Friday, March 8, 2002

Education Department Proposes Guidelines for Compensating Student Recruiters By ANNE MARIE BORREGO Washington The U.S. Department of Education has offered up what it hopes will be a blueprint for new guidelines on compensating student recruiters. As part of negotiations over revising federal student-aid rules, a committee of experts on Thursday discussed proposed changes that would allow certain types of incentive payments. The issue of whether colleges should be able to compensate recruiters based on their performance has Also Thursday, the negotiating panel postponed a decision on its recommendation on the "12-hour rule" until next month. generated significant controversy in recent years, as the Education Department has cracked down on institutions that have paid recruiters based on how many students enrolled. When Congress revised the Higher Education Act in 1992, it prohibited colleges from giving incentive payments to recruiters, to prevent them from wooing unprepared students into programs just to increase commissions. Officials of for-profit colleges, especially, have complained that the law did not account for the advent of Internet recruiting, and did not allow for compensation under normal business practices. The deliberations on Thursday, which are part of a process known as negotiated rule-making, are designed to bring various student-aid experts together to help federal agencies streamline the regulatory process. In the discussion about crafting new rules on incentive compensation, the Education Department proposed creating a series of so-called safe harbors, designed to clearly lay out what types of compensation are legal. While the list of provisions still hasn't cleared every level of the department and has to be approved by the rule-making committee, some version of these proposed changes will probably become a part of federal regulations. The proposed provisions would allow colleges to: Pay recruiters a fixed annual or hourly wage, as long as that wage isn't adjusted more than twice during any annual period. Compensate recruiters based on their recruitment of students who enroll in programs that are not eligible for federal student aid. Pay recruiters who arrange direct contracts with companies whose employees enroll in the institution, with the employer paying directly or by reimbursement all or substantially all of the tuition and fees of those employees. Share profits with some employees. Compensate recruiters with a bonus based on student retention, if a student completes either an entire educational program or one year of a program, whichever is shorter. Distribute profit to individuals who own at least 25 percent of an institution. Compensate companies that provide Internet-based recruitment and admission activities. Enter into revenue-sharing contracts, including tuition-sharing agreements, with third parties that deliver various services to institutions, provided that none of the services involve recruiting or admission activities, or the awarding of federal student aid. Allow for payments to third parties that deliver various services to institutions, even if these services include recruiting or admission activities, as long as the individuals performing the recruitment or activities or the awarding of federal aid, are not compensated through incentive payments. The new guidelines, if adopted, would be a boon to for-profit career colleges, which have openly criticized the department as being too vague on the issue. In the past, the department offered guidance to individual institutions through private letters that, at times, contradicted one another. During Thursday's session, department analysts conceded the flaws in the 1992 law. But they noted that the law was written to limit misbehavior by people or institutions engaged in inappropriate activities and that the department wants to ensure that it doesn't leave loopholes for potential abusers. The issue of incentive compensation took center stage in late 2000, with the bankruptcy of Career Learning Centers, which was found in violation of the law by the department's inspector general. The department asked the now-defunct company to repay $187-million in federal financial aid, after investigators discovered that the institution had paid its recruiters based on how many students they enrolled. Recently, however, incentive compensation has also become an issue for private nonprofit institutions. Last May, the inspector general recommended that the department ask Olivet Nazarene University and William Penn University to repay a combined $8.1-million in federal financial aid for compensating a consulting unit of the Apollo Group, the parent company of the University of Phoenix. Nancy Broff, general counsel at the Career College Association and an alternate negotiator for for-profit institutions, said the regulations should allow institutions to "fairly compensate their employees, without putting the institution in jeopardy." One member of the negotiating committee, Elena Ackel of the Legal Aid Foundation of Los Angeles, strongly criticized several of the proposals, saying they allowed for "back-door loopholes." She also noted that the retention bonuses left room for misrepresentation. "So now we'll have people completing programs. That doesn't take away from the fact that the recruiters can still mislead people by giving false information on starting salaries and transferability of credits." Background article from The Chronicle: Education Dept. Criticized Over Negotiations on Regulations (1/25/2002) Easy-to-print version E-mail this article

Boyer Commission says colleges have been making improvements sought in 1998 report Bush administration supports direct lending, at least for now, education official says Education Department proposes guidelines for compensating student recruiters New report on student-loan data finds debt loads burdensome for many graduates Part-time instructors in Washington State win tentative settlement for retirement benefits A Web site at the U. of North Carolina collects first-person accounts of the American South Negotiating panel postpones its recommendation on the "12-hour rule"