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Business and Policy Areas
Business and Policy Areas

ED Changes Course on Graduation-Based and Completion-Based Compensation

December 14, 2015

Following a court decision, the Department of Education has reversed its 2010 guidance on whether institutions can pay employees based on graduation and completion rates.

Employees such as recruiters may receive commissions or bonuses for the total number of students who graduate from or complete a program, which ED prohibited in its program integrity rules issued in 2010. They still may not be compensated based on numbers of students who enroll in a program.

The reversal comes after a lawsuit filed by the Association of Private Sector Colleges and Universities (APSCU), which has sued ED several times regarding program integrity regulations. In the case, a district court found that ED's stated interpretation of its final rules—which proscribed both enrollment-based and graduation- and completion-based compensation—did not adequately explain the latter.

"The Department has changed its interpretation because, at this time, it lacks sufficient evidence to demonstrate that schools are using graduation-based or completion-based compensation as a proxy for enrollment-based compensation," ED wrote in the Federal Register.

ED notes, however, that it will reserve the right to penalize institutions that merely label compensation structures as graduation- or compensation-based when they actually reward enrollment figures.

The Federal Register notice also includes explanations for two questions regarding regulatory effects on minority enrollment and diversity recruitment, which the district court found ED had not answered sufficiently in the past. In short, commenters questioned whether institutions could financially incentivize employees for enrolling low-income or minority students—neither of which is permissible, ED said.

"Minority student enrollment is not a goal in itself; minority student success matters, not just enrollment," ED noted. "....The Department continues to support all lawful efforts to promote diversity in enrollment, and nothing in the amended regulations changes that fact. Schools can implement effective recruiting programs generally, and effective minority outreach programs specifically, without compensating recruiters based on the number of students enrolled."


Anne Gross
Vice President, Regulatory Affairs

Bryan Dickson
Senior Policy Analyst