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

WReier-Aviles on DSKGBLS3C1PROD with RULES266878 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Rules and Regulationsemployees could be rewarded throughprofit-sharing or other payments forsuccess in meeting retention,graduation, and placement goals as longas they are not rewarded for the numberof students recruited and admitted.These commenters requested that wedefine an acceptable percentage of anemployee’s compensation adjustmentthat can be based on the number ofstudents recruited, admitted, enrolled,or awarded financial aid.One commenter asked that we clarifywhether payments tied to overallinstitutional revenues, including profitsharing,pension, and retirement plansare allowed. A number of commentersasked more broadly whether such planswould be permissible. A fewcommenters requested changes toincorporate the distribution of profitsharingor bonus payments undercertain circumstances, such as when apayment is made to a broad group ofemployees.Discussion: While there is nostatutory proscription upon offeringemployees either profit-sharing or abonus, if either is based in any part,directly or indirectly, upon success insecuring enrollments or the award offinancial aid, it is not permitted undersection 487(a)(20) of the HEA or§ 668.14(b)(22).The Department agrees withcommenters that there arecircumstances when profit-sharingpayments should be permitted. Underproposed § 668.14(b)(22), an institutionmay distribute profit-sharing paymentsif those payments are not provided toany person who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds. TheDepartment believes that such paymentsare consistent with the HEA as they arenot being made to a particular groupwho is active in admissions or financialaid.For this reason, we are making achange to § 668.14(b)(22)(ii) to providethat institutions may make payments,including profit-sharing payments, solong as they are not provided to anyperson who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds.Changes: We have revised§ 668.14(b)(22)(ii) to clarify that,notwithstanding the ban in§ 668.14(b)(22)(i), eligible institutions,organizations that are contractors toeligible institutions, and other entitiesmay make profit-sharing payments, solong as such payments are not providedto any person who is engaged in studentrecruitment or admission activity or inmaking decisions regarding the award oftitle IV, HEA program funds.Comment: Several commenters askedus to clarify what kinds of activitieswould not be considered under thedefinition of securing enrollments or theaward of financial aid. They asked thatwe revise the regulations to provideexplicitly that payments based on anyadditional activities are not allowed ifthey are directly or indirectly based onenrollment or the awarding of aid.Other commenters raised questionsabout the use of ‘‘aggregators,’’ that is,entities that assist an institution withthe institution’s outreach efforts. Theseefforts include but are not limited to,identifying students, offering counselingand information on multipleinstitutions, and encouraging potentialstudents to fill out an applicationdirectly with the individual institutions.Aggregators are paid based on thestudent remaining at the institution fora certain time period rather than basedon the fact that the student enrolls.Commenters asked us to clarify whetherthese practices are permitted undersection 487(a)(20) of the HEA and§ 668.14(b)(22).Some commenters focused onarrangements under which institutionspay third parties for student contactinformation and asked whether suchinformation may be sorted or qualified.Further, they questioned whetherinstitutions would be permitted to payonly for information that yields actualcontact with a student. They asked thatwe confirm that institutions may paystudents for contact information on aper person basis as long as payments arenot based on the number of studentswho apply or enroll. In addition, theysuggested that we allow qualitativefactors to be included in theconsideration of the price to provideincentives to third parties toappropriately identify students thatmore closely fit an institution’s profile.Some commenters believed that theproposed definition of securingenrollments or the award of financialaid does not make it clear that theactivities are prohibited through thecompletion of a student’s educationalprogram.Discussion: The Department agreesthat it would be helpful to clarify thetype of activities that are and are notconsidered securing enrollments or theaward of financial aid. For this reason,we have revised the definition ofsecuring enrollments or the award offinancial aid to specifically include (asexamples) contact through preadmissionor advising activities, scheduling anappointment for the prospective studentto visit the enrollment office or anyVerDate Mar2010 14:10 Oct 28, 2010 Jkt 223001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 E:\FR\FM\29OCR2.SGM 29OCR2other office of the institution,attendance at such an appointment, orinvolvement in a prospective student’ssigning of an enrollment agreement orfinancial aid application (see§ 668.14(b)(22)(iii)(B)(1) of these finalregulations).We also revised the definition toclarify that it does not include makinga payment to a third party for theprovision of student contact informationprovided that such payment is not basedon any additional conduct by the thirdparty, such as participation inpreadmission or advertising activities,scheduling an appointment to visit theenrollment office or any other office ofthe institution or attendance at such anappointment, or the signing, or beinginvolved in the signing of a prospectivestudent’s enrollment agreement orfinancial aid application (see§ 668.14(b)(22)(iii)(B)(2) of these finalregulations).With respect to the commentsrequesting guidance on ‘‘aggregators,’’we do not believe it is necessary orappropriate for the Department toindicate whether these types ofactivities would, across the board, bepermitted. Each arrangement must beevaluated on its specific terms. As notedearlier in this preamble, we believe anyinstitution can determine whether apayment it intends to make isprohibited by § 668.14(b)(22) byapplying the two-part test we havedescribed. Specifically, the first step foran institution in determining if paymentfor an activity or action is consideredincentive compensation is to evaluatewhether the entity is receivingsomething of value, then to determinewhether the payment is made based inany part, directly or indirectly, onsuccess in securing enrollments or theaward of financial aid.Finally, we agree with commentersthat the definition of the term securingenrollments or the award of financialaid should be revised to specify thatthese activities include activities thatrun throughout completion of thestudent’s educational program.Changes: We have revised thedefinition of securing enrollments or theaward of financial aid in§ 668.14(b)(22)(iii)(B) to provide moredetail about actions that are consideredto be covered by the definition. We alsohave revised the definition to clarifythat it includes activities through thecompletion of an educational program.Comment: Numerous commentersrequested that the Department offerguidance on the practicalimplementation of the proposeddefinitions. Many expressed concernabout our stated intention to address