In 1992, Congress amended the Higher Education Act to ban educational institutions from providing "any commission, bonus or other incentive payment" based either directly or even indirectly on success in "securing enrollments or financial aid." Among other things, this amendment was intended to address abuses in the recruiting and admissions processes, particularly by for-profit colleges.
Because the amended regs were found to be (surprise!) vague and difficult to interpret and apply in practice, the Department of Education, in 2002, issued new regulations that set out a dozen "safe harbors" - compensation arrangements that it deemed not to be a violation of the earlier ban. Among other things, these safe harbors allowed schools to make incentive payments to those without direct involvement in the admission or financial aid processes, such as executives or athletic staff members.
Enter the new crackdown, which also seems driven by concerns about abuses in the for-profit sector.
On October 29, 2010, the Department of Education issued new final regulations which, among other changes, eliminates all of the 2002 safe harbors. The new regs, which will take effect on July 1, 2011, essentially bring compliance back to the original 1992 Higher Education Act, but do offer additional definition for some terminology. Some institutions note, however, that this leaves them with the sort of ambiguity that led to the establishment of the safe harbors in the very first place.
Nevertheless, compensation and HR pros at educational institutions must now make it a priority to review both performance management and compensation programs affecting anyone even tangentially involved in the enrollment and admission processes. An article in the latest Towers Watson Insider provides additional information and guidance, including a listing of factors that are (from their perspective) likely to be prohibited as well as factors that are likely to be permissible in relation to performance and pay decisions.
Image: Creative Commons Photo "Gavel" by walknboston