The U.S. Department of Education Launches Review of Prohibition on Incentive Compensation for College Recruiters

The U.S. Department of Education (Department) will be holding virtual listening sessions covering both the impact of Department guidance and how institutions might increase transparency over college and university contractors.

The Department would like to hear from the public regarding an exception contained in the guidance and how it has affected the growth of online enrollment and associated federal student loan debt. The guidance in question is the following:

The Higher Education Act prohibits institutions of higher education from providing a commission or bonuses to individuals or entities based on securing enrollment or financial aid. This prohibition is known as the ban on incentive compensation.

In 2011, the Department issued guidance related to the ban, which created an exception for third-parties if they provide a bundled set of services, which can include recruitment.

The US Department of Education is concerned about the growth in loan debt even though online education has the potential to meet the needs of many students and lower the cost of tuition.

By obtaining information from the public, the Department will review the rules around how contractors recruit students for online programs. Since the guidance was issued in 2011, the number of students recruited by third parties has increased.

According to the press release, the Department is interested in comments from a wide range of stakeholders, including institutions, faculty, online program managers (OPM’s) and other contractors, advocates, researchers, borrowers and students, on the benefits and disadvantages of the exception for bundled services, how the guidance has impacted institutions and students and how the Department can better ensure compliance with the prohibition on incentive compensation. 

If you have any questions surrounding the review of prohibition on incentive compensation for college recruiters, please contact the Schneider Downs Higher Education Industry Group at [email protected].

About Schneider Downs Higher Education Services

The Schneider Downs Higher Education industry group is a dedicated team of experienced professionals specializing in serving institutions from high schools to universities. Our experience in audit and assurance, tax advisory, technology and data and more allow our professionals to stay ahead of the latest trends, developments and challenges within the education sector and provide timely and practical solutions to our clients. 

To learn more, visit our Higher Education Industry Group page.