Education Dept. Launches Review of Compensation for College Recruiters

WASHINGTON — The U.S. Department of Education will hold a series of virtual listening sessions to delve into how existing recruitment rules for colleges and universities have affected the growth of online enrollment and led to a surge in federal student loan debt.

The sessions will be held from 1 p.m. to 4 p.m. EST on March 8 and 9.

“Online education has the potential to meet the needs of many students and lower costs,” said Under Secretary James Kvaal, in a press release announcing the initiative.

“But we are concerned about the growth in loan debt and want to ensure students get value for their money,” Kvaal continued. 

“These listening sessions are part of the department’s commitment to undertake a careful, fair, and thorough review of the rules around how contractors recruit students for online programs,” he continued. “This process will give the public a chance to make its thoughts known on any possible changes.”

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.

Since issuing the guidance, the number of students recruited by entities operating under this exception has increased, particularly through online programs operated by third-party entities, including so-called online program managers.

Given the growth in online enrollment and associated federal student debt, the department is seeking public input to understand the impact of this exception and whether any updates are necessary to the guidance.

On a related note, the department has just released an updated guidance clarifying when organizations that contract with colleges and universities are considered regulated entities known as third-party servicers. For more on this change, read on.

In regard to the upcoming listening sessions, department officials said they hope to hear comments from a wide range of stakeholders, including colleges and universities, faculty members, online program managers, researchers, students and borrowers.

And not only do the officials want to know how these various entities have been impacted by the existing rules, they also want guidance on how they can better ensure compliance with the prohibition on incentive compensation. 

Individuals who would like to present comments of up to three minutes must register by sending an email to [email protected] no later than 12 p.m. EST on the business day prior to the listening session at which they want to speak. 

The message should include the name of the speaker, the email address of the speaker, and one or more dates and times during which the individual would be available to speak. 

Individuals who want to observe the listening sessions are also required to register for each day in which they wish to observe.

Updated Third-Party Servicer Guidance

The aforementioned guidance clarifies when companies and others who provide recruitment services for colleges will fall into this category.

Department officials said the change will ensure full transparency into and more data on the companies that work with colleges in areas that relate to federal financial aid. 

“It also ensures that the department and auditors will have the ability to review these companies’ compliance with federal rules and regulations,” a press release from the department said.

Colleges and universities have until May 1, 2023, to report any arrangements with third-party servicers that have not been reported to the department.

These reports must detail the services the entity performs on behalf of the institution, and disclose the timeframe of the agreement. 

Entities or individuals that meet the definition of a third-party servicer as a result of this Dear Colleague Letter are required to submit the Third-Party Servicer Data Form to the department or update their existing form by May 1, 2023.

Dan can be reached at [email protected] and at https://twitter.com/DanMcCue