampered enforcement and promoted fairly widespread abuse in this area -- not just in the for-profit sector. The panel began reviewing the 12 safe harbors and noted that some of them were unclear and created opportunities for conflicts of interest that are contrary to the statute.
One negotiator noted that it is impossible to legislate ethical issues, but if the Department can solve the misrepresentation of information issues then it will likely cut down on the conflict of interests in incentive compensation. Discussion of the existing safe harbors will continue on Wednesday.
Over the next week, Department officials will continue to meet with representatives from the higher education community to negotiate possible regulations on the remaining eight issues identified by the Department and the higher education community.
Negotiators include a NASFAA staff member and three aid administrators nominated by NASFAA. Today's News will carry daily updates of the Program Integrity Issues Negotiated Rulemaking meetings. Please submit any comments you have about the issues to be negotiated to policy@nasfaa.org
Posted 11/04/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.
