[Federal Register Volume 80, Number 228 (Friday, November 27, 2015)]
[Rules and Regulations]
[Pages 73991-73995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30158]
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DEPARTMENT OF EDUCATION
34 CFR Parts 600, 602, 603, 668, 682, 685, 686, 690, and 691
[Docket ID ED-2010-OPE-0004]
RIN 1840-AD02
Program Integrity Issues
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Final regulations; clarification and additional information.
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SUMMARY: On October 29, 2010, the Department of Education published in
the Federal Register final regulations for improving integrity in the
programs authorized under title IV of the Higher
[[Page 73992]]
Education Act of 1965, as amended (HEA) (October 29, 2010, final
regulations). The preamble to those regulations was revised in a
Federal Register notice of March 22, 2013. This document clarifies and
provides additional information about the October 29, 2010, final
regulations.
DATES: This clarification and additional information apply to the
October 29, 2010, regulations (75 FR 66832), which were generally
effective July 1, 2011.
FOR FURTHER INFORMATION CONTACT: Scott Filter, U.S. Department of
Education, 1990 K Street NW., Room 8014, Washington, DC 20006.
Telephone: (202) 219-7031 or by email at [email protected].
If you use a telecommunications device for the deaf (TDD), call the
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
Individuals with disabilities can obtain this document in an
accessible format (e.g., braille, large print, audiotape, or compact
disc) by contacting the contact person listed in this section.
SUPPLEMENTARY INFORMATION: The October 29, 2010, final regulations (75
FR 66832) amended the regulations for Institutional Eligibility Under
the HEA, the Secretary's Recognition of Accrediting Agencies, the
Secretary's Recognition Procedures for State Agencies, the Student
Assistance General Provisions, the Federal Family Education Loan (FFEL)
Program, the William D. Ford Federal Direct Loan Program, the Teacher
Education Assistance for College and Higher Education (TEACH) Grant
Program, the Federal Pell Grant Program, and the Academic
Competitiveness Grant (AGC) and the National Science and Mathematics
Access to Retain Talent Grant (National Smart Grant) Programs. On March
22, 2013 (78 FR 17598), the Department revised the preamble discussion
to the October 29, 2010, final regulations in response to the remand in
Ass'n of Private Sector Colls. & Univs. (APSCU) v. Duncan, 681 F.3d 427
(D.C. Cir. 2012) (78 FR 17598). This document clarifies and provides
additional information about the October 29, 2010, final regulations in
accordance with a subsequent district court order in APSCU v. Duncan,
70 F. Supp. 3d 446 (D.D.C. 2014).
Electronic Access to This Document
The official version of this document is the document published in
the Federal Register. Free Internet access to the official edition of
the Federal Register and the Code of Federal Regulations is available
via the Federal Digital System at: www.gpo.gov/fdsys.
At this site you can view this document, as well as all other
documents of this Department published in the Federal Register, in text
or Adobe Portable Document Format (PDF). To use PDF you must have Adobe
Acrobat Reader, which is available free at the site.
You may also access documents of the Department published in the
Federal Register by using the article search feature at:
www.federalregister.gov.
Specifically, through the advanced search feature at this site, you
can limit your search to documents published by the Department.
Clarification and Additional Information
Graduation-Based and Completion-Based Compensation. In APSCU v.
Duncan, 70 F. Supp. 3d 446 (D.D.C. 2014), the district court determined
that the Department had not adequately explained or supported its
decision to ban compensation to an educational institution's recruiters
of students based on the students' graduation from or completion of
educational programs offered by the institution. The regulations at 34
CFR 668.14(b)(22), implementing the statutory ban on enrollment-based
compensation to recruiters of students, 20 U.S.C. 1094(a)(20), do not
contain a ban on graduation-based or completion-based compensation.
Although the Department removed the safe harbor that permitted certain
graduation-based or completion-based compensation and previously
indicated that it interpreted the amended regulations to ban such
compensation, see, e.g., 75 FR 66874, the Department hereby indicates,
in response to the district court's decision, that the Department has
reconsidered its interpretation and does not interpret the regulations
to proscribe compensation for recruiters that is based upon students'
graduation from, or completion of, educational programs.
Correspondingly, the Department will not view the references in the
regulations to recruiter enrollment activities that may occur ``through
completion'' by a student of an educational program, 34 CFR
668.14(b)(22)(iii)(B) (introduction), and (iii)(B)(2)(ii), as
prohibiting graduation-based or completion-based compensation to
recruiters.
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. In assessing the legality of a
compensation structure, the Department will focus on the substance of
the structure rather than on the label given the structure by an
institution. Thus, although compensation based on students' graduation
from, or completion of, educational programs is not per se prohibited,
the Department reserves the right to take enforcement action against
institutions if compensation labeled by an institution as graduation-
based or completion-based compensation is merely a guise for
enrollment-based compensation, which is prohibited. Compensation that
is based upon success in securing enrollments, even if one or more
other permissible factors are also considered, remains prohibited.
Impact on Minority Enrollment. The district court found that the
Department failed to respond adequately to two commenters who
questioned whether the amended regulations ``might adversely affect
minority outreach.'' Id. at 456; see also APSCU v. Duncan, 681 F.3d
427, 449 (D.C. Cir. 2012). The district court remanded the matter for
the Department to address ``the potential effect on minority
recruitment, i.e., whether minority enrollment could decline under the
new regulations.'' APSCU v. Duncan, 70 F. Supp. 3d at 456.
The particular comments were included in two submissions that also
included comments on other aspects of the proposed regulations. The
first commenter asked:
Can schools increase compensation to personnel involved in
diversity outreach programs for successfully assembling a diverse
student body? Does the Department intend to foreclose schools'
ability to compensate their staffs for successfully managing
outreach programs for students from disadvantaged backgrounds like
the eight TRIO programs administered by the Department?
DeVry to Jessica Finkel (August 1, 2010), AR--3386. The second
commenter asked:
How will the new regulations apply to employees who are not
involved in general student recruiting, but who are involved in
recruiting certain types of students? Examples would include college
coaches who recruit student athletes, and employees in college
diversity offices who recruit minority students. We see nothing in
the proposed regulations that excludes these types of employees from
the scope of the incentive compensation law. Thus, coaches who
recruit student athletes would not be able to be compensated, in any
part, on the number or caliber of students they recruited or the
volume of university revenue generated by the teams on which the
athletes played. Similarly, employees responsible for
[[Page 73993]]
recruiting minority students would not be able to be compensated, in
any part, on an increase in minority students who enroll at the
college. We believe both of these practices are widespread and
promote desirable goals, and are another example of how unclear, and
potentially far-reaching, the Department's proposed regulations are.
We request the Department's guidance on how to apply the law to
compensation of these particular practices.
Career Education Corporation to Jessica Finkel (August 1, 2010) AR-
3308.
The ban on the payment of incentive compensation precludes
institutions from paying their recruiters, or enrollment counsellors,
bonuses based upon the number of students they enroll, irrespective of
the student's minority or other status and irrespective of whether the
goal of the recruiters is to increase diversity. The statute and
accompanying regulations address the powerful incentive that such pay
provides for the recruiter to close the sale--whether or not the
training offered is really what the individual needs. The ban exists to
shelter all students from abusive practices that have historically
occurred when recruiters were rewarded based on the number of students
enrolled, as opposed to a more fulsome evaluation of a student's
particular needs and an institution's capacity to meet those needs.
Congress had no basis to expect (nor do we) that recruiters paid by
incentive-based compensation who focus their recruitment efforts on
minorities (or any other group, including athletes) would disregard
their personal gain as they persuade individuals to enroll.
Minority student enrollment is not a goal in itself; minority
student success matters, not just enrollment. Although the ban on
incentive compensation may cause minority student enrollment numbers to
decline, we expect that the minority students who do ultimately enroll
will have a better chance at success, because they will have enrolled
based on a decision made free of pressured sales tactics, and they
presumably would be a good fit for the school they select. Indeed, as
the Department has stated, ``[m]inority and low income students are
often the targeted audience of recruitment abuses, and our regulatory
changes are intended to end that abuse. It is our expectation and
objective that enrollment of students, including minority students,
against their best educational interests would be reduced with the
elimination of improper incentive compensation.'' 78 FR 17600 (2013).
In response to the district court's remand and the commenters'
questions, the Department hereby acknowledges that the amended
regulations could negatively affect outreach and enrollment generally,
as well as student outreach that is specifically targeted at promoting
diversity, which could result in fewer minority students recruited and
enrolled. However, neither the statute nor any information presented by
the commenters or in the administrative record provides a basis for
treating a recruitment program directed at minority students
differently than an institution's general or other specific recruitment
programs. And, as explained below, there are ample ways for schools to
maintain or increase their enrollment of minority students (and other
students) that are likely to achieve a positive result from their
enrollment besides providing compensation based on recruiters'
enrollment numbers.
For several reasons, estimating how significant the effect on
minority recruitment or enrollment may be is difficult. A robust
assessment of the effect of incentive-based compensation on minority
outreach and enrollment would require a comparison between schools with
similar characteristics, one group of which paid its recruiters with
incentive-based compensation for minority enrollments, and the other
group which did not. We have not conducted such an experiment, and we
have found no such study or analysis of this issue in the literature.
Another way to estimate the effect of the incentive compensation
ban on institutions' recruitment of minority students would be to
estimate how schools that pay incentive compensation to staff who
recruit minorities would change their practices as a result of the ban
on enrollment-based incentive compensation. If recruiting minority
students is more difficult than recruiting other students, we expect
schools would need to take steps to achieve the same level of success
achieved by paying recruiters compensation based on the number of
minority students they enroll, and that this would include, among other
things, hiring more recruiters or changing their salary schedules in
order to attract more talented recruiters, or both. We believe that
schools that devote special efforts to recruit minority students and
that used incentive compensation payments to drive those efforts in the
past devoted significant resources to those payments, though we have no
data quantifying those costs. We would expect those schools to redirect
those resources if they wanted to ensure continued success in
recruiting and enrolling minority students. Such steps could include
increasing salaries to attract more capable recruiters or developing
new or enhancing existing outreach activities. We expect that those
for-profit schools that currently enroll substantial numbers and high
percentages of minority students would take such steps.
Accepting for purposes of this analysis the assertion that efforts
to recruit minority students are specialized and thus require more
resources than ordinary recruiting efforts generally used, we consider
it reasonable to expect that some schools may conclude that the cost of
those resources outweighs the benefits of maintaining or increasing
special recruiting efforts for minority students. The group of schools
more likely to choose not to allocate the added resources needed for
specialized minority recruiting would appear to be those schools which
depend less on minority enrollments, specifically: For-profit schools
that offer longer programs (2 year and 4 year programs), and public or
non-profit institutions. Minority enrollment might decline at some
institutions in this group, because institutions in this group,
compared to those for-profit institutions offering shorter programs,
appear to depend less on minority enrollment than for-profit
institutions offering shorter programs. They would be more likely to
consider the expenses of increasing salaries or adding staff for
specialized minority recruiting to outweigh the benefits of maintaining
their minority recruiting efforts at the same level as before the ban.
Nevertheless, the size of reductions in minority enrollments that would
be fairly attributable to the ban--as opposed to other causes--remains
difficult to predict.
Next, we would need to determine to what extent recruiters engaged
under any revised schemes would be likely to succeed in recruiting
minority students without the sales tactics that the ban is intended to
deter. Last, for schools affected by the ban, we would need to
distinguish those effects that are fairly attributed to the incentive
compensation ban itself from those effects that could be attributed to
other factors such as competitors' minority student recruitment efforts
or a program's performance under the Department's gainful employment
regulations, which apply to the same kinds of programs at for-profit
schools that are being promoted by such recruiters. No data exists from
which one can make these determinations.
While there is uncertainty about the size of any adverse effect of
the ban on institutions' recruitment of minority students, the evidence
that is available does not support an assertion that the Department's
rule will seriously
[[Page 73994]]
undermine efforts to obtain educational diversity. In ``For Profit
Higher Education: The Failure to Safeguard the Federal Investment and
Ensure Student Success,'' \1\ the Senate HELP Committee referred to
GAO's 2011 study of student outcomes at for-profit schools. In that
study, GAO observed that African American and Hispanic students already
comprised some 48 percent of all students enrolled in for-profit
schools--more than the percent of students enrolled at for-profit
schools who are non-Hispanic white (46 percent; Asian-Pacific Islanders
and other non-Hispanic white students account for the other 6 percent
of for-profit school students), double the percentage of students
enrolled at private non-profit schools who are minority students, and
far more than the percentage (28 percent) of students enrolled in
public institutions who are minority students.\2\ In addition, we note
that the pattern observed in the GAO report continued in succeeding
years, and was reflected at each credential level.\3\ These data
demonstrate that for-profit schools at each credential level already
enroll disproportionately large percentages of minority students
compared to non-minority students and therefore call into question one
of the commenter's claims that minority recruitment efforts by the for-
profit institutions to which the ban applies are needed to successfully
assemble a diverse student body. (AR -3386, 3429, 3430). For-profit
schools clearly already have diverse student bodies, dramatically
different than student bodies at public or private non-profit
institutions.
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\1\ For Profit Higher Education: The Failure to Safeguard the
Federal Investment and Ensure Student Success, Senate HELP
Committee, Majority Committee Staff Report, July 30, 2012, at 46,
47.
\2\ Id.
\3\ Smith, Peter & Parrish, Leslie (2014), Do Students of Color
Profit from For-Profit College? Poor Outcomes and High Debt Hamper
Attendees` Futures, Center for Responsible Lending, at 9, available
at http://higherednotdebt.org/tag/center-for-responsible-lending.
2011 data show that of African Americans who enroll in schools that
offer only short-term (non-degree) programs (less than 2-year), 91
percent do so at for-profit schools; of Hispanic students who
enrolled in those schools, 85 percent enrolled at for-profit
schools, but of white students in such programs, only 76 percent
enrolled at for-profit schools. Of students who enroll at 2-year
institutions, the pattern continues: 10 percent of African Americans
and 8 percent of Hispanic students who enroll in 2-year institutions
do so at for-profit schools, while only 5 percent of white students
who enroll in 2-year schools do so at for-profit schools. Of African
American and Hispanic students who enroll at 4-year institutions, 28
percent and 15 percent, respectively, enroll at for-profit schools,
while only 10 percent of white students who enroll at 4-year
institutions do so. Id. at 9.
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Although the data show that for-profit schools already enrolled a
significant percentage of minority students, estimating whether this
diversity has been the result of the payment of incentive compensation,
and whether the incentive compensation ban will negatively affect this
already very diverse enrollment, would require a reliable estimate of
the prevalence of incentive-based compensation in recruiting efforts
directed at these minority students, as opposed to other students. The
Department has no evidence to show what percentage of these minority
students were enrolled on account of incentive-based compensation, as
opposed to other features of for-profit schools.\4\ However, we do know
that the percentage of enrolled students who were minority students in
degree-granting institutions increased from fall 2010 to fall 2013,
after the regulations became effective: minority enrollment as a
percentage of all enrollment increased from 39.5 percent in 2010 to
43.1 percent in 2013.\5\ Similarly, minority student enrollment as a
percentage of total enrollments in for-profit degree-granting
institutions increased from fall 2010 to fall 2013: from 49.3 percent
(4-year institutions) and 56 percent (2-year institutions) in 2010 to
54 percent (4-year institutions) and 61 percent (2-year institutions)
in 2013.\6\ These changes may be the result of many factors that are
difficult to weigh or distinguish with respect to their effects on
enrollment, including that institutions have already made changes
needed to recruit in a manner compliant with the ban. However, these
data do not support a claim that the incentive compensation ban has in
fact negatively affected minority enrollment.
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\4\ Although the percentage of revenue spent by for-profit
institutions on advertising and recruiting, the numbers of
recruiters, and the abusive recruiting tactics used by for-profit
schools have been reported in, e.g., the HELP committee report, that
report simply states variously that ``some companies'' or ``many
companies'' used the practice. Id., at 3, 4, 50, 51. A commenter
asserted that incentive compensation payments are ``widespread'' (AR
3308).
\5\ National Center for Education Statistics (NCES) (2014)
Digest of Education Statistics (Table 306.50) available at http://nces.ed.gov/programs/digest/d14/tables/dt14_306.50.asp, and NCES
(2011) Digest of Education Statistics (Table 241), available at
http://nces.ed.gov/programs/digest/d11/tables/dt11_241.asp. The
numbers of students are those identified as the ``fall enrollment''
students, from the Integrated Postsecondary Education Data System
(IPEDS) maintained by the National Center for Education Statistics
and derived from periodic reports from postsecondary institutions.
The fall enrollment is the annual component of IPEDS that collects
data on the number of students enrolled in the fall at postsecondary
institutions. Students reported are those enrolled in courses
creditable toward a degree or other formal award; students enrolled
in courses that are part of a vocational or occupational program,
including those enrolled in off-campus or extension centers; and
high school students taking regular college courses for credit.
Institutions report annually the number of full--and part-time
students, by gender, race/ethnicity, and level(undergraduate,
graduate, first-professional); the total number of undergraduate
entering students (first-time, full-and part-time students,
transfer-ins, and non-degree students); and retention rates. In
even-numbered years, data are collected for State of residence of
first-time students and for the number of those students who
graduated from high school or received high school equivalent
certificates in the past 12 months. Also in even-numbered years, 4-
year institutions are required to provide enrollment data by gender,
race/ethnicity, and level for selected fields of study. In odd-
numbered years, data are collected for enrollment by age category by
student level and gender. http://nces.ed.gov/ipeds/glossary/?charindex=F
\6\ Id. Some of the data cited here post-dates the promulgation
of the final regulations, but the Department is including such data
for illustrative purposes.
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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. Considerable efforts have already been made by this and other
agencies, and non-governmental entities, to explore techniques to reach
minority students and persuade them that postsecondary education is
both available to them and worth their investment.\7\ It is beyond the
scope of this clarification and additional information to incorporate
that literature or summarize the findings. The commenters did not seek
Department guidance on how to conduct outreach to minority students,
and any institution interested in methods of such outreach can access
resources and information on methods of outreach through Department and
other sources.\8\ The commenters directly asked only for guidance about
how to apply the compensation ban to minority recruitment practices,
and we respond simply that the ban prohibits compensating those
performing outreach and recruitment activities for minority students on
the basis of the number of students enrolled. As we note above,
minority students are often the target of recruitment practices that
lead
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to enrollment in courses of study that do not further their educational
or vocational goals and are contrary to their economic interests, and
the rule is intended to reduce that occurrence.
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\7\ In addition, as one commenter notes, Title IV of the Higher
Education Act authorizes the Trio Grant Programs to finance
activities to encourage ``qualified individuals from disadvantaged
backgrounds'' to prepare for and enroll in postsecondary education,
and that for-profit institutions qualify for grants under these
programs. 20 U.S.C. 1070a-11 et seq.
\8\ See, e.g., list of resources on minority student outreach
available through the Department's Web site: http://findit.ed.gov/search?utf8=%E2%9C%93&affiliate=ed.gov&query=minority+outreach+.
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We acknowledge that some institutions may need to revise their
diversity outreach operations if they depend more on the financial
motivation of the recruiter than the design of the recruiting or
outreach plan or the relative value of the programs touted by the
recruiter. The regulations address only the payment of incentives to
recruiters, not the activities the school requires recruiters to
perform. Thus, the regulations do not prevent an institution from
holding a recruiter accountable for implementing an effective
recruiting or minority outreach plan adopted by the institution.
In sum, the Department acknowledges that the amended regulations
may result in some negative impact on minority recruitment and
enrollment. But neither the statute nor any information presented by
the commenters or in the administrative record provides a basis for
treating a recruitment program directed at minority students
differently than an institution's general or other specific recruitment
programs.
List of Subjects
34 CFR Part 600
Colleges and universities, Foreign relations, Grant programs-
education, Loan programs-education, Reporting and recordkeeping
requirements, Student aid, Vocational education.
34 CFR Part 602
Colleges and universities, Reporting and recordkeeping
requirements.
34 CFR Part 603
Colleges and universities, Vocational education.
34 CFR Part 668
Administrative practice and procedure, Aliens, Colleges and
universities, Consumer protection, Grant programs-education, Loan
programs-education, Reporting and recordkeeping requirements, Selective
Service System, Student aid, Vocational education.
34 CFR Part 682
Administrative practice and procedure, Colleges and universities,
Loan programs-education, Reporting and recordkeeping requirements,
Student aid, Vocational education.
34 CFR Part 685
Administrative practice and procedure, Colleges and universities,
Loan programs-education, Reporting and recordkeeping requirements,
Student aid, Vocational education.
34 CFR Part 686
Administrative practice and procedure, Colleges and universities,
Education, Elementary and secondary education, Grant programs-
education, Reporting and recordkeeping requirements, Student aid.
34 CFR Part 690
Colleges and universities, Education of disadvantaged, Grant
programs-education, Reporting and recordkeeping requirements, Student
aid.
34 CFR Part 691
Colleges and universities, Elementary and secondary education,
Grant programs-education, Student aid.
Dated: November 23, 2015.
Arne Duncan,
Secretary of Education.
[FR Doc. 2015-30158 Filed 11-25-15; 8:45 am]
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