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June 18, 2010 3:10 PM “Protecting” Students

By Daniel Luzer

While the new student-aid regulations the Department of Education revealed Tuesday did not include much anticipated rules about gainful employment, it did include an interesting new component: compensation for recruiting students. According to an article by Caralee Adams in Education Week:

The draft regulatory language would prevent the awarding of any bonus, commission, or incentive payment to individuals involved in admissions or financial aid at an institution of higher education.

Congress first banned incentive compensation in 1992 but regulations in 2003 created “safe harbor,” essentially a loophole allowing incentive compensation payment to people in admissions and financial aid. Many argue that this created a situation, particularly in for-profit schools, whereby admissions staff got bonuses for enrolling a lot of students, whether or not they could really succeed. The regulations close the loophole.

According to the article, the for-profit college lobby, the Career College Association, weighed in:

CCA President Harris Miller issued a statement Wednesday saying that the proposal focuses on issues that cut across all sectors of higher education and, for the most part, have support from the higher education community. However, issues remain. “CCA and its member institutions will send robust comments on those elements of the proposed rules that harm students, including the department’s decision to end all incentive-compensation safe harbors without offering alternative guidance. Incentive compensation as it stands is an extreme proposal that needs to be thought through carefully to protect students and make sure that it does not become a lawyers’ relief act,” Miller said.

This may well be the first time anyone has argued that students need to be “protected” from ending incentive compensation.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer