Office of Postsecondary Education - U.S. Department of Education

WReier-Aviles on DSKGBLS3C1PROD with RULES266874 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsfinancial aid. If it is not, suchcompensation would continue to bepermissible even with the removal ofthe safe harbor from current§ 668.14(b)(22)(ii)(C).Changes: None.Comment: A number of commentersvoiced their support for the safe harborfrom current § 668.14(b)(22)(ii)(E),which permits compensation basedupon a student’s successfullycompleting his or her educationalprogram or one academic year of his orher educational program, whichever isshorter. Some commenters expressedconcern that removal of this safe harborwould eliminate an important safeguardfor students because this safe harborencourages institutions to admit onlyqualified students. Other commentersnoted that to disallow incentivecompensation based on completion ofan educational program is contrary tothe Administration’s stated goal ofstudent retention. Several commenterssuggested that the Department shouldmeasure the positive effect thatincentive payments based oncompletion of an educational programcan have on students’ educationalexperience. Another commenter askedwhether payments based on a graduatedstudent’s employment in the student’sfield of study would be permitted underthe new regulatory framework forincentive compensation.Discussion: The Department believesthat an institution’s resolute andongoing goal should be for its studentsto complete their educational programs.Employees should not be rewardedbeyond their standard salary or wagesfor their contributions to thisfundamental duty. The safe harbor incurrent § 668.14(b)(22)(ii)(E) permitscompensation that is ‘‘indirectly’’ basedupon securing enrollments—that is,unless the student enrolls, the studentcannot successfully complete aneducational program. With theproliferation of short-term, acceleratedprograms, and the potential for shorterand shorter programs, we have seenincreased efforts by institutions to relyupon this safe harbor to incentivizerecruiters. Accordingly, we believe thatthe retention of the current safe harborcan be readily exploited, and that it isnot necessary for institutions toappreciate the value of keeping studentsin school. On balance, we believe thatthe proliferation of these types ofprograms justify any benefit that thissafe harbor allegedly provided studentsby encouraging institutions to admitonly qualified students.We disagree with the commenter whostated that removal of this safe harbor isinconsistent with the Administration’sgoal of increasing student retention inpostsecondary education. Institutionsshould not need this safe harborallowing incentive payments torecruiters to demonstrate theircommitment to retaining studentswithin their program of instruction.In addition, there is nothing about themaking of incentivized payments torecruiters based upon student retentionthat enhances the quality of a student’seducational experience. If the programof instruction has value and isappropriate for a student’s needs, astudent will likely enjoy a positiveeducational experience regardless of themanner in which the student’s recruiteris compensated.Finally, the Department’s experiencehas shown that some institutions payincentive compensation to recruitersbased upon claims that the studentswho the recruiter enrolled graduatedand received jobs in their fields ofstudy. Yet, included among the abusesthe Department has seen, for example, isa circumstance where a student’s fieldof study was culinary arts, and the socalledemployed student was workingan entry-level position in the fast foodindustry. Such a position did notrequire the student to purchase a highereducation ‘‘credential.’’ As a result, webelieve that paying bonuses to recruitersbased upon retention, completion,graduation, or placement remain inviolation of the HEA’s prohibition onthe payment of incentive compensation.Changes: None.Comment: Many commentersquestioned our rationale for eliminatingthe safe harbor in current§ 668.14(b)(22)(ii)(G), which exemptsmanagerial and supervisory employeeswho do not directly manage orsupervise employees who are directlyinvolved in recruiting or admissionsactivities, or the awarding of title IV,HEA program funds from theprohibition on receiving incentivepayments. These commenters arguedthat a bright line designation is neededand that the incentive compensationban should only apply to employeeswho are involved in direct recruitmentor admission of students or decisionsinvolving the award of title IV, HEA aid.Others recommended that we retain thissafe harbor, and that we clarify that thewords ‘‘indirectly or directly’’ do notapply to the determination of whichpersons are covered by the prohibition.Several commenters expressed theirconcerns about having the regulationsprohibit compensation practices at anylevel of an organization, no matter howfar removed from actual recruitment,admissions, or financial aid activity.These commenters argued that such anVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2approach would prevent institutionsfrom evaluating top management withrespect to student population metrics orany other business or organizationalmetric that is a function of studentenrollment.A few commenters raised morespecific concerns about thecompensation of top college officials insituations where the president attendsan open house or speaks with potentialstudents who the institution isrecruiting, either in a group orindividually. Some commenters alsoasked whether the proposed regulationswould permit a president to receive abonus or other payment if one factor inattaining the bonus or other paymentwas meeting an institutionalmanagement plan or goal that includedincreasing minority enrollment by acertain percentage.Finally, a few commenters askedwhether institutions can still rewardathletic coaches whose student athletesstay in school and graduate.Discussion: We intend the incentivecompensation ban in § 668.14(b)(22)(i)to apply to all employees at aninstitution who are engaged in anystudent recruitment or admissionactivity or in making decisionsregarding the award of title IV, HEAprogram funds. We interpret theseemployees to include any higher levelemployee with responsibility forrecruitment or admission of students, ormaking decisions about awarding titleIV, HEA program funds. To make thisclearer, we are revising§ 668.14(b)(22)(iii) to add a definitionfor the term entity or person engaged inany student recruitment or admissionactivity or in making decisions aboutthe award of financial aid. This newdefinition expressly includes anyemployee who undertakes recruiting oradmitting of students or who makesdecisions about and awards title IV,HEA program funds, as well as higherlevel employees as specified.Therefore, the actions of a collegepresident could potentially come withinthe HEA’s prohibition on the paymentof incentive compensation. However,the Department does not see how mereattendance at an open house or speakingwith prospective students about thevalue of a college education or thevirtues of attending a particularinstitution would violate the incentivecompensation plan. Other activitiesshould be evaluated within the contextof the Department’s previouslydiscussed two-part test to receiveassistance as to whether a particularactivity is permissible.Finally, recruitment of studentathletes is not different from