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Legal Brief: New Federal Rules on Student Recruiting Incentives

Posted April 18, 2011

"Legal Briefs" is a monthly article from the Office of the General Counsel designed to keep faculty and staff informed of legal issues and their implications. An archive of past Legal Briefs is available online. This is the last Legal Brief for the spring semester; the column will resume with the start of Fall Semester 2011.

After years of reports of aggressive recruiting practices resulting in students being encouraged to take out loans they could not afford or enroll in programs where they were unqualified or could not succeed, the U. S. Department of Education (DOE) has taken steps to remedy a perceived widespread problem. Even though current laws prohibit schools from compensating admissions recruiters based solely on success in securing student enrollment, provisions known as "safe harbors" allowed some questionable practices.

Last fall the DOE issued new regulations that further prohibit the use of incentive compensation for employees of college and universities that receive federal financial aid. Among other things, the new regulations change the rules governing programs authorized by the Higher Education Act of 1965 (HEA) to eliminate the 12 "safe harbors" that excepted certain payments from the HEA's ban on incentive compensation payments.

The new rules take effect on July 1, 2011, and apply to all university and college employees who are engaged in any student recruitment or admission activity or in making decisions regarding the award of Title IV HEA funds. This includes athletic personnel who recruit student athletes.

Recently, the DOE released general guidelines to clarify issues arising under the new regulations. Some highlights of the guidelines include:

· Awarding bonuses to recruiters based upon student retention, completion, graduation or placement is not permitted. However, incentive payments made to athletic personnel based on such factors as "team academic performance" is allowed. This suggests that bonus payments made to athletic personnel based on team cumulative GPA is acceptable as a form of "team academic performance," but that graduation is not.

· Anyone with direct or indirect responsibility for securing enrollments or granting student financial aid (whether on the front line or in a supervisory role), cannot be rewarded with any sum of money or thing of value for performance that is directly or indirectly related to enrollment or financial aid. This includes the president of a university or college and other members of leadership, unless they are only responsible for policy decisions. It should be noted that the appearance of a university or college president at student recruiting events to promote the institution is permitted.

The entire list of new DOE regulations can be found online at http://edocket.access.gpo.gov/2010/2010-26531.htm.

For additional information, contact Connie Hawke, associate vice president for federal government relations and associate counsel, at 330-672-2982 or
chawke@kent.edu.