The U.S. Department of Education announced today that it will hold virtual listening sessions on the impact of Department guidance on how institutions of higher education may compensate their recruiters. The Department is looking to hear from the public about how an exception contained in the guidance has affected the growth of online enrollment and associated federal student loan debt.

"Online education has the potential to meet the needs of many students and lower costs," said Under Secretary James Kvaal. "But we are concerned about the growth in loan debt and want to ensure students get value for their money. These listening sessions are part of the Department's commitment to undertake a careful, fair, and thorough review of the rules around how contractors recruit students for online programs. This process will give the public a chance to make its thoughts known on any possible changes."

The Higher Education Act prohibits institutions of higher education from providing a commission or bonuses to individuals or entities based on securing enrollment or financial aid. This prohibition is known as the ban on incentive compensation. In 2011, the Department issued guidance related to the ban, which created an exception for third parties if they provide a bundled set of services, which can include recruitment.

Since issuing the guidance, the number of students recruited by entities operating under this exception has increased, particularly through online programs operated by third-party entities, including Online Program Managers (OPMs).

Given the growth in online enrollment and associated federal student debt, the Department is seeking public input to understand the impact of this exception and whether any updates are necessary to the guidance.

The Department is interested in comments from a wide range of stakeholders including institutions, faculty, OPMs and other contractors, advocates, researchers, borrowers, and students on the benefits and disadvantages of the exception for bundled services, how the guidance has impacted institutions and students, and how the Department can better ensure compliance with the prohibition on incentive compensation. The listening session notice includes additional questions for stakeholders to address. A draft version of the listening session notice can be found here.

The Department will also accept written feedback from the public on these questions through March 16, 2023 (Docket ID ED-2023-OPE-0030).

The virtual listening sessions will be held from 1 p.m. to 4 p.m. (EST) on March 8 and 9. Individuals who would like to present comments of up to three minutes must register by sending an email to margo.schroeder@ed.gov no later than 12 p.m. (EST) on the business day prior to the listening session at which they want to speak. The message should include the name of the speaker, the email address of the speaker, and one or more dates and times during which the individual would be available to speak. Individuals who want to observe the listening sessions are also required to register for each day in which they wish to observe.

Updated third-party servicer guidance

Today, the Department also released updated guidance that clarifies when organizations that contract with institutions are considered regulated entities known as third-party servicers. In particular, the guidance clarifies when companies and others who provide recruitment services for colleges will fall into this category.

The updated guidance will ensure the Department has full transparency into and more data on the companies that work with colleges in areas that relate to federal financial aid. It also ensures that the Department and auditors will have the ability to review these companies' compliance with federal rules and regulations.

Institutions will have until May 1, 2023, to report any arrangements with third-party servicers that have not been reported to the Department, detail the services the entity performs on behalf of the institution, and disclose the timeframe of the agreement. Entities or individuals that meet the definition of a third-party servicer as a result of this Dear Colleague Letter are required to submit the Third-Party Servicer Data Form to the Department or update their existing form by May 1, 2023.

Any audits required of third-party servicers would not be needed for at least six months, with most servicers having significantly longer than that. At the same time, the Department will accept public comment on the guidance through the Regulations.gov website for 30 days (Docket ID ED-2022-OPE-0103). We will consider those comments and publish any relevant changes based upon that feedback at a later date.