A U.S. Department of Education panel offered up a blueprint last week for new guidelines on compensating recruiters, but it delayed for another month changes to a financial-aid rule that affects distance education.
As part of negotiations over revising federal student-aid rules, a committee of experts last week discussed proposed changes that would allow certain types of incentive payments to recruiters, who attract new students, and the federal aid money that often comes with them.
However, the committee could not reach a consensus on how to change a rule that requires some institutions to provide a student with 12 hours of course work per week before that student is eligible for federal financial aid. The rule is unpopular with some distance-education providers.
The issue of whether colleges should be able to compensate recruiters based on how many students those recruiters enroll has generated significant controversy in recent years, as the Education Department has cracked down on the practice.
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, in particular, have complained that the law does not account for the advent of Internet recruiting, and does not allow for compensation under normal business practices. The Education Department has also interpreted the law more broadly, applying the ban on incentive payments to employees who aren’t recruiters.
Safe Harbors
The deliberations, 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 contracts with a company whose employees enroll in the institution, when that employer pays 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 admissions 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 admissions 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’s interpretations of the law as being too vague. In the past, the department offered guidance to individual institutions through private-letter rulings that, at times, contradicted one another.
During last week’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 by the department’s inspector general to be in violation of the law. 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.
Incentive compensation also has 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 a negotiator for the 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 by the recruiters. “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,” she said.
Ms. Ackel was more effective, however, in persuading the committee to put off a decision on whether to revise the financial-aid regulation that affects distance education.
The rule requires college programs that don’t operate under a semester, trimester, or quarter system to deliver at least 12 hours of class work a week in order to be eligible to participate in the federal student-aid programs. Known as the 12-hour rule, the regulation is unpopular with some distance-education officials, who say it inhibits institutions from developing innovative teaching methods.
The Education Department has proposed changing the regulation from requiring 12 hours of in-class instruction a week to requiring “one day” of instruction a week. The one-day rule is already the requirement for programs that operate under standard semester, trimester, and quarter terms.
Critics Warn About Fraud
Some education groups not invited to sit on the committee had raised concerns that the panel was stacked with representatives of organizations that favor changing the regulation. Those few voices of opposition were able to delay approval of any changes until the next panel meeting, set for April.
Ms. Ackel argued that the new proposal doesn’t offer as much protection against fraud as the 12-hour rule does. “By eliminating that and not providing any safeguard, you’re essentially backtracking,” she said. “Continuing to roll back the minimum protections we have is not the right course of action.”
But Charles M. Cook, director of the New England Association of Schools and Colleges’ Commission on Institutions of Higher Education, said the 12-hour rule doesn’t protect against fraud or ensure quality. “There’s no automatic quality assurance that comes with 12 hours of seat time, and I think most people in here who’ve had undergraduate experience can attest to that,” he told the panel.
Susan Podziba, a mediation expert and the facilitator of the panel, said the opposing parties should talk privately before the committee meets again next month to see if they can come to an agreement. The Education Department has been holding meetings on the 12-hour rule for more than three years, she said. One more month won’t hurt.
“We’ve been looking at this for years, which leads me to conclude there is no perfect solution,” Ms. Podziba told the meeting. “Because if there were, we would have found it by now.”
http://chronicle.com Section: Government & Politics Page: A24