A r c h i v e d  I n f o r m a t i o n

This Overview section provides general information on how successful the Department has been to date in achieving this priority. This information will also be useful in establishing a baseline against which future progress can be measured and in identifying information gaps that need to be filled. The Overview consists of two parts: the one concerned with ensuring access, the other with ensuring quality.

Ensuring Access

Of course, many other factors besides student aid will influence the equalization of college participation rates across income groups. Students form lower-income families are less well-prepared academically. Consequently, they would be less likely to attend college. If student aid were totally successful at removing financial barriers to participation, then one would expect that among similarly well-prepared high school students the percentage attending college would not vary across income groups.

Figure 2, "Percent of High School Sophomores Enrolling in Fall of 1982, "tests this proposition. It looks at college attendance in the fall of 1982 among 1980 sophomores by socioeconomic status (SES) and test scores. Looking at the "All" Column, one can see the relationship between SES and college attendance without consideration of test scores. Students form the highest SES quartile are three times as likely to attend college as those form the lowest SES quartile (76 percent versus 23 percent). Even within test score quartiles, however there remains a strong relationship between SES and college attendance. Among students with the highest test scores, 56 percent of students in the lowest SES quartile attend college compared to 90 percent of students in the highest SES quartile. Similar differences are found for each test score quartile. These findings suggest that significant financial barriers to college participation remain in the educational system, particularly for lower-income students.

Participation rates alone do not provide data on how the Federal postsecondary education programs are contributing to ensuring access. The Pell Grant program is the primary Federal vehicle for providing access to postsecondary education for low-income students. One would anticipate, therefore, that the higher the portion of education costs met by the maximum Pell Grant award², the higher the percentage of low-income students enrolling in college.

Figure 3 is a straightforward representation and does not take into account other factors--such as economic conditions, academic preparation, and the availability of other aid--that also influence college participation rates. The rapid increase in recent years in the relative earnings between college and high school graduates, for example, should have increased the demand for a college education. More sophisticated analyses (McPherson dn Schapiro, Leslie and Brinkman) that control for the effect for other factors found that Pell Grants do have a significant impact on the participation rate of low-income enrollment rates would have increased more quickly than they actually did.

Another factor that will affect the performance of Federal programs is how they are targeted. Figure 4, "Percent of Postsecondary Students Receiving Any Federal Grants, by Dependency Status and Income: 1987 and 190," presents data on students receiving Federal grants by income and dependency status in 9187 and 1990. The figure indicates that low-income students (defined for Figure 4 as students in the bottom 25 percent of the income distribution) are much more likely to receive Federal grants. For dependent students, the likelihood of a student form a low-income family receiving a Federal grant increased form 56 percent in 1987 to 66 percent in 1990. However, for independent students, there was a decline in the percentage of low-income students receiving a Federal grant (form 72 percent in 1987 to 63 percent in 1990) while the likelihood of receiving a Federal grant increased for middle-and higher-income students.

The above discussion has focused on the effects of Federal grants. However, in 1992-93, the Federal Family Education Loan Program was the largest single source of aid to postsecondary students, providing $15 billion worth of aid, 43 percent of all available aid (College Board). Unfortunately, less work has been done on the effects of loans on postsecondary access, choice, and persistence. Several studies that have been done (St. John, Masten, Carroll) using the High School and Beyond data base have yielded contradictory results. The Department has recently commissioned a study analyzing how changes in GSL eligibility over time have affected students' decisions about whether and where to enroll in postsecondary education.

Program Integrity: Ensuring Quality at Postsecondary Institutions

The department's mission of ensuring quality in Title IV programs now emphasizes prevention in addition to inspection. This proactive approach is an outgrowth of the new legislative authority mandated by the Institutional Quality Assurance Program (IQA). The Department's commitment to ensuring quality at postsecondary institutions is supported by the fact that approximately 100 institutions now participate in the IQA Program. Accordingly, correction and prevention represent important aspects of the Department's pledge to work towards ensuring quality at postsecondary institutions. Rigorous accountability for Title IV dollars, school evaluations, and student satisfaction with programs attest to ED's concern for ensuring quality at postsecondary institutions.

The emphasis upon ensuring quality is intended to complement the importance that attached to ensuring access in ED's plan for postsecondary institutions participating in Title IV programs. Moreover, for FYs 1995 and 1996, the Department will continuously monitor and evaluate the functioning of all aspects of program integrity as part of its oversight responsibilities for ensuring the quality of postsecondary institutions.

The following section focuses on the issues of ensuring quality and access in its discussion of ED's program integrity activities. It further describes the responsibilities of States and accrediting agencies, in addition to the Federal Government, in the program integrity process and offers some baseline measures of how the current system is operating at the Federal level.

State Responsibilities

State Licensing: The key function of State licensing is to determine the viability of an educational institution as a business. Thus, State licensing agencies assess such characteristics as the adequacy of an institution's resources, the criminal records of institution owners, and compliance with health and fire codes. According to a recent study, the licensing of postsecondary institutions in many States also attempts to judge minimal educational standards by establishing guidelines for curriculum, equipment, teaching materials, and advertising.³

State Postsecondary Review Program: The State Postsecondary Review Program (SPRP) was introduced by the Higher Education Amendments of 1992 that created State Postsecondary Review Entitles (SPRE). Under this program, the State's function is to conduct or coordinate reviews of institutions referred to the State by the Secretary of Education under specific statutory provisions. The purpose of the SPRE reviews is to determine whether those institutions should continue to participate in student assistance programs authorized under Title IV of the Higher Education Act of 1965, as amended. The SPRE review institutions on the basis of State review standards developed in consultation with institutions located in the State and approved by the Secretary.

In FY 1993, $5.3 million was made available to States to allow them to begin to develop planning activities under the SPRP. All States have now entered into agreements with the Secretary to participate in the SPRP and submitted applications which were approved for funding to carry out planning activities. The allowable planning activities included developing State review standards, in consultation with institutions located in the State; developing procedures for receiving and responding to complaints, also in consultation with the institutions located in the State; and developing a cost estimate for an information system for the SPRE. For FY 1994, $21.25 million is available (through an award, year ending June 30, 1995) for States to complete the development of their standards and to begin review once those standards have been approved by the Secretary.

While the individual State timetables for developing State review standards vary, a number of States have concluded their consultation with institutions and have submitted standards for the Secretary's formal review. In the summer of 1994, the Department notified institutions of their possible referral to SPREs and allowed them an opportunity to challenge the accuracy of the data that would be used to refer them. The first reviews under the State Postsecondary Review Program are expected to occur in early 1995.

Accreditation

Accreditation serves as one of the key elements used by the Department to determine whether or not institutions of higher education are eligible to participate in programs administered by the Department and other Federal agencies. In addition, accreditation serves other functions such as certifying that an institution has met established standards; assisting prospective students in identifying acceptable institutions; assisting institutions in determining the acceptability of transfer credits; stimulating the self-improvement of educational institutions and programs; and establishing criteria for professional certification and licensure.

The Secretary of Education is required by statute to publish a list of nationally recognized accrediting agencies which the Secretary determines to be reliable authorities as to the quality of training offered by the educational institutions and programs they accredit. Currently, the Secretary recognizes 88 accrediting agencies. These agencies are required by statute to be evaluated by the Secretary at least once every five years, or sooner for cause.

The Higher Education Act (HEA) Amendments of 1992 required that new regulations be developed to govern the recognition of according of accrediting agencies. These new regulations were published on April 29, 1994 and became effective on July 1, 1994. The new regulations require accrediting agencies to revise and /or develop new, procedures, bylaws, and standards to comply with the law.

The following are some of the major new requirements that agencies must meet:

1. Agencies' accreditation must serve some Federal purpose: their accreditation must be a required element in enabling the institutions and programs they accredit to establish eligibility to participate in programs administered by the Department or by other Federal agencies.

2. Agencies whose accreditation enables the institutions they accredit to participate in programs authorized under the HEA must be administratively and financially separate form and independent of any related, associated, or affiliated trade association or membership organization.

3. Agencies whose accreditation enables the institutions they accredit to participate in programs authorized under the HEA must conducted, in addition to regular announced on-site review of an institution, at least one unannounced inspection of each institution that provides vocational education or training.

4. Agencies must assess any new or substantively changed program before including it in the agency's previous grant of accreditation.

5. Agencies must have standards that assess items such as faculty; curriculum; fiscal and administrative capacity; recruiting and admissions practices; program length and tuition and fees in relation to the subject matters taught and the objectives of the degrees or credentials offered; measures of program length in clock hours or credit hours; success with respect to student achievement in relation to the institution's mission; and the institution's compliance with its program responsibilities under Title IV of the HEA.

6. Agencies are required to take adverse action against an institution or program that fails to bring itself into compliance with agency standards within a specified time frame.

7. Agencies whose accreditation enables institutions to participate in Title IV of the HEA must take special action whenever institutions establish new branch campuses. Specifically, agencies must approve a business plan for the branch before its opening and conduct an on-site review within six months.

In September 1994, the Secretary withdrew the recognition of 8 accrediting agencies whose accreditation served no Federal purpose. The Department had begun to implement the new regulations by improving and expanding its ongoing system of monitoring accrediting agencies and the institutions they accredit. Other initiatives to increase the effectiveness of the Secretary's review process include increased communication with the States, institutions, and accrediting agencies.

Federal Responsibilities

Approval to Participate (Eligibility and Certification)

Before seeking certification, institutions must first satisfy statutory and regulatory eligibility requirements for the educational programs they offer. Eligible programs are those that are accredited, licensed, and have met other legal requirements for participating in the Title IV aid programs, such as admissions practices, minimum program length, and type of credential offered. Not all programs offered by a licensed and accredited institution are necessarily eligible to participate in ED student aid programs.

Through the certification process, institutions offering eligible programs are judged according to their administrative capability. Institutions that meet all certification requirements of the statute and regulations enter into a Program Participation Agreement with the Department.

Institutions that have not previously participated in the student aid programs are required to send representatives to Ed-sponsored pre-certification training sessions.

Figure 5, "Institutional Applications for Participation," and Figure 6, "Institutional Applications for Participation: Percentage Denied by ED," describe the results of ED's review of institutional applications for participation in the Title IV programs in recent years.

Pursuant to the authority granted by the Higher Education Amendments of 1992, ED is now requiring that all institutions submit audited financial statements annually and undergo recertification at least once every provisionally approved, for periods up to three years, to give ED the opportunity to monitor their financial responsibility and their compliance with applicable financial responsibility and administrative capability standards during the recertification process will be either denied reapproval or approved provisionally.

Program Reviews

Schools have been selected for review on the basis of a list of criteria indicating potential lack of proper program administration. Regional office input also has been a factor in review selection. In recent years, reviews have focused heavily on funding and documenting serious problems and determining the financial liabilities of the schools to the Department and other entities. Between 700 and 1000 reviews were conducted annually in FYs 1990 to 1992. Liabilities assessed ranged form $72 million to $226 million per year. The average liability assessed during this period ranged form $87,000 to $248,000 per institution.

Areas of deficiency most often cited in the program review reports include the following:

1. fiscal records or audit trail inadequate

2. excess cash maintained;

3. expenditures report inaccurate;

4. late or unpaid refunds;

5. refund calculation incorrect;

6. administration of ability-to-benefit requirements improper;

7. satisfactory progress standards not monitored or developed;

8. financial aid transcripts missing or incomplete;

9. verification incomplete or unresolved due to faulty documentation;

10. Perkins Loan due diligence deficient;

11. high default rate and associated issues; and

12. records not accessible or not maintained for five years.

In FY 1991, the Department elected to emphasize more intensive quality reviews. Some of the features of the quality intensive reviews are that they were longer in duration and frequently had more than one person performing the review. This strategy proved to be successful as assessed liabilities showed marked increases. In FY 1992. Furthermore, $311 million in liabilities have been assessed in FY 1994 as of June 1994.

In FY 1994, new program review initiatives include the use of review selection criteria targeting high-risk schools; institutional profiles of schools created prior to reviews; survey reviews to quickly assess the extent of administrative difficulties at an institution; a concentrated team approach to handle reviews of the highest-risk institutions (including representatives of the Office of Inspector General, accrediting agencies, State Postsecondary Review Entities, and the Office of the General Counsel, as appropriate); training in statistical sampling techniques; expanded use of and coordination between available computer systems; and new software and computer systems to support program reviewers' work.

Audit Resolution

Schools have been required to submit compliance audit every two years supporting all activities for their Title IV participation. Under the Amendments to the Higher Education Act, schools will now be required to submit annual audits demonstrating their compliance with SFA programs. As a direct result, the number of audits to be reviewed will increases form 3,200 audits a year to over 8,000. Of these, approximately one-third require intensive research, discussion, and resolution. This increased audit frequency will provide the SFAP with the ability to diligently pursue violations and immediate corrective action to prevent continued abuse of funds.

Closed schools and those that have lost their eligibility to participate in Title IV programs are still required to submit audits in support of their administration of funds. Through this mechanism, the SFAP can verify that funds have been correctly spent up to the point of closure or the point where a school may cease to continue in Title IV programs.

The result of determination made may include liabilities for funds improperly spent, fines, or demand for total return of all funds for a specific year in the most severe actions. Other measures may taken such as adjustments to Pell Grants authorizations, and actions to place schools on a reimbursement system of funding.

As a part of the concentrated oversight process, risk-assessment criteria and management methods are being developed to prevent program violations before the submission and conclusion of the audit process. Through data gathered form prior audits and cooperative efforts with program reviews, the focus will be on high-risk institutions nationwide. Over the past 10 years, conscientious attention to the auditing process has resulted in a dramatic increases in the total return of funds as demonstrated by Table 1, "Audits Closed."

Institutional Quality Assurance Program

Approximately 100 institutions currently participate in the IQA Program which encourages innovative and flexible management approaches to increase award accuracy and enhance service to students. After assessing their policies and procedures, institutions measure variances and analyze probable causes and develop potential solutions. The participants also commit to implement corrective actions and management enhancements and report to ED the results of their preventive actions.

Since 1985, both ED and the institutions have noted a variety of benefits form the emphasis on up-fornt correction, prevention and continuous improvement:

• realization of the benefits of an ED/institutional partnership to promote the effective delivery of student aid at the campus level, in contrast to the regulated compliance approach which, by its intent, detects problems after the fact;

• enhanced awareness by other components of the institution--such as registrars or business officers--that the financial aid office is committed to improved quality of service to students and their willingness to assist with the process;

• greater confidence that limited Title IV dollars are properly awarded to needy students;

• greater institutional control over their methods of validating the data relied upon to determine awards, plus the ability to focus limited staff and dollar resources on the things that make a difference when serving students;

• reduced ED on-sited review activity at such institutions, based upon the feedback provided annually detailing continuous improvement actions and positive trends in targeting aid to appropriate students, allowing ED to focus its limited on-site review capability on more compelling situations, and saving the institutional participants form unnecessary distraction;

• Better school evaluations in Title IV audits, resulting in fewer payback situations and less time spent in undertaking to reconstruct or correct past mistakes, and less ED effort needed to resolve such audits; and

• greater student satisfaction with services provided, as schools made more effective use of staff to meet genuine needs and address past weakness that slowed or flawed the awarding process and, in short, found it possible, once again, to be student-centered.

The four-year trend shows reduction of variances for the analysis group. All over- and underpayment, and over- and undercertification variances, have decreases form award year 1988-89 to 1991-92. This is true for the Pell, Campus-Based, and Stafford Loan Programs. In fact, the analysis group has attained an overpayment variance rate of under five percent for each program. For the Pell program, the analysis group had reduced overpayment variance form 7.79 percent in 1988-89 to 4.91 percent in 1991-92. Pell underpayment variance has decreased over the same period even though it was less that 2 percent in 1988-889. The most dramatic drop in variance rates can be seen in the Stafford overcertification item -- decreasing 7.19 percentage points in 1988-89 to 5.74 percent in 1991-92.

Acting on the positive results and the legislative authority, the Department had identified additional areas of institutional responsibility in which a commitment to quality assurance is vitally important. Among these areas are: 1) institutional and program eligibility; 2) selected general administrative and fiscal standards; 3) refund and repayment policies and procedures; and 4) management of Federal cash. The IQA Program Team in SFAP, aided by participating IQA Program institutions, is formulating the expansion into these areas. The IQA Program has served as the model for the Quality Assurance component that is part of the Federal Direct Student Loan Program.

Default Reduction Initiative

As required by the Higher Education Act of 1965, as amended, the Department can impose a restriction on a school's ability to certify Federal Supplemental Loans for Students (Federal SLS) loan applications if the school has a cohort default rate of 30.0 percent or greater. As a result of a court decision in December 1992, a school with a cohort default rate of 30.0 percent or greater can challenge its cohort default rate before the restriction on its participation in the Federal SLS program is fully implemented, if certain deadlines are met. Although the Omnibus Reconciliation Act 1993 eliminated the Federal SLS program effective July 1, 1994, the Department still had appeals to resolve for possible liability determinations.

Schools lose their eligibility to participate in the Federal Family Education Loan (FFEL) Program if they have cohort default rates of 30.0 percent or greater for fiscal years 1989, 1990, and 1991. With the releases of the fiscal year 1992 cohort defaults rates are 25.0 percent or greater for fiscal years 1990, 1991, and 1992. Historically Black Colleges and Universities, tribally controlled community colleges, and Navajo community colleges are statutorily exempt form this restriction of loss of FFEL Program eligibility. Schools that have previously lost their FFEL Program eligibility may have their ineligibility extended of their cohort default rates continue to exceed the threshold for FFEL Program eligibility. All schools may appeal the action on the ground of exceptional mitigating circumstances, erroneous data, or that the defaults were due to improper loan servicing.

A school with an FY 1992 cohort default rate that exceeds 45.0 percent, or exceeds 40.0 percent and is not five percentage points less than its fiscal year 1991 cohort default rate, is subject to an administrative action to limit, suspend, or terminate its participation in all Title IV student assistance programs. When the Department initiates a limitation, suspension, or opportunity to appeal the intended action before a hearing official. The school's only defense in such an action is that it acted diligently to implement all of the default reduction measures described in 34 CFR 668, Appendix D.

Five hundred ninety-seven schools have been subject to loss of FFEL Program eligibility over the past three years. Of these 597 schools, 398 have lost their eligibility or have closed. For FY 1991, 598 schools were subject to restrictions on their eligibility to participate in the Federal SLS program, and 455 schools were subject to limitation, suspension, or termination actions affecting their participation in all Title IV programs.

In the past year, the Department and other agencies (e.g., leaders) have increasingly used school default rates as an indicator of administrative capability. For example, school cohort default rates are used to determine schools' eligibility for the Federal Direct Student Loan Program. In addition, with the releases of the FY 1992 default rates, the Department and the States will begin to implement the State Postsecondary Review Entity (SPRE) Reviews mandated by Congress. Schools with cohort default rates of 25.0 percent or greater will be selected for review unless they can successfully challenge the accuracy of their cohort default rates.

Adverse Administrative Actions

Figure 7, "Adverse Administrative Actions taken by ED," reelects the increases in the number of adverse administrative actions taken by the Department's Compliance and Enforcement Division during the past four fiscal years.

Closed Schools

Closed schools nationwide are monitored by SFAP. This aspect of SFAP activity includes determining closure dates for such institutions, assisting in teachout arrangements for students, retrieving Perkins Loan notes, and coordinating the many issues that pertain to closed schools. Figure 8, "Formerly Participating Institutions That Have Closed," summarizes the trend for FYs 1986-1994 (to date) concerning schools that have closed.

[Adult Education - Functional Literacy and Life Skills Program for State and Local Prisoners]

[Federal Pell Grant Program]