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

Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulations66875WReier-Aviles on DSKGBLS3C1PROD with RULES2recruitment of other students. Incentivecompensation payments to athleticdepartment staff are governed by therestrictions included in § 668.14(b)(22).If the payments are made based onsuccess in securing enrollments or theaward of financial aid, the payments areprohibited; however, the Departmentdoes not consider ‘‘bonus’’ paymentsmade to coaching staff or other athleticdepartment personnel to be prohibited ifthey are rewarding performance otherthan securing enrollment or awardingfinancial aid, such as a successfulathletic season, team academicperformance, or other measures of asuccessful team.Changes: We have added a definitionof the term entity or person engaged inany student recruitment or admissionactivity or in making decisions aboutthe award of financial aid to§ 668.14(b)(22)(iii). New paragraph(b)(22)(iii)(C) of this section providesthat the term means—(1) With respect to an entity, anyinstitution or organization thatundertakes the recruiting or theadmitting of students or that makesdecisions about and awards title IV,HEA program funds; and(2) With respect to a person, anyemployee who undertakes recruiting oradmitting of students or who makesdecisions about and awards title IV,HEA program funds, and any higherlevel employee with responsibility forrecruitment or admission of students, ormaking decisions about awarding titleIV, HEA program funds.Comment: One commenter asked howthe removal of the safe harbor fromcurrent § 668.14(b)(22)(ii)(H), whichpermits an institution to provide a tokengift not to exceed $100 to an alumnusor student provided that the gift is notin the form of money and no more thanone gift is provided annually to anindividual, will affect institutionscompensating students for referrals. Thecommenter asked whether an individualwho is referred can be given ascholarship for friends or family of theindividual who is referring or a tuitionwaiver.Discussion: Section 668.14(b)(22)does not prohibit institutions fromproviding any commission, bonus, orincentive payment to students who arereferrals. Therefore, an individual whois referred to an institution should beable to receive whatever scholarshipmoney or tuition assistance that he orshe may otherwise be eligible to receivewithout violating the HEA.Changes: None.Comment: Several commenters askedfor clarification regarding the safeharbor in current § 668.14(b)(22)(ii)(J)permitting an institution to awardcompensation for Internet-basedrecruitment and admission activitiesthat provide information about theinstitution to prospective students, referprospective students to the institution,or permit prospective students to applyfor admission online. Specifically, thecommenters asked us to clarify thatinstitutions can make payments to thirdparties that provide Internet-basedrecruitment and admission services aslong as they do not otherwise violate thestatutory prohibition. Other commentersasked for confirmation that clickthroughpayments are permitted if thethird party is paid based on those whoclick, not those who enroll. Othercommenters requested examples ofpermitted relationships.Discussion: The HEA does notprohibit advertising and marketingactivities by a third party, as long aspayment to the third party is based onthose who ‘‘click’’ and is not based inany part, directly or indirectly, on thenumber of individuals who enroll or areawarded financial aid; therefore, theregulatory language would not prohibitsuch click-through payments. Further,institutions may make payments to thirdparties and entities with formal thirdpartyarrangements as long as the partiesare not compensated in any part,directly or indirectly, based on successin securing enrollments or the award offinancial aid.Changes: None.Comment: Many commenters offeredsuggestions regarding the safe harborsreflected in current § 668.14(b)(22)(ii)(K)and (b)(22)(ii)(L), which both involvepayments to third parties for sharedservices. A number of commentersrepresenting organizations that providea variety of services to institutions askedfor clarification about their continuedability to assist institutions in this way,as long as the compensationarrangements are not prohibited by theHEA. Many commenters asked whethertuition-sharing arrangements with thirdpartiesto secure servicers that includerecruitment would be permitted. Theyquestioned whether these arrangementsshould be treated the same asarrangements involving volume-drivenpayments. Several commentersexpressed concern about the affect theseregulations will have on third partieswho provide services to assist studentswho study abroad.One commenter suggested thatentities that provide enrollment servicesbe able to elect to be treated as ‘‘thirdpartyservicers,’’ with all of therestrictions, obligations, liabilities,reporting requirements, and oversightthat accompany that status.VerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2Other commenters asked whetherinstitutions would be held accountablefor the actions of third-party servicers.A few commenters also requested theDepartment to provide examples ofarrangements with third parties thatwould be permitted under the newregulatory framework (i.e., with theremoval of the safe harbors from current§ 668.14(b)(22)(ii)(K) and (b)(22)(ii)(L)).Discussion: The Departmentunderstands the value of partnershipsbetween institutions and entities thatprovide various support andadministrative services to theseinstitutions. Such arrangements arepermitted under these regulations aslong as no entity or person engaged inany student recruitment or admissionactivity or in making decisions aboutthe award of financial aid (as defined in§ 668.14(b)(22)(iii)(C)) is compensatedin any part, directly or indirectly, basedupon success in securing enrollments orthe award of financial aid.In addition, as the Department statedin the NPRM, arrangements underwhich an institution is billed based onthe number of student files that areprocessed (e.g., a volume-drivenarrangement) are not automaticallyprecluded, provided that payment is notbased in any part, directly or indirectly,on success in securing studentenrollments or the award of financialaid.Further, it is longstanding Departmentpolicy that an institution is responsiblefor the actions of any entity thatperforms functions and tasks on theinstitution’s behalf. The definition of athird-party servicer is established in§ 668.2; the responsibilities of a thirdpartyservicer are described in § 668.25.No additional language is needed.Changes: None.Permissible Compensation ActivitiesComment: Many commentersrequested clarification on the types ofcompensation that would be permittedunder proposed § 668.14(b)(22) andsection 487(a)(20) of the HEA. A fewcommenters who supported theproposed changes to § 668.14(b)(22)suggested additional alterations tostrengthen the language—such asmoving language we had included inthe NPRM preamble to the regulatorytext—to ensure that incentive paymentsare not based ‘‘in any part’’ on successin securing enrollments or financial aid.In addition, several commenterssuggested that more than two changes inpay in a calendar year should beconsidered evidence that the paymentsare incentive compensation.These commenters also requestedguidance about allowable salary