UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
In the Matter of Docket No. 94-189-SA
MODERN HAIRSTYLING INSTITUTE,
Appearances: Arturo Diaz-Angueira, Esq., and Roberto Feliberti,
Esq., Cancio, Nadal, Rivera & Diaz, San Juan, Puerto Rico, for Respondent.
Stephen M. Kraut, Esq., Office of the
General Counsel, United States Department
of Education, Washington, D.C., for Student Financial Assistance Programs.
Before: Frank K. Krueger, Jr.
In 1990 the Office of the Inspector General (OIG), U.S.
Department of Education (ED),
conducted an audit of MHI, and determined that MHI was ineligible to participate in the Federal
student aid programs because it admitted as regular students persons without high school
diplomas or the equivalent without determining that those persons had the ability to benefit from
the training offered. The OIG determination was incorporated into a final audit determination
issued by the Student Financial Assistance Programs (SFAP) on August 23, 1994, in which
seeks a reimbursement of approximately $3 million. It is the OIG determination concerning
MHI's alleged failure to determine whether its students have the ability to benefit from its
program that is the subject of this decision.See footnote
For the reasons provided below, I conclude that MHI has met its
burden of persuasion
that the expenditures questioned by SFAP were allowable and in compliance with all program
requirements. See 34 C.F.R. § 668.116 (d ).
A student who is admitted on the basis of the ability to benefit from
the education or training in order to remain eligible for any grant,
loan, or work assistance under this title shall --
* * *
(3)(A) be administered a nationally recognized, standardized or industry developed test, subject to criteria developed by the appropriate accrediting association, measuring the applicant's aptitude to complete successfully the program to which the applicant has applied; . . . .
See also 34 C.F.R. §§ 600.11 and 668.7(b) (1989). As of 1991, this section
was modified, as part of the Omnibus Budget Reconciliation Act of 1990, to provide that the
Secretary of Education
shall decide which tests are to be used in determining a student's ability to benefit from programs
enrolling students receiving Federal aid, and to determine the appropriate passing score for those
The Department of Education Organization Act, 20 U.S.C. § 3403(b), effective from May
1980 to the present, provides as follows:
No provision of a program administered by the Secretary
[of Education] or by any other officer of the Department shall be
construed to authorize the Secretary or any other officer to exercise
any direction, supervision, or control over the curriculum, program
of instruction, administration, or personnel of any educational
institution, school, or school system, over any accrediting agency or
association, . . . except to the extent authorized by law.
See also 20 U.S.C. § 1232a (almost identical language in Higher Education Act of
1965, as amended, except reference to accrediting agency or association is absent).
Since the CTBS test was one of the few translated into Spanish, and since it was on the NACCAS list of approved tests, MHI gave this test serious consideration. However, there are many CTBS tests. MHI became aware of this fact when, in response to its inquiries, CTB/McGraw-Hill sent it three versions of the CTBS test which were translated into Spanish -- CTBS Level B, CTBS Level C, and CTBS Level 1. After examining the three tests, Dr. Berrios decided to use CTBS Level 1 as the most appropriate for MHI's purposes since he considered it the most difficult of the three tests sent by CTB/McGraw-Hill. Dr. Berrios subsequently consulted with a member of the staff of NACCAS, who confirmed that the test was in fact
approved by NACCAS. MHI began using the CTBS Level 1 test in March of 1988.See footnote 2
(Id.) MHI established 70% as the passing score.
In early 1990, SFAP conducted program reviews at three of MHI's
locations. In its
program review reports issued on August 17, 1990, SFAP questioned MHI's use of the CTBS
Level 1 test as it is designed to measure the aptitude of third and fourth grade students, although,
as stated in the final audit review determination, it could be used to establish that the test taker
had a comprehension level at a higher grade. MHI took the position that the CTBS Level 1 test
was the best available test for its students, as it was one of the few translated adequately into
Spanish, and was approved by NACCAS as meeting its ability-to-benefit policy. Although the
Level 1 test was designed for third and fourth grade students, Levels B and C, the other two
CTB/McGraw-Hill tests available in Spanish, were not as advanced as the Level 1 test. This
explanation seemed to satisfy SFAP as, by letters of March 12, 1991, SFAP's Program Review
Specialist closed out this issue. However, when the final program review reports were issued in
the late summer and fall of 1991, this issue reappeared.
Almost simultaneously with the program review, MHI was subjected to an OIG audit covering the same period as was covered by the program review. By letter to NACCAS, dated March 24, 1990, OIG questioned MHI's use of the CTBS Level 1 test. By letter dated June 7, 1990, Carol Cataldo, Executive Director, NACCAS, in response to the OIG inquiry, took the position that MHI's use if the CTBS Level 1 rest was inappropriate. However, MHI appealed that opinion to the full NACCAS Commission, which held a hearing in this matter on January 11, 1991.See footnote 3 3 By letter of January 16, 1991, the full Commission found MHI in full compliance with the NACCAS ability-to-benefit policy. By letter of February 2, 1991, NACCAS informed OIG of its
determination. Remaining unconvinced, on September 13, 1991, OIG issued its audit report
finding that MHI's use of the CTBS Level 1 test was a violation of ED's regulations. Almost
two years after the OIG report was issued, on August 2, 1994, SFAP issued its final audit
determination adopting the OIG conclusion that MHI was in violation of ED's ability-to-benefit
regulations. During the course of its discussions with MHI to resolve the OIG finding, SFAP
became aware of MHI's use of a passing score of 70% for the CTBS Level 1 test. In its final
audit determination, SFAP also questioned the use of this passing score, as it determined that
a score measured the reading level of a fifth grade student and the math level of a sixth grade
SFAP's reliance on "common sense" reminds me of the free advice
often circulated among
trial attorneys -- If your case is strong, argue the facts and the law; if your case is weak, argue the
law; if you don't have a case, pound the table. Citing "common sense" in support of your case is
like pounding the table -- it makes a lot of noise, and gets attention, but there's no substance.
Under the plain meaning of 20 U.S.C. § 1091(d) in effect during the period covered by the
review, it was the clear responsibility of the accrediting agency, NACCAS, to establish the
and standards to be used in determining what ability-to-benefit test was appropriate. And, to
substitute the SFAP and OIG opinion for that of NACCAS and MHI would be the exercise of
direction and control over NACCAS and MHI in clear violation of 20 U.S.C. §§
3403(b).See footnote 4
In its January 16, 1991, letter to MHI, the Chief Executive Officer
of NACCAS stated as
[T]he Commission has reached the conclusion that MHI had not violated NACCAS's ability
to benefit policy when it used the CTBS, Level 1 test during the stated [February 1988
1990] period. The evidence proffered by MHI in its pleadings and
oral testimony persuaded the Commission that the school had acted responsibly and in good faith
in attempting to comply with the NACCAS ability to benefit policy. Furthermore, the
found that MHI's decision to use the CTBS, Level 1 test was
predicated on a good faith reading of the documents articulating the
Commission's ability to benefit policy.
* * *
For the reasons set out above, NACCAS will forthwith advise the Inspector General of the United States Department of Education that NACCAS has made a final determination that MHI did not act in contravention of the Commission's ability to benefit policy by using the CTBS, Level 1 test during the stated period. [Italics and underlining added.]
By focusing on the "good faith in attempting" language underlined
in the quotation above,
SFAP contends that the letter did not actually approve MHI's use of the CTBS Level 1 test.
Such arguments give lawyers a bad name. The clear meaning of the entire letter, read in total
context, is that MHI acted in good faith and followed a reasonable course of action in using the
CTBS Level 1 test. SFAP's focus on the "good faith attempt" language ignores the other two
sentences in the letter where NACCAS specifically states that MHI was not in violation of the
NACCAS ability-to-benefit policy. (See also Respondent's Exhibit 40, letter dated
February 5, 1991, from Mark Gross, Chief Executive Officer, NACCAS, to John D'Angelo,
Regional Inspector General, Region II, N.Y.) See
SFAP further argues that, even if NACCAS approved MHI's use of
the CTBS Level 1
test, it never approved of its choice of passing score. Neither CTB/McGraw-Hill nor NACCAS
adopted or recommended a passing score. By default, that decision was left to MHI. Once
20 U.S.C. §§ 1232a and 3403(b) would prevent SFAP or OIG from substituting
for an appropriate passing score for that of MHI. In In Re Health Care Training Institute,
Docket No. 92-124-SP, U.S. Dep't of Educ. (Nov. 4, 1993) , certified by Secretary (Nov. 8,
1994), the accrediting institution delegated the decision concerning the establishment of a
score on an ability-to-benefit test to its member institutions. The institution in question
established a passing score lower than that recommended by the publisher. The administrative
law judge determined that the language of 20 U.S.C. § 1091 (d)(3)(A) is "clear and
unambiguous"; Congress directed that accrediting agencies establish the criteria to determine
whether a student applicant possesses the necessary ability to benefit from a training program,
that directive extends to the establishment of cutoff scores. To paraphrase the judge, SFAP may
have a legitimate concern; however, the source of the concern is with NACCAS, not MHI.
While "common sense" may dictate that MHI's selection of the CTBS Level 1 test was
inappropriate, and that its selection of a passing score compounded the problem, "its action was,
nonetheless performed in conformance with the procedures adopted by its accrediting agency
pursuant to 20 U.S.C. § 1091(d)(3)(A) and 34 C.F.R. § 668.7(b)." Id. at
4-5.See footnote 6
In support of its "common sense" argument, SFAP notes that the CTBS Level 1 test was developed to test the reading and math levels of third and fourth grade students, and cannot possibly be used for MHI's "postsecondary" program. SFAP's attorney seems to suggest that the fact that a program is "postsecondary" creates some intellectual expectations from participating students. However, an institution of postsecondary vocational education qualifies for Federal student aid simply if it admits students who are beyond the age of compulsory education and has the ability to benefit from the training offered as established by 34 C.F.R. § 600.11. See 34 C.F.R. §§ 600.2 and 600.6 (1989). Although in effect arguing that OIG and SFAP have the authority under the guise of an audit to second guess the decision of MHI and NACCAS that the use of the CTBS Level 1 test was appropriate, SFAP makes no attempt to define the proper ability-to-benefit standards for a school of cosmetology. In addition, it should be noted, that the other test used by MHI in 1987, and which no one from ED questioned, had some severe translation problems, and did not conform with established professional standards for industry-
developed tests. (See Respondent's Exhibit 35, Analysis of Cosmetology Student
Aptitude Test and The CTBS Espanol, by Gabriel Cirino Gerena, Ph.D., pp. 3-4.) Although the
CTBS Level 1 test was designed to measure the reading and math skills of third and fourth grade
was some evidence that it could be adequate for admissions purposes to cosmetology programs
for Spanish-speaking students. Id. at 6-7.
In conclusion, not only did MHI act in full conformity with
appropriate legal standards
which applied at the time, but also in a totally reasonable manner, given the lack of ability-to-
benefit tests available in Spanish, given the problems it was having with the Milady test, and
that NACCAS listed the CTBS test as one which met its standards.
2. From July 1, 1987, until March 1988, MHI used the Milady
Aptitude Test to measure the ability of its student applicants to benefit from its training program.
The test was approved during this period by NACCAS as satisfying its criteria for an approved
3. From March 1, 1988, to June 30, 1990, MHI used the CTBS
Level 1, Espanol, test to measure the ability of its student applicants to benefit from its training
program in cosmetology.
MHI's use of this test was approved as meeting its criteria for use as an approved ability-to-
4. MHI was in full compliance with 20 U.S.C. § 1091(d) and
34 C.F.R. §§ 600.11 and
600.7(b) (1989) during the 1987-88, 1988-89, and 1989-90 award years.
Date:September 19, 1995 Frank K. Krueger, Jr.
A copy of the attached initial decision was sent by CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, to the following:
Stephen M. Kraut, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Ave., S.W.
Washington, D.C. 20202-2110