Thursday, July 19, 2001

Federal Ban on Recruitment Bonuses Causes Problems for U. of Maryland's Online Venture By DAN CARNEVALE A recent decision by the University of Maryland University College to scale back its for-profit subsidiary to comply with student-recruitment laws shouldn't cause alarm for officials of other major distance-education entities, observers say. The company, U.M.U.C. Online, is wholly owned by the university and provides marketing and recruitment services for U.M.U.C.'s distance-education program. U.M.U.C. Online was working to raise money with venture capitalists when the university decided in late May that some of the company's operations could violate an incentive-compensation law, passed as part of the Higher Education Act in 1992. The law forbids institutions from paying bonuses to personnel or outside consultants to recruit students. Many higher-education officials have been critical of the incentive-compensation law as being confusing and too restrictive, and H.R. 1992, which is working its way through Congress, would ease the rules. But observers say they know of no other instance where a major distance-education program has violated or could potentially violate incentive-compensation rules. Sally Johnstone, executive director of the Western Cooperative for Educational Telecommunications, says U.M.U.C.'s situation isn't an issue for most distance-education organizations because most of them don't have a for-profit entity aiding their distance program. "My understanding is that they are in a somewhat unique position," Ms. Johnstone says. "I don't know of other organizations or institutions that are facing that." David M. Freeman, assistant vice president for communications for the university, says other for-profit subsidiaries of institutions provide different services such as counseling or other management services, and they don't work on student recruitment. "Each for-profit entity is different, so it's hard to compare apples to apples," he says. Other for-profit entities, including those run by Columbia, Cornell, and New York Universities, don't recruit students; instead, they offer technical support and instructor training. And other for-profit institutions like Western Governors University have arranged their enrollment structure without any incentive payments to recruiters. U.M.U.C. officials have decided to reorganize the company to make enrollment operations smaller and to have recruiters paid at a flat rate instead of on commission. U.M.U.C. Online also decided to turn down money from venture capitalists, Mr. Freeman says, which hurts the growth of the company. At the time, the company was negotiating deals worth between $10-million and $20-million, he says. He would not give the names of the venture capitalists. "We saw the environment as not being risk-free enough to take the venture-capital money that's being offered to us," Mr. Freeman says. "Because we didn't accept venture capital, the scope and the scale have been reduced." The university did not seek a ruling from the Education Department, Mr. Freeman says. But when the department ruled against William Penn University and Olivet Nazarene University for violating incentive-compensation rules, U.M.U.C. officials decided to take another look at their own activities, he says. (See an article from The Chronicle, May 23.) Donald N. Langenberg, chancellor of the University System of Maryland, says the restrictions of U.M.U.C. Online's operations will most likely be temporary until the law is changed. But university officials wouldn't provide figures showing the degree to which its operations were being restricted. "Pending an appropriate resolution, U.M.U.C. Online's activities are being modified so we can stay within the regulations," Mr. Langenberg says. "Meanwhile, it will continue to function." But Mr. Freeman sees this as a minor setback for the university, as its distance-education program is expanding rapidly anyway. "The company is definitely intact, and it's providing enrollment services to U.M.U.C.," he says. Background articles from The Chronicle: Government May Fine William Penn U. for Payments by Recruiting Consultant (5/23/01) Bill to Ease Restrictions on Distance Providers Is Praised at Hearing (6/21/01) Temple U. Shuts Down For-Profit Distance-Education Company (7/20/01) Easy-to-print version E-mail this article

Long-awaited N.I.H. report gives cautious approval to embryonic-stem-cell research U. of Maine, citing inequities, gives raises to 199 female professors House Appropriations Committee seeks big spending increases for N.S.F. and NASA Government report on student credit-card debt spurs calls for tighter rules Study finds strong growth in for-profit higher education Texas A&M fires professor on accusations of plagiarism Mexico's president pushes for access by migrants to U.S. colleges Blackboard lays off 40 workers Professors use the Web to publish portfolios of teaching techniques Federal ban on recruitment bonuses causes problems for U. of Maryland's online venture  Sylvan Learning Systems forms division focusing on online higher education Algonquin College buys a company's online-training division